In the business world today, trust touches every area of the business and even a business transaction between government organizations and businesses also requires a certain level of trust.

This level of trust, to guarantee a smooth flow of business interactions and engagements in the category of Import and export can be seen with Customs Bonds. This is actually between a business importing into the country and the Customs and border protection (CBP), on their part, making sure all import requirements are met.

Such requirements may include the payment of taxes and duties, also, if the goods imported require the involvement and validation of other government agencies like the FDA. Also, if the value of the shipment is above a certain dollar amount, custom bonds may be required during the clearing process.

What is a customs bond?

A customs bond can be considered as a contract between the Customs and Border Protection (CBP), an importer, and a broker or surety which puts the importer in good standing to meet and comply with CBP during a custom clearing process. In the simplest terms, customs bonds are insurance for the duty and taxes charged on imported goods. Customs bonds are also sometimes referred to as Foreign Bonds or Import Bonds.

Some may wonder why this particular insurance is needed. The answer is simple – to protect the buyer from paying the wrong amount on import duties and to protect the CBP in collecting all duties and taxes.

A customs bond normally involves three parties. The importer of the goods known as or referred to as the principal, the issuer of the bond, mostly referred to as the broker or surety and the customs (CBP) normally referred to as the beneficiary.

A customs bond can be an excellent way for businesses to manage their imports and exports without a great deal of hassle. A customs bond also serves two purposes: it guarantees that a business owner will not use counterfeit or illegal products entering or leaving the country and it ensures that a business owner will pay duties and taxes incurred when importing goods into or out of the country.

In essence, all importations should undergo several inspections before leaving the country of origin. The inspectors at the port of entry will verify that the imported goods are legal and that they don’t fall under any tariff ban. Besides that, it is ensured that the shipment poses no danger to national security while crossing the border.

With this in mind, it is important to have this particular form of assurance in the form of customs bonds when importing goods. These are essentially meant to secure payment by the buyer if a certain percentage of duty and taxes are not paid on the imported goods during transit.

It is very important to note that customs bonds are not required for every shipment as there are certain categories of shipments that may not require a customs bond. Mostly, custom bonds a required for products imported for commercial purposes.  

In other for a shipment to qualify for a customs bond, It has to be valued above $2500 and also if the shipment may require the approval of other government agencies like the FDA.

What are the different types of customs bonds?

There are basically two types of customs bonds namely Single transaction Bond and Continuous Bond.

Single Transaction Bond or Single Entry Bond

A Single Transaction Bond is also referred to as a Single Entry Bond and it only covers a single customs transaction or entry. A single transaction bond is dedicated for importers that import for a one-time entry and to a specific port.

A Single Entry Bond is calculated and derived from the value of the products or merchandise including customs fees, taxes, and duties. Single Entry Customs Bonds is more common with companies that import low-cost value goods occasionally and usually about four shipments a year.

Continuous Bond

With a Continuous Bond, all the importer’s shipments with international carriers are covered at all US ports of entry for a complete year. A continuous bond is very important for importers with regular shipping activities and at several ports of entry for a complete year.

The continuous bond must be purchased for at least $50,000 and covers high-value shipments. Continuous bonds are also known to cover International Security Filing (ISF) when shipping by sea.

Why is a customs bond needed?

Customs bonds are needed to protect the government from importers who might fail to meet their financial obligations during the customs clearing process, like the paying of taxes, fees, and duties. A customs bond puts the importer in good standing with the CPB and other government entities that may require validating a shipment or imported goods.

Considering the CBP requirements, customs bonds are needed to protect the interest of the government and to make sure the importer is in compliance with government regulations, the laws and requirements for import duties, fees, and taxes when importing into the country.

However, and for the importer, customs bonds can facilitate the customs clearing process. Since customs bonds reflect a good standing between the CBP and the importer, the CBP is well assured all duties and taxes can be paid. With the customs bond in place and with a guarantee the CBP will be paid, a fast custom clearing process can be experienced.

How much is a customs bond?

The surety, broker, or insurance carrier is responsible to set the cost of a custom bond. Since the customs does not decide the cost of a customs bond, and just for the fact that all bonds, be it single entry bond or continuous bond, have their own formulation policies, only the issuer of the bond can determine the cost of the bond. Customs bond can range as low as $200 and up to $400 depending on the broker you might want to work with.

How do you get a customs bond?

Custom bonds can be obtained through a surety company licensed by the Department of Treasury. Here is a list of sureties from the Bureau of the Fiscal Service.

You can also get a U.S  Customs and Border Protection bond through a Customs Broker who acts as an agent and on the behalf of sureties. Customs brokers are licensed by the CBP and are professionals who can handle your customs clearing process. You can check the various ports and the customs broker here.

Before obtaining a Customs Bond, it is important to decide what type of Customs Bond will suit your needs. It can either be a Single Entry Bond or a Continuous Bond. Once you identify a custom bond you would like to use, you can then look for surety or work directly with a Customs Broker. You can provide an import declaration, your company name, Employer Identification Number (EIN), SSN, the type of business entity, address, and location or port of entry for your surety or custom broker to file or register the bond.

How much is a single entry bond?

A single entry bond can range as low as $200 to about $400 depending on the surety you are working with. There are no fixed prices for customs bonds and there are thousands of customs bonds surety companies working independently. This means these sureties can decide what they can charge for a custom bond.

A simple calculation can be based on the cargo value and the duty. A surety can charge a certain amount for every $1000 of the cargo value and the duty. If a shipment value is $50000 and the duty about $2000 (total of $52000), a surety can charge $5 per $1000 which will total a cost of $260 for the single entry bond.

If a shipment falls under a certain category that requires validation from authorities like say Food and Drug Administration (FDA), Environmental Protection Agency (EPA), Bureau of Alcohol, Tobacco and Firearms (BATF), Agricultural Marketing Service (AMS) etc, the bond is required to be three times the value of the shipment.

Who is required to have a customs bond?

Importers of commercial shipments with a value of above $2500 are required to present a customs bond during the clearing process with the CBP. Also, if a shipment requires the validation of another government authority, you will be required to present a customer bond.

How long does it take to get a customs bond?

The average time period to obtain a Customs Bond can be between 10 – 15 days for the bond to become active. The bond agency or surety is responsible for the filing of the Customs Bond with the CBP and the duration is actually determined by the CBP. If the CBP fails to approve the bond, then the bond remains inactive.

It is important to note that certain kinds of bonds with higher amounts can take a longer duration to become active.

Are customs bonds refundable?

Custom bonds are not refundable. The cost you endured in obtaining a Customs Bond is for the surety or broker to engage and take a stand on your behalf and to be held accountable or responsible if you fail to meet any of the fees, taxes, and duties during the customs clearing process.

When an importer fails to pay all the duties and fees, the customs turns and charges the surety or broker and not the importer. The charge can be placed by the CBP on the customs bond posted or filed for the shipment. This explains why for taking this risk, Sureties, charge a non-refundable fee for their customs bonds.