What Is a Customs Bond and Why Importers Need One

by | Jun 1, 2017 | Compliance

What Is a Customs Bond and Why Importers Need One

The moment has arrived. You’re ready to start importing your goods. There’s only one step left: Getting your customs bond. However, have you ever wondered what a customs bond is and why you need one? Or which bond is the right one for your business?

Here’s everything you need to know about customs bonds.

(Note: The information discussed here applies to U.S. imports only.)

What is a customs bond? Put simply: A customs bond is an insurance policy that ensures that the United States government will be paid for your duties and taxes. In the industry, they are often simply referred to as a “bond.”

Why do importers need one? To riff on a popular saying, the only things certain in importing are duties and taxes. In this case, by requiring you to have a bond, the government is guaranteeing that your duties and taxes will be paid, even in the extreme event your company can’t pay for them (bankruptcy for example). Bonds are required to cover shipments traveling both by ocean and by air, and without proper coverage, you can face fines and/or severe delays.

Having a bond is the price of being in the import business. Bonds expire too, so it’s important that you renew yours in a timely manner.

When is a bond required? A bond is required if you are importing commercial goods that are valued over $2,500. It is also required if your goods are subject to requirements from other U.S. government agencies. For example, if you are importing any type of food items, you’ll always need a customs bond in addition to your Food and Drug Administration (FDA) requirements.

Check out a general list of government agencies that monitor imports.

What type of bonds are there? For importers, there are two main types of bonds: single-entry bonds and continuous transaction bonds.

As their names imply, a single-entry bond covers only one import shipment.

A continuous transaction bond (or simply, a “continuous bond”) is for ongoing shipments of imports for a 12-month period.

Which is better for my business – a single-entry bond or continuous bond? That depends: If you are only importing goods occasionally (say, two or three times a year), a single-entry may be for you.

If you are shipping more frequently, the continuous bond is a better investment.

Another benefit of having a continuous bond is that you won’t have to purchase a separate bond for your Importer Security Filing (ISF). The ISF is information you must submit at least 24 hours before your goods are loaded onto an ocean vessel from the exporting country. This gives time for the CBP to review your cargo for safety and security risks.

Learn more about the ISF.

How much do bonds cost? Bonds are like any type of insurance policy: You are buying a bond for a certain amount of coverage. However, the cost of the bonds differs between single-entry and continuous bonds.

  • For single-entry bonds, the cost can be tricky. Your minimum bond amount cannot be less than what the goods are worth and how much taxes you’d owe on them. If your goods need to meet the requirements of a government agency, the bond must be at least three times the worth of your goods. For example, if you have $5,000 worth of goods, and they need to be approved by the government, you’re looking at purchasing a $15,000 bond.Which doesn’t mean you need to fork over $15,000 up front. The price you’ll pay varies, but the cost for the coverage in this example would often be less than $100. However, keep in mind that you’d need additional coverage for the ISF filing on ocean shipments.
  • Luckily continuous bonds are much simpler: You must purchase a minimum of $50,000 or 10 percent of the taxes and fees you paid in the previous year. The cost for that kind of bond will vary, but they are extremely cost-effective. If you have more than 3 or 4 shipments annually, a continuous bond is almost always your best option.

How do I get a bond? The easiest way to get a bond is often through your customs broker or international freight forwarder, who can take care of all the paperwork. If you’re doing it on your own, you must purchase a bond from a surety licensed by the Treasury Department.

Questions about importing your goods by air or ocean?

Check out 10 Common Questions About Importing Ocean Freight or Schedule a consultation with the global shipping experts at Dedola Global Logistics.

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