Understanding Customs Bonds - Global Trade Magazine
  August 27th, 2020 | Written by

Understanding Customs Bonds

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When you’re constantly plagued by bureaucracy and inventory management in the world of shipping, there’s one moment that makes it all worth it: importing the goods. However, that process has one extra step before it’s finalized — obtaining a customs bond. But what does this actually entail? Why must you even have a customs bond? And which one should you get? Don’t worry — we’ll help you with understanding customs bonds right here!

Bonds, Customs Bonds

First of all, we should note that all information found here is valid for the ocean ports and other import points in the United States. The notion of a customs bond originated here. To define it in the simplest possible terms, a customs bond is something like an insurance policy during the import process. But not for you — for the government of the United States. It’s a guarantee that all import taxes and duties will be paid. In the professional world of shipping between leading ports, this is simply called a “bond”.

But why must importers have one in the first place? To paraphrase Benjamin Franklin’s famous quote, the only two things that are sure in the world of importing and exporting are taxes and duties. If you have a customs bond, the government has a solid guarantee that it will receive its taxes and duties; even in a force majeure event that leaves your logistics company helpless to pay.

In other words, if an import company goes bankrupt, this bond will cover the air and/or ocean shipments in terms of duties and taxes. This is something that you’ll simply be required to have if you want to import anything into the United States; it’s all within the price of doing business. And bear in mind that these bonds expire as well, so don’t expect to hold onto the same one forever.

Bond Requirements

So, when do you need a customs bond? Mainly, when you’re trying to import goods for commercial purposes with an estimated value of more than $2,500. Apart from this, there may be other requirements for particular goods posed by different agencies of the United States government.

As an example — if you’re importing food items, you will be required to obtain a customs bond regardless of the amount or value of the items. You will also need to comply with other FDA regulations.

When it comes to the different types of bonds that you can have as an importer, there are two primary ones. There are continuous bonds and single-entry bonds. Their names are pretty self-explanatory — the latter only covers a single import shipment, while the former is valid for multiple shipments in a certain time period. Usually, we’re talking about twelve months.

So, which one should you get? This largely depends on the nature of your business. If you’re someone who only imports goods on a rare occasion, like a couple of times a year, you may not need anything more than a single-entry bond.

Obviously, a continuous bond represents a far better option if you’re going to be shipping regularly. And this type of bond has another benefit; when you’re completing the Importer Security Filing information, you won’t have to buy additional bonds. This is data that you need to submit in advance before you load any goods on a ship in a country of origin that’s headed for the United States. Having this information allows the CBP enough time to judge if your cargo poses any security or safety risks.

Bond Expenses

Now that we’ve explained the nature of customs bonds, the question that must be on your minds is — how much do they actually cost? Well, you need to look at customs bonds like any other kind of insurance policy. In the sense that, when you purchase a bond, it’s valid for a specific level of coverage. And naturally, the cost of continuous and single-entry bonds differs.

Single-entry ones can be quite tricky. The minimum amount that you’ll pay for the bond can’t be lower than the estimated monetary worth of the goods plus the taxes that you’d have to pay for their import.

And if these goods have to comply with other agency regulations as well, the initial value is raised to three times their estimated value; that would be the case with the above-mentioned food items, for instance.

When it comes to continuous bonds, the situation is far simpler. The minimal amount is $50,000 — alternatively, it can be ten percent of all the fees and taxes for imports that you’ve paid during the previous fiscal year. That means that the expenses for the bonds can vary, but they’re still far more cost-effective if you’re someone who regularly ships things between ports.

And finally — how do you actually obtain a bond in practice? The easiest method is going through a freight forwarder or a customs broker, that will deal with all of the assorted paperwork. On the other hand, if you’re going to do so yourself — the Treasury Department issues licenses to sureties that will sell you a bond.

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Samwell Stein is a freelance author and logistics advisor. He frequently cooperates with professional shipping and moving companies like Transparent International and advises them on the best industry practices.

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