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What is a Customs Bond and Why Do Importers Need One?

Posted by Becky Harris on July 7, 2020 - 1:50 PM
Cargo importing into the U.S. via ocean shipping

Understanding Import Bonds

There are over 300 land, air and sea ports of entry into the United States, and the U.S. Customs & Border Protection agency (CBP) has jurisdiction over all of them. At these ports, CBP provides security and screening of all foreign visitors, returning American citizens and imported cargo. Here, we’ll take a look at imported cargo — specifically at the requirement of a U.S. Customs Bond in order to clear commercial shipments for entry into the United States quickly and avoid costly fines — and at how ArcBest® helps make importing easier by helping you navigate the complicated process.

What is a customs bond?

A Customs bond is a legal contract between a principal (importer or shipper), a Surety company, and CBP that guarantees the importer complies with Customs regulations and that CBP is paid for applicable import duties, taxes, fines and penalties.

What happens if the principal doesn’t pay?

If the principal doesn’t pay, the CBP will collect from the Surety company that issued the bond, and the Surety company can then use legal means to collect from the importer. When a bond is required, Customs will not release the goods until the bond is posted and regulatory requirements are met.

When is a bond required?

A bond is required for clearing Customs on commercial goods that are valued over $2,500 and if the goods are subject to requirements from other U.S. government agencies (i.e. all food items require a bond and must meet FDA requirements). Note that this requirement extends to even duty-free shipments.

What happens if I don’t get a bond?

Without a bond, shipments will not be allowed to clear U.S. Customs, which means the importer could face fines and severe delays.

Where can I buy a Customs bond?

Customs bonds can be purchased through a Customs broker who is an agent for a Surety that is licensed and approved by the U.S. Department of the Treasury. If you utilize a logistics company like ArcBest®, that is experienced in international shipping and has a relationship with a licensed Customs broker, we will assist you throughout the process so you can purchase directly from the Surety company.

How is the bond tied to a specific company?

CBP issues a unique bond number that is tied to the company’s Importer Number/Tax ID.

What types of Customs bonds are there?

There are two basic types of Customs bonds:

1.     A single transaction bond (also known as a single-entry bond or SEB), which covers a one-time Customs entry.

2.     A continuous bond (code 1), which covers multiple/ongoing entries made by an importer at all U.S. ports of entry. It is good for one year from the date it is issued.

How does the bond renewal process work for continuous bonds?

While continuous Customs bonds expire one year from the date they are issues, they stay on file with CBP until a termination notice is put in place (usually by a Surety company or Customs broker). In order to keep a bond active, payment to the Surety is required. Some Sureties bill customers on an annual basis and some offer multi-year payment terms. 

Where can a continuous bond be used and who can use it?

Continuous import bonds can be used at any U.S. port, and can be accessed by anyone who is authorized to clear entries on behalf of the importer (including customs brokers or freight forwarders). The bond format is standardized by the CBP, so they are issued with consistent parameters, conditions and coverages. 

Leverage the experience of the ArcBest International team

Focus on your business and let ArcBest make importing goods into the U.S. easier. With expertise in Import Bonds and trade compliance and local representation across the globe, we’ll help guide you  through every aspect of cross-border shipping. Contact your local account manager for more information or for a complementary consultation.

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