What are Customs bonds?

Essentially, Customs bonds serve the purpose of insurance. They ensure that the US government will receive payment in the form of taxes and duties for the imports that you make. Customs bonds are just called “bonds” in the trade industry.

Why should an importer have one?

There is a popular adage in the trade industry that goes “taxes and duties are the only certainties in importing”. By making the bond a requirement for importers, the government is securing a guarantee for your payment of taxes and duties. Bonds are a necessity for covering shipments that are being transported by sea or air. Without the required coverage, you may have to pay fines or, at the least, face significant delays.

Even though bonds are a crucial element in global trade, several importers are unfamiliar with US Customs bonds and the function they serve. The following list serves as a starting point for things that importers should know about Customs bonds. For in-depth detail, you should visit the Customs and Border Protection’s website.

1.     Bonds do not provide coverage

Technically speaking, bonds are insurance instruments. However the function they serve is unique. A US Customs bond is a tripartite agreement between the principal (i.e. importer), US Customs and Border Protection and a guarantor / surety. The agreement serves as a guarantee that the principal’s outstanding liabilities to the CBP will be discharged. If the principal is unable to do so, then it will be the guarantor who will pay up. The bond is issued by the guarantor.

2.     A Customs bond is mandatory

If you do not have a valid US Customs bond, the CBP will not permit the goods that you imported entry beyond the port or terminal where they arrived.

3.     Continuous U.S. Customs bonds are perpetual

Once a bond has been registered with the CBP and if it is continuous, it will be perpetually active unless it is deliberately cancelled by either of the three parties involved (i.e. the principal, guarantor or CBP). Freight forwarders, Customs brokers and surety / guarantor agencies typically send their clients an invoice annually.

4.     You might already be holding a bond

If you have frequently imported goods into the US, chances are that you may already have a continuous bond. You may even be able to find it as an item on the invoice provided to you by your logistics service company. There are importers who import goods in relatively lower volumes under a logistics service provider’s import bond or through their broker in Customs. But if you import large volumes, then this would be a cost effective alternative. There are bonds that cover single transactions as well; but they are again not a feasible option for importers that have sizeable imports.

5.     Customs bonds can be directly purchased from surety agencies

There are several surety agencies that you can purchase Customs bonds from directly. You do have the option to purchase them from a logistics service provider as well as a licensed broker in Customs. However directly purchasing them from surety agencies is a cost-effective option.