Customs bond is a mandatory agreement required by the US CBP (Customs and Border Protection) to allow importers to import their goods across the US border. It guarantees the US government that the importer will pay all the dues, taxes, and penalties applicable to the shipment and ensures regulatory compliance according to the rules of the importing country. Based on their shipping requirements, shippers can choose between a single-entry bond and a continuous-entry bond. A customs bond helps in faster customs clearance, national security and compliance assurance. Let us learn more about customs bonds and how they work.

What are customs bonds in shipping?

A customs bond in shipping is defined as a contract between the importer, customs authorities, and the surity (an insurance company) to ensure that the duty and fee related to import and regulatory compliance will be duly paid. The US CBP (Customs and Border Protection) ensures national security and compliance with shipping regulations. The importers are responsible for ensuring that the goods entering the US border comply with the regulations. The importer must pay the fees to the customs, which is stated in the customs bond that a customs broker or any other reliable insurance company drafts. 

This legal contract is for commercial shipping that includes shipping containers for sale and lease. It binds the importer and holds them responsible for clearing all applicable duties, taxes, and penalties. Without a customs bond, the US CBP will not allow the goods to pass through the border, leading to severe delays and fines.

What are the different types of customs bonds?

Two major types of customs bonds are used throughout the shipping industry to allow fair and secure trade with the US consisting of cargo insurance, custom duties and import taxes. Let’s learn more about them.

1. Single entry bond – An SEB is meant to be a single entry for one shipment across the US border. Most customs bond issuing companies will not issue more than three single-entry bonds yearly. So, this type of bond is ideal for importers who know they intend to make only a single shipment in a year. It is commonly used for less valuable shipments, and a port of entry is the border designated for such goods. The cargo can enter only through the listed port of entry and cannot change it. The importer needs to pay all taxes, dues, and applicable penalties.
2. Continuous entry bond – This bond, also known as an annual entry bond, covers all the importers’ shipments over a year. The shipments are allowed to pass continuously without any delay. By signing in for a continuous entry bond, importers can receive their goods through any port of entry throughout the US multiple times. This kind of customs bond can quickly process high-value goods or large-scale shipping.

Calculation of customs bond charge

When calculating the customs bond rate, the amount a consignee or shipper pays will be determined by the port director to whom the custom bond form submission will be made for acceptance.

• The charges of a single-entry bond will be determined based on taxes, fees, and duties and will generally be equivalent to the total value of the imported shipment. In the case of restricted merchandise, the total value of the single customs bond must be triple the value of the imported merchandise. In addition to the merchandise value, taxes, duties, and fees are added to the customs bond charge. 
• The charges of a continuous entry bond are calculated based on the rate of customs bond paid by the importer the previous year. The bond amount is calculated as ten percent of the total taxes, duties, and fees that the importer paid last year. If the calculated amount is less than $50,000, the default custom bond amount is considered $50,000.

Purpose of customs bond

It is hailed as a mandatory document and must be held as an essential part of the importing process for the fast forwarding of freight containers. Let us learn more about the uses of customs bonds.

1. Guarantee compliance – A customs bond is a guarantee signed by the importer that ensures that the shipment will comply with all regulations and requirements set forth by the customs authority. Failing this, extra fines and duties will be levied on the importer. It emphasises adherence to all import documentation, regulations, and payment of duties and taxes.
2. Secure revenue collection – Through this bond, the government and customs authorities get assured that the correct amount of duties and taxes will be paid by the importer of imported goods timely. This security is crucial for the government’s revenue collection and the proper functioning of the customs process.
3. Faster customs clearance – If the customs bond is complete and well documented, all regulatory guidelines have been adhered to, facilitating smoother and quicker clearance of goods through the customs department. This efficiency is essential for maintaining the flow of goods in international trade.
4. Public health and safety – Adherence to all standard guidelines and protocols helps ensure that imported goods meet the country’s standard requirements for health and safety. By ensuring compliance with regulations, bonds indirectly help prevent the entry of potentially hazardous or prohibited goods.

How do customs bonds work?

1. Completing documentation – An importer can complete the bond application form electronically. Generally, a customs broker, also known as the surety, is responsible for drafting the bond application based on the type of customs bond.
2. Submission – After drafting the customs bond and completing the application process, the surety registers it with the US CBP (customs and border protection) authorities. 
3. Shipment release – After submission to the CBP, the importer can pay the bond fee. An agreement is formulated between the CBP, surety, and importer, following which the CBP releases the shipment listed in the bond by the importer.
4. Payment – The importer must pay the agreed taxes, fines, and duties as stated in the customs bond to the CBP. If the importer does not make payments, the surety or customs broker must make all payments on behalf of the importer.
5. Reimbursement – The process is completed if the importer pays all due charges to the CBP themselves. But if the broker has paid the dues, the importer is indebted to pay the surety the full amount as stated in the bond.

When are customs bonds required?

A customs bond is required in the following cases:

• Any importer making commercial shipping with a shipment valued at $2500 or above is legally bound to have a bond.
• If you are an international carrier that transports goods and passengers to US destinations using various modes of transport, you need a customs bond.
• Warehouse owners are also obliged to hold a bond if they wish to store the imported shipment or even if it is meant for export after a certain time.

These are a few situations when a customs bond is needed to make international transportation of goods secure and effective for the shipper and the CBP.

LOTUS Containers sells different types of shipping containers to suit client requirements. Shippers can buy shipping containers in different sizes for trade across international waters.