Customs Bonds are required for many importers, traders and other activities coming into the United States. The purpose of these bonds is to protect the revenue of the United States and to ensure compliance with laws and codes.
A U.S. Customs Bond is a surety bond that protects the revenue of the United States and compliance with laws and codes. The bond guarantees that tax, duties, fines, penalties and other amounts owed for certain activities will be paid to the U.S. Customs and Border Protection (CBP), AND that the person or business involved in those activities will comply with all laws and codes.
The principal pays bond premium and provides indemnity to a third-party surety bond company. In exchange, the bond company provides a financial guarantee on behalf of the principal to the CBP (the obligee). The bond guarantees the payment of dues, taxes, fines and other amounts owed, along with compliance to laws and regulations. Should the principal not comply with laws, or should they not pay amounts owed, CBP could make a claim on the bond with the surety. The surety would pay the claim and seek reimbursement from the principal under the indemnity agreement.
A customs bond provides the U.S. with valuable protection. Instead of spending taxpayer time and money trying to collect amounts owed from an importer, the CBP can simply collect from the bond company. Surety bond companies are licensed and rated for their financial strength and ability to pay claims, so it is much easier for CBP to get paid. However, payment on the bond does not relieve the principal from further penalties from CBP and the U.S.
Customs Bonds in many amounts can be obtained with a simple application and credit check. The most popular bonds such as basic importation bonds and airport customs security area bonds are usually approved very quickly with little information. Like many surety bonds, very large amounts may require more information such as financial information from the principal.
The cost of a customs bond depends on the amount of the obligation and the activity being bonded. Prices can be 1% or less for easy obligations or up to 4% for complex entries. Axcess Surety has multiple bond companies and tools to write customs bonds. We can issue them without additional fees and have rate flexibility in most cases.
CBP sets the requirements and amounts of Customs Bonds based on the activity code for which the principal is performing that requires bonding. The activity codes and bond amounts are below.
Activity Code 1 is often referred to as an “Importer Bond.” Activity Code 1 Importer Bonds are the most common type of Customs Bonds and are needed by most importers of goods to the U.S. Activity Code 1 covers basic import and entry covers products used in immediate consumption, immediate delivery, or products entered or withdrawn from a warehouse.
Drawback Bonds are needed when a party requests and is approved for acceleration of drawback under CFR 190.02.
Basic Custodial Bonds cover custodians of bonded merchandise. These include bonded warehouses and bonded carriers. Examples of those needing Basic Custodial Bonds include:
The minimum amount for Code 2 Basic Custodial Bonds is $25,000. The bond limit increases in increments of $10,000 up to $100,000 and increments of $100,000 after that.
Activity Code 3 Bonds or International Carrier Bonds are bonds for airlines, vehicles, ships and other transportation of international goods and services into the United States.
A Continuous Activity 3 International Carrier Bond must be in an amount of at least $50,000. All continuous international carrier bonds are written in increments of $10,000 up to $100,000 and increments of $100,000 after that. All Activity 3 bonds are in addition to other bond requirements. The following are exceptions and changes to the required amounts on International Carrier Bonds.
Foreign Trade Zones are defined as: “Secure areas under U.S. Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the United States' version of what are known internationally as free-trade zones.”
CBP is responsible for the transfer of merchandise into and out of the FTZ and for matters involving the collection of revenue. The bonds guarantee this collection of revenue as well as the payment of any fines or other amounts owed.
When a bond is used to secure activities within an FTZ, the bond amount must be at least $50,000 and in an amount the Director of OF-RD deems necessary to accomplish the purpose for which the bond is given. An FTZ Bond is in addition to any other required CBP Bond.
Commercial Gaugers are defined by CBP as: “Commercial organizations and individuals who measure, gaugers, or sample merchandise. The term "public gaugers" is used to denote a type of commercial gaugers dealing mainly with petroleum and petroleum products, such as crude petroleum, as well as alcohol, etc.
Commercial gaugers may own and operate commercial laboratories and vice versa. Once a commercial laboratory or commercial gaugers is accredited by U.S. Customs and Border Protection (CBP), they test and/or measure imported commodities on behalf of CBP.
Any product under the Wool Products Labeling Act of 1939, The Fur Products Labeling Act, or Textile Fiber Products Identification Act must have a bond in the amount of two times (2X) the product's value plus applicable duties.
This bond is in addition to any other required CBP Bond.
When a party is unable to produce a bill of lading, air waybill or other evidence of right to make entry, a bond may be substituted. In such cases, the bond must not be in an amount less than 1.5X the invoice value.
A bond given for the production of a bill of lading or air waybill shall be considered as canceled upon production of a bill of lading or air waybill, and may be considered as satisfied but shall not be canceled upon the production of a carrier's certificate or certified duplicate bill of lading or air waybill.
If the port director believes any imported material may be infringing on a copyright, the port director may withhold the item and notify the copyright holder. Within 30 days of the notice, the copyright holder must file a written demand to exclude the item from entry and file a bond or the item will be released to the importer.
The bond is conditioned to hold the importer or owner of the imported article harmless from any loss or damage resulting from Customs detention in the event the Commissioner or his designee determines that the article is not an infringing copy prohibited importation. The bond needs to be at least 120% of the value of the items plus duties, taxes and fees owed to CBP. The bond is in addition to any other CBP bonds required. The copyright owner obtaining the bond may not withdraw the bond until a decision on the issue of infringement has been reached.
Neutrality deals with arms, munitions and vessels of war. The port director shall not allow clearance of department for any vessels where there is a suspected violation of the Neutrality Act of 1939.
When a bond is necessary to protect Neutrality, the bond shall be at least 2X the value of BOTH the vessel and the cargo. The bond will be required in addition to other CBP bonds.
When property or vessel has been seized under 19 CFR 162.47, a party may file a claim for the vessel or property within 20 days of public notice. The claim must be accompanied by a bond that guarantees the payment of cost and expenses of the proceeding. The bond shall be in the greater of $5,000 or 10% of the property value. However, the bond must not be less than $250. A forfeiture officer may waive the bond requirement upon satisfactory proof of financial inability to post the bond, the fines, and penalties.
An Activity 11 bond guarantees that those with access to customs security areas in airports will comply with all laws and regulations. This includes employees and contractors of the bonded principal. If an importer has an Activity Code 2 or Activity Code 3 Bond in place, a separate Activity Code 11 is not necessary. An Activity Code 11 Bond is in addition to any other CBP Bond requirement.
Customs Security Area is defined as:
The amount of an Airport Customs Security Area Bond depends on the number of employees accessing the area. The minimum amount of a continuous bond is a follows:
19 USC 1337 deals with unfair trade practices. When entry of merchandise is subject to such an order from the ITC, a bond may be required. The ITC sets the amount of the bond. The bond is in addition to any other CBP Bond requirement.
This bond cannot be issued on form 301. It must be in the form of Bond to Indemnify. This bond must be transmitted to the relevant Port of Entry or Center. It cannot be submitted via EBond.
Under CBP regulations, CBP provides samples to trademark, trade name and copyright owners (rights owners) of certain merchandise suspected of bearing infringing trademarks, or copyrights or imports seized for such violations. To obtain such a sample, rights owners must provide an Intellectual Property Rights (Article Code 15) Bond.
An Intellectual Property Rights Bonds can be continuous or single. It guarantees four things:
Activity Code 11 Bonds are in addition to other required CBP bonds. These bonds cannot be submitted through EBond.
Before certain merchandise arriving by vessel to the United States can be imported, certain information must be transmitted in advance by the shipper or their agent. These requirements are often referred to as 10+2 requirements because of the 10 items the importer needs to supply + the 2 items the carrier needs to supply.
An ISF Bond guarantees that the accurate information has been supplied to CBP. When a continuous bond is supplied for the sole purpose of meeting the ISF requirement, the bond must be at least $50,000. When a single transaction bond is used solely to satisfy the ISF requirement, the bond must be at least $10,000. The ISF Bond is in addition to any other required CBP Bond.
Marine Terminal Operators (MTOs) are defined by 46 CFR §525.1(c)(13) as:
All MTOs who operate at ports of entry who engage in commerce of cargo arriving from foreign countries must post an Activity 17 MTO Bond unless they handle bulk cargo exclusively. An MTO Bond may not be less than $100,000 and may be $250,000 or more if the MTO has had previous violations. The bond requirement is in addition to any other CBP Bond requirement.
An MTO Bond may not be submitted on Bond Form 301 or be submitted electronically through Ebond.
Large recreational yachts that will be sold at boat shows can defer entry completion and paying duties for up to 6 months under 19 cfr 113 .75 appendix c. The bond guarantees the payment of duties, taxes and fees that would be owed upon entry. The bond must be in an amount of 2X the duties, taxes and fees that would be appropriate upon entry.
If within 6 months, the yacht is exported or sold, the bond will be returned. If the yacht is not sold or exported within 6 months, the owner will be required to make entry and replace the bond with an appropriate entry bond.
The bond cannot be submitted via Ebond.
Cash may be used to guarantee CBP obligations instead of surety bonds. Cash must still be in the amounts required by bonds. Cash must also be held for one year periods. Generally, surety bonds are superior to cash for individuals and businesses. While cash may not have an upfront cost, it has an opportunity cost. Cash held by to secure CBP requirements could be used for other purposes such as operations or growth.
CBP (Customs) Bonds can seem complicated. They are required for most importers and exporters of goods and products to and from the United States. Let the customs bonds experts at Axcess Surety make the process easier. Contact us today for assistance. Importers and exporters can also learn more about surety by visiting our Complete Guide.
Axcess Surety is the premier provider of surety bonds nationally. We work individuals and businesses across the country to provide the best surety bond programs at the best price.
