As the world’s largest importer, the United States’ import process is nothing short of complex. Besides the usual paperwork needed for any ocean freight shipment such as the Bill of Lading or packing list, there’s also a great deal of other expenses such as fees and taxes to consider. In this post, we’ll take a deeper look into one of them: the customs bond.

What is a customs bond?

A customs bond is like an insurance policy that guarantees payment of all duties and fees related to a shipment. As an importer, you purchase a bond from a surety company, who guarantees the US government that all corresponding shipment fees will be paid for.

By bonding the importer, the surety company is bounded by the importer’s responsibilities. Should the importer fail to honor his payments, the surety company may be obligated to do so on behalf and honor the bond conditions before then taking legal action against the importer.

It’s important to note that the customs bond only covers US Customs taxes and duties and does not cover the merchandise being imported.

When do I need a customs bond?

As a US importer, there are certain merchandise you bring into the country that will require you to file a customs bond:

Goods valued at over $2,500 for commercial purposes

Commodities subject to requirements from other government agencies such as weapons or food

Without a customs bond, your importing merchandise will not be able to clear customs.

Difference between a single entry bond and a continuous bond

There are two types of bonds available for US importers to select from: the single entry bond and the continuous bond. Which type of bond you choose will depend on how often you import into the US.

Single entry bond

A single entry bond, also known as a single transaction bond, is valid for, as its name suggests, one transaction (import) only and can only be used for the port at which the importing cargo will arrive. It is generally recommended for one-time or occasional imports. This is the better option if you’re importing fewer than three times a year. However, this depends largely on the bond cost and the breaking point may vary between two to five shipments.

Note that the Importer Security Filing (ISF), which is required to be submitted before your goods depart the exporting country, is not included in the single entry bond and will have to be purchased separately.

Continuous bond

A continuous bond, on the other hand, is valid for an unlimited number of imports through all US ports over a 12-month period. It covers all shipments within this period so you don’t have to obtain a single entry bond every time. This is the cheaper and better option for frequent importers realizing three or more imports annually.

A continuous bond also includes your ISF so you won’t have to make a double purchase. The continuous bond is automatically renewed each year until terminated either by the surety company or the importer himself. Purchasing a continuous bond does not restrict the importer to a freight forwarder or customs broker.

Note: If you have a customs broker that’s assisting with customs clearance with US Customs and Border Protection, you may be entitled to use your broker’s bond.

Speak to your freight forwarder to find out which option is better for your import needs.

How much do single entry bonds and continuous bonds cost?

Single entry bond price: There’s no fixed price for a single entry bond. In general, your bond amount is determined by the sum of the value of your merchandise and the applicable taxes. If your import is required to meet the requisites of a separate federal agency, the price of the applicable bond must be at least three times that of the value of your goods.

According to the CBP, the amount of any CBP bond must not be less than $100, except when it’s explicitly stated by law that a smaller amount is permitted.

Don’t forget that since it’s a single entry bond, the ISF filing is not included and will have to be paid for separately.

Continuous bond price: The price of a continuous bond is determined by the duties and fees associated with the imported merchandise. The amount of the bond is a minimum sum of $50,000 or 10% of the overall taxes and fees you paid over the course of the previous 12-month period.

US customs is not responsible for determining the price of customs bonds. These are set by the surety companies and will vary according to the company you choose.

How do I obtain a Customs bond?

You may get apply for a continuous bond through your freight forwarder. If you prefer to apply for it on your own, you will need to do it through a surety licensed by the US Department of Treasury. For more information, you may visit the Electronic Code of Federal Regulations page.

It’s more straightforward for the single entry bonds, as you may purchase them when your goods clear US customs.