Everything You Need to Know about Customs Bonds

A U.S. Customs Bond, sometimes referred to as an Activity Code 1 Bond, is a three-party contractual agreement between a principal importer, a surety company, and U.S. Customs & Border Protection (CBP). This agreement stipulates that the importer or shipper complies with all applicable customs regulations and standards; it also acknowledges that the importer will pay CBP any import duties, fees, taxes, or penalties that may be levied on the shipment. When fees arise, the surety company pays CBP and the importer pays the surety company. This agreement is a convenient method that ensures shipping efficiency. CBP is able to clear these imported items without the necessity of waiting for the importer to make a payment. 

When Do Importers Need to Obtain a Customs Bond?

The short answer is: any time they wish to ship goods into the United States. CBP oversees roughly 300 ports of entry. As a matter of course, the agency requires importers to have a Customs Bond on file if they wish to ship commercial goods into the U.S. Any importers of shipments that have a value of $2,500 or more must have a U.S. Customs Bond. In fact, even if this merchandise is duty free, the regulation remains. 

Additionally, if the items require approval from other U.S. agencies, they, too, require a Customs Bond, even if their value is below the $2,500 threshold. For instance, food items are subject to the approval of the FDA. Importers should obtain their bonds through a reputable company. 

Continuous vs Transactional Customs Bonds

Importers can choose to obtain a bond that covers their imported goods for a 12-month continuous period or on a shipment by shipment basis (transactional). Many importers prefer to purchase the continuous bond as it saves them from the hassle of repeated paperwork. However, importers who do not intend to make more than one or a few shipments might be content with a single-entry Customs Bond.

Can I Obtain a Continuous Bond for Longer Than One Year?

U.S. Customs Bonds are granted for one year from the precise date they were issued. To keep the bond active, the importer will need to pay the surety company. Many of these companies will bill importers annually before their bond is scheduled to expire; this prevents any delays in the bond’s renewal.

What Are the Other Types of Customs Bonds?

While the continuous and single-entry bonds are basic bond types, there are others you may consider. 

Drawback Payment Refunds Bond

Also known as Activity Code 1A Customs Bond, the Drawback Payment Refunds Bond is a contractual agreement that allows an exporter to obtain refunds on any paid duties of imported goods that are exported. The exporter has an option to claim their drawback refund from the exporter’s summary or via accelerated payment.

Again, the bond may be issued as a single transaction bond for an amount that is equal to the accelerated drawback duty amount that is claimed for the shipment’s entry. Or, it may be issued as a continuous bond that is for an amount that’s equal to the total accelerated drawback duty claim for the annual period.

Custodian of Bonded Merchandise Bond

The Custodian of Bonded Merchandise Bond, also known as U.S. Customs Bond Activity 2, is obtained to cover any operations required to hold or carry bonded merchandise that has not yet entered United States commerce. These operations might include carriers, container stations, or bonded warehouses. CBP determines the amount of the bond based on the importer’s application, which is dependent on the type of operation in question.

International Carrier Bond

U.S. Customs Bond Activity 3, the International Carrier Bond, is a bond for ship, airline, and other global merchandise conveyor operations. This bond is procured to ensure that the operators properly display or account for the merchandise they are transporting, pay for overtime services if needed, and comply with any CBP regulations that have to do with the vessel’s U.S. clearance. Although these bonds are not typically issued for an amount under $25,000, CBP will stipulate the amount.

Instruments of International Traffic Bond

Also known as the U.S. Customs Bond 3A, the Instruments of International Traffic Bond is procured to cover the international transport and clearance of containers. This provision negates the necessity to enter and pay a duty on each container upon its U.S. entry. These bonds are generally issued in the amount of $20,000.

Foreign Trade Zone Operator Bond

The Foreign Trade Zone Operator Bond, also referred to as Activity Code 4 U.S. Customs Bonds, refers to areas, generally outside of the United States, that are declared secure areas under the CBP’s jurisdiction for reasons of commerce. Usually, foreign trade zones are located near a U.S. port of entry and will be subject to the authority of the port.

Both international and domestic goods can be transported to foreign-trade zones for various operations that might include assembly, exhibition, manufacturing, processing or, simply, storage. The activity of these zones is subject to U.S. laws and regulations as well as local laws and regulations where they’re located.

Importers that operate in a foreign-trade zone are required to procure this bond in an amount specified by CBP. These bonds are not generally issued in amounts under $50,000.