A Deep Dive Into Continuous Customs Bonds (And Why You Need One)
Along with an entry, US Customs and Border Protection (CBP), requires a bond in order to import goods into the US. There are two options: A continuous bond or a single transaction bond. Both have purpose and both have benefits to suit your importing needs. Why do you need a bond? A bond guarantees the revenue due to the US government on imported merchandise.
This blog will provide answers to frequently asked questions about continuous entry bonds. We will also explain how they differ from single-entry and importer security filing bonds.
The Purpose Of Customs Bonds
Customs Bonds are financial guarantees required by US CBP. In order to import into the US, either a continuous or single-entry bond must be purchased.
Bonds act as insurance between the principal and CBP. In most cases, the principal is the importer of record, and CBP is the obligee. It guarantees that the principal will fulfill its obligations and responsibilities regarding importing goods. They help to protect the payment of:
- Other fees associated with importing into the US
It is important to note that Customs bonds do not cover service fees associated with the release of goods charged by your customs broker or other logistics service providers.
The bond helps protect the revenue of the United States. It also ensures adherence to trade laws and facilitates the flow of legitimate international trade.
The Difference Between Continuous Customs Bonds And Single-Entry Bonds
There are two types of CBP bonds: single-entry bonds and continuous bonds. Both are used for Activity Code 1, commonly called Import Customs Bonds.
What Is A Continuous Entry Bond?
Continuous Customs Bonds (CTB) are ongoing and can be renewed. They cover multiple shipments or activities for a period of time, usually twelve months from the date of issue. Continuous bonds eliminate the need to obtain a separate bond for each import or transaction, providing convenience and cost savings for businesses involved in regular import operations. If shipping by ocean, the CTB will also cover the bonding requirements for your Importer Security Filing (ISF).
Continuous bonds are typically required for entities involved in high-volume or high-value international trade, such as importers, customs brokers, warehouse operators, and transportation companies. Some common scenarios that may require a continuous bond include:
- Compliance with CBP regulations: Importers must ensure they have a continuous or single-entry bond in place prior to importing. Compliance with this CBP regulation is mandatory.
- Customs-Trade Partnership Against Terrorism (C-TPAT) program: C-TPAT is a voluntary partnership between CBP and businesses involved in international trade to enhance supply chain security. Participants in the program are required to have a continuous bond.
- Transportation and warehousing activities: Companies in the transportation and warehousing sector may require a continuous bond to cover their operations. This includes companies involved in transportation, freight forwarding, and operating bonded warehouses.
What Is A Single-Entry Bond?
A Single Entry Bond (SEB) is another type of bond used in international trade, specifically for individual import transactions, and is obtained for a single import transaction.
Customs Bonds vs. Single Entry Bonds
Some key differences between a Single Entry Bond and a Continuous Customs Bond include:
- Coverage: A Single Entry Bond is specific to a particular import transaction. It provides a financial guarantee for that specific shipment only.
- Renewal: A Single Entry Bond is not renewable. Once the import transaction is complete, the bond will be discharged. For any future import transactions, a new bond must be obtained.
- Frequency of Transactions: Single Entry Bonds are typically used for infrequent importers or for importers who don't engage in regular or high-volume trade.
Calculating Customs Bond Amounts
The estimated duties, taxes, and fees for the import transaction determine the bond amount for a Single Entry Bond. This amount is typically assessed on a case-by-case basis. It is specific to the value and nature of the goods being imported.
The bond amount for a Continuous Customs Bond is determined differently. It considers the importer's historical activity, financial standing, and other factors.
According to US CBP, "A continuous bond is 10% of duties, taxes, and fees paid for the 12 month period," whereas "A single entry bond is generally in an amount not less than the total entered value, plus any duties, taxes, and fees."
Single-entry bonds can be quite expensive compared to continuous if the entry is subject to Partner Government Agency review such as the Food and Drug Administration (FDA) or Environmental Protection Agency (EPA). In such cases, the bond cost is calculated at three times the value of the shipment.
Pro Tip: No matter the type of bond, single-entry or continuous, the amount of coverage must not be less than $100. Exceptions are present when the regulations expressly provide for a lesser amount.
Benefits Of A Continuous Bond
The biggest benefit of a CTB is reduced costs. For importers, instead of filing many expensive single-transaction bonds, a CTB will cover multiple transactions throughout the year of the coverage. For carriers, a CTB allows for the carriage and warehousing of security-sensitive cargo, respectively.
Customs Bond Activity Types
Customs bond activity types specify the reasons for use. When applying for a Customs Bond, an indication of activity type is required. There are 17 different types, including:
- Drawback Customs Bond
- Custodian of Bonded Merchandise
- International Carrier Customs Bonds
- Instruments of International Traffic
- Foreign Trade Zone Operator Bond
- Public Gauger
- Wool and Fur Products Labeling Act and Fibre Products Identification Act
- Billing of Lading
- Detention of Copyrighted Material
- Court Costs for Condemned Goods
- Airport Customs Security Area
- ITC Exclusion Order Bond
- In-Bond Export Consolidation
- Intellectual Property Rights (IPR) Sample
- Importer Security Filing
- Marine Terminal Operator
How To Obtain a Customs Bond
PCB can assist you in obtaining a continuous or single-entry customs bond. The process is simple and requires the required bond amount, importer name, importer number, and CBP-assigned number to get started.