US Customs Bonds: Single Entry vs Continuous

A customs bond is a financial guarantee to CBP that duties, taxes and fees will be paid and that the importer will comply with regulations. It is not insurance for the importer. If the surety pays a claim, it recovers from you.

When a bond is required

Any formal entry of commercial goods into the United States requires one. Formal entry applies above the $2,500 informal entry limit in 19 CFR 143.21, and some goods need formal entry whatever their value. Bonds are also required for specific activities regardless of value, including goods subject to certain partner government agency requirements, temporary importation, warehouse entries and in-bond movements.

If you are importing commercially by ocean, you need one.

The two types

Single transaction bond. Covers one entry. Priced per shipment, with the bond amount based on the value of the goods plus duties, taxes and fees. For goods subject to additional agency requirements, the amount is set at a multiple of the value.

Continuous bond. Covers all entries at all ports for a year. The standard minimum amount is calculated from the duties, taxes and fees paid in the previous twelve months, and it renews annually.

The breakeven is low. Once you are importing more than a handful of formal entries a year, the continuous bond costs less in total, and it removes a per shipment task from the process.

What the bond obliges you to do

The conditions of an importation and entry bond are written in 19 CFR 113.62. The principal, which is you, agrees to:

• pay the duties, taxes and charges imposed or estimated to be due when goods are released into commerce, within the time the law prescribes;
• make or complete the entry when goods are released before entry is finished;
• produce documents and evidence that CBP requires when goods were released conditionally;
• redeliver released merchandise to CBP on demand, if it fails to meet the requirements for admission, so a cleared container can be recalled;
• mark, clean, fumigate or otherwise rectify non-compliance with the conditions of admission;
• reimburse the United States and exonerate it from losses connected to the transaction;
• comply with Importer Security Filing requirements under 19 CFR part 149.

What a default costs

The consequence of default is liquidated damages, set in 113.62(n):

• A default on a general condition that involves merchandise costs the value of the merchandise involved, or three times the value if the merchandise is restricted or prohibited, or an alcoholic beverage.
• A default that does not involve merchandise costs $1,000 for each default.
• Failure to deposit the estimated duties costs two times the unpaid duties, taxes and charges or $1,000, whichever is greater. CBP presumes this default when a payment instrument is returned unpaid or an Automated Clearinghouse payment is not transmitted on time.
• Failure to comply with the Importer Security Filing requirements costs $5,000 for each violation (113.62(j)).

The principal and the surety are jointly and severally liable for the liquidated damages on the bond, so CBP can collect from either. The surety pays CBP first and then recovers the amount from the importer.

The ISF connection

The Importer Security Filing carries its own bond requirement, and the $5,000 per violation sits in the bond conditions above. A continuous bond covers it. With a single transaction bond, an ISF bond is needed on top, and shipments have been held because the entry bond was arranged while the ISF bond was not. The filing is due 24 hours before the cargo is loaded at the foreign port for most of its data elements (19 CFR 149.2), so settle the bond question at booking, not when the entry is filed. The filing itself is covered in ISF filing requirements, and the carrier's side in AMS filing for ocean freight.

How the amount is set

For continuous bonds, the standard formula uses ten percent of the duties, taxes and fees paid in the previous year, subject to a minimum. The regulation sets a floor for any CBP bond of $100 and gives CBP discretion above it. Under 19 CFR 113.13, CBP considers:

• the principal's record of timely payment of duties, taxes and charges;
• its record of complying with demands for redelivery and with the obligation to hold unexamined merchandise intact;
• the value and nature of the merchandise;
• the degree and type of supervision CBP will exercise over the transaction;
• its record of honoring bond commitments, including payment of liquidated damages;
• any additional information in the bond application.

CBP reviews each bond on file for sufficiency. When it finds a bond inadequate, it notifies the principal and surety in writing, and the principal has 15 days from the notice to remedy the deficiency. Until the deficiency is remedied, CBP can require a cash deposit or a single transaction bond for any and all of the principal's transactions. It can also require additional security at once when accepting a transaction under a continuous bond would place the revenue in jeopardy.

Importers whose duty bill rises sharply, for example because of additional tariff actions on their goods, see their bond become insufficient, and CBP requires it to be increased. Model the bond alongside the calculation in how to calculate US import duty.

Details that decide a claim

• Effective date. A single transaction bond is effective on the date of the transaction identified on CBP Form 301. A bond dated after the transaction does not secure it.
• Missing documents. When a continuous bond secures the production of a missing document and the importer fails to produce it on time, the claim equals the amount of the single transaction bond that would have been taken for that transaction.
• Surety standing. A port director can refuse a single transaction bond from a surety that is significantly delinquent without just cause, in the number or dollar amount of its outstanding bills.
• Cash in place of a surety. CBP can accept United States money, Treasury notes, Treasury bills and certain other US securities in lieu of a surety, with single transaction bonds accepted at the port director's level.

Getting one

Bonds, like most of the terms on an entry, are explained in our freight glossary. They are issued by surety companies, arranged through a licensed customs broker. The application asks for the importer of record number, the corporate details and the expected import activity. For a single transaction, the port director can require a bond application, and it can be a letter or a scanned application sent as an email attachment or by fax. The surety underwrites the application against the importer's corporate details, import activity and duty exposure, so a new importer or a high duty exposure gets additional underwriting before approval.

Non-resident importers

A non-resident corporation, meaning one not incorporated in the customs territory of the United States or the US Virgin Islands, cannot enter merchandise for consumption unless it meets two conditions under 19 CFR 141.18. It has a resident agent in the state where the port of entry is located who is authorized to accept service of process, and it files a bond on CBP Form 301 containing the 113.62 conditions with a resident corporate surety. Many suppliers who agree DDP terms discover this only after the sale. Check the importer of record position before agreeing delivered terms, as covered in door to door ocean freight.

The carrier's bond is a different bond

Carriers and NVOCCs post an international carrier bond under 19 CFR 113.64, not an importer's bond. An NVOCC that files its own cargo declaration through AMS needs that bond plus a license or registration from the Federal Maritime Commission, and a late or false declaration costs $5,000 per violation under 19 CFR 4.7(e). Your forwarder's bond does not stand in for yours.

FAQ

When is a customs bond required?

For formal entries of commercial goods, for shipments subject to certain agency requirements, and for warehouse, temporary import and in-bond movements.

Is a customs bond insurance for the importer?

No. It guarantees payment to CBP. The surety recovers any claim from the importer.

How much does a continuous bond cost?

The premium is set by the bond amount, which is based on the prior year's duties, taxes and fees. Brokers quote it annually, and the quote changes whenever the prior year's duty total changes.

Does a single entry bond cover the ISF?

No. A separate ISF bond is required with a single transaction bond, whereas a continuous bond covers both.

Can a foreign company be the importer of record?

Yes. A non-resident corporation needs a resident agent in the state of the port of entry to accept service of process and a CBP Form 301 bond with a resident corporate surety, under 19 CFR 141.18. Confirm both before agreeing DDP terms.

What does it cost if I default on the bond?

The surety pays CBP liquidated damages. For a default involving merchandise that is the value of the goods, and $5,000 for each Importer Security Filing violation. The surety then recovers the amount from you.

What happens if CBP decides my bond is too small?

CBP notifies you and the surety in writing, and you have 15 days to remedy the deficiency. CBP can require a cash deposit or single transaction bonds on your entries until you do.

Can I post cash instead of buying a bond from a surety?

CBP accepts United States money, Treasury notes, Treasury bills and certain other US securities in lieu of a surety.

Does the bond cover the importer security filing deadline?

The ISF obligation sits in the bond conditions, with $5,000 liquidated damages per violation. Its data is due 24 hours before loading at the foreign port, so arrange the bond when you book the cargo.

Importing regularly into the United States? Ask us how the bond, the filings and the freight fit together on your lane.