Questions and Answers on Customs bonds

What is a Customs bond?

A Customs bond is a contract that is given to insure the performance of an obligation or obligations imposed by law or regulation. A bond is like an insurance policy that is paid to the U.S. Customs Service if a required act is not performed. Bonds have a number of uses in the Customs Service. The most common use allows importers to take possession of their goods before all Custome formalities are completed. Another common use allows a carrier to move goods that have not been entered from one plaece to another.

All parties that import merchandise into the United States for commercial purposes or transport imported merchandise throught the United States must have a Customs Bond.

Who are the parties to a Customs Bond?

Usually, there are three parties to a Customs bond: the principal, the surety, and the beneficiary. The principal on a Customs bond can be an importer, a broker, a carrier, a bonded warehouse proprietor, a foreign trade zone operator or any one of a number of other parties that seek to do business with Customs. The principal gives the bond to Customs to insure satisfactory performance of obligations that it undertakes. The surety is normally an insurance company that has been authorized by the Treasury to write Customs bonds. The surety agrees to pay any liability that might arise from the principal's failure to perform its obligations. The principal and surety are also known as the bond obligors. The U.S. Customs Service is the beneficiary on all bonds it authorizes.

The specified sum of money that is set forth on the bond constitutes the damages suffered by the U.S. Customs Service as a result of the principal's failure to perform the required obligation. That sum, because the amount is set, is know as liquidated damages. the U.S. Customs Service has the authority to require bonds under Title 19, United States Code, section 1623, and most Customs bonds are taken under that authority. In addition, there are a few statutes that specifically require the U.S. Customs Service to get a bond from a person who wants to engage in certain transactions.

What are the obligations of the parties and where are they found?

Customs bonds are intended to reflect the obligations associated with the type of Customs transaction engaged in by the principal. An importer of merchandise has different obligations to the Government than does a custodian such as a carrier, a cartage operator, or a warehouse proprietor who does not own the merchandise that is being stored or transported. A person who makes a claim for drawback has a different set of obligations to the Government than does a master of a vessel which arrives in the United States from a foreign country.

Customs bond conditions appear in the Customs Regulations at title 19, Code of Federal Regulations (CFR), Subpart G of Part 113. The Customs Form 301 that is signed by the bond principal and surety employs a check-off that incorporates the bond text by reference. Bond conditions impose obligations that are otherwise required by statute or regulation. For example, an importer's bond obligations require him, among other things, to pay duties and submit entry summary documentation at the times required by regulation, and to redeliver merchandise to Customs upon a lawful demand.

What happens if the obligations under the bond are not met?

If a principal fails to perform its obligation under the bond, liquidated damages are owed to Customs. The amount of liquidated damages is established by the conditions of the bond. Both the bond principal and the surety are "jointly and severally" liable for the liquidated damages. In no case can a claim for liquidated damages exceed the amount of the bond that appears on the Customs Form 301.

If the bond principal cannot or will not perform its obligations, Customs can make demand for payment of liquidated damages on both the principal and the surety. Customs will accept payment from either party in satisfaction of the claim. If the surety pays Customs, it can make a claim for payment against the principal, but Customs is not a party to that transaction.

What are the main types of bonds?

Continuous Bond
A continuous bond is normally obtained by importers who have a large number of entries and/or imports through several ports of entry during a given year. A continuous bond is valid until it is terminated by the surety or the principal. It does not have to be renewed each year. The minimum bond amount for continuous bonds will be $50,000 or 10 percent of the total taxes and fees paid in the previous 12-month period whichever is greater. Please note that all bond amounts will be rounded up to the next whole dollar amount in multiples of $1000.

Single Entry Bond
Importers obtain a single entry bond for a single shipment. It covers only the entry or transaction for which it was written. The bond amount for a single entry bond is not less than the total entered value plus all duties, taxes, and fees. If merchandise is subject to other federal agency requirements or is restricted merchandise, the bond amount set is not less than three times the total entered value of the merchandise.

What do "termination" and "cancellation" mean?

Termination of a bond means that the term of the bond has elapsed. It has no effect on any obligation charged against the bond before termination. Cancellation of a bond means not only that the bond is terminated but, in addition, that all claims against the bond are annulled or wiped out.

Where can further information be obtained?

Questions on the legal effects of a Customs bond or the scope or meaning of the language in a Customs bond should be sent to:

Chief, Entry Procedures and Carriers Branch
Office of Regulations and Rulings
U.S. Customs Service
1300 Pennsylvania Avenue, NW
Washington, DC 20229
Telephone: 202-572-8730

Where can I get a bond?

Plane Cargo Inc can assist you with your bond needs. Please Contact us:
Toll free 800-766-4700 or
Email dfwimport@planecargo.com
Please ask for the Import Department and we'll see that your needs are met.