What is a Customs Bond (CBP Form 301)?
A customs bond is a legally binding contract that protects U.S. taxpayers. You need a US custom bond if you want to import goods valued over $2,500 into the U.S. for commercial purposes (or commodities that are bound by other federal agencies’ restrictions, such as food or firearms). If you work with a customs broker to clear your merchandise through the U.S. CBP, the broker's customs bond can be used as opposed to getting your own.
You will also need a customs bond if you're an international carrier who transports cargo or passengers through air, vehicle or vessel from foreign destinations to the U.S. or a domestic carrier that wants to transport imported cargo from one state to another “in bond”.
Also, if you are a warehouse operator and want to be able to store and secure imported/exported merchandise, you need a customs bond. You would also have to determine the type of warehouse you'd like to establish and apply with the port director.
Lastly, you'll need a customs bond if you want to perform work in a secure CBP property. This would include operating as a customs- approved gauger or laboratory or work as a customs broker.
Customs Bond Types: Which One Do You Need?
A continuous customs bond is usually needed by importers who have a large number of entries or who import merchandise through multiple ports of entry every year. They are also needed by international carriers who frequently arrive and depart the U.S. CBP territory, as well as custodians of goods who do business with the U.S. CBP regularly.
Single Entry Bond
Single entry customs bonds are needed for importers that only want to import a single shipment. This bond type only covers the specific entry or transaction that the bond was written for. If you only import goods occasionally, this type of bond is recommended.
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How Much Do Customs Bonds Cost?
Costs are based on a small percentage of the required bond amount (usually 1-15%).
What Customs Bond Amount Do You Need?
If you need a continuous customs bond, the amount must be the larger of $50,000 or 10% of the total duties, taxes and fees that you paid in the previous 12 month period.
The required amount for a single entry customs bond is determined by the port director who accepts your bond. Single entry bond amounts are usually no less than the total entered value of your imports including all duties, taxes and fees.
If the merchandise being imported is subject to other federal agency requirements or is restricted merchandise, the bond amount must be at least three times the total entered value of the merchandise.
Custom Bond Process: Step-By-Step
Step 1: Determine Which Bond You Need
First, you must apply to the entry office at the port where your goods will be imported. The application will include the customs bond form (CBP 301) which will ask for the type of bond you need, merchandise description and the amount of duties/taxes paid to the CBP the previous year. If you have never paid duties before, then you'll use the amount of duties and taxes you expect to pay in the current year.
When determining whether you need a continuous or single entry customs bond, you have to consider how often you import merchandise. Continuous customs bonds are generally needed by importers who import merchandise frequently or through multiple ports of entry every year. Single entry customs bonds are needed if you only want to import a single shipment.
Step 2: Apply For Your Customs Bond
Now that you have applied with the entry office and know which US customs import bond you need, your next step is to apply to get an instant approval.
Step 3: Submit Your Bond to Your Bond Agency
Once you apply and receive your customs bond from your bond agency, you'll need to:
- Sign your bond
- Make a copy for your records
- Send your signed customs bond back to your bond agency for filing with CBP
Your bond agency will handle your bond filing with the CBP, and the process usually takes about 10 business days. Keep in mind, you're responsible to pay any claims you trigger on your bond once you have your bond filed with the CBP. In order to avoid claims, make sure you pay all duties, taxes and fees on your goods on time.
Import Bond Alternatives
Purchasing a customs bond is not your only option to import goods legally. You also have the option of posting cash collateral, which the U.S. CPB refers to as the "cash-in-lieu of surety bond option". Both options have their own advantages and weaknesses, so you will have to make an informed decision as to which is best for your business.
Choosing the cash-in-lieu of surety bond option requires you to post cash collateral for the full face value of the bond, as opposed to paying the surety company a premium to get a customs bond. There are no fees or interest charged when you choose the cash-in-lieu of surety bond option, but you will have to post additional collateral in the same amount every year to keep the bond active.
For example, if you post cash to get a $50,000 continuous bond, you will have to post an additional $50,000 every year you want to renew it. Also, your funds will be held for a number of years after the bond is terminated. In short, you are guaranteeing that you'll pay for any bond claims that you cause with your own cash.
Posting collateral ties up your working capital, which is a huge downside if you're a smaller business. With the additional collateral required every year that you need to renew the bond, your working capital will be reduced very quickly.
On the other hand, getting a customs bond from a bond expert will cost a small percentage of the required bond amount, and usually must be renewed and paid for every year. While getting a customs bond from a surety company requires you to pay a yearly premium, our agency usually doesn't require any collateral.