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How Do Import Bonds Work?

The most common type of Customs Bond is an Activity Code 1 bond, also often referred to as an Import Bond. The reason the import bond is so prevalent and so important is that it is required by customs when a company is importing merchandise or commercial goods with a value of $2500.00 or above into the United States.

According to the U.S. Customs & Border Protection (CBP) regulations, a bond is “a contract which is given to ensure the performance of an obligation imposed by law or regulation.” In plain English, the bond guarantees that the party doing business with CBP will fulfill their financial obligation to U.S. Customs. The purpose of the bond is to ensure all duties, taxes, and fees owed to the government will be paid and paid on time. The importer is the party responsible for making payment. The bond is required as a protection to CBP should the importer fail to meet their financial duty.

There are three parties involved in the contract of an Import Bond:

  1. Principal – the party that must post the bond in order to do business with CBP, such as an importer.
  2. Surety – the party that guarantees the principal on the bond. The surety is a company that has been pre-approved by the Department of Treasury to write bonds up to a specific limit. By writing the bond, the surety agrees to pay amounts due to CBP if the principal is unable to do so.
  3. Obligee – the beneficiary of the contract (CBP).

The CBP requires a bond on all commercial shipments with a value of $2500.00 or above that are entering the commerce of the United States. The CBP’s regulations state that the bond is required to protect the revenue of the United States and to assure compliance with any pertinent law, regulation or instruction.

Import bonds may be written as either a single transaction or a continuous bond. In most cases, those entities importing goods into U.S. commerce are required to file an Importer Security Filing (ISF) on their shipment. A continuous import bond typically covers the ISF filing for all shipments being imported.

 

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