A customs bond, or customs surety bond, is a form of insurance to protect the U.S. Treasury, in the event that an importer fails to pay taxes, fees, duties, and/or fines to the U.S. on imports, guaranteeing their payment. Per U.S. Customs & Border Protections, a customs bond’s primary purpose is “to protect the revenue of the United States, and to assure compliance with any pertinent law, regulation or instruction.”

The parties involved in the bond contract are the principal (importer), surety company and obligee (U.S. CBP.)

The customs bond guarantees U.S. Customs & Border Protection that if they cannot collect monies due from the principal, they can seek remedy, up to the bond amount, from the insurance/surety company. The customs bond also indemnifies the insurance/surety company, allowing them to use any legal means to collect from the Principal any monies that were paid to U.S. Customs on the principal’s behalf.

When an importer posts a custom bond on their commercial imports, they also agree to produce documentation of the shipment, correct a non-compliance issue, and give US Customs & Border Protection permission to examine the shipment, among other U.S. CBP requirements. Customs bonds are mandatory for importers to furnish when importing commercial goods (valued over $2,500) to the U.S. as the goods will not be cleared by U.S. Customs if the customs bond is not executed properly, even if the goods are duty-free.

Some brokers will not issue you a bond without the importer giving the broker power of attorney to file the customs bond entry, or entries, on an importer’s behalf.

In lieu of purchasing a bond from a licensed or corporate surety (licensed by the U.S. Treasury Department), an importer may pledge cash. The import bond amount is calculated based on the amount of duties and fees associated with the imported goods. In most cases, the amount of the bond must be at least 10% of the total duties and taxes paid to CBP annually, at a minimum of $50,000. For example, an imported shipment valued up to $499,999 in duties and taxes, must have a bond value of $50,000 (minimum) or more.

Customs bonds contain 12 Activity Codes representing different activities a principal may need bonded.

There are two types of Activity Code 1 bonds, and the most commonly-used are single entry bonds and continuous bonds.  Single entry bonds are used for a single particular transaction for imported goods. Continuous bonds can be used for multiple transactions within a year’s period, and are the most cost-effective for a regular importer of goods. Should goods be imported into the U.S. but exported out of the U.S., an importer would use a drawback bond which refunds 99% of the duties paid on the imported goods upon entry and clearance to the U.S. Custodian bonds, international carrier bonds, Free Trade Zone bonds, and airport security bonds are also available to suit the importer’s needs and maintain the economic, as well as national, security of the United States.