FAQ's

Customs Bonds Explained

As a working definition, according to U.S. Customs & Border Protection (CBP) regulations, a Customs Bond is “a contract which is given to ensure the performance of an obligation imposed by a law or regulation.” The parties involved in the customs bond contract are the principal (such as an importer), the surety company who provides the bond, and an obligee (CBP).

What is the Goal of a Customs Bond?

The primary goal of customs bonds is to assure compliance with all laws and regulations governing the transaction while also guaranteeing the CBP will be paid for all import duties and taxes. There are various types of customs bonds and all serve a unique purpose for the importer.

 

What are the Types of Customs Bonds?

Customs bonds are broken down into activity codes that are designed to cover specific situations and import, trade, and travel activities. Below is a detailed description of the most common types of customs bonds.

Activity Code 1 – Import Customs Bond

19 CFR § 113.62

May be written as either a single transaction or continuous customs bond.

The most common type of Customs Bond is an Activity Code 1 bond, also referred to as an import bond.  An import bond is required on all commercial shipments of goods valued over $2,500 to lawfully enter the commerce of the United States. An import bond is also required on any shipment into the U.S. that is subject to other U.S. government agency requirements. For example, vehicles are subject to review by the Environmental Protection Agency and Department of Transportation and food products are subject to review by the Food and Drug Administration.

Import bonds may be written as single transaction or continuous:

A single transaction bond can only be used for one customs transaction.
A continuous bond is a self-renewing bond that covers all customs transactions through any port of entry.

Activity Codes 11 (Airport Customs Security Area) and 16 (Importer Security Filing) obligations can also be secured by this bond.

 

Activity Code 1a – Drawback Customs Bond

19 CFR § 113.65

May be written as either a single transaction or continuous customs bond.

When merchandise is imported into the United States and later exported, a principal may be entitled to a refund of most duties, taxes, and fees – referred to as a drawback claim. A drawback claimant may receive the refund  granted before liquidation of the drawback claim. A Drawback Bond guarantees full repayment to CBP of overpaid drawback as determined by liquidation of the drawback claim.

Drawback customs bonds may be written as single transaction or continuous:

A single transaction bond can only be used for one customs transaction.
A continuous bond is a self-renewing bond that covers all customs transactions through any port of entry.

Activity Code 2 – Custodian of Bonded Merchandise

19 CFR § 113.63

May be written as a continuous bond only.

This bond guarantees a variety of obligations relating to custodial activities including: all classes of bonded warehouses, domestic common carriers, cartmen, lightermen, centralized examination stations and container freight stations.

Bonded warehousemen guarantee the custody of freight while stored under CBP supervision until withdrawal for consumption.
Domestic common carriers guarantee the custody of bonded goods while being transported from one port to another (in-bond transactions).
Cartmen/lightermen guarantee the custody of bonded goods while being transported within the same port.
Container freight station operators guarantee the custody of freight until released by CBP.
Centralized examination station operators guarantee the custody of freight while under CBP examination.

 

Activity Codes 11 (Airport Customs Security Area) and 16 (Importer Security Filing) obligations can also be secured by this bond.

Activity Code 3 – International Carrier Customs Bonds

19 CFR § 113.64

May be written as either a single transaction or continuous bond. The continuous bond may also be written as a combination bond with the Activity Code 3a – Instruments of International Traffic bond.

This customs bond guarantees activities related to the entry or clearance of vessels, vehicles or aircraft from outside the United States, including any advance manifest filing requirements by carriers and NVOCCs.  It is also used when a vessel repair entry is made.  Commercial air carriers are required to have this bond to guarantee payment of passenger users fees collected on international commercial flights.

Marine Terminal Operators may fulfill Activity Code 17 bond requirements using this (continuous) bond. Also, Activity Codes 11 (Airport Customs Security Area) and 16 (Importer Security Filing) obligations can be secured by this bond.

 

Activity Code 3a – Instruments of International Traffic

19 CFR § 113.66

May be written as a continuous bond only. The bond may also be written as a combination bond with the Activity Code 3 – International Carrier bond.

This customs bond guarantees compliance with laws and regulations on the movements and clearances of shipping containers. Without this provision, each container moved into the United States would need to be formally entered with duty paid.

 

Activity Code 4 – Foreign Trade Zone Operator Bond

19 CFR § 113.73

May be written as a continuous bond only.

This customs bond guarantees the operation of a Foreign Trade Zone (FTZ) and guarantees FTZ operators will comply with CBP regulations for maintaining the FTZ. The FTZ is a designated area within the U.S. located in or near a CBP port of entry, but legally considered to be outside of customs territory for the purpose of tariff laws and entry procedures. FTZs are part of a duty deferral program and are subject to CBP jurisdiction. Generally, payment of duties and excise taxes on foreign merchandise admitted to a zone will be deferred until the goods are transferred from the zone to the customs territory for consumption.

An FTZ operator is required to secure a bond to assure compliance with Customs regulations. The minimum bond amount required by CBP is $50,000. However, the maximum amount is determined by each individual port director and therefore the limits may vary.

Roanoke is a long-time supporter of the National Association of Foreign Trade Zones and offers preferential pricing for surety bonds and insurance to their members.

Activity Code 16 (Importer Security Filing) obligations can also be secured by this customs bond.

 

Activity Code 5 – Public Gauger

19 CFR § 113.67

May be written as a continuous bond only.

This type of customs bond guarantees the operations of commercial gaugers that are commercial organizations that measure, weigh or sample merchandise. Commercial gauger must properly sample and gauge in accordance with CBP regulations and abide to the terms of the commercial gauger agreement.

 

Activity Code 6 – Wool and Fur Products Labeling Act and Fiber Products Identification Act

19 CFR § 113.68

May be written as a single transaction bond only.

These customs bonds guarantee compliance with provisions and procedures for labeling wool and fur products.

 

Activity Code 7 – Billing of Lading

19 CFR § 113.69

May be written as a single transaction bond only.

This customs bond protects CBP from losses if merchandise is released from CBP custody without a bill of lading.

 

Activity Code 8 – Detention of Copyrighted Material

19 CFR § 113.70

May be written as a single transaction bond only.

This customs bond protects CBP from damages arising from the detention of merchandise incorrectly believed to be pirated copies.

 

Activity Code 9 –Neutrality

19 CFR § 113.71

May be written as a single transaction bond only.

These customs bonds provide for the agreement to observe neutrality by armed vessels.

 

Activity Code 10 – Court Costs for Condemned Goods

19 CFR § 113.72

May be written as a single transaction bond only.

This customs bond guarantees payment of court costs, should judicial proceedings result in the property to be condemned.

 

Activity Code 11 – Airport Customs Security Area

Appendix A to Part 113

May be written as a term bond only. Unlike a continuous bond, this type does not self-renew at anniversary, and a new bond must be filed annually with CBP.

This customs bond guarantees that proper standards are maintained regarding access to CBP-secure areas of an airport. Covered parties on the bond include the bond principal’s employees, agents and contractors.

 

Activity Code 12 – ITC Exclusion Order Bond

Appendix B to Part 113

May be written as a single transaction bond only.

This  customs bond is required during the Presidential review period of an ITC exclusion order when an imported product, or component thereof, is the subject of the exclusion order.  The ITC determines the amount of the bond, however the complainant that sought the exclusion order is the bond obligee, not CBP. This bond is filed with the entry and is in addition to any additional bond requirements for making entry.

 

Activity Code 14 – In-Bond Export Consolidation

19 CFR 113

May be written as a continuous bond only.

This customs bond guarantees compliance with all laws governing the receipt, carriage, safekeeping, and disposition of in-bond merchandise. This bond is required for export consolidators who consolidate conveyances (vehicles) for export under 19 CFR 192 outside the port of exportation.

 

Activity Code 15 – Intellectual Property Rights (IPR) Sample

19 CFR 113.1; ()

May be written as either a single transaction or continuous bond.

This customs bond guarantees that a sample of imported merchandise provided by CBP to an IPR holder is returned to CBP.

 

Activity Code 16 – Importer Security Filing

Appendix D to Part 113

May be written as either a single transaction or continuous bond.

These customs bonds guarantee a timely and accurate transmission of specific data elements to CBP before loading the cargo on the vessel, as described in 19 CFR Part 149.

 

Activity Code 17 – Marine Terminal Operator

19 CFR 113.1; Customs Bulletin and Decisions, Vol. 40, No. 52, Pages 4-8.

May be written as a continuous bond only.

This customs bond guarantees a Marine Terminal Operator complies with CBP regulations and instructions regarding the delivery of cargo and containers.

 

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