Customs Bonds 101 Questions and Answers Vol 1

We recently gave a presentation on the basics of U.S. Customs Bonds, called “Customs Bonds 101.” During the presentation, the attendees asked so many excellent questions, we felt like it would be a good idea to share some of them.   We hope that the answers to these questions will shine some light on the Customs bond questions our readers that weren’t able to join us for the presentation might have.

We’ll start with a fairly basic, but important question:

“So the bond amount covers annual import duties? How is the amount determined?”

The Activity Code 1 – import bond is calculated at 10% of the estimated annual
import duties and related taxes, and subject to a minimum bond of $50,000. The bond
amount increases incrementally in $10,000 increments up to a $100,000 bond, then
increases by $100,000 increments from that point on. For example, if you firm had
estimated import duties and taxes at $425,000, you would need a $50,000 bond
(10% X $425,000 = $42,500 total, and therefore subject to the $50,000 minimum bond).

Here’s another question that we were happy to answer:

“What is a good rule of thumb on 'How Often Should' an importer review their Bond?”

My recommendation is to review your bond once a year, 90 days prior to its
anniversary. This allows you to make changes that coincide with your anniversary date
and avoid going into another bond period where duplicate premium charges come into
play. This proactive process also keeps you ahead of any CBP increase letter that can
get lost in the mail which could lead to shipments being delayed at port because the
bond was not increased timely. In another scenario, if your firm is expecting a very
significant change to the volume of imports at any time during the year, this too would
be a time to reassess your bond amount.

We had someone ask this question, the answer to which may or may not come as a surprise:

“How difficult is it for a foreign importer of record to obtain a bond?”

The risk to a surety in writing bonds for foreign entities is due to the difference in
international law and the surety’s ability to enforce the bond contract in a foreign court. If
it is a foreign entity of a large multi-national parent, then you have a better chance in
this situation due to this relationship. A general indemnity agreement to the surety
linking these related companies together in regards to sharing the legal liability is a
common remedy that may suffice. Another option many sureties will consider is a letter
of credit from the applicant as collateral.

Hopefully this has answered some of the questions our TRG Peak readers have had. We’ll continue to add more from our presentation’s questions and answers section as time goes by, but if you have a question that isn’t mentioned here, feel free to ask it in the comment section below and we’ll do our best to give you an answer.