A customs bond is similar to an insurance policy. It is a guarantee that those importing goods will pay the required amount to the U.S. Customs and Border Protection (CBP). A bond allows importers the ability to take possession of their merchandise and allows carriers to move goods from one place to another before all formalities are completed. It keeps the flow of imported goods, well, flowing. Anyone who imports or transports merchandise for commercial use through the United States must have a CBP Bond.
Three responsible parties
A CBP bond has three parties. The first two parties, the principal and surety, make up the bond obligors. These parties are responsible to fulfill the conditions and obligations set out in the bond. The final party is the beneficiary, the party to which the promises are being made.
1. The principal party is the party that seeks to do business with the CBP. This could be a carrier, a broker, or an importer, for example. The individual or company that wishes to do business with customs fills the role of principal.
2. The surety party is an insurance company, authorized by the Department of the Treasury, that writes the custom bonds and agrees to be liable if the principal party does not satisfy the bond’s requirements. Their job is to back the principal and minimize the risk of the beneficiary.
3. The beneficiary is the CBP.
Formalities of a CBP bond
As a legal document, a customs bond must be in writing and signed by the principal and surety parties. The presence of witnesses is determined by the status of the principal party. For example, individuals require two witnesses while corporations who send properly authorized officers or agents of a corporate principal do not require any witnesses. Not all bonds require an affixed seal. State law or the corporate charter or governing by-laws determines the requirement of a seal.
A customs bond is a legal document. It allows the principal party to keep goods moving without creating a gridlock or being stalled at the border while simultaneously insuring the CBP that the principal party will follow through with payment and obligations.
There are only two types of CBP bonds. The frequency of your shipments and how many ports of entries you will use determine the type of bond you need.
For more information or help with any of your shipping needs, contact ClearFreight and get in touch with our logistics and brokerage experts today.