A special constitutional section enables congress to impose and collect taxes, fines, duties and other excises. Whether you purchase electronics from foreign countries, food or any other product, these goods are always subject to customs duties. A customs surety bond is a type of agreement between three parties:
- Principal: an importer or business who is required to abide with certain federal obligations
- Obligee: a party to whom these obligations are owed (i.e. CBP)
- Surety Company/Broker: a party that is responsible to pay compensation to CBP if the Principal fails to adhere obligations
There are several types of bonds that you may have heard of before. You may have signed a contract or medicare bond previously. But, customs bond is a quite different document. A surety bond is fairly like a safety arrangement. The principal pays a charge, called a premium, to the surety. Getting a customs surety bond gives an extra impetus to the obligee to confide in the principal. In case of default, the surety pays the punitive entirety to the obligee (the Customs and Border Protection), and afterward looks for repayment from the principal.
Here are 4 different types of surety bonds:
Customs Activity Code 1: the US activity code 1 importer bond is the most common type of bond agreement mainly concerned with commercial importers of the US. Every importing products into the U.S. for commercial reasons, or that transports or carries imported goods through the U.S., must have a customs bond in place. There are two main types of customs bonds in this category: Continuous Transaction Bonds and Single Transaction Bonds.
Activity Code 2 Bond: also called custodian of bonded merchandise bond, is another popular type of bond that customs broker writes specifically for warehouse owners, container stations, carriers, and cartmen. These bonds are to cover custodians and the minimum bond amount for them is $50,000. This type of customs bond ensures custodians the security for the damage occurs to the imported cargo for while it is under their possession.
Activity Code 3: also referred to as International Carrier Bond (C3) is required by CBP Area Port Director(s). This bond is for operators who transport goods and passengers through waters to ensure timely payment of any overtime duties and fines to customs officials. The minimum amount for this bond is $25,000 and can go up to $250,000 depending on the type of shipment coming from the location outside of the US.
Airport Security Bonds: it is similar to a importer customs bond required by the U.S. customs to ensure compliance with rules and regulations while accessing the federal inspection services areas.
Understanding the all types of bonds isn’t something foolproof and you have to invest a lot of time to know all the aspects. It is always better to work with a licensed surety company to obtain any kind of customs bonds.
