5 Common Misconceptions about Customs Surety Bond

Businesses and merchandisers who tend to do importation of goods through ocean vessel into the US have to obtain a customs surety bond. These bonds are to ensure duties and taxes will be paid to the Customs and Border Protection (CBP) that are levied on imported cargo. The main purpose of customs bonds NY is payment of duties and adherence of specific obligations made between three chief parties in a transaction – the principal (consignee/importer), CBP, and insurance company/broker (obligee).

Though most of the importers know the importance of brokers and they usually deem it intelligent to hire licensed brokers for a continuous customs bond, they often get confused at most of the dimensions. There are many myths and misunderstanding between Americans about surety bonds.

Surety bonds and insurance are the same

This is one of the widespread misconceptions about a customs surety bond. This is a totally false belief as to line surety bond and insurance the same. The main difference in an insurance (like your bike or car insurance) and bonds is with insurance only two parties have to involve – the purchaser and insurer, and in case of customs bonds, three parties have to sign an agreement – the principal, obligee, and surety company. Another difference is surety bonds do involve risks, payment rates, obligations, and more, while insurance policies are to protect the person/entity who is insured.

Brokers do most of the legwork for principal

The job of customs brokers entails preparation of documents that ensure that the shipment will meet all the requirements and laws of CBP. They have to determine adequate duties and taxes according to the value of the shipment on behalf of their client. This is true that brokers act as power of attorney and represents their client in front of customs officials but they do not take responsibility for any transactions or other business pertaining to a client’s license.

Single entry bond does not require ISF

Importer Security Filing (ISF/10+2) is a filing required by CBP that includes information of cargo such as the seller, buyer, country of origin, importer of record, and more. It was made mandatory by CBP in 2009 for all imports through the vessel into the US to file an ISF 24 hours prior to the arrival of the shipment at the final destination. Importers often puzzle between single entry bond and continuous customs bond. The truth is continuous bond is more cost-effective that also includes ISF requirements.

You need to pay a full bond amount

This is just a myth among importers. You do not need to pay full bond amount upfront but just a few percentages of it. For example – if you’re purchasing continuous customs surety bond of $50,000, you just need to pay 10% of the taxes and fees you paid in the previous year.

All bond companies are the same

Unfortunately, all surety companies are not the same. The bonding agency has to obtain a license and has to be approved by the U.S. Department of Treasury. If the surety company is not licensed in your state, your bond will be rejected by the obligee (CBP).