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Do I need a Bond? A Short Introduction to the Types of Bonds Used in U.S. Customs Transactions

Do I Need a Bond?

In order to conduct business with U.S. Customs and Border Protection (CBP), the short answer is yes

 

What type of business you are going to conduct with CBP determines what type of bond you will need. 

 

There are two types of bonds used in customs transactions:

  • Single transaction bonds are used as suggested; for a single customs transaction relating to import or entry of goods brought to the U.S.

  • Continuous bonds are used to cover multiple or regular customs transactions over a period of time.Continuous bonds have an expiration date and need to be refiled with CBP.

 

 

Bonds are often referred to by their activity code, but what do those numbers mean? Below you will find a breakdown of the various CBP activities that require bond and an explanation of each:

  • Type 1 Import Bond (single or continuous): An import bond is used for basic commercial imports . It is required on all commercial shipments of goods valued over $2,500.00 to lawfully enter the commerce of the United States.The importer, or their broker is required to have this type of bond.
     

  • Type 1a – Drawback Bond (single or continuous): The Drawback Bond allows an importer to obtain a refund of 99% of the duties paid on imported goods upon providing proof that these goods were exported back out of the U.S. For example, if an importer brings a container of manufactured textiles, sends it to their warehouse to be repackaged and then sends the container out of the US, they would need a drawback bond.
     

  • Type 2 – Custodian Bond (continuous bond only): The Custodian Bond is used by an entity holding goods that have not been cleared into the country yet. These can be warehouses, carriers, truckers and other areas where unreleased containers are being held.
     

  • Type 3 – International Carrier Bond or ICB (single or continuous): The ICB gives CBP the guarantee that entry regulations for vessels, and/or vehicles aircraft carrying commercial goods will be followed. It also requires that the transporter manifests the merchandise.
     

  • Type 3a – Instruments of International Traffic Bond (single or continuous): Like the ICB, this bond covers movements of containers that are not carrying cargo for consumption and requiring duty. This would also cover shipping pallets, containers for specialized products or empty containers being returned.
     

  • Type 4 – Foreign Trade Zone Operator Bond: Legally, foreign trade zones (FTZs) are outside of the U.S. border. An FTZ operator obtains this bond to creates a foreign trade zone which is typically near or inside a port of entry run by CBP. FTZ operators make an additional guarantee that importers follow the FTZ guidelines. FTZ zones defer duties, taxes and fees that would normally be paid on foreign goods (think of the airport "Duty Free" stores).
     

  • Type 5 – Commercial Gauger Bond (continuous): Entities that measure, gauge or sample merchandise require a type 5 bond. Usually covers bulk merchandise, examples: vegetable oils, petroleum, chemicals, etc.
     

  • Type 6 – Wool and Fur Products Labeling Act and Fiber Products Identification Act (single transaction): This bond requires the importer to adhere to three federal acts: Wool Products Labeling Act of 1939, Fur Products Labeling Ace and Fiber Products Identification Act.
     

  • Type 7 – Bill of Lading (single transaction): If a documented bill of lading is not available for making entry, the port director may accept a bond to produce a bill of lading under the provisions of the tariff act. This bond guarantees that the importer will produce the bill of lading, and protects U.S. Customs from losses that could be incurred from merchandise being released without a documented bill of lading.
     

  • Type 8 – Detention of Copyrighted Material (single transaction): It is the responsibility of CBP to ensure that products being imported to the US are not infringing on copyrighted goods. A shipment may be detained that is not in violation of copyrights and this bond, like the bill of lading bond, protects CBP from having to compensate for damage to goods mistakenly detained.
     

  • Type 9 – Neutrality Bond (single transaction): If an importer is using an armed vessel to transport goods, the importer must guarantee that the vessel will not commit any hostile actions against the U.S. or its allies.
     

  • Type 10 – Court Costs for Condemned Goods (single transaction): Under certain circumstances, a court may rule that merchandise has been deemed unsafe for human or animal consumption.This bond guarantees that CBP will pay the court fees.
     

  • Type 11 – Airport Security Bond  (term bond): Any service company entering the secured area of an airport must be covered under an Airport Security Bond. This includes cleaning and maintenance personnel, restaurant and give shop workers, vending machine repair operators etc. A term bond can only be used on a specified date.
     

  • Type 12 – ITC Exclusion Order Bond (single transaction): Intellectual property rights are protected under International Trade Commission (ITC) section 337. Once the ITC completes its investigation, it is sent to the U.S. president for approval/disapproval of its ruling. The Exclusion Order Bond is needed during the president’s 60-day review period.
     

  • Type 14 – In Bond Export Consolidation Bond or IBEC: In Bond Export Consolidation Facilities (IBEC) are run by and kept secure by CBP. This type of bond is used by a consolidator when these goods are shipped, stored, manipulated, and then exported from outside the exportation port. The bond guarantees that compliance with laws covering the handling of in bond merchandise will be adhered to.
     

  • Type 15 – Intellectual Property Rights Sample (single or continuous): Owners of trademarks, trade names and copyrights are federally protected from fraud. If CBP suspects an importation violates these rights, they will send a sample of the suspected merchandise to the rights owner. To receive the sample, the owner must post an Intellectual Property Rights Sample bond to guarantee the sample is returned to CBP.
     

  • Type 16 – Importer Security Filing Bond: Importer Security filing (ISF) is required for all cargo entering the customs territory and is required 24 hours prior to loading on the importing vessel. An ISF bond guarantees that the importer is submitting proper information to CBP about the cargo within the specified time frame. Learn more on ISF 10+2 here

 

  • Type 17 – Marine Terminal Operator or MTO Bond (continuous): The MTO bond guarantees that the terminal operator will provide ocean carriers a place to wharf, warehouse and or dock and will be operated under the CBP regulations for loading and unloading.
     

  • Carnet Bond: An ATA Carnet bond allows temporary importation (and reentry) of certain goods into the U.S. without duty or taxes.These include commercial samples, professional equipment and goods used in presentations or at trade fairs, shows or similar events. ATA Carnets can be secured with a carnet bond.