In international shipping, Bonds are like an insurance policy payable to U.S. Customs. It guarantees to U.S. Customs, among other things, that duty and taxes will be paid.

All bonds must be submitted on CF 301 (CFR 19.113) to the Port Director and approved.
Block #6 in CF7501 is for the surety code.

When international shipping merchandise arrives in the United States, it remains in Customs custody until the importer of records or his Customs Broker secures the release of the international shipment. In some instances, especially in the case of duty-free noncommercial importations, the international shipping merchandise may be released to the importer of records simply upon furnishing proof of ownership, and NO FORMAL DOCUMENTATION IS REQUIRED.

However, in most cases involving commercial transportation, in international shipping, FORMAL DOCUMENTATION IS REQUIRED TO OBTAIN RELEASE OF MERCHANDISE.

Different types of bonds:

• Basic importation on an international shipment (most common)
• Bonds to put goods into a foreign trade zone
• Custodial bonds for bonded warehouses
• Bonds for bonded carriers
• FTZ - free trade zone bonds
• etc

All formal entries in international shipping require bonds. Even though it is duty-free. Bonds are required if entry is COMMERCIAL, and the value is over $2000.

THE CUSTOMS TRANSACTIONS RELEASING THE MERCHANDISE TO THE IMPORTER ARE REFERRED TO AS AN ENTRY. As part of the entry procedure, the Importer of Record or Customs Broker must file a bond with Customs.

Liquidated damages are the sum of money recovered for breach of bond. It must be paid to the U.S. Customs if the bond's principal fails to perform one or more bond conditions. (Examples: (1) He failed to file an entry summary within the prescribed time limit, or (2) he failed to redeliver to Customs merchandise ordered for redelivery, etc.)

International shipping bonds cover revenue, duty value, and liquidated damages. BONDS DO NOT COVER FINES!

According to CFR, THEORETICALLY, entries under $2500 bonds can be waived. However, it never happens in real life.

THREE PARTIES ON BOND:

1. PRINCIPAL - Importer of Record.
2. CREDITOR - U.S. Customs.
3. SURETY - Surety Company - An insurance company. Responsible for paying to U.S. Customs everything, including damages.

• Bonds in international shipping can be by INDIVIDUAL or SURETY COMPANY.
• Bond can be CASH or U.S. TREASURY NOTES. However, it CAN NOT be a U.S. Savings Bond or CD (Certificate of Deposit). It must be Treasury Notes. (For example: In lieu (as an alternative) of surety on any bond, the Port Director is authorized to accept U.S. money equal to the bond. This cash deposit will typically be retained by U.S. Customs for 2 years after the date of liquidation.)

GENERAL RULE of relation Principal and Surety is:
- A principal CANNOT be a surety.
- A surety CANNOT be a principal.
i.e., YOU CANNOT INSURE YOURSELF!!!

However: A U.S. Customs Broker, who has the power of Authority, CAN be a surety and act as ATTORNEY-IN-FACT for both principal and surety.

ALL BONDS HAVE VALUE LIMITS AND TIME LIMITS.

A. In international shipping, a single entry requires getting a bond for every single formal entry.

B. Continuous bond is good for one year. Multiple entries, multiple ports, nationwide.

SINGLE BOND & CONTINUOUS BOND.

1. Value on SINGLE ENTREE BOND = an amount equal to the Value of merchandise + All Duties, Taxes, and Fees that could apply.
The minimum amount of a single bond is $100.

2. On CONTINUOUS BOND (annual) = an amount ON THE DUTY ONLY.
Customs considerers that with a continuous bond (for the year), you have stability and less risk do not comply with international shipping customs regulations. Customs knows you are in the business and can comply with international shipping customs regulations.

Ether kind of bond is valued FOR LIVE until the entry is liquidated. All liability goes to the insurance company.

HOW TO APPLY FOR BONDS FOR AN INTERNATIONAL SHIPMENT?

1. Importer of record applies to U.S. Customs (to U.S. Port Director) with a description of previous activity. U.S. Customs (U.S. Port Director) then assigns $ the amount they require for the bond. The amount of any custom bonds in international shipping shall NOT be less than $100. THE MINIMUM AMOUNT FOR CONTINUOUS BONDS IS $50,000. There is NO MAXIMUM.

CUSTOMS HAS THE RIGHT TO ASSIGN THE AMOUNT OF BOND. YOU MUST AGREE WITH THE AMOUNT THAT CUSTOMS REQUIRE AND MUST GET IT.

2. The Port Director will review bond amounts periodically to see if they are sufficient. If he sees they are insufficient, he will notify the principal in writing, and THE PRINCIPAL WILL HAVE 30 DAYS FROM THE DATE OF NOTIFICATION TO REMEDY THE DEFICIENCY.

3. PREPARATION OF BOND.

The following information is required on a bond for international shipping:

1. The names of the principal and sureties and their respective places of residence.
2. The trade names and names of unincorporated divisions of the corporate principal, which do not have a separate and distinct legal status, are authorized to use the bond in their name.
3. The date of execution; and
4. The amount of the bond is stated in the figures.

In addition, the signature of each party to a bond executed by an unincorporated principal or surety SHALL BE WITNESSED BY TWO PEOPLE, who shall sign their names as witnesses and include their addresses.

No witnesses are required where bonds are executed by adequately authorized officers or agents of a corporate principal or corporate surety.

RULES WHILE FILLING CUSTOMS BOND ON AN INTERNATIONAL SHIPMENT:

• Abbreviations CAN NOT be used on a bond, except in dates and the state of incorporation of the principal or surety.
• LINE MUST BE DRAWN THROUGH all spaces and blocks on the bond that are not filled in.

The following types of riders the Port Director may accept:

1. Name change of principal;
2. Address change; or
3. Adding or deleting trade names and

Bonds and riders in international shipping should be filled up to 30 days before the effective date to provide adequate time for Customs review and processing.

• A single transaction bond in international shipping is effective on the day of the transaction identified on the bond.
• A continuous bond in international shipping is effective on the date identified on the bond.

4. Bond TERMINATION:

• A request by a PRINCIPAL to terminate a bond shall be made in writing to the Port Director. THE TERMINATION WILL TAKE PLACE ON THE REQUESTED DATE, PROVIDED IT IS AT LEAST 10 BUSINESS DAYS AFTER THE REQUEST'S DATE.
• SURETIES require reasonable written notice of AT LEAST 30 DAYS unless negotiated otherwise.

5. PRINCIPAL AND SURETY:

A partnership must be listed in the body of the bond with the full names of all partners and executed in the firm's name. A bond executed by one partner for the firm IS BINDING ON ALL PARTNERS. No individual member of a partnership may act as surety for the partnership.

Corporation bonds, executed under the firm name, must be signed by an authorized officer or attorney of the corporation. The CORPORATION SEAL shall be affirmed immediately, adjoining the signature of the person executing the bond.

If an ATTORNEY-IN-FACT fills and signs a corporate bond, a power of attorney must be filed with the bond unless such a power of attorney has already been filed with the Port Director.

Individual sureties: Unless the Port Director is satisfied that one surety is sufficient for the protection of the U.S. Government, TWO sureties are required for individuals.

1. Their residency and citizenship must be qualified;
2. If the individual is a married woman, she can only be accepted if the state in which the bond is issued does not prohibit her from acting in that capacity; and
3. Any individual may grant a power of attorney to sign as a surety, and the name of the importers for which a power of attorney is granted shall be shown in a power of attorney.

GENERAL RULE: AMOUNT OF CONTINUOUS BOND IS PER ENTRY, but not for the sum of entry!

Example: You have a $50,000 continuous bond for international shipping.
If you have 10 entries IN ONE DAY, each with a duty liability of $10,000 on each (total of $100,000), your continuous $50,000 bond is OK!

However, suppose even one single international shipment requires duties more than your continuous bond amount (let's say $65,000). In that case, you must BUY A SEPARATE ENTRY that exceeds THE AMOUNT OF YOUR CONTINUOUS BOND FOR THE FULL AMOUNT OF THE DUTY LIABILITY. (i.e. $50,000 of existing bond + $15,000 added bond IS NOT ALLOWED TO COVER THE $65,000 ENTRY).

Basic Importation and entry bond conditions in international shipping.
(most common). Covered in CFR 19.113.62. Some agreements covered:

• Agreement to Pay Duties, Taxes, and Charges.
• Agreement to Make or Complete Entry.
• Agreement to Produce Documents and Evidence.
• Agreement to be REDELIVER Merchandise. You must redeliver ALL goods back to customs within 30 days.
• Agreement to Rectify Non-Compliance of Provisions.
• Agreement for examination: 30 days.
• Agreement to Comply with Electronic Entry Filing Requirements.
  - etc.

Default of the agreement conditions CFR 113.62(l)is the value of the bond. For example, if you do not comply with one of any agreement's conditions, Customs goes against the entire amount of the bond.

Exceptions:
1. Alcohol - 3 times of value.
2. Restricted articles - 3 times of value.

If it is not a default but INCIDENTS:
- For non-sufficient funds (returned check), the fine is 2 times the duty or $1,000, whichever is greater. (For a $25-$40 returned check, you must pay $1,000!)
- For non-merchandize incidents, the fine is $1,000 (for example, you lost a badge or your employee-driver violated the terms of the badge).

Demand against bond production of documents for international shipping

When an entry is filed, and a required document is missing, the importer shall indicate the missing document in Block 16 of the CF 7501. Unless a shorter period is required by law, these missing international shipping documents must be submitted to Customs within 120 days. Otherwise, a penalty for non-production of missing documents, in the case of a continuous bond, would be cowered by a single-entry bond. These penalties are subject to mitigation (reduction or easing).

In international shipping, failure to satisfy a bond within 90 days from the issuance of the penalty, or if no application for relief has been made, will result in the matter BEING REPORTED TO THE U.S. ATTORNEY FOR PROSECUTION.