»Issue 12, Volume 07                          www.scarbrough-intl.com                        » December 2007 

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SCARBROUGH SERVICES

Continuous and Single-Entry Bonds:  What You Need to Know 

As an Import customer of Scarbrough International, Ltd., there are a number of criteria you should know regarding Customs bonds.  If you’re importing merchandise into the United States, in most cases a bond must be posted to ensure all duties, taxes and fees owed to the federal government will be paid.  If your company uses a Customhouse Broker (such as Scarbrough) to clear goods through US Customs, the broker’s bond may be used to secure your transaction.  Otherwise, there are two types of bonds that can be obtained: Continuous Bonds and Single Entry Bonds (SEB).  The type of bond obtained ultimately depends on how often your company imports and the dutiable value of each shipment.  Customs bonds are usually acquired through a Surety Company (Roanoke Trade) licensed by the Treasury Department.

If you only import on occasion, SEB’s are usually the recommended choice.  However, if you import frequently and through various US ports of entry, a Continuous Bond is beneficial and economically the better choice.

SEB’s are used on a single shipment and cover only the entry or transaction for which it was written.  SEB amounts are usually determined by the local Port Director who accepts the bond.  The bond amount of a SEB is generally not less than the total entered value plus all duties, taxes, and fees.  If the merchandise is subject to other federal agency requirements or qualifies as restricted merchandise, the bond amount set is not less than three times the total entered value of the merchandise.  The minimum amount for a SEB is $100.

To do business with Customs using a SEB, you may have to apply for permission.  The person must file a bond application usually in the form of a letter.  The application should identify the value and nature of the merchandise involved in the transaction to be secured.  When the SEB is filed with the Customs Entry, or when the Entry Summary is filed at the time of entry, an application may not be required.

A Continuous Bond is normally obtained by companies that import at least eight times annually and/or import through several US ports of entry during a given year.  They are also acquired by international carriers who frequently arrive and depart the Customs and Border Protection (CBP) territory and by custodians of merchandise who do business with CBP on a regular basis.  A Continuous Bond is valid for one year and is automatically renewed on an annual basis.  The Bond remains valid until it is terminated by the Surety or the Principal.  All Continuous Bond amounts are set by the Revenue Division of the National Finance Center.  (Monetary guidelines for setting bond amounts can be found on the CBP website.)  For Importers, the minimum Continuous Bond amount is $50,000 or 10% of the total taxes and fees paid in the previous 12-month period; whichever is greater.  If you haven’t previously paid duty, the amount is determined by using the estimated duties and taxes you expect to pay in the current year.  Be sure to note that bond amounts are typically rounded up to the next whole dollar amount in multiples of $1,000.

Just like a SEB, to do business with Customs using a Continuous Bond you must also apply for permission.  The application package should be submitted to the entry office at the port through which your goods are imported or where the majority of your goods are imported.  The application package should include the bond (CBP 301) issued by the Surety, a statement on company letterhead indicating the type of bond being requested, a description of the merchandise being imported (if applicable), the amount of duties and taxes paid to Customs and Border Protection the preceding year (if you have not paid duty previously, then the amount of duties and taxes you expect to pay in the current year), and a CBP 5106 if your address or telephone number has changed from a previous application.

Only one Continuous Bond for a particular activity will be authorized for each Principal.  The Port Director will determine whether the bond is in proper form and provides adequate security for the transaction(s).  There are a number of different types of Customs bonds used for various activities.  The most common type is an Activity 1 bond which is used on entries for Immediate Delivery.  Activity 1a bonds are used for Drawback payment refunds.  Activity 2 bonds are associated with the Custody of Bonded Merchandise.  And for clearance or entry of vessels or aircraft arriving from outside of the United States, an Activity 3 bond is sufficient.

A current problem that has been identified by the Revenue Division Bond Team is the continued use of insufficient Continuous Bonds.  To deter Principals and Customhouse Brokers from using these bonds, the Bond Team may take one or more of the following actions: Other Continuous Bonds which the Principal is using in combination with their own bond will be re-evaluated and may be rendered insufficient.  The Revenue Division, in conjunction with the Ports of Entry, may input cargo criteria to preclude immediate release of the Principal’s goods.  As a last resort, the Importer of Record may be voided.

More information on SEB’s and Continuous Bonds can be obtained through the U.S. Customs and Border Protection website at:  www.cbp.gov or in the CBP Code of Federal Regulations at title 19 part 113.  For more information on Roanoke Trade you can visit their website at:  www.roanoketrade.com.

-- Ryan Flickinger, CHB Customer Service Representative

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