In international shipping Bonds 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 Port Director and approved.
Block #6 in CF7501 is for surety code.

When internationally shipping merchandise arrives in the United States it remains in Customs custody until the importer of records or his Customs Broker secure the release of the international shipment. In some instances, especially in the case of duty-free noncommercial importations, the internationally 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 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. If entry is COMMERCIAL and value is over $2000 then bonds are require.

THE CUSTOMS TRANSACTIONS RELEASING THE MERCHANDISE TO THE IMPORTER IS REFERRED TO AS AN ENTRY. As part or 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 principal of the bond failed to perform one ore more conditions of the bond. (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.)

Bonds in international shipping cover revenue, value of duty and liquidated damages. BONDS DO NOT COVER FINES!

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

THREE PARTIES ON BOND:

1. PRINCIPAL - Importer of Record.
2. CREDITOR - U.S. Customs.
3. SURETY - Surety Company - Insurance company. Responsible to pay to U.S. Customs everything, including damages.

• Bond in international shipping can be by INDIVIDUAL or SURETY COMPANY.
• Bond can be CASH or U.S. TREASURY NOTES. However it CANNOT be 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 in an amount equal to the bond. This cash deposit will normally 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.
- An surety CANNOT be a principal.
i.e. YOU CANNOT INSURE YOURSELF!!!

However: A U.S. Customs Broker, who has a 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, single entry require to get 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 Value of merchandizes + All Duties, Taxes, and Fees which could apply.
Minimum amount of single bond is $100.

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

Ether kind of bonds are valued FOR LIVE until entry is liquidated. All liability goes on the insurance company.

HOW TO APPLY FOR BONDS FOR AN INTERNATIONAL SHIPMENT?

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

CUSTOMS HAS THE RIGHT TO ASSIGN THE AMOUNT OF BOND. YOU MUST TO AGREE WITH THE AMOUNT, WHICH CUSTOMS REQUIRES AND MUST GET IT.

2. The Port Director will review bond amounts periodically to see if they are sufficient. If he will see 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 who are authorized to use the bond on their own name.
3. The date of execution; and
4. The amount of the bond stated in figures.

In addition, the signature of each party to a bond executed by a 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 properly authorized officers or agents of a corporate principal or corporate surety.

RULES WHILE FILLING CUSTOMS BOND ON AN INTERNATIONAL SHIPMENT:

• Abbreviations CANNOT 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 bond, which 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 of trade name and

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

• A single transaction bond in international shipping is effective on the day of of the transaction identified on the bond.
• A continuous bond in international shipping is effective on the effective 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 DATE OF THE REQUEST.
• SURETIES requires reasonable written notice of AT LEAST 30 DAYS, unless negotiated otherwise.

5. PRINCIPAL AND SURETY:

Partnership must be listed in the body of bond with the full names of all partners and be executed in the name of the firm. 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 authorized officer or attorney of the corporation. The CORPORATION SEAL shall be affirmed immediately adjoining the signature of the person executing the bond.

If a corporate bond is filled and signed by an ATTORNEY-IN-FACT, 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: Normally, 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 qualify;
2. If the individual a married woman, she can only be accepted if the state in which the bond is issued does not prohibit her from from acting in that capacity; and
3. Any individual may grant a power of attorney to sign as a surety, and the name of of the importers for which the power of attorney is granted shall be shown in the power of attorney.

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

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

However, if even one single international shipment require duties more than your amount of continuous bond (let's say $65,000), THAN YOU MUST BUY A SEPARATE ENTRY, WHICH EXCEED THE AMOUNT OF YOUR CONTINUOUS BOND FOR 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 RE-DELIVER Merchandise. You must re-deliver 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 a value of the bond. I.e. if you did not comply with one of any agreement's condition, the Customs goes against 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 founds (returned check) fine is: 2 times of duty or $1,000, whichever is grater. (I.e. for $25-$40 returned check you must pay $1,000!)
- For non-merchandize incidents fine is $1,000 (example: you lost a badge or your employee-driver violate terms of the badge).

Demand against bond production of documents for international shipping

When entry is filed and a required document is missing, the importer shall indicate in Block 16 of the CF 7501 the missing document. Unless 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 that time no application for relief has been made, will result in the matter BEING REPORTED TO THE U.S. ATTORNEY FOR PROSECUTION.