What Is a Continuous Bond and Why Do I Need One?
Learn what a continuous bond is and why this financial guarantee is crucial for efficient customs compliance in international trade.
A continuous bond is a financial instrument for businesses importing goods into the United States. It serves as a guarantee to U.S. Customs and Border Protection (CBP) that an importer will fulfill their financial obligations and comply with all applicable customs regulations. This concept is important for businesses engaged in regular import activities, as it impacts the efficiency and legality of their supply chain operations. This bond streamlines the import process, ensuring that goods can enter the country without unnecessary delays while securing the government’s revenue.
What It Is
A continuous bond is a type of surety bond required by CBP for commercial importers. It functions as a financial guarantee, assuring the importer will adhere to customs regulations and promptly pay all duties, taxes, and fees. Unlike bonds for individual shipments, a continuous bond offers ongoing coverage for multiple import transactions over an extended period. This simplifies compliance for businesses with consistent importing needs.
The bond acts as a contract among three parties: the importer (principal), the surety company, and CBP (the obligee). The surety company pledges to pay CBP if the importer fails to meet financial or regulatory responsibilities. This mechanism safeguards the U.S. Treasury from potential losses due to non-compliance.
Why It Is Required
CBP mandates continuous bonds to protect government revenue and ensure adherence to trade laws. The bond ensures all applicable duties, taxes, and penalties are paid to the U.S. government. This mitigates financial risk to the Treasury if an importer defaults on obligations.
Beyond financial protection, the bond secures compliance with various trade regulations. This includes adherence to import quotas, protection of intellectual property rights, and meeting product safety standards. By requiring a bond, CBP maintains oversight and enforcement capabilities over the flow of goods, preserving the integrity of the U.S. marketplace. All commercial imports valued at $2,500 or more, even if duty-free, require a customs bond.
How It Functions
A continuous bond involves three primary parties: the Principal, who is the importer required to file the bond; the Surety, an insurance company that issues the bond; and the Obligee, which is U.S. Customs and Border Protection (CBP). The Principal enters into an agreement with the Surety, and the Surety, in turn, guarantees to CBP that the Principal will meet its obligations. This arrangement ensures that CBP’s financial interests are protected.
The term “continuous” signifies that the bond provides ongoing coverage for all import activities and other customs obligations for a specified duration, typically one year from its issue date. It automatically renews annually unless terminated by one of the involved parties. This bond can cover various customs activities beyond basic import entries, such as operating a bonded warehouse, acting as a customs broker, or fulfilling Importer Security Filing (ISF) requirements for ocean shipments.
The amount of a continuous bond is determined based on a percentage of the importer’s historical duties, taxes, and fees paid to CBP over the preceding 12-month period. The minimum bond amount is $50,000, or 10% of the total duties, taxes, and fees paid in the previous year, whichever is greater. This calculation ensures the bond adequately covers potential “bond liability,” which represents the importer’s financial exposure to CBP.
Continuous Versus Single Transaction Bonds
Both continuous bonds and single transaction bonds serve to guarantee customs compliance and payment, but they differ significantly in their scope and duration. A single transaction bond, also known as a single entry bond, is specific to one particular import shipment or customs activity. This type of bond expires once that specific transaction is completed, meaning a new bond must be obtained for each subsequent import.
In contrast, a continuous bond offers ongoing coverage for all import activities and other customs obligations over a defined period, typically one year. This makes it a more practical and often more cost-effective option for businesses that import goods frequently or regularly. While a single transaction bond might be suitable for infrequent importers, a continuous bond provides a streamlined process, eliminating the need to secure a new bond for every shipment. It also allows for use at any U.S. port of entry and by multiple customs brokers, offering greater flexibility for active importers.