Frequently, busy importers don’t give their customs bond much thought until they encounter a surety warning or a formal notice of Customs insufficiency. But since adequate bond coverage is crucial for maintaining a seamless supply chain, because it can prevent disruptions, unexpected expenses and excessive paperwork, grasping the concepts of bond limits and saturation is essential for ensuring that your organization operates smoothly rather than facing potential challenges. Below are some fundamental points to keep in mind.
How Much Should My Bond Be?
Per US Customs, importers need to have a bond that covers at least 10% of their total duties, taxes, and fees over any 12-month span. For instance, if you have a bond worth $100,000, it can cover up to $1 million in duties, taxes, and fees for the year leading up to any specific date.
What Is Bond Saturation?
Bond saturation (also referred to as bond sufficiency/insufficiency) indicates how much of an importer’s bond is being utilized, and it’s expressed as a percentage of the total bond amount. For instance, if an importer has paid $750,000 in duties, fees, and taxes over the past year and has a bond of $100,000, their bond saturation would be 75%.
Understanding Bond Saturation
A bond limit must cover up to 10% of total duties, fees, and taxes over a ROLLING 12-month period, but it’s wise to include a buffer when setting your bond limit to ensure it remains adequate, especially if you face unexpected increases in import volumes, growth or increased tariffs during the bond period. For instance, if you expect to spend $500,000 on duties, taxes, and fees in a year, it would be better to apply for a $60,000 bond instead of a $50,000 bond. The “rolling” portion of the bond requirement makes it important to look at your monthly importing activity because of the timing of entries and duties being paid.
What Does This Mean For You?
With the current market conditions and rising costs, the risk of bond saturation is great. You can request a bond activity report from your current customs broker or bond-holder so that you can proactively review your activity and be prepared to make any necessary changes, before they become an issue. By proactively managing your bond, you are protecting your supply chain and helping to avoid unwanted delays and extra costs. Your Taggart account representative is more than happy to work with you to review your bond!
