Customs Bonds and Liquidated Damages

• Author: Sarah M. Nappi
• Pages: 201-209

CHAPTER 10

Customs Bonds and Liquidated

Damages

SARAH M. NAPPI1

H INTRODUCTION TO CUSTOMS BONDS

AND LIQUIDATEDDAMAGES

A customs bond is a contract designed to “protect the revenue,” a phrase often

used by U.S. Customs and Border Protection (CBP), and to ensure compliance

with the laws and regulations enforced by that agency. For a person or company

engaged in a customs transaction, having a customs bond may be an essential

requirement in dealing with CBP. There are three parties to a customs bond:

() the principal (frequently the importer or a customs broker), who gives the

bond to CBP to assure the performance of its customs obligations; (2) the surety,

who agrees to guarantee payment of any liability arising from the principal’s

failure to comply with those obligations; and (3) the beneficiary, CBP. Bonds

are generally required for the commercial importation of goods into the United

States, for the transportation or storage of such goods before they are entered for

consumption, and for other specific import-related activities.

The breach of a bond condition, such as failing to submit an entry summary

timely or failing to make goods available to CBP for examination, subjects both

the principal and the surety to liability for liquidated damages under the bond.

This liability may be enforced through civil litigation by the U.S. Department of

Justice, if necessary, but also may be mitigated or cancelled through the CBP

administrative petition process.

H POSTING SECURITY FOR CUSTOMS TRANSACTIONS

Importers must post a bond with CBP as security to cover the duties, fees, and

taxes that accrue in connection with their import transactions and as an assurance

that they will fulfill certain nonmonetary obligations arising from their import

activities. Similarly, other parties that accept responsibility for the handling of

imported goods, such as carriers, warehouse proprietors, foreign trade zone

(FTZ) operators, and commercial gaugers and laboratories, are also subject to

CBP bond requirements.

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