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Duty rate. Check!

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As importers tick items off their shipment checklist, one of the most important tasks is purchasing a Customs bond – and setting it up right.

Customs bonds are required for all importers and are necessary for you to act as the importer of record for your shipment. The Customs bond is a contract most commonly used to guarantee Customs that payment of duties, taxes and fees will be paid to the US government at the time of import. A Customs surety bond can also function for other Customs-related obligations, for example moving freight domestically before it is cleared into US commerce, or a port warehouse storing goods for import or export, and ensures compliance with Customs regulations for whichever purpose the bond is used. For importers, the bond is used to guarantee payment of duties and Customs compliance.

Think of a Customs bond like a driver’s license.

When you obtain a driver’s license, you agree to abide by the local jurisdiction’s driving rules and regulations. If you violate these rules, you will receive penalties on your license against you as a driver. The same logic applies to the Customs bond. By obtaining a bond, you agree to comply with the import requirements of the US government and pay your applicable duties/taxes. Failure to comply with these requirements will result in Customs assessing penalties against your bond and you as an importer.

To set up your Customs bond with your broker (Shapiro!), you will need to complete a Power of Attorney and bond application. Though the language of the Power of Attorney (POA) form can be complex, essentially you are giving your broker the authority to conduct Customs business on your behalf. Whenever you are completing a POA, you are required to provide your US Tax ID, whether this is your Social Security Number (SSN) as an individual or an Employer Identification Number (EIN) as a company. If you are foreign-based and have applied for an EIN, please provide this information; otherwise, we will set you up with a Customs Assigned Importer Number (CAIN).

What is the difference between an SSN, EIN, and CAIN?

The SSN, EIN and CAIN are how Customs identifies you and your bond.

  • SSN – A social security number is used for Customs and tax purposes for US individuals and sole proprietors. SSNs can only be used for imports to the US, and cannot be used to export from the US.
  • EIN – The Employer Identification Number (aka Tax ID) is issued by the US Internal Revenue Service “for the purpose of tax administration.” Any US-based corporation, partnership, or LLC will have an EIN.
    • Exception! A single officer LLC may have either an SSN or an EIN number.
  • CAIN – A Customs Assigned Importer Number is issued to importers who do not have a US SSN or EIN. CAINs are assigned to foreign importers to the US at the time a Customs bond is set up.
    • Shapiro handles the set-up of the CAIN for our foreign-based clients and we will file your CBP Form 5106 for you!

Brokers need your Tax ID numbers to associate your Customs bond with your business entity. Your broker will file your bond using this number with Customs, and any broker can use your identifying number to query your bond with Customs.

What if I want to make a change to my Customs bond?

Because each bond is set up with a unique identifying number, there are certain limits to how the bond can be updated.

  • Name/Address Update – If only the name and/or address changes, and there is no change to the associated EIN/CAIN, then the bond can be updated with the new company name or address.
  • Structural Change – Any kind of structural change, for example from an Individual to an LLC, requires a new bond with a new EIN/CAIN. If the company name changes and a new EIN/CAIN is issued, then a new bond must be purchased for the new entity.
    • If you do decide to make a change to the entity structure, you can cancel existing bond for a prorated refund from your bond provider.

If your broker does not prompt you for a Tax ID or Customs Assigned Importer Number, beware!

If your broker does not request any kind of Tax ID information and you already have this in place, they may be quick to set you up with a CAIN. Now, your entity has 2 numbers, and you have a mess! If you ever switch brokers and complete the new broker’s POA with your (correct) Tax ID and provide a copy of your bond showing your CAIN, you won’t be able to use the bond you purchased because your identifying numbers don’t match!

Shapiro sees this happen far too often with snazzy, cheap bond providers. Quick and easy usually translates to untimely and costly for you! Not only will you have to wait for Customs to cancel and refund the unused portion of the incorrectly set-up bond, but you’ll also have to buy a new one with the correct identifying number. When you purchase a bond through Shapiro, you will complete our smart, online application to capture everything we need to get your bond right for you the first time. Our compliance experts will then file your bond with the number that is the best fit for you.

For more information on Customs bonds, contact your Shapiro representative to get started.