What are Customs Bonds and OTI Bonds?

by Samuel C. Customs Advisor

International trading is not an easy process. It is a kind of economic affair between two countries that involves various barriers. A person/company needs to master the techniques of how to represent himself/itself potential enough that they can affect a particular industry by their presence in the market. Every country has a different set of rules for trading with other provinces. The culture, interests, currencies and resources changes by every other part of the world. In the import/export industry, you need to hone the skills of gathering valuable resources and documentation. The agreements in two companies and suppliers directly/indirectly affect the policies and nature of a country’s economy. Thus, having documents like Customs Bonds CA and OTI Bonds CA are necessary to prove that an importer you are believable and legitimate.

Customs Bonds: One can say that customs bonds are important transporting documents that importers must obtain. When we talk about importing of good to the United States, it becomes mandatory to open the books about bonds. The US Customs and Border Protection (CBP) is a body of the federal government of America to regulate international trading via ocean vessels and protect its treasury. There are a total of 12 activity codes for importing through different means of commuting.

Importers in the United States are also required to post a bond (or its cash equivalent) with the U.S. Customs Service to guarantee that they (the importer/principal) will obey all the laws and regulations pertaining to bringing goods into the country for commercial purposes.

Generally, there are two types of bonds popular – Single Transaction Bond and Continuous Customs Bond. The continuous customs bond one is designed to cover all transactions done by ocean vehicles in a year. It covers import entries. The main purpose to enforce the bond system of the government is to make the merchandise safe and reliable. It helps in stopping the products that are prohibited and banned in the country. It helps in preventing illegal business.

OTI Bonds: Before initializing commercial operations, all the International Freight Forwarders and NVOCCs are asked by the Federal Maritime Commission (FMC) to obtain Ocean Transportation Intermediary license. You might have been heard about OTI Bonds before coming to this article. These are like Customs Bonds CA. It is to guarantee CBP that if the principal of commodities fails to pay duties and taxes then CBP can collect reimbursement from the insurance/broker. To qualify for OTI Bonds CA, an individual from the seeking organization should have three years of experience in working for a licensed freight forwarding company.

A broker can assist you for financial responsibilities and total bond amount. You can negotiate this amount according to the type of goods you tend to import to the United States. Try to hire an experienced professional to know things deeply and avoid mistakes.