Continuous bond belongs to the category of custom bonds. It is mostly used in United States of America for international trade and means a financial guarantee that renews automatically until someone cancels it. Continuous bonds never expires. When contractor or client makes his payments, continuous bond renewals. It ensures every transaction in a certain period ("Custom Bulletin and Decisions", 2003, page 13).
Two types of customs bonds
Customs bond is a "legal instrument designed to secure payment of a possible liability that arises from failure by an importer to adhere to United States trade laws and regulations affecting imported merchandise". .It is a government bonds, issued by them, that allows a company or single person to import goods within a world. We can list two types of customs bonds: Single-transaction bonds and continuous bonds (Bhala R., 2012, page 199/200).
Single-transaction and term bonds
These are contrasting types of bonds that are available next to continuous bonds:
- Traditional, term bonds: term bond, in contrast to continuous bond, has its maturity or expiration date.
- Single transaction: they are taken once in a time, and payment is made for only one single arrival or transaction.
It is an alternative for continuous bonds when a company or person does not want to invest in a long-time continuous bond ("Custom Bulletin and Decisions", 2003, page 13).
How continuous bonds works and its pros
Usually, continuous bonds are taken for a period of 1 year. There are three sides involved in process of continuous bond:
- Guarantor (Surety company): it agrees to make payments for any liability, that might happens when the bond principal (importer) do not perform his obligations.
- Beneficiary, which is CBP (Customs and Border Protection).
Continuous bonds are more profitable than single transactions. You pay once for continuous once in a year, and you are not limited to transactions, when in single-transactions you are obligated to pay for every single trade. Including that usually a company makes a lot of trades over year, continuous bond is cheaper than paying for every time transaction occurs (Bhala R., 2012, page 199/200).
- Bhala R., (2012), Dictionary of International Trade Law, Second Edition, "Associate Dean for International and Comparative Law & Rice Distinguished Professor", Matthew Bender & Company Inc., Canada
- Custom Bulletin and Decisions, Vol. 37, (2003), "Weekly Compilation of Decisions, Rulings, Regulations, Notices, and Abstracts Concerning Customs and Related Matters of the Bureau of Customs and Border Protection", U.S. Court of Appeals for the Federal Circuit and U.S. Court of International Trade, United States of America
- Horn H., Mavroidis C.P., (2010), The WTO Case Law of 2008, "Legal And Economic Analysis", Cambridge University Press, United States of America
- Office of the Federal Register, (2013), Code of Federal Regulations, Office of the Federal Register, United States of America
- World Trade Organization, (2008), Dispute Settlement Reports, Volume VIII: Pages 2771 to 3176, "Dispute Settlement Reports", Cambridge University Press, United States of America
Author: Mateusz Paduch