A collateral Customs bond is a type of financial security that is required by the U.S. Customs and Border Protection (CBP) agency in certain situations where an import business is importing goods into the United States. The purpose of a collateral Customs bond is to provide financial protection for the U.S. government in the event that the import business fails to pay customs duties, taxes, and other fees that are due on the imported goods.

The collateral is the financial instrument to secure the surety’s liability under the bond for all entries during the bond period. The surety would only release the bond after receipt of the collateral.

When required, the surety would usually accept in one of three methods.

Letter of credit issued by an approved U.S. bank exactly according to the format provided by the surety’s legal team. Arrangements between the bank and the importer is not the concern of the surety or their representatives.

A certificated check to be held be the surety. No interest provided.

A wire transfer of money to the surety. No interest provided.

The collateral would be held until all entries are liquidated, which indicates that no future call would be made on the bond (even though CBP has legal ability to enact a penalty up to five years after the liquidation of the entry).