What is IOR? What is a Bond?

US Formal Import Requirements

Under US Customs regulations, general cargo valued at over $2,500 (excluding mail express situations) must undergo a formal entry, rather than a simple personal item import. This applies regardless of whether the duty rate on the goods is zero. A formal entry requires an Importer of Record (IOR).

The Relationship Between IOR and Bond

A formal entry must be handled by an Importer of Record (IOR). The IOR must possess a customs bond (Bond). Without a Bond, the IOR will not be able to proceed with the normal customs clearance process.

What is an IOR?

IOR, or Importer of Record, refers to the party responsible for completing the import process in international trade. In layman's terms, it is the "importer." The responsibilities of this role include ensuring the legal entry of goods, complying with destination country regulations, and completing all necessary import procedures. In specific operations, the IOR is usually responsible for submitting customs clearance documents, paying duties and other fees, and ensuring the goods meet the destination country's standards, which involves legal obligations during the import process.

What is a Bond?

A customs bond, usually referred to simply as a "bond," is a financial guarantee paid to customs by the importer or their agent during the import process. The purpose of this bond is to ensure that the importer fulfills their legal obligations during the import process, including paying duties, complying with regulations, and providing required documents in a timely manner.

Customs bonds (Bonds) mainly fall into two common classifications: Single Transaction Bonds and Continuous Bonds. Choosing which type of bond to use usually depends on the enterprise's import frequency and scale.

Single Transaction Bond

This type of bond is established for a specific import trade and covers a one-time import of goods. Single Transaction Bonds are typically used in situations where import business is infrequent or the import frequency is low. Before each import trade, the importer needs to purchase a new Single Transaction Bond. The amount of this bond is usually calculated based on the specific import trade value.

Continuous Bond

This is a more common form of bond, suitable for enterprises that frequently engage in import business. A Continuous Bond covers a period of one year (commonly known as an annual Bond), and the importer only needs to renew it once a year, rather than purchasing a new bond before each import trade. Continuous Bonds usually involve a higher initial cost, but they can effectively reduce the handling fees and cumbersome purchasing processes for each individual import trade.

Who Can Assume the Role of an IOR?

In international trade, the Importer of Record (IOR) can be categorized into two situations, depending on who assumes the responsibilities and obligations during the import process.

A US Entity Company as the IOR

In this case, the US importer (usually the company purchasing the goods) assumes the role of the Importer of Record. This company is responsible for ensuring the goods comply with US regulations and standards, submitting customs clearance documents, paying duties and other related fees, and fulfilling other obligations during the import process.

A Chinese Shipping Company (Shipper) as the IOR

The Chinese export company or shipping company acts as the Importer of Record. In this scenario, the shipping company may purchase a customs bond (Bond) to assume the responsibilities related to the customs clearance process. This means the shipping company will be responsible for ensuring goods compliance and paying duties and other fees. This method is typically used to assist Chinese companies or other international companies selling in the US market that do not have an established physical entity in the United States.

Customs Clearance Methods for Exports to the US?

There are two common customs clearance methods in the US: clearing customs in the name of the US consignee or clearing customs in the name of the shipper. The choice of clearance method is usually decided by the importer or the US agent.

Clearing Customs in the Name of the US Consignee

a. The US consignee provides a POA (Power of Attorney) to the US agent of the freight forwarder.

b. The US consignee must provide a Bond.

c. The US consignee's Tax ID is used during the customs clearance process.

Clearing Customs in the Name of the Shipper

a. The shipper provides a POA to the freight forwarder at the port of departure, who then forwards it to the agent at the port of destination.

b. The shipper must purchase a Bond.

c. With the help of the US agent, the shipper registers for an Importer Customs Record Number in the US.

d. The US consignee's Tax ID is used during the customs clearance process.

Points to Note

• Tax ID and Customs Clearance: In the US, the US consignee's Tax ID, also known as the IRS No., must be used during customs clearance. This is the Taxpayer Identification Number registered with the Internal Revenue Service (IRS).

• Importance of the Bond: In the US, it may be impossible to complete customs clearance without a Bond. Sellers need to confirm with their customers whether they have a Bond and whether their BOND and POA can be used for customs clearance.

• POA (Power of Attorney): US customs brokers usually require Chinese exporters to sign a Power of Attorney (POA) before shipping. This is an authorization document that allows a US agent to handle relevant customs clearance procedures on behalf of the Chinese exporter.

What If the Seller Has No Bond and IOR?

• Register to Become an Importer of Record (IOR): Sellers need to register as a US Importer of Record to obtain an importer customs record number. This usually requires providing legal company documents, financial information, and other relevant materials.

• Purchase a Customs Bond (Bond): Sellers can choose to purchase a customs bond to ensure they can fulfill their payment obligations for duties and other fees when importing goods. Contact an insurance company approved by the US Internal Revenue Service (IRS) to understand the specific procedures and requirements for purchasing a Bond.

• Cooperate with a Third-Party Company: Sellers can consider cooperating with a professional customs broker or logistics company, and can entrust Desu E-commerce Logistics to assume the responsibilities of the IOR to help sellers complete the import customs clearance process.

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