Troy U Dev Site

The Complexities of a Foreign Trade Zone Operator Bond

Foreign trade zone operator bond

A Customs bond is a financial guarantee between the insurance or Surety Company issuing the customs bond, the operator (who is required to file the bond), and U.S. Customs & Border Protection (CBP). This bond guarantees U.S. CBP that fees due from the operator are paid by the Surety Company in the event of operator default. The customs bond also indemnifies the Surety Company, allowing them to use any legal means to collect from the operator any monies that were paid to CBP on the operator’s behalf. As a broker it is essential that you ensure that your client understands and adheres to these requirements as they have been established.

A Foreign Trade Zone (FTZ) is considered non-U.S. territory for customs’ purposes. Foreign goods placed into FTZ may be manufactured, manipulated, repacked or exported without paying duties. A Foreign trade zone operator bond requires the principal to comply with the law and CBP regulations relating to the receipt (including merchandise received and receipted for transport to his zone), admission, status, handling, transfer, and removal of merchandise from the foreign trade zone or sub-zone.

Additional Requirements Under FTZ

With regards to the receipt, handling and disposition of merchandise, the principal must also comply with CBP regulations concerning the maintenance of inventory control and record keeping systems covering merchandise in the foreign trade zone or sub-zone. If the principal defaults and the default involves merchandise other than domestic merchandise (for which no permit for admission is required), the obligee agrees to pay liquidated damages equal to the value of the merchandise involved in the default.

Some Foreign-Trade Zone Grantees elect to operate their General Purpose Zone themselves. In doing so, the Grantee maintains the greatest direct control over Zone operations, yet also directly bears responsibility and Customs liability for the Zone’s operation.

Clearly the goals of the zone project and the scope of services offered by potential operators will determine the allocation of responsibilities between the Grantee and operator. These goals will also affect decisions about who will operate the zone and/or how many Zone Operators there will be. This is a somewhat complex situation and it requires a working knowledge of how FTZs function and to what extent the liability issues may become a concern to your clients. That said, having a Foreign trade zone operator bond will help in making the entire process incident-free.