Everything You Need to Know About Working With a Bonded Carrier

When it comes to transportation, and getting your goods across borders, you have plenty of choices.

You could send the freight by air, sea, or land. You could engage a customs broker to assist in the process, or you could go it alone. You may even need multiple modes of transportation, called multi-modal transportation, to get the job done.

But no matter how you go about it, you’re going to have to comply to import and export regulations and interact with a border control agency and that can be one of the most confusing things to tackle as a business owner transporting goods internationally.

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So what’s a business owner to do? The answer is definitely not to go back to school and learn everything there is to know about customs and border regulations. Nope! That, among other logistical reasons, is why you want to hire a bonded carrier.

In this post, we’re going to break down everything you need to know about working with a bonded carrier, how the in-bond shipment process works, as well as the benefits of using bonded transport.

So let’s motor on to the rest of the information!

What Is a Bonded Carrier?

When it comes to understanding what a bonded carrier is and how it can be beneficial to use one in your business, you might be wondering what puts the ‘bond’ in bonded carrier.

Being a bonded carrier means that you have a type of surety bond (or agreement) with an agency like Canada’s CBSA (Canadian Border Services Agency) that allows you to bring goods inland from the border without initial customs clearance.

But let’s hit reverse for a moment and go back to that agreement the company makes with the border control authority.

Surety bonds are used in many industries, such as construction and contract work, in order to protect all parties involved and ensure both smooth operation and timely payments. It is not like insurance where only two parties are involved (you and the insurance company) but rather a three-party agreement. It involves the surety, the principal, and the obligee. In the case of bonded transport carriers, they would be the principal, CBSA would be the surety and the obligee would be you, the business using the carrier’s services.

The carrier, or principal, can offer smooth, efficient services to the obligee with no hold-ups at the border. Meanwhile, the CBSA can also ensure that even if the obligee won’t pay the duties and customs fees on the shipment, the principal will.

The bottom line is that your goods get to move more smoothly and efficiently inland, and the CBSA will ensure they get goods checked appropriately and collect necessary duties without hassle.

Using a bonded carrier gives many businesses peace of mind and ease. Sometimes, it can be seen as labour intensive and time-consuming depending on the destination, carrier, and the goods or shipment itself but is often chosen for logistical reasons as it allows shipments to continue to move inland, or in some cases, through the country to their destination.

Canadian Bonded Carrier

Canadian bonded carriers can offer a type of cross-border freight shipping service that allows goods to clear easily through the Canada Border Services. The in-bond process begins when a carrier is required or elects to put the shipment ‘in bond’ rather than having it pre-cleared or otherwise released at the Canadian border.

Like almost anything, though, there are guidelines for these carriers. Canadian bonded carrier rules require that providers hold a surety bond, which is just that demonstration of financial security we mentioned before, with the CBSA to cover the costs of things such as:

• Applying to the customs self-assessment program, where low-risk, pre-approved importers or carriers can bring goods into the country more efficiently due to less processing time needed.
• Moving shipments to a CBSA sufferance warehouse or office for release at that location.
• Using Canada as a “shortcut” or route to get to another destination outside of the country, such as from the lower mainland USA up to Alaska. The goods will not be released in Canada but can pass through with more ease on to Alaska.

US Bonded Carrier

Cross-border freight shipping between Canada and the US has become a routine occurrence for many businesses. Sharing one of the biggest land borders in the world, businesses on both sides of the border rely on US bonded carrier relationships. In fact, an estimated 10 million trucks cross the border each year, bringing goods into, out of, and through Canada and the United States.

Now that’s a lot of trucks!

That’s also a lot of processing, documentation, and duties to worry about, too.

Thankfully, both US and Canadian Customs have programs and protocols to streamline the process. If you are not familiar with cross-border shipping regulations, you can run into lengthy and costly shipping delays. One method of avoiding long delays is by utilizing a US bonded carrier to allow goods to continue their journey past the Canada-US border or to hire a 3PL freight shipping company to handle cross-border shipping regulations on your behalf.

Though in principle bonded transport is the same from country to country, requirements and specific rules differ. It’s important to know and understand the difference between countries' requirements in which you do business. Bringing in the help of a US bonded carrier like Moto can help you cancel out the noise and focus on what’s important.

In Bond Shipment

An "in-bond" shipment is an imported or exported shipment that has yet to be cleared by Customs.

The in-bond shipment process allows for the goods to be moved or stored by the government, even if they have not been obtained approval by Customs.

In bond shipments can be chosen for a number of logistical reasons or at the importer’s request and are considered an important part of trade between Canada and the US. Since in-bond shipments are still considered individual shipments, they must be accompanied by a bill of lading and shipping order, just like any other type of cross-border shipment.

In-Bond Shipment Process

Like any kind of transportation of goods, the in-bond shipment process has plenty of steps to be aware of.

As the business utilizing a carrier, you don’t need to become the expert in the in-bond shipment process, but you should understand the steps so you can make sure you’re meeting all of the obligations required and that your carrier is doing the same.

The in-bond shipment process is typically as follows in Canada:

1. Your freight carrier will pick up a shipment. They will either pick it up directly from a business location or it will be dropped at a warehouse.
2. The freight is hauled to the border.
3. Once the 3PL freight shipping carrier arrives at the border, they can declare the shipment as an in-bond shipment by reporting it as such on their ACI eManifest and presenting a Paper A form to the officer.
4. Canada Border Services will then authorize the movement of the goods, allowing them to be delivered to a specified bonded sufferance warehouse or another CBSA office to await customs release.
5. Then, the in-bond freight carrier must wait for a formal entry to be filed by the Customs Broker before the goods can be removed from the in-bond warehouse for delivery to the consignee.
6. The goods are then delivered to the consignee.

Only a bonded highway carrier is entitled to use the in-bond shipment process, so it is important that you select the right freight carrier like Moto when using cross-border shipping. You can be sure you are engaging the services of a bonded carrier by checking on their freight carrier code.

Freight carrier codes are used in both Canada and the USA, with unique programs existing in each country independently of each other. In the US, these codes are two to four digits long and are referred to as Standard Carrier Alpha Codes (SCACs). They are assigned by the National Motor Freight Traffic Association (NMFTA), who oversees much of the transportation regulation in the US.

In Canada, transportation companies are given a four-digit carrier code that is unique to their business. It identifies them as a carrier to the Canadian Border Services Agency and helps legitimize the industry in Canada. To check if a carrier is bonded in Canada, you will need to look at their freight carrier code. If it begins with either a one or a seven it is not considered a bonded carrier and, therefore, cannot declare in-bond shipments to Canada.

Freight Broker Bond Cost

As with almost anything in business, there will always be a price to pay. In the case of bonded transport, the freight broker bond cost can be anything from a small fee to a large sum, depending on several factors.

Those fees associated with in-bond shipments can vary depending on the size of your freight shipment and geographical location. Compared with a cross-border shipment, the in-bond shipment process can be time-consuming and labour-intensive, as much as it can be helpful to some businesses. Thankfully, the extra time and labour will be completed on the part of the carrier, so you don’t have to worry about doing the heavy lifting. It is worth understanding, though, so you know what to expect when you get a quote.

Differences between the freight broker bond costs and non-bonded costs are outlined in the table below.

Though it may seem like the costs for bonded transport add up, as the customer using the service, you can actually save a lot of money, as well as time, by using the services bonded transport offers.

If you have shipped things through any country before, you’ll be familiar with tariffs, duties and taxes to be paid under the guidelines of trade agreements and how costly those fees can be. Nobody wants to pay extra fees if they don’t have to, and by using bonded transport solutions, you do not have to worry about paying duties and fees on entry to a country you are simply passing through.

Plus, there are even bonded warehouses where you can have your shipments sent to be broken down into other smaller shipments, or as a secure, reliable stop en route to freight’s destination. This can be seen as a value-added service that many businesses will benefit from, especially those using Canada or the US as a stop along the way in their product’s journey.

Benefits of Bonded Transport

With all of this information about bonded transport in our rearview mirror, let’s get into the benefits of sending in bond shipments over the border.

Considering that bonded transport is reliable, backed by a surety bond, and only available to businesses of a certain scale, you know you’re working with a business that you can trust. That reliability can be seen as a benefit in and of itself, but there are plenty of other reasons bonded transport is something you’d want to consider for your business.

Though all businesses are unique, as are their needs, there are some serious benefits to those who use bonded carriers for cross-border shipping including:

• Ensuring your shipments adhere to customs protocols consistently
• May suit your logistics needs more appropriately
• Shipments only passing through a country such as Canada or the US can travel duty-free through the country, saving time and money
• Storage at suffrage warehouses is secure and reliable, keeping your shipment in-tact
• Some bonded transport companies will offer additional, useful logistics services including cross-docking, customs brokerage, and warehousing
• Can facilitate duty payments to the government(s) on your behalf if you are not there
• Allow you to save the time, money, and effort of clearing customs on your own

Ultimately, bonded transport can be extremely useful to some businesses for these reasons, but it may not be for everyone. Regular cross-border shippers may find this service particularly useful, but that isn’t to say those looking for a one-time cross-border shipment wouldn’t benefit.

The best way to determine if this mode of transport is right for your business is to talk to the pros, like Moto, who can help you determine what would work best in your unique circumstances. That way, no matter how your shipment ends up crossing the border (bonded or not) you know it will be handled with the professionalism and care you deserve.

FAQs About Working With a Bonded Carrier

What Is an In Bond Shipment?

Simply put, an in bond shipment is a shipment that is allowed to enter a country without clearing customs at the border and can travel inland to be checked by customs agents at another customs office that may be more convenient or sensical to a business’ logistical needs. Only bonded carriers are allowed to handle these shipments. This ensures that only those with appropriate financial backing can more freely move goods into and through the country.

What Is the Difference Between Bonded Carrier and Non-bonded Carrier?

Non-bonded carriers can’t take shipments from the border unless they have been first cleared by customs. Bonded carriers can take shipments from the border into or through the country. Bonded carriers are also subject to application to border control programs and fees for doing so.

Can Anyone Become a Bonded Carrier?

In short, yes. While almost any carrier can become bonded, there is a process to become approved that only some businesses will meet. To become a bonded carrier, a transportation company will work with a surety company to do so. As the first step in becoming a bonded carrier, finding a surety company is not something that can be avoided. They will be the ones to initiate the bonding process on a carrier’s behalf.

In addition to finding a surety company to work with, a company will have to provide information about their finances and meet financial security requirements. This could be a requirement of having anywhere from $5,000 - $25,000 in financial backing. Companies will often be asked to provide financial information about the company for review as well.

After review by the country’s border authorities, such as the CBSA, the carrier will be approved or denied based on the information provided.

Why Does Your Shipment Go “In Bond” Rather Than “Border Clear”?

In some cases, your freight shipment may be shipped as an in-bond shipment to Canada, even if you have not requested this as a sender. Some of the different reasons your goods may be shipped as in-bond freight include:

• Your freight shipment has been selected for inspection by Customs prior to being released into Canada.
• The customs broker is missing information to properly submit the shipment to Customs at the Canadian border.
• The customs broker did not submit the information or is awaiting payment on the account.
• There were no commercial invoices submitted to the 3PL freight shipping company or customs broker.
• Incorrect customs broker given to the carrier or carrier did not submit prior to arrival.

If you are unsure why your shipment was sent in-bond, get in touch with your transportation carrier to get clarification.

Can You Carry a Bonded Shipment as a Non-bonded Carrier?

Yes. Non-bonded carriers can carry a bonded shipment. It does require a single trip authorization, however.

This happens when, for example, a non-bonded carrier can’t get the shipment released at the first point of arrival and would like to bring it inland to another CBSA office for release. They would need to post, or pay, for a single trip authorization bond as they enter the country. Carriers can either post the security by cash or cheque or hire a customs broker to engage in the authorization on their behalf.

The single trip authorization will only be valid for one trip and can add time and expense to your shipment’s delivery.

Conclusion

Understanding customs and border rules, especially for newbies, can feel impossible to comprehend, let alone get right on the first try!

From complicated rules and fee schedules to understanding the in-bond shipment process to learning what a bonded carrier can do for your business — it can leave you swamped, confused, and take up way more of your time than it needs to, as a business owner trying to get things done for the betterment of their company.

That’s where Moto can help. We’re a bonded carrier, plus we work with the in-bond shipment process alongside customs brokers and border officials every single day, so you could say we know the ins and outs of cross-border shipping better than the back of our hand.

We’ll take care of all the details, so you can sit back and do what you do best as a business owner. Just get in touch with us, and we’d be happy to answer any questions you may have. You can also read our FAQs to learn more about what we can do for your business.