Definition of Bonds terminologies
According to the World Customs Organisation (WCO) Glossary of International customs terms 2018, a bond is “an undertaking in due legal form, by which a person binds himself to the Customs to do or not to do some specified act”.
It is a legal contract executed under a seal whereby the person or persons entering into it bind themselves to pay a specified amount of money if any of conditions of the contract are not satisfied.
The bond simply guarantees that Customs will collect all import duties, taxes, fines or penalties from the surety company, if they cannot collect them from the importer.
- Bank guarantee
This is a requirement for payment under dispute where the principal decides to execute a bond (of the amount in dispute) instead of paying in cash. Its validity depends on the use.
- Bond Reinstatement
A bond may be reinstated due to various reasons for example, due to successful accounting of transactions covered by the bond. In iCMS (Integrated Customs Management System), a bond reinstatement notice is send to the bond applicant.
- Bond Suspension
A bond may be suspended due to various reasons for example, due to failure to account for the transactions covered by the bond. In iCMS, a bond suspension notice is send to the bond applicant.
The person who undertakes to pay the bond if the principal fails not only to fulfill the conditions but also to pay the penalty to bond. These are normally the insurance companies or banking institutions.
- Custom Security Bond
Contract executed under seal whereby the party or parties entering into it bind themselves to pay to The Commissioner of Customs a specified sum of money, referred to as the penalty to the bond, if any of the conditions of the bond are not satisfied. The obligation in all security bonds is joint and several.
The person who undertakes to fulfill the conditions of the bond and pay the penalty of the bond if any of the conditions of the bond are not satisfied. They are normally the importers or their agents.