Insurance for Customs Bond
Bond For Customs by exporters and importers?
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?About30 years back I was visiting Hamburg in Germany to meet our agents who were at that time one of a very big organization in terms of import handling at that port. I found that their staff could make customs entry on the customs computer ?from office ?and get the import papers ?processed on line ?till they go the gate pass for the containers in their system . There was an import duty deferred collection ?system in Germany. The freight forwarders account would be debited with consolidated duty payable for a fortnight into their bank account.
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In India customs process has been digitised years later as compared to Germany and also to some degree harmonized with international practices like recognising the regular exporters , importers and freight forwarders with schemes like AEO ( authorises economic operators). But it has not fully develop as a seamless handsfree process ?like advanced countries even after all these years and in spite of India is a leading player in IT enabled services . Even today the percentage of clearances by RMS ( risk management system ) – hands free system of customs clearance is not s high as d. in developed countries This is as a result of lethargic bureaucracy , vested interests and deep distrust of customers ( importers & exporters) ?by? the Customs department.Stringent regulations arising out of insignificant instances of misdeed? of exporters and importers chokes the systems’ efficiency.
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One of the things which I notice is that there is only a slight improvement is in the method of duty payment .Earlier it used to be a tedious process involving several people in the system – one had to pay duty separately for each consignment and that too by banker’s pay order toa designated bank counter at custom? houses .It involved filling ?a request form to bank for pay order, a pay order processing at bank , a challan for payment at designated bank and acceptance by bank official for each individual shipment big or small. Often the process takes time and by? the time the pay order reaches designated bank through a person bank’s time working hours gets finished with more ground rent/demurrage accruing on import consignments
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Things improved with provision of online payment but it was also tedious in as much as payment had to be made separately for each import. For companies who have multiple consignments in a day like electronic? components for a hardware company it was a lot of effort. Later? bunching of payments by bank transfer was allowed .Now a wallet system has been introduced
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For a long-time I did not understand how German Customs were able to give credit to forwarders I understood the system many years later when we started handling DDP ( delivered Duty Paid ) shipments to USA. In USA for every shipment above USD2500 /- value there has to be compulsory bond given to the customs to cover duty , or any other penalty and also to vouch for the integrity of imports This is called a Customs Surety Bond. This is provided by Bond Brokers who are basically insurer a( insurance companies)n and their agents ?This ?means that Government revenues are guaranteed and at the same time duty credit is given to importers .In USA the custom brokers get 15 days credit for duty and if duty is directly paid by importers they get 21 days credit . There are similar bonds for many customs activities All these are given in the link given above .
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In India as I have mentioned above there is no duty credit and in additions there are several bonds ( assurances ) given by importers /exporters . Some of these are ITC bond , Section 48/59 bonds , SEZ/FTWZ bonds , Provisional Duty assessment bonds etc Some require bank guarantees and some do not ..In addition the importers to give an affidavit that the information and values which they have given in the import declarations are true and they are accountable for any misdealing ?Covering all these it is reasonable that India also introduces customs band scheme which should become compulsory for every import and schemes to cover other instances where custos require a bond. -Obviously general insurance companies have to be involved in this policy initiative. I had advocated this for a long time ?and the thought came back to my mind when in talking to a senior executive of a general insurance company ,she told me that Government had told them to seriously look at insurance policies
?replacing the earnest money and contract guarantees by insurance policies taken by the tenderers/contractors .
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What would be the benefit of such a scheme
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a)?? The digitisation and elimination of paperwork at customs .This would mean that policy/bond number will be uploaded on the customs computer and customs entry from an importer would mention this policy number which could be debited at the time of clearance
b)?? In will enable goods to be cleared without payment of duty and duty could be collected by direct debit to the bank accounts of importers/forwarders periodically
c)?? The tracking of physical bonds by Customs is very difficult and time consuming and many non-compliance fall under the crack – digital tracing of insurance will be easy and insurance companies can holed the insurers to account
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Foreign Insurance companies can invest in India up to 74 er cent in automatic route and 100 per cent with Regulator approval. These foreign companies can bring their experience elsewhere ?to India