The ONE Custom Bonds Policy is a unique and accepted alternative to the traditional bank guarantees or cash deposits. Fitch ratings has assigned Mutual & Federal Risk Financing Limited’s (MFRF) a National Insurer Financial Strength (IFS) rating of “AAA (zaf)” giving absolute assurance in performance and reliability. The Custom Bond Policy is mainly targeted at logistics companies, large manufacturers and of course any entity that operates in the export or import business.
What is a Custom Bond?
A Custom Bond is a contract binding the insurer to the South African Revenue Services (SARS), for any debts in relation to taxes and duties incurred for the import and export of goods by a Customer, which have not been received by SARS within the required period (generally between 30 – 90 days).
Customers don’t have to finance or tie up valuable security or working capital in providing bank guarantees or cash deposits to be held by SARS as security
The premium paid is an operating expense of the business and thus written off against taxable income
Opportunity cost of having released your cash or securities
Types of Custom Bonds
Bonded Warehouse Bond – This type of Bond provides a guarantee to SARS for any taxes or duties which are payable on all imports and exports.
Deferment Bond – Goods imported into South Africa for ‘home consumption’ attract VAT and customs duties. SARS requires these duties to be paid immediately unless a Deferment Bond can be provided to them.
Unless the importer obtains a Deferment Bond, they will be required to settle in cash each time a consignment
Special Removal of Goods – When goods are imported via South Africa, provisional payments are due to SARS until it can be proven that the goods have left South Africa. This bond provides a guarantee for provisional payments due to SARS, which would otherwise have to be settled prior to the goods being released. Provisional payments are refundable once it is proven that the goods have left South Africa.
The process of settling provisional payments is cumbersome and SARS insists on immediate payment, however the refunds due to the Insured are not processed immediately.
The Special Removal of Goods Bond ensures the client is not affected operationally nor financially due to
delayed refunds from SARS.
Freight – This bond provides a guarantee against the Insured defaulting on the costs due to Transnet. The size of the bond required may vary and depends on the management at these facilities.