Guarantee and Security

Definition/Scope

A "security" or “guarantee” is a mechanism for ensuring that obligations of a Customs procedure e.g. payment of duties and taxes, will be fulfilled in a given period in return for simplifications from the normal procedure e.g. release prior to clearance, deferred payment, or provisional release, where for example a supporting document is missing or the goods declaration is provisional. Guarantees and securities are also required for all Customs procedures where the payment of the duties and taxes are suspended for the time during which the goods are placed under this particular Customs procedure, e.g. warehousing, inward processing or the for the Customs transit procedure.

Problem statement

Sometimes Customs administrations do not provide transparent information about the forms of securities and how the amount of secruity is calculated. If Customs only accepts one form of a security, in particular cash deposits, and where the amount to be secured is arbitrarily set at levels exceeding the potential amount of duties and taxes due, this puts a significant financial burden on the trader and this cost is usually added to the cost of movement of the goods.

Implementation guidance

Customs should have clear, transparent and precise rules, preferably in national legislation, to determine the forms of security accepted and the way the amount to be secured is calculated. According to Standard 5.1 of the Revised Kyoto Convention (RKC), Customs shall enumerate the cases in which security is required and shall specify the forms in which security is to be provided. The forms of security include bank guarantee, cheque, cash deposit, insurance, etc. However, according to Standard 5.3 of the RKC, the form of security shall be the choice of the person who is required to provide the security. Standard 5.6 requires Customs to keep the amount of security as low as possible and not exceed the potentially chargeable amount.

For regular traders with a significant volume of declarations, in particular for Customs brokers and authorized traders, Customs shall provide in addition to securities valid for a single transaction, the possibility of a general security to cover obligations or all transactions over a given period and transactions conducted in more than one Customs office. Such guarantee systems require a proper and swift mechanism to keep track of obligations and to discharge completed transactions promptly. Customs automation can significantly facilitate this work.

Securities shall be discharged as soon as possible to minimize the financial burden on the trader.

Additional information (references, examples, etc.)

The ICC Customs Guideline # 15 make specific reference to the trade facilitation effects of a corporate surety bonding system.