Bonds

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Important note: This article is a part of the project, Products of Sri Lanka Customs.


Bonding process was legalized in 1869 under section XVII of customs ordinance. During the period when Bond facilities were not available, traders used to store the imported cargo in the government warehouses not paying the duties and other levies until the goods are taken out according to the demand for them in the local market. Customs Bonds Division was established in 1984 with the Free Trade Economic Policy of the government at that time.

With the Free Trade Economic Policy of the government and with the liberalization of the economy, traders were able to import large quantities of raw materials which finally resulted a huge increase in the local manufacturing process. Customs Bonds process gradually expanded due to high competitiveness in the international market and later new concepts such as TIEP I scheme, Entrepot Trade, TIEP IV scheme, oil bunkering, duty rebate schemes, transshipment etc. were introduced to further facilitate the international trade.



General Bonds (Private Bonds)

Government no more provides approval for General Bonds. This decision was made in 1986 and the companies obtained approval prior to 1986, are still allowed to operate under General Bonds.

Limitations

Section 69 to 100 of the Customs Ordinance provides legal authority for warehousing of goods.

Storage Duration

Cargo Type Storage Duration Extension
Confectionery 2 months extension depends on condition
Tinned foods, Cigarettes 3 months extension depends on condition
Wine, Beer 6 months extension depends on condition
Other 6 months extension could be granted up to two years

Under the regulations the initial period granted for Bonded Cargo is six months and the approval has to be obtained for the extension.

Goods Which Are Not Permitted for Warehousing

  1. Goods which are free from the duties and taxes.
  2. Duties and taxes paid goods.
  3. Perishable goods.
  4. Damaged goods.
  5. Dangerous goods.
  6. Prohibited goods.
  7. Inflammable goods.
  8. Restricted goods unless on license issued by the restricting authority.

Security for Liabilities (Duties and Taxes)

  • No bank guarantee or personal guarantee is required for state/public warehouses.
  • 100% bank guarantee, block bank guarantee or corporate bank guarantee is required to operate a private bonded warehouse.

Recovery of Customs Duty on Bonded Warehouses

Once goods are Ex-Bonded for local use, duties and taxes are payable,

  1. On CIF value at the time of importation.
  2. At the current rate of duty.
  3. At the current rate of exchange.

Responsibilities of the Bonded Warehouse Owner

  1. Maintaining proper records.
  2. Safe custody of goods.
  3. Storage for easy identification and easy access.
  4. Obtaining the service of a proper Customs official for any transaction of goods.
  5. Any damage or spoiled goods to be brought to the notice of the Customs immediately.

Bonded Warehouse

A Bonded Warehouse is a place where the importers are permitted to store goods in a warehouse or a secured place without paying the duties and taxes, subject to the customs supervision,

Public Bonds

Sri Lanka Ports Authority owns and manages Public Bonds within the Port premises under Customs supervision. Any importer is privileged to Bond the imported cargo at the Public Bond subject to the allocation of space by the SLPA and the approval by the Customs. Currently Public Bonds are located inside of the port. Most of the time this Bond is used for the Entrepot transactions and small BOI projects by some of the importers those who haven’t general bonds. (Singer Sri Lanka Ltd, Keels Business Ltd, DIMO Pvt Ltd, 3M Lanka Ltd etc.)

Warehouse Facilities Available

  1. BQ 1
  2. BQ 2
  3. BQ 3
  4. BQ 4
  5. Japanese Warehouse
  6. CFS 1
  7. CFS 2
  8. CFS 3
  9. CFS 4
  10. PVQ 1
  11. PVQ R
  12. Peliyagoda CFS

Bonded Warehouse Facilities

  1. Canal Yard Warehouse
  2. BQ 2A
  3. CFS 5


Private Bonds

Private Bonds are approved on request made by the traders who wish to warehouse the goods imported. The Customs does not allow establishing Private Bonds to supply goods to the local market except for re-export or for goods such as sugar and rice imported to keep as buffer stocks.

Some Private Bonds Operators

Abans Ltd, Abuer & Company, Singhagiri Ltd, Uni Walkers Ltd, Scanwell Pvt Ltd, Heyles Ltd, Autogrill Lanka Ltd, Free Lanka Trading Ltd.

Private Bonds are inspected by the project unit under the DDC approval. Each private Bond has a permanent Customs Locker. The Locker maintains the Bonding registers for inward and outward cargo and the stocks. The customs person at the private Bond is liable for those goods and the duties for the government.

Terms

CusDec Types

To-Bond
Bond the cargo.
Re-Bond
Transfer the cargo to another bond.
Ex-Bond
Pay all the duties and the levy’s and remove the cargo from the Bond for the local use.
Service Bond
Used to release cargo to duty-free shops.

The Bonds investigation unit is handling all the investigations under the sections from 69 to 100 in the Customs Ordinance. Under Customs law, irregularity or discrepancy of Bondsmen that has an impact on government revenue can be prosecuted.


Approvals

If the operator needs to operate in a private bonded warehouse then it should be approved and the prescribed application and the necessary documents should be submitted. (See documentation for requirements for approval of private bonded warehouses)

Renewals

All Bonds approvals should be renewed annually. With the assessment of the performance during the previous year, renewal is allowed by the Director General of Customs. For this purpose, renewal application should be submitted in the prescribed from one month in advance to the expiry of the validity period of the previous Bond. Along with the renewal application it is required to submit the other necessary documents which are required for the registration. (See documentation)

De-bond

A written application to the DC (Bonds) should be submitted by the Bondsman for the approval of De-bonding specifying the reasons for the De-bond. Requirements for the De-bond are,

  1. No existing physical stock.
  2. No liabilities against the Bonded goods.

Shifting of Bond

Shifting of Bond can be done with the approval of DC (Bonds) (See documentation)


Requirements for a New Waregouse

  1. Security arrangements throughout the day,
  2. Strong building and safe environment,
  3. Easy access to the premises for heavy vehicles.

Officers of the project unit will inspect the new Bond premises and on their recommendation DC (Bonds) will approve the shifting of the Bond to the new location. Approval needs to be obtained from the relevant Hon.Minister too. Finally the location of the existing Bond and the new Bond should be gazetted.


Documentation

Requirements to Obtain a Private Bonded Warehouse

  1. Appropriately filled application.
  2. Project proposals.
  3. Business Registration Certificate and Memorandum of Article.
  4. TIN Certificate and Registration.
  5. Building plan of the Warehouse and premises (should be approved by the local authority with Deed or Tenancy Agreement)
  6. Certificate on safety of electrical installation.
  7. Insurance Policy covering the Bond and the Cargo as well.
  8. Approval of the line ministry or department. (Where necessary)
  9. Security arrangements throughout the day.
  10. Strong building and safe environment.
  11. Easy access to the premises for heavy vehicles.

Requirements for Annual Renewals

  1. Insurance certificate to cover the bonds and the goods
  2. Stock report confirming the balance stock available in the bonded stores
  3. Valid bank guarantee or personal guarantee.
  4. Report from the bond investigation unit confirming no cases are pending

Requirements for Shifting of Bond

  1. Plan of the Bonded Warehouse and premises approved by the local authority with deed or Tenancy Agreement.
  2. Certificate on safety of electrical installation.
  3. Insurance policy covering the Bond and the Cargo.




--Gishan Chaturanga 16:07, 10 July 2012 (IST)