Customs -Warehousing Bond - security - CBEC Instructions

By Vijay Kumar

SECTION 59 of the Customs Act as amended by Finance Act 2016 requires an importer of goods filing a bill of entry for warehousing to submit a Bond in a sum equal to thrice the amount of duty assessed on the goods to be warehoused. The bond can be for a single consignment ora general bond to cover multiple imports by an importer within a specified period.

Sub-section (3) of section 59 prescribes that the importer, shall, in addition to the execution of a bond, furnish a security. The Board has issued instructions on the security to be furnished.

Board has decided that the requirement for security under section 59 (3) shall be dispensed in the following cases:

(i) Imports by the Central Government, State Government or a Union Territory administration or their undertakings;

(ii) Machinery, equipment and raw-materials imported for manufacture and installation of power generation units;

(iii) Project imports;

(iv) Petroleum products;

(v) Machinery, equipment and raw materials imported for building and fitment to ships;

(vi) Goods used in the units operating under manufacture-in-bond scheme (section 65);

(vii) Goods warehoused for supply to diplomats;

(viii) Goods warehoused and sold through duty free shops;

(ix) Goods warehoused for supply as ship stores/airlines stores;

In all other cases, security shall be obtained as follows:

Security for transit

The importer shall obtain comprehensive transit risk insurance policy to cover the transit of goods, equal in sum to the duty involved on the goods, in favour of the President of India.

However, in certain cases, such as, liquid bulk cargo being transported through pipelines, the requirement of transit insurance may be waived.

For storage

Goods, other than sensitive goods mentioned in para (b) below, permitted to be warehoused, will be subject to the following requirement of security under section 59 (3):

(i) for the initial period of one year, there shall be no requirement of furnishing any security;

(ii) any extension in warehousing period beyond one year will be subject to the importer or owner furnishing a security by way of a bank guarantee for an amount equivalent to 25% of the sum of duty plus interest accrued thereon during the preceding period;

(iii) any extension in warehousing period exceeding two years will be subject to the importer or owner furnishing a security by way of a bank guarantee for an amount equivalent to 50% of the sum of duty plus interest accrued thereon during the preceding period;

(iv) any extension in warehousing period exceeding three years will be subject to the importer or owner furnishing a security by way of a bank guarantee for an amount equivalent to the duty involved and interest accrued thereon during the preceding period;

The Board has further decided that henceforth the period of warehousing shall be extended by the Principal Commissioner/Commissioner of Customs at the port of import. Accordingly, the security to be furnished by the importer or owner of the goods shall be furnished at the port of import where the bill of entry for warehousing was filed.

CBEC Circular No. 21/2016-Customs., Dated: May 31, 2016