Meaning
A financial guarantee product issued by insurance companies to cover potential unpaid duties and taxes on imported goods allows importers to release their cargo before paying customs duties. This customs duty insurance provides an alternative to cash deposits or bank guarantees, which improves cash flow for trading enterprises. The General Administration of Customs in China approves the use of this policy across national ports.
Collateral Security
Importers use this policy to satisfy the security requirements of customs authorities. The insurer agrees to pay any outstanding duties, late fees, or penalties if the importer fails to pay within the statutory timeframe. This arrangement reduces the necessity of freezing operational capital in low-yield bank accounts.
Import Facilitation
The administrative time required to clear customs decreases significantly with the implementation of this system. Goods can be processed under a single annual policy rather than requiring separate guarantees for each shipment. This efficiency is beneficial for companies engaged in high-volume, repetitive trade of commodities or electronic components.
It allows them to maintain continuous operations without experiencing delays at port checkpoints during periods of peak demand.
Settlement Process
If the importer defaults on the payment of duties, the customs office demands payment from the insurance company. The insurer must settle the debt within the period specified in the policy, usually ten business days. After payment, the insurance company holds the right of subrogation to recover the funds from the assets of the importer.
