An insurance contract for customs purposes can be used as one of the ways of securing the performance of the obligation to pay customs duties and taxes. The insurer assumes the obligation to make a payment to the customs authority if the payer fails to perform, or improperly performs, the secured obligation.
- When security is required
- Methods of security
- Who can issue an insurance contract
- Object and insured event
- Amount of security
- How to arrange the contract
When security is required
Security is provided in the cases established by the Customs Code of the EAEU and the Code of the Republic of Kazakhstan: under certain customs procedures, deferral or instalment of payment, transit and other operations where there is an obligation to pay duties and taxes.
Not every foreign trade operation requires the same security. The grounds, amount and term are determined by the specific procedure, the goods, the benefits and the documents.
Methods of security
The Code provides for the following methods:
- money;
- bank guarantee;
- surety;
- pledge of property;
- insurance contract.
The payer chooses a permissible method taking into account the restrictions of the specific procedure. In some cases insurance is not applicable, so before arranging it you need to obtain confirmation from a customs representative or the authority.
Who can issue an insurance contract
The customs authority accepts contracts of insurance organizations that hold the relevant licence and are included in the register of companies admitted to provide such security. Simply holding a licence for any class of insurance is not enough: the special register is also checked.
Services in compulsory types of insurance are provided only by insurance companies holding the relevant licence. The contract in question is used as a method of securing a customs obligation and is arranged only by a proper insurer, not by a broker, agent or bank.
Object and insured event
The object is the property interest of the payer, or of another person provided for by the Code, connected with performing the obligation to pay duties and taxes within the established time. An insured event is the failure to perform, or the improper performance of, this obligation.
The beneficiary is the authorized customs authority. The payment is directed not to compensate the policyholder's ordinary commercial loss but to perform the secured public-law obligation.
Amount of security
The amount is determined on the basis of the duties and taxes that would be payable when placing the goods under the relevant procedure without applying individual preferences and benefits, unless the Code sets a different procedure. The calculation may include interest, penalties and special payments in the cases provided for.
The sum insured must cover the calculated amount. If it is lower, or the wording of the contract does not match the standard document, the customs authority has the right to refuse to accept the security.
How to arrange the contract
- Determine the customs procedure and the grounds for security.
- Calculate the amount of duties, taxes and other amounts taken into account.
- Choose an insurer from the official register.
- Provide information on the goods, declarations, route and deadlines.
- Agree the standard contract and the sum insured.
- Submit to the customs authority an application with the contract attached.
- Obtain confirmation of the registration of the security.
Under Article 102, the customs authority considers the application and either accepts the contract or refuses to accept it no later than three working days from the date the application is registered.
Reasons for refusal of acceptance
- the insurer is not in the special register;
- the contract does not comply with the standard form;
- the sum insured is insufficient;
- the insurer's established limits have been exceeded;
- there is an unsatisfied claim by the customs authority against the insurer;
- incomplete or contradictory information has been submitted;
- the procedure requires another method of security.
General security
For regular operations, general security covering several obligations can be used. Its use requires compliance with the conditions of the Code, accounting for the available balance and registration. For transit between EAEU member states, security certificates may be used.
What to check in the contract
- the exact name of the payer and of the customs authority;
- the goods, declarations and operations to which the cover relates;
- the sum insured and currency;
- the period of validity and the period of liability;
- the definition of an insured event;
- the procedure for making a claim and payment;
- compliance with the standard contract;
- the conditions for termination after the obligation is performed.
Cost and underwriting
The rate depends on the amount and term of the security, the payer's history, the type of goods, the route, the customs procedure, the financial position and the quality of the documents. The insurer may request security for its recourse claim, financial statements or other guarantees.
Actions after the obligation is performed
After the customs operation is properly completed, you need to obtain confirmation that the security has been terminated and check that the limit has been released. For regular operations, the used and available amounts are recorded. Documents should be kept together with the declaration and the contract.
In brief
Insurance of the payer's liability to customs authorities is a special method of securing duties and taxes. Successful use depends on a correct calculation, an insurer from the register and full compliance with the standard contract. Before paying the premium, confirm that the chosen method is permissible for the specific operation.