Introduction
It is the written document issued by Bank of China to the customs authority at the request of the applicant to guarantee that the applicant will fulfill the obligation of paying customs duties.
Functions
Reduce capital occupation, accelerate customs clearance and decrease trivialness of tax rebate formalities caused by temporary import articles.
Features
1. Avoid capital occupation caused by paying margin of customs duties to improve fund turnover rate.
2. Accelerate customs clearance to avoid increasing costs caused by detaining goods at ports.
3. Avoid repeated formalities of customs clearance.
4. Simplify tax rebate formalities for temporary entry of goods.
5. Facilitate duty deferral.
Scope of Application
1. Import and export commodities related to duty deduction or exemption policies on the state import and export commodities.
2. Customers who temporarily need to import and export equipment and machineries in the process of foreign engineering contract, exhibition and sales.
3. Processing trade enterprises import materials and parts.
4. Situations that the customs implement "tax payment after customs clearance" for some goods.
Application Qualifications
1. The applicant shall have the qualification to engage in underlying transactions;
2. The applicant shall maintain good credit standing without any bad record;
3. The applicant shall have sufficient credit line or be able to pay sufficient margin necessary for issuing the letter of guarantee;
4. The applicant shall possess real relationship of transactions that meets Bank of China's requirements on business compliance;
5. The applicant shall provide complete and valid business information.
Process
1. The customer submits application for letter of guarantee and relevant documents;
2. Bank of China reviews the documents and issues the letter of guarantee;
3. Bank of China charges guarantee fees;
4. Bank of China amends the letter of guarantee;
5. Bank of China makes compensation against the letter of guarantee or cancels the letter of guarantee.
Case
Company A and Company B engage in the business of importing iron ore, crude oil and other commodities. As the import price fluctuates along with the international market and duty-paid price is undetermined for customs clearance, the amount of customs duties payable can not be calculated temporarily. However, in order to avoid management costs and adverse effect to sales due to detention of import commodities at ports, Bank of China puts forward to issue a letter of guarantee for customs duties to the customs authority for enterprises to guarantee customs clearance first, while enterprises pay customs duties later in accordance with relevant regulations. Therefore, it meets enterprises' requirement of tax payment after customs clearance.
Company C and Company D are large enterprises engaged in importing high-tech and sophisticated equipment which are supported by the State policies. They respectively need to import the core parts and components of big aircraft and key equipment of nuclear power plants. As the duty exemption approvals from competent authority are not completed, Company C and Company D face payment of customs duties for customs clearance. Upon learns about that, Bank of China respectively issues a letter of guarantee for customs duties to the customs authority for these two enterprises, realizing tax payment after customs clearance.
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