BONDS AND GUARANTEES
What are Bonds?
A BOND can be defined as a promise by one party (in this case ECGC) to pay another party (the obligee \ beneficiary) a sum of money if the performance guaranteed in terms of the bond does not occur.
CONSTRUCTION BONDS
A construction contract bond is basically an undertaking whereby the guarantor agrees to indemnify the beneficiary, to a designated amount, against loss or damage sustained by the beneficiary through the failure of the principal to perform a building contract or execute some other construction work.
Types of Construction Contract Bonds
A bid bond is an obligation to pay a sum as actual damages in the event that either the Contractor fails to enter the contract in accordance with its bid or fails to provide the necessary performance bonds etc as required by the Principal / Beneficiary
A performance bond obliges the guarantor to ensure performance of the contract between the beneficiary and the principal either by arranging to complete the work or by paying money to the beneficiary.
Maintenance Bonds safeguard that the Contractor remedies any deficiencies after completing the structure of the building
A retention bond enables the retention monies to be released to the contractor, at the same time guaranteeing the employer that in the event of default by the contractor, such monies will be paid to the employer.
An advance payment bond guarantees the principal or beneficiary in respect of funds he has advanced to the contractor to finance mobilisation and performance of the work according to the terms of the contract
CUSTOMS BONDS / GUARANTEES
In the case of an extension of payment of customs duty granted by the Zimbabwe Revenue Authority (herein after referred to as ‘Zimra’), this guarantees that the principal will pay the customs duty on imported merchandise when the duty falls due. As a fall back, it is necessary to ask for collateral in the form of securities and or personal counter indemnities from third parties
Types of Customs Bonds
This a ‘good behaviour’ bond, for the due observation of Zimra regulations, to be lodged by any organization dealing with Zimra on a commercial basis before being registered by Zimra
The purpose of the removal and transit bond is to enable client to handle consignments passing through Zimbabwe without paying duty. A RIT Bond is put in place to ensure that goods get to their destination without duty being paid whilst in transit. The consignments are required to go out of the country within 3 days, failing which client will be asked to pay duty.
The warehouse bond enables the company to import finished products into the bonded warehouse without paying duty and VAT. The duty and VAT will only be payable upon sale. Should client sell products from the bonded warehouse and fail to pay relevant duty ZIMRA will call on the bond underwriter to pay an amount equivalent to duty and VAT on the sold goods
To avoid huge cash outlays as payment for duty on imported raw materials for use in manufacturing goods for export, at least 80 %, the raw materials are put in a bonded warehouse, approved by ZIMRA. As security for the duty at stake, in case the imported raw materials are not used to produce goods for export, an inward processing rebate bond (IPR) is lodged with Zimra. In the event that the finished products are sold on local market and client fails to pay the duty ZIMRA will call on the bond underwriter to pay an amount equivalent to duty on the imported raw materials used
The purpose of the guarantee is that principal will be making an undertaking that vehicles coming into the country to ferry consignments for various customers will go back to their countries of origin. Should the vehicles fail to go back, Zimra will ask client to pay duty on the vehicles failing which the bond will be called up
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