Provisional Duty Bond, Types, Where Such Bonds Can Be Used? How to Close and Get It Cancelled - Complete Procedure.

A Provisional Duty Bond (PDB) is a financial guarantee typically used in the import-export industry, particularly under Indian customs procedures. It allows the import of goods without immediate payment of customs duties, under the condition that the importer will fulfil specific obligations or conditions within a stipulated time.

🔹 What is a Provisional Duty Bond?

A Provisional Duty Bond is executed by the importer in favor of the customs authorities to cover duty liability when goods are cleared under provisional assessment due to incomplete documentation, pending test results, or valuation issues. This bond ensures that duties, if found applicable later, will be paid by the importer.

🔹 Types of Provisional Duty Bonds

1. Simple Provisional Duty Bond:
   • Used when customs duty payment is delayed due to pending clarification but does not require a security.
   • Usually supported by a letter of undertaking.
2. Provisional Duty Bond with Bank Guarantee (BG):
   • Required when customs authorities assess a higher risk or revenue implications.
   • Typically accompanied by a BG for a percentage (e.g., 25%) of the differential duty amount.
3. Provisional Assessment Bond under Section 18 of Customs Act, 1962:
   • For cases involving provisional assessment due to pending documents, test results, etc.
   • Often includes both the bond and bank guarantee.

🔹 Situations Where Provisional Duty Bonds Are Used

1. Pending Valuation/Classification Dispute
2. Pending Test Reports (e.g., from laboratory)
3. Pending Import Licenses/Approvals
4. Import under Concessional Duty Rates (awaiting exemption notification clarity)
5. Provisional release of goods under litigation
6. Imports under EPCG or Advance Authorization Schemes (until EODC is submitted)

🔹 How to Close and Cancel a Provisional Duty Bond

✅ Step-by-Step Procedure:

1. Fulfill Required Obligations
   • Submit the required documentation, test results, certificates (EODC, SVB orders, etc.), or comply with other pending conditions.
2. Request for Final Assessment
   • Apply to the jurisdictional customs authority for final assessment under Section 18 of the Customs Act, 1962.
   • Submit all pending documents for finalization.
3. Get Final Order
   • Customs authorities issue a Final Assessment Order confirming the final duty payable (if any).
4. Pay Differential Duty (if applicable)
   • Pay any short-levied or additional duty determined under the final assessment.
5. Submit Closure Application
   • File a formal request for cancellation of the Provisional Duty Bond, enclosing:
     • Final Assessment Order
     • Proof of payment (if applicable)
     • A request letter
     • Original Bond documents (and BG if submitted)
     • Acknowledgment of final assessment
6. Customs Verification and Cancellation
   • Customs will verify documents and cancel the bond.
   • The original bond and BG are returned or marked as cancelled.
7. Bank Guarantee Release
   • If a BG was submitted, request the customs to issue a BG release letter.
   • Submit this to the issuing bank to get the guarantee released.

🔹 Documents Required for Cancellation

• Application for bond cancellation
• Copy of the provisional assessment order
• Final assessment order
• Challan for differential duty payment (if any)
• Acknowledgment of document submission
• Original Provisional Duty Bond
• Copy of BG (if applicable)
• KYC documents (may vary per jurisdiction)

📝 Tips:

• Maintain proper record of all communication with customs.
• Timely follow-up ensures early final assessment and bond cancellation.
• Retain proof of cancellation and final assessment for audit or DGFT compliance (especially under EPCG/Advance Authorization schemes).

***

Here’s a template for a Provisional Duty Bond Cancellation Request Letter. You can customize it based on your company details, bond reference, and customs location.

Bond Cancellation Request Letter Template

To,
The Deputy Commissioner / Assistant Commissioner
[Customs House Name]
[Address of the Customs Office]
[City]

Subject: Request for Cancellation of Provisional Duty Bond – [Bond No./Reference]

Reference:

1. Provisional Duty Bond executed vide Bond No. [Bond Number] dated [Date]
2. Bill of Entry No. [BOE Number] dated [BOE Date]
3. Final Assessment Order dated [Order Date]

Dear Sir/Madam,

We, [Your Company Name], having IEC No. [IEC Number], had executed a Provisional Duty Bond referenced above in favor of Customs for clearance of goods under Bill of Entry No. [BOE No.] dated [BOE Date]. The goods were provisionally assessed due to [mention reason – e.g., pending test report, valuation, classification, license submission, etc.].

We wish to inform you that all conditions related to the provisional assessment have now been fulfilled. The final assessment has been completed, and the Final Assessment Order has been issued by your office vide Order dated [Final Order Date].

Accordingly, we request you to kindly cancel the above-mentioned Provisional Duty Bond and return the original bond and/or release the Bank Guarantee submitted (if applicable).

Please find enclosed the following documents for your kind perusal and necessary action:

1. Copy of Provisional Duty Bond
2. Copy of Bank Guarantee (if applicable)
3. Copy of Final Assessment Order
4. Proof of Duty Payment (if differential duty paid)
5. Copy of relevant Bill of Entry
6. [Any other relevant documents]

We request you to kindly acknowledge and process the cancellation at the earliest.

Thanking you,
Yours sincerely,

For [Company Name]
Authorized Signatory
[Name]
[Designation]
[Email ID]
[Phone Number]
[Company Address]
[Seal/Stamp if applicable]

***