About the Customs Letter of Credit Program
BEDC has partnered with HM Customs and has allocated $200,000 in funds annually to be used to facilitate lines of credit in amounts up to a maximum of $10,000 to assist businesses in importing goods for retail sale in Bermuda. The BEDC will offer a 100% guarantee letter of credit to assist qualified applicants in securing a HM Customs Line of Credit to defer payment of duty.
The product was developed in response to an identified gap in the lending market. Results from the BEDC’s bi-annual stakeholder survey showed that small businesses were in need of lines of credit to facilitate importation of retail goods. However financial institutions were requiring letters of credit to be secured by cash which was prohibitive to most small businesses.
The Letter of Credit is designed to assist start up and existing small businesses with inventory purchases directly related to increasing sales or services.
Approved retailers are not required to provide monetary security to HM Customs for any duty deferred. However, an approved retailer is required to furnish Customs with a letter of credit from a bank or other financial institution in Bermuda guaranteeing payment of a specified amount of duty that may be deferred by that retailer under the approval given by the Collector.
Ordinarily HM Customs does not release goods to importers unless they have first made a Customs Declaration and paid the duty due. Any importer/declarant who does not wish to prepay the duty must request a line of credit from Customs. Customs will extend a line of credit when it is 100% secured by an irrevocable letter of credit issued by a Bermuda Financial Institution. For as long as the letter of credit remains active, Customs will be prepared to extend a line of credit up to the value secured by the letter.
HM Customs is willing to accept a guarantee letter from BEDC to secure the line of credit. This scoping document sets out the framework on how a retailer can be approved for a BEDC guarantee for this line of credit. Public Notice 31 – Customs Duty Deferment: Goods for Retail Sale sets out how to apply for such partial duty deferment.
The details of the Customs Letter of Credit Program are as follows:
HM Customs Processing Fee
EEZ Businesses Application Fee
The Letter of Credit product is available to all small and medium businesses, islandwide; including vendors and those businesses
located in a designated Economic Empowerment Zone.
The BEDC defines a small business as Bermudian – owned and managed; operating locally; having an annual gross payroll not exceeding $500,000 or having annual sales revenues of less than $1,000,000.
The BEDC defines a medium-sized business as a Bermudian-owned & owner-operated business enterprise with at least three of the following attributes:
- Gross annual revenues between $1 million and $5 million
- Annual payroll between $500K and $2.5 million
- A minimum of 11 and a maximum of 50 employees
- In operation for a minimum of 10 years
- Net Assets of less than $2.5 million
Although open to all businesses who meet the criteria, the BEDC desires to expose Bermuda’s small business.
Please ensure that you have reviewed the checklist below and have all the necessary information needed to apply.Complete and compile all information below, BEFORE filling out the application.