An Advance Payment Bond is a guarantee given when money is paid before goods or services are supplied. So, if the client agrees to make an advance payment (sometimes referred to as a down payment) to a supplier, a bond may be required to secure the payment against default by the contractor.
The bond acts as a guarantee that, if awarded the contract based on the bid submitted, the contractor will enter into a contract to perform the work at the price quoted. If the contractor declines to enter into a contract to perform the work at the agreed-upon price, the bid bond will reimburse the obligee (owner or upper-tier contractor) the difference between the defaulting contractor’s bid and the next lowest bid, up to the penal sum of the bond.
A Customs bond is a contract between three parties (Customs, a principal (i.e. an importer), and a surety) to ensure that all the duties and fees associated with the rules and regulations of importing or other Customs activities are paid to Customs by the principal.
A performance bond, also known as a contract bond, is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor. The term is also used to denote a collateral deposit of good faith money, intended to secure a futures contract, commonly known as margin.
A Customs transit guarantee scheme is a system that ensures that Customs in a transit country receive proper payment for dues and duties for any goods in transit. The RCTG was introduced in 2012 on the Northern Corridor to facilitate movement of goods from the port of Mombasa to the landlocked countries in the region.