Marsh Surety Services

Surety is a credit instrument known as a bond guarantee. It is not insurance. A firm called a "surety company" guarantees that a business corporation called a "principal" will carry out an obligation to a third party, called an "obligee." Two examples of such obligations include:

If the principal does not fulfill its bonded obligation, the obligee can make a claim demanding that the surety company satisfy the obligation or pay the bond penalty. The surety company has the right to reimbursement from the principal in the case of a paid loss or claim.

Surety Terminology
Contract Bond	"Contract" is a broad classification of bonds which are generally comprised of performance, payment, supply and warranty bonds that re written in support of an underlying contract or agreement.
Bid Bond	Provided by a bidder to guarantee that the bidder, if awarded the contract within the time stipulated, will enter into the contract and that they will furnish the prescribed final bonds (performance and some cases, payment bonds).
Performance	A Performance bond protects the Obligee from financial loss should the Principal fail to perform their contractual obligations in accordance with the terms and conditions of the underlying contract documents.
Payment	Payment bonds are generally issued in conjunction with performance bonds and guarantee that payments due to contractors, subcontractors and/or suppliers for labor and materials associated with a project.
Maintenance/Warranty Bond	The normal coverage provided by a Maintenance Bond is a guarantee against defective workmanship or materials. However, Maintenance Bonds sometimes incorporate an obligation guaranteeing "efficient or successful operation" or other obligations of like intent and purpose.
Prequalification Letter/Letter of Intent	Letter to the obligee which states if principal is awarded the project, it is the intention of the Surety Company to issue the required bond(s).
Customs Bond Activity 1 - Importer or Broker	Generally, this activity is used by an importer of merchandise to guarantee to the government the duty is paid, in the proper amount, and the goods imported are in compliance with the laws of the United States. Continuous Transaction - The bond amount is usually equal to 10% of the duty and other import taxes paid for the previous year, in multiples of $10,000 if the duties are less than $1,000,000 or multiples of $100,000 if duties are over $1,000,000. The minimum bond permitted by U.S. Customs is $50,000.
Customs Bond Activity 1a - Drawback Payment Refunds	Drawback is a procedure under which an exporter can obtain refunds on duties previously paid on imported goods which have been exported. An exporter may claim drawback under either of two procedures: exporter's summary or accelerated payment under which payments are received more quickly. Continuous Transaction - This bond is executed in an amount equal to the total drawback duty to be claimed in one year if claiming accelerated drawback, or 25% of the total drawback duty to be claimed in one year if claiming exporter's summary drawback.
Customs Bond Activity 2 - Custodian of Bonded Merchandise	This activity is used to cover operations which carry or store merchandise not yet entered into the commerce of the United States. This merchandise may be for export or entry at a later time or place and is also known as "Bonded Merchandise". Operations such as bonded warehouses, cartmen, carriers, and container stations are covered under this activity. Also, importers carrying their own bonded merchandise would be required to obtain this coverage. Continuous Transaction - The amount of the bond is determined by Customs based on the principal's application and on (a) the size and (b) the type of operation. During the principal's application approval process, Customs will advise the principal of the correct bond amount.
Customs Bond Activity 3 - International Carrier	This activity is for operators of ships, airlines, and other conveyors of international merchandise. The bond is to ensure the operators properly manifest the goods they are carrying, pay for overtime services, and comply with other Customs regulations related to the clearance of the vessel. Continuous Transaction - This bond amount is determined by Customs, but is generally not less than $50,000.
Customs Bond Activity 3a - Instruments of International Traffic	This activity is used to cover the movements and clearances of containers which move internationally. Without this provision each container moved into the United States would have to be entered and duty paid upon entry. Continuous Transaction - This bond is set by each port authority. Min. $20,000/$50,000/$75,000
Customs Bond Activity 4 - Foreign Trade Zone Operator	Secures the operation of a Foreign Trade Zone and guarantees Foreign Trade Zone operators will comply with Customs regulations for maintaining the Zone. May be written as a continuous bond only.
Customs Bond Activity 5 - Public Gauger	Secures compliance with regulations on gauging (measurement of liquids, weighing imported merchandise, etc.) The bond guarantees that measurements are accurate and records are correct. May be written as a continuous bond only.
Customs Bond Activity 6 - Wool & fur Products Labeling Acts Importation (Single Entry Only)	Secures compliance with provisions and procedures for labeling wool and fur products as set forth in the Wool and Fur Products Labeling Act and Fiber Labeling Act. May be written as a single transaction bond only.
Customs Bond Activity 7 - Bill of Lading (Single Entry Only)	Indemnifies Customs from losses if merchandise is released without a bill of lading. May be written as a single transaction bond only.
Customs Bond Activity 8 - Detention of Copyrighted Material (Single Entry Only)	Indemnifies Customs from any damages for detention of merchandise erroneously believed to be copied. May be written as a single transaction bond only.
Customs Bond Activity 9 - Neutrality (Single Entry Only)	Provides for observance of neutrality by armed vessels. May be written as a single transaction bond only.
Customs Bond Activity 10 - Court Costs of Condemned Goods (Single Entry Only)	Secures payment of court costs if judicial proceedings result in condemnation of property. May be written as a single transaction bond only.
Financial Guarantee	Bonds that guarantee payment by the principal or licensee of taxes or payment for products received from others.
License and/or Permit	License and permit bonds are generally required by a statute or in connection with a permit issued by a government agency. There are numerous forms of license and/or permit bonds forms that may be required during the normal course of business.
Bond Details	The section contains specific information required in order to obtain approval from the surety company and to properly execute the bond (see below).
Bond Amount	This is the penal sum of the bond, as determined by the Obligee, which is the party requiring the bond. This is generally considered to be maximum level of exposure undertaken by the Principal and by the Surety with respect to the obligation and the amount upon which premium is determined.
Bond Effective Date	This is the date the bond is to take effect.
Bond Expiration Date	This is the date the bond is expected to be terminated or no longer needed (please note if bond is to be continuous).
Contract Date	Please provide the effective date of the agreement. Often times, the effective date of the bond must coincide with the effective date of the underlying agreement. In some cases, the bond may not have a true effective date and the effective date is considered to be the same as the effective date of the underlying contract or permit.
Contract Amount	This is the value of the work associated with the underlying contract. Often, the contract amount is identical to the bond penalty (i.e. the bond amount is 100% of the contract value), but there may be certain circumstances where the value of the contract exceeds the bond penalty (i.e. the Obligee requires a "percentage" bond issued in an amount that is less than the full contract value).
Job Name/Description	Providing a brief description of the underlying work to be performed – this will help to expedite the approval / issuance of the bond.
Principal	This is the specific entity that needs the bond issued. The exact legal name of the Client entity should be provided in this section, so that the bond may be properly completed. The Principal name should (exactly) match the name on the contract that necessitates the bond.
Obligee	This is the party that is requiring the Client to provide a bond and the bond is issued in their favor. The Obligee may be a municipality, government entity, corporation, etc.
Warranty / Maintenance Period	If there is a warranty or a maintenance term associated with the underlying work, please provide this information. In some cases, the warranty or maintenance liability may not need to be covered by the bond.
Completion Date	This is the estimated date that the underlying work will be completed. This is important in determining the premium and in obtaining approval for the bond itself.