Minister Fahy On BEDC Letter Of Credit Program
[Updated with video] BEDC, in partnership with HM Customs, 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 on the island, Home Affairs Minister Michael Fahy said today.
The Minister said, “What that means is that the BEDC will offer a one hundred per cent guarantee letter of credit to assist qualified applicants in securing an HM Customs Line of Credit to defer payment of duty. It should be noted that this is a pilot programme that will be assessed after one year.
“This initiative 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.
“Furthermore, HM Customs has had a product available since 2009 which allowed retailers to defer part of their customs duty payments for up to three months with the anticipation that a significant proportion of merchandise would be sold within that timeframe. However very few businesses took advantage of the product due to the lines of credit requirements.
“This Letter of Credit product 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. An approved retailer is simply 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.”
Minister Fahy said this initiative will come into effect as of September 1st 2015, and to apply for this letter, applications must be made to the BEDC.
“There is a $300 application fee for small businesses and $150 will be refunded if the application is unsuccessful,” Minister Fahy said.
“There is a $50 application fee for EEZ businesses or Vendors and there will be no refund if application is unsuccessful. Processing and approval from BEDC will occur within 10 business days of receipt of all required documents.”
“This Government is serious about encouraging the growth of small businesses with the BEDC providing tangible support and advice. We will continue to ensure that local economic development is a priority, by putting businesses and entrepreneurs first and creating sound, progressive policies for their success,” Minister Fahy added.
The Minister’s full statement follows below:
Good morning,
Thank you all for coming today.
This government remains committed to our island’s small businesses and ensuring not only that they succeed, but that they thrive.
Therefore I am thrilled to be here today to announce an exciting new initiative which will undoubtedly greatly assist many businesses in Bermuda.
BEDC, in partnership with HM Customs, 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 on the island.
What that means is that the BEDC will offer a one hundred per cent guarantee letter of credit to assist qualified applicants in securing an HM Customs Line of Credit to defer payment of duty. It should be noted that this is a pilot programme that will be assessed after one year.
This initiative 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.
Furthermore, HM Customs has had a product available since 2009 which allowed retailers to defer part of their customs duty payments for up to three months with the anticipation that a significant proportion of merchandise would be sold within that timeframe. However very few businesses took advantage of the product due to the lines of credit requirements.
This Letter of Credit product 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. An approved retailer is simply 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.
I am pleased to announce that this initiative will come into effect as of September 1st 2015. To apply for this letter, applications must be made to the BEDC. There is a $300 application fee for small businesses and $150 will be refunded if the application is unsuccessful. There is a $50 application fee for EEZ businesses or Vendors and there will be no refund if application is unsuccessful. Processing and approval from BEDC will occur within 10 business days of receipt of all required documents.
Duty must be paid to HM Customs within three months of goods being imported and the default rate is 7% plus collection fees to BEDC.
The Letter of Credit product is available to all small businesses, island wide; 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 five hundred thousand dollars [$500,000] or having annual sales revenues of less than one million dollars [$1,000,000].
Information on the application process involved can be obtained by contacting the BEDC directly at 292-5570 or by email at info@bedc.bm. Further details are also available on the BEDC and HM Customs websites, www.bedc.bm and www.customs.gov.bm respectfully.
This Government is serious about encouraging the growth of small businesses with the BEDC providing tangible support and advice. We will continue to ensure that local economic development is a priority, by putting businesses and entrepreneurs first and creating sound, progressive policies for their success.
In closing I would like to thank the Collector of Customs Ms Lucinda Pearman for partnering with us in this initiative; Financial Controller for H.M. Customs Mr. Christopher Pendle, for working with the BEDC team on developing the programme; and BEDC Executive Director Erica Smith and BEDC Director of Finance Ray Jones for making this possible.
Thank You.
Well Done!
King Leopold II has spoken.
This is a disaster! More subsidies for “private” entreprenuers! OBA following UBP play book…”Give away thing for free and you will be re-elected!” (HIP, govt. pensions, hospital subsidies, social security all contributing to greater debt for the people to carry for the govt. as the population ages!!) Only one outcome can be predicted = Bermuda bankruptcy looms!
Umm, OBA is UBP.