How does a Running bond work?

Running bond is commonly used at various government and private authorities against security requirements. 

• What is running bond? 
• How running bond works?

In imports and exports, running bond is commonly used at customs authorities under various requirements.

How does running bond work?

A bond is executed with the authorities to fulfill certain terms and conditions legally. Once after fulfilling the terms and conditions mentioned in the bond, the executor does not cancel the bond but carries over to next obligation against same terms and conditions mentioned in the bond.

If a running bond has been executed by a customer with authorities, once after fulfillment of required obligation under running bond, such running bond do not be cancelled, but carry over to the new obligation executing.

Here the benefit for the customer is that, he need not execute each and every time against each obligation.

For example, if a customer executes a bond worth 10 billion, he can use the said bond for more than one transaction below 10 billion. He can submit proof of obligation for each transaction time to time and reduce bond obligation. In turn, the customer can execute new jobs subjected to maximum 10 billion in this example. While fulfillment of obligation under each bond after necessary formalities by submitting necessary documentary proof, the value of each bond replenishes, to enable him to execute new transactions.

Let me explain once again in simple terms:

A bond for 10 billion has been executed by an importer to avail import duty exemption against his import shipment. This importer imports goods worth of import duty of 2 billions. The bond value came down to 8 billion. The said importer can further import goods worth import duty of 8 billion. Now the bond value is 0. During this period, if he fulfills his obligation against bond worth 2 billions against his first imports, the bond value comes up to 2 billions again. So he can further import goods worth import duty of 2 billion maximum. So the bond value replenishes when completing obligation under each import. In other words, If an importer executed a bond worth 10 billions against import duty exemption worth 10 billions, the said importer can import goods up to duty worth 10 billion at any point of time. The bond value should not exceed more than 10 billions at any point of time.