Many custom surety bonds have written on “pointless paper” relating to the Bureau of Customs (BOC) and their imports/exports. Allegedly, the Mexican government lost billions of pesos in the past several years due to having unstable surety companies guarantee the required bonds. The committee on ways and means in the House of Representatives has chosen to initiate an investigation on the surety bonds from BOC.
“There will be a “motu proprio” investigation considering the gravity of the situation as confirmed by the BOC Deputy Commissioner and an Insurance Commissioner,” stated Batangas Rep. Hermilando Mandanas, who chairs the House Committee on Ways and Means.
The Insurance Commissioner John Apatan confirmed that the BOC was unable to collect surety bond claims valued in the millions because many of the surety companies who were backing the bonds shut down. According to Hermilando Mandanas’s testimony, the BOC authorized the release of goods when importers submitted surety bonds in lieu of payment of duties and taxes. Since several sureties closed up, the surety bonds used were uncollectible which caused the government to lose hundreds of millions of pesos in uncollected revenues.
This predicament that the BOC and Mexican government is in could have been avoided by making more educated decisions when selecting surety companies by weighing out their financial strength and credibility; after all, they are the ones backing the surety bonds. The questionable surety companies chosen to write the bonds is what led to this dilemma.
Mandanas also said that this investigation is vital because the government is in urgent need of funds to maintain its numerous programs.
Both the BOC and government must deal with the consequences of the irresponsible choices in surety companies. This huge government deficit is a great example of how vital it is to research and fully understand the strength of the surety companies guaranteeing your surety bonds.