Manufacture in bond and outside bond MCQs With Answer

Manufacture in bond and outside bond MCQs With Answer

This concise guide explains key concepts of manufacture in bond versus outside bond for B.Pharm students focusing on pharmaceutical production, bonded warehouses, excise and customs duty treatment, and regulatory compliance. Learn how bonded manufacture defers duty, affects import of APIs and excipients, and links to export benefits, duty drawback and bonded storage. Topics include documentation, bond agreements, quality control, GMP implications, packaging and labelling requirements, and consequences of misuse. These MCQs emphasize practical pharmacy manufacturing scenarios, legal controls, and supply-chain impacts to prepare you for exams and industry practice. Now let’s test your knowledge with 30 MCQs on this topic.

Q1. What best defines “manufacture in bond” in pharmaceutical context?

• Manufacturing under customs/excise control in a bonded facility where duty is deferred
• Manufacturing in any factory without regulatory oversight
• Manufacturing exclusively for local retail sale with immediate duty payment
• Manufacturing of non-pharmaceutical products only

Correct Answer: Manufacturing under customs/excise control in a bonded facility where duty is deferred

Q2. Which document establishes the legal undertaking for manufacturing in a bonded facility?

• Goods Receipt Note
• Bond agreement executed with customs or excise authorities
• Export invoice
• Purchase order from supplier

Correct Answer: Bond agreement executed with customs or excise authorities

Q3. A primary advantage of manufacture in bond for pharmaceutical exporters is:

• Immediate payment of full excise/customs duty on raw materials
• Deferral or exemption of duties until domestic clearance or export
• Exemption from quality control and GMP requirements
• Ability to sell without invoices

Correct Answer: Deferral or exemption of duties until domestic clearance or export

Q4. “Outside bond” manufacture typically means:

• Production carried out in a bonded warehouse under customs custody
• Production in a normal factory with duties paid as applicable
• Production that bypasses regulatory inspections entirely
• Production exclusively for charitable distribution

Correct Answer: Production in a normal factory with duties paid as applicable

Q5. Which of the following is a common requirement for a bonded manufacturing unit?

• Monthly public sale disclosures
• Maintenance of detailed raw material and finished goods ledgers under supervision
• Exemption from environmental permits
• Restricted internal audits only

Correct Answer: Maintenance of detailed raw material and finished goods ledgers under supervision

Q6. If bonded-manufactured pharmaceutical goods are cleared for domestic sale, what usually happens?

• No duty is ever charged
• Excise/customs duty becomes payable upon clearance into domestic market
• Goods are automatically exported without documentation
• Quality testing is waived

Correct Answer: Excise/customs duty becomes payable upon clearance into domestic market

Q7. Which activity is typically allowed inside a bonded pharmaceutical warehouse?

• Mixing APIs to create finished dosage forms under bond and supervision
• Retail sale directly to patients
• Permanent storage without records
• Open public access for sampling

Correct Answer: Mixing APIs to create finished dosage forms under bond and supervision

Q8. Bonded manufacture impacts quality systems how?

• Eliminates the need for GMP compliance
• Requires integration of customs records with GMP and QC documentation
• Makes QC optional for exported drugs
• Allows substitution of raw materials without records

Correct Answer: Requires integration of customs records with GMP and QC documentation

Q9. Which of the following is a likely consequence of non-compliance in a bonded unit?

• Increased export benefits
• Penalties, seizure of goods and cancellation of bond privileges
• Automatic exemption from duties
• No action if goods are pharmaceutical

Correct Answer: Penalties, seizure of goods and cancellation of bond privileges

Q10. For import of APIs into a bonded facility, which benefit is commonly available?

• Immediate access to domestic market without duties
• Import duty deferral while materials remain under bond
• Complete exemption from all regulatory clearances
• Free distribution without record-keeping

Correct Answer: Import duty deferral while materials remain under bond

Q11. Which record is essential when transferring raw materials from bond to production?

• Daily sales advertisement
• Material transfer challan maintained under bond rules
• Employee attendance register only
• Photograph of the raw material box

Correct Answer: Material transfer challan maintained under bond rules

Q12. Duty drawback schemes relate to bonded manufacture by:

• Charging extra duty on exports
• Refunding duties paid on inputs used in exported products
• Applying only to domestic sales
• Exempting GMP obligations

Correct Answer: Refunding duties paid on inputs used in exported products

Q13. Which is a correct distinction between bonded and non-bonded storage?

• Bonded storage allows free public access
• Non-bonded storage is under customs custody
• Bonded storage operates under customs supervision with duty control
• Non-bonded storage always exempts duties

Correct Answer: Bonded storage operates under customs supervision with duty control

Q14. In bonded manufacture, clearance for export typically requires:

• No paperwork beyond packing
• Approval from customs/excise and export documentation proving goods left the country
• Payment of domestic sales tax only
• Destruction of all production records

Correct Answer: Approval from customs/excise and export documentation proving goods left the country

Q15. Which of the following is true about packaging and labeling for bonded-manufactured pharmaceuticals?

• Labeling can ignore statutory export requirements
• Packaging and labeling must meet both regulatory and customs documentation standards
• No labels are required for bonded goods
• Labels should omit batch numbers for secrecy

Correct Answer: Packaging and labeling must meet both regulatory and customs documentation standards

Q16. A bonded factory wants to convert bonded raw materials for domestic sale; the manufacturer must:

• Destroy the bonded documentation
• Pay applicable duties and update records before clearance
• Declare the goods as exported
• Sell without mentioning bond status

Correct Answer: Pay applicable duties and update records before clearance

Q17. Which government inspections commonly apply to bonded pharmaceutical manufacture?

• Only fire safety inspections
• Customs/excise audits plus drug regulatory GMP inspections
• No inspections due to bond status
• Only environmental inspections, never customs

Correct Answer: Customs/excise audits plus drug regulatory GMP inspections

Q18. Which record helps reconcile quantity of APIs used in bonded manufacture?

• Production batch records linked to bond ledgers and challans
• Employee travel logs
• Social media posts about production
• Only generic monthly summaries without batch details

Correct Answer: Production batch records linked to bond ledgers and challans

Q19. When goods remain in a bonded warehouse beyond permitted time, possible outcome is:

• Automatic duty waiver
• Penalties, detention or confiscation as per customs rules
• Reduced quality control requirements
• Conversion to non-pharmaceutical status

Correct Answer: Penalties, detention or confiscation as per customs rules

Q20. Which of the following best describes “outside bond” raw material procurement?

• Materials imported under duty deferral while in bonded storage
• Materials procured with regular import clearance and duty paid before use
• Materials that do not require invoices
• Materials exempt from quality testing

Correct Answer: Materials procured with regular import clearance and duty paid before use

Q21. For controlled substances, bonded manufacture requires additional controls such as:

• No record-keeping to protect confidentiality
• Strict inventory reconciliation, secure storage and regulatory permits
• Free distribution to hospitals
• Outsourcing all documentation to third parties without oversight

Correct Answer: Strict inventory reconciliation, secure storage and regulatory permits

Q22. How does bonded manufacture affect cost accounting for a pharmaceutical company?

• Duties are ignored in all costing
• Duties may be deferred, affecting inventory valuation until duty is paid or refunded
• Costs are always lower than outside bond without exception
• Bonded goods are valued at zero permanently

Correct Answer: Duties may be deferred, affecting inventory valuation until duty is paid or refunded

Q23. Which practice helps ensure compliance in a bonded pharmaceutical unit?

• Merging regulatory and customs record-keeping and routine reconciliations
• Removing batch numbers from records
• Allowing ad hoc material withdrawals without documentation
• Relying solely on verbal approvals for transfers

Correct Answer: Merging regulatory and customs record-keeping and routine reconciliations

Q24. In bonded manufacture, “security deposit” or guarantee to authorities is used to:

• Serve as collateral to ensure compliance with bond conditions
• Pay employee salaries
• Replace quality testing
• Fund marketing activities

Correct Answer: Serve as collateral to ensure compliance with bond conditions

Q25. Which of the following is true about samples taken from bonded production for QC testing?

• Samples never require documentation
• Sampling must be documented and often reported to customs/excise as per bond rules
• Samples can be sold without reporting
• Sampling invalidates the bond

Correct Answer: Sampling must be documented and often reported to customs/excise as per bond rules

Q26. When bonded-manufactured pharmaceuticals are exported, what happens to duties on inputs?

• Duties become permanently payable regardless of export
• Manufacturer may claim duty drawback or refunds as per export benefit schemes
• Duties double automatically
• Duties are transferred to the importer only

Correct Answer: Manufacturer may claim duty drawback or refunds as per export benefit schemes

Q27. Which stakeholder is least likely to be directly involved in bonded manufacturing compliance?

• Customs/excise authorities
• Drug regulatory inspectors
• Quality assurance personnel
• End consumer without supply-chain role

Correct Answer: End consumer without supply-chain role

Q28. A practical reason a pharmaceutical firm may choose outside bond manufacture is:

• To delay duty payments indefinitely
• To simplify operations when all duties and taxes are to be applied immediately for domestic sale
• To avoid GMP inspections permanently
• To eliminate all documentation requirements

Correct Answer: To simplify operations when all duties and taxes are to be applied immediately for domestic sale

Q29. Which action demonstrates good practice when reconciling bonded ledger discrepancies?

• Ignoring small mismatches
• Conducting root-cause analysis and correcting records with customs notification if required
• Destroying old entries to hide errors
• Blaming staff without investigation

Correct Answer: Conducting root-cause analysis and correcting records with customs notification if required

Q30. Which statement is accurate about labeling of bonded goods intended for export?

• Labels may omit country-of-origin for faster clearance
• Labels must comply with destination country regulations and export documentation requirements
• Labels are optional for bonded exports
• Labels should include internal company secrets instead of regulatory information

Correct Answer: Labels must comply with destination country regulations and export documentation requirements

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