While engaging in import, it is important to have all the necessary documents, so that the process is accomplished in a seamless manner. Availability of the required documents and accuracy of the documents help to obtain import clearance. If there is a delay in producing the documents, the import process can be delayed.
As a result, import cargo can suffer demurrage to a great extent, leading to financial losses. Custom authorities require an importer to submit of the necessary documents, whether the product is arriving by air, water or land.
Table of Content
- 1 Import Documentation
- 2 Types of Bill of Entry
- 3 Documents Required for Import Clearance
- 4 Advance Bill of Entry
- 5 Duty Payments
- 6 Stamp Duty
- 7 Customs Clearance Procedure
- 8 Noting a Bill of Entry
- 9 Processing a Bill of Entry
- 10 First Check
- 11 Physical Examination of Goods
- 12 Out of Charge
- 13 Customs Clearance Under Various Schemes
- 14 Incoterms
- 14.1 EXW: Ex Works
- 14.2 FCA: Free Carrier
- 14.3 CPT: Carriage Paid To
- 14.4 CIP: Carriage and Insurance Paid To
- 14.5 DAT: Delivered At Terminal
- 14.6 DAP: Delivered At Place
- 14.7 DDP: Delivered Duty Paid
- 14.8 FAS: Free Alongside Ship
- 14.9 FOB: Free On Board
- 14.10 CFR: Cost and Freight
- 14.11 CIF: Cost, Insurance and Freight
The freight forwarding agent also needs to furnish the customs documentation for approval of import. Upon arrival of the cargo, the importer has two options. One, he may take away his cargo immediately after paying the applicable duties. Or two, he may let it be stored under bond and clear later. In this, the cargo is stored under bonded warehouse and charges are levied for the period of storage. The importer may take his cargo from the bonded warehouse after paying the applicable duties.
Now, let us briefly list and describe the documents that are required for the import procedure as under:
- Bill of Lading if imported by sea /Airway bill if imported by air
- Packing list
- Chemical analysis report if applicable
- Insurance certificate if the incoterms are FOB
- Bills related to the freight charges
- Certificate of origin
- Declaration of origin mentioned on the invoice.
- Import license documents, special treatment request and supporting documents
Invoice contains the name and address of the consignee, antecedents of the buyer, date of sale transaction, information about the product (quantity, make, the type of goods, rate, value, and currency), the terms of payment, conditions of delivery, discounts and any deductions if applicable.
Types of Bill of Entry
Whenever goods are imported into India they have to pass through customs before entering the domestic market. It is necessary to complete the customs clearance procedures. To accomplish the task, an importer has to file the bill of entry online or manually, depending on the facilities available to the customs authorities. The legal document is created in the specific format mentioning the details of the products, importer information and other data.
There are three types of bill of entry:
Bill of Entry for Home Consumption
This bill is white in colour and is used to file an entry manually. It is used in facilities where electronic entry of bills is not possible. This type of bill is used by the importer when he wants to get the goods cleared (on payment of duty for dutiable goods or without duty for duty free goods) to his premises immediately. Section 46 of the Customs Act, 1962, mentions the information about this bill in a detailed manner.
Warehousing Bill of Entry
This bill is also called Into Bond Bill Of Entry and it is buff in colour and was used prior to the introduction of electronic filing. If the importer is not willing to pay duty on arrival, he signs a contract to keep the goods in the customs bonded warehouse by following the formalities under the different provisions.
When the duty is paid, the goods are released by the customs authorities. Or the importer may also pay duty for some quantity of the consignment and take that quantity. He may take the required quantity as and when he requires by paying the requisite duty. Sections 46 and 60 of the Customs Act 1962, describe this bill.
Ex-Bond Bill of Entry
Ex bond bill of entry is prepared when bonded goods are cleared from Bonded warehouse for home consumption. Generally, the colour of the bond certificate is green.
Details of procedures are mentioned in section 68 of the Indian Customs Act. Besides the 3 types of bill of entry described here, there is also a bill of entry which is pink in colour and it is used for clearing the goods imported for the defence establishments. Imported goods for defence are cleared by a pink-coloured bill. If any consignment is exported from bonded warehouse there is no need to file a ex bond bill of entry. It can be exported under shipping bill.
Documents Required for Import Clearance
The documents needed for import clearance are the following:
It certifies the sale of goods describes the items and enumerates the price of the cargo. The concerned customs officer who appraises the invoice can verify the rates mentioned in the commercial invoice and compare them with the actual rates in the international market to find the difference. In this way, any discrepancies or any unjust practice in the form of over invoicing or under invoicing can be found,
Shipping marks have to be placed on the cargo covering belonging to a range of products. For instance, the name of the consignment, quantity of the material, dimension of the parcel, gross and net weight and number of units must be mentioned in a detailed manner. Packing list is the packing list that is originally issued by the first exporter.
Certificate of Origin
Certificate of origin is a document which certifies the origin of a country where the goods were originally manufactured. Generally the importer requires a certificate of origin issued by the local chamber of commerce but in some cases the importer may require a generalised system of preference issued by the export council agencies of the respective county which comes along an attested copy of a commercial invoice. Bilateral and multi-lateral agreements incorporate favourable tariffs to reduce the import duties.
There are also cases when the government imposes certain duties or reduces them depending on the availability of a certain commodity or products to control their import. Governments may also increase or decrease the duties for the goods of certain countries depending on the political relations of these countries. When the consignments are exported from the intended countries, the export agency provides a certificate of origin to the customs. Therefore, the customs authorities can give discount by verifying the certificate.
Bill of Lading (B/L)
A bill of lading can be understood as a receipt from the cargo handler or shipping line as a proof that it carries your goods. The B/L is signed by the captain of the ship or any other agent of the transporter and it serves as evidence that the consignment has been shipped. Or in other words, it is a negotiable document that is provided by a shipping line certifying that the cargo belongs to a certain invoice on behalf of the said exporter as well as an importer.
There are various categories of the B/L. A Clean On Board or CleanB/Lstates that the transport company has not observed any irregularities in the packing or condition of the goods in the cargo, and it has been loaded on the ship. An airway bill is the negotiating document when the goods are transported by air.
It is considered as one of the documents required for the negotiations, indicating that the cargo has been loaded on the ship. A B/Lis marked as “foul” if the transport company notes or observes something which is not usual in the cargo. The irregularity may be improper packaging or damaged products. It is not good to present a “foul” marked container to any importer. So, the exporter must replace the foul container with a clean one.
An On Board B/L is the one that states that the cargo has been positioned on the board. An On Deck B/L is used in case if the goods being traded fall into the category of livestock.
Advance Bill of Entry
Advance bill of entry is also known as prior bill of entry. Goods that are imported into India attract import duty from the government and they should also conform to the legal requirements. Imported goods must be accompanied by relevant documents In other cases, importers should follow the rules laid down in sections 52 and the 56 of the Indian Customs Act, 1962. Usually, the bill of entry is filed when the importer receives the cargo.
But the importer may also file the bill of entry before the arrival of the shipment for faster clearance of goods. This bill of entry is valid only if the cargo arrives within 30 days of the filling of the bill. The details of filing the advance bill of entry have been mentioned in Section 46(3) of the Indian Customs Act, 1962. Here, since the bill of entry is filed before the cargo arrives, the rate of duty applicable will be the one on the date of arrival of cargo.
The importer needs to file 5 copies of bill of entry and the fifth copy is the Advance Noting Copy. The importer needs to declare that the vessel or aircraft is due to arrive within 30 days. The importer needs to file the bill of entry for final noting as soon as the Import General Manifest (IGM) is filed. The advance noting facility is available for all imports except the “Into Bond Bill Of Entry” While filing the advance bill of entry the importer may not know as to which vessel would bring his consignment because large container ships often transfer the cargo to smaller feeder vessels at intermediate ports.
Or we can say that transhipment of the goods can also occur after unloading at a port inside India. The goods that are offloaded at an airport or a port can avail customs clearance for home consumption. Importers should pay the duty beforehand to accomplish the task. Under the Customs Act, 1962, an importer is required to file the terms according to section 46 of the Act.
When the goods are cleared by customs with help of Electronic Data Interchange (EDI) procedure, the bill of entry is not filed manually. In manual filing of the bill of entry four copies of the bill of entry are required. The first and second copies are for customs, the third copy is for the importer and the fourth copy is for Reserve Bank sent by authorised bank of importer. In the filing of bill of entry through EDI, only three copies are required.
The duty can be paid to the concerned banks under the TR-challan that has to be submitted to the customs. Banks generally prefer payments through challan; however, it is important to check the branch and the name of the bank before proceeding. The government has decided to reduce the transaction cost; therefore, e-payments are made mandatory in the form of duty. This facility has been made available to importers since 2007. An importer paying more than ₹100,000 in a transaction should notify the customs authorities.
The stamp duty in Maharashtra is governed by Article 36 of schedule 1 of the Bombay Stamp Act, 1958. Under this act, stamp duty is levied at the prescribed rates on the instruments that entitle any person to delivery of goods that are lying in the port or any warehouse where the goods are stored. Stamp duty is paid online through the bank. As per the Indian Stamp Act, 1899, the export bills beyond 90 days were subjected to Stamp Duty which was implemented by the Public Sector Banks, uniformly in all parts of the country. In 2004, the government remitted the whole amount of stamp duty chargeable on usance bills of exchange for exporters.
Customs Clearance Procedure
The customs clearance procedure in India is as follows:
- Bill of entry: Imported cargo are moved to the respective Container Freight Station or Inland Container Depot (ICD) if imported by sea or to the customs Shed if imported by air.
- Customs clearance formalities need to be completed by the importer once the goods are in a custom port area. The necessary formalities and the list of documents are given below:
- Goods for home consumption can be released after the payment of duty.
- Filling the bill of entry either manually or electronic mode is necessary. When the bill of entry is filled through EDI system, no formal bill of entry is required but the importer is required to file a cargo declaration.
- Signed invoice should be provided.
- Packing list
- Bill of lading
- Importer’s declaration
- License, where necessary
- Letter of credit/ bank draft
- GATT declaration form filled with information
- Insurance document
- Import license
- Industrial license
- Certificate of Origin, if preferential rate of duty is claimed
- Test report in case of chemicals
- Ad hoc exemption order
- Catalogue technical write-up
- Goods for home consumption can be released after the payment of duty.
When the bill is being filed, it is important to mention the particulars in great detail, and the accuracy of the information has to be certified/ declared by the importer. This declaration, if found to be incorrect may attract legal consequences.
Noting a Bill of Entry
A bill of entry has to be filed in the respective customs house for the clearance document within 30 days of the arrival of the goods. The customs house or an agent can file the bill of entry according to the requirements and the specifications of the users. Under the EDI system, the Customs House Agent (CHA), renamed as Customs Broker (CB)downloads the ICE GATE software wherein the CHA can enter the import details of the importer. The first stage of the bill of entry is its noting with regard to the IGM filed by the shipper.
A Check list is filed by the importer or his agent with the customs who give a bill of entry number after verifying the details in the check list. The noting aspect of the bill is checked by the system and the bill of entry number is also generated by the system. After entering information, a detailed check list is created, which is then cross-verified with the imported goods. When the order is fulfilled, the entry form is uploaded electronically.
The check list is also forwarded to the CHA to complete the process of verification. In the non-electronic system, the information pertaining to a bill must be noted in the concerned unit that checks the consignment which the importer intends to have cleared. A bill of entry number is generated and indicated on all copies. After the bill of entry number is noted the bill of entry is sent to the appraising section of the custom house for assessment function, duty payment, import permissibility etc.
Processing a Bill of Entry
The customs officer determines the duty liability, taking note of the exemptions claimed under different schemes. It is also necessary to verify if the goods that are being imported are prohibited from entering the country. The assessing officer also takes into account the value of the import, invoice declaration along with the bill of entry and also verifies whether the transaction value method is acceptable in the long run. When the customs officer does not have any clarity on the description of goods, a detailed examination is conducted to evaluate the nature of the goods and appropriate action is taken to measure the duty.
Sometimes a sample of the items is also taken to evaluate if the sample conforms to the stated requirements. The customs officer then appraises the bill of entry. He specifies the final classification, valuation of goods in the bill of entry, various duties that may be applicable. After this, the bill of entry is forwarded to the assistant commissioner or the deputy commissioner for confirmation. Again, the bill of entry is sent to the comptist, who is an expert on comptometer.
Please note that in the EDI system no comptist is required, the calculations are done by the system only. He calculates the duty payable taking into account the rate of exchange at the date applicable. After going through the assessment procedure and the calculation of the duty liability, the importer needs to pay the requisite amount that was calculated by the comptist with the treasury or the nominated bank. After paying the duty he can go and collect his consignment.
In cases where the consignment/goods have been examined already for final classification and valuation, no other check is done by the customs staff at the time of giving delivery. Delivery can be taken after showing the orders and paying the dues if any. After the assessment, a “assessed bill of entry” is printed in the service centre of the customs house. The final bill of entry is printed after the customs officer gives “out of charge”.
Imported products are examined to verify the correctness of a bill of entry. The consignment is selected on a random sample basis and is examined in great detail. When the assessment officer doesn’t have complete information about the goods, he might require to examine the goods to evaluate the custom duty correctly.
It is known as the first check. It is requested at the time of filing of bill of entry; however, reasons should be given to the importer for the first assessment. The importer can also opt for first check in case of any doubt on duty structure. But customs always prefers second check. In the second check, the dock examiner examines the products as per the documents and records his findings.
Physical Examination of Goods
Physical examination of goods is done under the second check. The goods are examined after the assessment and payment of duty. Most of the consignments are cleared after the second assessment. Sampling is a very important aspect that helps to check the quality of the goods. The quality, quantity and value are matched by the figures provided in the documents. A declaration regarding the correctness of the documents must be made after the verification is completed. Two copies of the bill entry are to be returned to the CHA/ importer after the appraiser has duly signed them.
Out of Charge
After the examination of the goods, if no discrepancies are found, the “out of charge” orders are given to clear the consignment. If the goods are not cleared, port dues, demurrage, and other charges become applicable. Demurrage is applicable if the goods are not cleared within three days from the out of Charge orders. If the goods are not cleared within 30 days of out of charge, they may be disposed off.
Customs Clearance Under Various Schemes
The capital goods under the export promotion capital goods (EPCG) scheme can be imported at 0% customs duty. This is subject to an export obligation of 6 times the duty saved on capital goods, and must be fulfilled within 6 years from the date of authorisation. Import of goods under the specialised schemes can be cleared if the importers execute bonds with the customs authorities. The holder of EPCG authorisation has to file a bond (with or without) the bank guarantee with the customs before initiating the process of import of goods. The purpose of the bond is to ensure that the export obligation is fulfilled.
INCOTERMS is an abbreviation for International Commercial Terms published by International Chamber of Commerce. These terms are used in global trade transactions or the import transactions. These are three letter terms. The reason to have a standard and common terminology for the global trade is to lower or eliminate the discrepancies which may occur due to different language being used in different countries. According to the revised rules, there are 11 terms now (Earlier, there were 13 terms). DAS, DES, DEQ and DDU designations have been eliminated and two terms, DAT and DAP, called Delivered At Terminal and Delivered At Place respectively, have been added.
The following is a list of INCOTERMS:
EXW: Ex Works
“Ex Works” refers to works, factory, warehouse, etc. The importer will have to collect the goods from the exporters’ place i.e. factory, warehouse, etc. The importer has to make arrangement for moving the goods from exporter’s location. Importer has to organise the freight forwarding operations.
FCA: Free Carrier
“Free Carrier” implies that the exporter should give the delivery of the goods to the carrier or to another person as nominated by the exporter at a decided place. Both the importing and exporting parties should clearly specify the named place of delivery.
CPT: Carriage Paid To
“Carriage Paid To” implies that the exporter delivers the goods to the carrier or to another person as nominated by the exporter at a decided place. Also, the exporter should pay for the carriage costs.
CIP: Carriage and Insurance Paid To
“Carriage and Insurance Paid to” implies that the exporter delivers the goods to the carrier or another person as nominated by the exporter at decided place. The cost of the carriage required to deliver the goods to the specified destination must be contracted for and paid by the exporter. The seller receives only the minimum cover for insurance. If the buyer wants to enhance the insurance cover, he may do it in an agreed manner with the exporter or pursue it himself.
DAT: Delivered At Terminal
“Delivered at Terminal” implies that the exporter gets the goods delivered when the goods, which have been unloaded from the arriving means of transport are placed at the disposal of the importer at a named terminal/warehouse/port/destination. The risks related to the delivery of goods to the destination and their unloading at the terminal are borne by the exporter.
DAP: Delivered At Place
“Delivered at Place” implies that the exporter pays for the carriage to the named place apart from the import clearance costs. The risks associated with the delivery of goods to the destination are borne by the exporter to the point that the goods are ready for unloading by the importer.
DDP: Delivered Duty Paid
“Delivered Duty Paid” implies that the exporter is the authority to deal with the tasks included in getting the goods delivered from its origin to the importers destination. It is the responsibility of the exporter to get insurance for the goods and all the duties and fees are also borne by the exporter.
FAS: Free Alongside Ship
“Free Alongside Ship” implies that the exporter delivers the goods when they are placed alongside the vessel as nominated by the importer at the named port. The importer bears the risk of loss or damage to the goods when the goods are alongside the ship.
FOB: Free On Board
“Free On Board” implies that the exporter moves the consignment to the freight forwarder of the importer or port or the point of origin as designated by the importer. This is generally used when talking of ocean or transport by way of water. Delivery is said to be accomplished when the exporter passes the consignment to the importer’s freight forwarder and the risk of loss/damage is transferred to the importer and he is also responsible for the insurance of this instance onwards.
CFR: Cost and Freight
“Cost and Freight” refers to two items namely cost of consignment and the freight charges to a predetermined destination. It implies that the exporter delivers the consignment to the point of delivery as nominated by the importer and at this instance the delivery is said to be accomplished. The risk of loss/damage is passed on to the importer when the consignment is on board the vessel or predetermined port. It is the responsibility of t5he exporter to contract for and to pay for the cost and freight. The insurance costs are borne by the importer.
CIF: Cost, Insurance and Freight
“Cost, Insurance and Freight” implies that the exporter delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss/damage to the consignment is passed to the importer when the consignment is on board the vessel. Here the cost of insurance is borne by the exporter. The freight forwarder is generally chosen by the exporter.