THE CUSTOMS PROCEDURE, THE PROVISIONS RELATING TO BAGGAGE AND DUTY DRAW BACK ETC
PROCEDURE OF IMPORT-EXPORT
Goods may be imported in or exported from India through sea, air, land, by post or as a baggage with passengers. The procedure to be followed would vary depending on the mode of import or export. Normally, import procedures have to be followed by both; i.e., the importer as well as by the person-in-charge of conveyance.
IMPORT PROCEDURE
Procedures have to be followed by ‘person-in-charge of conveyance’ as well as the importer.
Procedure to be followed by the Carrier
The 'person in charge of conveyance' (carrier of goods) has to follow prescribed procedure.
o Arrival at customs port/airport only - Section 29 provides that person in- charge of a vessel or an aircraft entering India shall call or land at customs port or customs airport only. It can land at other place only if compelled by accident, stress of weather or other unavoidable cause. In such case, he should report to nearest police station or Customs Officer. While arriving by land route, the vehicle should come by approved route to ‘land customs station’ only.
o Import Manifest / Report- Person-in-charge of vessel, aircraft or vehicle has to submit Import Manifest / Report. [also termed as IGM - Import General Manifest]. (In case of a vessel or aircraft, it is called import manifest, while in case of vehicle, it is called import report.)
The import manifest in case of vessel or aircraft is required to be submitted prior to arrival of a vessel or aircraft. Import report (in case of vehicle) has to be submitted within 12 hours of arrival at the customs station. If the report / manifest could not be submitted within prescribed time, person-in-charge or any person specified as responsible by a notification is liable to penalty upto Rs 50,000
o IGM can be submitted electronically through floppy where EDI facility is available.
o Import manifest should be filled before arrival of ship aircraft.
Normally, agent submits the import manifest before arrival, so that maximum possible formalities are completed before vessel or aircraft arrives. This also enable importer to file ‘Bill of Entry’ in advance.
o Grant of Entry Inwards by Customs Officer - Unloading of cargo can start only after Customs Officer grants ‘Entry Inwards’. Such entry inwards can be granted only when berthing accommodation is granted to a vessel.
o Carrier responsible for shortages during unloading - If the goods are short landed, the carrier is liable to pay penalty upto twice the amount of duty payable on such short landed goods.
Import Manifest
As per the provisions of section 30 of the Customs Act, the person-in-charge of a vessel or an aircraft or a vehicle carrying imported goods or any other person as specified by the Government shall deliver to the proper officer an Import Manifest or Import Report as per the following time limit:
(i) in the case of a vessel or an aircraft prior to arrival of the vessel or the aircraft and
(ii) in the case of a vehicle within 12 hours after its arrival in the customs station.
In case of default, a penalty up to rupees fifty thousand can be levied on the person-in-charge if he does not deliver the manifest or report to the proper officer within the time period and does not show sufficient cause for the delay.
Procedures for Import
The importer is required to submit necessary details like the description of the product, name of the supplier, invoice number, bill of lading number, quantity of goods, classification, rate per unit etc. in order to get the bill of entries prepared under EDI (Electronic Data Interchange system). However in case of custom house, where manual bills of entries are processed, the importer either himself or through agent is required to submit the bill of entry along with the documents mentioned above.
This is a very vital and important document which every importer has to submit under section 46 Bills of Entry should be submitted in quadruplicate – original and duplicate for customs, triplicate for the importer and fourth copy is meant for bank for making remittances.
The bill of entry can be for the purpose of warehousing of goods or for clearance for home consumption.
o Types of Bill of Entry - Bills of Entry should be of one of three types. Out of these, two types are for clearance from customs while third is for clearance from warehouse.
o BILL OF ENTRY FOR HOME CONSUMPTION - This form, called ‘Bill of Entry for Home Consumption’, is used when the imported goods are to be cleared on payment of full duty. Home consumption means use within India. It is white coloured and hence often called ‘white bill of entry’.
o BILL OF ENTRY FOR WAREHOUSING - If the imported goods are not required immediately, importer may like to store the goods in a warehouse without payment of duty under a bond and then clear from warehouse when required on payment of duty. This will enable him to defer payment of customs duty till goods are actually required by him. This Bill of Entry is printed on yellow paper and often called ‘Yellow Bill of Entry’. It is also called ‘Into Bond Bill of Entry’ as bond is executed for transfer of goods in warehouse without payment of duty.
o BILL OF ENTRY FOR EX-BOND CLEARANCE - The third type is for Ex-Bond clearance. This is used for clearance from the warehouse on payment of duty and is printed on green paper.
o BILL OF ENTRY FOR EX-BOND CLEARANCE - The third type is for Ex-Bond clearance. This is used for clearance from the warehouse on payment of duty and is printed on green paper.
o RATE OF DUTY FOR CLEARANCE FROM WAREHOUSE – It may be noted that rate of duty applicable is as prevalent on date of removal from warehouse. Thus, if rate has changed after goods are cleared from customs port, customs duty as assessed on yellow bill of entry and as paid on green bill of entry will not be same.
o Mention of BIN on Bill of Entry – A BIN (Business Identification Number) is allotted to each importer and exporter w.e.f. 1.4.2001. It is a 15 digit code based on PAN of Income Tax (PAN is a 10 digit code)
o Filing of Bill of Entry - Normally, Bill of Entry is filed by CHA on behalf of the importer. Customs
Documents to be submitted by Importer - Documents required by customs authorities are required to be submitted to enable them to
(a) check the goods
(b) decide value and classification of goods and
(c) to ensure that the import is legally permitted.
The documents that are essentially required are:
(i) Invoice
(ii) Packing List
(iii) Bill of Lading/ Delivery Order
(iv) GATT declaration form duly filled in
(v) Importers / CHAs declaration duly signed
(vi) Import Licence or attested photocopy when clearance is under licence
(vii) Letter of Credit / Bank Draft wherever necessary
(vii) Insurance memo or insurance policy
(viii) Industrial License if required
(ix) Certificate of country of origin, if preferential rate is claimed.
(x) Technical literature.
(xi) Test report in case of chemicals
(xii) Advance License / DEPB in original, where applicable
(xiii) Split up of value of spares, components and machinery
(xiv) No commission declaration.
– A declaration in prescribed form about correctness of information should be submitted.
o The Noting is now done electronically in large ports, while it is done manually in small ports. Thoka Number (Serial Number) is given while noting the Bill of Entry.
ASSESSMENT OF IMPORT DUTY AND CLEARANCE
The documents submitted by importer are checked and assessed by Customs authorities and then goods are cleared.
o Noting of Bill of Entry - Bill of Entry submitted by importer or Customs House Agent is cross-checked with ‘Import Manifest’ submitted by person in charge of vessel / carrier. It is noted if the description tallies.
o Date of presentation of bill of entry is highly relevant and the rate of duty as applicable on this date will be considered for calculating the duty payable. Bill of Entry is accepted only after proper scrutiny vis-àvis import manifest and various declarations given in bill of entry and attached documents like invoicing, bill of lading etc. If such documents are not attached, the authorities can refuse to accept the Bill of Entry
o Prior Entry of Bill of Entry - After the goods are unloaded, these have to be cleared within stipulated time - usually three working days. If these are not so removed, demurrage is charged by port trust/airport authorities, which is very high. Hence, importer wants to complete as many formalities as possible before ship arrives.
ASSESSMENT OF CUSTOMS DUTY
Section 17 provides that assessment of goods will be made after Bill of Entry is filed. Date stamp of receipt is put on the ‘Bill of Entry’ and then it is sent to appraising department either manually or electronically
There are various Appraising groups for different Chapter headings. Each group is under an Assistant/Deputy Commissioner. Group consists of ‘Examiners’ and ‘Appraisers’.
o APPRAISING THE GOODS - Appraiser has to
(a) correctly classify the goods
(b) decide the Value for purpose of Customs duty
(c) find out rate of duty applicable as per any exemption notification and (d) verify that goods are not imported in violation of any law.
He can call for any further documents that may be required for assessment. If he is of the opinion that goods have to be examined for appraisal, he will issue an examination order, usually on the reverse of Bill of Entry.
o VALUATION OF GOODS - As per rule 10 of Customs Valuation Rules, the importer has to file declaration about full 'value' of goods. If the assessing officer has doubts about the truth and accuracy of 'value' as declared, he can ask importer to submit further information, details and documents. If the doubt persists, the assessing officer can reject the value declared by importer.
o APPROVAL OF ASSESSMENT - The assessment has to be approved by Assistant Commissioner, if the value is more than Rs one lakh. (in cases covered under ‘fast track clearance for imports’, appraiser is also authorised to approve valuation). followed by his name, preferably by rubber stamp.
o PAYMENT OF CUSTOMS DUTY - After assessment of duty, necessary duty is paid. Regular importers and Custom House Agents keep current account with Customs department. The duty can be debited to such current account, or it can be paid in cash/DD through TR-6 challan in designated banks.
o After payment of duty, if goods were already examined, delivery of goods can be taken from custodians (port trust) after paying their dues.
If goods were not examined before assessment, these have to be submitted for examination in import shed to the examining staff. After shed appraiser gives ‘out of charge’ order, delivery of goods can be taken from custodian.
o First and second system of assessment - There are two systems of assessment. Section 17(2) provides for assessment after examination of goods and section 17(4) provides for assessment on basis of documents, followed by inspection and testing of goods.
o “First appraisement system” or 'first check procedure' is followed if the appraiser is not able to make assessment on the basis of documents submitted and deems that inspection is necessary. Goods are examined first and then these are assessed.
First appraisement is generally carried out in following cases –
o If complete documents are not submitted
o Goods are to be tested for correct classification
o Goods are re-imported
o Goods are damaged or deteriorated and abatement is claimed
o Goods are abandoned and remission of duty is applied for
o When goods are provisionally assessed
o When importer himself requests for examination of goods before payment of duty.
In “Second Appraisement System” or 'second check procedure', which is normally followed, assessment is done on basis of documents and then goods are examined. Such examination is not mandatory. It is done on selective basis on the basis of ‘risk assessment’ or specific intelligence report. Section 17(4) of Customs Act specifically provides that if initially assessment is done on basis of documents, re-assessment can be done after examination or testing of goods or otherwise, if it is found subsequent to examination or testing or otherwise, that any statement made on Bill of Entry or any information supplied is not true in respect of matter relevant to assessment of duty.
EXAMINATION OF GOODS
Examiners carry out physical examination and quantitative checking like weighing, measuring etc. Selected packages are opened and examined on sample basis in ‘Customs Examination Yard’. Examination report is prepared by the examiner.
Provisional Assessment
Section 18 of Customs Act, 1962 provide that provisional assessment can be done in following cases
(a) when Customs Officer is satisfied that importer or exporter is unable to produce document or furnish information required for assessment
(b) it is deemed necessary to carry out chemical or other tests of goods
(c) when importer/exporter has produced all documents, but Customs Officer still deems it necessary to make further enquiry. In such cases, assessment is done on provisional basis. The importer/exporter has to furnish guarantee/security as required by Customs Officer for payment of difference if any. Goods can be cleared after payment of duty provisionally assessed and after providing the security. After final assessment, difference is paid by importer or refunded to him as the case may be. If the imported goods were warehoused after provisional assessment, the Customs Officer may require importer to execute a bond for twice the difference in duty, if duty finally assessed is higher [section 18(2) (a)]. The bond is called as 'P D Bond' (Provisional Duty Bond). The bond is with security or surety. Bank guarantee can also be given as a security.
Checking of duty drawback / license documents
Documents in respect of Duty Entitlement Pass Book (DEPB), advance license, duty drawback etc. will be checked.
Out of Customs Charge Order
After goods are examined, it is verified that import is not prohibited and after customs duty is paid, Customs Officer will issue ‘Out of Customs Charge’ order under section 47. Goods can be cleared from customs area only on receipt of such order. This is an ‘adjudicating order’ within the meaning of Customs Act, even if it is passed by Appraiser and not by Assistant Commissioner.
Demurrage if goods not cleared
Heavy demurrage is payable if goods are not cleared from port within three days.
Relevant Date for Rate and Valuation of Customs Duty
Section 15 of Customs Act prescribes that rate of duty and tariff valuation applicable to imported goods shall be the rate and valuation in force at one of the following dates.
(a) if the goods are entered for home consumption, the date on which bill of entry is presented
(b) in case of warehoused goods, when Bill of Entry for home consumption is presented u/s 68 for clearance from warehouse and
(c) in other cases, date of payment of duty.
Following steps are normally taken for the clearance of goods:
(i) Filling of Bill of Entry for home consumption or warehouse or in case of EDI system submitting the details.
Under EDI system, Bill of Entry is actually printed on computer in triplicate only after ‘out of charge’ order is given. Duplicate copy is given to importer.
(ii) Appraisement of Bill of Entry — In case of first appraisement, inspection is done first then duty is assessed. In case of second appraisement, assessment is done first and duty is assessed.
(iii) Payment of duty — The duty assessed has to be paid.
(iv) Inspection of cargo is done where second appraisement method is followed.
(v) The cargo is then delivered.
CLASSIFICATION OF GOODS UNDER THE ACT
Section 2 of the Customs Tariff Act, 1975 provides that the custom duty shall be levied at the rate specified in the schedules to the Act read with exemption notification if any. Thus the customs duty is leviable under the Customs Act, 1962 on the basis of value or quantity as specified in the Import Tariff to the Customs Tariff Act, 1975. Basic customs duty is charged in accordance with the First Schedule to the Customs Tariff Act, 1975 which is import Tariff. There are 21 sections in the Import Tariff, divided into 98 Chapters in all, with section notes and chapter notes. These notes are statutorily binding in nature. The interpretation of the Tariff schedule is strictly governed by six "Interpretative Rules" incorporated in First Schedule itself. Imported goods are to be classified under the appropriate headings, sub-headings, sub-division to sub-headings strictly, in accordance with section notes, chapter notes that are appearing in the Tariff.
In the event when classification cannot be made as above and when more than one classification appear appropriate under the Tariff and goods imported do not find appropriate classification, then a resort to, "Interpretative Rules" may be taken.
EXPORT PROCEDURE
Procedures have to be followed by
(a) ‘person-in-charge of conveyance’ and
(b) the exporter. The procedures are similar to procedures for import, of course, in reverse direction.
Procedures by person in charge of conveyance
Any new airline, shipping line, steamer agent should be registered in Customs Systems for electronic processing of shipping bills etc.
The ‘person in charge of conveyance’ has to follow prescribed procedures.
o Entry Outward - The vessel should be granted ‘Entry Outward’. Loading can start only after entry outward is granted. (Section 39 of Customs Act). Steamer Agents can file ‘application for entry outwards’ 14 days in advance so that intending exporters can start submitting ‘Shipping Bills’. This ensures that formalities are completed as quickly as possible and loading in ship starts quickly.
o LOADING WITH PERMISSION - Export goods can be loaded only after Shipping Bill or Bill of Export, duly passed by Customs Officer is handed over by Exporter to the person-in-charge of conveyance. In case of baggage and mail bags, shipping bill is not necessary, but permission of Customs Officer is required (section 40).
o Export Manifest - As per section 41, an Export Manifest/Export Report in prescribed form should be submitted before departure. [The report is popularly called as ‘Export General Manifest’ - EGM]. The details required are similar to import manifest. Such manifest/report can be amended or supplemented with permission, if there was no fraudulent intention. Such report should be declared as true by the person-incharge signing the export manifest. This report is not required if the conveyance is carrying only luggage of occupants.
Procedures to be followed by Exporter
Export procedures have been summarised in Chapter 3 Part II of CBE & C’s Customs Manual, 2001.
Every exporter should take following initial steps –
1. Obtain BIN (Business Identification Number) from DGFT. It is a PAN based number
2. Open current account with designated bank for credit of duty drawback claims
3. Register licenses / advance license / DEPB etc. at the customs station, if exports are under Export Promotion Schemes
o Exporter has to submit ‘shipping bill’ for export by sea or air and ‘bill of export’ for export by road. Goods have to be assessed for duty, even if no duty is payable for most of exports, as ‘Nil Duty’ assessment is also an assessment.
o Shipping Bill to be submitted by Exporter - Shipping Bill and Bill of Export Regulations prescribe form of shipping bills. It should be submitted in quadruplicate. If drawback claim is to be made, one additional copy should be submitted. There are five forms:
(a) Shipping Bill for export of goods under claim for duty drawback - these should be in Green colour
(b) Shipping Bill for export of dutiable goods - this should be yellow colour
(c) shipping bill for export of duty free goods – it should be white colour
(d) shipping bill for export of duty free goods ex-bond - i.e. from bonded store room - it should be pink colour
(e) Shipping Bill for export under DEPB scheme – Blue colour.
o The shipping bill form requires details like name of exporter, consignee, Invoice Number, details of packing, description of goods, quantity, FOB Value etc. Appropriate form of shipping bill should be used.
o Relevant documents i.e. copies of packing list, invoices, export contract, letter of credit etc. are also to be submitted. In case of excisable goods, from ARE-1 prepared at the time of clearance from factory should also be submitted.
o Customs authorities give serial number (called 'Thoka Number') to shipping bill, when it is presented.
o Duty drawback formalities - If the exporter intends to claim duty drawback on his exports, he has to follow prescribed procedures and submit necessary papers.
o Other documents required for export - Exporter also has to prepare other documents like
(a) Four copies of Commercial Invoice
(b) Four copies of Packing List
(c) Certificate of Origin or pre-shipment inspection where required
(d) Insurance policy.
(e) Letter of Credit
(f) Declaration of Value
(g) Excise ARE 1/ARE-2 form as applicable
(h) GR / SDF form prescribed by RBI in duplicate
(i) Letter showing BIN Number.
o RCMC certificate from Export Promotion Council – Various Export Promotion Councils have been set up to promote and develop exports. (e.g. Engineering Export Promotion Council, Apparel Export Promotion Council, etc.) Exporter has to become member of the concerned Export Promotion Council and obtain RCMC - Registration cum membership Certificate.
Check in customs Document submitted is processed by customs authorities, and following are checked
o Value and classification of goods under drawback schedule in case of drawback shipping bills
o Export duty / cess if applicable
o Advance License shipping bills are checked to ensure that description in invoice and final product specified in Advance License matches. If necessary, samples may be drawn and assessment may be done after visual inspection or testing
o Exportability of goods under EXIM policy and other laws – Some exports are totally prohibited under various Acts e.g. items restricted or prohibited under Foreign Trade (Regulation) Act; antiques; art treasures; Arms; narcotics etc. Some items like tea, coffee and coir products can be exported only against authorisation/licence under respective Acts.
Examination of goods before export
After shipping bill is passed by export department, the goods are presented to shed appraiser (exports) in dock for examination. Goods will be examined by examiner.
This inspection is necessary
(a) to ensure that prohibited goods are not exported
(b) goods tally with description and invoice
(c) duty drawback, where applicable, is correctly claimed.
Let Export Order by Customs Authorities
Customs Officer will verify the contents and after he is satisfied that goods are not prohibited for exports and that export duty, if applicable is paid, will permit clearance. (section 51) by giving ‘let ship’ or ‘let export’ order.
GR-1, ARE-1, octroi papers, quota certification for export etc. are also signed. Exporter’s copy of shipping Bill, GR-1, and ARE-1 etc. duly certified are handed over to exporter or CHA. Drawback claims papers are also processed.
Conveyance to leave on written order
The vessel or aircraft which has brought imported goods or which carry export goods cannot leave that customs station unless a written order is given by Customs Officer. Such order is given only after
(a) export manifest is submitted
(b) shipping bills or bills of export, bills of transhipment etc. are submitted
(c) duties on stores consumed are paid or payment of the same is secured
(d) no penalty is leviable
(e) export duty, if applicable, is paid.
- -Such permission is not required if the conveyance is carrying only luggage of occupants.
In case of exports instead of Bill of Entry the exporter has to submit Shipping Bill or submit the data, like description of export product, FOB value, quantity unit, invoice No., Bill of Lading, etc, to enable authorities to prepare shipping bill in EDI system.
Section 17 as replaced by the Finance Act, 2011 has introduced the self assessment procedure. The importer is now along with the above information is required to give details of duty payment required to be made on importation of goods. The self assessment will be verified by the proper officer and if required he may tests imported goods. He may also ask for various records in addition to the documents already submitted. In case after examination of documents it is found that the duty is to be reassessed he will reassessed the duty. The proper officer shall pass an order within 15 days from the date of reassessment of the Bill of entry, in case importer or the exporter does not agree with the reassessment.
Disclaimer: In this note, we have attempted to summarise some of the significant aspects to be kept in mind by readers to ensure compliance of tax laws and regulations. Readers should ensure to verify specific provisions as applicable to each case before taking any business decisions. It would be pertinent to note that some changes are being made to the tax laws and rules and regulations on a continuous basis by way of notifications, clarifications etc issued by the department based on their practical experience in implementing the legislation.
It may be noted that nothing contained in this note should be regarded as our opinion. Professional advice should be sought for applicability of legal provisions based on specific facts. Though reasonable efforts have been taken to avoid errors or omissions in this note we are not responsible for any liability arising to readers directly or indirectly due to any mis-statements or error contained in this note. It must be noted that the views expressed in the note are based on our understanding of the law and regulations as published by the Government authorities and we may or may not agree or subscribe to such views.
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