import trade procedure ii bcom ib – unit 4

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IMPORT TRADE PROCEDURE II BCOM IB – UNIT 4

PREPARED BY

DR.GB.KARTHIKEYAN ASSISTANT PROFESSOR AND HEAD DEPARTMENT OF COMMERCE (IB) GOVT ARTS COLLEGE,CBE - 641018

Reference : Foreign Trade Theory, Practices, Procedures and Documentation – Dr.Khushpat Jain, Dr.Apexa V.Jain

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UNIT 4 :CUSTOMS CLERANCE FOR IMPORTED GOODS

Under the Ministry of Finance (Department of Revenue), there are two independent Boards of Revenue:

(a) Central Board of Direct Taxes (for income Tax, Wealth Tax etc.) (b) Central Board of Excise and Customs.

The Customs administration vests with the Central Board for Excise and Customs, which shapes the policy and decides the customs formalities in the country, in terms of the of the Customs Act 1962.

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All goods imported in India have to pass through the customs clearance after they cross the Indian border. The goods so imported are examined, appraised, assessed, evaluated and then allowed to be taken out of customs charge for use by the importer.

The procedure for Customs clearance in general for goods imported in India is as follows:

(a) Import Manifest: As per the section 30 of the Customs Act, 1962, the persons in charge of a conveyance carrying imported goods should hand over, within 24 hours of the arrival of the conveyance, an import manifest to the customs. The import manifest is a complete list of all items the conveyance carries on board, including those to be transshipped and those to be carried to the subsequent ports of call.

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(b) Entry in the Import Department of Customs House: On receipt of information regarding the arrival of the goods, the importers or their agents information to make an entry by filing a Bill of Entry, in a prescribed form in the Imports Department of Customs House. The date of presentation of Bill of Entry is an important date as the rate of duty applicable to the imported goods will be the rate, which is in force on the date of presentation.

(c) Presentation of Bill of Entry for Appraisal: After the Bill of Entry is noted in the import department, the same should be presented to the Appraising Counters along with the following necessary documents:

• Import licence, if necessary.

• Exporter's Invoice.

• A copy of Letter of Credit

• Original Bill of Lading and its non-negotiable copy.

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• checking List.

• Weight specifications.

• Manufacturer's test certificate

• Certificate of Origin.

• Delivery order issued by the Shipping company or its agent.

• Freight and insurance amount certificate if the import is on FOB terms

• A declaration from importer that he has not paid any commission to agents in India.

• Customs declaration

• Catalogue/drawing, etc. for machinery imported.

In addition to the above, the following documents are also required to be submitted wherever necessary:

• If spare parts are imported — exporters invoice showing unit price and extended total of each item;

• if second hand machinery is imported — Chartered Engineer' If s Certificate;

• If steel is imported — Manufacturer's Analysis Certificate;

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• If chemicals and allied products are imported - Literature showing chemical consumption;

• If certificate. items are imported — Textile Commissioner's endorsement or certificate.

If the above documents furnished b the importer are found to be adequate for acceptance of the declared value and determination of classification and acceptance of ITC Licence, the Bill of Entry is completed by the Appraiser. it is then countersigned by the Assistant Collector and sent to the Licence Section with an order to the Dock Staff for examination of goods before clearance.

(d) Clearance of Goods: After payment of duty (the original copy of Bill of Entry is retained in the Customs House) the importer should obtain the duplicate copy of Bill of Entry on which order for examination of the goods is given by Customs and get the goods examined. If the description of goods is found to be correct, on the basis of declared and accepted particulars, clearance of goods is allowed by the appraiser.

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(d) Clearance of Goods: After payment of duty (the original copy of Bill of Entry is retained in the Customs House) the importer should obtain the duplicate copy of Bill of Entry on which order for examination of the goods is given by Customs and get the goods examined. If the description of goods is found to be correct, on the basis of declared and accepted particulars, clearance of goods is allowed by the appraiser.

(e) Storage of Goods: The imported goods can be warehoused at the port of shipment without the payment of duty by presenting a "Bill of Entry for Warehousing" to the Bonds Department along with a bond for twice the amount of duty payable. Initially the facility is granted for 3 months, which may be extended up to a period one year.

The warehoused goods can be cleared in one or more instalments. For clearance of goods from the warehouse, the importer is required to present what is known as 'Ex- bond Bill of Entry'.

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WAREHOUSING OF IMPORTED GOODS

The facility of warehousing of imported goods in Customs Bonded Warehouses, without payment of Customs duty, is permitted under the Customs Act, 1962. In addition to that, the provision of the Warehoused Goods (Removal) Regulations, 1963 and Manufacture and Other Operations in Warehoused Regulations, 1966 are also applicable. Basically, goods after landing are permitted to be removed to a warehouse without payment of duty and duty is collected at the time of clearance from the warehouse. The law lays down the time period up to which the goods may remain in a warehouse, without incurring any interest liability and with interest liability.

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Warehousing Stations:

• The warehouses are to be appointed/licensed at particular places only which have been so declared by Central Board of Excise and Customs. The Board has delegated its power for declaring places to be Warehousing Stations to the Chief Commissioners of Customs. In respect of 100% EOUs, the powers to declare places to be Warehousing Stations have been delegated to the Commissioners of Customs.

Storage Period of Warehoused Goods:

• Any goods deposited in a warehouse may be stored up to a period of one year in the Bonded Warehouse. In the case of capital goods intended for use in any 100%

EOU, such goods can, however, be stored up to a period of 5 years. The warehousing period can be extended by the Commissioner of Customs for a of 6 months and by the Chief Commissioner of Customs for such further period as is deemed fit by him. The importers should file their applications for extension well before the expiry of the initial/extended period of warehousing.

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Before granting extensions, officers have to examine the condition of the goods to see that they are not likely to deteriorate during the extended period. A somewhat liberal approach in extending warehousing period in the following categories of cases is considered, if the interests of revenue are not likely to be jeopardized:

(a) Goods supplied as ship stores/aircraft stores.

(b) Goods supplied to diplomats.

(c) Goods used in the units operating under manufacture-in-bond scheme.

(d) Goods imported by 100% EOUs.

(e) Goods warehoused and sold through duty free shops.

(f) Machinery, equipment and raw material imported for building and fitment to ships.

Extensions in warehousing period are not meant to be granted routinely but only in such cases where the goods have to be kept in the warehouse under circumstances beyond the control of the importer. Lack of finance to pay the duty is not considered as valid and good ground of seeking extensions which are otherwise given for short period.

In case the warehoused goods are likely to deteriorate, the Commissioner of Customs may reduce the one year's period of warehousing to such shorter period as he may deem fit.

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Rate of Interest on Customs Duty in case of Bonded Goods:

In Cases where the capital goods for 100% EOUs remain in a warehouse beyond a period of 5 years, interest at the rate of 24% per annum shalt be charged on the Customs duty payable at the time of clearance of the goods for the period from the expiry of the said warehousing period till the date of payment of duty. In the case of all other goods interest at the rate of 24% per annum is payable after the expiry of thirty days in the warehouse

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Recovery of Duty on Bonded Goods:

Customs Officers may demand from the owner of bonded goods the full amount of duty chargeable on such goods, along with all penalties, rent, interest and other charges payable in the following cases:

(a) Where any warehoused goods are removed in contravention of the Customs Act, 1962;

(b) Where such goods have not been removed from a warehouse at the expiry of the period permitted under section 61;

(c) Where any warehoused goods have been taken under section 64 as samples without payment of duty; and

(d) Where any bonded goods have not been cleared for home consumption or exportation or are not duly accounted for to the satisfaction of the Customs.

In case the owner fails to pay the amount as demanded above, Customs may detain and sell, after notice to the owner, such sufficient portion of the bonded goods as may be selected.

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EXCHANGE CONTROL PROVISIONS FOR IMPORTS

• Import trade is regulated by DGFT under the Ministry of commerce and industry, Department of commerce, Government of India. Authorised dealer

category-1 banks should ensure that that the imports into India are in conformity with the Foreign Trade Policy in force and Foreign Exchange Management Rules,2000 framed by Government of India and the directions issued by Reserve Bank under Foreign Exchange Management Act,1999 from time to time.

• AD Category -1 banks should follow normal banking procedures and adhere to the provisions of Uniform customs and practices for documentary credits, etc. while opening Letters of credit for import into India on behalf of their constituents.

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• Compliance with the provisions of Research and Development Cess Act,1986 may be insured for import of drawings and designs.

• AD Category-1 banks may also advice importers to ensure compliance with the provisions of Income Tax Act , wherever applicable

VALUATION FOR CUSTOM DUTY

India is presently following the provisions of WTO Agreement on Customs valuation (ACV) for determination of value of imported goods where customs duty is levied with reference to value.

Customs Duty is payable as a Percentage of ‘value’ which is known as ‘ Assemble Value’ or ‘Customs Value’. The value may be either : – ‘Value’ as defined in Section 14(1) of the customs Act;

– ‘Tariff Value’ is described under section 14(2) of the customs value.

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• Section 14 (1) of the customs act states that when a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation ,as the case may be , in the course of international trade , where the seller and buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale.

• Section 14(2) of the customs act empowers the central government to fix Tariff value for any goods. Tariff Value is fixed by the Central board of Excise and Customs (CBEC) for any class of imported goods or export goods. While fixing tariff value , the authorities consider the trend of value of the goods in question. Once fixed, the duty is payable as a percentage of this value.

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METHODS OF VALUATION

The value of imported goods for the assessment of duty is determined in accordance with the provisions of Section 14 of 1962 and the customs

valuation Rules, 2007. according to the rules, the assessable value equal the transaction value of goods as adjusted for freight and cost of insurance, loading, unloading and handling charges. In the assessable value, the following criteria are included :

a) Commission & brokerage

b) Cost of container, which are treated as being one with the goods for customs purposes.

c) Cost of packing – labour or materials.

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d) Materials , components , tools ,etc. supplied by buyer;

e) Royalties and license fees;

f) Value of proceeds of subsequent sales;

g) Other payments as condition of sale of goods being valued.

h) Cost of transport up to place of importation;

i) Landing charges;

j) Cost of insurance.

The following costs are excluded from the assessable value :

 Charges for construction , erection, assembly, maintenance or technical assistance undertaken after importation of plant ,machinery or equipment.

 Cost of transport after importation

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 Duties and taxes in India.

 Types on duties on exports and imports in India are covered in the customs tariff act 1975.

CUSTOMS HANDLING FEE

The Indian government assesses a one per percent customs handling fee on all imports in addition to the applied customs duty.

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REFERENCE :

Foreign Trade- Theory, Procedures, Practices and Documentation.

Dr. Khushpat S. Jain Dr. Apexa V. Jain

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THANK YOU