import and export procedures

Procedure for Clearance of Imported and Export Goods

3.1 EXPORT Export preliminaries: In order to enter into export business, certain preliminary steps have to be taken by every  business organization. The setting up of an export firm is completed in two stages. stages. They are:

A) Establishing a business firm-: There are various formalities and registrations to be made with different authorities before an exporter can enter into export business and accept an export order. 1) Selection of name of the firm-: An entrepreneur can choose any name for the firm he wants to start. It is desirable that the name of the firms indicates that the business relates to export/import. 2) Approval to name of firm-: There is no need to obtain prior approval of regional licensing authority of DGFT (Directorate General of Foreign Trade) for the proposed name of business firm. However, if the firm is planning to export readymade garments to any country; approval from Apparel Export Promotion Council (AEPC) is required. The entrepreneur has to apply to AEPC in the prescribed application form for the clearance of the name. Once the name is approved, registration of firm in that name with AEPC is to be made within a period of three months. After the registration is done, the firm would become registered exporter. 3) Registration of Organization-: The form of organization can be sole partnership, partnership firm under Indian partnership act, 1932 or join stock company registered under the companies act, 1956. 4) Opening of Bank Account-: The firm or company has to open a bank account with branch of  a commercial bank, authorized by reserve bank of India to deal in foreign exchange. The firm may require pre and post shipment finance for its business.

5) Obtaining Permanent Account Number-: export income is subject to a number of exemptions and deductions under the income tax act. For claiming those exemptions and deductions, it is necessary for every exporter to obtain permanent account number from the income tax authority. 6) Registration with Sales Tax Authorities-: exporter need not pay sales tax while making  purchases meant for export. But for availing the benefit, firm has to register with sales tax authorities and secure sales tax number.

B) Obtaining the importer-exporter code number -: This is required for completing other registrations. 1. Importer - Exporter Code Number (IEC)-: No export or import transaction can be made without obtaining an importer-exporter code number. IEC number is a pre-condition for  exports from and imports into India. IEC number entitles to import or export any item of non prohibited goods. This code number is made compulsory now. The registered /head office of  the applicant shall make an application for grant of IEC number to the regional office of  DGFT (known as Regional Licensing Authority), having territorial jurisdiction over the firm, along with the following documents: profile of the exporter/importer, demand draft from a  bank for rs.1000 as fees, certificate from the banker of the applicant, two copies of passport size of the applicant, declaration on applicant‟s letterhead that there is no association of the applicant‟s firm with caution listed firms. The licensing authority shall allot the IEC number  in prescribed format. There is no expiry date for iec number. This number is invariably used in all documents particularly in bill of entry in case of imports and shipping bill in case of  exports. 2. Registration Cum Membership Certificate (RCMC) -: it is obligatory for every exporter to register with appropriate Export Promotion Council (EPC) and obtain registration cum membership certificate. Any person applying for import or export license or any other benefit under the current exim policy is required to obtain registration cum membership certificate (RCMC). The benefits provided in the current EXIM policy are available only to those

having valid RCMC with the receipt of the certificate the exporter will be known as “Registered Exporter” 3. Registration with Export Credit and Guarantee Corporation (ECGC)-: the exporter should also register with export credit and guarantee corporation of India (ECGC) in order to secure export payments against political and commercial risks. It also helps to get financial assistance from commercial banks and other financial organization. 4. Registration with other authorities -:  it is desirable for the exporters to become members of  local chamber of commerce, productivity council or any other trade promotion organization recognized by the ministry of commerce or industry. Local membership helps the exporters in different ways, including in obtaining certificate of origin, which is vital for exporter to certain countries. 5. Registration for business identification number (BIN)-:  the exporters have to obtain pan  based Business Identification Number (BIN) from DGFT (Director General Foreign Trade)  prior to filling for custom clearance of export goods. Purpose of bin is to bring a common identification number to all persons dealing with various regulatory agencies such as custom department, central excise etc. 6. Export Licensing -: many items of goods are free for exports without obtaining any license, if  they do not fall in the negative list. The negative list consist of goods the import or export of  which is prohibited, restricted or canalized. Prohibited items-: these items can not be exported or imported. These items include wild life, exotic birds, wood and wood products in the form of logs, timber, pulp and charcoal. Restricted items -: these are the items, export or import of which is restricted through license. They can be imported or exported only in accordance with the regulations governing in this  behalf. Canalized items -: goods which are canalized can be imported or exported through the canalizing agency, specified in the negative list.

So it is necessary for the exporter to check the nature of the item before he enters into the contract or even makes efforts to secure the export order. Needless to add, the items of export agreed upon should not be fall in the negative/ banned list.

Exporter’s incentives & drawback: Incentives & facilities: Advance license -: inputs required for manufacturing export products can be imported without  payment of custom duty under advance license. Since the raw materials can be imported before exports of final product, the license issued for this purpose is called “advance licenses”. An advance license is issued under duty exemption scheme to allow import of inputs, which are  physically incorporated in the export product. Duty free replenishment certificate (DFRC):- DFRC is issued to a merchant exporter or  manufacturer exporter for the duty free import of inputs such as raw materials, components, intermediates, consumables, spare parts, including packing materials to be used for export  production. Such license is given subject of the fulfillment of time bound export obligation. Duty entitlement passbook scheme (DEPB) :- under the DEPB scheme, an exporter may apply for credit as a specified percentage of fob value of exports, made in freely convertible currency. The credit shall be available against such export products and at such rates as may be specified by the director general of foreign trade (DGFT) by way of public notice issued in this  behalf, for import of raw materials, intermediates, components, parts, packaging materials, etc. Export promotion capital goods scheme (EPCG) :- EPCG scheme was introduced by the EXIM  policy of 1992-97 in order to enable manufacturer exporter to import machinery and other  capital goods for export production at confessional or no customs duties at all. This facility is subject to export obligation, i.e., the exporter is required to guarantee exports of certain minimum value, which is in multiple of tit1e value of capital goods imported.

EXPORT PROCEDURE

The different steps involved in export department are as follows:

Step 1: Exporter sends the following document to Shakti Forwarder: 

Letter of credit: Assures exporter his payment promise to pay a seller (beneficiary) upon receipt of goods by a buyer if certain conditions outlined in the letter have been met. It is a method of payment for goods in the buyer establishes which his credit with a local  bank, clearly describing the goods to be purchased, the price, the documentation required, and a time limit for completion of the transaction. Upon receipt of documentation, the bank is either paid by the buyer or takes title to the goods themselves and proceeds to transfer funds to the seller.

Types of letter of credit

Clean letter of credit: negotiated against a clean draft without any documents Documentary letter of credit: documents specified in the letter of credit must accompany the draft Revocable letter of credit: can be cancelled or revoked any time without the consent or notice to the beneficiary Irrevocable letter of credit: cannot be amended, revoked or modified by the issuing bank without the express consent of all parties concerned Thus the issuing bank has definite undertaking to honor drafts drawn under that credit, provided that the conditions in letter of credit are met. Confirmed letter of credit: Issuing bank sends letter of credit to the bank located in beneficiary‟s country with a request to add confirmation to the credit Confirmation involves legal undertaking on the part of the confirming bank that it will duly honor payment or acceptance on presentation of documents

Back to back letter of credit: 

SECONDARY CREDIT: In favour of a domestic supplier. The original credit backs the secondary credit and facilitates the purchase of goods from a local supplier by the original  beneficiary of L/C

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Red clause letter of credit: Allows exporter to withdraw a predetermined amount so that he is able to pay his suppliers and purchase relevant letter of credit

Packing list: A list which shows number and kinds of packages being shipped, totals of gross, legal, and net weights of the packages, and marks and numbers on the packages. The list may be requested by an importer or may be required by an importing country to facilitate the clearance of  goods through customs. Invoice: One of the common to both international and domestic transactions is the bill (invoice) that the exporter sends to the importer. However, the content of an international invoice is more complex and should be prepared slightly differently for a foreign customer than for a domestic one.

Step 2: On the basis of invoice, Shakti Forwarder preparing Annexure – A, Annexure – C, Annexure – D and SDF ( Statutory Declaration Form ) along with the invoice.

Step 3: Send these annexure to the custom house. The custom prepares the shipping bill in four copies on the basis of these annexure.

Step 4: Custom calculate the duty (CESS) on the value of the goods. Using the Treasury Challan the duty can be paid. Cargo can enter the port premises.

Step5: Custom examined the cargo by using the sample. (Customs examined the cargo only after the duty is paid) in case of more than one container in one B/L than A.C give some container no. randomly for examination and that container must be de-stuff by CHA.

Step 6: The duplicate shipping bill and wharf age duly paid is given to the container agent. The container  agent hand over the duplicate shipping bill to the vessel agent who is here uses it for the purpose of filling EGM (Export General Manifest). The container agent gives the wharf age form paid is given to the container agent grants the loading permission. (But in case of the break bulk cargo, the CHA itself submits the wharf age  paid form to the port authority, so that loading can be allowed in the vessel).

Step 7: In the case of break bulk, after loading the cargo the chief officer issues the mate receipt, on the  basis of which captain of the vessel issues the bill of lading.

Step 8: Besides all the CHA sends the phytosanitary certificates/pre inspection certificate to the exporter  so that with all documents he can submit this to the bank. In case of charter, after processing and shipment of the goods following documents are sent back   by the CHA to exporter.

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Full set of bill of lading:

For pre carriage is through ship the bill prepared for export is called bill of lading & if the shipment is by air then the bill prepared is c alled airway bill. A bill of lading is a very important document. It is issued by the logistics service providers. It can be well explained as a document issued by a common carrier to a shipper that serves as: A receipt for the goods delivered to the carrier for shipment. A definition of the contract of carriage of the goods. A Document of Title to the goods described therein. This document is generally not negotiable unless consigned "to order." If we ask to the logistics companies than a Bill Of Lading is a product for them. They do the whole business on the Bill of  Lading. Increase in Bill of Lading shows increase in company‟s turnover. Bill of Lading, On Board:

A bill of lading acknowledging that the relative goods have been received on board a specified vessel. Bill of Lading, Order:

It is a negotiable bill of lading. There are two types: A bill drawn to the order of a foreign consignee, enabling him to endorse the bill to a third party.

A bill of lading drawn to the order of the shipper and endorsed by him either "in blank" or to a named consignee. The purpose of the latter bill is to protect the shipper against the buyer's obtaining the merchandise before he has paid or accepted the relative draft. To get B/L, software (Visual Samudra) is used. Various details are entered in the software such as Vessel Name & Number, Consignee, Shipper, Notify Address, Quantity, No. of Packages, Packing List (Details of Material), Container No. etc. The invoice is given to the company by the shipper. And a shipping bill is generated in the customs clearance on the basis of the invoice and packing list. The container is stuffed and the required information is received from the port office, such as the container number, and the Vessel name and No. The details are entered in the Software (Visual Samudra) also each B/L is given a manual entry if not computerized. Than the details are entered in the software and the final print of the B/L is taken. In B/L there are two types. Receipt for shipment: If the shipper wants a receipt the shipper can get the receipt when the container is ready to load on a vessel. HBL – House Bill of Lading

HBL – House Bill of lading is made when the information is received for the port office. If the shipper wants a bill before the loading of vessel on board, than HBL is provided. HBL is also sent to shipper for approval. MBL – Master Bill of Lading

MBL- Master Bill of lading is the final copy of Bill. It is given to the shipper it contains all the details of everything. The Bill is used to charge the fees from the shipper. It is only given after  the container is loaded on to the vessel for sail.  Now if the freight charges are paid by the exporter then bill of lading is stamped as freight prepaid & if the freight charges are to be paid by importer then bill of lading is stamped as freight to pay.

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Copy of Mate Receipt:

Issued by commanding officer of the ship that cargo has been loaded to the ship name of the vessel, date of shipment, condition of cargo at the time of receipt, berth, and description of   packages. Mate receipt is handed over to the port authorities so that port dues are cleared by the exporter. Bill of lading is issued by the shipping company only af ter the mate‟s receipt is submitted by the exporter  

Self Declaration Form or G R Form:

Under customs act, every exporter is required to declare export value of shipment ad give an undertaking that export proceeds would be realized within a period of six months from the date of shipment or due date, which ever is earlier. If customs clearance for the shipment is made manually, declaration is made in GR form, in duplicate. If the clearance is computerized, SDF form, in duplicate, is used in place of GR form. 

Copy of shipping bill (triplicate and quadruplicate).

Bill is generated in the customs clearance on the basis of The invoice is given to the company by the shipper. And a shipping the invoice and packing list. When cargo is stuffed, inside the container, in our port office or at factory. The details are given to the corporate office documentation department via fax. The details as such received are feed in to software called Visual Impex. Than, the details are sent via Ice gate link to the customs database. In return, the customs allocate a shipping bill number and print a shipping bill in the port office which is to be collected from the port office. Further, the procedure goes for carting and loading the cargo into the vessel.

Following three types of shipping bill with custom authorities

Dutiable shipping bill: it is used in case of goods, which attract export duty may or may not be entitled to duty drawback. It is printed on yellow paper. Free shipping bill: it is used in case of goods which neither attract any export duty nor entitled for duty drawback. It is printed on simple white paper. Drawback shipping bill:  it is used in case when refund of duties is allowed on the goods exported generally it is printed on green paper, but when the drawback claim is paid to a bank, then it is  printed on yellow paper. 

Certificate of origin.

A document provided by the exporter‟s chamber of commerce that attests that the goods originated from the country in which exporter is located.

Documents submitted by CHA to the customs: 

Invoice.

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Packing list.

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Self Declaration Form Or Gr Form

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Acceptance of contract.

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Letter of credit.

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Quality Control Certificate.

Lists of documents required to be submitted by the exporter to various authorities, organizations, and agencies. 1) To the custom authority:

Commercial invoice

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GR Form ( Original and Duplicate )

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Shippers Declaration Form

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Copy of the Export Contract /L/c/Export Order 

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Inspection certificate

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AR-4 Form Export License

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Export license

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Weighment Certificate

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Shipping bill

2) To the port authorities: 

Port Trust Copy of the Shipping Bill Wharf age application.

3) To the bank  

Letter of credit

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Commercial invoice

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Bill of lading

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Insurance Policy/Certificate

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Bill of exchange

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GR Form (duplicate copy)

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Bank certificate

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Export Inspection Certificate

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Certificate of Origin

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Shipment advice

4) To the RBI:

Copy of the invoice

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Sales Contract

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Bill of lading

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Inspection / Analysis Report

5) To the EXIM Bank: 

Export contract

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Letter of Contract

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Balance sheet of the exporter 

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Statement of profit and loss in the transaction cov ered by the export contract

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Statement regarding the projections of the credit requirement.

Short shipment: In case of short shipment customs sends the short shipment notice Annexure „C‟ to the RBI (Reserve Bank of India) along with G R form.

Short shipment notice is in five copies:

Original – Customs

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Second copy – Agent

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Third copy – Exporter 

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One copy – Wharf age refund

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One copy is for CESS

Treasure Challan:This is document is used at the time of payment of the duty to the customs. It shows the amount to be paid to the customs authority. It is in four copies:

Original

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Duplicate

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Triplicate

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Quadruplicate

Customs keeps the original and duplicate copies. Triplicate and Quadruplicate copies are sent to the CHA.

3.2IMPORT Import Procedure

The import procedure is quite different the ex port procedure. It starts with 

The importer asks for the three original bills of lading from the bank. The bank issues the bill of lading only when the importer cleared all the payments due to the bank.

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The importer then sends the following documents CHA :-

a) Bill of lading  b) Invoice c) Packing list d) Certificate of origin e) Pre shipment inspection certificate f) Insurance certificate g) Sales contract h) Bond copy (if H.S.S)

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The CHA shows the bill of lading to the shipping agent in order to get the NOC (Non Objection Certificate in Kandla Port only).

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 No objection certificate has been issued by the shipping line to make sure that they have no objection to open the containers for the examination of goods.

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CHA then presents the bill of entry to the customs for noting and then customs gives the import department the serial no. that comes on all copies of bill of entry.

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CHA pays wharf age to the port authority and the original copy of wharf age goes to the treasury of port trust.

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Customs give the examination order on the back of original bill of entry in case of first check   procedure.

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Cargo is inspected in front of the customs. Customs give the examination report at the back  of the bill of entry.

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Customs assessed the duty to ensure that the dut y evaluated by the CHA is correct.

Prior to this, the CHA on the basis of invoice, packing list prepares the bill of entry. The bill of  entry is a proof that the goods have been imported. For custom clearance purpose, the importer has to submit to the customs authority a form, which is known as bill of entry.

Bill of entry is in three copies :Original copy:-

This is called the customs copy. In first check procedure it contains the examination report on the  back of it. Duplicate copy:-

It is submitted in port either in container section or in break bulk section along with wharf age,  NOC, Delivery order. It shows charges have been paid to customs and contain on the back,  passed out of custom charges. Triplicate copy:-

This copy is for central excise for availing certain benefits. Quadruplicate copy:-

This copy is submitted to the bank. Port trust copies:-

th

th

th

Out of 5 , 6 , and 7 copies, one copy is given to the port authority. The other two copies are kept by the CHA for his record.

Types of bill of Entry:-

I. II. III.

Bill of entry for home consumption Bill of entry for warehousing Bill of entry for Ex-bond clearance for home consumption

Bill of entry for home consumption:-

This type of bill of entry is used when importer wants to take the delivery of goods on payment of custom duty. Bill of entry for warehousing:-

This type of bill of entry is used when importer wants to warehousing the goods in custom  bonded warehouse. Bill of for ex-bond clearance for home consumption:-

This type of bill of entry is used for clearing the goods from custom bonded warehouse against warehouse bill of entry on the payment of custom duties. Another important document that is used in import is bill of lading. It plays an important role  both for the exporter and importer. Calculation of duty in import :

The duty has been calculated on the basis of assessable value.

Assessable value in rupees = CIF (Cost Insurance Freight) value + landing charges (1% of CIF value and H.S.S. (High Seas Sale) CIF+2%+1) If the case is of FOB (Free on Board) then freight and insurance is to be added. If insurance is not there then 1.125% of the C & F (Cost and Freight) value is taken as insurance charges. Duty calculation is done by CHA as per the given rate of duty for a particular product.

There are six kinds of duties, which have to be paid at the time of custom clearance in case of  imports those are: 1. Basic Custom Duty 2. CVD 3. Additional cess on CVD 4. Secondary and higher cess on CVD 5. CESS 6. Custom sec & higher education cess 7. Additional Custom Duty Let us consider that basic custom duty on the ALL ALUMINIUM SCARP is 0%, CVD 8%, and additional duty is 4%. Say basic custom duty in rupees be X, Additional custom duty be Y and CVD be Z (12.826688%) X = 0% of assessable value Z = Assessable value *8%(CVD) Y = Assessable value + 4% of

ASS. VAL.+Z+ CESS on CVD 2%+ SEC.&HIGHER 

EDU.CESS ON CVD 1%+ CUS. EDU.CESS 2+1% CESS on CVD = 2% of Z SEC.& HIGHER EDU.CESS ON CVD = 1% OF Z

Total duty amount (in rupees) = X+Y+Z CUS. EDU.CESS on Total duty = 2% of Z +EDU.CESS ON CVD+S&H EDU.CESS ON CVD 1% of Z +EDU.CESS ON CVD+S&H EDU.CESS ON CVD

Documents to be used in import:

I. II.

Bill of lading Invoice

III.

Certificate of origin

IV.

59- Bond warehousing bond

V.

Wharf age

VI.

Bill of entry

VII.

Packing list

VIII. IX. X. XI.

 NOC (No Objection Certificate) Delivery order  Treasury challan Gate pass

DOCUMENTS WHICH ARE TO BE USED IN IMPORT AND EXPORT CUSTOM CLEARANCE. 

Letter of Credit

A Letter of credit is a document containing guarantee of a bank to honor drafts drawn on it by an exporter, under certain conditions and up to certain amounts, provided that the beneficiary fulfills the stipulated conditions. 

Packing list

Its is a detailed document provided by the exporter that spells out how many containers there are in the shipment and which merchandise is contained in each container.

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Invoice

It is a document which shows the total amount of the goods and the description of goods. 

Bill of lading

A generic term used to describe a document issued by the carrier to the shipper. 

Mate receipt

Mate receipt is issued by the mate (assistant to the captain of the ship) after the cargo is loaded into the ship. It is an acknowledgement that the goods have been received on board the ship 

Shipping bill

It is issued by the custom authority. Shipping is the main document of the basic of which the custom permission is given. After the shipping bill is stamped by custom, then only the goods are allowed to be enter to the deck. It is prepared by ED I system or manually system. 

Certificate of Origin

A document provided by the exporter‟s chamber of commerce that attests that the goods originated from the country in which exporter is located. 

Phyto-sanitary certificate

A document provided by an independent inspection company, or the Agriculture Department of the exporting country‟s government, that attests that the goods confirm to the agriculture standard of the importing country. 

Manifest

A document internal to the shipping company (the carrier) that lists all cargo onboard the transportation vehicle. 

Forms AR-4/AR-4A

These forms are meant for applying for the removal of excisable goods for export by sea/post. Form AR-4 is used for applying for excise inspection at the factory and form AR-4A is used when goods are to be exported under a claim for rebate of excise duty or under bond. 

Certificate of Measurement

Freight can be charged either on the basis of weight or measurement. When it is charged on weight basis, the weight declared by the overseas supplier is accepted. The certificate contains the name of the vessel, the port of destination description of goods, quantity, length,  breadth, depth etc of the packages. 

Shipping advice

A shipping advice is used to inform the overseas customer about the shipment of goods. There is no particular form of shipping advice. The exporter only advises his importer about the invoice number, Bill of lading / Airway bill number and date, name of the vessel with date of sailing of the vessel. 

Bill of entry

The bill entry is a document, prepared by the importer or his clearing agent in the prescribed form under bill of entry regulation, 1971, on which clearance of imported goods can be made. 

Certificate of insurance

A document providing by the insurance company of the exporter that the goods are insured during their international voyage.

4. SUGGESTIONS The custom clearance for import and export cargo is such a long procedure so it takes time to clear, so the employee must be try to make their work on time and quick. Some of the complicated procedure in custom clearance so if we get the support of all employees it must be easy. If custom clearance done through online then it should be more simple.

5. CONCLUSION The Indian business environment is changing with the rapid growth in infrastructure and technology. With the increasing inflows of multinationals, trade has been increased, which result in stiff competition between the organizations. Despite of the stiff competition Beekeyen freight Forwarfers pvt. Ltd known as the leading custom clearance agent, because of their effective implementation of quality management system and customer centric approach.