import and export procedures

7/30/2019 import and export procedures

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Procedure for Clearance of Imported and Export Goods


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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. 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 wantsto 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 licensingauthority 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, partnershipfirm 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 ofa 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.


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5) Obtaining Permanent Account Number-: export income is subject to a number of exemptionsand 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 makingpurchases 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 madewithout 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 applicants letterhead that there is no association of the

applicants 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 toregister 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


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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 shouldalso register with export credit and guarantee corporation of India (ECGC) in order to secureexport 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 oflocal 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 panbased 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, ifthey do not fall in the negative list. The negative list consist of goods the import or export ofwhich 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.


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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.

Exporters 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.


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EXPORT PROCEDURE


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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) uponreceipt 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 beneficiarys

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


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Back to back letter of credit:

SECONDARY CREDIT: In favour of a domestic supplier. The original credit backs thesecondary credit and facilitates the purchase of goods from a local supplier by the original

beneficiary of L/C

Red clause letter of credit: Allows exporter to withdraw a predetermined amount so that he isable 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 AnnexureA, AnnexureC, AnnexureD

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.


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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 containeragent 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 called 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 companys 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.


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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.

HBLHouse Bill of Lading

HBLHouse 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.

MBLMaster 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 afterthe 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 after the mates 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.


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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 exporters 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.

Packing list. Self Declaration Form Or Gr Form Acceptance of contract. Letter of credit. Quality Control Certificate.


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Lists of documents required to be submitted by the exporter to various

authorities, organizations, and agencies.

1) To the custom authority:- Commercial invoice GR Form ( Original and Duplicate ) Shippers Declaration Form Copy of the Export Contract /L/c/Export Order Inspection certificate AR-4 Form Export License Export license Weighment Certificate Shipping bill

2) To the port authorities:- Port Trust Copy of the Shipping Bill Wharf age application.3) To the bank Letter of credit Commercial invoice Bill of lading Insurance Policy/Certificate Bill of exchange GR Form (duplicate copy) Bank certificate Export Inspection Certificate


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Certificate of Origin Shipment advice4) To the RBI:- Copy of the invoice Sales Contract Bill of lading Inspection / Analysis Report

5) To the EXIM Bank: Export contract Letter of Contract Balance sheet of the exporter Statement of profit and loss in the transaction covered by the export contract 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:-

OriginalCustoms Second copyAgent Third copyExporter One copyWharf age refund One copy is for CESS


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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 Duplicate Triplicate QuadruplicateCustoms keeps the original and duplicate copies. Triplicate and Quadruplicate copies are sent to

the CHA.


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3.2IMPORT

Import Procedure


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The import procedure is quite different the export procedure. It starts with

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

The importer then sends the following documents CHA :-

a) Bill of ladingb) Invoicec) Packing listd) Certificate of origine) Pre shipment inspection certificatef) Insurance certificateg) Sales contracth) Bond copy (if H.S.S)

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

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

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

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

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


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

Customs assessed the duty to ensure that the duty 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:-


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Out of 5th

, 6th

, and 7th

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. Bill of entry for home consumptionII. Bill of entry for warehousing

III. Bill of entry for Ex-bond clearance for home consumptionBill 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.


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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 Duty2. CVD3. Additional cess on CVD4. Secondary and higher cess on CVD5. CESS6. Custom sec & higher education cess7. 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


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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. Bill of ladingII. Invoice

III. Certificate of originIV. 59- Bond warehousing bondV. Wharf age

VI. Bill of entryVII. Packing list

VIII. NOC (No Objection Certificate)IX. Delivery orderX. Treasury challan

XI. Gate pass

DOCUMENTS WHICH ARE TO BE USED IN IMPORT AND EXPORT CUSTOM

CLEARANCE.

Letter of Credit


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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 listIts 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.

InvoiceIt 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 receiptMate 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 billIt 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 EDI system or manually system.

Certificate of Origin


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A document provided by the exporters chamber of commerce that attests that the goods

originated from the country in which exporter is located.

Phyto-sanitary certificateA document provided by an independent inspection company, or the Agriculture Department

of the exporting countrys government, that attests that the goods confirm to the agriculture

standard of the importing country.

ManifestA document internal to the shipping company (the carrier) that lists all cargo onboard the

transportation vehicle.

Forms AR-4/AR-4AThese 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 MeasurementFreight 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 adviceA 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


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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 insuranceA document providing by the insurance company of the exporter that the goods are insured

during their international voyage.


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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.


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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.