Import Trade Procedures and Documentation

Liberalization of Imports The economic needs of the country, effective use of foreign exchange and industrial as well as consumer requirements are the basic factors, which influence India’s import policy. On the import side, the policy has three objectives: To make necessary imported goods more easily available, including essential capital goods for modernizing and upgrading technology; To simplify and streamline procedures for import licensing; To promote efficient import substitution and self-reliance. The Indian government plan to achieve, through a series of progressive steps, the average tariff levels prevalent in the ASEAN region. The basic customs tariff rate now ranges from 0 to 40% plus additional duty of 2%; the average rate is about 30%.

The economic needs of the country, effective use of foreign exchange and industrial as well as consumer requirements are the basic factors, which influence India’s import policy. On the import side, the policy has three objectives:

To make necessary imported goods more easily available, including essential capital goods for modernizing and upgrading technology;

To simplify and streamline procedures for import licensing;

To promote efficient import substitution and self-reliance.

The Indian government plan to achieve, through a series of progressive steps, the average tariff levels prevalent in the ASEAN region. The basic customs tariff rate now ranges from 0 to 40% plus additional duty of 2%; the average rate is about 30%.

Negative list for Imports 1. Freely Importable Items:- Import of all items, except those included in the prohibited list, is permissible free of duty for export production under a Duty Exemption Scheme. There is no quantitative restrictions on imports of capital goods and intermediaries. Import of second-hand capital goods is permitted provided they have a minimum residual life of 5 years. Under EPCGs, exporters are allowed to import capital goods (including computer systems) at concessionary customs duty, subject to fulfillment of specified export obligations. Service industries enjoy the facility of zero import duty under the EPCG scheme. Likewise, hospitals, air cargo, hotels and other tourism related industries. Software units can use data communication network to export their products. Imports are allowed free of duty for export production under a duty exemption scheme. Input-Output norms have been specified for more than 4200 items. These norms specify the amount of duty free import of inputs allowed for specified products to be exported.

1. Freely Importable Items:- Import of all items, except those included in the prohibited list, is permissible free of duty for export production under a Duty Exemption Scheme.

There is no quantitative restrictions on imports of capital goods and intermediaries. Import of second-hand capital goods is permitted provided they have a minimum residual life of 5 years. Under EPCGs, exporters are allowed to import capital goods (including computer systems) at concessionary customs duty, subject to fulfillment of specified export obligations. Service industries enjoy the facility of zero import duty under the EPCG scheme. Likewise, hospitals, air cargo, hotels and other tourism related industries. Software units can use data communication network to export their products.

Imports are allowed free of duty for export production under a duty exemption scheme. Input-Output norms have been specified for more than 4200 items. These norms specify the amount of duty free import of inputs allowed for specified products to be exported.

2. Prohibited List:- The import of the following four items in India has been completely banned: Tallow Fat; Animal Rennet; Wild animal including their parts and products; Unprocessed ivory. 3. Restricted list:- Restricted items can be imported only with licenses and only by actual users. The import of items in this list are restricted on the grounds of security, health and environmental protection or because the goods are reserved for production by small and tiny enterprises, which are home-based or village-based and which require low skills and employ a large number of peoples.

2. Prohibited List:- The import of the following four items in India has been completely banned:

Tallow Fat;

Animal Rennet;

Wild animal including their parts and

products;

Unprocessed ivory.

3. Restricted list:- Restricted items can be imported only with licenses and only by actual users. The import of items in this list are restricted on the grounds of security, health and environmental protection or because the goods are reserved for production by small and tiny enterprises, which are home-based or village-based and which require low skills and employ a large number of peoples.

Contd……. Consumer Goods:- All consumer goods, howsoever described, of industrial, agricultural, mineral or animal origin such as---- -- Consumer electronic goods, equipments and systems. -- consumer telecommunication equipments. -- concentrates of alcoholic beverages. -- Wines (tonic or medicated) -- Cloves, cinnamon and cassia. Precious, semi-precious and other stones:- -- cubic Zirconia -- stones such as rough diamonds, synthetic stones finished or unworked. -- Granite, porphyry, basalt, sand and other monumental or building stone. -- marble, travertine, ecaussine etc -- onyx.

Consumer Goods:- All consumer goods, howsoever described, of industrial, agricultural, mineral or animal origin such as----

-- Consumer electronic goods, equipments and systems.

-- consumer telecommunication equipments.

-- concentrates of alcoholic beverages.

-- Wines (tonic or medicated)

-- Cloves, cinnamon and cassia.

Precious, semi-precious and other stones:-

-- cubic Zirconia

-- stones such as rough diamonds, synthetic stones finished or unworked.

-- Granite, porphyry, basalt, sand and other monumental or building stone.

-- marble, travertine, ecaussine etc

-- onyx.

Contd……. Safety, Security and related items:- -- paper for security printing, currency paper, stamp paper and other special types of papers. -- Empty/discharged catridges of all bores/sizes. -- fire arms. -- ammunition. -- explosives. Communication jamming equipments, static/mobile/manporable. Electronic components for above, including antennae, RF Power amplifiers, noise generators. Acetic Anhydride. Seeds, plants and animals:- -- animals, birds and reptiles. -- stallions and broodmares. -- plants, fruits and seeds.

Safety, Security and related items:-

-- paper for security printing, currency paper, stamp paper and other special types of papers.

-- Empty/discharged catridges of all bores/sizes.

-- fire arms.

-- ammunition.

-- explosives.

Communication jamming equipments, static/mobile/manporable.

Electronic components for above, including antennae, RF Power amplifiers, noise generators.

Acetic Anhydride.

Seeds, plants and animals:-

-- animals, birds and reptiles.

-- stallions and broodmares.

-- plants, fruits and seeds.

Contd…… Insecticides and pesticides. Electronic items. Drugs and pharmaceuticals. Chemicals and allied items. Items relating to the small scale sector. Miscellaneous items. Special categories.

Insecticides and pesticides.

Electronic items.

Drugs and pharmaceuticals.

Chemicals and allied items.

Items relating to the small scale sector.

Miscellaneous items.

Special categories.

4. Canalised List:- items under this category can be imported only by specified public-sector agencies. Oils and seeds (); and cereals (by petroleum products can be canalised through the IOC. -- Aviation turbine fuel -- Crude Oil -- Motor Spirit. All types of nitrogenous, phosphatic and potassic fertilizers except Di-ammonium phosphate (DAP), Muriate of Potash (MOP), etc Vitamin-A drugs can be canalised through the State Trading Corporation. Coconut oil, RBD palm oil and RBD palm stearin through the STC and Hindustan Vegetable Oils. Seeds (copra, groundnut, palm, rapeseed, safflower, soyabean, sunflower, cotton). All other non-edible oils but excluding tung oil/China oil and natural essential oils; seeds or any other material from which oil can be extracted. Palm stearin, excluding crude palm stearine, palm kernel oils and tallow amines of all types. Cereals, excluding feed grade maize (i.e. maize unfit for human consumption but fit for use as poultry or animal feed) by the Food Corporation of India.

4. Canalised List:- items under this category can be imported only by specified public-sector agencies. Oils and seeds (); and cereals (by petroleum products can be canalised through the IOC.

-- Aviation turbine fuel

-- Crude Oil

-- Motor Spirit.

All types of nitrogenous, phosphatic and potassic fertilizers except Di-ammonium phosphate (DAP), Muriate of Potash (MOP), etc

Vitamin-A drugs can be canalised through the State Trading Corporation.

Coconut oil, RBD palm oil and RBD palm stearin through the STC and Hindustan Vegetable Oils.

Seeds (copra, groundnut, palm, rapeseed, safflower, soyabean, sunflower, cotton).

All other non-edible oils but excluding tung oil/China oil and natural essential oils; seeds or any other material from which oil can be extracted.

Palm stearin, excluding crude palm stearine, palm kernel oils and tallow amines of all types.

Cereals, excluding feed grade maize (i.e. maize unfit for human consumption but fit for use as poultry or animal feed) by the Food Corporation of India.

Tariff Schedule Classification:- The Indian classification on tariff items follows the Harmonized Commodity Description and Coding System (Harmonized System or HS). The harmonized system is an international six-digit commodity classification developed under the auspices of the customs cooperation council. Individual countries have extended it to ten digits for customs purposes and to 8 digits for export purposes. India has fully adopted HS through the Customs Tariff Amendment Act, 1985. There has been some modification of HS as appropriate to the Indian environment concerning excise taxes. Customs Duties:- The customs Act governs the levying of tariffs on imports and exports and frames the rules for customs valuation. The Customs Tariff Act specifies the tariffs rates and provides for the imposition of anti-dumping and countervailing duties. Duty Exemption Scheme:- Indian import policy provides for a duty exemption scheme for registered exporters so that they may import the inputs required for export production at international prices and free from duty in order to make to make their exports more competitive. Imported items, which are exempt from customs duty, are raw materials, components and consumables.

Classification:- The Indian classification on tariff items follows the Harmonized Commodity Description and Coding System (Harmonized System or HS). The harmonized system is an international six-digit commodity classification developed under the auspices of the customs cooperation council. Individual countries have extended it to ten digits for customs purposes and to 8 digits for export purposes. India has fully adopted HS through the Customs Tariff Amendment Act, 1985. There has been some modification of HS as appropriate to the Indian environment concerning excise taxes.

Customs Duties:- The customs Act governs the levying of tariffs on imports and exports and frames the rules for customs valuation. The Customs Tariff Act specifies the tariffs rates and provides for the imposition of anti-dumping and countervailing duties.

Duty Exemption Scheme:- Indian import policy provides for a duty exemption scheme for registered exporters so that they may import the inputs required for export production at international prices and free from duty in order to make to make their exports more competitive. Imported items, which are exempt from customs duty, are raw materials, components and consumables.

Categories of Importers Actual User (Industrial):- Actual users (industrial) means person who utilises the imported goods for manufacturing in his own industrial unit or manufacturing for his own use in another unit including a jobbing unit. Actual User (Non-industrial):- Actual User (Non-industrial) means a person who utilises the imported goods for his own use in:- any commercial establishment carrying on business, trade or profession; or Any laboratory, scientific research and development institution or hospital; or Any service industry. Non-Actual Users:- It includes:- Importers for stock and sale. Personal imports. Imports of gifts etc.

Actual User (Industrial):- Actual users (industrial) means person who utilises the imported goods for manufacturing in his own industrial unit or manufacturing for his own use in another unit including a jobbing unit.

Actual User (Non-industrial):- Actual User (Non-industrial) means a person who utilises the imported goods for his own use in:-

any commercial establishment carrying on business, trade or profession; or

Any laboratory, scientific research and development institution or hospital; or

Any service industry.

Non-Actual Users:- It includes:-

Importers for stock and sale.

Personal imports.

Imports of gifts etc.

Special Schemes for Importers Export Promotion Capital Goods Scheme (EPCG) Duty Free Replenishment Certificate (DFRC) Duty Entitlement Passbook Scheme (DEPB) Advance License.

Export Promotion Capital Goods Scheme (EPCG)

Duty Free Replenishment Certificate (DFRC)

Duty Entitlement Passbook Scheme (DEPB)

Advance License.

Pre-Import Procedure Selecting the commodity. Selecting the overseas suppliers. Capability and creditworthiness of overseas supplier. Role of overseas Suppliers Agents in India. Inquiry, offer and counter-offer.

Selecting the commodity.

Selecting the overseas suppliers.

Capability and creditworthiness of overseas supplier.

Role of overseas Suppliers Agents in India.

Inquiry, offer and counter-offer.

Legal Dimensions of Import Procedure Finalization of the Terms of Contract. Mode of pricing and INCO TERMS. Mode of settlement of payment. Obtaining IEC number. Obtaining Import License. Obtaining Foreign Exchange. Arranging Finance for Imports. Obtaining Import L/C limit. Despatching letter of credit.

Finalization of the Terms of Contract.

Mode of pricing and INCO TERMS.

Mode of settlement of payment.

Obtaining IEC number.

Obtaining Import License.

Obtaining Foreign Exchange.

Arranging Finance for Imports.

Obtaining Import L/C limit.

Despatching letter of credit.

Retirement of Import Documents Loading of goods and receipt of shipment Advice. Retirement of Import Documents. Acceptance of the bill of exchange. Documents against payment (sight Drafts) Documents against acceptance (Usance Draft) Scrutiny of Documents received under L/C. Appointment of C & F Agent.

Loading of goods and receipt of shipment Advice.

Retirement of Import Documents.

Acceptance of the bill of exchange.

Documents against payment (sight Drafts)

Documents against acceptance (Usance Draft)

Scrutiny of Documents received under L/C.

Appointment of C & F Agent.

Custom Clearance Procedure for Imported Goods Under the Ministry of Finance (Department of revenue), there are two independent Boards of Revenue:- Central Board of Direct Taxes (for Income Tax, Wealth Tax, etc.) 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 functions of the custom formalities in the country, in terms of the provisions of the custom Act 1962. 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.

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

Central Board of Direct Taxes (for Income Tax, Wealth Tax, etc.)

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 functions of the custom formalities in the country, in terms of the provisions of the custom Act 1962.

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: Import Manifest. Entry in the Import Department of Customs House. Presentation of Bill of Entry for Appraisal Clearance of goods. Warehousing the goods. Import Follow-up.

Import Manifest.

Entry in the Import Department of Customs House.

Presentation of Bill of Entry for Appraisal

Clearance of goods.

Warehousing the goods.

Import Follow-up.

Classification of goods for Import Policy and Assessment of Duty Types of Customs duties: Basic Duty:- Basic duty is levied on all goods imported into India as prescribed in Schedule-1 of Customs Tariff Act. This duty is levied as a percentage of value of goods imported or at a specified rate. Auxiliary Duty:- This duty was levied in addition the basic duty prescribed under the Finance Act every year. However, with effect from 28 th Jan’1993, auxiliary duty has been withdrawn by the government. Specific Duty:- This duty is levied in order to counter balance the excise duty leviable on the imports going into the production of such goods in India.

Types of Customs duties:

Basic Duty:- Basic duty is levied on all goods imported into India as prescribed in Schedule-1 of Customs Tariff Act. This duty is levied as a percentage of value of goods imported or at a specified rate.

Auxiliary Duty:- This duty was levied in addition the basic duty prescribed under the Finance Act every year. However, with effect from 28 th Jan’1993, auxiliary duty has been withdrawn by the government.

Specific Duty:- This duty is levied in order to counter balance the excise duty leviable on the imports going into the production of such goods in India.

Mode Of levy of Customs Duty Specific Duties Advalorem Duties Compound Duties. Valuation of Goods Valuation of goods is done as per principles laid down in Customs Valuation (determination and prices of Imported Goods) Rules, 1998. Demurrage Charges The goods imported and discharged in the customs area are stored in the warehouses of CWC or Port Trusts or other designated authority. Initially, such goods are allowed to be stored freely for few days and thereafter demurrage or storage charges are levied. The “free period” for different cargo is different as under: Commercial & Non-Commercial Cargo: 7 calendar days from date of landing. Unaccompanied Baggage: 14 calendar days from date of landing.

Specific Duties

Advalorem Duties

Compound Duties.

Valuation of Goods

Valuation of goods is done as per principles laid down in Customs Valuation (determination and prices of Imported Goods) Rules, 1998.

Demurrage Charges

The goods imported and discharged in the customs area are stored in the warehouses of CWC or Port Trusts or other designated authority. Initially, such goods are allowed to be stored freely for few days and thereafter demurrage or storage charges are levied. The “free period” for different cargo is different as under:

Commercial & Non-Commercial Cargo: 7 calendar days from date of landing.

Unaccompanied Baggage: 14 calendar days from date of landing.

Direct Delivery Facility for Imports by Air The facility of ‘Direct Delivery’ of goods imported by air is allowed in certain cases:- Goods like fresh fruits, frozen foods, life saving drugs and appliances, TV films; Any cargo requiring special handling or storage; and Any cargo in respect of which of the Deputy Collector of Customs, air Cargo Unit, have been obtained in advance permitting direct delivery.

The facility of ‘Direct Delivery’ of goods imported by air is allowed in certain cases:-

Goods like fresh fruits, frozen foods, life saving drugs and appliances, TV films;

Any cargo requiring special handling or storage; and

Any cargo in respect of which of the Deputy Collector of Customs, air Cargo Unit, have been obtained in advance permitting direct delivery.

Bill Of Entry Bill of Entry is a document, prepared by the importer or his clearing agent in the prescribed form under Bill of Entry Regulations, 1971,on the strength of which clearance of imported goods can be made. Bill of Entry is a document, which states that the goods of the stated values and description in the specified quantity have entered into the country from abroad. Types of Bill of Entry:- Bill of Entry for Goods Imported for Home Consumption (White coloured):- this kind of Bill of Entry is used for clearing imported goods by paying customs duty at the port. Bill of Entry for Bonded Goods (Yellow coloured):- this kind of bill of entry is used when no duty is paid on imported goods and therefore, they are transferred to customs recognised bonded warehouses. Bill of Entry for Ex-bond Clearance for Home Consumption (Green Coloured):- This kind of bill of entry is used where the importer intends to clear the dutiable goods, either in part or full, from a bonded warehouse by paying necessary duty.

Bill of Entry is a document, prepared by the importer or his clearing agent in the prescribed form under Bill of Entry Regulations, 1971,on the strength of which clearance of imported goods can be made.

Bill of Entry is a document, which states that the goods of the stated values and description in the specified quantity have entered into the country from abroad.

Types of Bill of Entry:-

Bill of Entry for Goods Imported for Home Consumption (White coloured):- this kind of Bill of Entry is used for clearing imported goods by paying customs duty at the port.

Bill of Entry for Bonded Goods (Yellow coloured):- this kind of bill of entry is used when no duty is paid on imported goods and therefore, they are transferred to customs recognised bonded warehouses.

Bill of Entry for Ex-bond Clearance for Home Consumption (Green Coloured):- This kind of bill of entry is used where the importer intends to clear the dutiable goods, either in part or full, from a bonded warehouse by paying necessary duty.

Contents of Bill of Entry Name and address of the importer. Name and address of the exporter. Import license number of the importer. Name of the port/dock where goods are to be cleared. Description of goods. Value of goods. Rate and amount of import duty payable. Other relevant documents. However, no bill of entry is required in the following cases:- Passenger’s baggage. Favour parcels. Mail bags and post parcels. Boxes, kennels of cages containing live animals or birds. Post parcels, ship stores in small quantities for personal use. Un-serviceable stores, such as, dunnage wood, empty bottles, drums, etc., of reasonable value (below Rs. 50) Cargo by selling vessels from Customs Ports when landed at open bunders only.

Name and address of the importer.

Name and address of the exporter.

Import license number of the importer.

Name of the port/dock where goods are to be cleared.

Description of goods.

Value of goods.

Rate and amount of import duty payable.

Other relevant documents.

However, no bill of entry is required in the following cases:-

Passenger’s baggage.

Favour parcels.

Mail bags and post parcels.

Boxes, kennels of cages containing live animals or birds.

Post parcels, ship stores in small quantities for personal use.

Un-serviceable stores, such as, dunnage wood, empty bottles, drums, etc., of reasonable value (below Rs. 50)

Cargo by selling vessels from Customs Ports when landed at open bunders only.

Note on Forward Contract International contracts are either concluded in Indian Rupees or in foreign currency. If the contract is concluded in terms of Indian rupees, all relevant documents are prepared in Indian rupees and hence no conversion is involved. However, if the contract is concluded in some internationally accepted currency then the importers have to pay Indian rupees equivalent to the amount of foreign currency.

International contracts are either concluded in Indian Rupees or in foreign currency. If the contract is concluded in terms of Indian rupees, all relevant documents are prepared in Indian rupees and hence no conversion is involved. However, if the contract is concluded in some internationally accepted currency then the importers have to pay Indian rupees equivalent to the amount of foreign currency.

Forward Contract: Where the International Contract has been concluded in foreign currency, an importer is always at risk due to adverse fluctuations in the exchange rates in the International market. Such risks can be avoided by the following methods: Invoicing the Goods in Indian Rupees:- The first remedy to adverse movements in exchange rates is invoicing goods in Indian rupees. However, foreign seller may not agree to invoicing goods in Indian rupees. Entering into a Forward exchange Contract:- This is the most commonly practised alternative for insuring the risks arising out of adverse movements in exchange rates. Under this adjustment, the importer enters into contract with its bank to purchase from the bank, foreign exchange at a future date or period and the bank agrees to sell the firm the foreign exchange on that date or during the agreed period at certain predetermined rate agreed upon at that time of entering into contract. Thus, the importer knows in advance the exchange rate that he going to pay on delivery of import documents.

Forward Contract: Where the International Contract has been concluded in foreign currency, an importer is always at risk due to adverse fluctuations in the exchange rates in the International market. Such risks can be avoided by the following methods:

Invoicing the Goods in Indian Rupees:- The first remedy to adverse movements in exchange rates is invoicing goods in Indian rupees. However, foreign seller may not agree to invoicing goods in Indian rupees.

Entering into a Forward exchange Contract:- This is the most commonly practised alternative for insuring the risks arising out of adverse movements in exchange rates. Under this adjustment, the importer enters into contract with its bank to purchase from the bank, foreign exchange at a future date or period and the bank agrees to sell the firm the foreign exchange on that date or during the agreed period at certain predetermined rate agreed upon at that time of entering into contract. Thus, the importer knows in advance the exchange rate that he going to pay on delivery of import documents.