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    Export import for ss is 1 Export import for ss is 1 Document Transcript

    • Exports & Import for SSI Units and Businessmen CONTENTS  Exim Trade  Terms of Payment in International Trade  Customs Matters Relating to Imports & Exports  Salient Features of 1) Advance Authorisation 2.) EPCG and 3.) 100% EOU / SEZ etc. Schemes  List of Steps involved in Execution of an Export Order  Definitions with Purpose/Function/Use/Significance  Duty DrawbackS. V. Modi Page 1
    • Exports & Import for SSI Units and BusinessmenEXIM TRADE1) Legal Framework Export means sending goods (and services) from India to any place outside India. Import means bringing goods (or services) into India from any place outside India. India, for import/export purposes, is: -- in case of every adjacent neighbouring country with whom India has common border on land, is the border exit/entry point. -- in case of all other countries, every point on the line at sea and vertically above in the air, at a distance of 12 Nautical Miles ( about 73,000 feet ) from appropriate base line. Thus, any ship/aircraft carrying goods entering or leaving the Indian territorial limit, import or export is considered to have taken place. Goods may be exported out of/imported into, India from/at notified sea- ports/airports/land customs stations, airports, ICDs/CFSs using: -- ships; -- aircrafts, including courier mode; -- trucks/railway wagons/other means of surface transport; -- postal system i.e. post parcels subject to certain size/weight/volume restrictions. Every export/import transaction (shipment out of/into, India) involves: -- the importer or exporter; -- his CHA; -- the port/airport/ICD/Custodial authorities; -- the respective shipping/air/transport, company/organization. All these entities are concentrated/focused on the purpose of effecting exports/imports, from/into, India. There are, therefore, certain basic laws and the Rules, Regulations, Instructions and the forms/documents, procedures prescribed, which, all such entities have to follow/comply with to the extent applicable to each one of them within their respective areas of activities/functioning, obligations/liabilities. The 3 (Three) Basic commonly applicable laws are: - -- Customs Act, 1962 (read with Customs Tariff Act, 1975); -- Foreign Trade (Development & Regulations) Act, 1992 (earlier Import & Export Control Act, 1947);S. V. Modi Page 2
    • Exports & Import for SSI Units and Businessmen -- Foreign Exchange Management Act, 1999. (earlier Foreign Exchange Regulations Act, 1947/1973). There may be certain commodity specific legislations e.g. Drugs & Cosmetics Act which may also apply to an export/import transaction in respect of such commodities. The above 3 Basic Legislations are passed by the Parliament (Union Legislations), extend to whole of India, including Jammu and Kashmir. The respective Government of India Administrative Ministries and the controlling authorities are: -- Ministry of Finance and Company Affairs, Department of Revenue with Central Board of Excise and Customs; -- Ministry of Commerce and Industry, Department of Commerce with Director General of Foreign Trade; -- Ministry of Finance and Company Affairs, Department of Banking with Reserve Bank of India, Exchange Control Department. The CBEC, through Commissioners of Customs and subordinate officers having jurisdiction over the notified ports/airports/ICDs/land stations etc. and the assigned areas/talukas/districts/states/UnionTerritories, exercise control/ supervision of all vessels/vehicles and the goods carried when being brought into India as imports or being taken out of India as export and allow clearances of export/import goods and even the carrying vessels/vehicles subject to prescribed declarations, examinations and compliance with the requirements under all other laws, to the extent applicable, including payment of duties of customs, as applicable. The DGFT, through its regional/port offices, exercises control/supervision of import/export licensing in respect of items under import/export controls i.e. restrictions. The RBI, Central Office, foreign exchange department (FED) through FEDs at their Regional Offices and mostly through banks (authorized persons) exercises control/supervision over the exchange control/foreign exchange aspects not only in respect of imports/exports, but also all other activities involving outflow/inflow of foreign exchange e.g. travel, education, subscriptions, investments abroad/in India etc. etc.2) Basic Registrations/Memberships for importers/exporters. a) MANDATORY Every entity as importer or exporter or both has to, mandatorily, under the FT (D&R) Act, 1992 and the Foreign Trade Policy there under, seek from the jurisdictional Regional Licensing Authority (JDGFT) a ten-digit one-time Importer- Exporter Code Number in the name and address of the Registered/Head Office or Main/Sole Office/Factory, which will cover also all other Branches/Divisions/Factories wherever located throughout India, when the details of locations/addresses are furnished to the IEC issuing authority.S. V. Modi Page 3
    • Exports & Import for SSI Units and Businessmen It is not a licence or permit nor is it related to the present and future activities of the applicant. It is simply a mandatory registration identifying a particular concern/firm/company/establishment; their proprietors/partners/directors/ functionaries; their Registered/Head/ Main office and other relevant particulars like IT PAN number etc. Every exporter/importer whether in trading/commercial/industrial/ professional/institutional capacity, has to have a valid IEC, when effecting exports/imports, when applying to JDGFT Offices for grant of export-linked incentives/benefits and when applying/declaring to Banks/RBI in exchange control related matters pertaining to exports/imports. Based on application in prescribed forms, Rs.250/- one-time fee (from: 01-04-2008 onwards and required documents, the IEC is allotted and an allotment letter issued. The persons/entities/situations exempted from IEC are: -- border trade transactions up to Rs.25,000/- per consignment between India-Nepal, India-Myanmar and Rs. India-China (Rs.2,00,000/-, if through Nathula Port); -- persons importing/exporting for personal use, not connected with agriculture, trade, industry; -- diplomatic missions; certain charitable organisations etc., -- Government departments etc. etc.; For them common permanent IEC numbers are allotted and published in Hand Book of Import-Export Procedures for use by such persons when clearing imported/export goods through customs. The IEC is valid for lifetime, unless changes in name, constitution, address etc. occur. It is not required to be renewed; nor is any annual reporting required. If lost/misplaced, a duplicate copy of the original allotment letter can be obtained upon application, FIR, Affidavit and an Rs.200/- fee. IEC, if not required, can be surrendered voluntarily. In case of changes e.g. constitution, name, address, shifting of jurisdiction, a modification application with relevant documentary evidences has to be made within 90 days from date of change or if thereafter then with a penalty of Rs.1, 000/-. If the exporter/importer comes to adverse notice of the Government, then IEC can be suspended / withdrawn, after due process of law, and thereupon, further exports/imports, if any, can be made only under a specific export/import licence, in each case, if granted. b) VOLUNTARYS. V. Modi Page 4
    • Exports & Import for SSI Units and Businessmen i) REGISTRATION-CUM-MEMBERSHIP CERTIFICATE (RCMC) FROM CONCERNED EXPORT PROMOTION COUNCIL/COMMODITY BOARD. EPCs (including FIEO) are autonomous bodies under Societies Act and function/operate in the interest of export promotion and as inter-face between exporters and Government. For certain exports e.g. Rice, Spices, Tobacco it is mandatory to have a valid RCMC at the time of customs clearance of the export goods within purview of respective EPCs/CBs. In rest of the cases it is voluntary to have a valid RCMC from concerned EPC/CB, but getting one helps as certain Foreign Trade Policy, excise-law related incentives/benefits are available only to Registered Exporters, whether manufacturer or merchant, holding a valid RCMC. The RCMC is granted upon application for a 5-year period (1st April – 31st March of the 5th year) subject to entrance/first year prescribed fees and required documentation and payment of annual fee in subsequent years. The RCMC, if not required, can be surrendered for cancellation subject to annual fee for the year when surrendered already paid. If the Registered Exporter comes to adverse notice of the Government, then the DGFT can, after due process of law, suspend/withdraw/cancel RCMC thus disenabling availment of export-linked incentives/benefits. Registered Exporter has to get RCMC updated with changes e.g. constitution, name, address, addition/ deletion of branches etc., as and when the changes occur. Registered-Exporter has to file periodically trade returns as prescribed by the EPC and non-filing can invite suspension/withdrawal/cancellation of RCMC. ii) SALES TAX (VAT) REGISTRATION - MERCHANT EXPORTERS Sale of goods between two parties in India attract the concerned State’s Sales Tax (e.g. GST in Gujarat now VAT) or the Central Sales Tax (CST) if the sale is inter- state. In those cases of exports, where the Merchant-Exporter (Trader) purchases goods, for exports, from manufacturers/others whether within the State or inter-state, the State ST/VAT or CST will be exempted provided buyer (exporter) concerned issues form ‘H’ prescribed under the CST Act. The international sale i.e. the sale effected by the Merchant Exporter (or even a manufacturer-exporter) directly to a buyer outside India is outside the purview of sales tax/VAT leviability, in view of Article 286 of the Constitution and therefore, as far as export sales overseas are concerned, the exporter need not necessarily be registered with the Sales Tax/Commercial Tax Authority, but because he has to first purchase the goods meant for export, in India from a supplier in India, sales tax/VAT on such purchases is, fundamentally, attracted, but can be avoided if the exporter (Merchant-Exporter) gets himself registered for ST or VAT/CST, obtains blank form ‘H’ Books and issues form ‘H’ for purchases for export, without ST or VAT/CST.S. V. Modi Page 5
    • Exports & Import for SSI Units and Businessmen iii) MEMBERSHIP WITH APPROVED CHAMBER OF COMMERCE & INDUSTRIES/TRADE ASSOCIATION. For most of the exports, the exporter needs to provide a certificate of origin (of goods) for use by buyer abroad in his country. Ministry of Commerce and Industry, Government of India, approves and authorizes certain Chambers of Commerce and Industries/Trade Associations/EPCs, to issue to their members/non-members Certificates of Indian Origin as and when required and requested. Members will be able to, easily, quickly and at normal cost, obtain certificates of origin and likewise attestation of documents/contracts/ agreements from the respective approved COC&I/TA/EPC. Non-members, can also get the same services but after recommendation each time by existing members, appropriate undertaking and at a higher cost of fee. Members can also be benefited by being invited by their EPCs/COC&I etc. to participate in Open Houses with highest functionaries from Commerce/Finance, other Ministries and their Departments e.g. CBEC, DGFT; Buyer-Seller Meets; Trade Delegations, Study Tours abroad; Exhibition in India/Abroad; representations to Central/State Government Ministries/Departments; Market Development Assistance; Visa Recommendations; Recommending export promotion incentives/ benefits; information services e.g. fortnightly/monthly magazines/ bulletins. Senior/Responsible functionaries of EPCs/COC&I are also members of Customs, Excise, ZDGFT/JDGFT and other similar Grievances Committees. Terms of Payment in International Trade The Seller (exporter) of goods sold to a buyer (importer) abroad has to receive payment for the goods from the concerned buyer. Similarly the buyer (importer) of goods has to effect payment for the imported goods to the seller abroad. For inter-partes settlement of payments in international trade, usually the banking system is involved/utilized. In most of the countries payment transactions for exports/imports, necessarily, require to be routed through normal banking channels. The terms of payment in International Trade will range from 100% Advance payment to deferred payment i.e. short term/long term duration of credit or installments which are known as cash settlement in the sense that payment, as and when due, is made and also received in a currency or equivalent thereof in the currency of the recipient. Payment may also be settled in kind i.e. either by way of two way mutual/third party supply of goods equal in value without any physical movement/transfer of currency (ies) or even by way of barter i.e. exchange of X quantity of goods A versus quantity of goods B without any price/value denominator. For exports from India under usual trade practices and also as per RBI (exchange control) regulations the following payment terms are allowed:S. V. Modi Page 6
    • Exports & Import for SSI Units and Businessmen A.) Not requiring any prior/post RBI/Bank approval i.e. under general permission. 1. 100% Advance Payment; 2. Letter of Credit (DP or DA sight); 3. D. P. Sight; 4. D. A. Sight (up to 180 days D/A). B.) Requiring RBI/Bank prior permission. 1. D. A. sight above 180 days DA/Deferred credit; 2. Open Account; 3. Escrow Account. C.) Under Specific Instructions of RBI/Government of India 1. Lines of Credit; 2. Barter Deal.The nature of permissibility and the effect of the different payment terms on costing,and consequently pricing, of export goods, are succinctly, as follows: -A. 1. - 100% Advance Payment.Exporter is allowed to receive any amount towards part/100% advance payment forfuture exports in the form of cheques, personal cheques, demand drafts, pay orders,mail/telegraphic/telecommunication transfers, and cheques from FCNR/NRE Accounts,Foreign currency notes/travelers cheques from buyer while on visit to India, throughcredit cards, etc. The foreign exchange thus received should be surrendered to anauthorized dealer in foreign exchange and a Foreign Inward RemittanceCertificate/Encashment Certificate should be obtained, retained and later used asevidence of receipt of payment when effecting exports.The Advance payment may be with or without interest liability. Interest if payableshould not exceed LIBOR + 100 Basis Points.Exports should be effected within 1 year from date of receipt of the advance payment.No refund of part/full advance payment (plus interest, if any) should be made afterexpiry of 1 year, without RBI prior permission. There are certain cost and comfortadvantages to seller as well as buyer, such as:- Seller bears no interest cost for production, shipment, as full amount of funds are already available in advance;- As there will no risk of loss of payment, seller does not have to buy credit risks insurance policy and thus avoids premium cost;- Direct dispatch of shipment documents to buyer is allowed – thus minimizing/eliminating certain bank charges, postage and other out-of-pocket expenses payable to banks;- Buyer may extract the best possible discount from the seller, which may be higher than interest cost to him.S. V. Modi Page 7
    • Exports & Import for SSI Units and BusinessmenFor small value transactions it is advisable to prefer the advance payment option -provided it is permissible in buyer’s country to remit advance payments.If, for any reason, the buyer is not willing or not in a position to remit in advance,payment toward goods ordered and both the Seller and Buyer still want certain level ofsecurity and comfort e.g. Seller prefers an irrefutable assurance of payment(immediate/later) against shipment of goods effected and presentation of relevantshipment documents if in order and in the same way buyer prefers that if at all anassurance of payment is given and payment also made on his behalf then the paymentshould be made only upon actual shipment and availability of required shipmentdocuments in conformity with all the terms/conditions stipulated by him, then theBuyer and Seller involve bankers for the purpose of issuance of and encashment of theassurance of payment and adopt payment settlement through :-A. 2 - Irrevocable (and confirmed) Letter of Credit for payment either at sight or acertain usance.A letter of credit is a written/signed or authenticated conditional assurance of payment,issued, at the instance, request, on account, at the risk and cost of the buyer, by hisbanker, addressed to the seller, promising to pay/honour the value due of the specifiedgoods ordered by the buyer, if shipped and documents thereof furnished strictly incompliance with all the terms, conditions, stipulations, stated in the letter of credit.The buyer’s, (opener/accreditor) banker (Opening Bank) opens/issues, letter of creditand forwards it to a bank in the seller’s country (advising bank) for authentication of itsgenuineness and delivery to the seller (beneficiary).Similarly the OB, later, if requested by Opener, issues and forwards amendments to theL/C, to the AB, for delivery to the beneficiary. The Opener or the Beneficiary, or bothwill bear (respectively) the OB’s opening/amendment commission charges, AB’sAdvising Commission and Postages. The OB’s opening/amendment commissioncharges will be on value and periodical i.e. for every 3 months/part thereof, except a flatrate for amendments, which do not enhance value or shipment/negotiation periods.The Beneficiary has to then effect shipment; prepare/obtain the required documentsand within the L/C validity present all the required documents together with the originalL/C (including all amendments up to that date) for negotiation and payment under the L/C to his bank or AB (through his bank) (if negotiation restricted to AB) (known asnegotiating bank).The NB will scrutinize all the documents presented and compare theshipment/documents with all the L/C terms/conditions etc.; and if satisfied, may agree tonegotiate and pay (subject to recourse) in anticipation of OB paying in turn.The NB may, after negotiation, claim re-imbursement, directly, from a bank in NB’scountry or another country (usually country of the currency in which payment is to besettled), if the OB have, in the L/C or otherwise, indicated the name/details ofReimbursing Bank and authorized direct claim.Thus there will be further bank charges e.g. NB’s, RB’s commission etc.S. V. Modi Page 8
    • Exports & Import for SSI Units and BusinessmenThe Opener may be required to deposit any amount from 5-10% to 100% of the L/Cvalue, as margin money, with the OB, depending on his credibility and credit-worthiness. The margin money deposit (3/6 months) may fetch interest, which may beat a very low rate compared to interest required to be paid on similar amount borrowedfrom bank/market. There will, therefore, be interest differential cost to the importer.Despite the OB’s assurance, there is a risk of failure of the OB or their country, whichmay result in non/late-realisation of the export proceeds. The beneficiary has, therefore,to cover the exposure, by securing a credit risk insurance policy, which entails paymentof premium on export value.If the NB bank detects discrepancies (which may not be capable of being rectified) thenit may agree to still negotiate either under beneficiary’s indemnity or under reserve. Itmay disagree to negotiate and treat the documents on collection basis outside thescope of L/C.Thus the L/C may lose its force and virtue due to expiry/discrepancies. For reasons ofcompetition as well the risks of higher quantum of bank charges and non-negotiationthen the next best payment terms, other than L/C, that may be agreed between Sellerand Buyer are: -Letters of credits issued subject to Uniform Customs and Practices for Documentary,Credits, ICC Publication 600 (UCPDC600 from 1-7-2007 onwards).A.3 D. P. Sight - Documents against payment at sight (Collection)Based on buyer’s Order, seller effects shipment of goods and tenders, the requireddocuments, to his bankers, along with appropriate instructions for forwarding to buyer’sbanker for presentation and delivery to buyer only against payment.The Seller has the security of goods till the buyer pays and can, if required, divert thegoods to another buyer in the same/neighbouring/other countries or at worst bring thesame back.Buyer has the comfort of having to pay only after shipment and receipt of documents byhis banker. Buyers usually postpone payment till around arrival of ship/goods. Cost ofbank’s charges are comparatively lesser than those under L/C but cost of creditinsurance will be higher under D. P. Sight as now even the buyer is perceived as a riskfactor apart from his bank and country. Seller also bears the interest cost for theelongated period from shipment date till receipt of payment, after it is made by buyer.However due to intra/inter-countries severe competition or the imperative on the buyerto sell goods on certain credit period e.g. Agricultural Machineries to farmers, the Sellermay have to extend a usance credit period higher than D.P Sight e.g.30/45/60/90/120/180 days, in which case the payment terms adopted are:A.4 D. A. Sight - Documents against acceptance at sight (up to 180 days DA)(Collection)Like D. P. Sight payment terms, the shipment is effected and documents tendered toS. V. Modi Page 9
    • Exports & Import for SSI Units and BusinessmenSeller’s banker, with appropriate instructions to forward to buyer’s banker forpresentation and delivery of documents to the buyer against his acceptance, at sight, topay on the agreed future date.Thus the buyer gets, delivery of shipment documents, and consequently the goods,without payment for the time being, under his written acceptance (promise) to pay onthe agreed future date.Seller has no security except buyer’s written promise to pay later. The cost of bankcharges will be the same but interest cost and credit insurance cost burden will becomparatively more on account of elongated duration of payment due date.In all these above situations, particularly A.2, A.3 and A.4 banks are involved fromdocuments to payment realisation/remittance stage. If the Seller and Buyer havemutual faith in one, another and want to minimize, even scale down bank charges,eliminate credit insurance cost and relish the comfort of direct dealings betweenthemselves with least intervention of banks, then the payment terms adopted in thatcase are known as:DP or DA sight Documentary Bills are handled subject to Uniform Rules for CollectionsICC Publication 522 (URC-522).B.1 - Open AccountUnder Open Account payment terms agreement, Seller forwards directly to Buyershipment documents and upon receipt, Buyer soon or as agreed (even periodicallyforwards to Seller payment by cheque/draft. Bank charges will be restricted to onlyeither commission on issue of Draft or collection of cheque.This may be one-way i.e. seller to Buyer or two-way i.e. Seller to Buyer for goods Sellersells (to Buyer) and Buyer to Seller for goods which Buyer Sells (to Seller).In a two-way direct exchange there can be tremendous savings in bank chargestowards issue of Draft/collection of cheques. For example if Seller were to bill Buyer ina month up to Rs.100 lacs and Buyer in turn bills seller 70 lacs during the same monthand in the ensuing month they square-up the accounts and mutually settle the net duesthen there will be only a final net remittance of Rs.30 lacs on which only bank chargesare incurred compared to bank charges on: - Bills for Collection - Rs.100 Lacs - Bill for Collection - Rs. 70 Lacs - Remittance - Rs.100 Lacs - Remittance - Rs. 70 Lacs ---------------- Rs.340 Lacs ==========For imports into India receiving Bills directly from sellers abroad were earlier allowedwithout limitations but in the recent past some limitations were imposed and as on todaythe limits are:a) Up to US$ 1, 00,000 in all cases;S. V. Modi Page 10
    • Exports & Import for SSI Units and Businessmenb) Without limit in case of: i) Wholly-owned Indian subsidiaries of foreign companies from their principals; ii) Status Holders - EH/TH/STH/SSTH/100% EOUs/SEZ units; Public Sector Undertakings and Public Limited Companies Including deemed public limited and private limited.c) All other cases at importer Client’s request authorized dealers may receive documents directly from overseas supplier based on track record of importer and report on supplier from overseas banker or reputed credit rating agency.For exports from India Open Account transactions are allowed to those exporters onlywho have a good track record and his bankers agrees to the arrangement. Exporters,otherwise, can ask their banks to directly forward export shipment documents to thebuyer.B.2 - Deferred Credit above 180 days DA or installmentsExporter will first have to seek RBI’s prior approval and shipments will be cleared bycustoms and similarly documents handled by banks only against evidence of priorapproval by RBI.B.3 - Escrow AccountThe buying or selling or both countries may be facing liquidity crunch and may not beable to pay in cash on due date even if long terms credit is offered. However they mayhave surpluses of goods that are mutually required.Under Escrow Account payment physically no payment one-way or both-ways will bemade by remittance of the money due.The supplier first forwards goods e.g. worth Rs.50.00 Million to the buyer in the buyingcountry. A bank in the buyer’s country will receive the value in its own currency fromthe buyer, which will be credited, to an Escrow Account of the Seller/Seller’s bankerwith the designated bank. Seller will then order any selected goods worth Rs.50.00Million from any vendor in the buyer’s country. Such Vendor (who may or may not bethe original buyer) will be paid by the designated bank in his own country the Rs.50.00Million. Thus for imports from the Seller’s country, no remittance of payment to Seller’scountry is made but instead any/certain goods worth the same amount (quantity,therefore will depend on price negotiated each time) will be shipped to the SupplyingCountry from where no remittance for payment will come.In this kind of arrangement price, money value of goods and consequently quantitiesare taken into consideration and the only difference is that X quantity (or higher or less)worth Y amount for goods A are exchanged for Z (or higher or less) quantity of goods Bworth the same amount.This is not bartering, but exchange of the same money value of goods A versus BS. V. Modi Page 11
    • Exports & Import for SSI Units and Businessmen(quantities subject to price negotiated) without movement of currency between theSelling and Buying Countries.C.1 – Barter Deal - very rarely adopted.Usually under Government-to-Government Undertakings. The respective supplierparties will be paid by their respective Governments in the respective local currenciesbut between the Governments the exchange of respective goods will be quantity –versus – quantity without price/value as a consideration.This occurs usually for political accommodation or when one or both countries aredesperate with not easily disposable surplus stocks.C.2 - Lines of Credit or Seller’s Credit/Buyer’s Credit.Government or EXIM/Other leading Banks may extend a line of credit to a Government/Financial Institute in the buying country on long term deferred payment basis. Sellerwill be paid in IRs equivalent of Sale value by such line of credit extending entities thatwill, under RBI approval, collect the dues from the buying countries as per the agreedrepayment programme.As far as seller is concerned it is as good as payment realised, though the buyerabroad pays much later, usually in installments in his country to the borrowing instituteswhich in turn pay the lending institutes.Customs Matters Relating to Imports & ExportsA. Background AspectsCustoms Act, 1962, a Union Legislation, extends to the whole of India (including J&K)and the Indian territorial limit i.e. every point at sea on a line at a distance of 12 NauticalMiles (1 NM = 6,080 feet approx.) from appropriate baseline (i.e. nearest land point),and the air space above every such point. Beyond the 12 NM territorial (political limit),every point at the seabed and sub-soil plus the seawaters up to 200 NM from baselineis India’s limit of continental shelf and exclusive economic zone for exploration,exploitation, environment protection etc. The CA, 1962, may by Notification, beextended even to areas in the CS/EEZ known as “designated areas” e.g. ONGC/foreignlicensed platforms. The border point between neighbouring adjacent countries is theterritorial limit on land.The main purpose, function and the object of the Act is to regulate: -- entry/arrival of vessels; -- entry/arrival of imported goods, departure of export goods; including ship’s stores, Passenger Baggage; -- prevent imports/exports, if not permissible under any law; -- collect statistical details on imports/exports; -- collect revenue on imports/exports.Thus Shipping/Airlines/Courier agencies, port authorities, importers/exporters andpassengers have to deal with the provisions of the Act, the Rules and Regulationsmade there under.S. V. Modi Page 12
    • Exports & Import for SSI Units and BusinessmenImporters/Exporters also have to deal with the Customs Tariff Act, 1975 (to an extentCentral Excise Tariff Act, 1986 also) with regard to particular classification of theindividual goods, based on an internationally recognized and followed system, knownas HSN (Harmonised System of Nomenclature), and the Customs/Excise duty thereagainst plus the ground Rules of classification including Rules of interpretation for thepurpose of classification.Under CA, 1962 the Government is empowered to administer the Law and also issuesubordinate legislation e.g. Rules, Regulations, Notifications, Directions. Theadministrative Ministry is the Central Ministry of Finance and Company Affairs and itsDepartment of Revenue.Implementing agency is the Central Board of Excise & Customs headed by a Chairmanand Members having control over all Customs/Excise Commissionerates at Zonal/State/District levels, and functioning as the policy making body. The Act provides forappointment of Ports /Airports as customs notified areas where only arrival/departure ofvessels; entry, unloading/loading of goods etc. can take place. The Act also providesfor appointment of various classes of Officers, their role, functioning and powersincluding delegated powers.The Port/Airport Authorities under Major Ports/Minor Ports etc. Acts are aninfrastructure/services/facilities providing entity for vessels/goods/passengers and havetheir own set of Rules/Regulation for entry/departure of vessels, unloading/loading ofgoods, storage, upkeep of goods till cleared and charges, fees, cost recoveriesincidental to such activities/services. The Port Authorities are the custodians (trustees)of goods on behalf of: - -- the owner ( importer/exporter); -- the concerned shipping company/vessel; -- Customs Authorities, and -- themselves.For exporting, out of India or importing into India, goods, by Vessels (ships, aircrafts,courier mode); land/surface transportation (Trucks, Railways, Boats, Carts), throughports/airports/land customs stations/postal system, for customs clearance, the importer/exporter will, usually, prefer engaging, for and on his behalf, the services of a CustomsHouse Agent (CHA) licensed to operate so by Customs Authority at respective ports,under CA, 1962. The CHA will deal with the Port, Customs, Shipping Company,Transport Co., Labour, Equipment providers, Surveyors, Octroi Authorities,Insurance Cos. Chambers of Commerce, Consulates and Inspecting Agencies etc., forand on behalf of the importer/exporter at their respective locations in thearrival/departure port cityB. PROCEDURAL ASPECTS1) IMPORTSWhen a ship carrying imported goods enters Indian Territorial limit, date and time ofarrival/entry becomes the taxable event though for administrative convenience eitherthe date of arrival or date of filing of Bill of Entry for import clearance is relevant fordetermination of exchange and duty rates applicable depending on whether B/E hasS. V. Modi Page 13
    • Exports & Import for SSI Units and Businessmenbeen filed pre/post arrival. A Customs rummaging team boards the ship to find outwhether anything is concealed or amiss plus seal the storerooms containing provisions/consumables/parts/components, in excess of the normal requirement, while the shipremains in port/Indian territorial area (anchorage).Within 12 hours after arrival and furnishing of a Manifest, (Import General Manifest) bythe ship; of all goods brought into India whether to be unloaded or remaining on board,consignment-wise, customs grant an entry inwards, whereupon, unloading of goods iscommenced, under Customs, Port, Shipping Co’s supervision. Ship then handover theunloaded goods to Port Authority who shift and store the goods as appropriate andhave to finally tally and account for all unloaded goods IGM-wise whether eventuallycleared, uncleared, short, missing, lost, destroyed.The individual importer in the meantime has received the shipment documents, arrivalnotice and forwards all required documents to appointed CHA at arrival port, forpreparation, completion, signing and submission of a Bill of Entry (along with requireddocuments) at the Customs House at the import port, for clearance and taking deliveryof the imported goods.The Bill of Entry gets noted, numbered in the Customs House and is then taken up byCustoms Appraiser for appraising of the import and assessment of duty i.e. determiningthe classification, duty rates, exemptions, valuation, licensing, restrictions, conditionsand any other statutory requirement. If the Appraiser is satisfied with all these aspects,then he determines the duty assessed and after counter-signature of Superintendentand Assistant/Deputy Commissioner of Customs, the assessed Bill of Entry is passedand returned to CHA, for duty payment, which has to be paid within 5 days after date ofreturn or even thereafter but with interest at 15% p.a. on the duty amount, from 6th dayonwards.Upon duty (plus interest) payment, the original B/E is retained in the Customs House,and duplicate, triplicate etc. with accompanying documents are then presented by CHAto the AC/DC, Docks in the port area for examination and passing of the goods. AC/DCendorses examination order (random, percentage, full) and accordingly theinspector/examiner of customs, under presence of Port Authority plus CHA (alsosurveyor if called) gets packages opened, verifies goods, tallies quantity/description,ascertains weight if required, draws and seals samples for analysis/testing, if required,and if satisfied writes in the B/E his examination report. If nothing is amiss, then theAC/DC grants final out-of-charge i.e. customs have nothing more to do with the goods,which, subject to port/shipping co’s clearance can be removed out of the Port Area.Goods under test/analysis will be allowed 80% delivery or 100% under provisionalassessment bond, subject to balance delivery/finalisation, based on test report.CHA in the meantime has obtained, from the Shipping Co., delivery order, addressed toport authority, against surrender of one of the original negotiable Bill of Lading copy,duly discharged, and payment of their dues e.g. DO charges, freight if not pre-paid etc.CHA, upon customs out-of-charge, clears port dues (wharfage, demurrage etc.) andobtains their out-of-charge as well (Gate Pass).CHA arranges transportation and removes the goods from port area, under port gateprocedures, and also if applicable (e.g. Mumbai, Chennai, Calcutta etc.), completesOctroi formalities at Gate i.e. either payment, if applicable or transit pass.S. V. Modi Page 14
    • Exports & Import for SSI Units and BusinessmenCHA then forwards to importer (or through transporter) Triplicate plus Quadruplicatecopies of B/E plus all documents no longer required, import licence if involved etc.along with his Bill for services and expenses paid.Importer (through transporter) may have to pay Octroi duty, if applicable, at his place onthe customs assessable value of goods, plus duty, plus CHA, transportation cost(factor), based on the Bill of Entry details.Importer receives, tallies, verifies goods and in case of shortages, damages, breakagesetc. calls the insurance surveyor at the earliest.Importer will preserve and use the original copy of “Triplicate-marked” B/E as vouchercopy evidencing duty payment and also for the purpose of availing Cenvat credit ofAdditional Duty of Customs, if paid, as per Central Excise Act, if to be used in or inrelation to manufacture of further excisable goods.Importer will have to furnish the original copy of the “Quadruplicate-marked” B/E copy,to his banker, as proof of import against remittance in foreign exchange made/to bemade for the import, towards exchange control compliance, under FEMA, 1999 (thishas been relaxed to up to US$ 1,00,000/- for all importers and higher/no limit for publiclimited companies etc.)If, however, there are disputes over classification, duty rates, exemption benefit,valuation, licensing, at appraising stage or at examination stage, then customs willissue query memos or Show Cause Notice for reply (which may be waived by theimporter), grant hearing, adjudicate, pass appellable order (pre-or post-clearance)confiscate goods, if misdeclaration, suppression found, allow redemption under fineand impose personal penalty, as applicable. The importer can, if desired, proceed inAppeal either on a live bill of entry i.e. without clearance (Order-in-Assessment) or firstclear in terms of adjudication and later, proceed in Appeal (Order-in-Original). Therecan be a seesaw appeal process starting with Commissioner (Appeals) and ending withSupreme Court, depending on, at each stage, whether the Adjudication or the AppellateOrders aggrieves the importer or the Customs.Orders of each Appellate Authority and even the High Courts/Apex Court (on points ofLaw) are binding on all lower authorities/courts within the respective jurisdiction/all Indiabasis and have to be accepted and implemented by the respondent party and reliefsgranted or amounts paid, as applicable, unless stayed by the higher judicial forum.However when relief claimed is in the nature of excess duty paid (by the importer) dueto valuation/classification/exemption denial case, then the importer will be entitled torefund only if he is able to prove that the burden of excess duty has not been passedon to others, if the disputed goods or goods manufactured there from are sold to others–which is known as doctrine of unjust enrichment. If the importer is unable to dischargethe bar of unjust enrichment, then the amount of refund will be credited to ConsumerWelfare Fund for use by Consumer Welfare organizations.Customs may seize and finally absolutely confiscate the goods in which case there willbe no duty, redemption fine liability, but personal penalty, if any may still have to bepaid (which can be litigated against, if desired).S. V. Modi Page 15
    • Exports & Import for SSI Units and BusinessmenBefore clearance of goods is ordered, importer can relinquish title to goods and willthen not be liable for duty, redemption fine, if applicable. (Penal, may still be imposed, ifoffence found). Relinquishment is not permitted in case there is an offence found.Bill of Entry may be filed ab initio for home consumption or warehousing or a homeconsumption B/E before clearance may be converted to warehousing B/E for thepurpose of storage, without immediate payment of duty, in a customs-bondedwarehouse and clearance later, ex-warehouse, on payment duty, then only, under anex-bond home consumption B/E for partial/full delivery (ies) as per duty rates prevalenton the date of filing of each ex-bond home consumption B/E, subject to interest on dutyamount if cleared after 90 days from deposit in the warehouse plus warehousingcharges, rent etc.Warehoused goods may be transferred to others who can clear ex-bond in their namesubject to duty etc.Warehoused goods can be re-warehoused elsewhere and can also be cleared forexport out of India without duty etc. Warehoused goods can also be relinquished, ifdesired.For excess duty paid the importer can file a refund claim in prescribed form andmanner, within 6 months from the date of duty payment, after which the claim, even ifcorrect, becomes, statutorily time-barred, with no remedy at all. However the straightfiling of refund of excess duty paid should not be due to lis i.e. an appellable dispute. Inthat case, first an Appeal against the disputed assessment under the Bill of Entry or anOrder-in-Original, if issued, has to be preferred.In the same way for duties not levied/short-levied or erroneously refunded, customs candemand the differential within 6 months from duty payment/refund date, otherwise thedemand is statutorily time-barred.However for duty demand (not-levied/short-levied/erroneously refunded) Commissioner,if satisfied, can extend the 6 months time limit to 5 years, provided it is a case of fraud,willful misrepresentation, and misdeclaration.For duty etc. demands not paid, Customs can proceed with recovery by attachingmoveable/immovable properties of the importer, auction, adjust Government dues andreturn the surplus, if any to the importer.Customs can also certify recovery of Government dues to District Collector who canthen proceed to recover through attachment etc. as if it is land revenue.Notifications (including Rules/Regulations) come into effect on date of issue or a datespecified. However the Notifications, Rules etc. will have only prospective effect andnot retrospective, unless the Parliament passes a Validating Act giving a retrospectiveeffect.Re-import of goods exported from India are to be treated as good as an import andchargeable to duty and also subject to restrictions/conditions in the same way as likeimported goods would attract. However, there are exemption notifications by virtue ofwhich, subject to certain time limits and conditions, re-imported goods if brought backfor retention will not be subject to normal import duties etc. but duty equal to incentives/S. V. Modi Page 16
    • Exports & Import for SSI Units and Businessmenbenefits or recompense equal to exemption scheme benefits availed (e.g. Drawback,Excise Duty Rebate/Not Paid under bond, Advance Authorization, DFIA, DEPB, EPCG)or no duty if nothing has been availed.Goods re-imported for repairs and return (under warranty/extended warranty),irrespective of benefit availed on export, will still be allowed clearance without dutysubject to re-export within time limit prescribed and customs satisfied with identity ofgoods. Goods exported for repair and return, upon re-importation will not attract dutyon their whole value, provided no drawback was availed on export, but will attract dutyon fair cost of repair and freight plus insurance both ways, whether paid or free.Foreign Goods can be imported and cleared duty free for repair and return plus evenraw materials, parts, components, Capital Goods, Moulds, Tools for carrying out therepairs, under customs bonded private premises subject to re-export of the repairedgoods, waste/scrap, Machineries etc. or duty payment on retained goods.Imports by privileged persons (e.g. President etc.), organizations (diplomatic missionsetc.) are allowed duty free/concessional duty and simpler clearance procedures.There are certain reliefs/concessions, subject to conditions, for private personalproperties exported for repair and return or replacement.There are also duty reliefs for goods imported belonging to deceased persons, defencepersonnel, Scientific, Research Organisations, and Developmental Agencies.Baggage Rules, Tourist Baggage Rules and Transfer of Residence Rules provide dutyfree/concessional duty reliefs subject to certain limits/conditions.Reliefs are also provided to temporary imports for exhibitions, advertising, publicity,events (mountaineering, car racing), TV/Media requisites etc. subject to bond, and re-export.Goods brought to India, for transit through India, to adjacent neighbouring countriese.g. Nepal, Bhutan or in other cases for transshipment i.e. onward shipment to anyforeign destination, have to undergo the transit/transshipment customs clearance(usually under bond) subject to exit proof.Imported duty-paid goods, if re-exported, to any place outside India will be entitled todrawback of duties paid up to 98%, if such goods are re-exported, without use within 2years from date of clearance or if used then at descending rates of per cent of duty paiddepending on the period of use i.e. up to 3, >3-6, >6-9, >9-12, >12-15, >15-18 and >18months up to 95/85/75/70/65/60/NIL percentage.Salient features of 1.) Advance Authorisation 2.) EPCG and 3.) 100% EOU/SEZetc. Schemes.1.) Advance Licence Scheme (now renamed as Advance Authorisation Scheme): -S. V. Modi Page 17
    • Exports & Import for SSI Units and BusinessmenA scheme under Foreign Trade Policy for registered-exporters facilitating customs dutyfree clearance of specified inputs for manufacture and export of the relevant finishedresultant goods subject to several requirements, terms, conditions, restrictions,obligations and liabilities. The Scheme is jointly operated by the DGFT and MOF. TheDGFT takes care of the Policy/Procedural aspects and MOF issues relevant customsduties exemption notifications. The salient features of the scheme are: -- it is available to registered-exporters, Manufacturer or Merchant - who has a tie-up with a supporting manufacturer;- exporter has to apply to the jurisdictional licensing authority (JDGFT), for grant of AA, in prescribed form along with required documents and applicable fees; (now only on-line through digital signature and Electronic Fund Transfer)- exporter has to await issue of AA which will be granted subject to : input-output norms; minimum prescribed value addition; description, quantity and value of export obligation required to be fulfilled in a certain time limit, in relation to: description, quantity and value of inputs; and several other terms/conditions etc.;- exporter has to undertake (i.e. furnish LUT/BOND) to fulfill the EO prescribed and observe/comply with all the terms/conditions etc. including liability to repay, duty saved, if required, together with interest on duty (presently 15% p.a.);- exporter has to furnish 100%/15% of amount of duty saved Bank Guarantee (which may be waived under certain statuses);- exporter has to tender the AA (bearing LUT/BOND and BG accepted or waived endorsement) to customs authority at import port for duty free clearance of the inputs allowed ;- actual user condition i.e. the AA or duty free cleared inputs cannot be sold/transferred/loaned or parted with any manner (except for job-working under proper excise documentation) and must be used for the purpose for which licence has been granted;- exporter has to declare AA particulars in each Shipping Bill when effecting exports in discharge of EO;- upon 100% fulfillment, exporter has to redeem the Bond + BG;- if not, then exporter has to repay the duty saved, proportionate to EO quantity shortfall with 15% p.a. Interest from duty free import clearance date;- for value-wise shortfall only, if value addition is negative then a penalty has to be paid the 100 times of which plus FOB export value actually realized is equal to positive value addition (e.g. if imports was 100 and exports was required to be more than 100 (i.e. 100+) and export value realised is 95, then 100 x Rs.0.051 = Rs. 5.10 + 95 = 100.10, will suffice);- the validity for effecting imports is 24 months extendable by 6 more months i.e. maximum up to 30 months;S. V. Modi Page 18
    • Exports & Import for SSI Units and Businessmen- the export obligation discharge period is for 36 months. It is extendable first by 6 more months at a cost of composition fee of 2% of the amount of duty saved on unutilized duty free materials and second 6 months at 5% composition fee.- if the exporter wishes to procure the materials allowed duty free from indigenous sources, then he can get the AA invalidated for direct imports and obtain an Advance Release Order or Advance Release Advice in favour of indigenous supplier, who in that case can have his supplies of the intermediate (inputs for ultimate exporter) to the AA holder counted as Deemed Exports and on that basis avail :- - if under ARO, then - drawback on his supplies; - terminal excise duty refund; - discharge of export obligation under other scheme (e.g. EPCG); or - if under ARA : - duty free clearance of imported inputs for his product (intermediate) under Advance Intermediate Authorisation facility; - terminal excise duty refund; - discharge of export obligation under other scheme (e.g. EPCG); - supplies made in India to Advance/EPCG Authorisation holders; 100% EOU units, STP/EHTP units, EPZ units, units and also projects financed by multilateral/bilateral agencies, or certain power, fertilizer, nuclear power, oil/gas exploration product etc. also qualify as Deemed Exports and are entitled to Deemed Export Advance Authorisation on more or less the same lines as AA for physical exports;- AA etc. if not utilized can be surrendered at any time for cancellation, or scaled down for quantity or value or both for imports or exports;- Definitions : - input-output norms:- - the description and quantity (including wastage) of relevant inputs allowed per unit of the finished export product; - value addition :- the rate of increase from CIF import value of the duty free inputs to the FOB export value of the relevant output; - export obligation :- - the description, quantity and value of finished goods required to be exported in relation to the description, quantity and value of the relevant duty free inputs, in the initial/extended time period allowed and valueS. V. Modi Page 19
    • Exports & Import for SSI Units and Businessmen thereof realized in free foreign exchange within RBI prescribed/extended time limit.2) EPCG Scheme ( Export Promotion Capital Goods Scheme ) :A scheme, under the Foreign Trade Policy for registered exporters, facilitating customsclearance at 3% basic import duty (instead of normal e.g. 7.5%) and zero duty inspecified sectors and without Additional Duty of Customs (CVD), of New and Unused orSecond Hand Capital Goods, subject to several requirements, terms, conditions,restrictions, obligations and liabilities. The Scheme is jointly operated by: the DGFTand Ministry of Finance, Government of India. The DGFT takes care of thePolicy/Procedural aspects and the MOF issues relevant supporting customs dutyexemption notification. The salient features of the Scheme are: - it is available to Registered Exporters, Manufacturer or Merchant who has a tie- up with a supporting manufacturer; - exporter has to apply to the jurisdictional licensing authority (JDGFT), for grant of EPCG Authorisation, in a prescribed form, together with applicable fees (Rs.5/Rs.1000/- on duty saved amount at present or 50% thereof if EDI filing of application preferred), and required documentation; Now on-line digital signature and EFT payment of fees is compulsory. - Exporter has to await issue of EPCG Authorisation which will be granted based on the nexus between the Capital Goods sought to be imported and the export product capable of being manufactured using the said Capital Goods. The EPCG Authorisation will bear a condition as to which relevant export goods should be exported up to 8 times the amount of duty saved within 8 years (12 years in case duty saved is 100 crores or more) and in some cases six times in six years/12 years and 8 times in 12 years from the date of issuance of the Authorisation. The said export obligation will be in addition to an obligation to effect exports up to the annual exports of the same product already achieved in the preceding 3 licensing years (April/March), if any. Other conditions/ restrictions like repayment of duty saved; upon failure to fulfill the obligation etc. shall also apply.- exporter has to undertake (LUT/BOND) to fulfill the prescribed export obligationand also comply with/observe all other terms/ conditions/ restrictions etc. including the liability to repay the duty saved, if required, together with interest (presently 15%p.a.);- exporter has to furnish a bank guarantee up to 15%/100% of amount of duty saved, depending on certain qualifying conditions, to the customs authority at the import port or to JDGFT licence issuing office, if the Capital Goods under the EPCG Authorisation, are desired to be indigenously procured with deemed exportsbenefits to the domestic supplier.- exporter has to furnish to Customs authority at the import port, the EPCG Authorisation, with Bond + BG accepted remarks, for clearance of the Machineries at 3% duty.S. V. Modi Page 20
    • Exports & Import for SSI Units and Businessmen- exporter has to furnish to customs authority at the port of clearance the EPCG machineries, certificate of installation at the declared factory/ premises issued by the jurisdictional Excise Authority, within 6 months/extended period, if allowed from date of clearance.- Actual user condition i.e. the EPCG Machines cannot be disposed, leased/rented out, transferred, sold or in anyway parted with (except repairs) until fulfillment of obligation and redemption of Bond + BG.- exporter has to declare the EPCG Authorisation particulars in each shipping bill (own/third party exports) when effecting exports in discharge of EO.- exporter has to submit to Customs and the JDGFT EPCG Authorisation issuing office yearly statement of exports certified by CA/Banks.- upon 100% EO fulfillment exporter has to redeem Bond + BG.- If not, then duty saved proportionate to EO unfulfilled has to be paid with interest at 15% p.a. from import clearance date.- Obligation has to be discharged slab-wise e.g. years 1st to 6th – 50%; 7th to 8th 50% (or 1st to 4th – 50%; 5th and 6th – 50% or 1st to 10th -50%; 11th and 12th 50%). Excess exports made in a preceding period can be carried forward to ensuing period but not vice versa. If there is EO fulfillment shortfall in a particular block, and no extension has been granted, then duty saved proportionate to the short fall; with interest at 15% p.a. has to be paid.- EPCG Authorisation holder can import and clear the machineries also in SKD/CKD condition.- EPCG Authorisation holder can get the Authorisation invalidated for direct imports and procure similar machines from domestic supplier who will be entitled to Deemed Exports benefits e.g. Drawback or Duty Free imports (of raw materials, parts, components etc. for manufacture of the machines); terminal excise duty refund and discharge of EO, if any e.g. under Duty Exemption/EPCG schemes.- If EO cannot be fulfilled by exporting the EPCG machinery-linked goods. including pre-production or post-production, then upon request EO may be refixed for fulfillment by way of export of any other products manufactured by the licence holder in the same/his other factory (ies).LIST OF STEPS INVOLVED IN EXECUTION OF AN EXPORT ORDER 1) Receive order/LC, Scrutinize, Acknowledge and ask for amendment/rectifications/modifications, if required; 2) Organise ECGC Policy/Credit Limit to adequately cover political/commercial risks;S. V. Modi Page 21
    • Exports & Import for SSI Units and Businessmen 3) Place Work Order on own factory or Purchase Order on manufacturer/supplier, if Merchant Exporter; mentioning crucial details like: description, quantity, quality/standards, packaging/packing, markings inspection requirements if any, excise if applicable, then option whether on payment or under bond, No Sales Tax/VAT i.e. against form ‘H’, price, date and place of delivery, port of shipment, last shipment date, transit/contingency/marine insurance, as applicable; 4) Obtain pre-shipment finance, if required; 5) Submit Advance Authorisation application, if so opted; 6) Monitor production, readiness of goods for inspection/excise clearance /dispatch to shipment port, progress; 7) Liaise with Inspecting Agency, if inspection required; 8) Execute LUT/ Bond, obtain CT1, if merchant exporter and if own bond option preferred; 9) Forward ARE1 or CT1 + ARE1 to own factory/supplier; 10) Prepare and forward a set of customs clearance and shipment purpose documents to CHA at shipment port; 11) purchase transit/contingency/marine insurance, as applicable, prior to removal of the export goods for transportation to shipment port; 12) receive from CHA dispatch instructions, relay to factory/supplier; 13) remove the export goods for transportation to shipment port under ARE1/ARE2 procedure, if export goods/materials contained in the export are excisable and rebate claim/under bond removal preferred; 14) await customs clearance and shipment; 15) receive from CHA export shipment documents; 16) inform shipment details to buyer/agent/buyer’s insurance company, as may be required; 17) prepare/obtain remaining shipment documents; 18) tender shipment documents to bank for negotiation/collection; 19) forward non-negotiable set to buyer/agent abroad; 20) monitor negotiation/collection, till payment realization; 21) clear the dues, of supplier, CHA etc.; 22) forward form ‘H’ to supplier;S. V. Modi Page 22
    • Exports & Import for SSI Units and Businessmen 23) report export to ECGC and pay applicable premium; 24) file excise rebate/bond discharge claim within prescribed time limit; 25) file other incentives/benefits claims etc. obligation discharge/DEPB etc. as applicable, with in respective time limits.Sequencing of Export Customs clearance, shipment then negotiation /collectionactivities and movements related thereto. Documentation Movements A set of pre-shipment documents Removal and transportation of the1. forwarded to CHA at export port for 1. export goods to shipment port. Shipping Bill procedure2. ARE1/ARE2 Procedure 2. Customs Clearance and shipments of the export goods. A set of post-shipment documents Bank forwarding export shipment3. for negotiation/collection 3. documents to overseas bank for collection or as a negotiation.S. V. Modi Page 23
    • Exports & Import for SSI Units and BusinessmenLIST OF DOCUMENTS REQUIRED FOR CUSTOMS CLEARANCE AND SHIPME OF EXPORT GOODS.A. From exporter’s side 1. Instructions letter to CHA at export shipment port; 2. Invoice set; 3. Packing list set; 4. GR form/SDF declaration, in duplicate (if export shipment above US$ 25,000/- with effect from 01-04-2004); 5. Original + Duplicate, 5th Copy of ARE1/ARE2, if goods/materials excisable and rebate/under bond manufacture/removal preferred; 6. EIA’s/any other Controlling Authority’s inspection certificate, if pre-shipment inspection compulsory (or alternative provided); 7. Export Licence/Quota certificate/NOC, as may be applicable, if item under export control; 8. Certificate/declarations, prescribed, depending on type of incentives/benefits claimed; 9. Copy of IEC + BIN; (or customs EDI registration). 10. Copy of any other statutory registration, licence, as applicable, specific to commodity e.g. Drug Licence; 11. Copy of export order/contract/LC, as may be applicable;B. Added by CHA. 1. Shipping Bill set; 2. Dock Receipt (Challan);LIST OF EXPORT SHIPMENTS DOCUMENTS REQUIRED FOR COLLECTION/NEGOTIATION.1. Instruction-cum-forwarding letter to bank;2. Bill of Exchange, set;3. Invoice Set;4. Packing List Set;5. Certificate of origin/GSP certificate of origin, if asked for;6. Insurance Policy, if CIF;7. Bill of Lading (full set) Airway bill/Rail/Road Receipt/Courier Airway bill, Consignment Note/Postal Receipt;8. CRF, if required;9. Certificates/Declarations, as prescribed in the LC or order or otherwise;10. Duplicate copy of GR/SDF. (if over US$ 25,000/-);11. LC with all amendments in original, if under L/C terms.DEFINITIONS WITH PURPOSE / FUNCTION / USE/ SIGNIFICANCEA. GR/SDF – Guaranteed Receipt/ Statutory Declaration Form.S. V. Modi Page 24
    • Exports & Import for SSI Units and BusinessmenIt is an export exchange control declaration form; prescribed under FEMA, 1999, issuedby the RBI in duplicate both the copies identically numbered (GR only), required for: (i)customs clearance and shipment of export goods, (ii) negotiation/collection of exportshipments documents and (iii) export value foreign exchange receipt accounting. It isfilled, completed signed and submitted, by the exporter to the customs authority atshipment port along with rest of the required customs clearance and shipmentdocuments plus the goods. Customs process both the copies right from submission tillfinal departure of the ship/aircraft/surface transportation vehicle. Customs retain originalfor directly on-forwarding to the RBI and return duplicate to exporter who in turn has tosubmit it to his bankers along with all the shipment documents required fornegotiation/collection. Bank initially reports to RBI having received the duplicate; andlater upon payment realisation, discharges it with payment realised remarks, releasesand forwards it to the RBI. Thus RBI comes to know of every export shipment directlyfrom customs; then the consequential negotiation/collection and realisation/non-realisation from the reporting bank. The GR/SDF is not only a declaration but also theexporter’s undertaking to RBI to realise and repatriate the export value to India withinthe RBI prescribed/extended time limit.B. Shipping BillIt is an export declaration form, prescribed under Customs Act, 1962, required forcustoms clearance and shipment of export goods. It is filled, completed, and signed bythe exporter/his CHA on his behalf and submitted to the Customs Authority at shipmentport along with rest of the required documents. It first gets noted and numbered withdate and security seal number and then processed by way of appraising andassessment. If satisfied, customs pass the shipping bill with ‘allow shipment’ order.Thereafter the passed shipping bill is again presented to customs authority in the portarea for examination, passing and allowing export. Customs in port area afterexamination of the goods, if satisfied complete the shipping bill with examination reportand ‘Let Export’ order i.e. customs ‘out-of-charge’. The cleared goods are then loadedinto the ship/aircraft under port authority/customs/CHA/shipping line/airline supervisionand required certification from the, ship/aircraft (e.g. Mate’s Receipt i.e. Captain’sacknowledgment of having received the goods specified on board his ship fortransportation as agreed). The MR details get noted in customs/port authority’s copiesof shipping Bill/Dock Challan. On departure (sailing) of the ship/aircraft, customscomplete the shipping bill with loading, shipment effected and departure details.Customs, then release one copy of shipping bill for use by the exporter as proof ofexport for claiming export–related incentives/benefits/obligation discharge. Thus theshipping Bill is not only an export declaration but also a full, final and authenticcertificate and evidence of export.C. Bill of LadingIt is a sea transport document, issued by the concerned Shipping Company, evidencingcarriage of goods specified therein, on board the vessel named therein, from oneseaport to another. It is a contract of carriage. It is a document of title to goods; it isnegotiable; i.e. the title can be transferred to others by endorsements. The ShippingCompany will grant delivery of the goods at destination port, against surrender of one ofthe original negotiable B/L copy duly discharged by the consignee or the last endorsee.S. V. Modi Page 25
    • Exports & Import for SSI Units and BusinessmenThus it is a sea-transport document as well as contract of carriage with a character oftransferability; enables delivery at destination port and can in the meantime be offeredas security/collateral for obtaining finance.D. Bill of ExchangeIt is an unconditional demand made in writing by the seller asking the buyer to pay, tothe presenter, a certain sum, either at sight or at a certain usance, for value received. Itis a document of title to monies. It is negotiable; i.e. the title can be transferred to othersby endorsements. When paid, the payee or the last endorsee, discharges it withpayment received confirmation and delivers it to the drawee (buyer) for whom itbecomes a receipt. However, if not paid, then it can by got noted/protested for non-payment and can then be used as evidence of non-payment for further litigation,arbitration, credit insurance claims and recovery proceedings. It may be required to beaffixed with the applicable stamp duty in the seller’s/buyer’s or both countriesdepending on the Stamp Duty legislations/provisions in respective countries.Duty DrawbackDrawback means taking back or claiming back. It is an accepted proposition under thecustoms legislations of all/most countries, and WTO compatible, that duties of customsand other taxes like VAT, Excise, Sales Tax etc., as applicable, if paid: - a) on imported goods, re-exported; b) on imported and/or domestic materials used in the manufacture of the finished export goods;has to be granted as drawback, upon export/re-export so that it is only the goods thatget exported/re-exported, from the country of export, and not the taxes on the goodsthemselves or on inputs used in the manufacture of the export goods.At present the Indian Legislations i.e. the Customs Act, 1962; the Central Excise Act,1944 and the rules/regulations/provisions made and the procedures prescribed thereunder, provide for: a) Under Section 74 of Customs Act, 1962 read with Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995: -Drawback of customs duties, viz. Basic + Additional (CVD) + Education Cess (likewiseany other duties of customs under section 3 of Customs Tariff Act; Section 12 ofCustoms Act or a particular Finance Act e.g. surcharge, special additional etc) – from98% or 95% graded down to 60%, of the duties paid at the time of import,depending on whether the goods in question are being re-exported as such i.e.without use or after use subject to certain period limitations etc. b) Under Section 75 of Customs Act, 1962 and/or Section 37 of Central Excise Act, 1944 read with Customs and Central Excise Duties (Drawback) Rules, 1995: -S. V. Modi Page 26
    • Exports & Import for SSI Units and Businessmendrawback of duties of customs and/or excise paid on materials used in themanufacture of the resultant finished export goods.The salient features with regard to (a) above i.e. drawback on re-export of importedgoods are:- drawback at 98% of the duties paid be will allowed, when re-exporting, if the subject goods have not been used and the re-export is within 2 years from the import date ;- at the time of export : - a drawback shipping bill/bill of export is filed; - declarations are made in the shipping bill/bill of export that: - export is under DBK claim under Sec. 74 of CA, 1962 - customs duties have been paid on imported goods; - the imported goods have not been taken for use; - or the goods were taken for use. - furnish copy of relevant import Bill of Entry, Invoice duty payment evidence,export invoice, Packing list and if required GR waiver/RBI permission to re-export. - after the re-export, within 3 months, the exporter should lodge with the customs house from where export took place, drawback claim by submitting/furnishing : - a claim in duplicate in a prescribed from (Annexure II); - original copy of the ‘Triplicate’ copy of shipping Bill/Bill of Export with examination report; - Copy of Bill of entry, import invoice duty paid challan; - RBI permission/GR waiver/exemption as applicable, - export invoice, packing list, B/L, AW-b. - within 2 months after filing and customs acknowledgement of receipt application, complete in every respect, drawback by way of cheque or credit in exporter’s bank account will be paid.- if the re-export is after use, the declarations/procedure will be the same, but the quantum of drawback will be : up to 3 months - 95% more than 3 upto 6 months - 85% ’’ 6 ’’ 9 - 75% ’’ 9 ’’ 12 - 70% ’’ 12 ’’ 15 - 65% ’’ 15 ’’ 18 - 60% ’’ 18 months NIL.- Customs should be satisfied with the identity of the goods.The salient features of drawback provisions under b) above are the government, aftercollecting each individual product-wise data on input-output consumption ratio;international/domestic prices of inputs, burden of customs and/or excise duties onS. V. Modi Page 27
    • Exports & Import for SSI Units and Businessmeninputs etc., determine on annual basis duty drawback rates on several finishedproducts and announces by a Notification the All Industry drawback rates subjectto certain conditions mentioned therein and further subject to the 1995 Rules andmainly the Sections 75 of CA, 1962 and 37 of Central Excise Act,1944 and certainother sections in CA, 1962.Exporters when exporting such notified and eligible products, if so preferred, shall claimdrawback at the specified AIR by filing a Drawback Shipping Bill/Bill of Export andfurnishing certain prescribed declarations for the purpose.Upon exportation, customs at the shipment port will sanction and pay the AIR drawbackby directly crediting to exporter’s account with a designated bank or issuing a cheque.Customs will have to pay interest on the drawback amount from 61st day, if the amounthas not been paid within 2 months after export.if the export proceeds are not realised in foreign exchange within the RBI prescribedtime limit or extension, if granted, then the exporter has to within 30 days after receivingnotice from customs, furnish proof of realization, if available; failing which customs willpass a recovery order in compliance with which the exporter has to repay the drawbackamount within 60 days; proportionate to amount not realised. The recovered amountshall be repaid, if within a year from recovery date exporter produces evidence ofrealization.if no AIR rate exits or if it exists, but is found to be low (i.e. less than 4/5 th (80%) of therate expected), then individual exporter can apply for fixation of Brand Rate/SpecialBrand Rate, under Rules 6 or 7 of the 1995 Rules, based on his stocks at thebeginning and actual purchases (imports/domestic) of the relevant inputs in the 3months period preceding the export date/application date. Upon fixation the concernedcustoms authority at the shipment port will sanction and grant DBK in respect ofexports made in the meantime and to be made later based on the order/contractspecifications including quantity.Drawback on export of goods is an alternative to Advance Authorisation /DFIA/DEPB100% EOU etc. scheme.Exports – Excise Provisions/Procedures.In terms of Rule 18 under Central Excise 2002 Rules, rebate (refund) of: - duty paid on the export goods (output duty) and/or. - duty paid on excisable materials (input duty) used in the manufacture of the export goods , if not otherwise availed as Cenvat Credit or Duty Drawback.will be granted to the exporter (manufacturer or merchant), upon exportation, subject toprocedures/conditions prescribed under a Notification.The relevant Notifications are:S. V. Modi Page 28
    • Exports & Import for SSI Units and Businessmen - 19/2004-CE (NT) dated 06-09-2004, as amended, for output duties when exported to all countries except Nepal and Bhutan; - 20/2004-CE (NT) dated 06-09-2004, as amended, for output duties when exported to Nepal. - 21/2004-CE (NT) dated 06-09-2004, as amended, for input duties when the relevant manufactured goods are exported to all countries, except Nepal and Bhutan;Form ARE1 will be used if the output duty paid at the time of removal is to be claimedas rebate upon exportation and ARE2 for input duty rebate claim or ARE2 for bothoutput and input duty rebate claim together. Alternatively in terms of Rule 19 i.e.: 19(1) - excisable goods can be removed for export without payment of duty (output duty) under undertaking/bond, subject to export and export proof submission and/or 19(2) - Procurement and removal of excisable materials from factory of its manufacture, without payment of duty, (input duty) under bond, for manufacture and export of the resultant export goods (whether excisable or not), subject to export and proof submission.The relevant notifications are: 19(1) - 42/2001-CE (NT) dated 26-06-2001 for export to all countries, except Nepal and Bhutan. 19(2) - 43/2001-CE (NT) dated 26-06-2001 for export to all countries and also Nepal and Bhutan, if payment for the export goods is received in freely convertible currency. 19(1) - 45/2001-CE (NT) dated 26-06-2001 for export under bond to Nepal and Bhutan, if payment made in freely convertible currency or even in IRs. in certain specified situation.Manufacturer, if self-exporting finished goods, shall execute Legal undertaking (LUT)with own Excise Divisional Office and remove and export under form ARE1 [Rule 19(1)];Manufacturer if procuring without duty excisable materials under bond for manufactureand export, shall execute Bond, procure under Annexure-1, receive under AR3, returnAR3 with re-warehousing certificate, manufacture, then remove and export under FormARE2 [Rule 19(2)];ARE2 may be used for output and input duties, not paid under bond, subject to exportand proof submission.Merchant exporter procuring from manufacturer finished goods for export, withoutpayment of duty, has to execute Bond with Maritime Commissioner of Central Excise, atrelevant Gateway Port or the Headquarters Excise Authority where his Office is located;obtain each time form CT1, forward to manufacturer who shall remove the finishedgoods under CT1+ARE1 for export and proof submission by the Merchant Exporter tothe Bond Accepting and Discharging Authority.S. V. Modi Page 29
    • Exports & Import for SSI Units and BusinessmenUnder Rebate claim or Bond procedure, the export should take place within 6 monthsfrom removal date or extension, if granted.The Rebate/Bond Discharge claim should be filed within 1 year from export date. Iffiled after 1 year, the rebate claim will be permanently and irrevocably time-barred;however late filing in case of removal under LUT/Bond, may not entail duty recovery,but a penalty for late submission may be imposed.If goods removed for export under rebate claim are not exported, then can be divertedto domestic market or brought back to factory under ARE1/ARE2 cancellationprocedure and availment of credit of duty in case paid subject to fresh duty whenremoved again, as such or to further processing.If goods removed under bond are not exported, then duty plus interest to be paid, ifdirectly diverted to domestic market or be brought back to factory under ARE1/ARE2cancellation procedure and duty to be paid when re-issued in the domestic market.If the goods removed for export, are exported, but subsequently re-imported forretention, then a customs duty equal to excise duty paid but rebated or not paid underbond, when the export had taken place, has to be paid on the occasion of re-import.The procedure for removal, export, rebate/bond discharge claim will as follows: 1) Under Central Excise Supervision:- 1.1 under Rebate claim: - Manufacturer (for himself or merchant exporter), fills, completes, signs and submits form ARE1/ARE2, in 4 or 5 copies (optional) to the Range Superintendent, at least 24 hours before date/time or removal. - Superintendent, will depute inspector for verification of goods, duty payment details, sealing and final removal under supervision; - Inspector arrives, verifies goods, duty debits, seals packages and certifies verification, duty debit sealing details in all 4 or 5 copies; - Inspector returns certified Original, Duplicate (and 5th) to the exporter; retains Triplicate for forwarding directly to the Rebate Granting Authority (RGA) and 4th copy for Range record. If requested Inspector may handover to the exporter Triplicate in a tamper-proof sealed envelope addressed to the RGA. - Exporter will handover the Original + Duplicate (and 5th) copies to the CHA at shipment port, direct or through the vehicle driver. - CHA will include these copies with the Shipping Bill/Shipment documents set, when examination, clearance, shipment of the export goods takes place. - upon shipment, customs at clearance port, will certify shipment effected and also vessel left/ship departure certificate in both or all 3 copies;S. V. Modi Page 30
    • Exports & Import for SSI Units and Businessmen return Original (plus 5th) to the exporter and retain duplicate for directly on-forwarding to RGA; but, if requested, will handover the duplicate, in a tamper-proof sealed envelope addressed to RGA. Customs may allow clearance without examination because of pre-sealing by Excise. - within one year form export date, exporter should file rebate claim before the RGA, using Original, open, certified by Excise and Customs, duplicate in sealed envelope certified by Excise and Customs, Triplicate in a sealed envelope certified by Excise plus other corroborative evidences of export e.g. copies of Shipping Bill, Bill of Landing etc. - Manufacturer can claim rebate only from own Divisional office whereas Merchant Exporter has a choice of claiming either from manufacturer’s Divisional Office or Maritime Commissioner of CEX at gateway port. 1.2 under LUT/Bond:- - Manufacturer will execute LUT with own Divisional Excise Authority, removes, exports as above and furnishes export proof as above to the said Divisional Office for bond discharge. - Merchant Exporter will execute Bond with i) Maritime Commissioner of Central Excise or ii) the Excise Headquarters Office under whose jurisdiction his office is located; obtain form CT1 (output duty) forward to manufacturer with ARE1, and then follow the same procedure as above. Proof submission responsibility and duty liability is on the Merchant Exporter. Manufacturer is free, upon removal. - Manufacturer may execute Bond with own Divisional Office for removals for Merchant-Exporter, subject to proof submission to the Divisional Office, by manufacturer, after obtaining it from merchant-exporter. 2.0 Without Supervision (self-removal) (in some eligible cases, self- sealing also):- - Goods are first removed without sealing under ARE1, Original + Duplicate (and 5th), without Excise certification accompany the goods. - the Triplicate and the Quadruplicate copies have to be submitted to the Range Superintendent within 24 hours from the date/time of removal. - Upon examination, clearance and shipment, Customs will certify Original + Duplicate (and 5th) and carry out disposal as above. Because of lack of Excise sealing, Customs will properly examine the goods and seal the packages. - Certain privileged categories of exporters can self-seal the packages/containers certify to that effect and otherwise follow the - same procedure as above.S. V. Modi Page 31
    • Exports & Import for SSI Units and BusinessmenExcise Authorities are statutorily bound to pay, suo-motu, interest on delayed refund(rebate claim) if the refund is delayed beyond 3 months from claim submission datefromthe expiry of the 3 months period till date of actual payment.Imports:Import control commonly known as Direct or Physical Controls or QuantitativeRestrictions i.e. permissibility, restrictions, prohibitions or canalisation with or withoutconditions is governed by the Foreign Trade (Development & Regulations) Act, 1992.Secondary controls like compliance with the laws, rules and regulations as applicable togoods produced or manufactured and sold in India e.g. BIS Standards, MRP markingwill also apply to imported goods. Before planning an import, the controls applicable, ifany, or to the extent applicable have to be verified and if amenable and conducive, thenonly import should be organised; lest the import is held invalid, unauthorized, illegalattracting consequences including confiscation and/or fine, penalties.Imported goods will also attract indirect controls i.e. fiscal controls by way of charge oftaxes mostly import duty plus import duty equal to certain cesses/levies as applicable togoods not imported. A cost analysis of all applicable duties including reliefs likeexemptions/concessions, conditional or unconditional, should be first undertaken todetermine the duty cost burden including the net effective cost burden if some parts ofthe aggregate of the duties is vattable and final decision is to be arrived at as towhether the import is a viable proposition or not.If viable, then in organising imports into India the following steps/procedures will befollowed: 1) identify/locate foreign supply sources; 2) obtain literature, catalogues, price lists, quotations and samples to the extent possible; 3) obtain IEC; 4) obtain import licence, any other permission, if so applicable; 5) finalise supplier, place order; 6) purchase marine (cargo)-cum-duty insurance, if contract on FOB/C&F terms; 7) apply to bank for opening of letter of credit if so agreed and deposit margin money as the bank may require; 8) obtain copy of L/C, verify, seek immediate amendment/rectification, if so required: 9) fax/e-mail copy of L/C to foreign supplier; 10) await shipment; 11) receive shipment effected information; 12) receive from supplier non-negotiable set of shipment documents; 13) forward a copy set to the CHA at import port along with other required documents for Bill of Entry preparation; 13) purchase duty add-on policy if import on CIF basis at any time latest by the time the goods arrive at the import port; 14) retire original negotiable set of shipment documents received by the bank; 15) forward the essential originals to CHA sequel to the N/N set earlier forwarded; 16) vessel(ship/aircraft) arrives; declares Import General Manifest featuring all imports individually, details-wise;S. V. Modi Page 32
    • Exports & Import for SSI Units and Businessmen 17) CHA tallies IGM entry and prepares, completes, signs and submits Bill of Entry for appraising and assessment; 18) duty and exchange rate as on the date of presentation (noting) of the bill entry shall apply. If a prior entry bill of entry has been preferred and noted prior to arrival of the ship then the duty and exchange rate as on the date of entry of the vessel in Indian territorial waters shall apply; 19) Appraising Group take up the Bill of Entry and all the required documents furnished for appraising and assessment; 20) if satisfied the Bill of Entry is passed with Assessment Order i.e. duty determined and the passed B/E returned for duty payment; 21) duty has to be paid within 5 days from date of return or with interest from 6th day onwards, if not paid within the 5 days; 22) the duty-paid Bill of Entry is then presented to the preventive section in the port storage area where the goods are placed; 23) goods are tallied, examined, samples drawn, if required and if satisfied then the B/E is finally passed with customs out-of-charge order; 24) CHA in the meantime obtains Delivery Order from the carriers by surrendering one of the original negotiable Bill of Lading copy/airlines arrival notice, duly discharged for receipt of goods; 25) CHA pays port dues and obtains their gate pass; 26) CHA organises transport vehicle, gets goods loaded, removed from portarea through gate security; 27) at port exit point octroi exemption pass has to be obtained if the vehicle has to pass through the port city limits where octroi on goods is still applicable or else octroi has to be paid; 28) driver will carry import documents for on the way checking and sales tax authorities purposes and deposit octroi pass at the city exit point; 29) receive goods at factory/godown premises; receive documents held with the driver; 30) verify goods, packages; do not open all packages if some damage/loss found/apparent or suspected; 31) call insurance surveyors if a claim arises; 32) submit with letter (duly acknowledged) original copy of Bill of Entry marked: TRIPLICATE EXCHANGE CONTROL to the bank through whom outward remittance in foreign exchange towards payment to the foreign supplier has been already or is to be effected; invariably in case of Advance Payment or direct receipt of documents from foreign supplier; in other cases only if import value per consignment above US$.1,00,000/- all entities or 10,00,000/- certain qualifying entities; 33) use original of DUPLICATE copy for availing cenvat credit of Additional and Special Additional Duties paid if applicable.Other Important features in an Import Transaction:The import duty chargeable on goods is by and large ad valorem i.e. on value of thegoods at the specified percentage rate. In a few cases the duty may be specific i.e. aspecified rate per unit of quantity. In some cases there may be a dual tariff structurei.e. ad valorem duty plus specific duty. In some cases duty though ad valorem may on apre-determined published tariff value i.e. irrespective of the value at which the importtakes place.Duty rates applicable may vary from item to item, commodity to commodity. This entailscategorisation of each and every type/kind/description of goods into a class/categoryS. V. Modi Page 33
    • Exports & Import for SSI Units and Businessmenappropriate to its materials characteristics, use, purpose, function etc. Worldwide avast majority of taxing authorities follow a universally accepted system of classificationof goods developed by the World Custom Organisation known as the HarmonisedSystem of Nomenclature (HSN) for indirect taxes like customs duties on importedgoods, excise duties on locally manufactured goods and VAT on imported/locally tradedgoods. The Indian Customs Tariff Act, 1975; the Central Excise Tariff Act, 1985 arebased on the HSN and the VAT legislations of each Indian State provide that the HSNshall prevail for determination of classification.The HSN has 21 Sections each Section comprising one or more Chapters running fromChapter 1 to 97 uniformly throughout the world wherever the respective countries haveadopted the HSN for indirect tax classification. Chapter 98 is left for each country toincorporate special category of goods or goods under special situations. In order to findout the exact entry applicable to the goods under consideration first the title of theChapter has to be referred and then if there are no exclusion Section/Chapter Notesaffecting the particular item then the heading appropriate to the goods is referred to.Within each heading there be a number of sub-headings(s) and furtherentries/subentries under each sub-heading. However there will be still heading orsubheading-wise explanatory notes to explain inclusion/exclusion, if applicable, inelaborate details.Once the applicable entry/sub-entry under the applicable sub-heading/main headingread with explanatory notes, chapter/section notes is determined the standard or insome cases the preferential tariff rate as determined through the Finance Bill/Act willessentially apply to the goods. However under Section 25 of the Customs, Act, 1962,the Government has powers to grant full/partial duty exemption conditional orunconditional by issue of Notification known popularly as exemption Notification;consequently the rate of duty applicable will be the tariff rate on merit or a reducedeven Nil rate under exemption. The tariff merit or concessional duty rate applicable isknown as the Basic duty of Customs (CA, 1962 Section 12 duty). But to counter-vailthe tax disadvantage that Indian manufacturers face by way of imposition of excise dutytax on goods manufactured in India, on similar goods when imported into India (whethersuch goods are or are not presently manufactured in India) and additional duty ofcustoms colloquially known as CVD will be payable on the imported goods on itsAssessable Value (i.e. CIF import value plus 1% landing charge) plus the basic duty onthe AV. Similarly a 4% Special Additional duty will be applied to imported goods on theaggregate of the AV + Basic + CVD to counter-vail the VAT/CST tax disadvantage thatgoods sold in India face. There will be Cesses like Education plus Secondary & HigherEducation Cess applicable on the CVD amount and then on the aggregate of the Basicand the CVD duty amount (not on SAD amount). The CVD and the SAD paid onimported goods is vattable to users in the manufacturing sector or output serviceproviders paying excise duty or service tax on goods manufactured or servicesprovided. Trader importers can pass on to their purchasing manufacturers/serviceproviders the benefit of availing CENVAT credit of CVD + SAD burden. If on the tradedimported goods the importer trader pays VAT or CST and does not pass on the SADcredit benefit to the purchaser then the trader importer can claim refund of the SADpaid.Upon investigation, proceedings and final findings and conclusion the Governmentmay by Notification specify goods imported from specified sources/countries dutiesknow as Counter-Vailing, Safeguard or Anti-Dumping to counter-vail imports that arefound subsidised by the exporting country or there sudden surge imports or dumping ofgoods causing injury to domestic industriesS. V. Modi Page 34
    • Exports & Import for SSI Units and Businessmen.Disputes during the course of Imports or Exports:A dispute between the importer/exporter and the customs authority may arise duringthe course of assessment/examination of the import/export goods. The disputes willlargely be in the area of valuation, classification, exemption/concession or legality orvalidity of import with reference to controls, restrictions, prohibitions or conditionsapplicable, if any; or breaches, infringements violations or contraventions of terms,conditions or provisions including misdeclaration, fraud forgeries leading to protractedlitigation. A query memo may be issued to the importer/exporter to elicit reply,explanation, justification or defence. If not satisfied a Show Cause notice proposinghigher rate/amount of duty or confiscation with fine or penalty has to be issued (unlesswaived in writing by the importer/exporter. Opportunity to furnish written submissionand personal hearing in defence (unless waived in writing) has to be granted.Thereafter the Adjudicating Authority at the Level of the Assistant Commissioner orDeputy or Joint or Additional Commissioner or Commissioner depending on financiallimits empowered to will decide the case and issue an Order-in-Original favourable oragainst the importer/exporter. The import/exporter clearance will then be allowedsubject to payment of duty determined and fine penalty if imposed with liberty to appeal.The aggrieved importer/exporter may appeal to the jurisdictional Commissioner(Appeals) with 60 days from the date of receipt of the OIO passed at the level ofAC/DC/JC/ADDLC or to the concerned regional bench of Customs, Excise & ServiceTax Tribunal (CESTAT) within 90 days. The Appellate Authority upon hearing both theparties will pass Order-in Appeal favourable or against the importer/exporter who canwithin 90 days further appeal to the CESTAT if the OIA is passed by the AppellateCommissioner or to the Hon. Supreme Court if the OIA has been passed by the Hon.Tribunal.The decisions of the Appellate Authority or the Tribunal or the High Courts (in referencecases) or the Supreme Court are binding on the importer/exporter or the AssessingAuthority and have to be implemented and the duties demanded or fine penaltiesimposed have to be paid or the refunds of excess duties collected or fine penaltiesimposed, as applicable have to granted to the importer/exporter. In the matter of importduty if excess paid by the importer due to classification, valuation or exemption disputeupon success in appeal the importer will be entitled to refund only if it can beestablished with records and evidences that the burden of the excess duty has beenborne by the importer himself and has not been passed onto the buyer of the importedgoods or goods further manufactured therefrom and sold. In other words the aggrievedimporter who had paid the excess duty even upon succeeding in appeal cannotstraightaway get the refund. Only if he succeeds in discharging the burden of thestigma of unjust enrichment then refund due will be paid to him or else the Governmentwill deposit the amount of refund in Consumer Welfare Fund for the benefit ofConsumer Welfare Organisation. In order not to attract the bar of unjust enrichment theaggrieved importer should not account the amount of duty excess paid as part of thepurchase cost and make entries and show in Books of Accounts and trial/final balancesheets in such a manner that the excess duty paid is not a revenue expenditure but acapital expenditure (receivables) and the profit and loss account should not beimpacted by the amount of excess duty payment. Other corroborative evidences likepre and post dispute prices maintained uniform and contractual prices agreed evenbefore the dispute arose and sale eventually at the pre-dispute agreed price etc. shouldbe used to support that the doctrine of unjust enrichment does not apply.S. V. Modi Page 35
    • Exports & Import for SSI Units and BusinessmenRe-Imports:Goods exported from India may be required to be re-imported because of rejection andreturn by the foreign buyer; brought back when not paid for by the buyer or aftercompletion of exhibition abroad; repurchased ( may at a discount) from the foreignbuyer. Exported goods may be brought back for repair, reconditioning, reprocessing,refining, remaking, renovating or like processes and re-export or goods may beexported for repair and re-imported after repair abroad.Essentially as per Section 20 of the Customs Act, 1962 every re-import is equal to animport and the duties and restrictions applicable on imported goods will apply similarlyon re-imported goods i.e. Section 12 i.e. Basic import duty + CVD + SAD + EC &SHEC.However by virtue of Section 25(1) of the Customs Act, 19662 the Government isempowered to grant exemption from duties full or partial with or without conditions.Accordingly the following exemption Notifications have been issued and are inoperation;1) Notification 158/95-Cus dated 14/11/1995 in respect of re-imports for repairs,reprocessing, reconditioning, renovating and like processes and return thereafter;2) Notification 94/96-Cus dated 16/12/1996 in respect of re-imports for retention.Re-imports for repairs etc. and return:Goods meant for repairs and return if brought back within 3 years from the date ofexport will be allowed duty free entry, irrespective of the exportbenefits/incentives/reliefs obtained at the time of export. The clearance will be underre-export bond. The re-export should take place within 6 months from the date of re-imports or a maximum of further six months extension which only the Commissioner canallow. Customs should be satisfied with the identity of the goods. Upon failure to re-export duty saved will have to be paid- - i.e. duty on merit (Section 20) or duty thatwould have been paid if the clearance was under 94/96-Cus. No interest on duty isapplicableGoods meant for reprocessing, refining etc. the re-import should be within 1 year. There-export period is similar i.e. 6 + 6 months. However conditions like reprocess etc.should take place under certain excise rules or a customs bond; account ofreprocessing etc. to be maintained to be shown to the Excise authority; waste/scrap tobe destroyed under excise supervision or duty on waste/scrap paid; process lossallowed and no duty payable on that. Duty applicable at the time of re-import, on meritor per 94/96-Cus basis, to be paid upon failure to re-export; interest not applicable.Re-imports for retention:Goods exported under claim of drawback and or excise rebate or excise not paid underbond or without any such reliefs (i.e. free) if reimported within 3 years from date ofexport (extendable to 5 years by Commissioner) will not be charged duty if no suchreliefs were availed at the time of export or will be charged to duty equal to drawbackand or excise rebate or amount not paid under bond at the time of export. Interest willapply on such equal to duty only if not paid within 5 days after return of the re-import billof entry with duty so payable duly assessed. There is no question of back datinginterest on the equal to amount from the date of export as the re-imported goodsS. V. Modi Page 36
    • Exports & Import for SSI Units and Businessmenbecome taxable only upon re-entry in India and that too only after 5 days upon return ofthe assessed bill of entry. The equal to duty are as good as Section 12 Customsduties. The equal to amounts so paid are not repayment of drawback or exciseamount; the amounts paid are amount of import duty applicable on the re-importmeasured with reference to availment at the time of export. If such equal to duty paidgoods are re-exported then Section 74 drawback can be claimed.However if the export was under Export Promotion Schemes like AdvanceAuthorisation, EPCG, DEPB then re-import should be within one year (extendable to 2years by Commissioner) from the date of export. If the relevant Advance Authorisationand or EPCG are still valid and not closed then the export entries will be delogged as ifthe export had not taken place meaning fresh compensating export under AA/EPCGwill have to be made. But if AA/EPCG not valid then duty that was saved against theexport that was made has to be paid. There will be no back-dated interest but intereston such compensating duty will have to be paid if the duty is not paid within 5 days afterthe re-import bill of entry is retuned duly assessed. Even if the export was under exciserebate/bond, manufacturers re-importing will have to give to customs transit bond forreentry into factory premises verified and certified by Excise Authority.In case of DEPB exports any valid DEPB of equal amount can be offered for debit.Excise duty applicable at the time of re-import to be paid. Manufacturers can claimcenvat credit under Rule 16 of the Central Excise Rules.Instead of availing the 158/95 or 94/96 exemptions the exporter can voluntarily pay dutyon merits i.e. under Section 20 of the Customs Act, 1962.In case of re-imports after repair abroad the starting point is export from India for repairand getting back. NO GR/SDF requirement will apply but an undertaking to own bankthat the goods will be re-imported after repair or instead free replacement will beimported or value be realised from the consignee in Foreign Exchange has to be givenand the bank’s confirmatory certificate has to be obtained and furnished to customs toallow export without GR/SDF. For the duty that was paid on such goods sent for repaira provisional (manual) Section 74 Shipping Bill should be filed if the re-export for repairis within 18 months from the date of import by way of caution. If the same goods arereturned duly repaired then upon re-import there will be no duty except duty on the faircost of repair (whether free or paid) and freight and insurance both ways (whoever haspaid). The drawback claim should be foregone/not pursued. However if replacementgoods are sent i.e. the same goods are not returned, then duty on the value and therate of duty and the exchange on the date of re-import bill of entry will apply and haveto be paid in which case the provisional drawback claim should be pursued. If thegoods duly repaired or replacement goods are not received and instead thecompensating amount is received then also the drawback claim should be pursued.Evidence (Bill of Entry) proving re-import or replacement import or inward remittanceproving claim payment should be submitted to the bank for discharge of thecommitment that was given at the time of export.Merchanting Trade/Intermediary Trade:S. V. Modi Page 37
    • Exports & Import for SSI Units and BusinessmenA trader may buy goods from country A and sell directly to country B without bringingthe goods to India for re-export i.e. arrange direct dispatch from the supplier in countryA to the ultimate buyer in country B. There will be no import and no export thereforethe Customs Act, 1962 and the Foreign Trade (Development & Regulations) Act, 1992shall not apply and there will not be any import bill of entry or any export shipping bill.This will be only a financial trade transaction involving outflow from India of foreignexchange towards payment to supplier in country A and inflow into India of foreignexchange received as payment for the goods so sold to buyer in country B. Only FEMAprovisions get attracted and the Import of Goods and Services FEMA Regulationsprovide that the outlay period of Indians funds should not exceed 90 days and both thepurchase and the sale transactions should get completed within 180 days. Not beingexport of Indian goods, no incentives/benefits will be available; on the contrary theincome made will be taxable like any other income. The shipment documents that thesupplier provides except invoice can be delivered to the ultimate buyer if disclosurethreat is not an issue. But if it is an issue then, if possible, in the transport documents,B/L or A-Wb the shipper’s name should be of the intermediary trader in India ratherthan the original foreign supplier and consignee should b ‘To Order’. If that is notpossible then a ‘Switch’ B/L should be managed. In case of Air Cargo Master Airway billmay show consignee as the Consolidator agent at destination and the House A-Wbmay show intermediary trader as consignor and the ultimate buyer as consignee. If acertificate of Origin is required then against surrender of the first place COO thatsupplier gives, a re-export COO from the local Chamber of Commerce showing onlyorigin as country A but Exporter as the Indian intermediary should be obtained so thatthe ultimate buyer knows only the country of origin but not the supplier and the suppliermay know only the destination country or may even not know that. In the A-Wb frompoint of origin in case of straight shipment the supplier should be told to obtain A-Wbwith NCV and NVD mentioned i.e. ‘No Customs Value’ and .’No Value Declared’.S. V. Modi Page 38