Final Thesis 1

TOPIC: ENHANCING THE EFFICIENCY OF THE CUSTOM HOUSE AGENTS AT INDIAN PORTS.
THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT,
AHMEDABAD
THESIS TOPIC ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS
SUBMITTED BY: PRIYESH NAGDA
SS/09-11/IIPM
THESIS ID NO. SS/09-11/AHD/GM/2
SUBMISSION DATE: 08TH SEPTEMBER, 2011
GUIDED BY: PROF: GAURAV VATS
1|Page
INDIAN INSTITUTE OF PLANNING AND MANAGEMENT
LETTER OF CONSENT
IIPM Ahmedabad 19, Inquilab Society Gulbai Tekra Ahmedabad-380015
To, The Dean, I.I.P.M Ahmedabad
Subject: Consent to supervise the thesis
Dear Sir, I, Gaurav Vats, express my consent to act as a guide to Mr. Priyesh Nagda (Batch: SS/09-11/IIPM-FIANANCE). He has expressed his interest in writing his thesis on ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS and has requested me to guide him through the same.
This is to inform that I shall support him as a guide for his thesis on the above mentioned topic and share my knowledge and help in all ways possible.
With warm regards,
GAURAV VATS
2|Page
Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13
Particulars LETTER OF CONSENT CERTIFICATE OF ORIGINALITY CERTIFICATE FROM GUIDE ACKNOWLEDGEMENT SYNOPSIS EXECUTIVE SUMMARY CHAPTER 1 : INTRODUCTION CHAPTER 2 : CUSTOM HOUSE AGENT CHAPTER 3 : ROLES OF CUSTOM HOUSE AGENT CHAPTER 4 : CUSTOM CLEARANCE OF IMPORT CHAPTER 5 : IMPORTANT TERMS IN SHIPPING CHAPTER 6 : DETAILS REGARDING EXPORT CHAPTER 7 : OTHER BUSINESS IN SHIPPING SECTOR CHAPTER 8 : ENHANCHING EFFIENCY FOR CHA RESEARCH METHODOLOGY ANALYSIS FINDINGS RECOMMENDATIONS BIBLIOGRAPHY ANNEXURE 1 : QUESTIONNAIRE RESPONSE SHEET 1 RESPONSE SHEET 2 RESPONSE SHEET 2 RESPONSE SHEET 3
Page no.
14 15 16 17 18 19 20 21 22 23 24
3|Page
25 26 27
RESPONSE SHEET 4 RESPONSE SHEET 5 RESPONSE SHEET 6
4|Page
CERTIFICATE OF ORGINALITY
This is to certify that the thesis titled ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS is prepared and submitted by me to Indian Institute of Planning&Management, Ahmedabad in partial
fulfillment for the award of the Master Degree in Business Administration, and this report has not been submitted elsewhere.
Date:
Signature:
5|Page
CERTIFICATE FROM THE GUIDE

This is to certify that this thesis titled ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS is prepared and completed successfully by Priyesh Nagda under my guidance. The thesis has been completed to my satisfaction and I wish him all the best in his future endeavor. Date: Signature:
6|Page
ACKNOWLEDGEMENT
First of all I would like to thank Indian Institute of Planning and Management for giving me the opportunity to work on this thesis. There is no self dependency in the world. Each individual depends on the other for one thing or the other. And he needs people for the guidance and help in all the stages of life. I sincerely thank my thesis guide PROF: Gaurav Vats for helping me, guiding me and giving me directions where and when needed. The thesis work that I have done would never have been possible without the help provide by him. There are other areas in the thesis which I could not have covered if the marketing concepts werent clear. So for that I would give my sincere thanks to Prof. Pabitra Ranjan for the things he taught and the helping hand that he extended. There are other people in the industry of clearing and forwarding who helped me get through with the proper analysis. There were people who gave opinions, ideas and their views for the subject. And for that matter I would like to thank Mr. Sachit dedhia form velocity global logistics. It was he who helped getting interviews from different individuals. And there were also people from reputed business houses without who the work could never have been completed. And lastly I would thank all my professors, friends and family members for helping me in one way or the other to complete the thesis.
7|Page
SYNOPSIS
Topic: - Enhancing the efficiency of custom house agents at Indian ports
Objective The basic objective of the study would be to analyze the requirements of the customers regarding clearance and also the government norms and regulations for the same. And the objective would be to find out the procedures of clearance and the problems occurring on clearance of cargo in Indian ports.
The scope of the thesis Details regarding how to get cha licence. Covering the details relating to the clearance procedure The detailed study on importance of a CHA The government policies regarding the imports will be studied in depth The future of the business of clearing and forwarding would be known The thesis will help getting the knowledge about getting into the business of clearing and forwarding
RESEARCH QUESTIONS:
1. What is the international demand and supply of the shipping industry ?
2. What are the ways to make this customs procedure be more organized?
3. What further diversification and other business can be developed other than cha?
8|Page
RESEARCH METHODOLOGY:
Data from previously published materials, books & the internet would be used as a part of the literature review. Also to gain further insight, opinions from industry experts would be gathered via structured questionnaires and interviews
Commercial viability With the increasing number of ports the demand for clearing and forwarding agents has continuously increased. I am doing this project, and my study would be in depth so this thesis would act as a blue print for those people who wish to enter this field of clearing and forwarding.
9|Page
EXECUTIVE SUMMARY
Due to the policy of the government the import in the country has been continuously increasing. And with the imports coming in, the customs has to be paid. And for this purpose the custom agent has to be appointed. So with this chain of these incidents, what we understand is that the scope of the business of clearing and forwarding is on a boom in the Indian market. More entrepreneurs are starting up with the business of clearing of imports. The license for the CHA (custom house agent) has to be gained for the same. The Indian market in the future would be flooded by lots of imports. The changing taste of the Indian people and the want for quality products has lead to the rise in the imports of the raw materials for the production of good quality products. Also at the same time the imports are boosted by the leniency in the import policies. So there is a great need for high quality and highly qualified clearing agents at the Indian ports. Now that the vessel carrying the goods comes by sea, freight has to be paid for the transportation. The freight is for the ship that carries the goods. There is a trend at most of the ports that the custom agents who are involved in the clearing of imports, have now started with the business of freight forwarding together with the business of clearing. They have today merged both the businesses and are also known as C&F agents. So with the increasing imports and exports from the country the business of clearing and forwarding will flourish in India. The thesis carries an in depth analysis on the business with the analytical figures. Also there are certain changes to bemade in this industry. With the coming up of newer technology and an ever increasing competition it has become inevitable for the industry to adapt quickly to the change or perish.
10 | P a g e
CHAPTER 1- INTRODUCTION Current market scenario of world trade The UPA Government has assumed office at a challenging time when the entire world is facing an unprecedented economic slow-down. The year 2009 is witnessing one of the most severe global recessions in the post-war period. Countries across the world have been affected in varying degrees and all major economic indicators of industrial production, trade, capital flows, unemployment, per capita investment and consumption have taken a hit. The WTO estimates project a grim forecast that global trade is likely to decline by 9% in volume terms and the IMF estimates project a decline of over 11%. The recessionary trend has huge social implications. The World Bank estimate suggests that 53 million more people would fall into the poverty net this year and over a billion people would go chronically hungry. Though India has not been affected to the same extent as other economies of the world, yet our exports have suffered a decline in the last 10 months due to a contraction in demand in the traditional markets of our exports. The protectionist measures being adopted by some of these countries have aggravated the problem. After four clear quarters of recession there is some sign of a turnaround and the emergence of green shoots, though I would be hesitant to hazard a guess on the nature and extent of this recovery and the time the major economies will take to return to their pre-recession growth levels. Announcing a Foreign Trade Policy in this economic climate is indeed a daunting task. We cannot remain oblivious to defining demand in the developed world and we need to set in motion strategies and policy measures which will catalyze the growth of exports. Before defining the objectives of the new policy it would be useful to take stock of our achievements in the foreign trade over the last 5 years. The foreign trade policy announced by the UPA Government in 2004 had set two objectives, namely, (i) to double our percentage share of global merchandize trade within 5 years and (ii) use
11 | P a g e INDIAN INSTITUTE OF PLANNING AND MANAGEMENT
trade expansion as an effective instrument of economic growth and employment generation. Looking back, we can say with satisfaction that the UPA Government has delivered on its promise. Agriculture and industry has shown remarkable resilience and dynamism in contributing to a healthy growth in exports. In the last five years our exports witnessed robust growth to reach a level of US$ 168 billion in 2008-09 from US$ 63 billion in 200304. Our share of global merchandise trade was 0.83% in 2003; it rose to 1.45% in 2008 as per WTO estimates. Our share of global commercial services export was 1.4% in 2003; it rose to 2.8% in 2008. Indias total share in goods and services trade was 0.92% in 2003; it increased to 1.64% in 2008. On the employment front, studies have
suggested that nearly 14 million jobs were created directly or indirectly as a result of augmented exports in the last five years. The short term objective of our policy is to arrest and reverse the declining trend of exports and to provide additional support especially to those sectors which have been hit badly by recession in the developed world. We would like to set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by March 2011. In the remaining three years of this Foreign Trade Policy i.e. upto 2014, the country should be able to come back on the high export growth path of around 25% per annum. By 2014, we expect to double Indias exports of goods and services. The long term policy objective for the Government is to double Indias share in global trade by 2020. In order to meet these objectives, the Government would follow a mix of policy measures including fiscal incentives, institutional changes, procedural rationalization, enhanced market access across the world and diversification of export markets. Improvement in infrastructure related to exports; bringing down transaction costs, and providing full refund of all indirect taxes and levies, would be the three pillars, which will support us to achieve this target Endeavour will be made to see that the Goods
12 | P a g e
and Services Tax rebates all indirect taxes and levies on exports. At this juncture, it is our Endeavour to provide adequate confidence to our exporters to maintain their market presence even in a period of stress. A Special thrust needs to be provided to employment intensive sectors which have witnessed job losses in the wake of this recession, especially in the fields of textile, leather, handicrafts, etc. We want to provide a stable policy environment conducive for foreign trade and we have decided to continue with the DEPB Scheme upto December 2010 and income tax benefits under Section 10(A) for IT industry and under Section 10(B) for 100% export oriented units for one additional year till 31st March 2011. Enhanced insurance coverage and exposure for exports through ECGC Schemes has been Insured till 31st March 2010. We have also taken a view to continue with the interest subvention scheme for this purpose. We need to encourage value addition in our manufactured exports and towards this end, have stipulated a minimum 15% value addition on imported inputs under advance authorization scheme. It is important to take an initiative to diversify our export markets and offset the inherent disadvantage for our exporters in emerging markets of Africa, Latin America, Oceania and CIS countries such as credit risks, higher trade costs etc., through appropriate policy instruments. We have endeavored to diversify products and markets through rationalization of incentive schemes including the enhancement of incentive rates which have been based on the perceived long term competitive advantage of India in a particular product group and market. New emerging markets have been given a special focus to enable competitive exports. This would of course be contingent upon availability of adequate exportable surplus for a particular product. Additional resources have been made available
under the Market Development Assistance Scheme and Market Access Initiative Scheme. Incentive schemes are being rationalized to identify leading products which would catalyze the next phase of export growth.
13 | P a g e
As part of our policy of market expansion, we have signed a Comprehensive Economic Partnership Agreement with South Korea which will give enhanced market access to Indian exports. We have also signed a Trade in Goods Agreement with ASEAN which will come in force from January 01, 2010, and will give enhanced market access to several items of Indian exports. These trade agreements are in line with Indias Look East Policy. We have also concluded the Mercosur Preferential Trade Agreement. It shall be our endeavor to deepen our trade engagement with other major economic groupings in the world. The Government seeks to promote Brand India through six or more Madein India shows to be organized across the world every year. In the era of global competitiveness, there is an imperative need for Indian exporters to upgrade their technology and reduce their costs. Accordingly, an
important element of the Foreign Trade Policy is to help exporters for technological upgradation. Technological upgradation of exports is sought to be achieved by
promoting imports of capital goods for certain sectors under EPCG at zero percent duty. Under the present Foreign Trade Policy, Government recognizes exporters based on their export performance and they are called status holders. For technological upgradation of the export sector, these status holders will be permitted to import capital goods duty free (through Duty Credit Scripts equivalent to 1% of their FOB value of exports in the previous year), of specified product groups. This will help them to upgrade their technology and reduce cost of production. For u p g r a d a t i o n of export sector infrastructure, Towns of Export Excellence and units located therein would be granted additional focused support and incentives.
14 | P a g e
MARITIME TRANSPORT Water has always been the oldest and most sustainable resource to man. Maritime transport plays a prominent role in Indian economy; it accounts for 95 percent of Indias external merchandise trade by volume and 70 percent in terms value. Regulations Shipping is a central subject dealt by the ministry of shipping. The industry is governed by the following acts: 1. 2. 3. 4. The merchant shipping act,1958 The inland vessel act ,1917 The coastal vessel act,1917 The multi modal transportation of goods act,1993
The Ministry is responsible for administering the following acts: 1. 2. 3. 4. The Indian Ports Act ,1908 The Dock worker Act ,1948 The Major Ports Act ,1963 The Inland Waterways Authority of India Act ,1985
The Ministry regulates the functioning of the industry through its various subordinate offices, autonomous bodies, societies and associations and public sector undertaking .The National Shipping Board, a statutory body, advises the central government on the shipping matters. The Directorate General of Shipping is the main administrative authority, which issues orders and notifications on various aspects of shipping. The Mercantile Marine Department, which comes under the administrative control of Directorate General of shipping, deals with the registration and survey of ships .The Transchart is a wing under the Ministry responsible for making shipping arrangements
15 | P a g e
for import cargo under the control Government/public sector undertakings .The Indian Register of Shipping is a classification society. As per Section 406 of Merchant Shipping Act , no ship can be taken to the sea from the port or a place within or outside India expect under the license granted by the director general of Shipping. Coastal trade is reserved for Indian flag vessels and is governed by section 407. To operate foreign flag vessel in the Indian coast, permission of Directorate of General of Shipping is required. Indian shipping companies are also required to comply with the rules and regulation issued by the Ministry of Finance and Company Affairs as well as the Ministry of Commerce. The industry is also governed by thr various IMO/ILO instruments (conventions and protocols) ratified by the Government of India.
PORT INFRASTUCTURE There are 12 major ports and 200 non major port /intermediate ports the 7517 km coastline. Major ports: Chennai port Kochi port Ennore port Jawaharal Nehru port Kolkata port Kanda port Marmugao port Mumbai port New managlore port Paradip port Tuticorin port
16 | P a g e
Vishakhapatanam port
Trend in capacity of Major Ports YEAR MILLION TONNES 2002-03 2003-04 2004-05 2005-06 2006-07 363.75 389.50 397.5 456.20 504.75
SOURCE: DEPARTMENT OF SHIPPING,MINISTRY OF SHIPPING Trend in Traffic at major ports YEAR MILLION TONNES 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 313.55 344.80 383.76 423.57 463.78 519.16 530.36
SOURCE:DEPARTMENT OF SHIPPING,ROAD TRANSPORT AND HIGHWAYS Total Traffic handled During 2007-08, the total traffic handled was 715 million tones (major port 519 million tones and non major ports 196 milion tonnes) against the total port capacity of 772 million tones per annum .
Average Turnaround time The major port wise average turnaround time has been as follows: PORT KOLKATA 1990-91 11.9 2005-06 4.12 4.89 2.23 7.2 3.32 4.08 2006-07 3.89 4.87 1.89 3.36 4.46 2007-08 4.87 4.48 2.08 4.55 4.03
VISHAKAPATANAM 7.07 ENNORE CHENNAI JAWAHARLAL NEHRU MUMBAI KANDLA 10.8 10
1.97 4.39
1.94 5.56
1.85 5.13
SOURCE: DEPARTMENT OF SHIPPING,MINISTRY OF SHIPPING India has largest merchant shipping fleet among the developing countries and rand 20 amongst the countries with largest cargo carrying fleet with 8.83 million tones as on 01.06.2008 and the average of the fleet being 18 years. Indian maritime sector facilitates not only transportation of national and international cargo but also provides a variety of other services such as handling service, ship building, freight forwarding and training of marine personnel,etc.
18 | P a g e
MAJOR INDIAN SHIPPING COMPANIES India has over 110 shipping companies; the major ones are Shipping Corporation of India Ltd, Essar Shipping Co Ltd, Great Eastern Shipping Co Ltd. The Indian feets gross tonnage grew by 1.8 percent per annum only as compared to the average maritime trade growth of 14 percent per annum . Name of Company Shipping Corporation of India Ltd Great Eastern 51 1837455 20.35 Ships 79 Gross tonnage 2730602 % share of gt 30.24
Shipping Co Ltd Mercator Line Ltd 15 735146 566240 8.14 6.05
Essar shipping Co 24 Ltd Varun Shipping Co 20 Ltd
463792
5.14
SOURCE:ANNUAL REPORTS,DEPARTMENT OF SHIPPING
Global shipping & ports tax service offering Advancing globalisation, more flexible tax regimes and an increasingly mobile workforce are creating opportunities and challenges for the shipping industry. New corporate strategies and processes are required to deal with an industry which is being reshaped through market consolidation and shifts in the balance of world trade. Sustained profitability in many sectors, increasingly international operations and even more sophisticated tax authorities are leading shipping companies to look at effective ways to align their corporate, operational and tax structures. With its well established global network of shipping industry specialists, PricewaterhouseCoopers offers comprehensive
taxation and legal advice to help you achieve the best tax operational model for your business. The port and shipping industry is changing at a high pace with many challenges ahead. As new opportunities emerge, critical business decisions embarked by high levels of uncertainty must be taken. These decisions are part of the implementation of an overall strategy and can be considered as commitments to the future. Before you take your final decision, it pays to get advice from dedicated professionals with a proven track record, who can help you on the ground with relevant and practical advice. Even if you have made up your mind, experienced advice can help you to identify new alternative solutions, address specific problems and uncertainties, and gain the confidence to formulate and implement strategic response. PricewaterhouseCoopers has a comprehensive network of dedicated specialists arrayed across 125 countries and a dedicated team of specialists located in Antwerp, Belgium providing objective advice and assistance with the formulation of industry specific solutions. The team includes consultants with high relevant experience in boardroom consulting to port authorities and operators around the world. Ports have been historically viewed as onestop omnibus solution for all requirements of shipping, in terms all loading and unloading operations for multiple types of cargo, on a common access basis. However, the worldwide trend in port development is now veering towards terminalisation of ports with focus towards freight specialization. LNG terminals, Container terminals that involve high capital costs and intensive deployment of cargo handling equipment and other facilities are some instances of what is likely to emerge as future trend in port development. There is a global trend in the port sector towards growing separation of port authority from port operator impinging on all exiting institutional models of port organizations. Port organizations all over the world are experiencing wide ranging institutional reforms, as a part of the adoption to new demands of shipping and international trade. Port authority is increasingly getting focused on policy and regulatory role while a range of private port operators and port service providers are taking over a range of port related services. There is an increasing
trend towards redundancy of monopolistic structures of port access in regional and national port systems, with the growing trend towards multiple port system. Increasing customer pressures towards logistics rationalization of cargo movement between the cargo hinterland and ports, is leading to new ports being developed with consequent shift in movement of cargo out of the erstwhile single dominant discharge or load ports. The shift of cargo from Mumbai port to Nhava Sheva port, or from major ports to new minor ports in the Indian port sector signifies the trend. A similar phenomenon is seen in international transshipment ports like Singapore.
21 | P a g e
CHAPTER 2 CUSTOM HOUSE AGENT Custom house Agent The phrase Custom house agent (CHA) is mostly used in India. He is a person who is empowered to act on the companys or on a firms behalf for the clearance of imports and exports. The agents should possess the proper license required for the clearance work to be carried out. Licensing Features of Custom House Agent licensing Regulations 1984.There are certain essential features as per the CHA licensing regulations and they as follows:Definitions. In these regulations, unless the context otherwise requires, (a) "Act" means the Customs Act, 1962 (52 of 1962); (b) "company" means a company as defined in the Companies Act, 1956 (1 of 1956); (c) "Customs House Agent" means a person licensed under these regulations to act as agent for the transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any Customs Station; (d) "firm", "firm name", "partner" and "partnership" shall have the same meanings respectively assigned to them in the Indian Partnership Act, 1932 (9 of 1932), but the expression "partner" shall also include any person who, being a minor, has been admitted to the benefits of partnership; (e) "Form" means form appended to these regulations; (f) "section" means a section of the Act;
(g) the words and expressions used herein and not defined in these regulations but defined in the Act shall have the same meanings respectively assigned to them in the Act.
3.
Customs House Agents to be licensed. No person shall carry on business as a Customs House Agent relating to the entry or departure of a conveyance or the import or export of goods at any Customs Station unless such person holds a licence granted under these regulations. Provided that no licence under these regulations shall be required by : (a) an importer or exporter transacting any business at a Customs Station solely on his own account; (b) any employee of any person or a firm transacting business generally on behalf of such person or firm, and holding an identity card or a temporary pass issued by the Deputy Commissioner of Customs or Assistant Commissioner of Customs. (c) an agent employed for one or more vessels or aircrafts in order solely to enter or clear such vessels or aircrafts for work incidental to his employment as such agent.
4.
Invitation of application. - The Commissioner of Customs may invite applications for the grant of such number of licenses as assessed by him, to act as Customs House Agents in the month of January every year by means of a notice affixed on the notice board of each Customs Station as well as through publication in at least two newspapers having circulation in the area of his jurisdiction, specifying therein the last date of receipt of application. Such application shall be for clearance work within the jurisdiction of the said Commissioner of Customs.
5.
Application for licence. (1) An application for a license to act as a Customs House Agent in a Customs Station shall be made in Form A and shall, inter alia, contain the name and the address of the person applying; and (2) If the applicant is a firm
23 | P a g e
the name and address of every partner of the firm, the firm's name, and the name of the partner or the duly authorized employee, who will actually be engaged in the clearance of goods or conveyances through the customs. (3) If the applicant is a company the name of each director, managing director, manager, and the names of director, managing director, manager or the duly authorized employee, who will actually be engaged in the clearance of goods or conveyances through the customs. 6. Conditions to be fulfilled by the applicant. The applicant referred to in clause (b) of sub-regulations (2) and (3) of regulation 5, as the case may be, or a person who has passed the examination referred to in regulation 8, shall prove to the satisfaction of the Commissioner of Customs, that(a) the applicant, or his authorized employee, is a graduate from a recognized University and C.A./M.B.A./L.L.B./ Diploma in Customs Clearance work from any Institute or University recognized by the Government with a working knowledge of computers and customs procedures, or is a graduate having at least three years experience in transacting Custom House Agent work as a G-Card holder, or a person who has passed the examination referred to in regulation 8, or is a retired Group A officer from the Indian Customs and Central Excise Service (IC&CES) having a minimum of ten years experience in Group A. (b) the applicant has financial viability supported by a certificate issued by a Scheduled Bank or such other proof acceptable to the Commissioner of
possesses
professional
degree
viz.
Customs evidencing possession of assets of value of not less than Rs. 2 lakhs; (c) the applicant is a citizen of India. 7. Scrutiny of application for licence. On receipt of application under regulation 5, the Commissioners of Customs may make enquiries for verification of the particulars set out in the application and also such other enquiry as he may deem necessary, including enquiries about the reliability and financial status of the applicant. 8. Examination of the applicant. (1) Any applicant whose application is received within the last date specified in the notice or publication, as the case may be, referred to in regulation 4 and who satisfies the requirements of regulations 5 and 6, shall be required to appear for the written as well as oral examination conducted by the Director General of Inspection at specified centers and specified dates, twice every year, for which intimation shall be sent individually in advance before the date of examination. Provided that an applicant who has already passed the examination referred to in regulation 8 will not be required to appear for any further examination. (2) The applicants declared successful in written examination shall be called for oral examination. (3) It shall be necessary for the applicant to clear written as well as oral examinations separately. An applicant who clears the written examination but fails in the oral examination linked to it, shall have to clear the oral examination within two years of the related written examination irrespective of the number of chances, and if he fails do so, he shall be treated as having failed in the examination. (4) An applicant shall be allowed a maximum period of seven years within which he shall pass both the written and oral examinations. No further extension of
time shall be granted. (5) Notwithstanding anything contained in sub-regulation (4), any person who holds a temporary licence granted under regulation 8 of the Customs House Agents Licencing Regulations, 1984, shall be allowed to pass the examination within a period of two years from the date of commencement of these regulations. (6) The examination may include questions on the following : preparation of various kinds of bills of entry and shipping bills; arrival entry and clearance of vessels; tariff classification and rates of duty; determination of value for assessment; conversion of currency; nature and description of documents to be filed with various kinds of bills of entry and shipping bills; procedure for assessment and payment of duty; examination of merchandise at the Customs Stations; provisions of the Trade and Merchandise Marks Act, 1958 (43 of 1958), the Patents Act, 1970 (39 of 1970) and the Copy Rights Act, 1957 (14 of 1957).
26 | P a g e
prohibitions on import and export; bonding procedure and clearance from bond;
re-importation and conditions for free re-entry; drawback and export promotion schemes; offences under the Act; the provisions of allied Acts including the Foreign Trade (Development and Regulation) Act 1992 (22 of 1992), the Central Excise Act, 1944 (1 of 1944), Foreign Exchange Management Act, 2000 (42 of 1999), the Indian Explosives Act, 1884 (4 of 1884), the Arms Act, 1959 (54 of 1959), the Narcotics Drugs and Psychotropic Substances Act, the Drugs and Cosmetics Act, 1940 (23 of 1940), Destructive Insects and Pests Act, 1914 (2 of 1914), the Dangerous Drugs Act, 1930 (2 of 1930), in so far as they are relevant to the clearance of goods through customs;
provisions of the Prevention of Corruption Act, 1988 (49 of 1988);
procedure in the matter of refund of duty paid, appeals and revision petitions under the Act.
on-line filing of electronic shipping bills or bills of entry and Indian Customs and Central Excise Electronic Commerce/Electronic Data interchange Gateway (ICEGATE) and Indian Customs
Electronic Data Interchange Systems (ICES).
(7) The Commissioner of Customs shall also satisfy himself whether the applicant, if he is an individual, possesses, or in the case of a firm or
27 | P a g e
company, the persons who shall be actually engaged in the work relating to clearance of goods through customs on behalf of that firm or company, possess satisfactory knowledge of English and the local language of the Customs Station: Provided that in the case of persons deputed to work exclusively in the docks, knowledge of English shall not be compulsory. Knowledge of Hindi shall be considered as an additional or desirable qualification. (8) The holders of a license under regulation 9 may authorize any one or more of their employees or partners or directors to appear for the examination referred to in sub-regulation (1) on behalf of such holders of license, in addition to the person of their agency who has passed the examination referred to in sub-regulation (1). 9. Grant of licence. (1) The Commissioner of Customs shall on payment of a fee of Rs. 5,000/- grant a license in Form B to an applicant who has passed the examination referred to in regulation 8. (2) The Customs House Agents who are granted licenses under sub-regulation (1) shall be eligible to work in all Customs Stations within the country subject to intimation in Form C to the Commissioner of Customs of the concerned Customs Station where he intends to transact business. No separate licence shall be required in places where in addition to a Customs House handling imports by sea, there is also an International airport to handle imports by air, even if under the jurisdiction of a different Commissioner of Customs. (3) The Commissioner of Customs may reject an application for the grant of license to act as Customs House Agent if the applicant is involved in fraud or forgery, or any criminal proceedings are pending before any court of law against him or he has been convicted in any court of law. (4) Any applicant aggrieved by the order of the Commissioner of Customs
28 | P a g e
passed under sub-regulation (3) may appeal to the Chief Commissioner of Customs or Chief Commissioner of Customs and Central Excise, as the case may be, within a period of thirty days from the communication of such order. (5) The Chief Commissioner of Customs or the Chief Commissioner of Customs and Central Excise, as the case may be, may, on his own motion or otherwise, call for and examine the records of any proceedings in which the Commissioner of Customs has passed the order under sub-regulation (3) for the purpose of satisfying himself as to the legality, propriety or correctness of such order and may pass such other orders as he may deem fit. No order under this sub-regulation shall be made so as to prejudicially affect any person unless such person is given reasonable opportunity for making a representation and being heard in his defense, if he so desires. (6) No order shall be made under sub-regulation (5) in relation to an order passed by Commissioner of Customs under sub-regulation (3) or subregulation (1), as the case may be, after the expiry of one year from the date on which such order was passed by the Commissioner of Customs. 10. Execution of bond and furnishing of security. (1) Before granting a license under regulation 9, the Commissioner of Customs shall require the applicant to enter into a bond in Form D and, if necessary, a surety bond in Form E for due observance of these regulations and shall also require him to furnish a bank guarantee, postal security or National Savings Certificate in the name of the Commissioner of Customs for an amount of Rs. 50,000/- for carrying out of business as a Customs House Agent. (2) If the applicant furnishes postal security or National Savings Certificate, the same shall be pledged in the name of the Commissioner of Customs and the applicant shall get the benefit of the interest accruing on it.
29 | P a g e
11. Period of validity of a licence. (1) A license granted under regulation 9 shall be valid for a period of ten years from the date of issue and shall be renewed from time to time in accordance with the procedure provided in sub-regulation (2). (2) The Commissioner of Customs may, on application made by the licensee before the expiry of the validity of the license under sub-regulation (1), renew the license for a further period of ten years from the date of expiration of the original license granted under regulation 9 or of the last renewal of such license, as the case may be, if the performance of the licensee is found to be satisfactory with reference, inter alia, to the following :quantity or value of cargo cleared by such licensee conforming to norms as may be specified by the Commissioner; Absence of instances of any complaints of misconduct including non-compliance of any of the obligations specified in regulation 13. (3) The fee for renewal of a license sub-regulation (2) shall be Rs. 5000/-. 12. License not transferable. Every licence granted or renewed under these regulations shall be deemed to have been granted or renewed in favour of the licensee, and no license shall be sold or otherwise transferred. 13. Obligations of Customs House Agent. - A Customs House Agent shall (a) obtain an authorization from each of the companies, firms or individuals by whom he is for the time being employed as Customs House Agent and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs; (b) transact business in the Customs Station either personally or through an employee duly approved by the Deputy Commissioner of Customs or
30 | P a g e
Assistant Commissioner of Customs; (c) not represent a client before an officer of Customs in any matter to which he, as an officer of the Department of Customs gave personal consideration, or as to the facts of which he gained knowledge, while in Government service; (d) advise his client to comply with the provisions of the Act and in case of noncompliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs; (e) exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage; (f) not withhold information contained in any order, instruction or public notice relating to clearance of cargo or baggage issued by the Commissioner of Customs, from a client who is entitled to such information; (g) promptly pay over to the Government, when due, sums received for payment of any duty, tax or other debt or obligations owing to the Government and promptly account to his client for funds received for him from the Government or received from him in excess of Governmental or other charges payable in respect of the clearance of cargo or baggage on behalf of the client; (h) not procure or attempt to procure directly or indirectly, information from the Government records or other Government sources of any kind to which access is not granted by the proper officer; (i) not attempt to influence the conduct of any official of the Customs Station in any matter pending before such official or his subordinates by the use of threat, false accusation, duress or the offer of any special inducement or promise of advantage or by the bestowing of any gift or favour or other thing of value; (j) not refuse access to, conceal, remove or destroy the whole or any part of
31 | P a g e
any book, paper or other record, relating to his transactions as a Customs House Agent which is sought or may be sought by the Commissioner of Customs; (k) maintain records and accounts in such form and manner as may be directed from time to time by a Deputy Commissioner of Customs or Assistant Commissioner of Customs and submit them for inspection to the said Deputy Commissioner of Customs or Assistant Commissioner of Customs or an officer authorized by him whenever required; (l) ensure that all documents, such as bills of entry and shipping bills delivered in the Customs Station by him show the name of the importer or exporter, as the case may be, and the name of the Customs House Agent, prominently at the top of such documents; (m) in the event of the license granted to him being lost, immediately report the fact to the Commissioner of Customs; (n) ensure that he discharges his duties as Customs House Agent with utmost speed and efficiency and without avoidable delay. 14. Change in directors of company, etc. In case a company holding a license under regulation 9 undergoes any change in the directors, or managing director, such change shall forthwith be communicated by such licensee to the Commissioner of Customs. 15. Change in constitution of any firm or a company. (1) In the case of any firm or a company, holding a license under these regulations, any change in the constitution thereof shall be reported by such firm or company, as the case may be, to the Commissioner of Customs as early as possible, and any such firm or a company indicating such change shall make a fresh application to the said Commissioner of Customs within a period of sixty days from the date of such change for the grant of license under regulation 9, and the Commissioner of Customs may, if there is
32 | P a g e
nothing adverse against such firm or company, as the case may be, grant a fresh license of the category held by the applicant prior to the change in constitution. Provided that if the existing firm or company moves an application for such changes, then such firm or company may be allowed to carry on the business of Customs House Agent with the approval of the Commissioner of Customs till such time as a decision is taken on the fresh application of such firm or company. (2) Notwithstanding anything contained in sub-regulation (1), where a license granted or renewed under these regulations in favor of a firm or a company has ceased to be in force because of the death or retirement of the person referred to in clause (b) of sub-regulations (2) and (3) of regulation 5, as the case may be, the firm or the company may apply for replacement of the name of the demised person by the name of a partner, director or employee who has passed the examination referred to in regulation 8 in accordance with sub-regulation (8) of regulation 8. Provided that if there is no such person in the firm or company, then such firm or company, as the case may be, may authorize any other partner, director or employee who is a G card holder, to pass the examination referred to in regulation 8 within a period of two years from the date of the demise or retirement of such person, and the firm or company may be permitted to carry on the business of a Customs House Agent with the approval of the Commissioner of Customs till such time such partner, director or employee passes the said examination. 16. Change in the constitution of a concern. (1) Where a licence granted or renewed under these regulations in favour of a person, not being a firm or a company, changes the constitution of his concern to a firm or a company, such new firm or new company may, pending the grant of a licence in accordance with these regulations, be
permitted to act as Customs House Agent through an employee duly qualified as per regulation 8, with the approval of the Commissioner of Customs. (2) Notwithstanding anything contained in sub-regulation (1), where a licence granted or renewed under these regulations in favour of a person has ceased to be in force because of the death of that person, his legal heir, who is a major and a H card holder, may be permitted to work as a Customs House Agent with the approval of the Commissioner of Customs, and such legal heir shall be required to pass the examination referred to in regulation 8 within a period of two years from the date of demise of the original licensee. 17. Engagement of persons qualified in the examination referred to in regulation 8, etc. (1) A person who has qualified in the examination referred to in regulation 8 may engage himself in the work relating to the clearance of goods through customs on behalf of a firm or a company licensed under regulation 9, provided that at any given time he shall not so engage himself on behalf of more than one such firm or company. (2) Any change in the persons qualified in the examination referred to in regulation 8 and actually engaged in the work in the Customs Station on behalf of a licensee firm or company shall be communicated forthwith by the firm or the company, as the case may be, to the Deputy Commissioner of Customs or Assistant Commissioner of Customs, and no new person other than F, G or H card holders shall be allowed to work in the Customs Station as a duly authorised employee on behalf of that firm or company. 18. Maintenance and inspection of accounts. (1) A Customs House Agent required to maintain accounts under these regulations shall maintain such accounts :
34 | P a g e
in an orderly and itemised manner and keep them

current; and reflect all financial transactions as Customs House Agent. (2) A Customs House Agent shall keep and maintain on file a copy of each of the documents, such as bill of entry, shipping bill, transhipment application, etc. and copies of all his correspondence and other papers relating to his business as Customs House Agent. (3) All records and accounts that are required to be maintained under these regulations shall be preserved for at least five years and shall be made available at any time for inspection of officers authorised to inspect such records and accounts. 19. Employment of persons. (1) A Customs House Agent may, having regard to the volume of business transacted by him, employ any number of persons to assist him. The minimum educational qualification of such persons shall be 10+2, or equivalent (2) Appointment of a person referred to in sub-regulation (1) shall be made only after obtaining the approval of the Deputy Commissioner of Customs or Assistant Commissioner of Customs designated by the Commissioner of Customs for this purpose and in the matter of granting approval, he shall take into consideration the antecedents and any other information pertaining to the character of such person. (3) The person referred to in sub-regulation (1) shall, within four attempts from the date of his appointment, pass an examination conducted by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs or by a Committee of Officers of Customs, to be appointed by him for the purpose, and the examination shall be such as to ascertain the adequacy of knowledge of such person regarding the provisions of the Act subject to
which goods and baggage are cleared through customs. (4) Notwithstanding anything contained in sub-regulation (3), a person employed under a Customs House Agent and who has passed the examination referred to sub-regulation (3) may, on his appointment under any other Customs House Agent, with the approval of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, be exempted from passing of such examination. (5) Where the Customs House Agent has authorised any person employed by him to sign documents relating to the business of such agent on his behalf, he shall file with the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, a written authority in this behalf and give prompt notice in writing if such authorization is modified or withdrawn, and the person who has passed the examination referred to in regulation 8 or regulation 19 shall only be authorized to sign the declaration on the bills of entry, bills of export, bills of import, shipping bills and annexures thereof. (6) The Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall issue a photo-identity card to every person employed by a Customs House Agent, in Form F in case he has passed the examination referred to in regulation 8; in Form G , in case he has passed the examination referred to in sub-regulation 3; in Form H , in case he has not passed the examination referred to in sub-regulation (3); and every such person shall, at all times when he transacts the work at the Customs Station, carry such card with him and produce it for
36 | P a g e
inspection on demand by any officer of the Customs Station.
(7) The photo identity card in Form H shall not be withdrawn from an employee of a Customs House Agent even if he fails to pass the examination referred to in sub-regulation (3) even after four attempts. (8) The Customs House Agent shall exercise such supervision as may be necessary to ensure the proper conduct of any such employees in the transaction of business as agents and be held responsible for all acts or omissions of his employees in regard to their employment. 20. Suspension or revocation of licence. (1) The Commissioner of Customs may, subject to the provisions of regulation 22, revoke the licence of a Customs House Agent and order for forfeiture of part or whole of security, or only order forfeiture of part or whole of security, on any of the following grounds, namely : failure of the Customs House Agent to comply with any of the conditions of the bond executed by him under regulation 10;
failure of the Customs House Agent to comply with any of the provisions of these regulations, within the jurisdiction of the said Commissioner of Customs or anywhere else;
any misconduct on his part, whether within the jurisdiction of the said Commissioner of Customs or any where else which in the opinion of the Commissioner renders him unfit to transact any business in the Customs Station.
37 | P a g e
(2) Notwithstanding anything contained in sub-regulation (1), the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the licence of a Customs House Agent where an enquiry against such agent is pending or contemplated. 21. Prohibition. Notwithstanding anything contained in regulation 22, the Commissioner of Customs may prohibit any Customs House Agent from working in one or more sections of the Customs Station, if he is satisfied that such Customs House Agent has not fulfilled his obligations as laid down under regulation 13 in relation to work in that section or sections. 22. Procedure for suspending or revoking licence under Regulation 20. (1) The Commissioner of Customs shall issue a notice in writing to the Customs House Agent stating the grounds on which it is proposed to suspend or revoke the licence and requiring the said Customs House Agent to submit, within such time as may be specified in the notice, not being less than fortyfive days, to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by him, a written statement of defense and also to specify in the said statement whether the Customs House Agent desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs. (2) The Commissioner of Customs may, on receipt of the written statement from the Customs House Agent, or where no such statement has been received within the time-limit specified in the notice referred to in sub-regulation (1), direct the Deputy Commissioner of Customs or Assistant Commissioner of Customs to inquire into the grounds which are not admitted by the Customs House Agent. (3) The Deputy Commissioner of Customs or Assistant Commissioner of Customs shall, in the course of inquiry, consider such documentary evidence and take such oral evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings, and he may also
put any question to any person tendering evidence for or against the Customs House Agent, for the purpose of ascertaining the correct position. (4) The Customs House Agent shall be entitled to cross-examine the persons examined in support of the grounds forming the basis of the proceedings, and where the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing. (5) At the conclusion of the inquiry, the Deputy Commissioner of Customs or Assistant Commissioner of Customs shall prepare a report of the inquiry recording his findings. (6) The Commissioner of Customs shall furnish to the Customs House Agent a copy of the report of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, and shall require the Customs House Agent to submit, within the specified period not being less than sixty days, any representation that he may wish to make against the findings of the Deputy Commissioner of Customs or Assistant Commissioner of Customs. (7) The Commissioner of Customs shall, after considering the report of the inquiry and the representation thereon, if any, made by the Customs House Agent, pass such orders as he deems fit. (8) Any Customs House Agent aggrieved by any decision or order passed under regulation 20 or sub-regulation (7) of regulation 22, may prefer an appeal under section 129A of the Act to the Customs, Central Excise and Service Tax Appellate Tribunal established under sub-section (1) of section 129 of the Act. 23. Grant of licence no right to accommodation. The grant of a licence under these regulations does not confer any right to accommodation in a Customs Station.
39 | P a g e
24. Membership of associations: (1) Each Customs House Agent shall enroll himself as a member of the Customs House Agents Association, if there is one registered in the Customs Station and recognized by the Commissioner of Customs.
REVISED FORMS FOR CHALR 2004 Form [see regulation 5 (1)] Application Form for Grant of Custom House Section 146 of the Customs Act, 1962 1. Name of the applicant. (in case the applicant is a firm or a company, the names of each of the partners of the firm or the directors of the company, as the case may be):2. Full address of the applicant. (in case of the applicant is a firm or a company, the name of each of the partners of the firm or the directors of the company, as the case may be):3. In case the applicant is affirm or a company, the name(s) of its partner/partners or director/directors or duly authorized employees who will actually be engaged in the work as Custom House Agents. 4. 5. In case it is desired to appoint clerk(s), the name and address of the clerk(s):Educational qualification of each of the persons, who will actually be engaged in the work as Customs House Agent (including proof of working knowledge of computers):6. Particulars regarding knowledge of English, local language and Hindi (these particulars are required in respect of each of the persons actually engaged in Agents Licence under A
40 | P a g e
the work as Customs House Agent). 7. Particulars regarding knowledge of Customs Law and procedure. (These particulars are required in respect of each of the persons actually engaged in the work as Customs House Agent). 8. Whether the applicant had earlier applied for a licence to act as Customs House Agent and whether such application was rejected. 9. Whether he or the firm or company by whom he is employed have earlier held a Custom House Agents Licence under these Regulations and whether it was cancelled or suspended. 10. Whether the applicant or any of the persons proposed to be employed by him have been penalized, convicted or prosecuted under any of the provisions of the Customs Act, 1962 (52 of 1962) or any other law for the time being in force: 11. Number and date of each of the documents furnished in accordance with regulation 5. I/We hereby affirm the I/we have read the Customs House Agents Licensing Regulations, 2004 and agree to abide by them. Date: Signature of applicant(s)
41 | P a g e
FORM [see regulation 8] Licence for Custom House Agent Licence No..
M/s./Sarvashri/Shri......................................... ............ Address is/are hereby authorized to transact business as Custom House Agent all over India subject to the conditions laid down in this licence. It is the condition of this licence that in the case of firm or a company, the Custom House Agents work shall be transacted through one of the following persons:Name of person(s) 1. 2. 3. 4. 5. _________________________ _________________________ _________________________ _________________________ _________________________ Specimen Signature(s) __________________________ __________________________ __________________________ __________________________ __________________________ Signature of the Commissioner of Customs (with seal) Date of Issue:
Customs Station of issue
Conditions
of
the
License
This license is issued subject to the following conditions: The Licensee shall 1. not sell or otherwise transfer the licence to any other person. 2. obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as Custom House Agent and produce such authorisation whenever required by an Assistant or Deputy Commissioner of Customs; 3. transact business in the Customs Station either personally or through an employee duly approved by the Assistant or Deputy Commissioner of Customs, designated by the Commissioner of Customs; 4. in the event of the licence being lost, report the same immediately to the Commissioner of Customs; 5. ensure that he discharges his duties as Custom House Agent with utmost speed and efficiency and without avoidable delay. 6. comply with the obligations specified in regulation 13; and 7. this licence is be valid for a period of ten years from the date of issue and should be renewed from time to time in accordance with the procedure provided in sub-regulation (2). FORM [see regulation 9 (2)] Application Form for Grant of Custom House Agents Licence 1. Name of the Customs House Agent. (In case the applicant is a firm or a
company, the name of each of the partners of the firm or the directors of the Company as the case may be). 2. 3. Details of licence issued under sub-regulation of regulation 9. Full address of the Customs House Agent. (in case the applicant is a firm or a company the full address of each of the partners of the firm or the directors of the company as the case may be). 4. In case the Customs House Agent is a firm or a company, the name(s) of its partner/partners or director/directors or duly authorized employees who will actually be engaged in the work of the Custom House Agent. 5. In case it is desired to appoint clerk(s) the name and address of the clerk(s) as the case may be. 6. Educational qualifications of each of the persons, who will actually be engaged in the work as Custom House Agent. 7. Particulars regarding knowledge of English and local language and Hindi. (These particulars are required in respect of each of the persons actually engaged in the work as Custom House Agent). 8. Particulars regarding knowledge of Customs Law and procedure. (These particulars are required in respect of each of the persons actually engaged in the work of Custom House Agent). 9. Particulars of the quantity or value of cargo cleared as Customs House Agent during the currency of the Customs House Agent licence. 10. Whether the Customs House Agent Licence held under these Regulations was cancelled or suspended. 11. Whether the applicant or any of the persons proposed to be employed by him have been penalized. Convicted or prosecuted under any of the provisions of the Customs Act, 1962 (52 of 1962), or any other law for the time being in force.
12. Number and date of each of the documents furnished in accordance with regulation 5. I/We hereby affirm that I/we have read the Custom House Agents Licensing Regulations, 2004 and agree to abide by them. Signature --------------------------------------------------------------Date: FORM [see regulation 10] BOND No of .. 20 Know all men by these present that we are held and firmly bound to the President of India in the sum of Rs.. for payment whereof we hereby bind ourselves, and each us bind himself and each of our heirs, executors and administrators firmly by these presents dated this day of in the year two thousand. Whereas the said.. has been authorized to act as a Custom House Agent under Section 146 of the Customs Act, 1962 (52 of 1962), and the said has agreed to enter into this bond as required by the Custom House Agent Licensing Regulations 2004 (thereafter referred to as the said Regulations). And whereas the said has deposited the sum of (rupees fifty thousand) only with the President of India as security for his faithful behavior and that of his clerks as regard the said Regulations. D of applicant(s)
45 | P a g e
Now the condition of the above written bond is such that if the said. and his clerks do at all times, whilst holding, such licence as aforesaid, behave themselves in a faithful manner as regards the said Regulations and if the said. and their executors or administrators do at all times make good to the President of India all and every sums of money which being due to the Government shall be reason of the misfeasance or negligence of the said or of his clerks have not been paid to the President of India then the above written bond shall be void; otherwise the same shall be and remain in full force and virtue and it is hereby agreed and declared that the President of India may apply the said sum of Rs. 50,000/- (rupees fifty thousand) only deposited as aforesaid in making good to the President of India all and every sums due to the Government by reason of the misfeasance or negligence of the said. or his clerks as aforesaid. And it is hereby agreed that the said sum of Rs. 50,000/- (rupees fifty thousand) only shall remain with the President of India for twelve calendar months after the date upon which the said shall cease to act as Custom House Agent as security for the payment of any sums due to the Government by any reason of any misfeasance or negligence of the said . or his clerks which may not be discovered until after the said date and that this bond shall be and remain in full force and virtue until the expiration of the said term of twelve months. It is also agreed and declared that the President of India may apply the above sum of Rs. 50,000/- (rupees fifty thousand) only in making good wholly or in part any short collection of duty or other charges in respect of any transaction made by the said on behalf of importers or exporters in the event of such sums remaining unpaid, even after issue of demands under section 28 of the Customs Act, 1962. Signed, sealed and delivered by the above named in the presence of witnesses. Accepted for and on behalf of the President of India
46 | P a g e
1. . 2. . Signature (with seal) of the Commissioner of Customs
FORM [see regulation 10] SURETY BOND
No of 200.. know all men by these presents that we .. (A). and . (B) . are held and firmly bound to the President of India in the sum of Rs. 50,000/- (rupees fifty thousand) only for payment whereof we hereby bind ourselves and each of us binds himself and each of our heirs, executors and administrators firmly by these presents dated this day of . in the year two thousand and. Whereas the said. (A)
has been authorized to act as a Custom House Agent under Section 146 of the Customs Act, 1962 (52 of 1962) and the said (B) .has agreed to enter into this bond as required by rules made under the said section: Now the condition of the above written bond is such that if the said .. (A) doth at all times whilst holding such authorization as aforesaid behave himself in a faithful and incorrupt manner as regards the Custom House Regulations and the officers, and if the said (A) and (B) . their executors, or administrators some or one of them do, and shall at all time make good to the
President of India all and every sums of money which being due to the Government shall by reason of the misfeasance or negligence of the said .. (A) . have not been paid to the President of India then the above written bond shall be void; otherwise the same shall remain in full force and virtue. Signed, sealed and delivered by the above named in the presence of witnesses. Executed before me this of 200 1. Signature of the Commissioner of Customs 2... (with seal)
FORM [see regulation 8 and 19 (6) (i)] C.H.A. Licence No. Identity Card M/s./Sarvashri/Shri: Designation (Proprietor, Partner, Director, Employee): Issued at: Valid upto: Name of the Customs House Agent: 2 Type of CHA (Proprietorship/firm/Pvt./Public Ltd./others) Specimen signature of the Custom House Agent:
48 | P a g e
He has passed the examination conducted under regulation 8 of the Customs House Agents Licensing Regulations, 2004. Signature (With seal) (Photo to be supplied by the Agent) of the Deputy/Assistant Commissioner of Customs
FORM [see regulation 19 (6) (ii)] Valid upto.
Identity Card
Shri registered in the books of this Shri/Sarvashri
of. office as an authorized
having
been of having
employee
of..
been authorized by him/them to transact business at the. Custom House on his/their behalf is hereby permitted to do so for a period of years with effect from or until the cancellation of the licence issued to his principal, whichever is earlier. He has passed the Examination conducted under Regulation 19 of Customs House Agents Licensing Regulations 2004. Specimen Signature of Clerks Agent . Customs Station.
Dated (Photo to be supplied by the Agent) Signature (With seal) of the Deputy Commissioner/Assistant
the20
Commissioner
of
Customs
FORM [see regulation 19 (6) (iii)] Valid upto.
IDENTITY-CUM-AUTHORITY CARD
Shri . of ..having been registered in the books of this office as Clerk of Shri/Sarvashri/M/s.. (C.H.A. Licence No ), for assisting the Custom House Agent or his authorized employee(s). Specimen Signature of Clerks Agent . Customs Station.
50 | P a g e
CHAPTER 3- ROLES OF CUSTOM HOUSE AGENT
Roles of a Custom House Agent The businessmen do not have all the time to deal with all the issues relating to the import and export also they do not have the technical knowledge required to solve all the problems that arise in the clearance of the imported cargo. So for carrying out this function of clearing the imported goods they appoint a CHA. Also there is high level of bureaucracy in the Indian business segment. The company or the firm that has appointed any CHA has indirectly agreed that all the actions taken by the agent would be on behalf of the company. The company would stand liable for all the deeds of the CHA. And the agent is treated as the owner of the goods. But in case the company fails to pay the custom duty, the custom officer would not hold the agent but they would catch hold of the company for the payments. The custom house agent posses the license issued to him by the customs commissioner. Firstly the applicant has to clear the examination and then accordingly he is given the temporary license and then gradually the regular license. The role of the CHA includes getting all the papers prepared for the goods to be cleared as soon as possible and also to get the custom duties paid. He does this on behalf of the company and the company in return gives him the commission. The commission that has to be given to the agent is pre-decided. The major role of an agent is to lessen the burden of the importers and that of the commissioners at the custom office and make the entire process look smooth. The CHAs play an important role in educating the people and the entire community of export-import about how to get the clearance work done with ease and at a faster speed. The custom agents act as the main link between the department and the importers and exporters in the clearance of the cargo. So the role of a custom agent is very well defined.
51 | P a g e
Duties of a Custom House Agent The principal (the importer) has to authorize the CHA for the clearance work to be done. The CHA can only clear the goods for import and export if he is authorized by the principal. And also he has to produce the required letter of authorization before the Deputy assistant commissioner as and when asked for. The methods Used It is not compulsory for the CHA himself to get the goods cleared. He can get the word done even by his employee. But the employee who does that work should be approved by the assistant commissioner who is designated for the particular work. The CHA should not try to bribe the custom officers. He should in no case try and influence the officers to get the work done. The USP of any CHA should be the speed that he works with and the delays that he avoids. The charges for his work should be pre decided. Personal interests of the Agent The CHA would not be allowed to represent the matter before the custom officer if he himself was a officer formerly. He can also not use the facts and theories that he used for the similar case when he himself was the officer. Giving the right Advice It is the duty of the CHA to ask the clients to properly follow the rules and regulations as laid down by the custom houses. And if in any case the client refuses to comply with the regulations then the agent need to inform the custom officer or the assistant officer regarding the non compliance. The CHA is liable to give the information to the department. Also the CHA has to provide the correct and exact information to the clients regarding their goods. And the duties that are to be paid. And he has to inform the client regarding the procedures that has to be followed for the clearance of the goods.
52 | P a g e
Should provide proper accounts for the money received The CHA collects the money from the principal and gives it to the government. And also he collects the money from the government (in case of excess) and passes it on to the client. Now its the duty of the CHA to honestly pass on the entire amount to the government or to the client. Liable for the information The CHA has to maintain complete records of the work done by him as directed by the commissioner. The CHA should not in any case try to steal the records or gather the records by wrong means if the same are denied to him by the working officer. And the records that are maintained by him should not be denied to any of the custom officer for scrutiny. The records have to be produced before them. Also all the documents should be prepared according to the rules laid down. And if the CHA has lost his license he has to inform the same to commissioner as soon as he knows about it. And in case the CHA does not provide the proper information or conceals it from the commissioner, the commissioner has the right to prohibit him from further acting as a CHA. (with obligations under regulation 14).
Liabilities of a Custom House Agent As discussed above the CHA works on behalf of the company so there are many things that a CHA is liable for. He is considered liable for all the actions that he takes. The work of a CHA is important because of the high level of technicality included in the clearing work. And also the businessmen themselves do not have the time and knowledge to carry out the work. The Custom House Agents licensing regulations 1984 regulates the work of the agents. The Section 147 fastens certain liabilities on the agents of the importers and exporters. An agent is empowered to do everything that the company can do like he can file the bill of entry also the shipping bill. He has to decide regarding the warehousing of the goods and when the goods need to be taken out of
the warehouses. He can help in examining the goods. He is also empowered to pay all the duties to the custom officers. Putting these liabilities on the CHA reduces the work burdens from the companys shoulders. All the paper work has to be done by the CHA. Now that the CHA works on behalf of the company, the company is bound by the actions of the Agent. They are equally liable for the deeds done. Legally the agent is considered the owner of the goods. But if in case the duty is not paid by the importer than the agent cannot be held liable for the same. But there are some exceptions to it. In some cases the Agent has to pay the duties that are not paid by the principal.
54 | P a g e
Status of a Multi Modal Transporter Operator (MTO) The MTO is a new legal entity which has emerged out of the introduction of multi modal transport. MTO acts as the principal for the performance of the multi modal transport (MT) contract and, in that capacity, undertakes to contract and provide for the different modes of transport required for the healthy transportation of the goods that he has to deliver to the destination according to the contract. In this process he has to use different carriers. So some of them are:1. Ship-owner 2. Road operators 3. Railways 4. Airlines 5. Inland waterway operators The non-carriers may be those who own or control; 1. Container terminals (in which case they may be called terminal operators) 2. Warehouses 3. Container freight stations (CFSs) or group age of consolidation depots 4. Container leasing organizations 5. Organizations like freight forwarders attending to packaging, customs clearance. The MTO enters into separate contract with each of the persons or organizations whose services he engages, subject to the applicable international conventions; national law or customary practice, but the terms of such contracts in to way affects his obligation to the
55 | P a g e
consignor of the goods under the MT contract. Some MTOs have subsidiary organization instead of sub-contractors for rendering such services. The work of the multimodal transport operators involves the carriage of the goods by different means of transport. Their work is quite different from that of the CHAs. They majorly handle the stuffing and the destuffing of the cargo. They do not automatically receive the status of the steamer agent or that of the CHA but this is done only if they are qualified enough for the same. Other important things for a Custom House Agent Any person who has the CHA license (regular or temporary) can work at all the custom stations. There is no need to get a different license for the airport customs. The applicant just has to pay the surety fee to the commissioner of that particular port and also he has to convince him regarding the clients that he has He has to show him that he has got enough clients to carry his business and also that he is financially sound for the business he is undertaking at the port. The regular license holder will get the license at any port he wants to work at. Its not compulsory for him to be present at the same custom station where he got his license from.
56 | P a g e
CHAPTER 4 CUSTOM CLEARANCE OF IMPORT GOODS AND PAYMENT OF CUSTOM DUTY All the cargo or the goods imported into India has to pass through the procedure of customs clearance after they cross the Indian Border. The goods are then examined, appraised, assessed, evaluated and then allowed to be taken out of customs charge for use by the importer. The process of custom clearance is complex and to carry out this procedure smoothly, the help of accredited custom clearing agent has to be taken. These agents are licensed by the commissioner of customs. They are experienced and capable of handling the documents/goods. Procedure in general After receiving the information of the arrival of the vessel, the importers has to present a bill of entry. This bill of entry can be of two types. It can either be for the 1.Home consumption or it can be for 2. The warehousing of the goods. The bill of entry is then given in import department, with the proper entry made against the consignment entry in the IGM. There is a difference in the rate applicable to the goods for home consumption or for the warehoused goods because of the date on which the bill of entry is noted in the import department. The date is very important because of the rates applicable on that date would be the basis of the customs charged. In case of warehoused goods the rates would be charged for the date when the goods are physically cleared. After the import department the bill of entry is passed on to the appraising department of the appraisal of the goods. The bill of entry is furnished with many different documents. The documents that are to be attached with the bill of entry are commercial invoice, certificate of origin. Certificate of quality, import license and also the catalogue literature is asked for. The documents that are given in the appraisal department goes to the appraiser or the assistant commissioner and if they find it adequate for the Valuation of the goods and for the classification then it signed by the commissioner and passed on. The bill of entry
is the main document which is passed on from one department to the other. The documents are given to the licensing department which audits the license and then debit the work in the licensee account and then they give back the bill to the agent or to the importer for the payment to be made in the cash department of the customs. Examining of the goods is the next step. The appraising commissioner keeps the original copy of the bill of entry with himself and passes on the duplicate copy and triplicate copy to the importer and the importer then has to get the cargo examined. It is then the duty of the shed appraiser to examine the goods and if he does not find any problems or any hazardous nature of the goods he has the right to grant the out of charge to the goods. But before the out of charge is issued to the importer he has to clear the port charges. There are two procedures under which the cargo is given the out of charge. One is known as the Second Check Procedure. Most of the consignments i.e. 80 to 90% of the consignments are cleared or are given the out of charge under the second check procedure. But in certain cases the goods need to be check. Or the goods are of the nature that is difficult to assess. So they go for First Check. In this process the bill of entry is send to the appraising commissioner and is then send to the scrutinizing officer and then after examining the goods the bill of entry is returned. And the out of Charge is granted after paying the port duties. The goods after reaching the ports are transferred to the customs area. No person can open the goods or in any case do any changes in the goods without the permission of the proper officer from the customs. There are different officers assigned different works. Also there is a hierarchy of these officers based on the liabilities and their duties. The work of examination of the goods/cargo is carried out by the appraising officer who is the chief of the appraising department. The grant of the Out Of Charge depends on the results of the examination of the cargo. Whatever the result is, it is written on the back of the bill of entry. Also the entire cargo is weighed. And the weight of the goods is also written on the back of the bill of entry. The examination sometimes takes more than one day. And if this happens the records and the results of each day are properly recorded at the custom house. The CHA has to be present before the officer as and when
required. The records that the officer has to keep regarding the day to day checking of the cargo has to be signed by the representative of the importer or the importer himself. And on the weighment slip also the representative has to give his initials.
The Code Number There is A code number that is given to the importer for importing the goods. If the importer does not have the code number he is not allowed to import any cargo into the country. The custom authorities have the right to ask for the code number whenever they feel to. This code number known as the IE code number is allotted to the importer by the import trade control authorities. Authority The CHA has the authority and the right to clear the cargo or the goods at any of the ports in India. He just has to fulfill certain things. Also he can carry the clearance procedure at the airport customs. And also at the container freight stations that are built near the ports for the dry cargo. The goods that are imported to the country are first unloaded at the port. The goods are then transferred to the customs area. These goods are kept under the supervision of a person authorized by the commissioner of that port. The goods can only be taken out if the it is cleared of the customs duty and the port charges. For example: - at the Kandla Port the goods after being unloaded are kept at the plots of the port and under the Kandla port trust. And are released only after the duties and the port charges are cleared. Central Board of Excise and Custom The Central Board of Excise and Customs is the main authority deciding upon the rules and regulation. So for this they have implemented the Customs Act 1962 for the customs. They have incorporated two main things for the healthy working of the ports and the clearance procedures. The first one being the Appraisement and this department is assigned the work of collecting of the revenues from the importers and different working bodies at the ports and other custom stations. And the second wing is
the Preventive department and the work of this department is to see that there is no smuggling being done at the ports. Assessment of Duty for goods The duty (Custom duty) on the goods depends on the nature and type of the goods. The goods are firstly classified according to their nature and then the duty payable is decided based in the use of the goods. Validity of the goods there are certain goods that are not allowed to be imported according to the custom laws of India. So the goods are checked on the basis of the import policy that if the import of the particular goods is allowed or not. So the validity of the goods imported depends on the parameters that are prescribed in the Import Policy. And if the goods fulfill those parameters then they are considered as valid imports. And in case there are some goods that fail to qualify under the import policy then there is a very heavy penalty charged for those goods and also those goods are ceased by the ports or the authorities of the ports. Custom Duties There are different kinds of duties that are to be levied from the importers as well as the exporters. It is the Union Government that decides upon the duties that are to be levied from the importers based on the goods. The different duties are as follows:a. Basic Duty: - All the goods imported into the country are charged a basic duty as per the customs tariff act. This duty can be a certain percentage of the total value of the goods or it can be a specified rate. Every year or in every 2-3 years there is a change in this rate. b. Additional Duty:- The import of the goods is an opportunity cost for the country. The additional duty charged on the goods imported is equal to the excise duty that is charged on the goods that are of the same nature and are produced in India. Additional duty is also known as countervailing duty. And the additional duty is levied on the total valuation of the imported goods.
60 | P a g e
i. When the goods are imported into the country there is a risk that is faced by the domestic producers. Excise duty is levied from the domestic producers of the goods. So to belittle their risks, an equal or an equivalent amount of duty is charged on the similar goods when imported. By doing this there is no risks in terms of duties levied between the two. c. A Special Additional Duty of 4% d. Safeguard Duty wherever warranted e. Antidumping Duty is also levied on certain goods that are imported from certain countries because of the damage they produce due to their dumping. f. Education cess is also collected at 2% and secondary and also higher secondary cess at 1% is levied of the aggregate of the custom duties. Ways in Which Duty is levied There are different ways in which the custom duties are levied. There are threedifferent ways in which the custom duties are to be paid. a. At a specified rate: - This rate is levied at a specific rate prescribed depending on the number of goods or on the weight of the goods. Sometimes the duty is levied based on the length of the goods as well. b. Duty on Ad-valorem:- In this case the duty is levied based on the total value of the goods. c. In some cases the duty is charged in both the ways i.e. at a specified rate and on Advalorem basis. Goods Valuation As discussed above that the duty can be levied either at a specific rate or at the value of the goods. So it is very important to calculate the valuation of the goods. The importer
would always like to pay less amount of duty to the customs. So for that he will show the value of the goods at a low amount. And this leads to a dispute between the importer and the valuation officer. So to avoid this dispute there is valuation principles laid down by the union government with the central board pf excise and customs. Goods therefore are valued according to the principles that are laid down in the customs valuations rules 1988. Appraisal of the custom duty There are certain criteria for the assessment of the duty on the goods based on: If the goods to duty are the one which are regularly imported or If the goods are to be tested in the laboratory of the custom house for thefulfillments of the conditions of the license In some cases the appraiser takes a sample of the goods and then assesses the custom duty levied on the nature of the goods. The goods are examined by the officer at the site and then the message and the records are send to the duty assessing officer who then based on the reports decides the duty to be taken from the importer. The importer pays the duty and gets the out of charge. This process is followed only if the goods are not of the regular import nature. Now if the same goods are regularly imported then the assessing officer does not need to take the sample or do the checking. If the officer is very well satisfied by the importer and the goods and if all the documents are properly arranged without any faults then the importer can pay the duty even before the vessel is arrived. In most the cases the importer tries to pay the duty before the vessel arrives to escape the demurrage. The goods then just get examined by the officer at the site and the out of charge is given. There are also cases where the assessment may take some time due to the nature of the goods. If the goods are of hazardous nature then the assessment may take time.
62 | P a g e
Custom Duty and the Rate The CHAs should have the complete knowledge regarding the rates at which the custom duties are to be charged from the importer on the goods that are imported. Now at the time of deciding the custom duty the most important factor is the exchange rate. The duty is charged based on the invoices produced before the customs. In case where the invoice has the currency other than rupees, the custom has fixed the exchange rate for the same. These exchange rates are published on day to day basis in the custom house for the calculation of the custom duty. There are certain countries from which the importers, if import, enjoy a preferential duty. The custom duties on different products or different goods and on from different countries varies a lot. Each good imported has a different duty imposed on it. Even the CHAs and the officers can not remember all the rates applicable. And also it becomes difficult to remember the rate at which the custom duty is imposed on the goods. So to write all the custom duties and the rates applicable here in this report is not possible. But to explain how the calculation of the custom duty is done we can take a short example:Cost on landed including C.I.F of hinges of brass Rs. 100 Basic custom duty as per the Customs tarrifs act 7.5% Rs. 7.5 Add: Excise duty 16.00% Rs. 17.2 Add: Cess on excise 2.00% Rs 0.344 Add: Education cess 1.00% Rs 0.172 Add: Additional cess 2% Rs 0.501 Add: Cess 1% Rs 0.257 Ass: SAD 4% Rs 5.039
Duty Payable Total Rs. 31.013
Import license and the Checking of the License The importer of the vessel or of the goods must posses the import license. The appraising officer asks for the license from the importer before the arrival of the vessel. The officer checks the name of the importer the validity of the license, the commodity imported etc. The import license held by the importer should notify that the goods imported by him are legally approved in the license. If the officials are not satisfied then the importer cannot import the goods. And if everything is in place and if all the conditions are satisfied then the import license is passed on to the license section along with the bill of entry. The work of the license department is to maintain a complete record of all the licenses that are accepted. And also they show the last balance of the license. The importer should necessarily know about all the goods that he can legally import under the license granted to him. He should not try to import the goods that are not binding under the license he is granted. And in case if the importer imports the goods illegally and if he escapes the punishment from the officials that does not mean that he can import the goods again for the second time on the same license.
64 | P a g e
CHAPTER 5 IMPORTANT TERMS IN SHIPPING THE THREE IMPORTANT INCO TERM 1. FREE ON BOARD (FOB)
Under the FOB contract, the seller quotes a price which includes all the expenses incurred until the goods are actually delivered on board the ship at the port of shipment, it constitutes: a) b) c) d) e) f) g) h) Ex- factory price Packing charges Inland transportation cost. Customs and port dues Export duty, if any Documentation charges Cost of quality control and any other expenses,if any Profit margin of the seller is added and if export incentives are received
form government, that directly affect the price, then such incentives are deducted Thus, FOB price is calculated by adding the cost of goods, the expenses up to the board of the ship plus profit. Export incentives received form the government are deducted FOB PRICE = COST OF GOODS + EXPENSES UPTO BOARD OF SHIP +PROFIT EXPORT INCENTIVES
Usually the FOB contract requires the following seller and buyer OBLIGATIONS: The Seller must : A) Supply of goods in conformity with the contract of sale.
65 | P a g e
B)
Deliver the goods on board the vessel named by the buyer at the port of
shipment. C) Bear all the cost payable on or for the goods until they have been placed
aboard the ship. D) E) Suitably pack the goods for mode of transportation. Provide documentation indicating proof of delivery of goods aboard the
vessel. F) Inform the buyer without delay that the goods have been delivered on
board the vessel
The Buyer must: A) At his own expenses, book necessary space on board a vessel and give
the seller notices in respect of the name of the vessel, loading berth, and delivery date . B) C) D) Payment of insurance premium to the insurance company Payment of freight to the shipping company. Bear any other cost and risk form the time the good have been placed on
board the vessel. E) Make payment to the exporter as per the terms of contract.
Under FOB quotation, the seller loses his right lien on the goods and right of stoppage in transit. This is because the shipping company is under the contract of the buyer. In India, export incentives such duty drawback, are given on the basis of FOB proce. 2. COST AND FREIGHT (C & F)
The importer may request the exporter to quote C&F price which means FOB price plus cost of transportation of the goods to the port of destination. C&F= FOB PRICE + FREIGHT
66 | P a g e
The charges like cartage, unloading charges etc, are requires to be paid by the importer to bring the goods to his warehouse. insurance charges also to be borne by the importer Seller and Buyer OBLIGATIONS under C&F contract: The Seller must: In addition to obligations under FOB (A to F), the seller must pay freight charges of the shipping company . The Buyer must : a) b) c) Arrange and pay insurance Pay clearing charges, import duties etc. Make payment to exporter as per the commercial invoice.
3) COST INSURANCE AND FREIGHT (CIF) It includes FOB price plus freight plus marine insurance upto the port of destination. It is preferred by the importer over FOB because there are fewer responsibilities for him as the exporter takes all risk for the fluctuation in rates and insurance unless otherwise specified in the contract. CIF = FOB PRICE + FREIGHT + INSURANCE
The Seller must: In addition to obligations mentioned under FOB (A to F), the seller must pay freight and insurance cover. The buyer must:
a) b)
Pay clearing charges, import duties etc. Make payment to exporter as per the commercial invoice.
METHODS OF PAYMENT/ TERMS OF PAYMENT 1) PAYMENT IN ADVANCE
This method does not involve any risk of bad debts, providing entire amount has been received in advance. At times, a certain percent is paid in advance, say 50 % and the rest on delivery. This method of payment is desirable when : a) The financial position of the buyer is weak or credit worthiness of the The economical/political condition in the buyers country is unstable. The seller is not willing to assume credit risk , as in the case of open
buyer is not known. b) c)
account method. However, this is the most unpopular method as a foreign buyer would not be willing to pay in advance of shipment unless: i. ii. The goods are specifically designed for the customer, and There is heavy demand for the goods (a sellers market situation ).
2)
PAYMENT AGAINST SHIPMENT ON CONSIGNMENT
The exporter supplies the goods to the overseas consignee or agent, without actually giving up the title. Payment is made only when the goods are ultimately sold by the overseas consignee to the other parties. This method is costly, because of commission to be paid to the consignee, apart from the other charges and at the same time it is very risky. The consignee may
return the goods back if remained unsold and even the consignee may not clear off dues in time. The price to be realized is also uncertain as it depends on the market conditions in buyers country. However, this method offers an advantage to the buyer as the buyer can examine the goods before purchasing and the seller may get a higher price if the buyer is satisfied about quality. In India prior approval is required to be taken from the exchange control department of RBI for shipment on consignment basis. 3) DOCUMENTARY BILLS
Under this method, the exporter agrees to submit the documents to this bank along with bills of exchange. The documents required are (a) a ful set of bill of lading (b) invoice (c) marine insurance policy and other documents if required. There are two main types of documentary bills DOCUMENTS AGAINGST PAYMENT (D/P)
The documents are released to the importer against payment. This method indicates that the payment is made sight draft. Necessary arrangements will have to be made to store the goods, if a delay in payment occurs. The risk involved is that the importer may refuse to accept the documents and to pay against them. The reasons for non-acceptance may be political or commercial ones. In India, ECGC (EXPORT CREDIT GAURANTEE
CORPORATION INDIA LTD) covers losses arising out of such risk. Under this system, as compared to D/A the exporter has certain advantages a) The documents remain in the hands of the bank and the exporter does not lose possession or the ownership of goods till the payment is made.
b) Other reasons may include that the exporter may not able to allow credit and wait for payment.
DOCUMENTS AGAINST ACCEPTANCE (D/A)
The documents are released against acceptance of the time draft i.e. credit is allowed for certain period, say 90 days, however, the exporter need not wait for payment till the bill is met on due date, as he can discount the bill with negotiating bank and avail of funds immediately after shipment of goods. In case of D/A as compared to D/P bills, the risk is involved is much greater, as importer has already taken the possession of goods which may or may not be in his custody on the maturity date of the bill. If the importer fails to pay on due date, the exporter, will have to start civil proceedings to receive his payment, if all other alternatives fails. The risk involved can be insured with ECGC. LETTER OF CREDIT (L/C)
This method of payment has become the most popular form in recent times, as it is more secured as compared to other methods of payment. A letter of credit can be defined as an undertaking by importers bank stating that payment will be made to exporter if the required documents are presented to the bank within the validity of the L/C.
70 | P a g e
PROCEDURE FOR OPENING LETTER OF CREDIT: The following are the steps in the process of opening of a letter of credit:
1.
Exporters Request: The exporters requests the imported to issue LC in Importers Request to his Bank: The importer requests his bank to
his favour. LC is the most secured form of payment in foreign trade. 2.
open a L/C. He may either pay the amount of credit in advance or may request the bank to open credit in his current account with the back. 3. Issue of LC: The issuing bank issues the L/C and forwards it to its
correspondent bank with a request so inform the beneficiary that the L/C has been opened. The issuing bank may also request the advising bank to add its confirmation to the L/C, if so required by the beneficiary. 4. Receipt of L/C: The exporter takes in his possession the L/C. He should
see to it that the L/C is confirmed. 5. Shipment of goods: Then the exporter supplies the goods and presents
the full set of documents along with the draft to the negotiating bank. 6. Scrutiny of goods: The negotiating bank then scrutinizes the documents
and if they are in order makes the payment to the exporter. 7. Realization of payment: The issuing bank will reimburse the amount
(which is paid to the exporter) to the negotiating bank. 8. Documents to importer: The issuing bank in turn presents the
documents to the importer and debits his account for the corresponding amount.
71 | P a g e
IMPORTANT TYPES OF LETTER OF CREDIT
I.
Revocable and Irrevocable letter of Credit:
1.
Revocable LC- In this type of LC, the issuing bank reserves the
right to withdraw, cancel or modify the credit, at any time without the prior consent to beneficiary. However, after revoking the LC, the issuing bank has to give notice to the beneficiary. Revocable LCs is risky and as such the exporters do not want to accept a revoking LC.
2.
Irrevocable LC- This type of LC is preferred to revocable letter of
credit. In this type, once the LC is accepted by the exporter, it cannot be cancelled or modified by the buyer or issuing bank without prior permission of the beneficiary.
With Recourse and without Recourse Letter of Credit
3.
With recourse L/C: In this type, the exporter is held liable to the
paying/negotiating bank, if the draft/bill drawn against LC is not honored by the importer/issuing bank. The negotiating bank can make the exporter to pay the amount along with the interest, which it has already paid to the beneficiary. 4. Without Recourse LC: In the case of without recourse L/c, the
negotiating bank has no recourse to the exporter, but only to the issuing bank or to the confirming bank.
72 | P a g e
However, in the case of with recourse L/C, the negotiating bank can ask the exporter to pay back the money along with certain expenses.
Confirmed and Unconfirmed Letter of Credit
5.
Confirmed L/C: When the issuing bank is practically unknown in
the beneficiarys country, the exporter may ask the issuing bank to make arrangements to confirm the credit by a local bank. The confirming bank undertakes to honour all the drafts/bills drawn and presented with the terms L/C. 6. Unconfirmed L/C: An unconfirmed L/C is one to which the correspondent bank in the exporters country does not add its conformation, and thereby, does not accept liability to make payment under L/C.
Other types
7.
Back to Back L/C: Back to back L/C is a domestic letter of credit. It
is an ancillary credit created by bank based on a conformed export LC received by the direct exports. The direct exporters keep the original LC with negotiating bank or some other bank in India, as a security, and obtain another LC in favour of domestic supplier. Through this route the domestic supplier gains direct gains direct access to the preshipment loan based on the receipt of domestic or back to back LC. 8. Documentary LC: Most of the LCs are documentary LCs.
payment is being made by the bank against delivery of the full set of documents as laid down by the terms of credit. The important documents required to be submitted by the exporter under documentary LC includes the following: Bill of Lading
73 | P a g e
Commercial invoice Insurance policy Shipping bill Certificate of origin Packing list, etc.
Bill Of Entry
The document on the strength of which clearance of imported goods can be effected is known as the Bill of Entry (B/E), the form of which has been standardized by the Central Board of Excise and Customs. The Bill of Entry should be type-written. No bill of entry is, however, required in the following cases: Passengers baggage Favour parcels Mail bags and port parcels. Boxes, kennels or cages containing live animals or birds. Ships stores in small quantities for personal use. Cargo by sailing vessels from Customs ports when landed at open bunders only. Types of bill of entry All goods discharged from a vessel, from foreign or coastal ports, are cleared on Bills of Entry in the prescribed forms presented under the Bill of Entry Regulations,1971.
a. Goods entered for home consumption are cleared on White Bills of Entry. b. Goods entered for warehousing are removed into bond on Into Bond Bills of Entry (Yellow Bills of Entry). c. Goods cleared ex-bond for home consumption on payment of duty on Ex-Bond Bills or Green Bills of Entry. Printed Bill of Entry forms are available with government authorized agents. For imports through the medium of post there is no B/E. Instead a waybill is prepared by the foreign post office for assessment of duty. The time to present the bill of entry It should be presented for noting in the import department of the Customs House after the Import General Manifest which gives a detailed description item-wise of the goods brought by the concerned vessel is filed by the ships agent. A facility has been afforded to the ships agents to lodge this manifest 14 days in advance prior to arrival of the vessel. This concession has been given to facilitate the importers Custom House Agent to keep the documents ready so that immediately on arrival of the vessel and landing of the cargo, the same could be cleared on examination and payment of duty thereon without any loss of time. The date of presentation of the Bill of Entry is very important as the rate of duty applicable to the imported goods will be the rate which is in force on the date of presentation. Features of the Bill of entry Salient features of the Bill of Entry which is to be presented for clearance of goods for home consumption are mentioned below: 1. Origin & Vessels Particulars: The importer or his Clearing Agent has to give relevant particulars of the origin of the consignments and the vessel e.g. port of Shipment, country of origin (and country consignment if different), vessels name and rotation number and also Bill of Lading date.
75 | P a g e
2. Particulars of the Goods: In regard to the goods covered by the Bill of Entry, certain basic information has to be furnished by the importer which includes (I) Number and description, as well as marks and numbers of the packages; (ii)weight/volume/or number in so far as quantity is concerned; (iii) Description of the goods imported details to be given separately for each separate class of goods; (iv)Gross weight and total number of packages have also to be given. 3. Value: The importer has also to indicate assessable value in terms of Section 14 of the Customs Act, 1962. For arriving at this assessable value he has also to give further break-up of invoice value, freight, insurance, exchange rate, loading and local agency commission, miscellaneous charges and landing charges (taken into consideration for the assessable value) 4. Duties Leviable: The form has separate columns for indicating Customs tariff heading and exemption notification No. if any applicable. For purposes of contravening duty, there is separate column indicating the value, the rate and amount and the total amount of duty on the goods both in figures and words to be indicated by pin-point typewriter. 5. Codes: For certain statistical purposes (which is the basis of Foreign Trade Statistics), certain code numbers have also to be indicated by the importer while filing the Bill of Entry which include Port Code, Custom House Agent Code, Importer Code, Country of origin/Consignment Code, Unit Code, Currency Code, etc. 6. Declaration of Importers/Clearing Agent: Besides the information of the type referred to above, certain declarations have to be furnished by the importer and his authorized Custom House Clearing Agent wherever the Bill of Entry is processed through a Clearing Agent. Some of these declarations
76 | P a g e
have to be signed by the importer himself. These specifically include declaration about correctness of the contents of the goods described in the Bill of Entry (being in accordance with the invoice and other documents), corrections of the price/value. Declaration whether the goods have been purchased on outright purchase/consignment basis and whether the importer has any connection with the supplier/manufacturer. Importers declarations are furnished and signed by him on the reverse of the Bill of Entry. In cases when an importer clearing his goods through a Custom House Agent, does not have his office at the port, the declarations may be signed by the importers on a separate sheet of paper which may be attached to the reverse of the bill of entry. The Appraiser may make the final assessment after the C.H.A pastes the declaration on the reverse of the Bill of Entry. Documents presented along with the bill of entry Apart from filing up various columns of this prescribed bill of entry form, the importer is supposed to submit certain essential documents which may be required for checking the correctness of the declarations made and for completing the assessment (for checking value and for determining permissibility of import etc. The documents presented along with the Bill of Entry generally include Invoice, Packing List, Bill of Lading or Delivery Order, Import License(s) / Customs Clearance Permit, Insurance Policy, Certificate of Origin, etc. A. Bill of lading The document under which cargo is carried on board vessels is a bill of lading, and may be defined as a receipt for goods, signed by the master or other duly authorized person on behalf of the ship-owner, and constitutes a document of title to the goods specified therein. For over three hundred years, bills of lading have been most important documents in a variety of international trade transactions. Their format has varied in accordance with the particular trade and the requirements of individual ship owners. Whilst it is primary a
receipt, and not strictly speaking a contract of carriage, it is nevertheless good, and sometimes the only evidence of the terms and conditions of carriage. There has been some divergence of opinion as to whether a bill of lading is in fact a receipt or a contract, but in the case of it has been clearly stated: There is I think another inaccuracy in the statute (Bill of Lading Act 1855) which is indeed universal. It speaks of the contract contained in the bill of lading. To my mind there is no contract in it. It is a receipt for goods stating the terms on which they are to be received and carried by the ship, and, therefore, excellent evidence of those terms, but it is not a contract. That has been made before the bill of lading has been given The words of his Lordship put the question in its proper perspective and eliminate all doubt. The indispensable features of every contract are of course offer and acceptance. When a ship owner advertises his vessel for the carriage of cargo, and the shipper signifies his offer by requesting the owner to reserve, space in the vessel, he thereby makes an offer. It is only when the ship owner has accepted the cargo on board that the contract of freightment is concluded His liability would, however, be limited by the provisions of the Merchant Shipping Acts. The ship owner is at liberty to restrict his liabilities, and this he seeks to do by concluding special contracts as evidenced by the terms, conditions and exceptions of the bills of lading. A glance at a modern general cargo bill of lading will convince one that the ship owner takes every Topic: precaution to minimize his liabilities by inserting protective clauses exempting himself from responsibility for a very exhaustive range of losses, including those arising from the negligence of his servants, etc. Bills of lading for goods shipped from the United Kingdom and Northern Ireland, however, are in this respect subject to the Carriage of Goods by Sea Act 1971. The act establishes the responsibilities, liabilities, rights and immunities attaching to carriers under bills of lading, and in effect prescribes a standard form of bill of lading which has the force of law. It removes the difficulties and uncertainties which were associated with the plethora of protective clauses which ship owners were accustomed to insert in bills of lading and has bestowed a considerable advantage on the mercantile community, particularly banks & insurance companies, as, now that they know exactly the extent of the ship owners liabilities, etc, they can make advances and adjust
insurance premiums on cargo with greater facility. It is not necessary specifically to incorporate fully the terms and conditions of the Carriage of Goods by sea Act 1971 in bills of lading. It is the shippers duty to supply the shipping company with the bills of lading. As soon as the shipper ascertains the number of packages he wishes to ship by the vessel, he completes the bills of lading and lodges these with the shipping company for their attention. He may, however, request the carrying company to make out bills of lading for him, in which case he supplies an invoice and instructions, and the shipping company undertakes this business. A small charge is made for the extra work entailed. The bills of lading are made out in sets, and any number may constitute the set according to the requirements of the particular trade. It is essential that at least one bill of lading be supplied, together with a copy bill of lading, known as the captains copy, which is retained by the master for record purposes. While the bill of lading is the document proper, the copy is of no value, and as many copy bills of lading may be included in the set as are desired either for the shipping company purposes or for the shippers own requirements. The bills of lading, however, are of equal standing, and it is usual to find at the foot of the bill of lading the term in witness whereof the master or agent hath affirmed bills of lading all of this tenor and date, the one of which being accomplished the others stand void. The numbers of bills of lading which constitute the set are entered in the blank space. The shipper usually affirms to three bills of lading, one for his own records, one for his consignee, and the second copy for the consignee sent usually by the following mail in case the first copy forwarded him is lost or delayed. The master of the ship is instructed to deliver the goods to the person who produces a bill of lading, and therefore it is in the interest of all shippers, where more than one bill of lading is issued, to see that the consignee is the person who receives it. The master, in the absence of knowing that the holder of the bill of lading has no right to it, in the absence of known fraud, has the authority to deliver the goods. In the event of any goods being so delivered, to another person who holds the document of title but is not authorized, the master is free from liability for wrongful delivery. In describing bills of lading it must be remembered that nearly all bills of lading were originally received for
79 | P a g e
shipment bills of lading, which state that the goods have been received for shipment on board the vessel. Here, there is no actual receipt for goods which have been shipped. The Carriage of Goods by Sea Act contains a stipulation that if a shipper so demands, he shall have issued to him a shipped bill of lading when the cargo is loaded. This commences shipped on board the vessel, and states that the goods are actually on board. Bankers are reluctant to accept documents that do not clearly set out this important statement, and many demand shipped bills of lading. Many shipping companies now only print shipped bills of lading. As there is no implied or express demand for a seaworthy ship, the term shipped on board the good ship is rarely seen, it being shipped on board the vessel The next clause for consideration is that of apparent good order and condition. The full opening phrase on a bill of lading is Shipped (or received) in apparent good order and condition on board the vessel. This phrase means that the outward condition of the goods on being received by the ship is in good order, the ship owner in effect says: I can only judge by exterior proof as to the soundness of the goods received, and apparently they are in good order. To earn his freight carrier is only bound to carry the goods and deliver them in the same order in which he received them. If they were in apparent good order, on shipment, it is his duty to deliver them in like apparent good order and condition. Should the goods have any defects, then the carrier will qualify the Topic: Clearing and forwarding of imports term apparent good order by including in the margin of the bill such terms as old case, stained case, straw wrapped pieces only, or unprotected. The addition of any similar qualifying clause makes the bill of lading unclean, and conversely, the expression clean bill of lading means any bill of entry which has the clause apparent good order and condition unqualified. Shipping companies in their own interest insert these clauses when necessary as a safeguard against unwarranted claims. There is a practice of issuing letter of indemnity against clean bills of lading, which is adopted by number of companies. These letters of indemnity state that in consideration of being given a clean bill of lading the holder
indemnifies the carrier against all risks and claims arising from the defect. This, although practiced, is legally wrong, and the holder of a letter of indemnity in this case has no right other than that of good faith. The master of the vessel having signed for so any cases in apparent good order and condition, when he knows they are not so by being given a letter of indemnity to that effect, issues a legal document in the form of the bill of lading with a misstatement of fact upon it, which is nothing less than a common fraud, and on these grounds numerous cases fail because the owners are unable to seek the assistance of the letter of indemnity. The bill of lading is made out in the name of the shipper, or, if an agent, as A.B. as agents, and consigned to the consignee or receiver. For many reasons, such as confidentiality, some shippers are anxious that the name of the consignee shall not become known, and in this case the bill of lading is consigned to order or shippers order When goods are consigned to a named consignee, the shipper has no need to endorse the bill of lading before forwarding to his consignee, but when it is consigned to order he must endorse the bill over to the consignee to whom he wishes delivery made. Other clauses appear in the body of the bill, but the clause paramount of the Carriage of goods by Sea Act makes it unnecessary to deal with these here. The bill is signed at the foot by, or for, the master. He, as the agent for the owners in the care of the vessel, and bailee for the cargo during the period of its shipment, is personally responsible for the goods while in his care. If a bill of lading is signed for goods which are not actually on board, the liability of the master is increased, for it may happen that the bill is issued, and therefore the prima facie evidence is that the goods were actually shipped, and the carrier may have great difficulty in proving that this was not so. It is conclusive to a holder for value. It is therefore the masters duty, or the duty of anyone having authority to sign for the master, to see that the particulars in the bill of lading are accurate, before the bill is issued. The date which appears at the foot of the bill should of course be the actual date of shipment, or receipt of the goods. This traditional bill of lading is now known as the long form bill of lading. In the body of the bill the ports of shipment and delivery are mentioned, and the contract is therefore to carry the goods with all reasonable speed from the one place to other. A
81 | P a g e
clause is found in many bills allowing carrier the privilege of deviating to other ports in any order whatsoever, backwards forwards in any directions. This clause is valueless as there is no permission at any time for the owner to leave his course. Where this route is an advertised one, and the shipper is aware that by custom of trade the vessel calls at intermediate ports, e.g. London South Africa, calling at Cape Town, Durban and Port Elizabeth, he accepts this route, but does not give the carrier permission to take his vessel to Liverpool after leaving London. Through bills of lading are issued when a shipper wishes the carrying company to make arrangements for a complete journey, and these bills of lading in addition to the agreement to carry goods from port to port include a further journey (by sea or land) from the port of ships destination to a distant place. In this case the carrier incorporates in the bill of lading a clause stating that the goods are to be transhipped and forwarded to at ships expense but at shippers risk. An additional charge is made for the extended journey, and the carrier bears all the expenses of shipping and transshipping, but from the time the goods leave his care he repudiates all responsibility for their safe carriage. This extra journey is outside the contract of affreightment, and the terms and conditions of the bill of lading do not apply. The carrying company is merely acting as agent in arranging the on carriage. Combined transport bill of lading. This is comparatively recent development. It is negotiable document (or can be) and the combined transport operator takes charge of the goods at a place of acceptance and provides an undertaking to deliver the goods at a designated place of delivery against surrender of the document. A clause in the document that the goods are to be delivered to the order of a named person, or to the bearer, constitutes the undertaking. The combined transport operator accepts full responsibility for the entire journey and acts as principal vis--vis the shipper and other carriers. Since the repeal in 1949 of stamp duty on bills of lading, copy bills (i.e bills other than the number of bills on the set) are stamped Copy bill of lading not negotiable or similar wording . In some cases different coloured bills are used to distinguish copies from negotiable bills. For bills of lading under charter parties, the above conditions apply with a few exceptions, the most important of which is that the conditions of a bill of lading are always subservient to the charter party clauses. When a
82 | P a g e
charter party is issued, this is a contract pure and simple, and the bill issued under such document is only a receipt with all terms as per charter party. The Bill of lading Act 1855 is a small but valuable act, and its provisions are briefly: It gives the consignee or endorse to whom the property passes, all rights of suit as if the contract had been made with him originally. it preserves the right of stoppage in transit, the right to claim freight against the shipper, or any other liabilities of the consignee. It provides that the bill of lading in the hands of the consignee for valuable consideration is conclusive evidence of the shipment having been made, even though the goods were not shipped, unless the holder has been advised that the goods were never on board. Considerable national and international thought has been given to the problem of simplifying the paper work entailed in the production of the commercial documents relating to an export consignment. These are the various forms required by the carriers, customs authorities, port authorities, forwarding agents, banks, and insurance companies. These efforts resulted in two documents, the common short form of bill of lading and the sea waybill. The short form of bill of lading came from a more general rationalization in maritime transport documents as recommended by the United Nations. This short form was recognized by the international chamber of commerce in 1974. It was agreed that, unless specifically prohibited by the terms of an individual credit, short form bills of lading could be used in credits issued in accordance with ICCs Uniform customs and practice for Documentary credits. On 2 April 1979 the General Council of British Shipping (GCBS) and the Simplification of International Trade Procedures Board (SITPRO) took these developments a stage further and introduced a common short form of bills of lading, it being recommended by both organizations. This short form retains the legal protection afforded by the long form bill of lading. Instead of conditions and clauses in small print, it has on the front a short incorporation clause which advises ship owners that details of the conditions of carriage are available separately. This clause has been agreed between the GCBS and underwriters and should be given equal effect under English Law as if the conditions had been printed in
full on the form. This common short form bill of lading is a received for carriage document, which can be converted into a shipped or loaded on board document by notation of the carrier as stated in the Carriage of Goods by Sea Act. The common short form of bill of lading is not only for ship owners who are members of GCBS but is available for outward liner shipments from the UK. By agreement it can be used instead of the ship owners own form and act as a port to port or through bill of lading, for containerized, group age or general cargo. A common short form of bill of lading is a document of title to the goods by endorsement and transfer, or the goods pledged or mortgaged as security for an advance. Like the long form, this does not give the transferee a better title than that held by the person making the transfer. The sea way bill is nonnegotiable document. It came into being largely because of faster ships and the very swift turn-round particularly of container ships on the short sea routes between the UK and the Continent and Scandinavia, which had lead to a situation where ordinary bills of lading were failing to arrive in time. In January 1977 the GCBS and SITPRO introduced the common short form sea waybill. It provides a receipt for goods by the carrier and is evidence of the contract of carriage as described .It has the protection vis--vis its construction in English Law with underwriters and it also possesses the incorporation clause regarding conditions of carriage similarly to the short form of bill of lading. Care should however be exercised to ensure that the country of destination does not prevent the use of waybills. In a similar way to bills of lading, sea waybills can be converted into a shipped or loaded on board document by the carrier, and then can be transmitted through a bank for collection, but if a UK bank is required to advance finance on the strength of the document, a shipped bill of lading is normally required. Both the common short form of bill of lading and the sea waybill contribute to economies in that carriers do not insist on their own forms and therefore the forms can be used for various lines and trades and also much time can be saved in preparing documents. This time factor is important in avoiding delayed documentation and should benefit commerce by being both quicker and cheaper. B. Commercial invoice.
84 | P a g e
There is no document in the process of clearance that can be said the most important document. But the commercial invoice is one of the most important documents for the process of clearance. It is an international trade document which has to be prepared as accurately as possible. The document helps the custom broker in getting the entry prepared by him accepted by the customs. If there is any small or minor problem in the invoice then the customs reject the customs entry. There are instances when the goods are just shipped for the sampling. But even for the sample shipment the commercial invoice has to be prepared with properly mentioning that the goods are just for the sample and no re-sale of it can be done. The agreement between the buyer and the seller has many terms and conditions. All the terms and nature of the agreement between the buyer and the seller should be properly reflected in the commercial invoice. As we have discussed regarding the duties applicable on the basis of the advalorem basis and on the weigh basis. Duties on most of the vessels are calculated on the advalorem basis. Ad- valorem means the total value of the goods. The commercial invoice would be totaled to find out the value of the goods. In certain cases there is manipulations done by the importer in the value of the goods so as to reduce the amount of the duty to be paid. The value of the goods is mentioned upon the arrival of the vessel. It is usually counted on CIF i.e. Cost Insurance and Freight. The commercial invoice is prepared when the goods are being shipped. the seller prepares the commercial invoice as per the trade term and totals it. The invoice is then sent to the buyer through some banks or the seller directly sends the invoice to the buyer. There is no standard form of preparing a commercial invoice. But there are certain information that has compulsorily to be included in the invoice. The information is as follows: The name of the seller and the address The name of the buyer and the address Exact description of the goods The price agreed upon in U.S dollars
The package description Container type Point of delivery The payment terms Place and date of shipment Method of shipment The shipper/sellers signature The commercial invoice has its own importance for different parties. All the parties involved in the import and the export of the vessel and the goods have their own reason of demanding the commercial invoice. The exporter needs the commercial invoice to keep it as a record for the shipment and how the payment needs to be made to him. On the other hand the importer needs the commercial invoice for the process of clearance of the cargo at the port of destination. Also with the help of the invoice they know about the payment mechanism. The invoice has its importance for the freight forwarder as well. They use it for the preparation of the documentation as the part of their services. The customs entry is prepared by the custom broker using this invoice. There are sometimes questions on the integrity of the shipment. So for checking the integrity of the shipment the U.S customs needs the commercial invoice. The foreign customs may also require the invoice for being able to calculate the duty and to clear the cargo. Sometimes the invoice is not directly sent to the buyer. Some banks are involved in the process. So the sellers bank uses the document for their reviews. And also the buyers bank uses the same invoice for their records. In case of CIF the insurance company also needs a copy of the invoice so as to know the exact value of the goods that needs to be insured. There are other documents similar to the commercial invoice with a minor change in the format and also some changes in the duties payable. Taking an example of the excise invoice and comparing it to the
commercial invoice we know the major difference between the two. In case of commercial invoice we just need to pay the VAT (value added tax) tax. This VAT tax to be paid is mentioned on the commercial invoice. On the other hand the excise invoice states that there is another tax to be paid named the cenvat tax. The VAT tax is also to be paid in the case of excise invoice. The entire details of the tax to be paid are given in the excise invoice unlike the commercial invoice. If I am purchasing some goods from a trader and the quantity of those goods is 10 in number and the same trader has purchased in all 100 goods then the excise invoice that I receive will show all the details of the total 100 goods and also the amount of excise duty that the trader has paid. So the duty that will be charged from me will be that on 10 goods but will be calculated on the basis of the duty that the trader has paid for the 100 goods that he had purchased. And this detail of the trader is not shown in the commercial invoice that we are given. This is the major difference between the commercial invoice and the excise invoice. And the commercial invoice should have the statement that mentions that the invoice received is hindered percent true and should have a signature of the parties related to the invoice. The commercial invoice is useful for the calculation of the tariffs. The valuation of the goods can only be done on the basis of the commercial invoice. C. Packing list This is another document that is to be attached with the bill of entry. The goods that are imported do not necessarily be in the form of bulk cargo. The goods can be in the containers as well. So when the goods are sent in the containers they need to be packed properly. And when these are packed the details regarding their packing should be properly mentioned. The number of packs the methods used for packing and the other details are mentioned in the packing list. It is very important for the custom officer to know about the contents that the packs are carrying. The examination of the goods is done and the goods are only discharged if the officer find it to be safe enough and if it not violating the customs law. So the content of each of the packs are mentioned in the packing list. Also the weights of the packets are mentioned in the packing list to ensure that the weights mentioned in the weighment slip are accurate. In case the officer does not find the content on the packing list accurate he has the complete authority to check
the goods by re-opening them. For the imports of the goods you need to have an HS number. HS number means the harmonized number. It is very important for the packing list to contain the HS number because it is on this HS number that the product is identified and the duty levied is decide. If the appraising officer does not find the packing list appropriate he has the right to identify and inspect any of the packs. D. Pro forma invoice The pro forma invoice is a document that is just a formality that needs to be fulfilled by CHA. This invoice shows that the importer is the person who should receive the goods. Sometimes some of the countries do not produce the commercial invoice and instead of that they produce the pro forma invoice which acts as the commercial invoice. Banks usually prefer a pro forma invoice to a quotation for establishment of a letter of credit or for advance payment by the importer through his bank. In some of the countries the customs accept the pro forma invoice if the commercial invoice is not prepared. The pro forma invoice is prepared not by the exporter but by the importer. It is prepared by the importer incase the commercial invoice is not received by him. The importer can take the out of charge order form the commissioner once the pro forma has been shown to them and if they are fully satisfied by the invoice. There are certain contries that accept the pro forma invoice instead of the commercial invoice. U.S customs for example accept the pro-forma invoice to calculate the duty that is to be levied on the goods that are imported. But the customs accepts the pro forma only on the condition that the importer will have to show them the commercial invoice within 120 days from which the pro forma has been produced. There has to be a bond between the importer and the U.S customs regarding the same. The records have to be made in the customs department. So in case the commercial invoice is required by the customs for some statistical records then the importer will have to produce the commercial invoice within the 50 days instead of 120 days. H. Certificate of origin
88 | P a g e
The document that certifies that the products that are sent to the other country are actually originated or are produced in the same country from which they are exported is known as the certificate of origin. This document is majorly used for the export purpose. The certificate of origin certifies that the goods are wholly obtained the country from where the export has been done from. For example if the goods are exported from India the certificate should mention that the goods in the vessel are produced in India or are obtained wholly from India. The certificate of origin is very important from the Indian point of view. India is a registered member of the world trade organization. And also India has its trade pacts with many other countries. And we have discussed earlier about the concessional benefits that the importing party receives if the goods are imported from the developing country. India is a developing country and the goods exported from the Indian country would attract concessional duty payments in the importing country. So the certificate of origin when prepared by the exporters of India should mention that the goods are prepared, produced or are obtained wholly from India. The same is the case with the imports. If the customs in Indian sub continent allows some concessional duty payments on the imports from certain countries then the certificate of origin from the exporting country should certify that the goods are produced there. There are many schemes offered by the government for the import of goods. The various schemes are like generalized system of preferences, common wealth preference, and global system of trade preference. Under these schemes the importer gets some benefits on the duty payable. But for availing the benefit of the duty the importer should produce the certificate of origin before the custom officials that is prepared by the officials of the exporting country. And if the custom people are satisfied by the certificate then the importer would get the preferential tariff benefit. Generally there are two different categories of certificate of origin. They are classified as the preferential certificate of origin and non-preferential certificate of origin. In most the countries they demand the non-preferential certificate of origin. Any chamber of commerce cannot prepare the certificate of origin. The certificate of origin is an important document which involves the country into the trade. So it can only be prepared by the directorate general of foreign trade. It can also be produced by the
union ministry of commerce and industry. The DGFT has authorized certain agencies who can issue the certificate of origin to the exporter. So the certificate of origin is an important document to be attached with the bill of entry. it is an important document from the perspective of the importer. For the exporter the document does not hold much importance. And for the custom officials the document helps in the calculations of the duty that is to be levied on the goods imported. PRESENTATION OF BILL OF ENTRY AND NOTING THEREOF The Bill of Entry after completing all the relevant columns and with proper declarations signed by the importer (and or his Clearing Agent if any) is presented in the import noting department. After its proper scrutiny, vis--vis, the import manifest and also with respect to the various particulars declared on the bill of entry and the attached documents (which normally covers invoice and the bill of lading at that stage), if no descriptions are noticed, the bill of entry is deemed to have been presented and the date of presentation is satisfied and bill of entry noted against the relevant entry in the manifest. This date of presentation becomes crucial for determining the rate of duty (if the vessel has already entered) as well as rate of exchange. After a bill of entry is noted in the Import Department, the same is routed through the Appraising Main Section to the Appraising group concerned for dealing with love documents for scrutinizing the bill of entry and noting the rate of duty. The Bill of Entry is scrutinized to ensure that: All the columns have been duly filled in by the importer. The Bill of Entry is accompanied by relevant documents.
90 | P a g e
CHATER 6 - DETAILS REGARDING EXPORT EXPORT PROCEDURE STAGES IN EXPORT PROCEDURE I. PRELIMINARY STAGE: 1. Organizing: The exporter should have an organization to look after
export. Exporters may set up a complete new organization or add an export section to an existing one. At this stage the exporter may take a decision to select the right product to sell abroad. 2. Registering with various Authorities: The exporter should
register his organization with various authorities: a. Income Tax Authorities- to obtain Permanent Account Jt. DGFT- to obtain Importers Exporters Code Number
Number (PAN). b.
(IECNO). c. EPC- to obtain Registration-Cum-Membership-Certificate
(RCMC). d. Other authorities, such as FIEO, Sales Tax authorities,
Chamber of Commerce, etc. 3. Appointing Agent/ Distributors: It is advisable to appoint agents
or distributors in the selected overseas markets. The exporter may also open branches or sale divisions or depute permanent representative abroad. 4. Approaching Foreign Buyers: The overseas agents/
representatives approach foreign buyers with a quotation. The foreign buyer, if satisfied with the quotation and after clarifications, if any, will place an order with the exporter. PRE SHIPMENT STAGE:
II.
91 | P a g e
5.
Confirmation of Order: When the buyer is satisfied with the terms
and conditions of the seller, he will place either a formal or confirmed order along with a signed copy of the contract. The exporter should acknowledge confirm the receipt of such order. 6. Obtaining Letter Credit: Along with the acknowledgement letter
confirming the receipt of export order, the exporter may send a formal request to issue a letter of credit in his favour. 7. Obtaining Pre-Shipment Finance: As soon as the exporter
receives the confirmed order and the letter of credit, he should approach his bank to secure pre-shipment finance to meet working capital requirements. 8. Production and Procurement of Goods: As soon as the export
order is finalized and pre-shipment credit is obtained, preparations are made for the production and procurement of goods to be exported. 9. Packing and marketing: The goods must be packed properly and
attractively depending upon the type of product, transit coverage etc. If required, necessary assistance can be obtained from IIP(INDIAN INSTITUE OF PACKAGING). The exporter should prepare a packing list. The goods must be appropriately marked with country of origin, net and gross weight port of entry/destination, port of shipment and other details, if any. 10. Pre-shipment Inspection: The exporter apply to EIA, if the
exporter cargo is subject to quality control and pre-shipment inspection. The EIA issues an Inspection Certificate, if satisfied with quality and if not, Rejection Note. (At present, exporters who have obtained ISO 9000 certification or equivalent do not have to get their goods inspected by EIA). 11. Central Excise Clearance: Export goods are exempted from
central excise. However, clearance has to be obtained from excise authorities. There are two ways of excise (a) Export under rebate (b) Export under bond.
12.
ECGC Cover: The exporter should obtain ECGC cover to protect
against credit risk. The exporter may obtain either standard policy or specific policy, depending upon, the type of product/service and period of credit extended to overseas buyer. 13. Marine Insurance Policy: As soon as the goods are ready for
export, the exporter has to apply to insurance company for insurance cover- if it is a CIF quotation or if the exporter wants the exporter to obtain cover on his behalf. 14. Appointment of C & F Agent: It is always advisable to appoint C
& F agent to look forwarding work which includes booking of shipping space, preparing and submitting various documents to customs. 15. Instruction to C & F agent: The exporter should issue detailed
instruction to the C & F agent for the shipment of cargo. The instruction should be accompanied by certain documents such as : A) Commercial Invoice B) GR form (original and dupicate) C) AR4 form D) Packing list E) Original L/C F) Other export documents III. SHIPMENT STAGE 16. Processing of shipping documents in the custom house: On
receiving of documents form the exporter, the C & F agent prepares shipping bill in 5 copies and then present the shipping bill and other documents to Customs Appraiser at the Custom house. If everything is in order he endorses duplicate copy of shipping bill. All documents, except the original copy of GR form, original copy of shipping bill and one copy of commercial invoice, are returned to C & F agent after verification. 17. Physical examination of goods at the port: The C & F agent
obtains the carting order form the port trust to cart the goods inside the docks. He then approaches the custom examiner, who may physically
inspect the goods. The custom examiner then gives LET EXPORT ORDER. 18. Loading of goods: the duplicate copy of shipping bill which is
endorsed by the custom examiner is handed over to the custom preventive officer, who endorses it with LET SHIP ORDER. The goods are then loaded on the board the ship, for which Mate receipt is handed over to the shipping company, to obtain Bill of Lading. IV. POST SHIPMENT STAGE 19. Dispatch of documents by C & F agent to the Exporter: The C
& F agent then proceeds to submit the necessary documents to the exporter for further action. These documents include: a) Commercial invoice, attested by customs b) Shipping bill c) Original L/C d) Bill of lading e) GR form f) Form AR-4 g) Railway freight rebate form 20. Shipment advice to importer: The exporter then issues shipment
advice to the importer, indicating the date of shipment, the name of vessel and so on. A few documents are also enclosed (a) A nonnegotiable copy of B/L (b ) packing list (c ) commercial invoice. 21. Presentation of documents to the bank: All the required
documents are handed over to the bank by the exporter for processing. The bank then sends a set of documents to the importer, which normally includes commercial invoice, certificate of origin, bill of lading and insurance policy. The bank then sends a copy of bank certificate and attested copies of commercial invoice to the exporter. 22. Realization of export proceeds: After the receipt of bank
certificate and commercial invoice, the exporter collects the export proceeds from the importer through his bank. Generally export proceeds,
in India must be realized within 180 days from the date of shipment, otherwise, special permission must be obtained from RBI. 23. Follow up of export sales: A good exporter should always have
follow-up after sales i.e. he should provide necessary after sales service, find out buyers opinion towards the product and so on.
ROLE OF CUSTOM HOUSE AGENTS REGARDING EXPORTS The CHA provides a number of services. The services of the CHA includes the following 1. Obtaining Shipping Order: The CHA may obtain shipping order from the
shipping company. The shipping order enables booking the space on the vessel. At times, the importer does the booking space on the ship. 2. Arrangement for Internal Transport: The CHA agent would make
necessary arrangement of internal transport. Such transport is required to transport the goods from the exporters factory or warehouse to the docks/airport. 3. Preparation of shipping bill: The CHA prepares the shipping bill in five
copies. The shipping bill is an important document required for the customs clearance. The shipping bill is prepared on the basis of other documents provided by the exporter such as commercial invoice, packing list, etc. 4. Submission of documents to customs: The CHA submit the relevant
documents to the customs house for the purpose of verification. The documents include required number of copies of: i. ii. iii. iv. v. Commercial invoice Packing list Shipping bill ARE-1 form GR form
95 | P a g e
5.
Obtaining Carting order: The CHA has to obtain the carting order form
the port trust authorities. Carting order is required to get the goods inside the docks for the purpose of examination and shipment. 6. Storing of goods: After obtaining the carting order, the CHA would then
make arrangement to store the goods in the sheds at the docks. Such storing is required for the purpose of examination of goods. 7. Obtaining Let Export order: The CHA gets the goods examined by the
custom Examiner. If the customs examiner is satisfied, then he will issue the Let export order. 8. Obtaining Let Ship Order: The agent shows the let export order to the
custom preventive officer before loading the goods on the ship. The custom preventive officer may check the Let Export Order and goods. If satisfied he will issue let ship order. 9. Loading of goods: The agent then makes arrangement to load the goods
on the ship. The agent has to see it that the goods are loaded in good condition in the ship. 10. Payment of port dues: The agent would then make payment of port
dues for making the use of docks. After that he will collect the mate receipt from the port authorities. 11. Obtaining Bill of Lading: The agent then goes to the shipping company
and exchanges the mate receipt to the bill of lading. The bill of lading is the important document required by the importer for the customs clearance at the port of destination.
96 | P a g e
Export Promotion Schemes 1. Duty Drawback Scheme: Under Duty Drawback Scheme relief of Customs and Central Excise Duties suffered on the inputs used in the manufacture of export product is allowed to Exporters. The admissible duty drawback amount is paid to exporters by depositing it into their nominated bank account. Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944, empower the Central Government to grant such duty drawback. Customs and Central Excise Duties Drawback Rules, 1995 have been framed outlining the procedure to be followed for the purpose of grant of duty drawback (for both kinds of duties suffered) by the Customs Authorities processing export documentation. Under Duty Drawback Scheme, an exporter can opt for either All Industry Rate (AIR) of Duty Drawback Scheme or brand rate of Duty Drawback Scheme. Major portion of Duty Drawback is paid through AIR Duty Drawback Scheme which essentially attempts to compensate exporters of various export commodity for average incidence of customs and Central Excise duties suffered on the inputs used in their manufacture. Brand rate of duty drawback is granted in terms of rules 6 & 7 of Customs and Central Excise Duties Drawback Rules, 1995 in cases where the export product does not have any AIR or duty drawback rate, or where the AIR duty drawback rate notified is considered by the exporter insufficient to compensate for the Customs/Central Excise duties suffered on inputs used in the manufacture of export products. For goods having an AIR the brand rate facility to particular exporters is available only if it is established that the compensation by AIR is less than 80% of the actual duties suffered in the manufacture of the export goods. Duty Drawback facilities on re-export of duty paid goods is also available in terms of Section 74 of Customs Act, 1962. Under this Scheme part of the customs duty paid at the time of import is remitted on re-export of the goods subject to identification and prescribed procedure being followed.
97 | P a g e
A. 2.
Scheme for All Industry Rate(AIR) of Duty Drawback: AIR of Duty Drawback for a large number of export products are notified every
year by the Government after an assessment of average incidence of Customs and Central Excise duties suffered on Inputs utilized in the manufacture of export products. This facility is generally availed by the exporters as no proof of actual duties suffered on inputs used is required to be produced. After announcement of Union Budget every year, new AIR of drawback are notified every year usually with effect from 1st June, after factoring in the changes in duty rates effected by the budget. The Directorate of Drawback requests all Export Promotion Councils/Associations, etc. to collect, collate and furnish representative data in respect of the existing export products as also for any new product which the Councils feel have sufficient export from the country. After the announcement of the Budget various Export Promotion Council/Associations are also consulted by the Joint Secretary (Drawback), and their suggestions as well as their requests and justification for suitable enhancement of rates and also any changes sought in the scheme of the Drawback Table or the entries therein are taken note of while finalizing and announcing new AIRs. The AIRs are generally fixed as a percentage of FOB price of export product. Often very good export prices are obtained for a product or class of products which have no corelation with the actual duties suffered on inputs used which is sought to be refunded to Exporters as drawback. In order to safeguard Government revenue but also be fair to exporters, reasonable duty drawback caps have been imposed in respect of many export products having rates on FOB basis. These caps essentially reflect the average duty incidence suffered on the inputs used in the manufacture of the particular goods exported by several exporters with different prices and they are fixed on the basis of data supplied by the export promotion councils and collected by Directorate from other sources. The duty drawback claim scrutiny, sanction and payment in 23 Custom Houses is now done through the Electronic Data Interchange (EDI) System. This system facilitates
98 | P a g e
credit/disbursal of drawback within 72 hours from the date of shipment and electronic filing of Export General Manifest (EGM) in respect of related aircraft/vessel, directly to the exporters, accounts in the specified bank branches Customs notification Nos. 29/2001(NT) dated 1.6.2001 and 30/2001(NT) dated 22.6.2001 refer for ascertaining the details of current All Industry Rates of drawback for various export products. B. Brand Rate of Duty Drawback Scheme:
3. In respect of export products where AIR of duty drawback is not notified or where the AIR of duty drawback in considered by the exporter to be insufficient to fully neutralize incidence of duties suffered on the inputs utilized in the production/manufacture of the export product, the exporters opt for Brand Rate Duty Drawback Scheme. Under this Scheme, the exporters are compensated by paying the amount of Customs & Central Excise Duty incidence which is actually incurred on the inputs used in the manufacture of export products. For this purpose, the exporter has to produce documents/proof about the actual quantity of inputs utilized in the manufacture of export product along with evidence of payment of duties thereon The exporter has to make an application to the Directorate of Drawback in prescribed format along with enclosures (in the form of 3 drawback statements called DBK-I, II & III), within 60 days from the date of export of goods. The application has to be submitted to Directorate of Drawback with copies to the concerned Central Excise Commission rate which has jurisdiction over the factory of production of export product. The Central Excise Authorities conduct verification of the authenticity/fact of utilization of inputs/payments of duties on the inputs on the basis of records maintained by the factory of the exporter, current production of identical goods, if being effected, etc. A verification report has to be sent to the Directorate of Drawback. The Directorate of Drawback, on the basis of verification report and other relevant documents submitted by the exporter, process and issue drawback Brand Rate Letter to the exporter on the basis of which the concerned Custom House (from where the goods were exported)
99 | P a g e
makes payment of duty drawback. The Brand Rate Letter may be valid for particular export shipment or series of shipment and may also be extended for future shipments for one or more ports on request subject to proof of availability of related raw materials and duty evidence, etc., when verification was carried out. C. Simplified Scheme of Brand Rate:
4. Under Brand Rate of Duty Drawback Scheme, a "Simplified Scheme" is also available to limited companies and registered partnership firms. Under this Scheme, a rate letter for duty drawback is issued prior to receipt of verification report from the jurisdictional Central Excise Authorities on the basis of application made by the exporter subject to certain certification etc. For this purpose, besides application in the prescribed format along with enclosures, the exporter is also required to submit Chartered Accountant/Chartered Engineers certificate about the authenticity of consumption pattern and duty payments as claimed. An indemnity bond undertaking to pay back the duty drawback being claimed by him if it is found later on verification that the drawback amount paid to him is in excess of the admissible amount, has also to be furnished. In all cases where duty drawback is paid under Simplified Scheme, after receipt of the verification report from jurisdictional Central Excise Authority, the veracity of the application is counter checked with the said verification report and recovery action taken, where ever found necessary. D. Section 74- Drawback: 5. In case of goods which were earlier imported on payment of duty and are later sought to be re-exported within a specified period, customs duty paid at the time of import of the goods with certain cut can be claimed as duty drawback by the exporter at the time of export of such goods. Such duty drawback is granted in terms of Section 74 of the Customs Act, 1962 read with Re-export of Imported Goods (Drawback of Customs Duty) Rules, 1995. For this purpose, at the time of import, the identity particulars of the goods are recorded at the time of examination of import goods; at the time of export, cross verification of the goods under export is done with the help of related import
100 | P a g e
documents to ascertain whether the goods under export are the very ones which were imported earlier. Where the goods are not put into use after import, 98% of duty drawback is admissible at the maximum under Section 74 of the Customs Act, 1962. In cases where the goods are put into use in India after import (and prior to its export), duty drawback is granted on a sliding scale basis depending upon the extent of use of the goods. No duty drawback is available if the goods are put into use for a period exceeding 36 months after import. Application for duty drawback is required to be made within 3 months from the date of export of goods. E. Limitations on Drawback Admissibility: 6. The Customs Act lays down certain limitations and conditions which exporters claiming drawback have to meet/fulfill. Thus, no drawback is admissible under Section 75 if the market price is less than the amount of drawback claimed. Drawback is also not admitted if the claim is less than Rs.50/- in individual shipments. Government has also powers to deny or admit drawback claim subject to laid down conditions where there is likelihood of goods exported being smuggled back. These powers have been used for exports to Nepal where normal provisions of duty drawback are not applied. The Drawback Rules also further lay down in Rule 8 some further limitations, where rate is less than 1%, and this may be referred to. Government has also powers to deny drawback facility in such cases where export of goods if less than the value of imported material used in their manufacture. If necessary, certain minimum value addition over the value of imported materials can also be prescribed before granting drawback. It is also pertinent to note that the drawback is permitted to encourage exports and essentially there must be export proceeds repatriation. Though prior repatriation of export realization is not pre-requisite, the law prescribes that if sale proceeds are not received within the stipulated period, the drawback paid will be recoverable by the Government as per procedure laid down in drawback. F. Procedure for Claiming Drawback:
7. The drawback on export goods whether under AIR or Brand Rate is to be claimed at the time of export and requisite particulars have to be filled in the prescribed format of shipping bill/bill of export under Drawback. Triplicate copy of the Shipping Bill is treated as claim for Drawback. The claim is also to be accompanied by certain documents as laid down in the Duty Drawback Rules. If the requisite documents are not furnished or there is any deficiency, the claim may be returned after shipment for complying with the requirements and furnishing requisite information/documents (e.g. Brand Rate letter which may not be available at the time of export but becomes available after shipment). (Reference: Customs notification No.19 dated 6.2.1965) 2. Duty Exemption Scheme: 8. Duty Exemption Scheme is an export promotion scheme and it enables import of inputs required for export production free of Customs duty. Advance Licences are issued under Duty Exemption Scheme to allow import of inputs, which are physically incorporated in the export product (after making normal allowance for wastage). In addition, fuel, oil, energy catalysts, etc., which are consumed in the course of their use to obtain the export product can also be allowed under the scheme. Value and quantity of each item permitted duty free import are specified in the Advance License. Standard input-output norms (SIONs) notified by the DGFT under Para 7.8 of the Handbook of Procedures (Vol.I) or as modified under Para 7.10 of the said Handbook facilitate determination of the proportion of various inputs which can be used or are required in the manufacture of different resultant products. Advance Licences are issued for Physical exports, Intermediate supplies and Deemed exports. Advance Licences are also issued on the basis of annual requirement for exports/supplies. This enables the exporter to plan out his manufacturing/export programme on long term basis. Advance Licences for deemed exports are issued to (i) manufacturer exporter or main contractor in case of deemed exports, and (ii) Merchant exporter having supporting manufacturer.
102 | P a g e
All Advance Licenses and/or materials, imported there under are not transferable even after completion of export obligation. Advance Licenses are issued with a positive value addition stipulation. However, for exports for which payments are not received in freely convertible currency, the same are subject to higher value addition. In order to ensure proper monitoring and utilization of inputs imported against Advance Licenses (except Advance License for deemed exports), a Duty Entitlement Exemption Certificate (DEEC) Book is issued along with the Advance License by DGFT authorities. At the time of import and export against Advance License, entries are made in the DEEC Book by Customs to keep record of the import/export made against it. After completion of export obligation and imports against the Advance License, the DEEC book, Advance License and relevant export/import documents are submitted to Customs for logging (reconciling) of DEEC Book. Thereafter the Advance License, DEEC book and export/import documents are submitted to DGFT authorities for issue of export obligation (EO) discharge certificate. On the basis of EO discharge certificate issued by DGFT, redemption of bond/B.G. filed by the Advance License holder with Customs is allowed. Advance License are issued on pre-export or post export basis in accordance with the Export/Import Policy and procedure in force on the date of issue of license and are subject to the fulfillment of a time bound export obligation as in the license. The Advance License holder fulfils export obligation (EO) by exporting the resultant product specified in the Advance License upto specified quantity/value. In order to ensure fulfillment of such export obligation, the Advance License holder executes a bond with or without Bank Guarantee (B.G) with Customs undertaking to fulfill the specified export obligation. In the event of failure to fulfill the specified EO. The license holder becomes liable to pay differential Customs duty with interest @ 24% per annum on such duty. Exemption from furnishing of bank guarantee is given in the following categories of cases:(i) where the license holder is a manufacturer exporter having export turnover of
103 | P a g e
Rs.1 crore or above during preceding financial year and he has a clean track record; and (ii) Where the license holder is certified as a super star trading house, star trading house, etc. by DGFT. In such cases a bond is considered sufficient. In all other cases the Advance License holder is required to furnish 100% bank guarantee for the duty difference. Advance License holder for intermediate supply is required to fulfill his export obligation by supplying the intermediate goods, which are required in the manufacture of resultant export product to the advance license holder. In order to ensure such fulfillment of EO the license holder is required to give bond with or without bank guarantee and in the event of failure to fulfill the EO he becomes liable to pay differential Customs duty with interest @ 24% per annum on such duty. Advance License holder for deemed export is permitted import of materials which are required in the manufacture of resultant product free of Customs duty. The license holder is required to fulfill his EO by supplying the resultant product to the project, specified in the said license, in India and in the event of failure to do so, he is required to pay differential Customs duty with interest @ 24% per annum on such duty. All Advance Licenses are normally valid for import of goods upto 18 months from the date of issue and the relevant DGFT authority (who issues the license) is competent to grant revalidation. DGFT authority (who issues the license) is also competent to grant extension of EO period beyond the normal EO period of 18 months. No duty drawback is normally admissible to an Advance License holder. However the license holder is entitled to claim brand rate of duty drawback in respect of inputs which are not imported against the advance license and on which Customs/excise duty has been paid. Since Advance License Scheme involves technicalities, its operation has been restricted to limited ports, airports, ICDs, etc. which are notified for the purpose. Commissioners of Customs have, however, been empowered to permit export/import
under the Scheme from any other place which has not been notified, on case to case basis by making suitable arrangements at such other places. (Reference: Customs notification No.48/99-Customs, dated 29.4.99 and 50/2000-Cus., and 51/2000-Customs, both dated 27.4.2000 ) 3. Duty Remission Scheme:
Duty Remission Scheme consists of ; (a) Duty Free Replenishment Certificate and
(b) A. 9.
Duty Entitlement Passbook Scheme.
Duty Free Replenishment Certificate (DFRC) Scheme: DFRC Scheme was announced on 1.4.2000 under the EXIM Policy 1997-2002. It
is an export promotion scheme under which DFRC licenses are issued permitting duty free import of inputs which were used in the manufacture of export product on post export basis as replenishment. Duty Free Replenishment Certificate (DFRC) License is issued to a merchant-exporter or manufacturer-exporter. DFRC licenses are issued only in respect of export products covered under the Standard Input Output Norms (SION) as notified by DGFT. DFRC Licenses are issued for import of inputs, as per SION, having same quality, technical characteristics and specifications as those used in the export product and as indicated in the shipping bills. The validity of such licenses is normally 18 months and relevant DGFT authority (who issues the license) is competent to grant extension of validity period. DFRC license and or the material(s) imported against it are freely transferable. Exporters operating under DFRC Scheme are entitled for availing AIR of duty drawback in respect of that duty paid materials, whether imported or indigenous, used in the
105 | P a g e
export product, which are not specified in the DFRC license. Brand rate of duty drawback can also be availed in respect of such inputs. Since DFRC Scheme involves technicalities like Advance Licence Scheme, its operation has been restricted to limited ports, airports, ICDs, etc. which are notified for the purpose. Commissioners of Customs have, however, been empowered to permit export/import under the Scheme from any other place which has not been notified, on case to case basis by making suitable arrangements at such other places. (Reference: Customs notification No.48/2000-cus., dated 25.4.2000) 4. 10. Duty Entitlement Pass Book (DEPB) Scheme: DEPB Scheme was first announced on 1.4.1997 under EXIM Policy 1997-2002. It
is an export promotion scheme and envisages grant of DEPB Credit Entitlement to an exporter at the time of export at an ad-valorem rate notified by DGFT, in relation to FOB value of the export product. The DGFT have so far notified DEPB rates for nearly 2000 export products. These rates are based on the computation of Basic Customs Duty suffered by the exporters on the inputs listed in the Standard Input-Output Norms (SION) applicable to the export product. The crucial feature of the DEPB Scheme is that all the inputs listed in the Standard Input-Output Norms are deemed to have been imported and to have suffered Customs duties. DEPB rates are finalized by the DEPB Committee, chaired by Additional DGFT and consist of representative from Ministry of Finance also. Value caps have been imposed on export products having DEPB rates of 15% or more to curb the tendency of unscrupulous exporters to avail most of the runaway benefits by over-invoicing export. The normal validity period of a DEPB Scrip is 12 months and DGFT authority (who issues the scrip) is empowered to grant revalidation. These scripts are for a certain amount of DEPB credit and can be utilized for adjusting Customs Duties (Basic or CVD) against import of any products into India, without the necessity of any co-relation between the export product and the import goods, i.e. it is not necessary to import only the relevant inputs corresponding to the export product.
Since DEPB Scheme also involves technicalities like DFRC Scheme, its operation has also been restricted to limited ports, airports, ICDs, etc. which are notified for the purpose. Commissioners of Customs have, however, been empowered to permit import/export under the scheme from any other place which has not been notified, on case to case basis. The DEPB and/or the items imported against it are freely transferable. Import against DEPB scripts is allowed at the port specified in the DEPB which is the port from where exports have been made. Imports from a port other than the port of export are also allowed under TRA (Telegraphic Release Advice) facility as per the terms and conditions of the notification issued by Department of Revenue. No duty drawback is allowed on exports made under DEPB Scheme. However, in cases where CVD is paid in cash on imported inputs, or where indigenous duty paid inputs, not specified in SION, are used in the manufacture of export product, in such cases brand rate of duty drawback is admissible as per circular issued by the Ministry of Finance, provided CENVAT Credit in respect of such duty incidence is not availed. (Reference: Customs notification No.34/97-cus., dated 7.4.97) 5. 11. Export Promotion capital Goods (EPCG) Scheme: Under EPCG Scheme import of capital goods which are required for the
manufacture of resultant export product specified in the EPCG License is permitted at concessional rate of Customs duty. This Scheme also enables up-gradation of technology of the indigenous industry. For this purpose EPCG Licenses are issued on the basis of approval granted by EPCG Committee. The EPCG Committee comprises of officers from DGFT, MOF and concerned Administrative Ministry. At present the EPCG license holder is permitted to import capital goods at 5% or 10% Customs duty. Whereas under 5% duty EPCG Scheme the license holder is required to undertake to fulfill export obligation equivalent to 5 times the CIF value of imported capital goods within a period of 8 years reckoned from the date of issue of license, under 10% duty EPCG Scheme, the license holder has to fulfill export obligation equivalent to 4 times the CIF value of imported capital goods in five years. EPCG licenses are issued to
107 | P a g e
manufacturer exporters and merchant exporter with or without supporting manufacturer, and service providers. The license specifies the value/quantity of resultant export product to be exported against it. In the case of manufacturer/merchant exporters, such Export Obligation (EO) is required to be fulfilled by exporting resultant products manufactured with the help of imported capital goods. In the case of service providers the export obligation is required to be fulfilled by earning foreign exchange through rendering service. In order to ensure fulfillment of specified export obligation as also to secure interest of revenue, the license holder is required to file bond with or without bank guarantee with the Customs Authority prior to commencement of import of capital goods. Bank guarantee equal to 50% of the differential duty is required to be filed by the license holder excepting the following cases; (i) where the license holder is a manufacturer exporter having export turnover of Rs.1 crore or above during preceding financial year and he has a clean track record; and (ii) Where the license holder is certified as a superstar trading house, star trading house, etc. by DGFT. In such cases, a mere bond is sufficient. Capital goods imported under EPCG Scheme are subject to actual user condition and the same cannot be transferred/sold till the fulfillment of export obligation specified in the license. In order to ensure that the capital goods imported under EPCG Scheme are utilized in the manufacture of resultant export product, after importation/clearance of capital goods from Customs, the license holder is required to produce certificate from the jurisdictional Central Excise Authority (CEA) or Chartered Engineer (CE) confirming installation of such capital goods in the declared premises. The normal validity period of EPCG license is 24 months and DGFT authority (who issues the license) is empowered to grant further revalidation. In order to ensure proper accountable of fulfillment of export obligation, the EPCG license holder is required to indicate the EPCG license No/date on the body of the Shipping Bill. After fulfillment of
specified export obligation, the license holder submits relevant export documents along with EPCG license to the DGFT authorities for the purpose of obtaining EO discharge certificate. After obtaining EO discharge certificate from DGFT, the license holder produces the same before Customs for the purpose of obtaining redemption of bond/B.G. filed by him. In order to ensure that the license holder maintains a specified level of export obligation throughout the EO period of 5/8 years, in addition to overall EO, year wise/block wise EO are also specified. A gestation period of 1/2 years is allowed for the purpose of installation of capital goods and commencement of production. In cases where the EPCG license holder is unable to maintain the specified level of year wise/block wise EO or overall EO., extension of year wise/block wise EO period upto a maximum of 1 year/block is allowed by DGFT Authority. Similarly in cases where the license holder is not able to fulfill overall EO within specified period, extension of 1 year is allowed. In case of default in EO the license holder has to pay differential Customs duty along with 24% interest per annum on such duty. Exporter of goods manufactured with the help of Capital Goods imported under the EPCG Scheme is entitled to input duty incidence neutralization benefits like Drawback, DFRC, Advance License, etc. in accordance with the terms of the individual scheme(s). (Reference: Customs notification Nos.28/97-cus.,dated 1.4.97 (10% duty) and 49/2000cus. dated 27.4.2000 (5% duty))
109 | P a g e
CHAPTER 7- OTHER BUSINESS IN SHIPPING SECTOR Shipping Management Ship management is the business of manning, equipping, provisioning and maintaining a ship. It broadly includes technical, commercial, and crew management of ships. Maintenance, dry-docking and technical up-gradation of ship is the responsibility of technical management. Commercial management involves decisions regarding vessel deployment and sale and purchase while, crew management takes care of recruitment and selection of technical, deck side officers and ratings people.
110 | P a g e
Classification and Survey Ship survey concentrates on ship classification societies that register the ships under a particular class and flag. The technical rules, regulations, standards, guidelines and associated surveys and inspections covering the design, construction and through-life compliance of a ship's structure and essential engineering and electrical system are the main concerns of the classification societies. International Maritime Organization (IMO), through their various conventions requires certification that the above mentioned elements are satisfactory for the service for which the ship is intended. To attain the highest structural and engineering standards in the merchant ships, classification societies form the basis on which the statutory certification is issued. It also provides the technical support, compliance verification and research and development. Periodic surveys are carried out to ensure the continued compliance of rules after the construction of the ship. These include various surveys of hull and machinery on a continuing basis.
Ship Supplier Operation of the vessel needs various consumables in the form of bunker, lubricants, fresh water, stores and others. Ship chandeliers provide food and provisions to the ship for the next journey in the sea. It also arranges for the services of the doctor, washer man and others when the ship is at port. The shipping agent of the company or the ship manager normally arranges for the ship chandelier to serve its client. Increasingly these shipping agents and ship managers are entering into the field of supplies.
Ships have to have the adequate supply of fresh water on it, which they purchase on the port they visit. Many of these fresh water suppliers own the barges to supply water for the vessels like tankers, which does not come inside the port for berthing. The vessels at the lighter age port also take services from the fresh water supplying barges.
The industry of ship suppliers is highly fragmented with a significant number of small companies active in this sector. Various other specialized players like dredging companies, shipping agents, ship managers, stevedores etc. are also entering into the business of ship suppliers to leverage on their experience and good contacts within the shipping industry. However, bunker and lubricant supply to the ship is dominated by the large sized players like Castrol, Shell, Indian Oil Corporation and other public limited companies. These companies supply bunker or lubricant to the ship owner either directly or through their agents.
Logistics Container lines 'Containerization', the term very familiar to present day shipping It was Malcolm
industry was a completely unknown concept a few decades back.
McLean, owner of a huge trucking company in USA, who first conceived the idea of containerization by transporting containers through 'Ideal - X' in 1956 and initiated a revolution in the history of shipping industry. Over the years, the industry has created a separate identity within the shipping world through continuous development and Maersk Lines, P&O Nedlloyd, Zim lines, Sealand Services (CSX), APL, Hapag Lines and others have come up as international major serving customers all over the globe.
ICD/CFS Container Freight Station (CFS) or Inland Container Depot (ICD) also referred to as dry ports, provide various services for handling containers outside the port. The terms ICD and CFS are used interchangeably as there is not much of difference in their functioning. Generally, a dry port located in the hinterland is called ICD; while if located in the port city, it is known as CFS. Dry ports are the hubs, which facilitate the aggregation and transportation of export containers from hinterland to the gateway ports. Similarly, they act as receiving hubs for the import containers meant for hinterland. Other associated functions include cargo consolidation, stuffing and
112 | P a g e
destuffing, warehousing, custom clearance and duty collection, processing of custom documents, cargo and container handling and others.
Integrated Logistics The term logistics is defined as "the process of planning, implementing and controlling of the efficient, cost effective flow and storage of raw material, in-process inventory and finished products and related information from the point of origin to the point of consumption as per customer demand". The entire process involves a large number of activities to be done in accordance with user requirement and requires proper integration of different activities, which would lead to the smooth flow of operations across the value chain. Integrated logistics co-ordinates all the logistical activities taking place in valuable chain to provide optimum benefit to the user. The concept of integrated logistics service is new; traditional transport companies, courier companies and freight forwarders have emerged as integrated logistics service provider by leveraging on their existing infrastructure and experience. They not only provide the prime functions like transportation, warehousing, packaging, clearing and forwarding but also handle other activities like order processing, sales tax and excise duty documentation, invoicing, collection of bills, inventory management, and others. With the strategies taken up by traditional industrial firms to reduce operational costs and enhance value addition throughout the value chain, importance of integrated logistics has got a new dimension. Outsourcing of logistics service to specialized service provider having considerable expertise over the industry becomes the trend.
Transportation Transportation, an indispensable component of economic progress, is an essential and major sub-function of logistics, creating time and place utility in goods. It serves as the backbone of supply chain management. Though traditionally, transportation involves physical movement of goods, however, in the new economy era, it is largely influenced
113 | P a g e
by information and communication technologies with the focus being on knowledge of customer needs and value added services in order provide maximum benefits to user.
Warehousing Traditionally, warehousing involves the storage of raw material, work-in-process inventory or finished goods in a covered space in the most suitable way for a specific time period. It also adds temporal and spatial significance to the value of the commodity. With the growing importance of logistics and supply chain management throughout the world, warehousing has emerged as one of the vital component of the supply chain. Globally, the USD100 billion warehousing industry has undergone significant changes in the last decade owing to the growth in world trade and expansion of international markets as well as increasing application of new technology. Internationally, warehousing industry is classified into three different types : Public warehousing, Private warehousing and Contract warehousing. Of these, contract warehousing, which has dedicated customers with long-term agreement, is the fastest growing segment of the industry internationally and is expected to grow at a rate of 1215 percent over the next couple of years. Ports act as the interface for seaborne trade movement. Most of the major ports of a country provide warehousing facilities to users through its own warehouses and also by privately-owned warehouses located within or outside the port arena. Increased liberalization of the economy has boosted private sector participation in ports. FRIEGHT FORWARDING Freight forwarding is a service used by companies that deal in international or multinational import and export. While the freight forwarder doesn't actually move the freight itself, it acts as an intermediary between the client and various transportation services. Sending products from one international destination to another can involve a multitude of carriers, requirements and legalities. A freight forwarding service handles the considerable logistics of this task for the client, relieving what would otherwise be a formidable burden.
114 | P a g e
Freight forwarding services guarantee that products will get to the proper destination by an agreed upon date, and in good condition. The freight forwarding service utilizes established relationships with carriers of all kinds, from air freighters and trucking companies, to rail freighters and ocean liners. Freight forwarding services negotiate the best possible price to move the product along the most economical route by working out various bids and choosing the one that best balances speed, cost and reliability. A freight forwarding service generally provides one or more estimates to the client along with advisement, when necessary. Considerations that effect price will range from origin and destination to special requirements, such as refrigeration or, for example, transport of potentially hazardous materials. Assuming the client accepts the forwarder's bid, the freight is readied for shipping. The freight forwarding service then undertakes the responsibility of arranging the transport from point of origin to destination. One of the many advantages of using freight forwarding is that it handles ancillary services that are a part of the international shipping business. Insurance and customs documentation and clearance are some examples. As a consolidator, a freight forwarding service might also provide Non-Vessel Operating Common Carrier (NVOCC) documentation, or bills of lading. Warehousing, risk assessment and management, and methods of international payment are also commonly provided to the client by the freight forwarding service. A good freight forwarding service can save the client untold time and potential headaches while providing reliable transportation of products at competitive rates. A freight forwarding service is an asset to almost any company dealing in international transportation of goods, and is especially helpful when in-house resources are not versed in international shipping procedures.
Freight Forwarding Services:
Sending products from one international destination to another can involve a multitude of carriers, requirements and legalities. A freight forwarding service handles the considerable logistics of this task for the client, relieving what would otherwise be a
formidable
burden.
The major cause often
involves negotiating the best rate for services. A
successful freight forwarder normally has strong contacts within the shipping industry and is often privy to options not available to the general public.
International Freight Forwarders:
Additionally, they will submit the appropriate documentation, such as bills of lading, commercial invoices or certificates of origin. Air freight forwarders will work closely with international customs brokers to guarantee full compliance with all import and export regulations.
Freight forwarding is a service used by companies that deal in international or multinational import and export. While the freight forwarder doesn't actually move the freight itself, it acts as an intermediary between the client and various transportation services.
116 | P a g e
New Technologies and The shipping industry Internet and Information Technology have revolutionized the maritime industry which uses more and more software to better serve (rapidly and efficiently) its clients in reducing time and administrative procedures.
Traditionally, a transportation chain involves a multitude of activities taking place at different points and performed through the transfer of paper documents and manual processes. The application of Internet and IT has changed the entire scenario by integrating the different processes and bringing considerable efficiency across the chain. Internet is fostering new ways in which business is done. The maritime industry has been laggard in adopting Internet technology, especially in Developing countries. However, adoption of Internet has become the choice of the industry to substantially increase the efficiency level and reduce cost of operations. Business processes within
the maritime sector are increasingly become web-enabled to take advantage of the new technology. As a result, the fragmented nature of the industry, the lack of transparency and usual geographical dispersion of various parties involved in the trade and shipping industries have been reduced. Information technology (IT) has increased the efficiency and productivity of different economic activities and has taken the center-stage in today's world. IT includes not only softwares required for ship operations and cargo handling at ports but also other software products reducing substantially the volume of paper transfer and increasing transparency of operations. The software required for a ship operation can be divided into technical software and commercial software. The technical software are power plant maintenance software, loading software, navigational software, marine software etc, while, commercial software includes cargo management software, port information software and others. The loading software is mandatory for any vessel as per the International Maritime Organization (IMO) and is generally required at the construction stage of the vessel. The software requires the generic approval as well as specific approval with which the ship is classified from the ship classification societies. Other software products include Electronic Data Interchange (EDI), which eliminates duplication of manual data by replacing it with electronic data entry, increases accuracy and eliminates processing delays. Vessel Traffic Management Information System (VTMIS), monitors all the vessel traffic with the goal of improving safety and security and optimizing overall port operations. Use of Internet as a medium of information and communication reduces the gap between the service provider and client resulting into lower demand for the intermediaries and more assurance of profitability.
118 | P a g e
CHAPER 8 ENCHANCING EFFIECIENCY FOR CHA EDI SYSTEM
Over the time there have been many changes in the technologies used in the custom stations for maintaining the records and for transferring the records. There has been a revolution in the maritime industry with the coming up of the internet and IT. More and more software are being introduced to reduce the time taken in the clearance procedure and the work burden has been reduced to a great extent. Traditionally the work of the customs was done manually. The documents and other important files were sent from one table to the other or from one custom station to the other by means of different transport. But with new technologies coming up the manual process is being vanished. The internet application has integrated different process of clearance and has brought efficiency in the entire chain of work. Also the industry chooses the internet application to reduce the cost of the work. The manual work initially used involved many people and the cost of employing those people was very high. So with the introduction of these internet applications the work burden has been reduced and the cost has been cut. The entire clearing sector has become web enabled. The industry used to be fragmented and there was even lack of transparency in the clearing sector. But the use of internet has removed all the geographical dispersion between the different parties involved in the transaction like the exporters and the importers and also the CHA and the custom officials. The productivity of the custom officers has also increased with the use of new technologies. IT does not only include the software for easy paper transfers but also an easy mechanism for the freight forwarding business.
There are different software introduced like the commercial software and the technical software. The commercial software helps the management of the cargo that has been imported into the country and the cargo that is to be exported from the country. Also there has been port information software launched. There is software installed on the ports for the vessel traffic management as well. The international maritime organization has made a compulsion for the use of some software like the loading software. During
the construction of the vessel it is mandatory to have the loading software installed in the ships. The main revolution in the clearing and Forwarding industry was done by the launch of the EDI (electronic data interchange).
There are many business forms that are used in the process of clearing the cargo form the customs. Initially those forms were exchanged using paper but with the coming up of electronic data interchange the business forms will be exchanged electronically. The simplicity of the process of the EDI has motivated many organizations of government to put this into practice. The EDI and the electronic commerce is now viewed by most of the people in the same way. The tedious procedure of transferring of the paper from one place to the other has been removed. There are several other benefits of the electronic data interchange but at the same time there are disadvantages of the same.
There are several documents required by the commissioners for the process of clearing the cargo and these documents are required not only for the process but also for maintaining the records. So the documents will be submitted once to the agency and then these documents will be passed on to the other agencies electronically. If the documents so are manually shifted form one table to the other the errors keeps on creeping at each stage. The entire system would look very good if the EDI is successfully introduced. All the work would become automated. The importer would just once file the documents with the custom agency and then it will be transferred automatically from one department to the other. The same would be transferred to the port trusts and then to the sales tax department. And with the use of EFT (electronic fund transfer) the custom duty for the clearance of the goods would be paid by the importer directly to the customs without him physically present before the officials. Also there are times when the custom refunds have to be taken from the government. So the custom refunds would also be directly transferred to the importers account using the electronic fund transfer. The process of EDI is based entirely on trust and contractual obligations. Once the act is passed, no bill of entry, packing list and the commercial invoice will have to be presented in paper. Each of the documents will have to be kept with the
importer/exporter/CHA for a minimum period just for the verifications purpose. There would not be any examination of the goods on regular basis. Only the goods that are of hazardous nature would be examined. The Green channel system would be applied to 80% of the clearing procedure. But for this it is very important that the government at all the ports understands the benefits of the same.
The EDI has already been installed in the major ports of the country like the Kandla customs house, Chennai port, Mangalore port, Haldia, Goa, Vizag and Mumbai. If EDI is not adopted properly by the custom board in all the departments and at all the custom station we would be left behind in the nations economic prosperity as compared to the global scenario. And if done properly we would be one of those using the paperless transaction system.
DRAWBACKS OF EDI SYSTEM
There are some drawbacks of the EDI system. Unlike the manual system the EDI has a specific working time. So if the CHA is late in applying or submitting the documents he will have to wait for one more day to get the documents cleared. And in time of congestion there is a heavy demurrage that has to be borne by the importer for the delay. While in the case of manual system the documents could be submitted at any hour of the day. Also for the successful working of the EDI the entire system needs to be changed. People need to be deployed. Sincere efforts have to be put in by the government to make the process of EDI a success.
121 | P a g e
CHAPTER 10- RESEARCH METHODOLGY
Research methodology: Research is a tool of science and that its purpose is to advance human knowledge features which distinguish research from other investigatory activities. Research and research methods might be studied for a variety of reasons. First, it is useful to be able to understand and evaluate research reports and articles which one might come across in an academic or professional context. It is therefore advantageous to understand the basis of such reports and articles. Second, in an academic environment, research is conducted for its own sake, in the interests of the pursuit of knowledge for example for a thesis. Third, most readers who are managers will find themselves conducting or
commissioning research for professional reason.
Qualitative and Quantitative The quantitative approach to research involves statistical analysis. It relies on numerical evidence to draw conclusions or to test hypotheses. To be sure of the
reliability of the results it is often necessary to study relatively large numbers of people and to use computers to analyze the data. The data can be derived from questionnaire surveys, from observation involving counts or from secondary sources. The qualitative approach to research is generally not concerned with numbers. It involves gathering a great deal of information about a small number of people rather than a limited amount of information about a large number of people. The information collected is generally not presentable in numerical form. It is used when a full and rounded understanding of the leisure or tourist behaviour and situation of a few individuals, however unrepresentative they may be, is required, rather than a limited understanding of a large, representative group. Primary and Secondary Research Primary data collection is the collection of data which is done by using methods such as interviews and questionnaires.
There are many methods of collecting primary data and the main methods include : Questionnaires Interviews Focus group interviews Observation Case-Studies Diaries Critical incidents Portfolios
Questionnaires Questionnaires are a popular means of collecting data, but are difficult to design and often require many rewrites before an acceptable questionnaire is produced.
Interviews Interviewing is a technique that primarily used to gain an understanding of the underlying reasons and motivations for peoples attitudes, preferences or behaviour. Interviews can be undertaken on a personal one-to-one basis or in a group. They can be conducted at work, at home, in the street or in a shopping centre, or some other agreed location.
123 | P a g e
Secondary Data Collection Secondary data are easy to obtain as compared to the primary data. And also the data can be obtained at a far cheaper cost than that of primary data. Secondary data means the information that has been already obtained by different people and can be gained from different sources. The main sources of obtaining the secondary data is internet sites, books, magazines, journals and articles etc. sometimes for specific subjects the primary data cannot be collected or is not feasible to get, so for those subjects the secondary data can be obtained. For the research on the topic of Enhancing the Efficiency of Custom House Agents there has been data collected from many government websites relating to the imports in the Indian economy and also there is reference to many of the articles from the journals. Also there are some limitations to the secondary data. All the secondary data might not be original and may have some manipulations in it. So it is sometimes not feasible to completely rely on such data.
ANALYSIS The questionnaire was filled by business people of different age group. The nature of the business was same but the age group was different. So on the basis of the age of the respondent the above chart has been prepared. The age group of the respondent is an important thing to be noticed.
Out of 50 respondents 12 respondents were of the age group of between 20 years and 30 years.
20 were of the age group of 30-40.
And 18 people were of the age group above 40 years but were younger than 50 years of age.
124 | P a g e
QUES 1: How much do you think has the Liberalization of imports changed the business of clearing of imports?
Impact of Liberlisation Of Imports

78%
20% 2% Drastically Some what Not At All
The liberalization of imports by the government played a very helping hand to the business of clearing and forwarding. With business of clearing was given a boost and the freight forwarding was a lucrative business to start along with. There were many new businesses started relating to the clearance of customs.
Out of 50 respondents 78% of them believed that the liberalization of imports had a very drastic change in their business.
Another 20% said that there was a little impact on their business due to the Liberalization.
But there was only 2 % who said that there was no impact due to liberalization.
125 | P a g e
Ques 2: Do you think the CHA plays an important role in custom clearance of ex-Im?
CHA Plays An Vital Role
100% 50% 0% Yes No
. There are 65% who said that CHAs plays an very vital role in clearing of goods from customs.
. There are 35% who were exporters/importers himself do the self clearance where there turnover is very high.
Ques3: The business of clearing of which of the two is more in India?
Clerance of EX-IM
32% Clearing of Imports Clearing of Exports 68%
126 | P a g e
The income that the clearing and forwarding agent generates from the clearing of the goods is different in the case of imports and from that of exports. Previously the income from the imports was quite less. But due to the reduction in the duty of the imported goods and due to increase in the imports the clearing business of imports has become more lucrative.
68% respondents out of 50 believed that the income from the clearance of imports is high as compared to that of exports.
32% of them said that the business of clearance of exports is more lucrative when compared among the two.
Ques4: How much time does it take to get the documents cleared from the custom house?
Time taken for Clearance

45% 32%
12%
11%
One working day
2-3 Working days
A week
More than a Week
127 | P a g e
. The CHAs who have a heavy volume, they have great contact with customs and do the work very easily, so 12% of people can clear the goods in one working days and 45% of CHAs need 2-3 working days.
. Remaining CHAs who have volume very less, so they need time and also have less knowledge regarding the procedures so they take around a week,32% of CHAs are included in this category.
. If the cargo has some problem regarding weight, valuation etc. so that need a time may be more than a week. So 11% of CHAs need that much time to clear that cargo.
Ques5: How strict is the licensing policy to get the license for a custom house agent?
Licencing Policy
20%
10% 1 Very Strict 2 Strict 35% 3 lenient 4 very lenient
35%
The CHA before starting the work of clearing and forwarding should have the license for the business. And for having the license he should qualify for the same as per the
128 | P a g e
governments rules and regulations laid down. Majority of the respondents were not satisfied by the licensing policy.
35% of the respondents believed that the policies and the requirements by the government for the licensing are very strict.
35% of the respondents said that the rules were strict.
20% of the people out of 50 believed that the rules for getting the license were lenient
And only a 10% out of all believed that the qualification policies laid down by the government are very lenient.
Ques 6: Has the government taken appropriate and adequate steps to help boost the business of a Clearing and forwarding?
Government Initiative
100% 80% 60% 40% 20% 0% Yes No
The respondents had mixed views for this question. The government policies play an important role in the success or failure of this business. And also the rules and regulations made by the government affects the working of the custom and the freight
agents. So the steps taken by the government each year or the amendments made are important for the CHAs.
70% of the respondents out of 50 said that the steps taken by the government are adequate enough and has helped them a lot.
Another 30% believed that the government has not taken the right steps for the helping boost the business of custom agents.
Ques 7: Do you agree that the bureaucracy in the custom department has lead to the slow Procedure of the clearance of imports?
Bureaucracy in Customs results slow Procedure

Disagree 24%
Agree 76%
The bureaucracy in the custom department has lead to the slow procedure of clearing. Most of the respondents very firmly believe with this. The documents pass on from one table to the other and resulting in the delay.
130 | P a g e
76% of the respondents firmly believe that it is the bureaucracy that has lead to the slow procedures.
24% of the people strongly disagree to the bureaucracy of custom officials.
Ques8: . Which of the following do you think is the most complex work in the entire Procedure of clearing the imports?
Difficult Part in Clearance

1 Documentation 3 Calculation of custom duty 2 clearance for warehousing
21% 45%
34%
There are many complex works in the clearing and forwarding business. Each work has its own set of complexities. So to know about the most complex of some of the processes the CHAs were asked about it and the following outcomes have been reached at:
45% the respondents said that the documentation is the most complex of all the works done under the clearing business.
131 | P a g e
While 34% of respondents believed that the calculations of the customs duty was more difficult as compared to documentation.
And the rest 21% said that the clearance procedure for the warehouses is a more complex job than the other two.
Ques9: How much is the bureaucracy in custom department?
Bureaucracy in customs
85%
15% Yes No
In every custom department at Indian ports there is lot of bureaucracy. Without this the work is not done. Even if the goods and all the documents are proper then also the CHAs bribe to the customs for ease work. . 85% of the respondents believe there is bureaucracy at customs.
132 | P a g e
. The huge companies who are doing the business for more than 40 years they all are registered and their goods imported/exported are fixed so they do not need to bribe them. Only 15% are there such.
Ques10: EDI software is really helpful or manually it was better?
EDI Feasablity
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Yes No
The manual work has been replaced by the electronic softwares at all the ports. . So the respondents were about the effects that EDI would have on the documentation process. And the results are:
90% people were assertive in their reply and said that the paper procedures would be lessened by the electronic data interchange software.
There were still 10% who did not agree to this. They believed that manually is far better than the EDI software.
133 | P a g e
FINDINGS
RESEARCH FINDINGS The research conducted in the primary form and the secondary form has given a detailed insight of the business of clearing and forwarding. There are different aspects of the business looked into. The scope to the business and the blockage in the path of the business were understood. Some of the key findings from the research are:
o The business of clearing and forwarding was given a boost and the businessmen were motivated to start the business due to the government policy of liberalization of imports. o Most of the businessmen found the business of clearing of the imports more lucrative as compared to that of clearing the exports o The licensing policy of the government relating to the issuance of license to the custom house agent was very stringent and needs to be liberalized. o EDI software is most convenient for the CHAs rather than doing manual. o The bureaucracy in the custom department has lead to the slow procedures of the clearance of goods while imported. The entire process takes more time due to the laziness of some of the officers. o As per the research conducted it was found that most of the CHA did not take more than one day to get the papers cleared. But there were other reasons such as documents are not proper, valuation of goods, weight of cargo, etc.
134 | P a g e
o The cases of manipulations done in the payment of customs are continuously increasing over the years. What is found is that these manipulations are due to the ignorance of the importers relating to the policies or due to the selfish motives of importer and also due to the misleading of the CHAs. o Documentation procedure is the most complex procedures according to most of the custom house agents. The complexity of the procedure arises due to the more paper work and less use of the software.
o The hierarchy of the custom officials is very well defined and the reporting structure is up-to-date. o The licenses required by the importer to import a specific good are easily available from the board if the requirements are fulfilled. o It was also found that the CHAs knowingly get into the clearance of the cargo which is disputable in nature so that they can charge a high sum of money for the same. o The importers find it very difficult to comply with the complicated norms of the excise and customs in the manufacturing units.
The bureaucracy is so much in custom department that without it CHA could not proceed it, even if all the things are proper they have to bribe them.
There is also a good scope of other shipping business other than clearing and forwarding .
135 | P a g e
RECOMMENDATIONS
From the research conducted and the study done on the business of enhancing the efficiency clearing and forwarding of imports, we have found that there are many things that have been improved over the years and there are still many things which need to be changed.
There are loop holes in the system that has to be changed. Some policy changes have to be made. So there are some recommendations for the proper running of the system and for the better future of the business. And they are as follows:
. The EDI software has helped for CHAs to enhance and increase the efficiency in clearing of goods within short period of time. o At the Kandla port there are more than 700 CHAs working. Most of the custom agents are into the business of custom clearing and also at the same time are engaged in the business of freight forwarding. So there should be strict licencing policy to CHAs to get licence due due that less completion occurs.
o Also the norms of the CHA license procedure should be liberalized. o More expense should be done on the development of the port infrastructure so that the port can work on its full capacity. o Steps should be taken by the government to reduce the manipulation in the documents by the importer or by the CHAs. o Seminars should be conducted for imparting knowledge regarding the import procedures and the custom payments for the importers.
o There should be transparency in the process of customs calculations. o Information about the amendments made by the government in the rules and regulations should be immediately imparted to the CHA and also to the importers. o New technologies should be used time to time so that the domestic ports remain in the competition as to the international ports. o There should be a regular inspection (disguised) in the customs offices so as to reduce the amount of corruption prevalent. o The CHA should try and avoid getting into the clearance of the imports which are illegal in nature. o Some benefits should be awarded to the custom agents based on the performance of the agents. The performance measurement should be on the basis of the custom duty paid by him over the last years. o The norms that the custom people impose on the manufacturing units for the imports should also be liberalized also making sure that the units do not take advantage of the same.
The infrastructure of the Indian ports is not good enough. There are certain things needed to be changed at the ports. The capacity has to be increased. And this would help boosting up the balance sheets of the custom agents.
The licensing policy by the government for the importers should be made more transparent and lucid.
137 | P a g e
RESEARCH LIMITATIONS
There is also a limitation to every research conducted. The research conducted and the study done for the information gathering on the topic of clearing and forwarding of imports has some limitations to it. The data collected from the secondary source was assumed to be correct. But all the data was from the government website and there are some manipulations to these data some of the times. So making out what data is correct and what is wrong was not feasible. Also there were some limitations to the primary search. The field of clearing and forwarding is vast. And there are many business people into the business of same nature. So it was not possible to get to each and every individual and get the information. And thus the input was collected from just 50 randomly selected businessmen. Also due to the rules and regulations at the port it was not possible to take a formal interview from the custom officer at the custom department.
So the data of the customs authorities was just put based on the unstructured question and informal interview from them. Also the data is basically from the Kandla port and the Mundra port. There are other major ports in India but the data could not be collected by visiting all the ports due to the geographical limitations as well. Looking at the size of the industry and the complicated nature of the business even the time for the study acted a major limitation to the research.
138 | P a g e
BIBLIOGRAPHY Web sites http://www.indiacore.com/ports.html http://www.cbec.gov.in// http://indiadata.com http://kandlaport.gov.in/ http://indiatrade.com
Articles Import tax in India Hindu business line
Books HOW TO IMPORT as per new foreign trade policy & procedures 2009-2014, august 2009 and RBI guide lines for imports - Nabhi Publications CUSTOMS LAW MANUAL 2005-2006 30th edition R.K Jain SHIPPING PROCEDURES Narsee Munjee Institute . EXPORT MARKETING MICHAL VAS
139 | P a g e
ANNEXURE NAME: AGE: GENDER: NATURE OF BUSINESS
1. How much do you think has the Liberalization of imports changed the business of clearing of imports? [ ] Drastically [ ] Some what [ ] Not at all
2. Do you think the CHA plays an important role in custom clearance of ex-Im? [ ] yes [ ] no
3. The business of clearing of which of the two is more in India? [ ] clearing of imports [ ] clearing of exports
4. How much time does it take to get the documents cleared from the custom house? [ ] One working day [ ] 2-3 Working days [ ] A week [ ] more than a week
5. How strict is the licensing policy to get the license for a custom house agent? [ ] Very Strict [ ] Strict [ ] lenient [ ] very lenient
6. Has the government taken appropriate and adequate steps to help boost the business?
of a Clearing and forwarding? [ ] Yes [ ] No
7. Do you agree that the bureaucracy in the custom department has lead to the slow Procedure of the clearance of imports? [ ] Agree [ ] Disagree
8. Which of the following do you think is the most complex work in the entire Procedure of clearing the imports? [ ] Documentation [ ] Calculation of custom duty [ ] clearance for warehousing
9. How much is the bureaucracy in custom department? [ ] High [ ] Low
10. EDI software is really helpful or manually it was better ? [ ] Yes [ ] No
141 | P a g e
Response Sheet 1
1. NAME: Priyesh Nagda 2. ID number: SS/09-11/AHD/GM/2 3. The Topic of the Study: ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS 4. Date when Guided: 16-02-2011 5. The outcome of discussion: The clarity about topics which were to be covered. 6. The progress of the thesis: Questionnaire to be made
Signature:
Guide:GAURAV VATS
142 | P a g e
Response Sheet 2
1. NAME: Priyesh Nagda 2. ID number: SS/09-11/AHD/GM/2 3. The Topic of the Study: ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS 4. Date when Guided: 20-03-2011 5. The outcome of discussion: some changes to be made in questionnaire, details regarding custom house agents 6. The progress of the thesis: Rules and regulation of CHA, procedure to obtain license for CHAs.
SIGNATURE,
Guide : GAURAV VATS
143 | P a g e
Response Sheet 3
1. NAME: Priyesh Nagda 2. ID number: SS/09-11/AHD/GM/2 3. The Topic of the Study: ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS 4. Date when Guided: 03-05-2011 5. The outcome of discussion: Questionnaire been approved, next step decided 6. The progress of the thesis: Basics findings of shipping terms SIGNATURE,
Guide : GAURAV VATS
144 | P a g e
Response Sheet 4
1. NAME: Priyesh Nagda 2. ID number: SS/09-11/AHD/GM/2 3. The Topic of the Study: ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS 4. Date when Guided: 06-07-2011 5. The outcome of discussion: Books to be read , personal interviews to be taken 6. The progress of the thesis: important documents to be needed for clearance of goods. Questionnaire is done. SIGNATURE,
Guide : GAURAV VATS
145 | P a g e
Response Sheet 5
1. NAME: Priyesh Nagda 2. ID number: SS/09-11/AHD/GM/2 3. The Topic of the Study: ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS 4. Date when Guided: 06-07-2011 5. The outcome of discussion: Ask from different CHAs regarding import and export procedure 6. The progress of the thesis: All is done regarding import and export procedures, documentations, basics shipping terms, and to found more shipping business other than clearing and forwarding.
SIGNATURE,
Guide : GAURAV VATS
146 | P a g e
Response Sheet 6
1. NAME: Priyesh Nagda 2. ID number: SS/09-11/AHD/GM/2 3. The Topic of the Study: ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS 4. Date when Guided: 06-09-2011 5. The outcome of discussion: How can the efficiency are increased for CHAs. 6. The progress of the thesis: Editing part to be done. SIGNATURE,
Guide : GAURAV VATS
147 | P a g e

Final Thesis 1

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Final Thesis 1

Uploaded by

Copyright:

Available Formats

TOPIC: ENHANCING THE EFFICIENCY OF THE CUSTOM HOUSE AGENTS AT INDIAN PORTS.

THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT,

SUBMITTED BY: PRIYESH NAGDA

THESIS ID NO. SS/09-11/AHD/GM/2

SUBMISSION DATE: 08TH SEPTEMBER, 2011

GUIDED BY: PROF: GAURAV VATS

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

IIPM Ahmedabad 19, Inquilab Society Gulbai Tekra Ahmedabad-380015

To, The Dean, I.I.P.M Ahmedabad

Subject: Consent to supervise the thesis

With warm regards,

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

RESPONSE SHEET 4 RESPONSE SHEET 5 RESPONSE SHEET 6

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

CERTIFICATE FROM THE GUIDE

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

Topic: - Enhancing the efficiency of custom house agents at Indian ports

1. What is the international demand and supply of the shipping industry ?

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

VISHAKAPATANAM 7.07 ENNORE CHENNAI JAWAHARLAL NEHRU MUMBAI KANDLA 10.8 10

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

Shipping Co Ltd Mercator Line Ltd 15 735146 566240 8.14 6.05

Essar shipping Co 24 Ltd Varun Shipping Co 20 Ltd

SOURCE:ANNUAL REPORTS,DEPARTMENT OF SHIPPING

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

provisions of the Prevention of Corruption Act, 1988 (49 of 1988);

Electronic Data Interchange Systems (ICES).

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

in an orderly and itemised manner and keep them

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

inspection on demand by any officer of the Customs Station.

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

Customs Station of issue

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

1. . 2. . Signature (with seal) of the Commissioner of Customs

FORM [see regulation 10] SURETY BOND

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

FORM [see regulation 19 (6) (ii)] Valid upto.

Shri registered in the books of this Shri/Sarvashri

of. office as an authorized

FORM [see regulation 19 (6) (iii)] Valid upto.

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

CHAPTER 3- ROLES OF CUSTOM HOUSE AGENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT