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Agriculture, Food &

Marine

Apparel & Clothing

Arts & Crafts

Automotive &

Automobile

Bicycle & Rickshaw


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Chemicals & Dyes

Construction Materials

Cosmetics

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lectrical & lectronic

Gems & Jewelry

Hand & Machine Tools


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Hardware & Software

Herbal & Ayurvedic

Home Textile &

Furnishings

Household & Home

Supplies

Industrial Goods &

Products

Leather & Leather

Products
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Medical &

Pharmaceutical

Products

Metals, Minerals &

Ores

Musical  uipments

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½atural Stones

Office & Commercial

Supplies

Packing Materials &

 uipment
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Paper & Paper

Products

Plant & Machinery

Plastic & Plastic

Products

Printing & Publishing

Rubber & Rubber

Products
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Scientific & Laboratory

Instruments

Shipping & Aviation

Sports Goods

Telecommunication

Products

Textile, Fabrics &

Yarns

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ñ How to Import -Introduction


Pricinpal Law & Import xport Policy
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ñ Registration with Regional Licencing Authority and obtaining IC Code
ñ Licence Application Fees
ñ malidity of Licence
ñ Conditions of Licence
ñ Imports under Special Scheme for xporters
ñ Selecting the Overseas Supplier
ñ Finalising the Terms of Import
ñ Payment against Imports
ñ Letter of Credit
ñ Scrutiny of documents and Retirement of Documents
ñ Mode of payment & Time limit for Import Remittance
ñ Customs Clearance of imported goods
ñ Classification of Customs tariff and Levy of Customs Duty
ñ arehousing of Imported go ods
ñ Import by xport of Services
ñ Import through Courier
ñ Import for personal use
ñ Import of Samples
ñ Import of Prototype
ñ Import of Computer, Computer parts and Computer Software
ñ Import of Passenger Baggage

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[As governed by the Foreign Trade (Development & Regulation) Act, 1992]

ith the globalisation of Indian economy and conse uent upon comfortable
balance of payment position Government of India has liberalised the Import
Policy and practically all Controls on imports have been lifted.Imports may be
made freely except to the extent they are regulated by the provisions of Import
Policy or by any other law for the time being in force.

          


 

Imports in to India are governed by Foreign Trade (Development & Regulation)


Act 1992. Under this Act, imports of all goods is Free except for the items
regulated by the policy or any other law for the time being in force.In exercise of

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the powers conferred by the Foreign Trad e (Development & Regulation) Act
1992 the Government has issued the following Rules & Order:

Foreign Trade(Regulation)Rules, 1993, which inter alia, provide for grant of


special licence, application for grant of licence, fee, conditions for licences,
refusal of licence, amendment of licence, suspension of a licence, cancellation of
licence, declaration as to the value and uality of imported goods, declaration as
to the Importer- xporter Code number, utilisation of imported goods, provisions
regarding making, signing of any declaration/statement or documents, power to
enter the premises and inspect, search and seizure of goods, documents, things
and conveyance, settlement, confiscation and redemption and confiscation of
conveyance.

Foreign Trade (xemptio n from Application of Rules in Certain Cases) Order


1993

½otifications under Foreign Trade (Development & Regulation) Act 1992.

    

The present import policy and procedures in respect of various


commodities/category of importers, are, inter alia, contained in the following
publications issued by the Ministry of Commerce and revised from time to time:

Import - xport Policy, 1997-2002 as modified upto 31.03.1999


Handbook of Import - xport Procedures(molume 1), 1997 -2002 as modified
upto 31.03.2000.

Handbook of Import - xport Procedures: (molume 2) Duty xemption Scheme:


Input - Output and malue Addition ½orms, 1997-2002.
ITC(HS) Classification of Import and xport Items.

    
  

The Import - xport Policy and Procedure books issued by the Government are
amended/clarified/ explained by the Ministry of Commerce from time to time.
The types of ½otifications/Clarifi cations/Instructions issued by the Ministry for
this purpose are:

Public ½otices.
½otifications
Policy Circulars

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Be aware of the import potential and the commercial viability of the


commodity/product.

Check whether the items of your interest fall in the Restricted list of ITC(HS)
Classifications of xports & Imports items.

Prohibited items are not permitted to be imported at all. List of Prohibited items
of import are detailed below:

Tallow, Fat or Oils rendered, unrendered or otherwise of any animal origin,


animal rennet and wild animals including their parts and products and ivory any
part and products, including ivory.

For import of items appearing in Restricted list you need secure import licence .
Third category of items comes under the Canalised list of items. Import of items
included in Canalised list are permitted to be imported through Canalising
Agencies.

Thus items not appearing in Prohibited list, Restricted list and or in Canalised list
can be imported Freely without any import licence. A large number of Consumer
goods are freely importable without licence.

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Registration with Regional Licensing Authority is a pre -re uisite for import of
goods. The Customs will not allow clearance of goods unless:

The importer has obtained I Code ½umber from Regional Licensing Authority.
However, no such registration is necessary for persons importing goods from/ to
½epal provided malue of a single Consignment does not exceed Rs. 25000/=

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An application for grant of IC Code ½umber should be made in the prescribed
proforma given at Appendix 3.I. The application duly signed by the applicant
should be supported by the following documents:

Bank Receipt (in duplicate)/demand draft for payment of the fee of Rs.1000/-
Certificate from the Banker of the applicant firm as per Annexure1 to the form.

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Two copies of passport size photographs of the applicant duly attested by the
banker of the applicant.

A copy of Permanent Account ½umber issued by Income Tax Authorities, if PA½


has not been allotted, a copy of the letter of legal authority may be furnished. If
there is any non-resident interest in the firm and ½RI investment is to be made
with repatriable benefits, full particulars thereof along with a photocopy of RBI's
approval. If there is ½RI investment without repatriation benefit, a simple
declaration indicating whether it is held with the general/specific permission of
the RBI on the letter head of the firm should be furnished. In case of specific
approval, a copy may also be furnished.

Declaration by the applicant that the proprietors/partners/directors of the


applicant firm/company, as the case may be, are not associated as
proprietor/partners/directors with any other firm/company the IC ½o. i s allotted
with a condition that be can export only with the prior approval of the RBI.

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The Registered Office or HO or Branch Office (duly authorized by the HO in this


behalf) should apply for allotment of IC ½o. However, only one IC no. is
allotted to a company and the same is valid for all its branches/offices/units. The
applilcation for grant of IC ½o. should be made to the Regional Licensing
Authority concerned as specified in Appe ndix 3.III.

The application fee shall be deposited by way of deposit in an authorized branch


of Central Bank of India indicating the head of Account 1453 Foreign Trade and
xport Promotion Minor Head 102. Import Licence Application Fee.

The IC ½o. is likely to be granted within 3 days of the receipt of the complete
application and re uisite documents.

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ñ Application form should be made in the prescribed form in duplicate along


with the above enclosures, mentioned against serial 1 to 8 of above
paragraph, also in duplicate.
ñ The form should be neatly typed/handwritten in bold capital letters only.
ñ ach copy of the application form should be signed in ink by the
authorised person.
ñ Items of information relevant to applicant should only be filled and
remaining items may be marked not applicable.

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ñ Modification of particulars of the applicant should also be fur nished on this


form by filling the relevant items.

However, in case an I Code holder no longer wishes to operate under the


allotted code number, the matter should be brought under the notice of the
Regional Licensing Authority to make the Code number ino perative.

   

For items not mentioned as Prohibited, Restricted or Canalised List for import in
ITC(HS) Classification of xport and Import items; import of such items are
freely permitted. There is no need to obtain any license or permission f or
importing such goods. The ITC(HS) Classification of xport and Import items
contains 99 chapters and in each chapter there are column heading covering
xim Code, items description, policy and nature or restriction. The information
related to import policy for any item can be obtained from our site under
Customs Duty Calculator Schedule.

 
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An application for grant of an import licence or CCP for import of the items
mentioned as restricted for import in ITC(HS) Classification of xport and Import
items may be made to the regional licensing authority concerned.

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very application for import licence or CCP should be accompanied by 2 copies of


a bank receipt from the Central Bank of India or a Bank Draft from any Bank
indicating the deposit in accordance with the prescribed scale of fees.

Rs. 200 where the value of goods specified does not exceed Rs. 50,000.
Rs. 2 per thousand or part thereof subject to a minimum of Rs. 200 and a
maximum of Rs.1 lakh 50 thousand, where the value of goods exceeds Rs.
50,000.
Rs. 200 where Application is filed be SSI units where the CIF value of goods
specified in the application does exceed Rs. 2 lakh.
Rs. 200 where application is fro grant of duplicate licence.

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By way of deposit in an authorized branch of Central Bank of India indicating the


Head of Accounts 1453 Foreign Trade and xport Promotion - Minor Head 102,

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Import Licence Application Fee. The Bank receipt must show the name of the
department viz. "Director General of Foreign Trade". The bank receipt should be
drawn in favour of Pay & Accounts Officer concerned. Such fees can also be
deposited with Indian Missions abroad.

Or, Crossed DD on a scheduled bank for the re uisite amount should be made in
favour of the concerned licensing authority.

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Besides import licence for import of restricted items there are other variety of
licences and such licences have different period of validity.

xport Promotion Capital Goods Licence validity 24 months

Customs Clearance Permit " 12 months

DPB " 12 months

Advance License/Special Imprest Licence

For Project/Turnkey Project "18 months or co -terminus with the contracted


duration of the Project

For the cases where the license expires before the last day of the month, the
license shall be deemed to be valid until the last day of that month.

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      License revalidation can be done on merits but not
beyond 12 months by the concerned licensing authority for a period of six
months at a time reckoned from the date of expiry of the validity period.


         the last date for receipt of applications for
grant of licenses is 28th February of the licensing year unless otherwise
specified.


     
   
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ñ the goods covered by the license shall not be disposed of except in


accordance with the provisions of the IM Policy, 1997-2002 or in the
manner specified by the licensing authority in the license;
ñ the applicant for a license shall execute a bond for complying with th e
terms and conditions of the license.

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no person shall transfer or ac uire by transfer any license issued by the licensing
authority except in accordance with the provisions of the P olicy;

the goods for the import of which a license is granted shall be the property of
the licensee at the time of import of which a license is granted shall be the
property of the licensee at the time of import and up to the time of clearance
through the Customs;

the goods for the import of which a licensee is granted shall be new goods,
unless otherwise stated in the license;

the goods covered by the license for import shall not be exported without the
written permission of the DGFT;

À   
        Provided the application is complete
in all respects along with prescribed documents, the applicant -importer can
expect the disposal in:

IC ½o. - 3 working days


Duty free license where input-output norms are notified - 5 working days
Duty free license where input-output norms are notified but cases are to be
placed before ALC -15 working days
Duty free license where input-output norms are not notified, PCG
licenses/export licenses/export

licenses/specific import licenses - 15 working days


Revalidation of license and extension of export obligation period by RLA - 5
working days
Acceptance of Bank Guarantee/Legal undertaking - 3 working days
Redemption of Bank Guarantee/Legal undertaking/ndorsement of
Transferability - 10 working days

Issuance/renewal of xport House/Trading House/Star Trading House/Super Star


Trading House - 15 working days

Amendment of any category of license - 5 working days SIL - 7 working days


Fixation of Standard input -output norms - 45 working days

DPB - 5 working days


All licenses falling under Chapter 8 - 5 working days
Miscellaneous - 15 working days

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Fixation of deemed exports drawback rate - 45 working days


½.B. This apart, a " Counter Assistance" service is provided in all the offices of
the DGFT for speedy disposal of applications. A foreign trade development officer
(FTDO), in charge of the counter in each office. On submission of the application
at the counter the applicant will be handed over a token and advised to return
the same day when he will be informed whether his application has been found
complete and admitted for further processing by the office or if there are any
deficiency or lacunae. If deficiency is noticed the same is sent back to the
applicant.

Counter Assistance may also be availed of, for amendments of minor


nature/en uiries. Applications in such cases will be received in the licensing
offices at the counter.

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 An application for issuance of an Identity Card
may be made in the prescribed form . In case of loss of an Identity Card, a
duplicate card is issued.

 
        
The Govt. of India has framed the certain schemes to promote exports.

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Capital goods including jigs, fixtures, dies and moulds may be imnported at a
concessional rate of customs duty as per table given below. Subject to an export
obligation to be fulfilled over a period of time. In addition spares up to 20 per
cent of the cost insurance and freight (CIF) value of the capital goods may also
be imported under the scheme.

Under this scheme Customs duty is 5% if the export obligation is 5 times the CIF
value of the capital goods or 4 times the CIF value of capital goods on ½F basis.
The period of fulfillment of the export obligation is 8 years reckoned from the
date of issuance of licence.

Period from the date of issue of licence Proportion of total export obligation

Block of 1st and 2nd year nil

Block of 3rd and 4th year 15%

Block of 5th and 6th year 35%

Block of 7th and 8th year 50%

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The licence holder under PCG sche me shall fulfill the export obligation over the
specified period in the following proportions:

An application for grant of license under this scheme should be made to the
licensing authority concerned in the form given in Appendix 10 A of the
Handbook of Procedures, 1997-2002 along with documents prescribed therein.
Before clearance of goods through customs, the importer has to execute a bond
supported by a bank guarantee with the Customs Authority in the prescribed
manner. The license holder will also hav e to submit progress report of the
export/supplies made and services provided, duly certified by a Charted
Accountant/Cost and orks Accountant to the Licensing Authority. The report
should be submitted in the prescribed form 10C of the Handbook of Procedu res,
1997-2002. For Customs duty exemption exemption in respect of imports under
PCG scheme, the Ministry of Finance has issued ½otification ½o. 28/97-Cus. &
29/97-Cus., both dated 1st April, 1997.

À   

According to the IM Policy 1997-2000, duty free import of inputs is permitted
under the following schemes:

Advance License - granted to merchant exporter or manufacturer exporter for


the import of inputs re uired for the manufacture of goods without payment of
basic customs duty. However, such inputs shall be subject to the payment of
additional customs duty e ual to the excise duty at the time of import.
Reference: ½otification ½o. 30/97-Customs both dated 1.4.97.

Annual Advance License - Manufacturer exporter with export performance of Rs.


1 crore in the preceding year and registered with excise authorities, except for
products which are not excisable for which no such registration is re uired, shall
be entitled for Annual Advance License. xport House, Trading House, Star
Trading Houses and Super Star Trading Houses Holding the certificate as
merchant exporter where they agree to the endorsement of the name(s) of the
supporting manufacturer on the relevant annual advance license shall also be
entitled for the annual advance license.

This license and/or material imported thereunder shall not be transferable even
after completion of export obligation. Such annual advance license shall be
issued with positive value addition without stipulation of minimum value
addition. The entitlement under this scheme shall be up to 125% of the average
FOB value of export in the preceding licensing year. Imports against this is
exempted from payment of Additional customs duty, Special Additional Duty,

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Anti Dumping Duty, Safeguard duty, if any, in addit ion to Basic customs duty
and surcharge thereon.

Advance Intermediate License: This license is granted to a manufacturer


exporter for the import of inputs re uired in the manufacture of goods to be
supplied to the ultimate exporter holding an Advance Lice nse/Special Imprest
License.

Special Imprest License: This license is granted for the duty free import of inputs
re uired in the manufacture of goods to be supplied to the ultimate exporter
holding an Advance License/Special Imprest License. Such Special Imprest
License is granted for the Duty Free import of inputs re uired in the manufacture
of goods to be supplied to the oUs/units in PZs/STP/HTP, holders of license
under the PCG scheme, projects financed by multilateral/bilateral
agencies/funds as notified by the Dept. of conomic Affairs, MoF, Fertilizer Plants
if the supply is made under the procedure of International Competitive Bidding,
supply of goods to refineries and proejcts/purposes for which MpF permits
import of such goods on zero customs duty.


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A duty free license holder except Advance Intermediate License Holder intending
to source the inputs from indigenous sources/canalising
agencies/OUs/PZ/HTP/STP units in lieu of direct imports has the option to
source them against Advance Release Order denominated in foreign
exchange/Indian rupees. In such cases, the license is invalidated for direct
import and permission in the form of ARO is issued which will entitle the supplier
to the benefits of deemed exports.

Back to back inland letter of credit: This is an alternative to ARO. For this the
duty free license holder intending to avail such facility may approach a bank for
opening an inland L/C in favour of an indigenous supplier. Before this the bank
will ensure that necessary bank guarantee or Letter of Undertaking has been
executed by the license holder and endorsement to this effect has been made on
the License. The indigenous supplier may supply the goods on the strength of
L.C. opened in his favour . For the purpose of claiming Deemed xport benefits,
an indigenous supplier shall produce the copy of the L/C together with a
photocopy of the Duty Free License, duly endorsed by the bank concerned and
the said documents shall for all purposes be deemed to be an ARO.

Duty ntitlement Pass Book scheme: It aims at neutralising the incidence of


customs duty and surcharge thereon on the import content of the export

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product. This neutralisation is provided by way of grant of duty credit on the


deemed import content in the expor t product as per Standard input output
norms and considering the value addition achieved. This scheme is allowed to be
operated on pre and post export basis by a manufacturer exporter and merchant
exporter. The scheme allows exporter to claim credit of cus toms duty at a
specified percentage of the f.o.b. value of the exports made in freely convertible
currency. DGFT issues public notice featuring eligible products along with the
credit rates under this scheme. Although items outside the restricted list can be
exported without Customs duty, DPB holder may pay additional customs duty
in cash, if any. (vide MoF Customs ½otification ½o. 34/97 - Cus. Dated 7.4.1997
and Circular ½o. 10/97-Cus. Dt.17.4.1997). Third party exports are also
permissible for grant of credit under this scheme and DPB is valid for 12
months from the date of issue.

Special Import License(SIL): issued to xport/Trading/Star Trading/Super Star


Trading houses; Manufacturers/processors with the uality certification from
ISO,HACCP,HO-GMP or SSI CMM level 2 and above certification; OUs/PZs ;
Deemed exporters; exporters of telecom and electronic e uipments; small scale
exporters(certified); service providers and other exporters. This provision has
been withdrawn from 31.03.2000. ½o SIL licen ses will be issued for exports
made after 31.03.2000.

Diamond, Gem & Jewellery xport Promotion Scheme: xporters of gem and
jewellery are eligible to import their inputs by obtaining Rep. License and
diamond imprest license from the licensing authority. xporters of
gold/silver/platinum jewellery and articles thereof may import their essential
inputs e.g. precious metals and stones in accordance with the procedure
specified in this regard.

100% OU/PZ/FTZ Scheme -This means an industrial unit offering i ts entire


production, excluding rejects and items otherwise specifically permitted to be
supplied to the domestic tariff area(DTA), for exports. Such units may be set up
under the OU/PZ scheme. hile OUs can be set up anywhere in India subject
to certain locational conditions, units in PZ/FTZ can be set up in specific areas
separated from the DTA by physical barriers.

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Proper selection of the Commodity will depend up on marious Commercial and


legal Considerations including the regulations Contained in the Current Import
xport Policy, Procedure, while selecting the product, particularly for Commercial
purposes one should know the export regulations in the exporting Countries.

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Imports can be made from any country of the world except Fiji and Ira . The
information regarding overseas supplier can generally be obtained from the
following sources:

Trade Directories and Yellow Pages, like Singapore yellow pages, Japan yellow
pages, USA yellow pages etc. available from leading booksellers in India
including. Consulate Generals and Trade Representatives of various countries in
India and abroad.

Friends and relatives in foreign countries. International Trade Fairs and


xhibitions for which you may contact:

International Trade Promotion Organisation(ITPO),


Pragati Maidan, ½ew Delhi.
Chamber of Commerce.
Directorate of Industries, etc.
Indenting Agents of Foreign Suppliers.

The advertisement in foreign papers may also be useful.

Similar informations are also available in our Import -xport database.

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Successful completion of an import transacti on will mainly depend upon the


capability of the overseas supplier to fulfil his contract.The credit worthiness of
the overseas supplier, his capacity to fulfil that contract, etc. should, therefore,
be properly verified beforeentering into a contract with him. Confidential reports
about the supplier may be obtained through the banks and Indian embassies
abroad. Reputed overseas suppliers normally have their Indenting Agents with
offices in India and contract can also be finalised through them for smoother
operations. The importer can also take the assistance of Credit Information
Agencies for specific commercial information on overseas suppliers. They may
also contact Trade Information Centres of the country concerned.

Correct address of these agencies can be obtained from the overseas countries
trade representatives posted in India.

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Some overseas suppliers have appointed their agents in India. These agents
procure orders from the Indian parties and arrange for the supply of goods from

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their principal abroad. It is advisable to import through such agents as they can
be readily contacted in case of any difficulty with regard to uality of goods,
payment and documentation, etc.

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This is an important subject and should be handled with extreme care and
caution. It is advisable that before finalising the terms of Import Order, you
should call for the samples or catalogue and other relevant literatures a nd the
specification of the items to be imported. Import of samples of goods is exempt
from import duties under 'Geneva' Convention of 7th ½ovember, 1952. Samples
are subject to re-export and other conditions as specified in the Geneva
Convention. Besides, vide Customs ½otification ½o. 154/94 dated 13.07.1994,
commercial samples brought into India as personal baggage by bona fide
commercial travellers and businessmen or imported into Into India by post or by
air are exempt from the customs duty. Similarly, vide ½otification ½o. 154/94
dated 13.07.1994, prototype of engineering goods when imported into India as
samples for executing or for use in connection with-export orders are exempt
from customs duty. Likewise, the Central Government has exempted bona fid e
commercial samples and prototype of engineering goods when imported into
India by post or by air or by courier service by manufacturers of export goods.

Once you are satisfied with the samples and the creditworthiness of the overseas
supplier, you can proceed to finalise the term of the contract to be entered into.
For this purpose, the Import Contract should be carefully and comprehensively
drafted incorporating therein precise terms, all relevant conditions of the trade
deal. There should not be any am biguity regarding the exact specifications of the
goods and terms of the purchase including import price, mode of payment, type
of packaging, port of shipment, delivery schedule, etc. The different aspects of
an import contract are enumerated as under some of which may be relevant and
other may not be:

Product, Standards and specifications.


Quantity.
Inspection.
Total value of the Contract.
Terms of Delivery.
Taxes, Duties and Charges payable at xporting Country and payable in India on
importation.
Period of Delivery/Shipment.
Packing, Labelling and Marking.
Terms of Payment-Amount, Mode & Currency.

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Discounts and Commissions.


Licenses and Permits.
Insurance.
Documentary Re uirements.
Guarantee.
Force Majeure or xcuse for ½on-performance of Contract.
Remedies.
Arbitration.

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hile finalising the terms of import contract, the Importer, should, inter alia, be
fully conversant with the mode of pricing and the manner of payment for the
imports. As regards mode of pricing, the overseas supplier normally uote the
terms prevailing in international trade.

The importer for his benefits should know the meaning of the technical
terminology. To avoid ambiguity in interpretation of such terms, International
Chamber of Commerce, Paris, Has give detailed definition of a few standard
terms popularly known as 'I½CO TRMS'. These terms have almost universal
acceptance and are explained below:

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'x-work' means that the seller's responsibility is to make the goods availab le to
the buyer at works or factory. The full cost and risk involved in bringing the
goods from this place to the desired destination will be borne by the buyer. This
terms thus represents the minimum obligation for the seller. It is mostly used
for sale of plantation commodities such as tea, coffee and cocoa.

& £ +&"£ & ' (+&"' 

These terms are used when the goods are to be carried by rail, but they are also
used for road transport. The seller's obligations are fulfilled when the goods are
delivered to the carrier.

&  
 +&  

Once the goods have been placed alongside the ship, the seller's obligations are
fulfilled and the buyer notified. The buyer has to contract with the sea carrier for
the carriage of the goods to the destination and pay the freight. The buyer has
to bear all costs and risks of loss or damage to the goods hereafter.

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& , 
+&", 

The sellers's responsibility ends the moment the contracted goods are placed on
board the ship, free of cost to the buyer at a port of shipment named in the
sales contract. 'On board' means that a Received for Shipment' Bill of Lading is
not sufficient. Such B/L if issued must be converted into 'Shipped on Board B/L'
by using the stamp 'Shiped on Board' and must bear si gnature of the carrier or
his authorised representative together with date on which the goods were
'boarded'.

 
& +& 

The seller must on his own risk and not as an agent of the buyer, contract for
the carriage of the goods to the port of destination named in the sale contract
and pay the freight. This being a shipment contract, the point of delivery is fixed
to the ship's rail and the risk of loss or of damage to the goods is transferred
from the seller to the buyer at that very point. As will be seen though the seller
bears the cost of carriage to the named destination, the risk is already
transferred to the buyer at the port of shipment itself.

    & +& 

The term is basically the same as C & F but with the addition that the seller has
to obtain insurance at his cost against the risks of loss or damage to the goods
during the carriage.

     


Payment under better of Credit is a universally accepted mode of payment. A
Letter of Credit is a Signed instrument and an undertaking by the banker of the
buyer to pay the seller a certain sum of money on presentation of documents
evidencing Shipment of Specified goods subject to Compliance with the
stipulated terms and Conditions.

  
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A letter of credit differs from a bank guarantee. An issuing or confirming bank's
obligation is independent of, and un ualified by , the contract of sale under the
transaction. A commercial credit is neither a performance bond, nor it is a guarantee of
the uantity or uality of the goods shipped.

Letters of Credit are Separate Transactions

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A contract for sale of goods between the seller and the buyer incorporates mode
of settlement. Letters of credit by their nature are separate from the sale
contract, and banks are not concerned or bound by such sale contracts even if
the credits bear reference to them.

The credits stipulate documents which have to be tendered for payment and it,
therefore, follows that in credits parties deal with documents and not with
goods, services or performances to which the documents relate.

It is, therefore, in the interest of all the parties concerned that the conditions
and terms of credit are complete and precise and barefit of excessive details.

Payment under a letter of credit does not depend on the performance obligation
on the part of the exporter except those which the credit imposes. Banks accept
documents under letters of credit for what those document purport to be on
their face. Contract between the buyer and the seller is obligatory between
themselves. The seller(beneficiary) cannot take advantage of any contractual
terms in between the buyer and the opening bank and between the opening
bank and the advising/confirming bank.

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In the course of time, a number of practices, expressions and terms have


evolved between banks dealing with documentary credits. To ensure uniformity
of interpretation in international trade, the International Chambers of Commerce
in Paris has worked out t he "Uniform Customs and Practice for Documentary
Credit". These have been revised and brought up to date several times in the
past. The latest in the line of revisions is the UCP 500 (w.e.f. January 1, 1994)
which updates and consolidates the previous UCP 400. They are now applied by
the banks in nearly all countries including India.

   




Following persons are generally parties, to a letter of Credit:

Benificiary : The exporter of goods in whose favour the L/C has been
established. Customer/importer : The person we intends to import the goods
and instructs bank to established Letter of Credit.

Issuing Bank: The Banker in the importers Country who opened the L/C.
Correspondent Bank or Advising Bank: The banker in the exporters co untry, who
is authorised by the issuing bank to advise the beneficiary of the Credit and to

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effect such payment or to accept and pay such bills of exchange or to negotiate
against Stipulated documents and on Compliance of Stipulated terms and
condition specified by the importer on the exporter.

Confirming Bank: The banker in the exporters(beneficiary) country, who at the


desire of the beneficiary adds confirmation to the letter of Credit so that
beneficiary can get payment without recourse from the Confirm ing bank. The
Confirming bank may be correspondent bank itself or some other bank.

Generally following types of Letter of Credit are in operation.

Revocable or Irrevocable Letters of Credit


Confirmed Credit
Transferable Credit
ith or without Recourse Credit
Revolving Letter of Credit
Transit Credit
Back to Back Credit
The Sight Credit
The Credit available against Time Draft (Usance Credit)
The Deferred payment Credit.

    !(   !   




Letter of credit offers almost complete protection to the seller but the buyer is
put to many disadvantages and has to make payments against documents only.
Before agreeing to open a letter of credit in favour of the seller, the opener must
be satisfied with the creditworthiness and general reputation of the seller. ntire
success of an L/C transaction depends on proper conduct of the seller.

Confidential report on the seller must be obtained at the time of first transaction
with him.

Letter of credit also does no t offer any protection for the uality/ uantity of
goods supplied under the L/C. It would, therefore be necessary to know the
nature of goods and specify submission of uality reports/inspection reports
from an independent agency to ensure receipt of goods of proper uality. This is
particularly important in case of import of chemicals and such other goods. The
opener has to submit an L/C application to the opening bank. The instructions
contained in the L/C application is the mandate for the issuing bank a nd letter of
credit will be issued in accordance with this application. It is, therefore,
necessary that complete and precise information must be given in the L/C

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application form specifying therein the description, unit rate and uantity of the
goods covered under L/C and details of documents re uired in absolute clear and
unambiguous terms. The reference to underlying sale contract must be avoided
as far as possible. The L/C application must nevertheless contain all the
re uired/information based on which L/C could be opened by the bank.

After the L/C has been issued by the bank, a copy thereof must be obtained
immediately. The L/C must be scrutinized to ensure that it has been properly
issued and is in conformity with L/C application. Discrepancy, if any, must be
brought to the notice of opening bank immediately.

Import contact may be concluded either in terms of I½R or in foreign currency.


here the contracts are in I½R, the related documents are also prepared in I½R
and no conversion is involved. Howev er, where the bill is drawn in foreign
currency, the payment is made in Indian rupees e uivalent to the foreign
currency. The e uivalent rupee value is arrived at by applying suitable exchange
rate. These rates are applied by banks to standardise the forei gn exchange-
rupee conversion process.

hen the price of foreign currency is uoted in terms of home or local currency
it is called direct uotation basis. This has been in application since 02.08.1993.
However, there is a difference between inter -bank exchange rates and merchant
rates.

Merchant rates are the exchange rates applied by the bankers for transaction
with their customers for various purposes, including imports and exports. These
rates are calculated by the banks as per the guidelines issued by the Foreign
xchange Dealers Association of India (FDAI). Inter-bank rates are the rate for
transactions amongst the authorised dealers in foreign exchange and depend on
the market conditions.

Since exchange rates are volatile, documents delivered by the bank at the time
of a favourable exchange rate will enable the Indian purchaser to pay less of
Indian rupees. Forex rates are always uoted as two way price i.e. at a rate at
which the bank is willing to sell foreign currency(buying rate) and at a rate at
which the bank is willing to buy foreign currency(selling rate). There is always
some difference in buying and selling rates. However, the maximum spread
available to bank is restricted in terms of celling imposed by RBI. All exchange
rates by authorised dealers are uoted in terms of their capacity as buyer or
seller.

'' £

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This rate is applied for all clean remittances outside India. For selling foreign
currency to its customer by the bank such as for issuance of bank drafts,
mail/telegraphic transfer etc.

'',  £

This rate is applied for purchase of foreign currency by banks when the banks in
India have already obtained the cover in India. Thus all foreign inward
remittances which are made payable in India are converted by applying this
rate. A mail transfer issued by a bank in Dubai for US $ 10,000 drawn on any
commercial bank having branch at the overseas destination will be converted
into rupees at TT buying rate.

Reading Rates-The rates announced by the banks every day morning are card
rates.

Reputed importers can always bargain with the bank for improvement in the
card rates for reducing their rupee liability on conversion of foreign currency into
Indian rupees. Also a distinction is made between spot rates and forward rates.
Spot rates are applicable on the day of transaction, whereas forward rates are
fixed in advance for a transaction that will mature at a specified date or during a
specified period in future imports.

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xchange risk arising on account of adverse movement of the exchange rates,


can be avoided by the following methods:

ñ By re uesting the supplier to invoice the goods in Indian rupees (possible


only when the seller agrees to i t)
ñ By entering into a forward exchange contract.

This involves booking of forward exchange contract with the bank of the
importer.

For booking forward contract the importer should approach his bank with which
an L/C has been opened. The bank will book a forward contract only against
genuine trade transaction. The bank will verify suitable documents to ensure the
authenticity and the amount of permitted currency of the underlying transaction.
The amount, date and number of the forward contract will be mark ed on such
documents under the stamp and signature of the bank to ensure that more than
one forward contract is not booked in respect of the same underlying

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transaction. A transaction may be covered either in parts or in whole. The period


and extent to which an exposure is to be covered is left to the choice of the
customer. Ordinarily, the maturity of the forward contract matches with that of
the underlying transaction. If the documents of import are not received within
the agreed period of the contract, the contract needs to be cancelled(an fresh
contract booked if desired) for which the bank will levycancellation charges as
per FDAI rules. In case the documents are received before the stipulated date
and the importer wants early delivery, the bank will a gain levy charges for early
delivery, as per FDAI rules.

The importers should be careful in chosing the period of forward contract.


Otherwise early delivery or cancellation of forward contract would lead to
unnecessary charges. The RBI allows substitution of an import order on specific
re uest, provided the bank is satisfied with the circumstance leading to the non -
performance of the contract.

here the documents are under a contract(½on-L/C case), the seller will submit
the complete set of documents to his bankers with the re uest to either
purchase/discount the documents to his banker with the re uest to either
purchase/discount the documents or same on collection basis to the importer. In
the former case the seller's bank finances the sellers whereas i n the latter case,
no financial facility is extended to the overseas seller. The seller's banker may
advance some money against documents sent on collection basis while, treating
the documents as collateral security.

hen the documents are under L/C, the documents are prepared strictly in
conformity with the letter of credit.

After preparing the documents the overseas seller will tender the documents to
his banker for negotiation. The bank, after receiving the documents, will
examine them to ensure that t hey are strictly drawn as per the terms of the
credit. Following this the overseas banker will send the documents to the
importer's banker in India. The impoter's bank will advise the importer to collect
the shipping documents either against payment or acc eptance as per the terms
of the contract.

In case the documents are drawn under L/C, the issuing banker(of the overseas
supplier) will examine the documents and if found in order it will hand over the
same to the importer after debiting his account with a mount involved or against
acceptance as per the terms of the credit.

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If the documents are not in line with the terms of the credit, the overseas
banker can either refuse to negotiate further and ask the seller to send them on
collection basis only; or it can contact the importer's bank(in the buyer's
country) for authorisation; or it can also make payment under the reserve
against seller's indemnity.

   

For items not mentioned as Prohibited, Restricted or Canalised List for import in
ITC(HS) Classification of xport and Import items; import of such items are
freely permitted. There is no need to obtain any license or permission for
importing such goods. The ITC(HS) Classification of xport and Import items
contains 99 chapters and in each chap ter there are column heading covering
xim Code, items description, policy and nature or restriction. The information
related to import policy for any item can be obtained from our site under
Customs Duty Calculator Schedule.

 
 !  
       

An application for grant of an import licence or CCP for import of the items
mentioned as restricted for import in ITC(HS) Classification of xport and Import
items may be made to the regional licencin g authority concerned.

    
 
This is a very important function and this should be done with great care. After receiving
the document from the overseas supplier's bank the importer's bank will scrutinise them
to verify the extent of correctness as per the terms of the L/C. For discrepancies in the
documents following principles are adopted:

If discrepancies are such which violates any of exchange control or import


control regulations, the documents should straightaway be rejected.

If the discrepancies are of trivial nature not affecti ng the character of the
transactions the documents may be accepted on merits.

If the documents are rejected, immediate notice to that effect should be given to
the bank to safeguard the importer's interests.The documents prescribed by the
beneficiary are carefully scrutinised by the issuing banker. The importer should
also scrutinise the documents to ensure that:

They were presented when the credit was in force and had not expired.
The amendments and special instructions have been taken care of

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The amount of bill does not exceed the value of L/C


All documents re uired in the L/C have been made available
Documents carry re uired endorsements

The documents do not contain discrepancies which violate any exchange


control/import control regulations

The invoice is duly signed, tallies with amount of draft, xact uantities are
shown and is drawn in appropriate currency of the origin of goods

Bill of leading is presented in full set of negotiable copies and is on board bill of
lading and duly signed In case the goods are imported on cash against
documents(CAD), documents against payment(D/P) or documents against
acceptance(D/A) basis, the importer needs to take delivery of documents from
the banker before completion of the customs formalities. This process, known as
retirement of documents, needs the importer to apply to authorised
dealer/banker who is in possession of documents. This can be done by tendering
the funds e uivalent to the value of documents and the bank charges exchange
control copy of import license, where applicable, Form A-1 duly completed for
remittance of foreign exchange.

The documents are released to the importers against payment in case of DP bills
and against acceptance in case of DA bills. The payment in either case is
accepted only from the bank account of importer. If the bank is out of funds the
interest is charged to the importer's account. For any overdue period a penal
interest will be charged.

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General-check whether all documents in full sets as per L/C terms have been
received
Documents had been presented before the expiry date
All the documents are dated subse uent to the date of issue of the L/C
Cancellation/overwriting in all documents are authenticated
Bills of xchange-check whether
Drawn on the person indicated in the L/C and duly signed up by the beneficiary
of the credit
Drawing is within L/C amount and in the same currency as per the L/C
The amounts in words and figures are the same and identical with the amou nt
stated in the invoice

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Superscription, regarding drawing under L/C has been made and the Bill must
have been issued stamped.

Invoice- check whether invoice:


Is made out in the name of the person who had opened the L/C
Quantity, unit price and value are uoted as per L/C
hether unit price and value are uoted as per L/C
The description of the merchandise corresponds to the description in the L/C
The arithmetical calculations are correct
Import license/OGL/Contract ½o./Order ½o./Indent ½o. mentione d as per L/C
½o charge other than stipulated in L/C in included
Additional copy for xchange Control purposes is submitted
The date and no. of the License/OGL indicated

Bill of lading is submitted within 21days from the date of shipment, if no specific
time is between the date of issue and expiry of L/C

The date of shipment is between the date of issue and expiry of L/C
Full uantity of goods is shipped, if part shipment is not allowed
Full set is submitted
Freight is shown as prepaid/payable at des tination, as per L/C
Bill of lading shows 'on board shipment'
Parties are notified as per L/C terms
Carrying vessel's name has been mentioned in Bill of Lading
The beneficiary's name is shown as consignor, unless L/C terms permits third
party bill of lading
The consignee's name is as per L/C
The B/L is manually signed

The description of goods is consistent with L/C


The ports of loading/destination are mentioned as per L/C
Marks, numbers, uantity and weight agree with the invoice
The carrying vessel belongs to any particular line as per L/C
Ade uately stamped
Properly endorsed
If AB, whether flight number and date of departure mentioned
If freight has been added separately in invoice and no separate freight certificate
of shipping company is submitted. B/L shows freight amount.

Scrutiny for Insurance documents-check whether the policy is taken out in the
name of the shipper

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Certificate/policy is according to Letter of Credit terms


Risk commences w.e.f. date of B/L
Amount of insurance as per L/C terms
hether drawn in the same currency as the L/C
Description of goods agree with B/L
Risks as per L/C are covered
The place where claims are payable is as per L/C terms
Ade uately stamped
Details such as name of carrying vessel, ports of load ing/destination, marks,
agree with the B/L
Certificate of analysis, weighment,etc.
The certificates are issued by the authority stipulated in L/C
½ame of the shipper is properly shown
The samples drawn relate to the goods actually shipped
Date of sample verification is within the date of shipment

      
It is issued by the authority stipulated in the L/C
The description of goods agrees with that in the invoice

 (  
 
All other documents stipulated in the L/C are ver ified

They are issued by the authorities specified in the L/C

They contain the details as re uired by the L/C

For matter relating to Documentary Collections and Commercial terms, the


importers are likely to be conversant with the brochures issued by the
International Chamber of Commerce(ICC), Paris.

&      !  


Uniform Customs and Practice for Documentary Collection and Commercial
Terms
Uniform Rules of Collections (ICC522)
Uniform Rules for a Combined Transport Document (ICC298)
I½CO Terms 1990
RBI regulations for Making Payments by importers

    


For items not mentioned as Prohibited, Restricted or Canalised List for import in
ITC(HS) Classification of xport and Import items; import of such items are

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freely permitted. There is no need to obtain any license or permission for


importing such goods. The ITC(HS) Classification of xport and Import items
contains 99 chapters and in each chapter there are column heading covering
xim Code, items description, policy and nature or restriction. The information
related to import policy for any item can be obtained from our site under
Customs Duty Calculator Schedule.

 
   !   
          
An application for grant of an import licence or CCP for import of the items
mentioned as restricted for import in ITC(HS) Classification of xport and Import
items may be made to the regional licencing authority concerned.

Œ
   
Payments in retirement of bills drawn under L/C as well as bills received from
abroad for collection against imports into India, must be received by authorised
dealers, irrespective of amount, by debit to the account of the importer with
themselves or by means of a crossed che ue drawn by him on his other
bankers. Payment against bills should not be accepted in cash. This rule also
applies to private imports where the amount involved is Rs. 20,000 or more.

Payment for import bills -here the import bills are drawn in Indian Ruppes
(I½R), an e uivalent amount(plus bank charges) is debited to the account of the
importer by the authorised dealer and the amount remitted to the foreign seller.
In case the bills are drawn in foreign currencies, the I½R e uivalent is arrived at
by applying the appropriate foreign exchange rate.

Fixing of Re.  uivalent-In order to bring uniformity in the handling of import


bills under L/C authorised dealers have been directed by the RBI of follow the
following procedure:

Sight import bills received under L/C and conforming to credit terms, may be
held in foreign currency for a maximum period of 10days from the date of
receipt of documents by the Bank.

In case of non-payment by the drawee within 10days, the importer's liability on


the foreign currency bill shall be crystallised by converting the foreign currency
amount in to rupee at the

B.C. Selling rate prevailing on the 10day or the forward exchange contract rate
where applicable. Authorised dealers shall keep a proper record of the date of
receipt of documents.

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In case the 10th day is holiday or a Saturday, the importer's liability in rupees
shall crystallise in the next following working day.

Authorised dealer shall carry swap costs from the customer.

Authorised dealer shall charge interest at the rate as prescribed by RBI for
advances to non-priority sectors from time to time on rupees advances made
against the import bills pending retirement by the customer. Such interest shall
be recovered from the date of negotiation or the date of crystallisation of the
rupee liability and thereafter penal interest shall be recovered.

hen the rupee liability on an import bill is crystallised at the Forward xchange
Contract Rate and it results in early/late delivery, the charges as per FDAI rule
9 shall be levied.

Authorised dealers shall charge commission/handling charges at the rate of


0.15% on the bill amount at the time of converting foreign currency into I½R
irrespective of the fact whether the bill is retired within 10 days or la ter.

'        

The remittance against imports should be completed not later than 6 months
from the date of shipment. Accordingly, deferred payment arrangements
involving payments beyond 6months are not permissible without approval of
RBI/Gol.

However, no objection to importers withholding a small part of the cost of the


goods not exceeding 15 percent towards guarantee of performance etc.
Authorised dealers may make remittances of amounts so withheld provided the
earlier remittance had been made through them. ½o interest payment should be
allowed to be remitted on these withheld amounts.

Sometimes, settlement of import dues may be delayed due to disputes, financial


difficulties, Authorised dealers are permitted by the RBI to make r emittances in
such cases even if the period of 6 months expires, provided -

Authorised dealer is satisfied about the bona fides of the circumstances leading
to the delay in payment.

½o payment of interest is involved for the additional period.

In case, where the overseas supplier insists on payment of interest, it may be


allowed in accordance with the provisions contained in para 7A.12 up to a

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maximum period of 60 days beyond 180days from the date of shipment


provided the import bill is paid within that p eriod. Remittances against import of
books may be allowed without restrictions as to time-limit, providedno interest
payment is involved nor has the importer forgone any part of the
discount/rebate normally allowed to importers towards compensation for del ay in
settlement of dues.

Interest remittance on import bills-interest accrued on usance bills under 'normal


interest clause' or of overdue interest paid on sight bills for a period. not
exceeding 6 months from the date of shipment in respect of imports w ithout
prior approval of RBI. In case of pre -payment of usance import bills, remittances
may be made only after reducing the proportionate interest for the unexpired
portion of usance at the rate at which the interest has been claimed or the
'prime' rate (or its e uivalent) of the country in the currency of which the goods
are invoiced, whichever is higher. here interest is not separately claimed
remittances may be allowed after deducting the proportionate interest for the
unexpired portion of usance at th e prevalling 'prime'.

However, interest under normal interest clause would mean interest at the prime
rate (or its e uivalent) of the country in the currency of which the goods are
invoiced.

Impoter's documents-The importer should comply with certain obligations:


submission of xchange Control Copy of Bill of ntry for Home
Consumption/Postal rappers to the authorised dealer. This will act as evidence
that the goods for which the payment was made, have actually been imported
into India.

Authorised dealers should ensure that in all cases, including cases of advance
remittances permitted (mide para 7A, 10, these are submitted by their importer
customers and are verified. In respect of imports made on D/A basis, since
goods would normally be cleared before the due date of payment, authorised
dealers should insist on production of documentary evidence of import i.e.
xchange Control Copy of Bill of ntry for Home Consumption/ postal wrappers
at the time of effecting remittance of import bill. Authorised deale rs should also
advise this re uirement to their importer customers in writing while delivering
the documents against acceptance.

  

Remittances against bills received for collection in respect of imports by post


parcel may be made by authoris ed dealers, provided the goods imported are

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such as are normally despatched by post -parcel. In these cases the relative
parcel receipts must be produced as evidence of dispatch through the post and
on undertaking to submit importers should furnish post parcel wrappers within
three months from the date of remittance.

If the parcel has already been received in India, the parcel wrapper should be
produced in support of the remittance application. here goods to be imported
are not of a kind normally imported by post parcel or where authorised dealer is
not satisfied about the bona fides of the applications the case should be referred
to RBI for prior approval with full particulars together with relative parcel
receipts/or wrappers.

       


 

Customs Authorities and the Clearing agents play the key role in the import of
goods. All goods imported into India have to pass through the procedure of
Customs clearance as they cross Indian border. The goods are examined,
appraised, assessed, evaluated and then allowed to be taken out of charge of
the Customs for use by the importer. The entire process of customs clearance is
complex and to carry out this procedure smoothly, the help of accredited
customs clearing agents has to be taken.

The importers need to present a Bill of ntry on receipt of the advise of the
arrival ofthe vessel. The B/ is noted in Import Department, with corresponding
endorsementmade against the consignment entry in the IGM along with the
date. The B/ will then be presented in the Appraising Department with all the
relevant documents like invoice, Bill of Lading, Import license and catalogue
literature. The appraising procedure may be of two types.

The First Check Procedure-Applicable only when appraisers/assessing group


finds it difficult to complete the assessment on the basis of the documents made
available.

The Scrutinising Appraiser in the group gives the examination order. The goods
are then examined in the docks and the B/ rerutned to the Scrutinising
Appraiser for completion and license debit. In this case the Customs 'out of
charge' is given by the Accounts Department soon after the recovery of duty.

The Second Check Procedure-Under this 80 to 90 percent of the consignments


are cleared.

If the documents are ade uate for determining the classification, value, ITC
license, the form is completed by the Appraiser and then countersigned by The

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Assistant Collector. It is then forwarded to the License Department for licensing


debit and audit. Then it is returne d to the importers for payment of duty in the
Accounts/Cash department. After recovery of duty the original B/ is retained in
the Accounts Department and the duplicate and other copies are returned to the
importer for getting the goods examined in the doc ks.

In the docks, the Shed Appraiser/xaminer shall examine the goods and if in
order, shall give the out of charge for taking delivery from the custodian of the
goods viz. Port Trust, after payment of Port Trust charges.

Irrespective of the procedure, examination of cargo for assessment purpose is


chiefly the function of the Appraising Department having special staff of
examiners in the docks/Air cargo shed. The records of the examination and
weighment should be declared, attested and dated at the time of the
examination. If the examination spreads over more than one day, the result on
each day's progress should be disclosed.

These apart some of the Customs house in India have introduced the simplified
computer procedure for speedy clearance of consignment through B/.

      

The customs administration vests in CBC for implementing the provisions of the
Customs Act.1962. There are two main wings of Customs House. In the
'Appraisement' wing the job of collecti on of revenue is assigned, while the
'Preventive' one aims at prevention of smuggling.

The Customs authority functions under the Ministry of Finance (MoF) with the
Central Board of xcise & Customs at the apex. The board is headed by a
Chairman and assisted by Members. The Member (Customs) looks after the
following matters:

Customs Law and its interpretation and application, policy and broad
procedures(Other than those concerning anti-smuggling)
nforcement of Import xport prohibitions
Foreign Travel and Cases on imports and exports
Baggage concessions and rules;
Customs maluations;
Tariff Classification and Tariff advices;Customs procedures, Customs House
Agents Regulations;
arehousing, inland Bonded arehouses;
FTZs, PZs, 100% OUs etc.

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Matters relating to Drawback;


Customs Co-operations Council, GATT and SCAP and international talks and
agreements, organisations concerning customs;
All other works on Customs not specified elsewhere;
Supervision and control over Customs Commissionerate of M umbai, Calcutta,
Chennai, Kandla, Bangalore, Cochin, Delhi , misakhapatnam, Goa and Tuticorin
and Customs Divisions of other Central xcise Commissioners, Assistant
Commissionerates regarding Customs work handled by them.
Chemical laboratories and
Directorate of Drawback

The Ministry of Finance (MoF) issues Customs ½otifications to levy duty on the
imported goods. The Changes are made each year on the Day of the Fiscal
Budget. Customs clearance of the imported goods is done by the customs
Authorities functioning under the overall charge of MoF. The hierarchy of the
Authorities:

Central Board of xcise & Customs (CBC) in the MoF


Under which operates:Customs Commissionerates of Mumbai, Calcutta, Chennai,
Kandla, Bangalore, Cochin, Delhi, mizag, Goa and T uticorin.

Directorate of Drawback
Field Level:Principal Commissioners Customs ,Commissioners,Addl.
Commissioners ,Dy. Commissioners,Asst. Commissioners,Port of clearance.

         


The basic legislation is the Indian Customs Act, 1962 read with Customs Tariff Act, 1975.
Section 12 of the Customs Act,'62 empowers levy of duties on goods imported into or
exported from India.

However, the rates at which the different import export duties shall be leviable
have been respectively specified in the First and Second Schedule to the
Customs Tariff Act, 1975-called the import Tariff and xport Tariff respectively.

ith effect from Feb. 28, 1986, the new tariff import schedule based on
international convention of Harmonised Commodity and Co ding system,
commonly known as Harmonised Coding System came into being. The basic
features of the Import Tariff

½omenclature are outlined below:


The headings, the Section and Chapter ½otes and the interpretive Rules,
Customs duties are levied in three ways-Specific rate-at the rate prescribed per

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unit of item i.e. weight or number of length; Ad -valorem duty-levied on the


value of the item; Specific and advalorem -levied in both ways.

Types & Levy of Customs duties: -

Basic duty: all goods imported into India are chargeable to duty as prescribed in
the 1st Schedule of Customs Tariff Act. This Schedule is amended from time to
time of Customs Tariff Act. This duty can be levied either as a percentage of
value of goods or at a specified rate.

Surcharge: It is levied at the rate of 10% of the basic rate on all commodities
except crude oil and petroleum products, GATT -bound items, gold and silver.
Additional Duty: Also known as countervailing duty, is levied on the cost of
imported goods and is e ual to excise duty levied on like goods when
manufactured in India. The objective is to ensure that the protection provided by
the import duty to domestic industry is not eroded.

Special Additional Duty: It is levied at the rate of 4%. Anti -dumping Duty: This
is levied on specified goods imported from specified countries to protect
indigenous industry from injury resulting from USA, Korea and so on.

Customs Duty Assessment: The assessment of goods to duty is done on the


basis hether the goods covered by the B/ are su ch as are regularly imported,
or are re uired to be tested by the customs house laboratory for fulfilment of
license conditions, or The appeaiser desires to see the representative sample
before completing the bill of entry for the purpose of verification o f the
value/description, etc. or The re uired document is not forthcoming.

Customs Duty Rates: hen the import invoice is in any currency other than
Indian rupees, customs fix the exchange rate for conversion into the Indian
rupees at a predetermined rate which is published in customs houses on a daily
basis.

Imports from specified countries enjoy preferential duty. This is generally the
result of special status accepted under bilateral trade agreements or otherwise.
However, the incidence of customs duties on various goods imported are
obtained as follows:

Total duty payable=(Landed cost including CIF of the item concerned + Basic
customs duty under the Customs Tariff Act + Surcharge thereon + Additional
duty + Special Additional duty as per Finance Act).

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Getting Import License checked-The appraising official checks the license for
their description, value, validity period, importers name, etc. It is for the
importer to establish that the goods satisfied the description in the license unless
he is able to establish the fact he would not be entitled to lawful import thereof.
If the appraising official is satisfied that the license is in order, he will send the
license with B/ to license section for registration and audit. The department
maintains a register for every license accepted and debited showing the l ast
balance on the license.

The importer is likely to know the term of license, the type of goods and whether
they can be lawfully imported as per the terms of the license. In case there is
any error on the part of the appraising authority then possession of even a valid
license will not confer any right upon the importers to import such goods again
on the basis of similar licenses.

Bill of ntry-This is a document on the strength of which clearance of imported


goods can be effected. Its form has been standardised by the Central Board of
xcise and Customs. All goods discharrged from a vessel, from foreign or coastal
Ports, are cleared on this prescribed forms presented under the B/ Regulations,
1971.

It should be presented for 'noting' in the import dep t. of the customs house after
theimport General Manifest which gives a detailed description item wise of the
goods brought by the concerned vessel is filed by the steamer Agent.

   

For items not mentioned as Prohibited, Restricted or Canalise d List for import in
ITC(HS) Classification of xport and Import items; import of such items are
freely permitted. There is no need to obtain any license or permission for
importing such goods. The ITC(HS) Classification of xport and Import items
contains 99 chapters and in each chapter there are column heading covering
xim Code, items description, policy and nature or restriction. The information
related to import policy for any item can be obtained from our site under
Customs Duty Calculator Schedule.

 
   !   
          
An application for grant of an import licence or CCP for import of the items
mentioned as restricted for import in ITC(HS) Classification of xport and Import
items may be made to the regional licencing authority concerned.

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An importer may not like to clear or may have certain problems in clearing the
imported goods immediately on payment of duty for home consumption. In that
case the importer can deposit the goods in a Public or Private Bonded
arehouse, provided he is satisfied with the arrangement. Thus, the importer
can avail the facility of deferring payment of duty on imported goods pending
their actual clearance. Towards this the importer should file a set of yellow
coloured B/ known as warehousing B/.

Self-Assessment Scheme: Applicable to goods without any ITC license/CCP or


any restrictions thereof. The objective is to enable importers effecting repetitive
imports of some commodities to assess their own B/ and determine their duty
liability and pay the duty accordi ngly. Any importer, including Govt. bodies and
PSUs, with proven identity and track record can avail of this.

This process does away with the procedure of processing, and the time
consumed by the appraising and licensing sections.

hen the duty is paid, the goods would be cleared in the docks, provided the
goods are partly examined and payment of duty verified.

Green Channel : This fast-track facility has been introduced to simplify and
expedite the process of cargo clearance. Instead of going in for a hundred per
cent examination only a part of the cargo is checked. Bulk importers, Govt.
Depts. & PSUs, consignment of a single product of well known brand name and
importers with identified and unblemished track record are allowed to avail this
facility.

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A new Chapter has been added in the revised IM Policy 1997 -2002, March
1999 d., recognising the importance of export of services and the potential in
the sector. Apart from extending all possible facilities applicable to merchandise
exports, the threshold limit for recognition as Service xport House etc. has
been pegged at 1/3rd of the level prescribed for merchandise exports.

The salient provisions of IM Policy relating to services exports are given below
:

"Services" include all the 161 tradeable services covered under the General
Agreement on Trade in Services where payments for such services is received in
free foreign exchange.

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Facilities for service providers:

The service providers shall be eligible for the facility of PCG Scheme as
described in Chapter 6 of IM Policy. The provisions of paragraph 6.5(vii) shall
also extend to the service providers availing licences under this scheme.

The service providers shall also be eligible for the facility of OU/PZ/ HTP/STP
scheme.

Service providers are also permitted to import drawings, designs, integrated


circuits and layout designs, software in diskettes and CDs related to their line of
services as a part of passenger baggage without a licence.

Facility of import of restricted items by service providers:

Service providers shall be entitled to import restricted items up to 10% of the


foreign exchange earned by them during the preceding licensing year for import
of essential goods related to their line of business, including of fice and other
e uipment re uired for their own professional use.

      


As laid down by the current xim Policy, import of goods through courier is
permitted in accordance with the Courier Imports & xports (Clearance)
Regulations, 1998.

If the CIF value of the consignment imported does not exceed Rs.100000, the
relative Bill of ntry is re uired to be filed by the registered courier service.

If the CIF value is Rs.100000 or more, importers are to file separate B/ as in
the case of other imports.

In case of remittances for imports through courier services, authorised dealers


should ensure submission of xchange Control Copy of Bill of ntry for home
consumption in the case of imports valued at Rs. 100000 or more.

This is not regarded as baggage for the purpose of assessment of duty and
clearance therof. The practice of charging a uniform duty on articles imported
through courier has been discontinued. Imports by courier are now classified on
merits in the respective customs Tariff headings. The new system of assessment
and clearance of goods imported by courier is now governed under the Courier
Imports & xports (Clearance) Regulations 1998.

Imports without Forex remittances:

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Imports not involving foreign exchange remittance is allowed as given below(


vide Para 5.41 of the Handbook of Procedures):

Import of items by United ½ations Organisation and Specialised Agencies and its
officials without payment of Customs duty.

Import of Medical  uipment by Indian Doctors and Professionals is allowed


under the Baggage Rules, 1994.

Goods as Baggage by Foreign Mountaineering xpedition Teams and Painting


and other Display Articles, except consumables, are allowed. Foodstuffs and
Medicines by Charitable organisations are als o allowed.

Import of food parcels, except alcohol and tobacco, subject to a limit of Rs. 100
000 per annum is allowed for personal consumption of foreign citizens.

Import of free gifts and relief supplies by certain organisations/institutions e.g.


Indian Red Cross Society, ½ational Defense Fund is allowed.

Also import of e uipments, raw-films etc. by foreign publicists like Radio, Press,
Films, Television teams are allowed.

Import of exhibits including construction and decorative materials re uired for


the temporary stands of the foreign exhibitors at the exhibitions, fair or similar
show or display for a period of 6 months on re -export basis is allowed provided
these fairs are sponsored/approved by the Govt. of India in the Ministry of
Commerce/India Trade Promotion Organisation and is being held in public
interest.

      


Importers under this category do not need any IC number. Import of goods by
any person as passenger baggage is permitted to the extent admissible under
the Baggage Rules 1994. However, uinine of more than 500 tablets or =
pounds powder or 100 ampules is not permissible.

Also, for any tourist, articles of high value whose re-export is obligatory under
the Baggage Rules shall be re-exported on his leaving India. Othe rwise, those
goods shall be deemed to be regarded as prohibited goods under the Customs
Act, 1962.

Any type of goods for which the c.i.f. value shall not exceed Rs. 2000 can also
be imported through Post or otherwise for personal use, provided they are no t:

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megetable seeds exceeding 1 pound in weight, bees, tea, books and periodicals,
alcoholic beverages, consumer electronic items (save hearing aids and life
saving e uipments and items for which import is canalised under IM Policy.

½evertheless, the customs duty, as applicable, shall have to be paid. As regards


the procedure for personal imports is concerned the same may involve sending
of advance remittance if re uired by the overseas supplier, opening of letter of
credit, retirement of documents and remittance of foreign exchange, customs
clearance of the goods and payment of customs duty.

   


Bona fide technical and trade samples of items, even those in the restricted in
ITC(HS)Classifications of xport and Import items is allowed without a license
for a value notmore than Rs. 1 lakh(CIF) in one consignment save vegetable
seeds, bees and new drugs by any importer. Tea samples not above Rs.2000
(CIF) in one consignment is allowed without a license by any person connec ted
with Tea industry.

    
This may be allowed on payment of duty without a license to an actual user,
industri;al ecgaged in the production of or hgaving industrial license/LoI or
research, as the case may be, provided the number of items i mported does not
exceed 10 in number in a year.

         


Computers including personal computers, Keyboards or monitor valued upto Rs.
1.50 lac and Rs. 7000/- respectively can be imported freely without any licence.
Computer Software can also be imported freely without licence despite the fact
computer software is regarded as Consumer Goods.

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Under the Rules various kinds of articles can be imported upto certain value limit
depending upon the duration of sta y of the passenger abroad and on the basis of
Resident and ½on-Resident Status of the passenger.

Passenger Baggage Rules and import duty structure for baggage as applicable
for such imports under the Baggage Rules has been given seperately

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