Module IV--Customs Clearance of

Import & Export Cargo

Dr.Prof :Darshana Palwankar
B.com, LLB, LLM, PHD.
Role of Central Board of Indirect Taxes and
Customs and World Customs Organization

 Central Board of Indirect Taxes & Customs (CBIC), Department of

Revenue, Ministry of Finance is responsible for formulation of policy
relating to levy and collection of Indirect taxes namely, Customs
duty, Central Excise duty Central Goods and Service tax.
 Central Board of Indirect Taxes &
Customs (CBIC)

 The Central Board of Indirect Taxes & Customs (CBIC) is the

authority responsible for administering indirect taxes such as GST,
central excise, service tax, customs, among others in India.

 The Central Board of Indirect Taxes is under the Department of

Revenue, Finance Ministry, Government of India.
 CBIC Functions
 CBIC administers indirect taxes in India such as goods and services tax, and
customs.

 Collection of Goods & Services Tax and previously Central Excise Duty and
Service Tax.

 Collection of Customs Duty on Land Customs Stations, Inland Container

Depots (ICDs), Special Economic Zones (SEZs) & Container Freight Stations
(CFSs).

 Cont…
 Collection of Customs Duty on International Airports, Seaports,
Custom Houses, International Air Cargo Stations & International ICDs.

 Prevention of Smuggling on International Airports & Sea.

 Prevention of Smuggling through Land Customs Station & Border

Checkpoints.
 In the international arena, customs plays an important monitoring
role in checking the borders for contraband, smuggling and such
other non-tax criminal activities. But they may also be tax related.

 It permits the Indian government to charge duty on imports and

exports, prohibits import and export of products, procedures for
exporting/importing & offenses along with penalties.

 Each and every matter regarding customs duty falls under CBEC
(Central Board of Excise & Customs).
 Types of Customs Duties in India

 Under the Second Schedule, the Customs Duty is not levied on all the
products imported/exported.

 For instance – tax is not levied on life-saving drugs or equipment,

food grains or fertilizers.

 Depending on the purpose and value of the goods Customs Duty is

divided as follows
 Basics customs duty: Basic customs duty is a duty which is imposed on the
goods importing India.

 It may be at the standard rate or at the preferential rate. All goods

importing India are chargeable to Basic Customs Duty under the Customs
Act, 1962, and they are known as customs import.

 The rates of this duty are indicated in the first schedule of the Customs
Tariff Act, 1975.
 Countervailing duty (CVD): A duty equivalent to the amount of subsidy
granted by the government is imposed on such subsidized good which is
known as countervailing duty.

 These duties are also known as anti-subsidy duties.

 They are imposed to neutralize the negative effect of subsidies, as

goods can be imported and exported at a price lower than the original
price based on the subsidy given by the government
 Additional customs duty: Additional customs duty is a duty which is
levied on goods produced or manufactured in India.

 It’s a subset of countervailing duty and is imposed on imported goods

in order to equalize imports with local taxes like service tax, VAT.

 This duty is leviable on the assessable value + basic customs duty.

Generally, the CVD rate is 16%.
 Safeguard duty: It’s a duty which is imposed to safeguard the
interest of the local domestic industries so that no harm or loss
is faced by the domestic producers and their productivity.

 It is calculated on the basis of loss suffered by the local

industries.
 Anti Dumping Duty: It’s a duty which occurs when a manufacturer
exports a product to another country at a price rate either below the
price rate in his/her home market or below its cost of production.

 The Purpose of this duty is to increase the foreign share or

sometimes to expose off their excess stock.

 In order to avoid such dumping, the Central government imposes an

anti-dumping duty under section 9A of the Customs Tariff Act, 1975,
if goods are sold at a value less than the normal value.
 Education Cess: This duty is levied at a rate of 2% for secondary Cess
and 1% for higher education cess. No cess would be levied, if the goods
are fully exempted from duty or are cleared without payment of duty
under the prescribed procedure.

 National calamity contingent duty: National calamity contingent duty

is a duty which is imposed on goods like tobacco, pan masala or any
other good which is injurious to health. The rate of tax under this duty
varies from 10% to 45% and different rates are applicable to different
situations.
 Protective duties: It is a tariff which is formulated with the aim of
protecting domestic industries or domestic producers.

 Protective custom duty can be imposed at the rate recommended u/s 6

of the Customs Tariff Act.

 It is valid till the date prescribed in the notification.

 Objectives of Customs Duty

 To conserve foreign exchange by restricting imports

 To shield the domestic industries from foreign competition that

restricts the import of selected goods and services, import quotas,
import licensing, and an outright import ban.

 Disallowing exports and imports of goods for achieving the policy

objectives of the government.

 Balancing or controlling exports.

 Disallowing the smuggling of goods.

 It facilitates implementation of laws relating to Foreign Exchange

Regulation Act (FERA), Foreign Trade Act, Conservation of Foreign
Exchange, prevention of smuggling Act etc.

 To regulate foreign exchange.

 It is also concerned to improve the domestic productivity, to

facilitate exports.
 What is a Pre-Shipment Inspection?

 A pre-shipment inspection is a step taken by trade operators (buyers, suppliers,

agencies) to inspect newly manufactured products before they are shipped for
export/import.

 The purposes of a pre-shipment inspection are to:

 Check the quantity and quality of the merchandise

 Check products for any defects

 Ensure products meet the safety requirements of the destination market

 Issue report for import and billing

 Pre-shipment inspections were officially introduced in 1994 as
an agreement to improve international trade standards under
the General Agreement on Tariffs and Trade (GATT), which was
later replaced by the World Trade Organisation (WTO).
 A number of obligations were included in the “Agreement on Pre-Shipment Inspection,”
stating that pre-shipment investigations should be applied according to the following
principles:

 Non-discrimination

 Transparency

 Protection of confidential business information

 Avoidance of delays

 Price verification based on the price of identical or similar goods in the country of
exportation, in which the exporter has the opportunity to explain the price charged

 Inspection agencies establish appeals procedures, the findings of which are made available
to other exporters
 Clearance of Import/Export Cargo
 All goods imported into India have to pass through the procedure of
customs for proper examination, appraisal, assessment and evaluation.

 This helps the custom authorities to charge the proper tax and also
check the goods against the illegal import. Also it is important to note
that no import is allowed in India if the importer doesn’t have the IEC
number issued by the DFGT.

 There is no requirement of IEC number if the goods are imported for the
personal use.
Conditions for Clearance of Imported Goods
 Every importer is required to file the bill of entry in the form as prescribed by
regulations.
 Every importer will have to obtain an Importer-Export Code (IEC) number
before filing a bill of entry from the Director-General of Foreign Trade.
 The information given has to be certified by the importer in the form of a
declaration at the bill of entry while filing the bill of entry.
 The importer can submit a document in an electronic format containing all the
relevant information to the service center.
 A checklist should be generated for verification of data by the importer, and
after verification, the data filed by the service center operator generates a bill
of entry number.
 The importer is required to sign on the final document before
customs clearance.
 The importer needs to get the bill of entry, which will be
forwarded to the appraising division of the custom-house for
assessment function, payment of duty, etc.
 After registration, the bill of entry is forwarded electronically or
manually to the concerned appraising group in the custom-
house.
 Customs valuation
 Customs valuation is the process where customs authorities
assign a monetary value to a good or service for the purposes of
import or export.

 Generally, authorities engage in this process as a means of

protecting tariff concessions, collecting revenue for the
governing authority, implementing trade policy, and protecting
public health and safety.
 Today, almost all customs administrations of the current 161 WTO Members
value imported goods in terms of the provisions of the WTO Agreement on
Customs Valuation (adopted in 1994).

 This Agreement establishes a customs valuation system that primarily bases

the customs value on the transaction value of imported goods, which is the
price actually paid or payable for the goods when sold for export to the
country of importation, plus, certain adjustments of costs and charges.

 Currently more than 90% of world trade is valued on the basis of the
transaction value method which provides more predictability, uniformity and
transparency for the business community.
THANK YOU