IMPORT MANAGEMENT

Introduction Today's business environment, perhaps more than at any other time in modern history, demands a continuous search for new sources of competitive advantage. Lasting success requires steady and sometimes drastic cost reductions, quality and delivery improvements, reduced cycle times, and improved responsiveness to customer, competitive and financial market demands. As organizations think about the best way to respond to these demands, the development of global strategies and approaches, including global sourcing strategies, will become an increasingly attractive option. Since most organizations do not have in place well-developed global sourcing strategies, improvement opportunities are indeed attractive and largely unrealized. The global sourcing involves proactively integrating and coordinating common items and materials, processes, designs, technologies & suppliers across worldwide purchasing, engineering and operating locations. While integrated global sourcing has yet to receive the attention it deserves from executive leadership or the academic community, this topic will very soon receive increased scrutiny as organizations will search for new ways to compete. Looking across most industries results in one clear conclusion--competition & customer pressure to improve is relentless and severe. Those firms that succeed will be the ones that have learned how to leverage & coordinate their activities on a worldwide basis. For many, integrated global sourcing may well offer one of the best opportunities to achieve the kinds of performance breakthroughs and consistency required to compete in highly competitive markets & therefore there is a need for a greater understanding of integrated Global sourcing. During the late 1980s and early 1990s, a great deal of research focused on various aspects of international purchasing. Most researchers have concluded that unit price reduction (although not necessarily total cost reduction) is the primary benefit realized from international purchasing. One view maintains that technological and organizational advances have reduced the cost and increased the speed of transportation and communication, thereby facilitating international purchasing. A second view counters that distance remains a significant barrier to conducting business and that the true costs of international purchasing are often under-estimated or unknown. Other international purchasing benefits include greater access to product and process technology, higher quality and the ability to introduce competition to the domestic supply base.

IMPORTING COUNTRY

GOODS & SERVICES MONEY IN FOREIGN CURRENCY

EXPORTING COUNTRY

CURRENCY
Definition The term Imports may be defined as a process of procuring Goods and Services from the supplier/s situated in the Foreign Countries. This activity involves inflow of goods & services from the foreign country (exporting Country) into the Base Country (Importing Country) & In-turn Outflow of Foreign Currency from Base Country to the Foreign Country towards payment for the Goods & Services Purchased. Buying internationally is a specialized activity and requires an expertise, skills and detailed knowledge of many aspects of procurement that you don't have to worry about when buying domestically. Buying internationally is much more complex than buying domestically. Differences in cultures, laws,

communications, currencies and more have to be understood to support international procurement. And if you don't have a good foundation, your international procurement efforts will have a higher probability of failing. Therefore International procurement is a big challenge for the companies. Need For Imports No country in the world is self-sufficient in respect of all their materials need. Even the most advanced countries in the world depend on procuring their requirements of various products ranging from basic raw materials to finished products involving high technologies, from other countries as those products are not available in their country. The decision of Importing Goods / Services is made for the reasons like: The Products are not available at all in the Domestic Markets The Products are available but not in the Sufficient Quantity in Domestic Markets The Products are available but not of Desired Quality in the Domestic Markets The Price Of The Product in Domestic Market Is Higher than Imported Product.

The Raw Materials, Spare Parts, Components, Consumables, Plant & Machinery etc. required for undertaking a business activity may not be available in terms of Quantity / Quality / Price within the country and hence might have to be imported from abroad. This activity not only involves the transaction between the Buyer & Seller belonging to different countries but also the payment in foreign currency. Over & above this, the Imports from the foreign countries may also affect the Indigenous Industries & therefore the Government of the base country always monitors the Inflow of goods & Services as also outflow of precious Foreign Exchange. In short, it involves not only a good knowledge of foreign sources of supply but also complete understanding of various statutory laws & regulations besides careful handling of whole affair since buying in international market is a different ball game. Besides, the activity creates reciprocal trade relationship, develops mutual friendship between countries & promotes international understanding. In todays global economy, success is not possible unless a companys supply base is competitive on a worldwide basis. Successful companies do not limit their sourcing horizons to national borders but seek to find and establish sound working relationships with the best suppliers in the world, foreign and domestic. International purchasing cannot be a stand-alone process. It must be integrated with the overall purchasing strategies of the company. However, this requires skills & knowledge that are not often present in purchasing departments. Success also requires intra-company linkages among purchasing, finance and logistics that often do not exist in companies with purely domestic supply chains. If you are new to international purchasing then it is essential to learn certain complexities of international sourcing like: when to make the decisions necessary to identify the best potential suppliers, How to effectively prioritize requisitions, when to use competitive bidding, negotiation or both, How to conduct competitive bidding using various tools, How to use financial and operational analysis to select suppliers with not only the best monetary offer but also the least risk of failure How to determine whether a contract, purchase order or other method of ordering is best for a certain purchases How to use follow up techniques to ensure supplier compliance How to close out a transaction with confidence How to think like a purchasing manager How to prepare for the future of purchasing

Organizational Functions In our Country, the monitoring of activities related to purchasing from overseas suppliers (Import activities) is done by the Government of India through the Ministry of Commerce & Ministry of Finance. The Commerce Secretary heads the Department of Commerce in the Ministry of Commerce. This Department is responsible for the country's external trade and related matters connected with it. The Department of Commerce formulates policies in the sphere of foreign trade, in particular the Imports and Export Policy of the country. The Director General of Foreign Trade (DGFT), New Delhi, heads the EXIM Trade Control Organization. The implementation & co-ordination of Foreign Trade Policy is done through 21 offices of the Regional Licensing Authorities (headed by Joint. DGFT) situated in all major towns. While formulation and administration of the import trade laws and regulations are the function of the Department of Commerce in the Ministry of Commerce, enforcement of the policy is the function of the Customs Authorities in the Ministry of Finance exercising powers under the provisions of the Customs Act, 1962. As the import activities also involves outflow of Foreign Currency, the monitoring & controlling of all the activities related to Foreign Exchange is performed by the Ministry of Finance through Reserve Bank of India vide the rules & regulations prescribed under Foreign exchange Management Act (FEMA) and different provision of Customs / Excise Acts, Rules and Regulations. It will be therefore observed that Imports or International Purchasing activities are monitored & controlled by different Ministries of government of India & various departments attached to these Ministries through their prescribed rules & regulations/ procedures under Foreign Trade Policy, Foreign Exchange Management Act, Customs / Excise Act etc. Therefore activity of Importing goods / services from Foreign Countries, is quite different from purchasing goods /services from the suppliers situated within the country.

IMPORT CYCLE An ' Import Cycle' begins with 'Need Identification' for imports and ends with the Receipt of Imported Cargo followed by due accounting thereof. Need Identification A prospective Importer has to identify the need for import of a specific material. This may be prompted by various reasons. Lower Price Better Quality Only source available More Advanced Technology Shorter Lead Time

Ascertaining Possibility Of Imports Vis-A-Vis Import Policy Once the need is identified, the next step is to find out whether this item is allowed for import or not as per the prevailing Foreign Trade Policy. Foreign Trade Policy The law on the subject of imports into India is contained in the Foreign Trade (Development & Regulation) Act, 1992. incorporating the changed approach of the Government of India in the matter of import trade. In contrast to the object of the Act of 1947, which was to "prohibit or control imports and exports ", the object of the Act of 1992 is "to provide for the development and regulation of foreign trade by facilitating imports into and augmenting exports from India". The change to the liberalised approach and policy of the Government of India occurred from July 1991. The Trade Policy Statement made on 4th July 1991 and the Statement on Trade Policy made in Parliament on 13th August, 1991 launched a new era in the export & import trade policy of India. The Export and Import Policy 1992-97 announced on the 31st March 1992 was the First EXIM Policy effective for a period of five years from 1st April 1992 to 31st March 1997. With an Objective of giving necessary boost to Countrys Exports, to double Indias share of global st merchandised trade within next five years, Govt. of India, on 31 August 2004 announced Indias First st Foreign Trade Policy for the period 1september 2004 To 31 March 2009. Under the prevailing Foreign Trade Policy, The Importer may find the product of his interest covered by one of the following categories: Banned For Imports: The Items under this category cannot be imported at all for any commercial or personal use. Restricted Items: The imports of the items falling under this category are restricted for imports & hence the Importer will have to obtain a specific Licence or permission from the concerned licensing authority before its Imports. Canalised Items : The items under this category can be imported only through the specified canalizing agencies (Government Agencies) Items under Open General Licence (OGL): The Items not covered by any of the categories mentioned above, can be imported by anyone without obtaining any permission from any licensing Authority.

Registration With Licensing Authority ( Obtaining Importer Exporter Code Number (IEC No.) No person can import goods without obtaining an Importer-Exporter Code Number from the concerned Regional Licensing Authority (Jt.DGFT) unless he has been specifically exempted from obtaining the same. In other words, registration with Regional Licensing Authority is a pre-requisite for import of goods. The Customs Authorities will not clear the goods unless the Importer has obtained Importer Exporter Code number. Procedures For obtaining IEC Code Number, an Application for grant of IEC Number is to be submitted by the Registered /Head Office of the applicant to the concerned Regional licensing authority in the specified Format, along with all the relevant documents and the requisite application fee of Rs.1000/- With the application. An applicant is also required to furnish Profile of his Company in the prescribed format along with Banks confidential report confirming details of applicants current account. An IEC Number allotted to an applicant will remain valid permanently for all its branches / divisions / units / factories as indicated on the IEC number. The Licensing Authority will issue the IEC Number in their Format in favour of an applicant, with a copy endorsed to the applicants banker.

SOURCING THE OVERSEAS SUPPLIER Executing a Global Sourcing Strategy With all the talk about the global sourcing that many companies are doing, one may think that it is easy, right? That perception could not be further from the truth. Global sourcing may be one of the most complex activities youll encounter as a purchasing professional. Theres no doubt about it global sourcing is a challenge with many opportunities to fail. There are many complex processes that need to be done right. Its not enough to know what those processes are. You need to know how to perform those processes in order to Be successful. Despite the challenges of global sourcing, purchasing professionals do succeed at it. They succeed because they know specifically how to handle all of the situations involving coordinating logistics, dealing with customs, arranging payment, identifying countries for sourcing, finding suppliers, calculating landed cost, assessing risks, and implementing their global contracts. Purchasing internationally, like many international business skills, is not well understood in India. This is because India does a relatively small amount of importing and exporting measured as a fraction of the countrys Gross Domestic Product (GDP) when compared to the countries like United States, Germany. Japan, Singapore & Taiwan As a result of the relatively low level of importing, training for import-related issues is not well developed in this country. This lack of training and information has caused international purchasing to be seen as mysterious and fraught with hazards. While international purchasing is not as mysterious as its reputation would indicate, it does require skills that are not usually taught in business schools and it does pose hazards (such as exchange rate fluctuations) that do not occur in domestic purchasing. Sources for Finding out International Suppliers With today's market place becoming even more competitive, a question that often arises within many corporate cultures and small businesses is: "how do we know our company is paying the best possible price and sourcing our materials and products from the best possible source?" As different countries

develop expertise in varying industries, manufacturing, and product development, it can be a daunting task to keep up with the developments of specialized product activities in multiple countries. Fortunately, there are a number of resources, both domestic & international, that can Assist with global sourcing needs. They are : Trade Directories & Yellow Pages International Trade Fairs and. Exhibitions Chambers of Commerce Directorate of Industries Indenting Agents of Foreign Suppliers. Visiting websites.

First and foremost, before your company decides to outsource its offshore purchasing and/or manufacturing, you must be sure that by doing so your company can save at least 15 to 20% of its current cost of purchasing activity. This saving should include all standard and hidden international purchasing costs. Some of the standard costs, in addition to quoted prices, include shipping, cargo insurance, customs brokerage fees, import duty, dock fees and letters of credit fees. Some of the hidden costs can include contract development fees with new suppliers, site visits to supplier factories, shipping fees due to customs clearance delays, customs fees due to inaccurate customs and purchasing documentation, delays at port due to shipping congestion/wait times, anti-dumping fees & product quota fees. Sourcing is the process of finding suppliers, evaluating them, and if the evaluation is positive, engaging in business with them. Internationally, it is more difficult to locate information sources and evaluate suppliers. Travel can be expensive and cultural differences can confuse those who are inexperienced & new in a foreign country. Therefore it requires different approaches to domestic & international procurement. The professional companies have a conscious goal to look for the best sources in the world. Excellence, as it relates to suppliers includes technical considerations as well as quality and cost. Some of these companies certify suppliers in house & sometimes in conjunction with ISO standards or third-party qualification. These companies also strive for environmental standards as also for legally enforceable contracts with their suppliers. These contracts are used to compel compliance through arbitration or the threat of lawsuits, although disputes are rarely settled in court. Hence the best way to locate good sources is to have employees of the companies in the suppliers country. The most of Indian companies unfortunately evaluate potential foreign suppliers the same way they evaluate domestic suppliers. They measure and manage existing foreign and domestic suppliers using the same criteria consistently throughout the organization. Floating Import Enquiries In view to obtain competitive offers from the overseas suppliers, the Importer will have to send their enquiries to these probable suppliers indicating the Required Quantity, Desired Quality (specification) of the item, the Time when the item is required & the Place where it is required. The Importer should be very specific on these aspects (no approximations) as the price offered by the supplier will depend on these elements. Any change in either quantity/quality/time or place will change the price offer. The Importer should also indicate the terms of offer desired by him (FOB/C&F/CIF etc.) so that the suppliers can submit their offers accordingly.

Finding Credibility Of Overseas Supplier Successful completion of an import transaction will mainly depend upon the capability of the overseas supplier to fulfill his contract. The credit worthiness of the overseas supplier, his capacity to fulfill that contract etc. should, therefore, be properly verified before entering into a contract with him. Confidential reports about the supplier may be obtained through EXIM Bank, the Commercial banks and Indian embassies abroad. Import Of Samples In the International Purchasing it is considered often necessary that the samples of goods manufactured in one country be sent to another country for giving correct idea on quality of product offered by the supplier. This not only enables importer to assess correctly what the exporter is offering but also avoids post shipment disputes and litigations between the parties. The bonafide trade samples, if supplied free of charge can be imported without obtaining any permission from the licensing authorities subject to the items not prohibited under Foreign Trade Act,1992. For availing duty free clearance of these samples value of individual sample should not exceed Rs.5000 and aggregate value should not exceed Rs.60,000 per year or 15 units of samples in a year. Finalising The Terms Of Import In international purchasing, it often becomes necessary to negotiate with the supplier concerned before the purchase contract is finalized. It can be for the purpose of settling the price of the materials or relate to finalizing various terms and conditions such as material quality / specifications, delivery, packaging, insurance & so on. Notwithstanding the volume of purchases, negotiations have to be conducted in every type of industry or business engaged in the function of purchasing. Unless youve been just as diligent at improving your procurement negotiation skills, your chances of getting the best deals from your suppliers are very slim. Unfortunately, many procurement professionals feel that their past negotiation experience will serve them well today, which is far away from the reality. To succeed in this aspect of purchasing, they have to quickly learn the modern procurement negotiation strategies and skills to get the best deals in todays environment. This is an important aspect & should be handled with extreme care and caution. It is advisable that before finalising the terms of Import Order, the Importer should call for the samples or catalogue and other relevant literatures and the specifications of the items to be imported. The different aspects of an import contract are enumerated as under: Product, Standards and specifications. Quantity. Inspection procedure Total value of the Contract. Terms of Delivery. Taxes, Duties and Charges. Period of Delivery/Shipment. Packing, Labeling and Marking. Terms of Payment - Amount, Mode & Currency. Discounts and Commissions. Licences and Permits. Insurance. Documentary Requirements.

Guarantees. Force Majeure or Excuse for Non-performance of Contract. Remedies. & Arbitration

IMPORT PRICING AND INCOTERMS

International trade transactions based on the contract of sale usually embody trade terms which are not customary in domestic trade. These trade terms is a link between sellers and buyers in different countries and required to answer certain questions like: 1. Who will arrange and pay for transport charges of the goods from point of loading to point of discharge? 2. Who will bear the risk if these operations cannot be carried out? 3. Who will bear the risk of loss or damage to the goods in transit? In present international custom the main purpose of the trade terms is to determine at what point the exporter has fulfilled the obligations so that the goods in legal sense could be said to have been delivered to the buyer While finalising the terms of import contract, the importer should be fully conversant with the mode of pricing and the manner of payment for the imports. International Chamber of Commerce, Paris, has given detailed definition of a few standard terms of international transactions popularly known as International commercial Terms 'INCOTERMS' and these terms have universal acceptance. The choice of the term depends on various considerations like economic, control of transport and insurance, governmental involvement and exceptional clauses such as imposition of duties, war etc. Some of the INCOTERMS commonly used in our country are as follows: 1. Ex-works (EXW) 'Ex-works' means that the Exporters responsibility is to make the goods available to the Importer at Exporters works or factory. All the risks and expenses thereafter should be borne by the importer. 2. Free Alongside Ship (FAS) Once the goods have been placed alongside the ship at the port of loading, the Exporters obligations are fulfilled and the Importers responsibility starts right fr om the loading of the goods in the carrier. 3. Free on Board (FOB) The Exporters responsibility ends the moment the contracted goods are delivered on the carrier at the port of shipment named in the sales contract & the receipt of the goods is duly acknowledged by the captain of the ship / Pilot of the Aircraft. This term include all the charges up to the point of delivery on the board of a ship/aircraft on exporters account. In this type of term the Bill of Lading must indicate the wording shipped on board. 4. Cost and Freight ( C & F ) The term 'Cost and Freight' means that the Exporter arranges for shipment of the goods by paying the freight on behalf of the Importer & delivers the goods to the Port authorities at the port of discharge. The responsibility of exporter also includes obtaining of all the relevant shipping documents including Bill of Lading from the shipping company.

5. Cost Insurance Freight (CIF) The term CIF includes the FOB cost + Freight Charges + Insurance cost. Under this term, the Exporter also has to obtain insurance at his cost covering the risks of loss or damage to the goods during the transit of the goods besides all the responsibilities covered under C & F contract terms.

IMPORT PAYMENTS The transactions under international purchasing are generally settled by any of the following modes depending upon credit worthiness of the importer/exporter, demand for the commodity in the international market, exchange control regulations prevailing in the importer/exporter countries and other relevant factors. They are : Advance Payment. Payment / Acceptance against Documentary collections. Payment under Letter of Credit.

a) Advance Payment The buyer agrees a price for goods from an overseas exporter and sends his Full or Part payment with the firm order before the goods are shipped While adopting this mode of payment, the importer must check the reliability of the exporter, the stability of the exporter's country & other risks involved. The Authorised Dealers (Bankers) may allow advance remittance subject to the following conditions: The import is made in accordance with the prevailing Import Policy. Remittance of payment is made direct to the suppliers. If the amount of advance remittance exceeds U.S. $ 25,000, a guarantee from a reputed international bank situated outside India. The validity of the guarantee / letter of credit should adequately cover the Period for the purpose of enforcing payment. Physical import of goods into India should be made within three months (twelve months in the case of capital goods) from the date of remittance and the importer should give an undertaking to furnish documentary evidence of import within fifteen days from the close of the relevant period.

b) Payment / Acceptance Against Documentary Collections Payment for import can also be made against Documentary Collections, in which case the overseas supplier sends the documents direct to the importer's banker with instructions to deliver the documents to importer against payment or against acceptance of documents The former mode of payment is known as 'Documents against Payments (D/P) and the latter mode is known as 'Documents against Acceptance (D/A). Under D/P bills, the exporter's bank will send the documents to the bank of Importer and on payment of the bill of exchange, the Importers bank deliver the documents to the importer so that he can take possession of the goods. D/P bills, are usually drawn on 'sight' i.e., no credit is involved. In the case of D/A bills, the correspondent bank will submit the bill of exchange to be signed by the buyer to indicate his acceptance of the payment obligation. After the buyer accepts the bill, he will get possessions of the documents. On the due date of payment, the bank will again present the bill to the Importer for making payment. The money received is remitted through the usual bank channels & to be

credited to the exporter's account. D/A bills involve credit for a fixed period and are drawn on USANCE basis. c) Payment Against Letter Of Credit ( L / C ) This is the most important & commonly used mode of settlement of international trade transactions and has been widely accepted all over the world, particularly dealing with an unknown Importer or exporter. In this method, the payment is settled by means of a Letter of Credit issued by importer's banker in favour of the supplier abroad. Under this method the overseas supplier gets payment of goods from his own bank that negotiates the documents under the credit. In view of the important role played by L/C in the international trade, the International Chamber of Commerce formulated a set of guiding principles. The International Chamber of Commerce has defined a banker's documentary credit as an arrangement, whereby a bank (the issuing bank), acting on the request of their client (the Importer) is to make payment to the Exporter (the beneficiary) through their banker (negotiating Bank) against stipulated documents and compliance with stipulated terms and conditions. OPERATIONS UNDER LETTER OF CREDIT

Importer

Shipment Exporter (Beneficiary)

Importers Bank (Opening Bank)

L/C Movement

Exporters Bank (Negotiating Bank)

Documents Movement

Parties to The Letter Of Credit The Applicant : The applicant is the importer on whose behalf the letter of credit is opened / issued by his bank. The Opening Bank : The opening bank is the bank in the importer's country issuing the letter of credit at the request of the importer. The Beneficiary: The Exporter is the beneficiary in whose favour the credit is issued and who is entitled to receive the payment of his bills according to the terms of letter of credit. The Negotiating Bank: The negotiating bank is the bank, which negotiates the beneficiarys bills & pays to the exporter.

Operations Under Letter Of Credit The entire process of Letter of Credit & transactions under it, are performed in various Steps as enumerated below:

1. Importer (opener) concludes a purchase contract for buying of certain goods with his overseas supplier who wants payment by letter of credit. The importer asks his banker (Authorised dealer) to open a letter of credit in favour of his overseas supplier. 2. After the request from the importer and considering the proposal in line with existing Trade Policy, his bank opens letter of credit in favour of the overseas supplier (exporter). 3. The negotiating bank ( exporters bank) receives credit from the opening bank and after satisfying itself about the authenticity of the credit, it forwards the same to the Beneficiary (exporter) for his acceptance 4. After receiving the credit from the advising bank the exporter checks it thoroughly to ensure that it confirms to the terms of sale contract and if necessary, effect amendments to the credit and then proceeds to effect the shipment of goods. 5. The acceptance of the Letter of Credit is then communicated to the Importer through his banker 6. After the shipment is effected the exporter prepares the documents & draws his bill under the letter of credit for obtaining payment from the negotiating bank. 7. After getting documents and the bill from the exporter, the negotiating bank checks them with the letter of credit terms and if in order, negotiates the bill & pays to the exporter. 8. The opening bank (importers bank) receives the bill & documents from the negotiating bank (exporters bank), checks them and if found in order, confirms & reimburses to the negotiating bank. The opening bank presents the bill for payment to the opener (Importer) 8. The importer (opener) receives the bill, checks the documents and if in order then accepts / pays the bill. On acceptance/payment, the Importer gets the shipping documents covering the goods purchased by him. Clauses Of Letters Of Credit Basically, the letters of credit of are either a) Revocable or b) Irrevocable. All credits therefore, should, clearly indicate whether they are revocable or irrevocable. In the absence of such indication, the credit shall be deemed to be irrevocable. 1. Revocable Letter of Credit A Revocable credit can be amended or cancelled by the Importer / issuing bank at any moment and without prior notice to the beneficiary. This type of credit does not constitute a legally binding undertaking between the bank concerned and the beneficiary because such a credit may be modified or cancelled at any moment without prior notice to the beneficiary. This credit is of limited utility and is not in much use. 2. Irrevocable Letter of Credit An irrevocable credit constitutes a definite undertaking of the issuing bank for the payment of the bills drawn under the credit, provided the beneficiary presents the stipulated documents to the credit nominated bank or to the Issuing bank and complies with all the conditions of the credit. Thus the beneficiary receives a firm undertaking of the issuing bank, giving him the security he desires from the risks of international transaction This type of credit can neither be modified nor cancelled without the prior approval of the beneficiary / his banker concerned and it is therefore, widely accepted.

3) Confirmed Letter of Credit The Uniform Customs basically and explicitly recognise only the revocable & irrevocable letters of credit which can be either confirmed or unconfirmed. These rules also make a specific reference to transferable credits. But all other types of credits are prevalent only by implication Only irrevocable credits are confirmed for obvious reasons. An unconfirmed irrevocable letter of credit constitutes an irrevocable commitment on the part of the issuing bank provided that stipulated documents are presented and the terms and conditions of the credit are complied with. In this case, the issuing bank has no recourse to the drawer in The event of non-payment Both revocable and irrevocable credits are advised to a beneficiary by the advising bank without any engagement on its part. When an issuing bank authorizes or requests the bank to confirm Its irrevocable credit and the latter has added its confirmation, such confirmation constitutes a definite undertaking of the confirming bank to pay against presentation of proper documents. Such credit is called the Confirmed Letter of Credit. The credits are confirmed under the express authority of the advising bank or the request of the issuing bank. By adding its confirmation the confirming bank steps in to the shoes of the issuing bank and consequently its confirmation constitutes a definite undertaking to honour its commitments provided stipulated documents are presented and conditions are complied with .Such an undertaking can neither be amended or cancelled without the agreement of issuing bank, the confirming bank and the beneficiary (exporter) 4. With Recourse & Without Recourse Letter of Credit In the case of With recourse letter of credit if the buyer fails to pay the bank after the specified period, the bank can have recourse on the exporter. There is no such provision under Without recourse letter of credit. It is therefore, in the interest of the exporter to obtain a confirmed, irrevocable & without recourse credit because In this case the opening bank has an added obligation to pay. If the confirming bank accepts the documents as being complete & correct and any rejection by opening bank will be a matter of discussion between the two banks 5. Anticipatory Letters of Credit (Red Clause Letters of Credit) The anticipatory credits provide for advance payment or at least part payment to the beneficiary against his undertaking to effect the shipment and submit the bill and/or documents in terms of credit within the validity. The advance payment made at the pre-shipment stage will be liquidated from the proceeds of the bill negotiated. As the clause containing the authority of the opening bank to the intermediary bank for making the preshipment payment to the beneficiary is printed / typed usually in red ink (now highlighted) and hence termed as Red Clause credits. 6 Revolving Letters of Credit In a revolving credit the amount of a drawing is reinstated and made available to the beneficiary again after a period of time on the advice of payment by the applicant or merely the fact that the shipment has been made by the exporter under the prevailing contract Obtaining L/C Limit For Import Activities For the payment of import bills and related customs duties on due date, the financial planning is very essential. For a small value of imports it is not necessary to get the special credit limits sanctioned from your bank if you are having a sufficient cash flow position. But for the regular import of inputs you will

need funds from time & for import of capital goods you will need funds from your banks under special arrangements. For this purpose, importer will have to get the import L/C limits sanctioned from his banker well in advance. While sanctioning import L/C limit, your bank may demand some security or at the time of opening of L/C, cash margin money, as per the Reserve Bank rules or its own discretion to cover the risk. The margin money will be released by the bank only after retirement of import bill received under the relative Letter of Credit.. Opening Letter Of Credit For the opening of L/C, Importer should approach his bank where his current account is maintained. The Importer has to fill the prescribed L/C application form and present the same to the designated banker/authorized dealer along with following documents: a) A copy of purchase order / sale contract between the exporter and importer. b) Exchange Control copy of import licence ( if the imports are under specific licence). Application for the Opening of L/C In the letter of credit application, the applicant importer should give the following details: The full (and correct) name and address of the beneficiary (seller) The description of the goods including details of the currency, unit price, quantity and amount of the credit The type of credit (revocable / irrevocable / Irrevocable / with the added confirmation of the advising bank) Whether freight is payable / prepaid Details of the documents required The place of shipment and the final destination of goods Whether the trans-shipment is allowed or not Whether or not partial shipments allowed The last date for shipment of goods The period of time negotiation of documents The date and place of expiry of the Credit

Before opening the L/C, the bank will first verify the details Incorporated in the credit application form with the copy of sale contract between the exporter and importer. If the imports allowable freely as per the prevailing Foreign Trade Policy, It will open the L/C in favour of the exporter on its correspondents in the exporters country. If the L/C limit is already sanctioned, at the time of opening of L /C, the bank will earmark the L/C limit of the importer and note all the particulars of L/C in its records.

DOCUMENTS RELATED TO IMPORT ACTIVITIES

1. Import Order An import order is a commercial transaction which is not only important to the importer and exporter, but is also of concern to their respective countries, since it affects the Balance of Payment position of both the countries. It is therefore not just a matter of product, manufacturing, packing, shipment and payment, but also of one of concern to licensing authorities, exchange control authorities and banks dealing in foreign exchange. The importer is required to produce copies of import order to various Government departments/financial

institutions e.g. obtaining import licences when the product is covered under the restricted items or canalised items for imports, arranging import finance, and dealing with customs offices and exchange control authorities etc. for various purposes 2. Order Acceptance Order acceptance is another important commercial document prepared by the exporter confirming the order received from the overseas importer. Under the order acceptance, the exporter gives his confirmation to the order placed by the importer and commits the shipment of products covered at the agreed price during a specified time. Sometimes, the exporter At the request of the importer his bank issues a letter of credit in favour of the exporter through its correspondents in the country of the exporter giving him the authority to draw bills up to a particular amount (as per the contract price) covering a specified shipment of goods and assuring him of payment against the delivery of shipping documents. The operations of letters of credit have been regulated and are governed by UCP 500 of International Chamber of Commerce, Paris. 3. Bill of Exchange Bill of Exchange Is also known as Draft. A bill of exchange an instrument in writing containing an unconditional order signed by the maker directing a certain person to pay certain sum of money only to or to the order of a person or the bearer of the instrument. A bill of exchange contains an order from the creditor to the debtor to pay a specified amount to a person mentioned therein. The maker of a bill is called Drawer, the person who is directed to pay is called the Drawee. The person who is entitled to receive payment is called the Payee. When the exporter expects the importer to make immediate payment upon the presentation of draft, that draft is called Sight draft or Draft drawn at first Sight or on demand or on presentation. When the draft is drawn at a date latter than presentation, it is called Usance draft or Usance bill or Demand Draft. 4. Commercial Invoice An invoice is a document drawn by the exporter on his overseas importer which contains the detailed description of the goods consigned, the consignors name, the consignees name, the name of the steamer, number and date of bill of lading, order acceptance or contract number and date, country of origin, shipping marks, numbers and special marking if any, number of packages, quantity shipped, price each and total, terms of payment, terms of sale (FOB, C&F, CIF, FAS etc.) amount of freight and insurance etc. Invoice is a prima facie evidence of the contract of sale and purchase and should be strictly In accordance with the sale and purchase contract and must be signed by the Exporter of his authorized agent. 5. Packing List / Note A Packing list/note includes the date of packing, connecting invoice number, order number, details of shipping such as the name of the steamer, bill of lading number and date of sailing, case number to which the list/note relates, details of goods such as quantity and weight and/or item-wise details. Packing List/Note helps the importer or his agents to clear the goods easily from customs authorities/ports. 6. Transport Documents The following documents are used in Import trade as transport documents.

a) Ocean Freight : b) Air Freight : c) Rail/Road: d) Post : e) Courier :

Various types of Bills of Lading Airway bills/Air Consignment Notes Railway Receipt/Consignment Note Waybill issued by Foreign Post Office Courier Receipt/Waybill

7. Insurance Policy / Certificate in international purchasing, when the goods are in transit, they are exposed to marine perils. Marine insurance is intended to protect the insured against the risk of loss or damage to goods in transit due to marine perils. Marine Insurance Policy is a contract whereby the Insurer (Insurance Company) in consideration of a payment of premium by the insured agrees to indemnify the latter against loss incurred by him in respect of goods exposed to perils of the sea or more accurately - since some of the risks are on inland waters or land which are incidental to sea voyage - the particular perils insured against. Marine Insurance Certificate is a document which gives details of the shipment insured together with a shortened version of the provisions of open cover. It is a more convenient document than a policy as it can be issued quicker. 8. Certificate of Origin Many countries require a certificate from the overseas supplier stating the origin of goods9 manufactured in the country) and certified by the Chamber of Commerce or any other recognised authority in the exporters country 9. Certificate of Inspection Certificate of Inspection is issued by the Inspection authorities In the exporters country certifying that the goods have been inspected under the recognised quality control standards and satisfies the conditions relating to quality control and inspection as applicable to it and is export-worthy. The importer may also demand for a Certificate of Inspection from his own designated inspection agenc y in the exporters country, if required. 10. Certificate of Measurement Freight can be charged either on the basis of weight or measurement. When it is charged on weight basis, the weight declared by the overseas supplier is accepted. This certificate contains the name of the vessel, the port of destination, description of goods, quantity, weight, volume, length, breadth, depth etc. of the packages. 11. Freight Declaration Freight Declaration is required to be obtained from the overseas supplier, in both the cases, when the importer agree to pay the freight or the overseas supplier pays the freight. Scrutiny Of Letter Of Credit After opening of L/C, the issuing bank will hand over a copy of L/C to the applicant importer. The importer must scrutinise its details with his credit application and ensure that it has been issued properly and is in conformity with his application. If he finds any discrepancy in the L/C, he should approach the Issuing bank immediately for its correction / amendment. What the Beneficiary (Exporter) will check after receipt of L/C

On receipt of the Letter of Credit, the exporter will check following details to avoid any problems or misunderstandings later on: Importers name and address are shown correctly. Type of credit and its terms and conditions, whether they are in conformity with the sales contract There are no unacceptable / illegal terms & conditions, The documents can be obtained in the form required The description of the merchandise or commodity, its unit price, conforms with the sales contract The amount of credit is sufficient to cover all costs permitted by the terms of the contract The possibility of meeting indicated shipping date Allow sufficient time for processing the order, effecting shipment and making presentation of the documents to the bank for payment, acceptance or negotiation The points of shipment and final destination are as agreed The provision for insurance is in accordance with the terms of the sales contract

FOREIGN EXCHANGE REGULATIONS

General Provisions of FOREIGN EXCHANGE MANAGEMENT ACT(FEMA) The Sale of foreign exchange for of import of goods into India from any foreign country, except Nepal and Bhutan permitted under the Foreign Trade Policy, will be made only by Authorised Dealers (AD) in foreign exchange, without the approval of Reserve Bank subject to the conditions in Exchange control Manual. Form A1 Applications by persons, firms and companies for making payments towards imports into India must be made in Form A1. Form A1 should be properly filled up and necessary declarations/undertakings should be furnished thereon. Manner of Payment Payments for retirement of bills drawn under letters of credit 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 maintained with them or by means of a crossed cheque drawn by the importer on his other bankers. Payments against bills under no circumstances should be accepted in cash. Currency of Invoicing Indian rupee is the only legal tender in India and importer has to complete all transactions with the bank in India in rupees only (except where the payment is from the foreign currency accounts as per RBI regulations) irrespective of the currency of the invoicing. The bank does the conversion of Indian rupees in to foreign currency and it arranges for its remittance to the exporter by applying prevailing foreign exchange conversion rate (exchange rate). Time Limit For Settlement Of Import Payments The basic rule relating to remittances against imports is that they should be completed no later than six months from the date of shipment. Deferred payments beyond six months will have to be approved by the Reserve Bank of India /Government of India.

Import Licences Import licences wherever issued are for the CIF value of the goods to be imported which includes Commission, if any, allowed by the supplier or manufacturer. Import licences cannot be utilized to the full amount to cover only the FOB cost of the goods leaving insurance, freight and commission to the agent of the supplier, as additional charges to be paid in rupees over & above the amount specified in the import licences. Interest On Import Bills Authorised Dealers may make remittances on account of interest accrued on USANCE bill under normal interest clause or of overdue interest paid on sight bills for period not exceeding six months from the date of shipment in respect of imports without prior approval of Reserve Bank of India. Payment to Buying Agents Abroad Authorised Dealers may on application and supported by documentary evidences allow remittances of commission to overseas buying agents of Indian Imports up to 2.5% of F.O.B value of imports Payment Towards Insurance Authorised Dealers may allow & make remittances towards war risk insurance premium, premium for extended insurance cover etc.which are incidental to imports provided the amounts are adequate and satisfactory & duly supported by the documentary evidence. Evidence of Import It is obligatory on the part of importers to submit exchange control copies of Bill of Entry / Postal / courier wrappers to the authorised dealer through whom the relative goods for which the payment was made, as a proof of import of the goods covered under the transaction. FOREIGN EXCHANGE RISK MANAGEMENT The foreign exchange market is a volatile one with exchange rates changing every minute. Therefore anyone who has a foreign exchange exposure by way of imports runs an exchange risk. Before heading the risk it is essential to take a view as to which way the currency exposed is likely to move Booking Forward Contract This is the most common and traditional way of reducing a foreign exchange risk. An importer books a forward sale contract (the bank agrees to sell to the customer). The exchange rate at which the transaction will be negotiated is fixed in advance by the Bank, taking in account the discount or premium prevailing on the currency under reference in the market. On the due date the transaction will be put only through at the contracted rate irrespective of the prevailing exchange rate for that currency. The main advantage of this contract is that the Importer is protected from unforeseen & unfavorable exchange rate fluctuations. Since the Rupee liability is known in advance, it helps the Importer in costing his product. However, the disadvantage is that the Importer cannot walk out of a forward contract, If the Exporter could not deliver the goods for some reason or other, he can only cancel it. Any loss in canceling the contract, the same will have to be borne by him.

NEGOTIATIONS OF IMPORT DOCUMENTS After shipping the goods, the Exporter (seller) abroad prepares the necessary documents as per the terms of contract / Letter of Credit. Where the documents are under a contract (Non L/C case), the seller will submit the complete set of documents to his banker with the request to either purchase / discount the documents or send the same on collection basis to the importer. In the former case, the exporters bank finances the exporter, whereas in the latter case no financial facility is extended to the overseas seller. However, in exceptional cases, the exporter's banker may advance some money against documents sent on collection basis while treating the documents as collateral security. In case of shipment under Letter of Credit, the documents are prepared strictly in conformity with the Letter of Credit. After preparing the documents the exporter will tender the documents to his banker for negotiation. Before negotiating, the bank will examine these documents to ensure that the documents are strictly drawn as per the terms of the Credit. The overseas banker of the exporter sends the documents to the importer's banker in India. for acceptance The importer's banker will advise the importer to collect the shipping documents either against payment or acceptance as per the terms of the contract. In case the documents are drawn under L/C, the issuing banker will examine the documents and if found in order it will hand over the same to the importer after debiting his account with the amount involved or against acceptance as per the terms of the Credit. Scrutiny Of Documents Received Under L / C After receipt of the documents from the negotiating bank the opening bank in India has to scrutinise the documents so as to satisfy itself as to their correctness as per the terms and conditions of L/C. The documents are then presented to importer who shall again scrutinise the same and ensure that there are no discrepancies. Common Discrepancies In Import Documents Following are the discrepancies normally observed in the import documents and therefore the importers should keep them in view while accepting the documents from Their bankers Credit expired prior to the shipment of goods Late shipment / Short shipment of the Goods Shipment made between ports other than those stated in credit Documents are not presented in time Absence of documents called for in L/C. Credit amount exceeded Clause Bill Of Lading (late shipment /damaged goods shipped) Absence of Freight Paid where credit covers C&F Bill of Lading does not bear Shipped on Board Stamp Description of goods differs from that mentioned in L/C Mark and numbers differ between documents. Bill of Lading / insurance documents / Bill of exchange not endorsed correctly by the exporter.

Goods under insured (all the risks not covered) Insurance certificate submitted in place of Insurance policy Insurance not effective from the time of shipment Insurance cover expressed in currency other than that of credit Weight of the consignment shown in various documents differs, Absence of signatures of exporter, where required on documents, Bill of exchange drawn on wrong party & for wrong amount Tran-shipment / Part shipment made in spite of not allowed

The following principles for accepting or rejecting documents with discrepancies are generally adopted If discrepancies are violating any of exchange control or import control regulations, the documents should straightaway be rejected If the discrepancies are of trivial nature & not affecting the basic character of the transaction, the documents may be accepted on merits. In case the documents are rejected, immediate notice to that effect should be given to the bank to safeguard Importers interests

Retirement of Import Documents The documents presented by the beneficiary are carefully scrutinised by the issuing banker. The issuing banker cannot waive any conditions of a credit unless he is duly authorised by the importer. 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. The amount of bill does not exceed the value of L/C. All documents required in the LIC have been made available & the Documents carry required endorsements. The documents do not contain discrepancies, which violate any exchange control or import control regulations. The invoice is duly signed & in conformity with amount of draft, the exact quantities are shown / are drawn in appropriate currency of the origin of goods. Bill of Lading is presented in full set of negotiable copies and is on board clean Bill of Lading & duly signed.

When goods are imported on Cash against Documents (CAD), Documents against Payment (D/P) or Documents against Acceptance (D/A) basis, the importer is required to take delivery of documents from the banker. The process is called retiring of documents. The importer should apply to authorised dealer/banker who is in possession of documents by tendering: Funds equivalent to value of documents and the bank charges. Exchange Control Copy of Import Licence, wherever applicable. Form A-I duly completed for remittance of foreign exchange.

Charging Of Interest on Import Bills Interest for the period for which the bank is out of funds shall be charged to the account of the importer. Penal interest will be charged for any overdue period. If the cash margin under L/C is kept in margin deposit account without any interest, corresponding rebate in interest should be obtained from the bank.

IMPORT CLEARANCE PROCEDURES

Introduction All goods imported into India have to pass through the procedure of customs clearance after they cross the Indian Border. The goods are examined, appraised, assessed, evaluated, charged Import Duties & the then allowed taking out of customs charge for use by the importer. The entire process of customs clearance is complex and to carry out this procedure smoothly, the Importer should be aware of the clearance procedure and have resources to clear the consignment by him (self-clearance) or he should appoint an accredited custom clearing agents for doing the job efficiently. These agents are licenced by the Commissioner of Customs and are experienced and capable of handling the documents/goods. Customs administration plays an important role in appraising, assessing and clearing the goods and they are the sole and final authority to take decision in this respect. The scope of work of customs administration has become more important as well as technical, keeping in view the advances made by science and technology and thus the brains of customs administration are taxed more and more to identify, ascertain and classify the goods in 99 Chapters of Custom Tariff Classification Code. Although the basic duty of customs administration is to collect revenue but they have a bigger job of ideally classifying the goods. Customs Authorities The monitoring of Customs clearance of the imported goods is done by the Customs Authorities functioning under the overall charge of Ministry of Finance. At the apex, there is Central Board of Excise & Customs in the Ministry of Finance. The Board is headed by a Chairman and assisted by members. The Board & its members (Customs) look after the following matters in the Ministry: Customs Law and its interpretation and application, policy and broad procedures (other than those concerning anti smuggling); Enforcement of Import Export prohibitions; Foreign Travel and CESS on imports and exports; Baggage concessions and rules; Customs Valuations; Tariff Classification and tariff advices; Customs procedures, Customs House Agents Regulations; Warehousing, inland Bonded Warehouses; Monitoring activities of FTZ, EPZ, and EOU etc. Matters relating to Drawback; All other work pertaining to Customs not specified elsewhere. Supervision and control over Custom Commissioners of all the Indian Ports / Chemical Laboratories and Directorate of Drawback.

Import General Manifest (IGM) In terms of the provisions of Section 30 of Customs Act, 1962 the Master of the vessel or his Agent is expected to furnish a copy of the Import General Manifest within 24 hours of their arrival in the countrys territory. In case of aircraft, the time limit for submission is 12 hours. The Manifest is nothing more than a list of all goods carried on board including those meant for other ports in India or aboard with all details like number of packages, marks and numbers, description of the goods and the importer's details.

Custom Clearance Procedures As soon as the importers receive the advice of arrival of the vessel, he is required to present a document known as Bill of Entry in terms of section 46 of the Customs Act, either for Home Consumption or for warehousing the goods. The Bill of Entry is noted in Import Department. The date of noting is indicated on the Bill of Entry under corresponding endorsement made against the consignment entry in the I.G.M. The date of noting is an important date, for the reason that the rate for duty applicable to the goods imported would be that which is in force on the date of noting. In case of warehoused goods, the rate of Custom Duty applicable would be that in force on the date of payment of Custom Duty. Under the Second Check Clearance Procedure, The BiII of Entry will be presented in the Appraising Department at Custom House, with all the relevant documents like Invoice, Bill of lading, Import licence, catalogue/ literature & other relevant documents. Where the documents produced are adequate for determining the classification, value & rate of Custom Duty, the Bill of Entry is then Passed by the concerned Appraiser and the Assistant Commissioner countersigns the same. The Passed Bill of Entry is then forwarded to the Licence Department for licensing debit and audit and then returned back to the importers for payment of duty in the Accounts/Cash department. After recovery of duty, the original Bill of Entry is retained in the Accounts Department and the duplicate and other copies returned to the importers for getting the goods examined in the docks. In the Docks, Shed Appraiser/Examiner shall examine the goods and if is in order then will give the out of charge for taking delivery form the custodian of the goods viz. Port Trust, after payment of the Port Trust charges. This procedure is known as the 'Second Check Procedure'. Under the First Check Clearance Procedure, the concerned Custom Appraiser at Custom House prior to passing of the Bill of Entry gives the order to the Port Supervisor to examine the imported goods. The goods are then examined in the docks and the Bill of Entry is then returned with the remarks on examination of goods to the Appraiser for passing & charging the appropriate custom duty on the goods imported. In this case the Customs gives out of charge only after payment of Custom Duty by the Importer No persons shall, except with the permission of the proper officer of Customs, is allowed to open any packages of goods imported into India and lying in a Customs Area. The Examination of cargo for assessment purposes is chiefly the function of the Appraising Department or their representative posted at the docks/Air cargo shed. Ports of Clearance An Import licence issued under the import policy is valid for import of goods through any of the Ports notified by the Customs Authorities including Air Custom in India (except in case of Advance Licences) and container freight stations (Dry ports) established in the interiors. Port Trusts Authorities Imported goods off-loaded in a customs area are required to be in the custody of an authority may be appointed by the Commissioner of Customs, until they are cleared or are trans-shipped in accordance with the provisions of the Customs Act, 1962. As per the prevailing provisions of the Customs Act, the Goods imported remain in the custody of port trusts at various Seaports or with Central Warehousing Corporation (CWC) at Airports. Customs Administration The customs administration vests in Central Board of Excise & Customs for implementing the provisions of the Customs Act, 1962. There are two main wings of Customs House. 'Appraisement' is assigned the

job of collection of revenue and 'Preventive' for prevention of smuggling. Commissioner of Customs is the Administrative head assisted by Additional/ Deputy & Asst. Commissioner. Indian Customs Tariff Classification The Constitution of India allocates the taxing powers between the Union and the States through precise entries and accordingly Union of India are empowered to levy Duties of Customs including export duties". The basic legislation concerning levy of Customs duties is the Indian Customs Act, 1962 read with Customs Tariff Act, 1975. Section 2 of the Customs Act, 1962 is the enabling section empowering levy of duties of customs on goods imported into or exported from India. However, the rates at which the different import or export goods shall be leviable to duties of customs have been respectively specified in the First and Second Schedule to the Customs Tariff Act 1975 called as the "Import Tariff' and "Export Tariff' respectively. Whereas the Export Tariff is very limited in scope as only a few specified types of articles are presently subject to Export duties. The Import Tariff is all pervasive and very comprehensive. The International system of classifying the goods for customs purposes known as Brussels Tariff Nomenclature, in short referred as BTN had been rapidly gaining ground in recent years and had been adopted by a large number of countries in the world, including India, as the basis of their National Customs Tariff. Accordingly a new Tariff Schedule came into force from 2nd August 1976, replaced the erstwhile Import Tariff. However, with effect from 28th February 1986 the Import schedule to Customs Tariff Act, has been replaced by the New Schedule, which is based on an international convention of Harmonised Commodity and Coding system commonly known Harmonised System. (HS) Structure Of Brussels Tariff Nomenclature (B.T.N.) The Brussels Tariff Nomenclature comprises: a) A list of headings arranged in a systematic order, b) Section and Chapter Notes c) General Rules for the Interpretation of the Nomenclature The Headings Of The B.T.N. The Brussels Nomenclature comprises 1098 headings, which are arranged in 99 chapters, which are themselves grouped in 21 sections. First four digits identify each heading in the B.T.N. The first two represents chapter in which the heading appears while the next two indicates its position in that chapter. The Section And Chapter Notes The Notes, which form an integral part of the Nomenclature, precede Certain Section and Chapters. The function of these Notes is to define the precise scope and limits of each heading, Chapter and Section. Harmonised System Of Nomenclature (HSN) The need for harmonisation of different classification systems followed for trade, tariff, transport, production etc. had been engaging the attention of the experts and users of these different classification and discussed at different international forums. Keeping the above objectives in view, Customs Cooperation Council (CCC), Brussels came out with a new 6 digit classification namely Harmonised Commodity Description and Coding system (HS) which was intended for application in the fields of trade, tariff, transport and related areas. India being one of the signatories of the convention, HS was adopted for both Trade and Tariff purposes. This necessitated restructuring of Indian Trade Classification on the basis HS. Accordingly, ten section of Indian Trade Classification (ITC) were replaced by 21 Section of HS comprising 99 chapters which were further subdivided into 1253 Heading at 4 digits, 5063 subheading at 6 digit and 10979 ultimate 8 digit

codes. The 8 digit codes are the extension of 6 digit codes of HS to specify the products of national importance. Principles of Classification The Nomenclature sets out in systematic form the goods handled in international trade. The goods are grouped in Sections, Chapters and sub-Chapters which are given titles indicating as concisely as possible the categories or types of goods they cover. In many cases, however, the variety and number of goods classified in a Section or Chapter are such that it is impossible to cover them all or to cite them specifically in the titles. The classification of the Imported Item is determined: 1. According to the terms of the headings & any relative Section / Chapter Notes and 2. Where appropriate, provided the heading or Notes according to the provisions of Interpretative Rules. Six Digits Classification System Each chapter contains a number of headings with corresponding 4 digit numerals (For example: 85.21 Video recording or reproducing apparatus) First 2 digit indicate chapter number, Second 2 digit represent Heading number, to denote Sub-heading a third set of 2 digits are used (i.e. 8521.10 Magnetic Tape type 8521.90 Others) There are 6 Rules for classification known as Interpretative Rules, which are part of the statute and legally binding. Types and Levy of Customs Duties Import Duties The following are the Import Duties, which are presently levied on import goods 1. Basic Customs Duty, It is specified against each Heading or Sub-heading in the first Schedule to the CTA. This is popularly called Basic Customs Duty. There are different rates of duty for different commodities. There are also different rates of duty for goods imported from certain countries in terms of bilateral or other agreements with such countries, which are called preferential rates of duties. The duty may be a percentage of the value of the goods (when it is called ad valorem duty) or at a specific rate. 2. Additional Duty It is equal to the excise duty leviable on like goods produced or manufactured in India. This is levied under Section 3 of CTA. This is commonly called "Additional duty" (earlier known as CVD). If such duty is on ad valorem basis then the value for this purpose is the total of the CIF value plus the basic customs duty. 3. Anti-Dumping Duty Under Section 9A, CTA on specified goods imported from specified countries to protect indigenous industry from injury resulting from dumping of goods. Valuation of Goods When the goods attract specific rate of duty there is no problem but when duty is ad valorem , often importer and Customs administration have disputes on value of goods. Valuation of goods for customs

purpose is done as per the principles laid down in Custom Valuation (Determination of Price of Imported Goods) Rules1988. The valuation of goods has to be done in terms of section.4 of the Customs Act to determine the Customs Duty. Valuation on invoice price cannot be denied if the conditions of relevant notification are satisfied unless buying and selling companies can be proved to be related persons, who are influencing the invoice price.

Bill Of Entry (B / E) The bill of entry is a document, prepared by the importer or his clearing agent in the prescribed form under Bill of Entry Regulations, 1971, on the strength of which clearance of imported goods can be made. The different kinds of Bill o entry are used for following purposes. 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 (b) Goods entered for warehousing are removed into bond on 'Into Bond' Bills of Entry (c) Goods cleared ex-bond for home consumption on payment of duty on "Ex-Bond" Bills of Entry 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 When To Present 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 Steamer Agent. A facility has been offered to the steamer agents to lodge B/E 30 days in advance of arrival of the vessel for provisional passing of the B/E. This concession has been given to facilitate the importer's Customs House Agents 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 Bill of Entry is very important, as the rate of duty applicable to the imported goods will be rate, which is in force on the date of presentation. . Documents to Be Furnished With Bill Of Entry. Apart from filling up various columns of this prescribed bill of entry form, the importer is supposed to submit certain minimum documents which may be required for checking the correctness of the declarations made and for completing the assessment (for checking value and for determining the classification and rates of duties) and import control licence or suitable declarations for determining permissibility of import etc. The documents presented along with the Bill of Entry generally include 1. Commercial Invoice, 2. Packing List, 3. Bill of Lading or Delivery Order, 4. Insurance Policy, 5. Certificate of Origin etc. 6. Product literature/Catalogues 7. Import Licence (custom purpose copy)

Section 17(3) of the Customs Act, 1962 provides that the proper officer may for purposes of assessment ask the importer to furnish any other documents whereby the duty leviable on the imported goods can be ascertained. The aforesaid section also makes it obligatory on the part of the importer to subscribe to a declaration as to the truth of the contents of the Bill of Entry. Declaration of Tariff Classification An indication of Customs Tariff Heading and Exemption Notification, if any, which the importer feels may be applicable to goods imported is expected to be given in the relevant column of the Bill of Entry to enable allocation of the Bill of Entry to proper Group/Appraiser in the custom house and to expedite its processing. In case the Customs Tariff Heading under which the importer feels his goods will be covered are not finally accepted by the customs dept., appropriate classification under the Customs would be made in the Appraising Group. Presentation of Bill Of Entry for Noting The Bill of Entry after completing all the relevant columns and with proper declarations signed by the importer is presented in the import-noting department. After its proper scrutiny in reference to the import manifest and also with respect to the various particulars declared on the Bill of entry and the attached documents, if no discrepancies are noticed the bill of entry is treated as presented and the date of presentation is impressed and bill of entry noted against the relevant entry in the manifest. This date of presentation becomes crucial for determining the rate of duty. This procedure is referred as Noting of Bill Of Entry. Scrutiny of Bill Of Entry After appropriate noting, the Bill of Entry is presented to the particular Appraiser for further processing. Two major functions, which an Appraiser has to perform while scrutinising and processing a Bill of Entry, are (A) Enforcing of prohibitions or restrictions if any in regard to the imported goods & (B) Assessment of the goods entered in the Bill of Entry to appropriate amount of Import Duties. 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 'live' documents for scrutinising the bill of entry and noting the rate of duty. The Bill of entry is scrutinised to ensure that a) The Importer has filled all the columns and b) The Bill of Entry is accompanied all the relevant documents like Copy of order/contract. Supplier's invoice in four copies. Copy of the letter of credit. Import Licence. Bill of Lading (original and non-negotiable). Packing list (2 copies). Weight specification. Freight insurance memo. Manufactures test certificate. Certificate of origin. Delivery order issued by shipping company, its agent or carriers. If invoice is for FOB, freight charges and insurance premium amount certificate should be attached. OGL declaration Custom declaration (4 copies) Importer Exporter Code Number.

Under the Electronic Data Interchange (EDI) system, the importer does not submit documents as such for assessment but submits declarations in electronic format containing all the relevant information to the Service Centre. A signed paper copy of the declaration is taken by the service centre operator for acceptance of the declaration. A checklist is generated for verification of data by the importer/CHA. After verification, the data is submitted to the system by the Service Centre Operator and system then generates a B/E Number, which is then endorsed on the printed checklist and returned to the importer/CHA. No original documents are taken at this stage. Original documents are taken at the time of physical examination of the imported consignments only. The importer/CHA also needs to sign on the final document after Customs clearance. The first stage for processing a bill of entry is what is termed the noting of the bill of entry, vis --vis, the 1GM filed by the carrier. In the non-EDI system the importer has to get the bill of entry noted in the concerned unit which checks the consignment sought to be cleared having been manifested in the particular vessel and a bill of entry number is generated and indicated on all copies. After noting the bill of entry gets sent to the appraising section of the Custom House for assessment functions, I payment of duty etc. In the EDI system, the Steamer Agents get the manifest filed through EDT or by using the service centre of the Custom House and the noting aspect is checked by the system itself which also generates bill of entry number. After noting/registration of the Bill of entry, it is forwarded manually or electronically to the concerned Appraising Group in the Custom House dealing with the commodity sought to be cleared. Appraising Wing of the Custom House has a number of Groups dealing with earmarked commodities falling under different Chapter Headings of the Customs Tariff and they take up further scrutiny for assessment, import permissibility etc. angle. Permissibility of Import Imports are permitted subject to suitable licences being produced by the Importer. There are certain exceptions and imports are also permitted under Open General Licence (OGL) i.e. without licence or customs clearance permit. In consideration of valid importation the importer should therefore submit appropriate licence(s) or makes suitable declaration on the various copies of the Bill of Entry. Verification of Import Licence The appraising official will check the licences basically for their description, value, validity period, importers name etc. It is for the importer to establish that the goods imported are in line with the description in the licence. If the Appraising official is satisfied that the licence is in order, he will send the licence with the bill of entry to Licence Section for registration and audit. The department maintains a register for every licence accepted and debited showing the last balance on the licence. Valuation of Goods Imported The second basic function of the Appraiser is the assessment of duty. (a) Checking from the point of view of appropriateness of value of the goods declared (wherever goods are leviable to ad valorem rates of duties). (b) Classification of goods under the Import Tariff Schedule and determination of appropriate rate of duty with exemption notifications in force, if any. It also includes classification of the goods in terms of Central Excise Tariff and determination of additional duty leviable. (C) Determination of any other duties that may be leviable at the time of importation under any other taxing statutes (like Special Additional Duties, Cess etc.)

As for value of goods, the importer has to attach an Original commercial invoice with the Bill of Entry. Apart from this, the Appraiser scrutinises carefully the declaration subscribed by the importer on the reverse of the Bill of Entry with a view to check whether there is any indication of any relationship between the importer and the exporter. In other words if the supplier and the importer are Related parties, in terms of New Valuation Rules, then the Value of the Consignment is loaded accordingly in consultation with Valuation Section at Custom House. Classification of Goods Imported Once the value aspect has been decided and decision taken about the assessable value, the next decision will be taken about the customs duties, which may be levied on the imported goods. For this purpose, he has to classify appropriately the goods both the Customs Tariff Schedule as well as Central Excise Tariff Schedule. For Customs duty purposes the appraiser has to determine, after checking declaration and the documents which may be submitted by the importer the appropriate headings and sub-headings of the Customs Tariff Schedule. The Appraiser may also have to seek further explanation from the importer about the nature and function of the goods, their composition or manufacturing process etc. For determining the appropriate heading or sub-heading in the Customs Tariff Schedule under which goods may be classified the appraiser may ask the importer to get the goods tested or examined physically before the classification question can be finalised. Rates Of Customs Duty The rates of duty which customs authorities levy under the Customs Act, 1962 are stipulated in the First and Second Schedules of the Customs Tariff Act, 1975. Schedule I deals with imports & Schedule II deals with exports. The headings in Schedule I are grouped in 99 Chapters in 21 sections. As this Act is based on Brussels Trade Nomenclature (BTN) the headings numbers are of six digits. A notable feature of this 1975 legislation is that it contains detailed explanatory and clarification notes under each section and chapter. This helps in classification of goods and reduces the possibility of disputes arising between the tax collector and the taxpayer. It also contains a set of four interpretative rules, which are also useful for proper classification of goods under various chapters. Every year when the budget is presented to Parliament, the changes are made in respect of customs duties & presented in the form of the Finance Bill. When these proposals are adopted by the Parliament, it becomes law. Since the BTN classifications are accepted all over the world & between all the trading nations, the classifications put on by the exporters in overseas countries are accepted and duties paid according to it. Therefore when the import orders are placed, it is an advantage to the importer to put the BTN number in his letter of credit or order, as the case may be, to avoid any wrong classification of the goods or other difficulties at the time of seeking clearance of goods. As per the prevailing Custom Rules, the import duties are charged on the basis of Assessable value of the goods in Indian Rupees. The assessable value is calculated by adding CIF value of the imported goods & Landing charges @1%of the CIF value. The CIF value of the goods is calculated by multiplying Invoice value in foreign currency by conversion rate for the currency published by the Customs on a monthly basis. In case of imports on FOB basis, the FOB value in foreign currency is converted in to rupee amount & then the insurance & freight paid in rupees are added to it for arriving at CIF value. In case, Importer fails in furnishing documentary evidence indicating the insurance & freight amount, the custom authorities are empowered to add 20.25 % on account of insurance & freight elements) of the FOB value of the goods to arrive at CIF value of the goods.

The landing charges are the charges to be paid by the importer to the Port trust Authorities towards taking care of their products on its arrival till its clearance from their custody. In fact the liability of the payment of these charges comes after the payment of custom duties & getting clearance from the customs authorities. However as per the prevailing Customs Rules, they are authorized to add 1% of the CIF value towards these charges for arriving at assessable value which forms the basis for charging Import Duties. Imports from specified countries also enjoy preferential duty. Calculation of Import Duty A) Assessable Value (including CIF + Landing Charges @1% of CIF) B) Basic customs duty say @ 25% C) Add Additional duty say @16% (On A + B above) D) Add: Education Cess @ 3% on Additional Duty (C) E) Add : Education Cess @ 3% on B+C+D above Total Duty Payable (B+C+D+E) Assessment of Customs Duty

Rs.100 / 00 Rs. 25 / 00 Rs. 20 / 00 Rs. 0 / 60 Rs. 1 / 40 Rs. 47 / 00

The basic function of the assessing officer in the appraising groups is to determine the duty liability taking due note of any exemptions or benefits claimed under different export promotion schemes. They have also to check whether there are any restrictions or prohibitions on the goods imported and if they require any permission/ license/ permit etc., and if so whether these are forthcoming. Assessment of duty essentially involves proper classification of the goods imported in the customs tariff having due regard to the rules of interpretations, chapter and sections notes etc., and determining the duty liability. It also involves correct determination of value where the goods are assessable on ad valorem basis. The assessing officer has to take note of the invoice and other declarations submitted along with the bill of entry to support the valuation claim, and adjudge whether the transaction value method and the invoice value claimed for the basis of assessment is acceptable, or value needs to be redetermined having due regard to the provisions of Section 14 and the valuation rules issued there-under, the case law and various instructions on the subject. He also takes note of the contemporaneous values and other information on valuation available with the Custom House. Where the appraising officer is not very clear about the description of the goods from the document or as some doubts about the proper Classification which may be possible only to determine after detailed examination of the nature of the goods or testing of its samples, he may give an examination order in advance of finalisation of assessment including order for drawing o representative sample. This is done generally on the reverse of the original copy of the bill of entry which is presented by the authorized agent of the importer to the appraising staff posted in the Docks/Air Cargo Complexes where the goods are got examined in the presence of the importers representative. On receipt of the examination report the appraising officers in the group s the bill of entry. He indicates the final classification and valuation in the bill of entry indicating separately the various duties such as basic, countervailing, anti-dumping, safeguard duties etc., which may be leviable. Thereafter the bill of entry goes to Assistant Commissioner/Deputy Commissioner for confirmation depending upon certain value limits and sent to computist who calculates the duty amount taking into account the rate of exchange at the relevant date as provided under Section 14 of the Customs Act. After the assessment and calculation of the duty liability the importers representative has to deposit the duty calculated with the treasury or the nominated banks, there after he can go and seek delivery of the goods from the custodians. Where the goods have already been examined for finalization of classification or valuation no further examination/checking by the dock appraising staff is required at the time of giving delivery and the goods

can be taken delivery after taking appropriate orders and payment of dues to the custodians, if any. In most cases, the appraising officer assesses the goods on the basis of information and details furnished to the importer in the bill of entry, Invoice and other related documents including catalogue, write-up etc. He also determines whether the goods are permissible for import or there is any restriction/prohibition. He may allow payment of duty and delivery of the goods on what is called second check/appraising basis in case there are no restriction/prohibition. In this method, the duties determined and calculated are paid in the Custom House and appropriate order is given on the reverse of the duplicate copy of the bill of entry and the importer or his agent after paying the duty submits the goods for examination In the import sheds in the docks etc, to the examining staff. If the goods are found to be as declared and no other discrepancies / mis-declarations etc., are detected, the importer or his agent can clear the goods after the shed appraiser gives out of charge order Wherever the importer is not satisfied with the classification, rate of duty or valuation as may be determined by the appraising officer, he can seek an assessment order. An appeal against the assessment can be made to appropriate appellate authority within the time limits in the manner prescribed. The assessment of goods to duty is done on the basis whether: a) The goods covered by the bill of entry are regularly imported b) To be tested by the customs house laboratory c) Appraiser desires to see the representative sample before completing the Bill of Entry for the purpose of verification of the value/description etc First Check & Second Check Clearance Procedure Under the first check clearance procedure, the Appraiser after the initial scrutiny of documents returns the Bill of Entry to the importers with an order for examination of goods before assessment of duty. The examination, visual or chemical, is intended to verify the description, type, quantity, quality etc. of the product imported for its proper classification & assessment of import duties. In such cases the Appraiser gets the goods examined first from custom officer / shed Appraiser in the docks and on receipt of the report of inspection of the sample or test report received from the custom laboratory completes assessment of Bills of Entry. Thereafter, the importer can pay duty and take delivery of goods from the docks The assessing officer has also to ensure that the relevant test results which is relied upon in arriving at a particular classification/assessment, is duly recorded and reproduced fully on the reverse of bill of entry by the test clerk. After completing the above checks the appraiser is supposed to complete the assessment and sign the Bill of Entry. He will also debit the import licence in his own hand before the Bill of Entry is sent to Group Asst. Commissioner for counter check. Under the Second Check Clearance Procedure, the goods which are regularly imported and the Appraiser is satisfied that the goods are properly covered by the documents presented, he passes the Bill of Entry for payment of custom duties without inspection of the goods imported. Under this provision, the importer first pays custom duties & then asked to get goods examined and cleared directly without going back to customs house. Clearance through Electronic Data Interchange (EDI) System In the EDI system of handling of the documents/declarations for taking import clearances as mentioned earlier the cargo declaration is transferred, to the assessing officer in the groups electronically.

The assessing officer processes the cargo declaration on screen with regard to all the parameters as given above for manual process. However in EDI system, all the calculations are done by the system itself. In addition, the system also supplies useful information for calculation of duty, for example, when a particular exemption notification is accepted, the system itself gives the extent of exemption under that notification and calculates the duty accordingly. Similarly, it automatically applies relevant rate of exchange in force while calculating. Thus no computist is required in EDI system. If assessing officer needs any clarification from the importer, he may raise a query. The query is printed at the service centre and the party replies to the query through the service centre. After assessment, a copy of the assessed bill of entry is printed in the service centre. Under EDI, documents are normally examined at the time of examination of the goods. Final bill of entry is printed after out of charge is given by the Custom Office. In EDI system, in certain cases, the facility of system appraisal is available. Under this process, the declaration of importer is taken as correct and the system itself calculates duty which is paid by the importer. In such case, no assessing officer is involved. Also, a facility of tele-enquiry s provided in certain major Customs stations through which the status of documents filed through EDI systems could be ascertained through the telephone. If any query is raised, the same may be got printed through fax in the office of importer/exporter/CHA. End Use Bonds There are many cases where concessional rates of duties are prescribed by exemption notification for particular end uses of the goods and subject to certain conditions as stipulated in the notification being satisfied. These conditions are generally post importation conditions and the importer binds him by executing a suitable Bond undertaking to satisfy the proper officer for the goods having been actually utilised for the purpose for which they were cleared at that time of imports. In many cases preferential rates of duties have been provided if the articles are originating from certain countries in terms of certain International Agreements. The concessional rates of duties on the basis of the country of origin are applicable subject to rules for determination of origin of the specified goods being satisfied and appropriate certificates being produced at the time of clearance by the importer. After determining rates of duty and relevant exemptions which may be applicable, the appraiser will indicate on the Bill of Entry both under Customs duty column as well as additional duty column the effective rates of duty which may be applicable on the import goods sought for clearance. Other duties leviable are also suitably indicated. Examination of Goods All imported goods are required to be examined for verification of correctness of description given in the bill of entry. However, a part of the consignment is selected on random selection basis and is examined. In case the importer does not have complete information with him at the time of import, he may request for examination of the goods before assessing the duty liability or, if the Customs Appraiser/Assistant Commissioner feels the goods are required to be examined before assessment, the goods are examined prior to assessment. This is called First Appraisement. The importer has to request for first check examination at the time of filing the bill of entry or at data entry stage. The reason for seeking First Appraisement is also required to be given. On original copy of the bill of entry, the Customs Appraiser records the examination order and returns the bill of entry to the importer/CHA with the direction for examination, which is to take it to the import shed for examination of the goods in the shed. Shed Appraiser / Dock examiner examines the goods as per examination order and records his findings. In case group has called for samples, he forwards sealed samples to the groups The importer is to bring back the said bill of entry to the assessing officer for assessing the duty. Appraiser assesses the bill of entry. It is countersigned by Assistant/Deputy Commissioner if the value is

more than Rs. 1 lakh. The goods can also be examined subsequent to assessment a payment of duty. This is called Second Appraisement. Most of the consignments are cleared on second check appraisement basis. It is to be when that whole of the consignment is not examined. Only those packages are selected on random selection basis are examined in the shed. Under the EDI system, the bill of entry, after assessment by the group or first appraisement, as the case may be, need to be presented a counter for registration for examination in the import shed. A declaration for correctness of entries and genuineness of the original documents need to be made at this stage. After registration, the BIE is passed on to the Appraiser for examination of the goods. Along with the BIE, the CHA present all the necessary documents. After completing examination goods, the Shed Appraiser enters the report in System and transfers first appraisement BIE to the group and gives out of charge in case of already assessed B/E. Thereupon, the system prints Bill of Entry and order of clearance (in triplicate). All these copies carry the examination report, of clearance number and name of Shed Appraiser. The two copies e B/E and the order are to be returned to the CHA / importer, after the Appraiser signs them. One copy of the order is attached to the Customs copy of Bill of Entry and retained by the Shed Appraiser. Green Channel facility Some major importers have been given the green channel clearance facility. It means clearance of goods is done without routine examination of the goods. They have to make in the prescribed declaration form at the time of filling the Bill of Entry. The appraisement is done as per normal procedure except that there would be no physical examination of the goods. However in rare cases, if there any specific doubts are regarding description or quality of the goods, physical examination may be ordered by the senior officers/investigation wing. Execution of Bonds: Wherever necessary for availing duty free assessment or concessional assessment under different schemes, execution of end use bonds with bank guarantee or other surety is required to be furnished. Payment of Duty The duty can be paid in the designed bank or through TR 6 challan. Different Custom Houses have authorised different banks for payment of duty. It is necessary to check the name of the bank & the branch before depositing the duty. The bank endorses the payment particulars in challan which is submitted to the customs. Amendment of Bill of Entry Whenever mistakes are noticed after submission of documents, amendments to the bill of entry is carried out with the approval of Deputy / Assistant Commissioner. The request for amendment may be submitted with the Supporting documents. Amendment in document may be permitted after the goods have been given out of charge i.e. goods have been cleared on sufficient proof being shown to the Deputy / Assistant Commissioner. Endorsement of Documents Examined For Assessment Particulars of documents examined by the Appraiser to resolve any doubt in respect of correct valuation or assessment of goods are invariably recorded on the bill of entry for the information of audit so that enquiries and objection from audit on the later date can be avoided.

Endorsement Of Examination / Appraisal / Inspection Orders The Appraiser will endorse the examination/appraisal/inspection orders to the shed appraising staff simultaneously with the assessment of bill of entry if all the required documents have been submitted and the bill of entry is released under the second appraisement procedure for payment of duty and taking delivery from the Docks. The examination/inspection/appraisal order may be deferred if any document, which he feels, should undergo verification before orders are endorsed to the shed staff. In that case he assesses the bill of entry and endorses the duplicate copy of bill of entry asking the importers to submit the required documents before and/or after payment of duty. Movement of Bill of Entry After Assessment After the bill of entry is assessed by the Appraiser and checked and countersigned by the Asst. Commissioner, the duty amount is calculated by the Computist and embossed, it is forwarded to the Licence Section for necessary verification of the Licence produced. The Accounts Department then detach the original copy of the bill of entry after payment of duty amount impressing the bill of entry with the duty payment stamp and suitable perforation is done on duplicate copy. The Original copy of the bill of entry is thereafter forwarded to the Customs Revenue Audit for checking and verification from revenue aspect. After the audit is over, the original copy of the bill of entry is passed on to the Manifest Clearance Department for reconciling and closure of Manifest along with the Duplicate copy of bill of entry, which is received, from Dock after the clearance of goods. The triplicate copy of the bill of entry is the copy for the importer file, the fourth copy commonly known as the Exchange Control Copy is for the purpose of submitting to RBI, exchange control department, as a proof of imports made. Procedure Regarding Warehousing (Bonding) Of Imported Goods An importer may not like to clear entire consignment imported or may have certain problems in clearing the goods imported immediately on payment of duty for home consumption. The legislature has provided that in such an eventuality he can, subject to certain conditions being satisfied, deposit the goods in a Public or Private Bonded Warehouse. The object of warehousing is to allow the trade the facility of deferring payment of duty on imported goods (up to period as indicated in section 61 of Customs Act, 1962) pending actual clearance for Home consumption on payment of duty or their re-export without payment of duty to any foreign port. For warehousing the imported goods the importers are required to file a set of yellow coloured bill of entry commonly known as warehousing or into bond Bill of Entry. The warehousing B/E has more or less the same columns as that of a Home Consumption BIE except that the columns indicating the mode of payment and realisation of duty in the Home Consumption B/E have been replaced by columns showing particulars of time by which goods are allowed to be removed to warehouse by Asst. Collector, Bond Registration number and particulars of actual deposit of the goods to warehouse by Preventive Officer. The duplicate copy of the Bond bill of entry shows two more columns on the reverse to indicate the particulars of escorting by the escorting officer and order of removal of the goods to warehouse by the proper officer (Shed Appraiser). The importers have to furnish the same particulars / information / documents and subscribe to similar declarations as in the Home Consumption BIE. The procedures with regard to presentation and noting in the Import Noting Department as usual have to be followed before the Bill of Entry is received in the Appraising Department. In the Appraising Groups before warehousing is allowed assessment has to be completed, though duty is not paid and thereafter the scrutiny and processing of the bill of entry as indicated earlier for home consumption BIE will apply to warehousing BIE. Even though the rate of duty applicable for warehoused goods is linked with the date of physical clearance and it may necessitate reassessment if after warehousing but before physical clearance there is a change in rate of duty. It may be observed that the crucial checking relating to acceptability of valuation, rate of exchange applicable, permissibility of imports have to be considered at the time of

processing Warehousing Bill of Entry. Even the rate of duty applicable at the time of warehousing has to be ascertained and to be indicated on the Bill of Entry to ascertain the value of the Bond (which is a sum equal to twice the amount of duty assessed on such goods) to be submitted by the importer u / s 59 of Customs Act, 1962 to Import Bond Department before the actual warehousing of the goods. After the assessment is completed the appraiser debits the import licence(s) where necessary and the set of Bond B/E undergoes usual counter checks by the Accounts Dept. The Bond B/E is thereafter audited by the Internal Audit Department and then sent to Import Bond Department where the importers file the requisite warehousing Bond u/s 59 of Customs Act, 1962. The Bond after scrutiny is accepted by A.C. (Bond) and registered in the Bond Department and the Bond number is impressed on all copies of B/E. The original copy is kept in the Bond Department while the others are handed over to importers/Clearing Agent. The goods are thereafter will get examined by the Dock Appraising staff on the basis of orders of the Appraiser on Duplicate copy and if found in order, the same are allowed to be physically warehoused by the Dock Appraiser under the escort of a Preventive Officer. Ex Bonding Of Warehoused Goods For Home Consumption In order to clear the dutiable imported goods from a Warehouse, the Importer is required to present an ex-bond bill of entry, printed on green paper in the Import Bond Department. It is not necessary for the importer to take clearance of the entire consignment, which was warehoused under a particular Into Bond B/E while filing an ex-bond Bill of Entry. Even ex-bond B/E for part clearance can be submitted. The importer after getting the ex-bond B/E registered in the Import Bond Department submits it to Appraising Department along with Triplicate copy of related Bond B/E and invoice/packing list, for verification of the particulars furnished on the B/E (made on the basis of Bond B/E). The concerned Group Appraiser assesses B/E & thereafter hands it over to the importers/Clearing Agents for payment of duty and taking delivery of the goods after the usual counter check by concerned Group Asst. Commissioner. Demurrage Charges The goods discharged in the customs area by the conveyance carrying imported goods are stored in warehouses of Port Trusts or other designated authority. The storage is without levy of demurrage charges for a few days. Thereafter demurrage or storage charges are levied. Following genera] principles are applied for 'free period'. (a) Commercial cargo : 7 calendar days from date of landing (b) Unaccompanied Baggage: 14 calendar days from the date of landing (c) Non-commercial Cargo: 7 calendar days from date of landing Demurrage When Customs Formalities Are Delayed In case of delay in assessment of Custom Duty due to the customs formalities, such demurrage may be exempted by Port trust authorities provided a certificate is issued by the Customs authorities stating that detention was due to bona fide operation of customs or import control formalities. It is pertinent to note that it is the duty of custom officer to issue detention certificate, if for the purpose of customs examination the imported goods are detained. Import Follow-through Once an importer is allowed to remit foreign exchange out of the country he has an obligation to import the permitted goods of equivalent value into the country. If no goods or goods of lesser value are imported, it would lead to leakage of foreign exchange.

To ensure that foreign exchange released for import of goods is properly utilised, the authorised dealers will verify Documentary evidence of import in the form of either postal wrappers (imports by post parcel) or Bills of Entry (imports other than by post parcel). One of the copies of Bill of Entry is called the Exchange Control Copy and will be designated as such by means of a notation on the top of the form. This copy has to be submitted to the authorised dealers by the importer within 90 days from the date of remittance. Authorised dealers will record additional information such as (a) due date for submission of EC copy of Customs Bill of Entry, (b) date/s of issue of reminder/s to the importer. (c) date of submission of EC copy of Bill of Entry, and (d) date of verification of the documentary evidence (by authorised dealers / auditors or by inspecting officials of RBI). The Bill of Entry will be scrutinised with reference to the corresponding remittances made by the authorised dealers with respect to the description, quantity and the value of the goods, as well as the number and date of import licence agree with the details furnished by the importer when applying for the remittance. Postal wrappers will also be verified to ensure that the available details agree with the importers declarations. The authorised dealers will also record a note suitably on the Import Bills register and the bills of entry or postal wrapper under proper authentication after verification. If any major material discrepancies are observed, they will refer such case to RBI with the entire set of documents. If the importer does not submit documentary evidence of import within 90 days of the date of remittance, the authorised dealers will advise the importer to produce it forthwith. The second reminder will be sent by authorised dealers by registered post advising the importer to submit the documentary evidence of import within 21 days. If the bill of entry/ postal wrapper are not submitted within 21 days of the registered reminder, the authorised dealers will report such case to Reserve Bank.

OTHER PROVISIONS A ) Uncleared Goods Sometimes goods are not cleared from the port by importers for some reason or the other. The Port prepares a statement of all such goods and presents it to the collector of Customs. Under the Port Trusts Act, any goods lying un-cleared or unclaimed for a period of one month from the payment of custom duties, can be auctioned if the dues have not been paid and even if the dues are paid the Port Trust are still entitled to auction it if not cleared at the end of two months. Such auctions are preceded by notifications in the official Gazette. B ) Untraced Goods Where all the packages are not made available for delivery, Importer is entitled to file an Enquiry with the Port Trust authority. Before this enquiry form is accepted, Importer should give an opportunity to the Shed Master to trace out the packages by issuing a Trace Request, which will be handed over to the importer subsequently with a suitable endorsement. Now, the enquiry form is important in the sense that this must be registered in the port trust office and only then is it a valid document. The date of registration at the office is important because the registration of the enquiry is your first intimation of possible claim in case the Port Trust is unable to deliver the package to you. Under the Port Trust Act the Port Trust takes responsibility only for seven clear working days. Any cargo that is lying beyond seven clear working days is lying on the importer's account at his risk.

C) Damaged Goods When packages are found in a damaged condition before one removes the goods and where such damages has occurred while goods were in the Port Trust's custody, one has to file a claim on the Port Trust. In such cases the shed master is required to hold a survey. This survey is carried out only for goods that have been landed in good condition and damaged subsequently. If the goods have been damaged at the time of landing the Port Trust, he will not hold the survey. It is the Steamer Agents responsibility, as carriers to survey the packages when they are landed in defective conditions. The importers should remember that the claims with Port Trust Authorities towards missed packages should be registered within 7 days from the date of landing. Beyond that there is no liability for the Port Trust, as they cannot keep the cargoes indefinitely as the port is a transit area. Goods have to be constantly moving out making room for fresh inwards arrivals.