CUSTOM DUTY

DEFINITION

Customs Duty is a tax imposed on imports and exports of goods.

A tax levied on imports (and, sometimes, on exports) by the customs authorities of a

country to raise state revenue, and/or to protect domestic industries from more efficient or
predatory competitors from abroad. Customs duty is based generally on the value of goods or
upon the weight, dimensions, or some other criteria of the item (such as the size of the
engine, in case of automobiles).

TYPES OF CUSTOMS DUTY

The customs duty can be divided into different categories according to different
standards or from different angles. According to the flow direction of the import and export
goods, it can be divided into import duties, export duties and transit duties; according to the
taxation standard(or taxation method), it can be divided into ad valorem duties, specific
duties, mixed duties (including compound duties, alternative duties), sliding duties, seasonal
duties, variable levies, etc; according to the nature of the customs duty, it can be divided into
ordinary customs duties, preferential duties (most-favored-nation duties, preferential duties,
generalized system of perference, etc), differential duties (anti-dumping duties, anti-subsidy
duties and retaliatory taxes).

According to the primary purpose of tax collection, it can be divided into revenue
duties and protective duties, which are the concepts of customs duties sometimes used in
making customs policies; according to the restrictions from other countries or international
organizations when formulating customs duties, it can be divided into autonomous tariffs,
non-autonomous tariffs, state-designated duties, agreement tariffs, and bound tariffs, etc.
Customs duties can also be divided into principle duties and additional duties; the latter is as
opposed to the former. The principle duty is the regular duty specifically listed in the customs
tariffs while the additional duty is a kind of duty levied besides the principle duty due to
some specific needs. Usually additional duties are temporary or provisional.

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 According to the related regulations of the WTO, dumping should be condemned and
the victim country is entitled to levy a certain amount of anti-dumping duty on the dumping
imports to countervail dumping or prevent its further move. Whether or not to form a
dumping is a sensitive economic, even political problem, therefore, it is quite necessary to
form a clear-cut, scientific concept of dumping and to distinguish different types of dumping,
which is also the premise of proper application of anti-dumping duties. In order to protect fair
competition, to prevent dumping and the abuse of anti-dumping measures, the Agreement on
Implementation of Article VI of GATT 1994 (the Agreement) one of the Agreements of
the World Trade Organization, has laid down further guidelines on calculating the dumping
margin, the anti-dumping program, the time limit of taking anti-dumping measures and the
specific standards for the work of the expert panel for the anti-dumping disputes.

The Agreement, however, also prescribes that the anti-dumping duty and the anti-
subsidy duty cannot be levied on the same product at the same time for the reason of
countervailing the dumping or export subsidies. The Anti-Dumping and Anti-Subsidy
Regulations of the People's Republic of China (the Regulations), promulgated and
implemented by our country on March 25, 1997, is the first anti-dumping and anti-subsidy
statute in China. The Regulations prescribes that dumping refers to exporting of import
products to China at a price lower than its normal value. Based on the investigations on the
dumping and the dumping margin launched jointly by the Ministry of Foreign Trade and
Economic Cooperation and the General Administration of Customs, and the investigations on
the damage and the extent of damage launched jointly by the National Commission of
Economy and Commerce and the departments concerned under the State Council, the
Ministry of Foreign Trade and Economic Cooperation and the National Commission of
Economy and Commerce make the preliminary verdict respectively and the results will be
promulgated by the Ministry of Foreign Trade and Economic Cooperation.

Further investigations should be conducted according to the afore-mentioned article

on the dumping and the dumping margin, the damage and the extent of the damage if the
preliminary verdict is tenable. The Ministry of Foreign Trade and Economic Cooperation and
the National Commission of Economy and Commerce will make the final verdict respectively
based on the results of the investigations and the final verdict will be released by the Ministry
of Foreign Trade and Economic Cooperation. The anti-dumping duty will be levied by the
customs and the duty amount does not exceed the dumping margin.

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TYPES OF CUSTOMS DUTIES IN INDIA

While Customs Duties include both import and export duties, but as export duties
contributed only nominal revenue, due to emphasis on raising competitiveness of exports,
import duties alone constituted major part of the revenue from Customs Duties and include
the following:

Basic Customs Duty

All goods imported into India are chargeable to a duty under Customs Act, 1962
.The rates of this duty, popularly known as basic customs duty, are indicated in the First
Schedule of the Customs Tariff Act, 1975 as amended from time to time under Finance
Acts. The duty may be fixed on ad -valorem basis or specific rate basis. The duty may be a
percentage of the value of the goods or at a specific rate. The Central Government has the
power to reduce or exempt any good from these duties.

Additional (Countervailing) Duty of Customs

This countervailing duty is livable as additional duty on goods imported into the
country and the rate structure of this duty is equal to the excise duty on like articles
produced in India. The base of this additional duty is c.i.f. value of imports plus the duty
levied earlier. If the rate of this duty is on ad-valorem basis, the value for this purpose will be
the total of the value of the imported article and the customs duty on it (both basic and
auxiliary).

Export Duties

Under Customs Act, 1962, goods exported from India are chargeable to export duty
The items on which export duty is chargeable and the rate at which the duty is levied are
given in the customs tariff act,1975 as amended from time to time under Finance Acts.
However, the Government has emergency powers to change the duty rates and levy fresh
export duty depending on the circumstances.

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Auxiliary Duty of Customs

This duty is levied under the Finance Act and is leviable all goods imported into the
country at the rate of 50 per cent of their value. However this statutory rate has been reduced
in the case of certain types of goods into different slab rates based on the basic duty
chargeable on them.

Cesses

Cesses are leviable on some specified articles of exports like coffee, coir, lac, mica,
tobacco (unmanufactured), marine products cashew kernels, black pepper, cardamom, iron
ore, oil cakes and meals, animal feed and turmeric. These cesses are collected as parts of
Customs Duties and are then passed on to the agencies in charge of the administration of the
concerned commodities.

Education cess on customs duty

An education cess has been imposed on imported goods w.e.f. 9-7-2004. The cess will
be 2% and wef 01.03.2007 2%+1% of the aggregate duty of customs excluding safeguard
duty, countervailing duty,Anti Dumping Duty.

Protective Duties

Tariff Commission has been established under Tariff Commission Act, 1951. If the
Tariff Commission recommends and Central Government is satisfied that immediate action is
necessary to protect interests of Indian industry, protective customs duty at the rate
recommended may be imposed under section 6 of Customs Tariff Act. The protective duty
will be valid till the date prescribed in the notification.

Countervailing Duty on Subsidized goods

If a country pays any subsidy (directly or indirectly) to its exporters for exporting
goods to India, Central Government can impose Countervailing duty up to the amount of
such subsidy under section 9 of Customs Tariff Act.

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Anti Dumping Duty on dumped articles

Often, large manufacturer from abroad may export goods at very low prices compared
to prices in his domestic market. Such dumping may be with intention to cripple domestic
industry or to dispose of their excess stock. This is called 'dumping'. In order to avoid such
dumping, Central Government can impose, under section 9A of Customs Tariff Act, anti-
dumping duty up to margin of dumping on such articles, if the goods are being sold at less
than its normal value. Levy of such anti-dumping duty is permissible as per WTO
agreement. Anti dumping action can be taken only when there is an Indian industry
producing 'like articles'.

Safeguard Duty

Central Government is empowered to impose 'safeguard duty' on specified imported

goods if Central Government is satisfied that the goods are being imported in large quantities
and under such conditions that they are causing or threatening to cause serious injury to
domestic industry. Such duty is permissible under WTO agreement. Safeguard duty is a step
in providing a need-based protection to domestic industry for a limited period, with ultimate
objective of restoring free and fair competition

National Calamity Contingent Duty

A National Calamity Contingent Duty (NCCD) of customs has been imposed vide
section 129 of Finance Act, 2001. This duty is imposed on pan masala,chewing tobacco and
cigarettes. It varies from 10% to 45%. - - NCCD of customs of 1% was imposed on PFY,
motor cars, multi utility vehicles and two wheelers and NCCD of Rs 50 per ton was imposed
on domestic crude oil, vide section 134 of Finance Act, 2003. 20.3.5 Rate of duty applicable

There are different rates of duty for different goods there are different rates of duty for
goods imported from certain countries in terms of bilateral or other agreement with such
countries which are called preferential rate of duties the duty may be percentage of the value
of the goods or at specified rate.

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ADVANTAGES OF CUSTOMS DUTY

There are many benefits available to companies by taking advantage of the Customs
Warehouse procedure, as the following list shows:

Delay paying Import Duty and/or VAT on imported goods indefinitely

Defer payment of Import Duty and/or VAT for up to 45 further days for goods
imported, warehoused and distributed within the same EU country
Defer payment of Import Duty for up to 45 further days and do not pay VAT for
goods imported and warehoused in one EU country and distributed to a different
EU country
Do not pay Import Duty or VAT on goods imported then exported outside the EU
Delay having a Customs treatment applied to imported goods
Warehouse goods where there is a problem meeting particular import
requirements (such as certain import licensing requirements)
Pay reduced Import Duty and/or VAT on revalued goods
Carry out quality control checks on imported goods without payment of Import
Duty and VAT

DISADVANTAGES OF CUSTOMS DUTY

Customs is part of one of the three basic functions of a government, namely:

administration; maintenance of law, order, and justice; and collection of revenue. However,
in a bid to mitigate corruption, many countries have partly privatised their customs. This has
occurred by way of contracting pre-shipment inspection agencies, which examine the cargo
and verify the declared value before importation occurs. The country's customs is obliged to
accept the agency's report for the purpose of assessing duties and taxes at the port of entry.

Major drawbacks are as follows:

While engaging a pre-shipment inspection agency may appear justified in a

country with an inexperienced or inadequate customs establishment, the measure
has not been able to plug the loophole and protect revenue.
It has been found that evasion of customs duty escalated when pre-shipment
agencies took over.

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 It has also been alleged that involvement of such agencies has caused shipping
delays.
Privatization of customs has been viewed as a fatal remedy

FUNCTIONS OF CUSTOMS DUTY

Customs is an authority or agency in a country responsible for collecting tariffs and

for controlling the flow of goods, including animals, transports, personal effects, and
hazardous items, into and out of a country. The movement of people into and out of a country
is normally monitored by immigration authorities, under a variety of names and
arrangements. The immigration authorities normally check for appropriate documentation,
verify that a person is entitled to enter the country, apprehend people wanted by domestic or
international arrest warrants, and impede the entry of people deemed dangerous to the
country.

Each country has its own laws and regulations for the import and export of goods into
and out of a country, which its customs authority enforces. The import or export of some
goods may be restricted or forbidden. In most countries, customs are attained through
government agreements and international laws. A customs duty is a tariff or tax on the
importation (usually) or exportation (unusually) of goods. Commercial goods not yet cleared
through customs are held in a customs area, often called a bonded store, until processed. All
authorised ports are recognised customs areas.

Trade Facilitation and Border Security effective application of risk management

principles is key to achieving the balance between control and facilitation.
Encouraging Voluntary Compliance this is promoted not only by an awareness of
rights and expectations of fair and efficient treatment but also clear, simple legislation
and user friendly administrative systems and procedures.
Maximizing Revenue Collection by improving Compliance and managing risk as an
organizational philosophy to support effective decision making at the Strategic,
Operational and Tactical levels.
Capacity Building to ensure that there is adequate professional and technical staff
through continuous training and development

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 Public Education in respect of our Stakeholder Charter that balances
Rights/Expectation and Obligations. It will reflect the distinctive character of our
regulatory responsibilities we deliver State obligations rather than just services.

Duties, Rights and Responsibilities of the Customs Authorities

Article 408. Legal Rights of the Customs Authorities and their Offices

In carrying out the functions vested in them the customs authorities are vested with
the following legal rights to:

take measures stipulated by this Code for enforcing the observance of the customs
legislation of the Russian Federation;
demand the documents and information stipulated by this Customs Code;
check the identification documents of the individuals and officials involved in
customs-related operations;
demand that individuals and officials certify their powers for performing specific
operations or effecting specific activities in the field of the customs system;
in accordance with the law of the Russian Federation on criminal investigation
procedures, perform investigations with a view to detecting, preventing, stopping
and exposing crimes, conduct on-the-spot investigations and interrogations
pursuant to the provisions of the criminal procedural law of the Russian
Federation assigning the investigation of such crimes to the customs authorities,
expose and identify the persons responsible for preparing committing or having
committed such crimes, as well as ensure safety of customs officers in discharge
of the duties;
conduct on-the-spot investigations and interrogations in their line of duty of the
offences pursuant to the Criminal Procedural Code of the Russian Federation;
investigate cases of administrative offences and prosecute the persons responsible
for administrative offences pursuant to the provisions the Law of the Russian
Federation on Administrative Offences;
in case of emergency, to use the communications facilities and means of transport
belonging to organisations or public associations (except the communications
facilities and means of transport owned by diplomatic missions, consular and

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 other institutions of foreign countries or by international organisations) for
preventing customs-related crimes, pursue and detain the perpetrators of such
crimes or the persons suspected of having committed such crimes. The customs
authorities shall be obliged to compensate any damages suffered by the owners of
said communications facilities or means of transport in such instances upon their
request for compensation submitted to the customs office concerned in accordance
with the order determined by the Government of the Russian Federation;
detain and escort to the service premises of the customs offices or to the offices of
the Ministry of the Interior of the Russian Federation persons suspected of
customs-related administrative offences or the perpetrators of such offences
pursuant to the Russian legislation;
perform documentary filing, video-taping, audio-recording, motion- or still-
picture photography of the facts and events associated with the conveyance across
the customs border of the goods and means of transport under the customs control
and performance of other cargo-handling operations with such goods and means
of transport;
obtain from the information from various state bodies and agencies, as well as
from natural persons which may be required for carrying out their duties pursuant
to this Customs Code;
make written reprimands to the heads of various state bodies and agencies,
directors of enterprises, leaders of public unions and associations containing
requirements to rectify their breaches of the customs regulations of the Russian
Federation with subsequent verification of the implementation by said persons of
requisite measures;
bring lawsuits to the courts of justice or the arbitration tribunals pertaining to:
- compulsory collection of unpaid customs duties and taxes;
- compulsory collection of unpaid customs duties and taxes at the expense
of the goods;
- in other cases stipulated by this Customs Code and other federal laws;
establish and maintain official relations of advisory and consultative nature with
various participants of foreign economic activities, the other persons whose
functioning is associated with foreign economic activities, as well as with their
trade unions (associations) for the purpose of interacting with them in the issues of

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 introduction and adoption of the advanced customs registration and customs
control mechanisms;
carry out other functions stipulated by this Customs Code and other federal laws.

Article 409. Legal Rights of the Customs Authorities in Effecting Customs Control
Measures Using Customs Patrol Boats

1. In the process of exercising customs control measures with the use of customs
patrol boats case of using customs patrol boats customs are vested with the following legal
rights to:

upon discovery of signs of illegal conveyance of goods liable for customs control
onboard a means of transport, apprehend said means of transport and subject it to
the customs examination (Article 372);
detain the individuals onboard a means of transport suspected of committing the
crimes subject to on-the-spot investigation pursuant to the provisions of the
criminal procedural law of the Russian Federation assigning the investigation of
such crimes to the customs authorities unless the international treaties, to which
Russian Federation is party, contain other provisions thereto;
pursue and apprehend the seagoing vessels (riverboats), which have exited the
customs territory of the Russian Federation without permission of the customs
authorities, beyond the territorial waters of the Russian Federation up to their
entry into the territorial waters of a foreign country if such pursuit has been
continuing since its initiation in the territorial waters of the Russian Federation
following a transmission of a visual or acoustic signal to said seagoing vessel
(riverboat) to halt from the distance sufficient for observing or hearing said signal;
in case of detecting signs of administrative violation of customs regulations,
apprehend such means of transport for their subsequent withdraw pursuant to the
Russian legislation on administrative offences;
in the instances stipulated by this Customs Code, escort apprehended means of
transport with or without customs officers on board.

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2. The crews of the customs seagoing (river) patrol boats and aircraft are authorised to
exercise:

free use of water- and airspace of the Russian Federation , the sea harbours and
river ports, as well as the airports, the airfields (runways) on the territory of the
Russian Federation regardless of their attributes and purposes;
free use of the priority right of entry to and exit from ports and harbours in
accordance with the order coordinated with the interested federal executive
authority;
free access to navigation, hydrological, meteorological, hydrographical, and other
information;
free flight control and navigation services.

Article 410. Rights of the Customs Authorities with regard to Motor Vehicles Hauling
Goods under Customs Control

The customs authorities have the right to apprehend motor vehicles including those
which are not involved in international haulage of goods if such vehicles are carrying goods
under the customs control for the purpose of inspecting said goods and the documentation
thereto. The customs authorities may only apprehend such motor vehicles in the customs
control zones established along the customs border. In other places such vehicles are
apprehended by the traffic safety authority of the Ministry of the Interior in coordination with
the customs authorities.

In the event of apprehension of a motor vehicle beyond the customs control zone, the
permissible time limit designated for inspecting goods and waybills thereto shall not exceed
two hours. The fact of inspection of goods the waybills thereto is registered in a report whose
form is approved by the Federal Customs Authority, with one copy of said report being
handed to the goods carrier. Compulsory placement of motor vehicles to the territory of a
temporary-storage warehouse or another place constituting a customs control permanent zone
(Article 362) shall only be permitted in case of initiation of a lawsuit for an administrative
offence when a copy said ruling is handed to the goods carrier or the driver of the
apprehended motor vehicle.

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 In such a situation, said motor vehicle may remain in the temporary-storage a
warehouse or in another place constituting a customs control zone within the period of time
required for its unloading, except in those instances when said motor vehicle is liable for
withdrawal pursuant to law of the Russian Federation

Article 411. Interaction and Cooperation of the Customs Authorities with Other State
Bodies

The customs authorities shall fulfil their functions independently and in

cooperation with other public bodies.
Pursuant to this Customs Code and other federal statutes, the customs authorities
have the right authorised to permit execution by other state bodies of individual
actions relating to their competence.
In those instances when the customs authorities have discovered signs of
administrative transgressions (offences) whose consideration, pursuant to the
Russian legislation, is in the competence of other state bodies the customs
authorities shall be obliged to convey such information to respective state bodies
without delay.

Article 412. Departmental Supervision over Customs Activities

Unless this Customs Code and other federal statutes contain other provisions thereto,
the superior customs office or the superior customs officer are vested with the right, in terms
of the departmental supervision, to rescind or correct the resolution passed by a subordinate
customs office or its officer which does not meet the requirements laid down by Russian law
or take any other measures stipulated by the Russian legislation with regard to unlawful
actions (inaction) of the subordinate customs offices and/or their officers.

Article 413. Responsibility of Customs Offices and their Officers

In accordance with the Russian legislation, customs officers shall bear disciplinary,
administrative, criminal and other responsibility for their unlawful decisions, actions
(inaction).
Customs offices shall be obliged to reimburse any damage inflicted on persons and
their property as a result of unlawful decisions, actions (inaction) of their customs

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 officers and other employees in discharging their duties or professional obligations
pursuant to the provisions stipulated by the Labour Code and budgetary law of the
Russian Federation.
Any damage caused by the lawful actions of customs offices and their officers shall
not be subject to indemnity unless this Customs Code and other federal statutes
contain other provisions thereto.

REFERENCES

http://www.businessdictionary.com/definition/customs-duty.html#ixzz3ojFsVnyY

http://economictimes.indiatimes.com/definition/customs-duty

http://www.custom-duty.com/types_custom_duties.html

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