Final Thesis 1

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

THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT,

AHMEDABAD

THESIS TOPIC “ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS

AT INDIAN PORTS”

SUBMITTED BY:

PRIYESH NAGDA

SS/09-11/IIPM

THESIS ID NO.

SS/09-11/AHD/GM/2

SUBMISSION DATE:

08TH SEPTEMBER, 2011

GUIDED BY:

PROF: GAURAV VATS

1 | P a g e I N D I A N I N S T I T U T E O F P L A N N I N G A N D M A N A G E M E N T


LETTER OF CONSENT

IIPM Ahmedabad

19, Inquilab Society

Gulbai Tekra

Ahmedabad-380015

To,

The Dean,

I.I.P.M Ahmedabad

Subject: Consent to supervise the thesis

Dear Sir,

I, Gaurav Vats, express my consent to act as a guide to Mr. Priyesh Nagda (Batch:

SS/09-11/IIPM-FIANANCE). He has expressed his interest in writing his thesis on

“ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN

PORTS” and has requested me to guide him through the same.

This is to inform that I shall support him as a guide for his thesis on the above

mentioned topic and share my knowledge and help in all ways possible.

With warm regards,

GAURAV VATS



Sr. No. Particulars Page no.

1 LETTER OF CONSENT

2 CERTIFICATE OF ORIGINALITY

3 CERTIFICATE FROM GUIDE

4 ACKNOWLEDGEMENT

5 SYNOPSIS

6 EXECUTIVE SUMMARY

7 CHAPTER 1 : INTRODUCTION

8 CHAPTER 2 : CUSTOM HOUSE AGENT

9 CHAPTER 3 : ROLES OF CUSTOM HOUSE AGENT

10 CHAPTER 4 : CUSTOM CLEARANCE OF IMPORT

11 CHAPTER 5 : IMPORTANT TERMS IN SHIPPING

12 CHAPTER 6 : DETAILS REGARDING EXPORT

13 CHAPTER 7 : OTHER BUSINESS IN SHIPPING SECTOR

14 CHAPTER 8 : ENHANCHING EFFIENCY FOR CHA

15 RESEARCH METHODOLOGY

16 ANALYSIS

17 FINDINGS

18 RECOMMENDATIONS

19 BIBLIOGRAPHY

20 ANNEXURE 1 : QUESTIONNAIRE

21 RESPONSE SHEET – 1






CERTIFICATE OF ORGINALITY

This is to certify that the thesis titled “ENHANCING THE EFFIECIENCY OF

CUSTOM HOUSE AGENTS AT INDIAN PORTS” is prepared and submitted by

me to Indian Institute of Planning&Management, Ahmedabad in partial

fulfillment for the award of the Master Degree in Business Administration, and this

report has not been submitted elsewhere.

Date:

Signature:



CERTIFICATE FROM THE GUIDE

This is to certify that this thesis titled “ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS” is prepared and completed successfully by Priyesh Nagda under my guidance. The thesis has been completed to my satisfaction and I wish him all the best in his future endeavor.

Date:

Signature:



ACKNOWLEDGEMENT

First of all I would like to thank Indian Institute of Planning and Management for

giving me the opportunity to work on this thesis. There is no self dependency in the

world. Each individual depends on the other for one thing or the other. And he needs

people for the guidance and help in all the stages of life.

I sincerely thank my thesis guide PROF: Gaurav Vats for helping me, guiding me

and

giving me directions where and when needed. The thesis work that I have done

would

never have been possible without the help provide by him. There are other areas in

the thesis which I could not have covered if the marketing concepts weren’t clear. So

for that I would give my sincere thanks to Prof. Pabitra Ranjan for the things he taught

and the helping hand that he extended.

There are other people in the industry of clearing and forwarding who helped me

get

through with the proper analysis. There were people who gave opinions, ideas and

their views for the subject. And for that matter I would like to thank Mr. Sachit dedhia

form velocity global logistics. It was he who helped getting interviews from different

individuals. And there were also people from reputed business houses without who the

work could never have been completed. And lastly I would thank all my professors,

friends and family members for helping me in one way or the other to complete the

thesis.



SYNOPSIS

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

Objective

The basic objective of the study would be to analyze the requirements of the customers

regarding clearance and also the government norms and regulations for the same. And

the objective would be to find out the procedures of clearance and the problems

occurring on clearance of cargo in Indian ports.

The scope of the thesis

Details regarding how to get cha licence.

Covering the details relating to the clearance procedure

The detailed study on importance of a CHA

The government policies regarding the imports will be studied in depth

The future of the business of clearing and forwarding would be known

The thesis will help getting the knowledge about getting into the business of

clearing and forwarding

RESEARCH QUESTIONS:

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

2. What are the ways to make this customs procedure be more organized?



3. What further diversification and other business can be developed other than

cha?

RESEARCH METHODOLOGY:

Data from previously published materials, books & the internet would be used as a part

of the literature review.

Also to gain further insight, opinions from industry experts would be gathered via

structured questionnaires and interviews

Commercial viability

With the increasing number of ports the demand for clearing and forwarding agents has

continuously increased. I am doing this project, and my study would be in depth so this

thesis would act as a blue print for those people who wish to enter this field of clearing

and forwarding.



EXECUTIVE SUMMARY

Due to the policy of the government the import in the country has been continuously

increasing. And with the imports coming in, the customs has to be paid. And for this

purpose the custom agent has to be appointed. So with this chain of these incidents,

what we understand is that the scope of the business of clearing and forwarding is on a

boom in the Indian market. More entrepreneurs are starting up with the business of

clearing of imports. The license for the CHA (custom house agent) has to be gained for

the same. The Indian market in the future would be flooded by lots of imports. The

changing taste of the Indian people and the want for quality products has lead to the

rise in the imports of the raw materials for the production of good quality products. Also

at the same time the imports are boosted by the leniency in the import policies. So there

is a great need for high quality and highly qualified clearing agents at the Indian ports.

Now that the vessel carrying the goods comes by sea, freight has to be paid for the

transportation. The freight is for the ship that carries the goods. There is a trend at most

of the ports that the custom agents who are involved in the clearing of imports, have

now started with the business of freight forwarding together with the business of

clearing. They have today merged both the businesses and are also known as C&F

agents. So with the increasing imports and exports from the country the business of

clearing and forwarding will flourish in India. The thesis carries an in depth analysis on

the business with the analytical figures. Also there are certain changes to bemade in

this industry. With the coming up of newer technology and an ever increasing

competition it has become inevitable for the industry to adapt quickly to the change or

perish.



CHAPTER 1- INTRODUCTION

Current market scenario of world trade

The UPA Government has assumed office at a challenging time when the entire

world is facing an unprecedented economic slow-down. The year 2009 is witnessing

one of the most severe global recessions in the post-war period. Countries across the

world have been affected in varying degrees and all major economic indicators of

industrial production, trade, capital flows, unemployment, per capita investment and

consumption have taken a hit. The WTO estimates project a grim forecast that global

trade is likely to decline by 9% in volume terms and the IMF estimates project a decline

of over 11%. The recessionary trend has huge social implications. The World Bank

estimate suggests that 53 million more people would fall into the poverty net this year

and over a billion people would go chronically hungry.

Though India has not been affected to the same extent as other economies of

the world, yet our exports have suffered a decline in the last 10 months due to a

contraction in demand in the traditional markets of our exports. The protectionist

measures being adopted by some of these countries have aggravated the problem.

After four clear quarters of recession there is some sign of a turnaround and the

emergence of ‘green shoots’, though I would be hesitant to hazard a guess on the

nature and extent of this recovery and the time the major economies will take to

return to their pre-recession growth levels.

Announcing a Foreign Trade Policy in this economic climate is indeed a

daunting task. We cannot remain oblivious to defining demand in the developed world and we

need to set in motion strategies and policy measures which will catalyze the growth of

exports.



Before defining the objectives of the new policy it would be useful to take stock

of our achievements in the foreign trade over the last 5 years. The foreign trade policy

announced by the UPA Government in 2004 had set two objectives, namely, (i) to

double our percentage share of global merchandize trade within 5 years and (ii) use

trade expansion as an effective instrument of economic growth and employment

generation. Looking back, we can say with satisfaction that the UPA Government has

delivered on its promise.

Agriculture and industry has shown remarkable resilience and dynamism in

contributing to a healthy growth in exports. In the last five years our exports witnessed

robust growth to reach a level of US$ 168 billion in 2008-09 from US$ 63 billion in 2003-

04. Our share of global merchandise trade was 0.83% in 2003; it rose to 1.45% in

2008 as per WTO estimates. Our share of global commercial services export was 1.4%

in 2003; it rose to 2.8% in 2008. India’s total share in goods and services trade was

0.92% in 2003; it increased to 1.64% in 2008. On the employment front, studies have

suggested that nearly 14 million jobs were created directly or indirectly as a result of

augmented exports in the last five years.

The short term objective of our policy is to arrest and reverse the declining trend

of exports and to provide additional support especially to those sectors which have

been hit badly by recession in the developed world. We would like to set a policy

objective of achieving an annual export growth of 15% with an annual export target of

US$ 200 billion by March 2011. In the remaining three years of this Foreign Trade

Policy i.e. upto 2014, the country should be able to come back on the high export

growth path of around 25% per annum.

By 2014, we expect to double India’s exports of goods and services. The long

term policy objective for the Government is to double India’s share in global trade by

2020.

In order to meet these objectives, the Government would follow a mix of policy

measures including fiscal incentives, institutional changes, procedural rationalization,



enhanced market access across the world and diversification of export markets.

Improvement in infrastructure related to exports; bringing down transaction costs, and

providing full refund of all indirect taxes and levies, would be the three pillars, which

will support us to achieve this target Endeavour will be made to see that the Goods

and Services Tax rebates all indirect taxes and levies on exports.

At this juncture, it is our Endeavour to provide adequate confidence to our

exporters to maintain their market presence even in a period of stress. A Special thrust

needs to be provided to employment intensive sectors which have witnessed job

losses in the wake of this recession, especially in the fields of textile, leather,

handicrafts, etc.

We want to provide a stable policy environment conducive for foreign trade

and we have decided to continue with the DEPB Scheme upto December 2010 and

income tax benefits under Section 10(A) for IT industry and under Section 10(B) for

100% export oriented units for one additional year till 31st March 2011. Enhanced

insurance coverage and exposure for exports through ECGC Schemes has been

Insured till 31st March 2010. We have also taken a view to continue with the interest

subvention scheme for this purpose.

We need to encourage value addition in our manufactured exports and

towards this end, have stipulated a minimum 15% value addition on imported inputs

under advance authorization scheme. It is important to take an initiative to diversify

our export markets and offset the inherent disadvantage for our exporters in

emerging markets of Africa, Latin America, Oceania and CIS countries such as

credit risks, higher trade costs etc., through appropriate policy instruments. We

have endeavored to diversify products and markets through rationalization of

incentive schemes including the enhancement of incentive rates which have been

based on the perceived long term competitive advantage of India in a particular

product group and market. New emerging markets have been given a special focus

to enable competitive exports. This would of course be contingent upon availability of



adequate exportable surplus for a particular product. Additional resources have been

made available under the Market Development Assistance Scheme and Market Access

Initiative Scheme. Incentive schemes are being rationalized to identify leading products

which would catalyze the next phase of export growth.

As part of our policy of market expansion, we have signed a Comprehensive

Economic Partnership Agreement with South Korea which will give enhanced market

access to Indian exports. We have also signed a Trade in Goods Agreement with

ASEAN which will come in force from January 01, 2010, and will give enhanced

market access to several items of Indian exports. These trade agreements are in

line with India’s Look East Policy. We have also concluded the Mercosur Preferential

Trade Agreement. It shall be our endeavor to deepen our trade engagement with other

major economic groupings in the world. The Government seeks to promote Brand India

through six or more ‘Madein India’ shows to be organized across the world every year.

In the era of global competitiveness, there is an imperative need for Indian

exporters to upgrade their technology and reduce their costs. Accordingly, an

important element of the Foreign Trade Policy is to help exporters for

technological upgradation. Technological upgradation of exports is sought to be

achieved by promoting imports of capital goods for certain sectors under EPCG at zero

percent duty. Under the present Foreign Trade Policy, Government recognizes

exporters based on their export performance and they are called ‘status holders’. For

technological upgradation of the export sector, these status holders will be permitted

to import capital goods duty free (through Duty Credit Scripts equivalent to 1% of

their FOB value of exports in the previous year), of specified product groups. This

will help them to upgrade their technology and reduce cost of production. For

u p g r a d a t i o n of export sector infrastructure, ‘Towns of Export Excellence’ and

units located therein would be granted additional focused support and incentives.



MARITIME TRANSPORT

Water has always been the oldest and most sustainable resource to man. Maritime

transport plays a prominent role in Indian economy; it accounts for 95 percent of India’s

external merchandise trade by volume and 70 percent in terms value.

Regulations

Shipping is a central subject dealt by the ministry of shipping. The industry is governed

by the following acts:

1. The merchant shipping act,1958

2. The inland vessel act ,1917

3. The coastal vessel act,1917

4. The multi modal transportation of goods act,1993

The Ministry is responsible for administering the following acts:

1. The Indian Ports Act ,1908

2. The Dock worker Act ,1948

3. The Major Ports Act ,1963

4. The Inland Waterways Authority of India Act ,1985

The Ministry regulates the functioning of the industry through its various subordinate

offices, autonomous bodies, societies and associations and public sector

undertaking .The National Shipping Board, a statutory body, advises the central

government on the shipping matters. The Directorate General of Shipping is the main



administrative authority, which issues orders and notifications on various aspects of

shipping. The Mercantile Marine Department, which comes under the administrative

control of Directorate General of shipping, deals with the registration and survey of

ships .The Transchart is a wing under the Ministry responsible for making shipping

arrangements for import cargo under the control Government/public sector undertakings

.The Indian Register of Shipping is a classification society.

As per Section 406 of Merchant Shipping Act , no ship can be taken to the sea from the

port or a place within or outside India expect under the license granted by the director

general of Shipping. Coastal trade is reserved for Indian flag vessels and is governed by

section 407. To operate foreign flag vessel in the Indian coast, permission of Directorate

of General of Shipping is required. Indian shipping companies are also required to

comply with the rules and regulation issued by the Ministry of Finance and Company

Affairs as well as the Ministry of Commerce. The industry is also governed by thr

various IMO/ILO instruments (conventions and protocols) ratified by the Government of

India.

PORT INFRASTUCTURE

There are 12 major ports and 200 non major port /intermediate ports the 7517 km

coastline.

Major ports:

Chennai port

Kochi port

Ennore port

Jawaharal Nehru port

Kolkata port

Kanda port

Marmugao port



Mumbai port

New managlore port

Paradip port

Tuticorin port

Vishakhapatanam port

Trend in capacity of Major Ports

YEAR MILLION

TONNES

2002-03 363.75

2003-04 389.50

2004-05 397.5

2005-06 456.20

2006-07 504.75

SOURCE: DEPARTMENT OF SHIPPING,MINISTRY OF SHIPPING

Trend in Traffic at major ports

YEAR MILLION

TONNES

2002-03 313.55

2003-04 344.80

2004-05 383.76

2005-06 423.57

2006-07 463.78

2007-08 519.16

2008-09 530.36

SOURCE:DEPARTMENT OF SHIPPING,ROAD TRANSPORT AND HIGHWAYS

Total Traffic handled



During 2007-08, the total traffic handled was 715 million tones (major port 519 million

tones and non major ports 196 milion tonnes) against the total port capacity of 772

million tones per annum .

Average Turnaround time

The major port wise average turnaround time has been as follows:

PORT 1990-91 2005-06 2006-07 2007-08

KOLKATA 11.9 4.12 3.89 4.87

VISHAKAPATANAM 7.07 4.89 4.87 4.48

ENNORE 2.23 1.89 2.08

CHENNAI 7.2 3.32 3.36 4.55

JAWAHARLAL

NEHRU

4.08 4.46 4.03

MUMBAI 10.8 1.97 1.94 1.85

KANDLA 10 4.39 5.56 5.13

SOURCE: DEPARTMENT OF SHIPPING,MINISTRY OF SHIPPING

India has largest merchant shipping fleet among the developing countries and rand 20

amongst the countries with largest cargo carrying fleet with 8.83 million tones as on

01.06.2008 and the average of the fleet being 18 years. Indian maritime sector

facilitates not only transportation of national and international cargo but also provides a

variety of other services such as handling service, ship building, freight forwarding and

training of marine personnel,etc.



MAJOR INDIAN SHIPPING COMPANIES

India has over 110 shipping companies; the major ones are Shipping Corporation of

India Ltd, Essar Shipping Co Ltd, Great Eastern Shipping Co Ltd. The Indian feet’s

gross tonnage grew by 1.8 percent per annum only as compared to the average

maritime trade growth of 14 percent per annum .

Name of Company Ships Gross tonnage % share of gt

Shipping

Corporation of India

Ltd

79 2730602 30.24

Great Eastern

Shipping Co Ltd

51 1837455 20.35

Mercator Line Ltd 15 735146 8.14

Essar shipping Co

Ltd

24 566240 6.05

Varun Shipping Co

Ltd

20 463792 5.14

SOURCE:ANNUAL REPORTS,DEPARTMENT OF SHIPPING

Global shipping & ports tax service offering

Advancing globalisation, more flexible tax regimes and an increasingly mobile workforce

are creating opportunities and challenges for the shipping industry. New corporate

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The port and shipping industry is changing at a high pace with many challenges ahead.

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boardroom consulting to port authorities and operators around the world.

Ports have been historically viewed as onestop omnibus solution for all requirements of

shipping, in terms all loading and unloading operations for multiple types of cargo, on a

common access basis. However, the worldwide trend in port development is now

veering towards terminalisation of ports with focus towards freight specialization. LNG

terminals, Container terminals that involve high capital costs and intensive deployment

of cargo handling equipment and other facilities are some instances of what is likely to

emerge as future trend in port development. There is a global trend in the port sector

towards growing separation of port authority from port operator impinging on all exiting

institutional models of port organizations. Port organizations all over the world are

experiencing wide ranging institutional reforms, as a part of the adoption to new



demands of shipping and international trade. Port authority is increasingly getting

focused on policy and regulatory role while a range of private port operators and port

service providers are taking over a range of port related services. There is an increasing

trend towards redundancy of monopolistic structures of port access in regional and

national port systems, with the growing trend towards multiple port system. Increasing

customer pressures towards logistics rationalization of cargo movement between the

cargo hinterland and ports, is leading to new ports being developed with consequent

shift in movement of cargo out of the erstwhile single dominant discharge or load ports.

The shift of cargo from Mumbai port to Nhava Sheva port, or from major ports to new

minor ports in the Indian port sector signifies the trend. A similar phenomenon is seen in

international transshipment ports like Singapore.



CHAPTER 2 – CUSTOM HOUSE AGENT

Custom house Agent

The phrase Custom house agent (CHA) is mostly used in India. He is a person who is

empowered to act on the company’s or on a firm’s behalf for the clearance of imports

and exports. The agents should possess the proper license required for the clearance

work to be carried out. Licensing Features of Custom House Agent licensing

Regulations 1984.There are certain essential features as per the CHA licensing

regulations and they as follows:-

Definitions. — In these regulations, unless the context otherwise

requires, —

(a) "Act" means the Customs Act, 1962 (52 of 1962);

(b) "company" means a company as defined in the Companies Act, 1956 (1 of

1956);

(c) "Customs House Agent" means a person licensed under these regulations

to act as agent for the transaction of any business relating to the entry or

departure of conveyances or the import or export of goods at any Customs

Station;

(d) "firm", "firm name", "partner" and "partnership" shall have the same

meanings respectively assigned to them in the Indian Partnership Act, 1932

(9 of 1932), but the expression "partner" shall also include any person who,

being a minor, has been admitted to the benefits of partnership;

(e) "Form" means form appended to these regulations;

(f) "section" means a section of the Act;



(g) the words and expressions used herein and not defined in these

regulations but defined in the Act shall have the same meanings

respectively assigned to them in the Act.

3. Customs House Agents to be licensed. — No person shall carry on business

as a Customs House Agent relating to the entry or departure of a conveyance or

the import or export of goods at any Customs Station unless such person holds

a licence granted under these regulations.

Provided that no licence under these regulations shall be required by :—

(a) an importer or exporter transacting any business at a Customs Station

solely on his own account;

(b) any employee of any person or a firm transacting business generally on

behalf of such person or firm, and holding an identity card or a temporary

pass issued by the Deputy Commissioner of Customs or Assistant

Commissioner of Customs.

(c) an agent employed for one or more vessels or aircrafts in order solely to

enter or clear such vessels or aircrafts for work incidental to his

employment as such agent.

4. Invitation of application. - The Commissioner of Customs may invite

applications for the grant of such number of licenses as assessed by him, to act

as Customs House Agents in the month of January every year by means of a

notice affixed on the notice board of each Customs Station as well as through

publication in at least two newspapers having circulation in the area of his

jurisdiction, specifying therein the last date of receipt of application. Such

application shall be for clearance work within the jurisdiction of the said


5. Application for licence. -

(1) An application for a license to act as a Customs House Agent in a Customs

Station shall be made in Form A and shall, inter alia, contain the name and



the address of the person applying; and

(2) If the applicant is a firm —

the name and address of every partner of the firm, the

firm's name, and

the name of the partner or the duly authorized employee,

who will actually be engaged in the clearance of goods

or conveyances through the customs.

(3) If the applicant is a company –

the name of each director, managing director, manager,

and

the names of director, managing director, manager or the

duly authorized employee, who will actually be engaged

in the clearance of goods or conveyances through the

customs.

6. Conditions to be fulfilled by the applicant. — The applicant referred to in

clause (b) of sub-regulations (2) and (3) of regulation 5, as the case may be, or

a person who has passed the examination referred to in regulation 8, shall prove

to the satisfaction of the Commissioner of Customs, that-

(a) the applicant, or his authorized employee, is a graduate from a recognized

University and possesses a professional degree viz.

C.A./M.B.A./L.L.B./

Diploma in Customs Clearance work from any Institute or University

recognized by the Government with a working knowledge of computers and

customs procedures, or is a graduate having at least three years

experience in transacting Custom House Agent work as a G-Card

holder, or a person who has passed the examination referred to in

regulation 8, or is a retired Group ‘A’ officer from the Indian Customs and

Central Excise Service (IC&CES) having a minimum of ten years



experience in Group ‘A’.

(b) the applicant has financial viability supported by a certificate issued by a

Scheduled Bank or such other proof acceptable to the Commissioner of

Customs evidencing possession of assets of value of not less than Rs. 2

lakhs;

(c) the applicant is a citizen of India.

7. Scrutiny of application for licence. — On receipt of application under

regulation 5, the Commissioners of Customs may make enquiries for verification

of the particulars set out in the application and also such other enquiry as he

may deem necessary, including enquiries about the reliability and financial

status of the applicant.

8. Examination of the applicant. —

(1) Any applicant whose application is received within the last date specified in

the notice or publication, as the case may be, referred to in regulation 4 and

who satisfies the requirements of regulations 5 and 6, shall be required to

appear for the written as well as oral examination conducted by the Director

General of Inspection at specified centers and specified dates, twice every

year, for which intimation shall be sent individually in advance before the

date of examination.

Provided that an applicant who has already passed the examination

referred to in regulation 8 will not be required to appear for any further

examination.

(2) The applicants declared successful in written examination shall be called

for oral examination.

(3) It shall be necessary for the applicant to clear written as well as oral

examinations separately. An applicant who clears the written examination

but fails in the oral examination linked to it, shall have to clear the oral

examination within two years of the related written examination irrespective



of the number of chances, and if he fails do so, he shall be treated as

having failed in the examination.

(4) An applicant shall be allowed a maximum period of seven years within

which he shall pass both the written and oral examinations. No further

extension of time shall be granted.

(5) Notwithstanding anything contained in sub-regulation (4), any person who

holds a temporary licence granted under regulation 8 of the Customs

House Agents Licencing Regulations, 1984, shall be allowed to pass the

examination within a period of two years from the date of commencement

of these regulations.

(6) The examination may include questions on the following :—

preparation of various kinds of bills of entry and

shipping bills;

arrival entry and clearance of vessels;

tariff classification and rates of duty;

determination of value for assessment;

conversion of currency;

nature and description of documents to be filed

with various kinds of bills of entry and shipping

bills;

procedure for assessment and payment of duty;

examination of merchandise at the Customs

Stations;

provisions of the Trade and Merchandise Marks

Act, 1958 (43 of 1958), the Patents Act, 1970 (39

of 1970) and the Copy Rights Act, 1957 (14 of



1957).

prohibitions on import and export;

bonding procedure and clearance from bond;

re-importation and conditions for free re-entry;

drawback and export promotion schemes;

offences under the Act;

the provisions of allied Acts including the Foreign

Trade (Development and Regulation) Act 1992

(22 of 1992), the Central Excise Act, 1944 (1 of

1944), Foreign Exchange Management Act, 2000

(42 of 1999), the Indian Explosives Act, 1884 (4 of

1884), the Arms Act, 1959 (54 of 1959), the

Narcotics Drugs and Psychotropic Substances

Act, the Drugs and Cosmetics Act, 1940 (23 of

1940), Destructive Insects and Pests Act, 1914 (2

of 1914), the Dangerous Drugs Act, 1930 (2 of

1930), in so far as they are relevant to the

clearance of goods through customs;

provisions of the Prevention of Corruption Act,

1988 (49 of 1988);

procedure in the matter of refund of duty paid,

appeals and revision petitions under the Act.

on-line filing of electronic shipping bills or bills of

entry and Indian Customs and Central Excise

Electronic Commerce/Electronic Data

interchange Gateway (ICEGATE) and Indian



Customs Electronic Data Interchange Systems

(ICES).

(7) The Commissioner of Customs shall also satisfy himself whether the

applicant, if he is an individual, possesses, or in the case of a firm or

company, the persons who shall be actually engaged in the work relating to

clearance of goods through customs on behalf of that firm or company,

possess satisfactory knowledge of English and the local language of the

Customs Station:

Provided that in the case of persons deputed to work exclusively in the

docks, knowledge of English shall not be compulsory. Knowledge of Hindi

shall be considered as an additional or desirable qualification.

(8) The holders of a license under regulation 9 may authorize any one or

more of their employees or partners or directors to appear for the

examination referred to in sub-regulation (1) on behalf of such holders of

license, in addition to the person of their agency who has passed the

examination referred to in sub-regulation (1).

9. Grant of licence.—

(1) The Commissioner of Customs shall on payment of a fee of Rs. 5,000/-

grant a license in Form B to an applicant who has passed the examination

referred to in regulation 8.

(2) The Customs House Agents who are granted licenses under sub-regulation

(1) shall be eligible to work in all Customs Stations within the

country subject to intimation in Form C to the Commissioner of Customs of

the concerned Customs Station where he intends to transact business. No

separate licence shall be required in places where in addition to a Customs

House handling imports by sea, there is also an International airport to

handle imports by air, even if under the jurisdiction of a different




(3) The Commissioner of Customs may reject an application for the grant of

license to act as Customs House Agent if the applicant is involved in fraud

or forgery, or any criminal proceedings are pending before any court of law

against him or he has been convicted in any court of law.

(4) Any applicant aggrieved by the order of the Commissioner of Customs

passed under sub-regulation (3) may appeal to the Chief Commissioner of

Customs or Chief Commissioner of Customs and Central Excise, as the

case may be, within a period of thirty days from the communication of such

order.

(5) The Chief Commissioner of Customs or the Chief Commissioner of

Customs and Central Excise, as the case may be, may, on his own motion

or otherwise, call for and examine the records of any proceedings in which

the Commissioner of Customs has passed the order under sub-regulation

(3) for the purpose of satisfying himself as to the legality, propriety or

correctness of such order and may pass such other orders as he may

deem fit. No order under this sub-regulation shall be made so as to

prejudicially affect any person unless such person is given reasonable

opportunity for making a representation and being heard in his defense, if

he so desires.

(6) No order shall be made under sub-regulation (5) in relation to an order

passed by Commissioner of Customs under sub-regulation (3) or sub-

regulation (1), as the case may be, after the expiry of one year from the

date on which such order was passed by the Commissioner of Customs.

10

.

Execution of bond and furnishing of security. —

(1) Before granting a license under regulation 9, the Commissioner of Customs

shall require the applicant to enter into a bond in Form D and, if necessary,

a surety bond in Form E for due observance of these regulations and shall

also require him to furnish a bank guarantee, postal security or National



Savings Certificate in the name of the Commissioner of Customs for an

amount of Rs. 50,000/- for carrying out of business as a Customs House

Agent.

(2) If the applicant furnishes postal security or National Savings Certificate, the

same shall be pledged in the name of the Commissioner of Customs and

the applicant shall get the benefit of the interest accruing on it.

11

.

Period of validity of a licence.—

(1) A license granted under regulation 9 shall be valid for a period of ten years

from the date of issue and shall be renewed from time to time in

accordance with the procedure provided in sub-regulation (2).

(2) The Commissioner of Customs may, on application made by the licensee

before the expiry of the validity of the license under sub-regulation (1),

renew the license for a further period of ten years from the date of

expiration of the original license granted under regulation 9 or of the last

renewal of such license, as the case may be, if the performance of the

licensee is found to be satisfactory with reference, inter alia, to the following

:-

quantity or value of cargo cleared by such licensee

conforming to norms as may be specified by the

Commissioner;

Absence of instances of any complaints of misconduct

including non-compliance of any of the obligations

specified in regulation 13.

(3) The fee for renewal of a license sub-regulation (2) shall be Rs. 5000/-.

12

.

License not transferable. — Every licence granted or renewed under these

regulations shall be deemed to have been granted or renewed in favour of the

licensee, and no license shall be sold or otherwise transferred.



13

.

Obligations of Customs House Agent. - A Customs House Agent shall -

(a) obtain an authorization from each of the companies, firms or individuals by

whom he is for the time being employed as Customs House Agent and

produce such authorisation whenever required by the Deputy

Commissioner of Customs or Assistant Commissioner of Customs;

(b) transact business in the Customs Station either personally or through an

employee duly approved by the Deputy Commissioner of Customs or

Assistant Commissioner of Customs;

(c) not represent a client before an officer of Customs in any matter to which

he, as an officer of the Department of Customs gave personal

consideration, or as to the facts of which he gained knowledge, while in

Government service;

(d) advise his client to comply with the provisions of the Act and in case of non-

compliance, shall bring the matter to the notice of the Deputy

Commissioner of Customs or Assistant Commissioner of Customs;

(e) exercise due diligence to ascertain the correctness of any information

which he imparts to a client with reference to any work related to clearance

of cargo or baggage;

(f) not withhold information contained in any order, instruction or public notice

relating to clearance of cargo or baggage issued by the Commissioner of

Customs, from a client who is entitled to such information;

(g) promptly pay over to the Government, when due, sums received for

payment of any duty, tax or other debt or obligations owing to the

Government and promptly account to his client for funds received for him

from the Government or received from him in excess of Governmental or

other charges payable in respect of the clearance of cargo or baggage on

behalf of the client;



(h) not procure or attempt to procure directly or indirectly, information from the

Government records or other Government sources of any kind to which

access is not granted by the proper officer;

(i) not attempt to influence the conduct of any official of the Customs Station in

any matter pending before such official or his subordinates by the use of

threat, false accusation, duress or the offer of any special inducement or

promise of advantage or by the bestowing of any gift or favour or other

thing of value;

(j) not refuse access to, conceal, remove or destroy the whole or any part of

any book, paper or other record, relating to his transactions as a Customs

House Agent which is sought or may be sought by the Commissioner of

Customs;

(k) maintain records and accounts in such form and manner as may be

directed from time to time by a Deputy Commissioner of Customs or

Assistant Commissioner of Customs and submit them for inspection to the

said Deputy Commissioner of Customs or Assistant Commissioner of

Customs or an officer authorized by him whenever required;

(l) ensure that all documents, such as bills of entry and shipping bills delivered

in the Customs Station by him show the name of the importer or exporter,

as the case may be, and the name of the Customs House Agent,

prominently at the top of such documents;

(m

)

in the event of the license granted to him being lost, immediately report the

fact to the Commissioner of Customs;

(n) ensure that he discharges his duties as Customs House Agent with utmost

speed and efficiency and without avoidable delay.

14

.

Change in directors of company, etc. — In case a company holding a license

under regulation 9 undergoes any change in the directors, or managing director,

such change shall forthwith be communicated by such licensee to the




15

.

Change in constitution of any firm or a company. —

(1) In the case of any firm or a company, holding a license under these

regulations, any change in the constitution thereof shall be reported by

such firm or company, as the case may be, to the Commissioner of

Customs as early as possible, and any such firm or a company indicating

such change shall make a fresh application to the said Commissioner of

Customs within a period of sixty days from the date of such change for the

grant of license under regulation 9, and the Commissioner of Customs may,

if there is nothing adverse against such firm or company, as the case may

be, grant a fresh license of the category held by the applicant prior to the

change in constitution.

Provided that if the existing firm or company moves an application for such

changes, then such firm or company may be allowed to carry on the

business of Customs House Agent with the approval of the Commissioner

of Customs till such time as a decision is taken on the fresh application of

such firm or company.

(2) Notwithstanding anything contained in sub-regulation (1), where a license

granted or renewed under these regulations in favor of a firm or a company

has ceased to be in force because of the death or retirement of the person

referred to in clause (b) of sub-regulations (2) and (3) of regulation 5, as the

case may be, the firm or the company may apply for replacement of the

name of the demised person by the name of a partner, director or

employee who has passed the examination referred to in regulation 8 in

accordance with sub-regulation (8) of regulation 8.

Provided that if there is no such person in the firm or company, then such

firm or company, as the case may be, may authorize any other partner,

director or employee who is a ‘G’ card holder, to pass the examination



referred to in regulation 8 within a period of two years from the date of the

demise or retirement of such person, and the firm or company may be

permitted to carry on the business of a Customs House Agent with the

approval of the Commissioner of Customs till such time such partner,

director or employee passes the said examination.

16

.

Change in the constitution of a concern. —

(1) Where a licence granted or renewed under these regulations in favour of a

person, not being a firm or a company, changes the constitution of his

concern to a firm or a company, such new firm or new company may,

pending the grant of a licence in accordance with these regulations, be

permitted to act as Customs House Agent through an employee duly

qualified as per regulation 8, with the approval of the Commissioner of

Customs.

(2) Notwithstanding anything contained in sub-regulation (1), where a licence

granted or renewed under these regulations in favour of a person has

ceased to be in force because of the death of that person, his legal heir,

who is a major and a ‘H’ card holder, may be permitted to work as a

Customs House Agent with the approval of the Commissioner of Customs,

and such legal heir shall be required to pass the examination referred to in

regulation 8 within a period of two years from the date of demise of the

original licensee.

17

.

Engagement of persons qualified in the examination referred to in

regulation 8, etc. —

(1) A person who has qualified in the examination referred to in regulation 8

may engage himself in the work relating to the clearance of goods through

customs on behalf of a firm or a company licensed under regulation 9,

provided that at any given time he shall not so engage himself on behalf of

more than one such firm or company.



(2) Any change in the persons qualified in the examination referred to in

regulation 8 and actually engaged in the work in the Customs Station on

behalf of a licensee firm or company shall be communicated forthwith by

the firm or the company, as the case may be, to the Deputy Commissioner

of Customs or Assistant Commissioner of Customs, and no new person

other than ‘F’, ‘G’ or ‘H’ card holders shall be allowed to work in the

Customs Station as a duly authorised employee on behalf of that firm or

company.

18

.

Maintenance and inspection of accounts. —

(1) A Customs House Agent required to maintain accounts under these

regulations shall maintain such accounts :

in an orderly and itemised manner and keep them

current; and

reflect all financial transactions as Customs

House Agent.

(2) A Customs House Agent shall keep and maintain on file a copy of each of

the documents, such as bill of entry, shipping bill, transhipment application,

etc. and copies of all his correspondence and other papers relating to his

business as Customs House Agent.

(3) All records and accounts that are required to be maintained under these

regulations shall be preserved for at least five years and shall be made

available at any time for inspection of officers authorised to inspect such

records and accounts.

19

.

Employment of persons. —

(1) A Customs House Agent may, having regard to the volume of business

transacted by him, employ any number of persons to assist him. The



minimum educational qualification of such persons shall be 10+2, or

equivalent

(2) Appointment of a person referred to in sub-regulation (1) shall be made

only after obtaining the approval of the Deputy Commissioner of Customs

or Assistant Commissioner of Customs designated by the Commissioner of

Customs for this purpose and in the matter of granting approval, he shall

take into consideration the antecedents and any other information

pertaining to the character of such person.

(3) The person referred to in sub-regulation (1) shall, within four attempts from

the date of his appointment, pass an examination conducted by the said

Deputy Commissioner of Customs or Assistant Commissioner of Customs

or by a Committee of Officers of Customs, to be appointed by him for the

purpose, and the examination shall be such as to ascertain the adequacy of

knowledge of such person regarding the provisions of the Act subject to

which goods and baggage are cleared through customs.

(4) Notwithstanding anything contained in sub-regulation (3), a person

employed under a Customs House Agent and who has passed the

examination referred to sub-regulation (3) may, on his appointment under

any other Customs House Agent, with the approval of the Deputy

Commissioner of Customs or Assistant Commissioner of Customs, be

exempted from passing of such examination.

(5) Where the Customs House Agent has authorised any person employed by

him to sign documents relating to the business of such agent on his behalf,

he shall file with the Deputy Commissioner of Customs or Assistant

Commissioner of Customs, as the case may be, a written authority in this

behalf and give prompt notice in writing if such authorization is modified or

withdrawn, and the person who has passed the examination referred to in

regulation 8 or regulation 19 shall only be authorized to sign the declaration

on the bills of entry, bills of export, bills of import, shipping bills and



annexures thereof.

(6) The Deputy Commissioner of Customs or Assistant Commissioner of

Customs, as the case may be, shall issue a photo-identity card to every

person employed by a Customs House Agent, —

in Form F in case he has passed the examination

referred to in regulation 8;

in Form G , in case he has passed the

examination referred to in sub-regulation 3;

in Form H , in case he has not passed the

examination referred to in sub-regulation (3);

and every such person shall, at all times when he transacts the work

at the Customs Station, carry such card with him and produce it for

inspection on demand by any officer of the Customs Station.

(7) The photo identity card in Form H shall not be withdrawn from an employee

of a Customs House Agent even if he fails to pass the examination referred

to in sub-regulation (3) even after four attempts.

(8) The Customs House Agent shall exercise such supervision as may be

necessary to ensure the proper conduct of any such employees in the

transaction of business as agents and be held responsible for all acts or

omissions of his employees in regard to their employment.

20

.

Suspension or revocation of licence. —

(1) The Commissioner of Customs may, subject to the provisions of regulation

22, revoke the licence of a Customs House Agent and order for forfeiture of

part or whole of security, or only order forfeiture of part or whole of security,

on any of the following grounds, namely :—



failure of the Customs House Agent to comply

with any of the conditions of the bond executed by

him under regulation 10;

failure of the Customs House Agent to comply

with any of the provisions of these regulations,

within the jurisdiction of the said Commissioner of

Customs or anywhere else;

any misconduct on his part, whether within the

jurisdiction of the said Commissioner of Customs

or any where else which in the opinion of the

Commissioner renders him unfit to transact any

business in the Customs Station.

(2) Notwithstanding anything contained in sub-regulation (1), the

Commissioner of Customs may, in appropriate cases where immediate

action is necessary, suspend the licence of a Customs House Agent where

an enquiry against such agent is pending or contemplated.

21

.

Prohibition. — Notwithstanding anything contained in regulation 22, the

Commissioner of Customs may prohibit any Customs House Agent from

working in one or more sections of the Customs Station, if he is satisfied that

such Customs House Agent has not fulfilled his obligations as laid down under

regulation 13 in relation to work in that section or sections.

22

.

Procedure for suspending or revoking licence under Regulation 20. —

(1) The Commissioner of Customs shall issue a notice in writing to the

Customs House Agent stating the grounds on which it is proposed to

suspend or revoke the licence and requiring the said Customs House Agent

to submit, within such time as may be specified in the notice, not being less



than forty-five days, to the Deputy Commissioner of Customs or Assistant

Commissioner of Customs nominated by him, a written statement of

defense and also to specify in the said statement whether the Customs

House Agent desires to be heard in person by the said Deputy

Commissioner of Customs or Assistant Commissioner of Customs.

(2) The Commissioner of Customs may, on receipt of the written statement

from the Customs House Agent, or where no such statement has been

received within the time-limit specified in the notice referred to in sub-

regulation (1), direct the Deputy Commissioner of Customs or Assistant

Commissioner of Customs to inquire into the grounds which are not

admitted by the Customs House Agent.

(3) The Deputy Commissioner of Customs or Assistant Commissioner of

Customs shall, in the course of inquiry, consider such documentary

evidence and take such oral evidence as may be relevant or material to the

inquiry in regard to the grounds forming the basis of the proceedings, and

he may also put any question to any person tendering evidence for or

against the Customs House Agent, for the purpose of ascertaining the

correct position.

(4) The Customs House Agent shall be entitled to cross-examine the persons

examined in support of the grounds forming the basis of the proceedings,

and where the Deputy Commissioner of Customs or Assistant

Commissioner of Customs declines to examine any person on the grounds

that his evidence is not relevant or material, he shall record his reasons in

writing for so doing.

(5) At the conclusion of the inquiry, the Deputy Commissioner of Customs or

Assistant Commissioner of Customs shall prepare a report of the inquiry

recording his findings.

(6) The Commissioner of Customs shall furnish to the Customs House Agent a

copy of the report of the Deputy Commissioner of Customs or Assistant



Commissioner of Customs, and shall require the Customs House Agent to

submit, within the specified period not being less than sixty days, any

representation that he may wish to make against the findings of the Deputy

Commissioner of Customs or Assistant Commissioner of Customs.

(7) The Commissioner of Customs shall, after considering the report of the

inquiry and the representation thereon, if any, made by the Customs House

Agent, pass such orders as he deems fit.

(8) Any Customs House Agent aggrieved by any decision or order passed

under regulation 20 or sub-regulation (7) of regulation 22, may prefer an

appeal under section 129A of the Act to the Customs, Central Excise and

Service Tax Appellate Tribunal established under sub-section (1) of section

129 of the Act.

23

.

Grant of licence no right to accommodation. — The grant of a licence under

these regulations does not confer any right to accommodation in a Customs

Station.

24

.

Membership of associations:

(1) Each Customs House Agent shall enroll himself as a member of the

Customs House Agents’ Association, if there is one registered in the

Customs Station and recognized by the Commissioner of Customs.

REVISED FORMS FOR CHALR 2004

Form – A

[see regulation 5 (1)]

Application Form for Grant of Custom House Agent’s Licence under

Section 146 of the Customs Act, 1962



1. Name of the applicant. (in case the applicant is a firm or a company, the

names of each of the partners of the firm or the directors of the company, as

the case may be):-

2. Full address of the applicant. (in case of the applicant is a firm or a company,

the name of each of the partners of the firm or the directors of the company,

as the case may be):-

3. In case the applicant is affirm or a company, the name(s) of its

partner/partners or director/directors or duly authorized employees who will

actually be engaged in the work as Custom House Agents.

4. In case it is desired to appoint clerk(s), the name and address of the

clerk(s):-

5. Educational qualification of each of the persons, who will actually be

engaged in the work as Customs House Agent (including proof of working

knowledge of computers):-

6. Particulars regarding knowledge of English, local language and Hindi (these

particulars are required in respect of each of the persons actually engaged in

the work as Customs House Agent).

7. Particulars regarding knowledge of Customs Law and procedure. (These


the work as Customs House Agent).

8. Whether the applicant had earlier applied for a licence to act as Customs

House Agent and whether such application was rejected.

9. Whether he or the firm or company by whom he is employed have earlier

held a Custom House Agent’s Licence under these Regulations and whether

it was cancelled or suspended.

10

.

Whether the applicant or any of the persons proposed to be employed by

him have been penalized, convicted or prosecuted under any of the

provisions of the Customs Act, 1962 (52 of 1962) or any other law for the



time being in force:

11

.

Number and date of each of the documents furnished in accordance with

regulation 5.

I/We hereby affirm the I/we have read the Customs House Agent’s Licensing

Regulations, 2004 and agree to abide by them.

Date:

Signature of applicant(s)

FORM – B

[see regulation 8]

Licence for Custom House Agent

Licence No……………..

M/s./Sarvashri/Shri………………………………………………….........................................

............…………

Address………………………………………………………………………… is/are hereby

authorized to transact business as Custom House Agent all over India subject to the

conditions laid down in this licence.



It is the condition of this licence that in the case of firm or a company, the

Custom House Agent’s work shall be transacted through one of the following persons:-

Name of person(s) Specimen Signature(s)

1. _________________________ __________________________

2. _________________________ __________________________

3. _________________________ __________________________

4. _________________________ __________________________

5. _________________________ __________________________

Customs Station of issue Signature of the Commissioner of Customs

(with seal)

Date of Issue:

Conditions of the License

This license is issued subject to the following conditions:

The Licensee shall -

1

.

not sell or otherwise transfer the licence to any other person.

2

.

obtain an authorisation from each of the companies, firms or individuals by

whom he is for the time being employed as Custom House Agent and

produce such authorisation whenever required by an Assistant or Deputy

Commissioner of Customs;

3 transact business in the Customs Station either personally or through an



. employee duly approved by the Assistant or Deputy Commissioner of

Customs, designated by the Commissioner of Customs;

4

.

in the event of the licence being lost, report the same immediately to the

Commissioner of Customs;

5

.

ensure that he discharges his duties as Custom House Agent with utmost

speed and efficiency and without avoidable delay.

6

.

comply with the obligations specified in regulation 13; and

7

.

this licence is be valid for a period of ten years from the date of issue and

should be renewed from time to time in accordance with the procedure

provided in sub-regulation (2).

FORM – C

[see regulation 9 (2)]

Application Form for Grant of Custom House Agents Licence

1. Name of the Customs House Agent. (In case the applicant is a firm or a

company, the name of each of the partners of the firm or the directors of the

Company as the case may be).

2. Details of licence issued under sub-regulation of regulation 9.

3. Full address of the Customs House Agent. (in case the applicant is a firm or

a company the full address of each of the partners of the firm or the directors

of the company as the case may be).

4. In case the Customs House Agent is a firm or a company, the name(s) of its

partner/partners or director/directors or duly authorized employees who will

actually be engaged in the work of the Custom House Agent.

5. In case it is desired to appoint clerk(s) the name and address of the clerk(s)



as the case may be.

6. Educational qualifications of each of the persons, who will actually be

engaged in the work as Custom House Agent.

7. Particulars regarding knowledge of English and local language and Hindi.

(These particulars are required in respect of each of the persons actually

engaged in the work as Custom House Agent).

8. Particulars regarding knowledge of Customs Law and procedure. (These


the work of Custom House Agent).

9. Particulars of the quantity or value of cargo cleared as Customs House

Agent during the currency of the Customs House Agent licence.

10

.

Whether the Customs House Agent Licence held under these Regulations

was cancelled or suspended.

11

.

Whether the applicant or any of the persons proposed to be employed by

him have been penalized. Convicted or prosecuted under any of the

provisions of the Customs Act, 1962 (52 of 1962), or any other law for the

time being in force.

12

.

Number and date of each of the documents furnished in accordance with

regulation 5.

I/We hereby affirm that I/we have read the Custom House Agents Licensing

Regulations, 2004 and agree to abide by them.

Signature of applicant(s)

--------------------------------

--------------------------------

Date:……………………………



FORM – D

[see regulation 10]

BOND

No……………………………………… of …………………….. 20……… Know all

men by these present that we are held and firmly bound to the President of India in the

sum of Rs……………….. for payment whereof we hereby bind ourselves, and each us

bind himself and each of our heirs, executors and administrators firmly by these

presents dated this …………………… day of ………………… in the year two

thousand…………….

Whereas the said……………….. has been authorized to act as a Custom House

Agent under Section 146 of the Customs Act, 1962 (52 of 1962), and the said

………………… has agreed to enter into this bond as required by the Custom House

Agent Licensing Regulations 2004 (thereafter referred to as the said Regulations).

And whereas the said ……………… has deposited the sum of (rupees fifty

thousand) only with the President of India as security for his faithful behavior and that of

his clerks as regard the said Regulations.

Now the condition of the above written bond is such that if the

said……………………………. and his clerks do at all times, whilst holding, such licence

as aforesaid, behave themselves in a faithful manner as regards the said Regulations

and if the said…………………. and their executors or administrators do at all times

make good to the President of India all and every sums of money which being due to

the Government shall be reason of the misfeasance or negligence of the

said………………… or of his clerks have not been paid to the President of India then

the above written bond shall be void; otherwise the same shall be and remain in full

force and virtue and it is hereby agreed and declared that the President of India may

apply the said sum of Rs. 50,000/- (rupees fifty thousand) only deposited as aforesaid in

making good to the President of India all and every sums due to the Government by



reason of the misfeasance or negligence of the said……………………………. or his

clerks as aforesaid.

And it is hereby agreed that the said sum of Rs. 50,000/- (rupees fifty thousand)

only shall remain with the President of India for twelve calendar months after the date

upon which the said…………… shall cease to act as Custom House Agent as security

for the payment of any sums due to the Government by any reason of any misfeasance

or negligence of the said …………. or his clerks which may not be discovered until after

the said date and that this bond shall be and remain in full force and virtue until the

expiration of the said term of twelve months. It is also agreed and declared that the

President of India may apply the above sum of Rs. 50,000/- (rupees fifty thousand) only

in making good wholly or in part any short collection of duty or other charges in respect

of any transaction made by the said…………………… on behalf of importers or

exporters in the event of such sums remaining unpaid, even after issue of demands

under section 28 of the Customs Act, 1962.

Signed, sealed and delivered by the above named in the presence of

witnesses.

Accepted for and on behalf of the President of India

1. …………………….

2. …………………….

Signature of the Commissioner of Customs

(with seal)

FORM – E

[see regulation 10]

SURETY BOND



No…………………… of …………………… 200….. know all men by these

presents that we ……………….……………. (A)………………………………. and

……………………. (B) ……………………………. are held and firmly bound to the

President of India in the sum of Rs. 50,000/- (rupees fifty thousand) only for payment

whereof we hereby bind ourselves and each of us binds himself and each of our heirs,

executors and administrators firmly by these presents dated this day……………… of

…………………. in the year two thousand and………….

Whereas the said……………………………………………………………. (A)

…………………………… has been authorized to act as a Custom House Agent under

Section 146 of the Customs Act, 1962 (52 of 1962) and the said ……………… (B)

…………………….has agreed to enter into this bond as required by rules made under

the said section:

Now the condition of the above written bond is such that if the said

………………………………….. (A)……………………………… doth at all times whilst

holding such authorization as aforesaid behave himself in a faithful and incorrupt

manner as regards the Custom House Regulations and the officers, and if the

said………………… (A) and ………………… (B) …………………………. their executors,

or administrators some or one of them do, and shall at all time make good to the

President of India all and every sums of money which being due to the Government

shall by reason of the misfeasance or negligence of the said ……………………….. (A)

……………………………. have not been paid to the President of India then the above

written bond shall be void; otherwise the same shall remain in full force and virtue.

Signed, sealed and delivered by the above named in the presence of

witnesses.

Executed before me this……………… of ………… 200…

1……………………….

Signature of the Commissioner of Customs



2………………………...

(with seal)

FORM – F

[see regulation 8 and 19 (6) (i)]

C.H.A. Licence No……….

Identity Card

M/s./Sarvashri/Shri:

2

Designation (Proprietor, Partner, Director, Employee):

Issued at:

Valid upto:

Name of the Customs House Agent:

Type of CHA (Proprietorship/firm/Pvt./Public Ltd./others)

Specimen signature of the Custom House Agent:

He has passed the examination conducted under regulation 8 of the Customs

House Agents Licensing Regulations, 2004.

Signature of the Deputy/Assistant Commissioner of Customs

(With seal)

(Photo to be supplied by the Agent)

FORM – G

[see regulation 19 (6) (ii)]



Valid upto………………….

Identity Card

Shri…………………………… of……….……………………… having been

registered in the books of this office as an authorized employee of

Shri/Sarvashri……………………………… of…………………………………….. having

been authorized by him/them to transact business at the…………………………. Custom

House on his/their behalf is hereby permitted to do so for a period of ……… years with

effect from………………… or until the cancellation of the licence issued to his principal,

whichever is earlier.

He has passed the Examination conducted under Regulation 19 of Customs

House Agents Licensing Regulations 2004.

Specimen Signature of Clerks……………… Agent ……………. Customs

Station.

Dated the……………………20

(Photo to be supplied by the Agent)

Signature of the Deputy Commissioner/Assistant Commissioner of Customs

(With seal)

FORM - H

[see regulation 19 (6) (iii)]

Valid upto………………….



IDENTITY-CUM-AUTHORITY CARD

Shri ………………………. of …..……………………having been registered in the

books of this office as Clerk of Shri/Sarvashri/M/s………………………………..………

(C.H.A. Licence No… ……………), for assisting the Custom House Agent or his

authorized employee(s).

Specimen Signature of Clerks……………… Agent ……………. Customs Station.

CHAPTER 3- ROLES OF CUSTOM HOUSE AGENT

Roles of a Custom House Agent

The businessmen do not have all the time to deal with all the issues relating to the

import and export also they do not have the technical knowledge required to solve all

the problems that arise in the clearance of the imported cargo. So for carrying out this

function of clearing the imported goods they appoint a CHA. Also there is high level of

bureaucracy in the Indian business segment.



The company or the firm that has appointed any CHA has indirectly agreed that all the

actions taken by the agent would be on behalf of the company. The company would

stand liable for all the deeds of the CHA. And the agent is treated as the owner of the

goods. But in case the company fails to pay the custom duty, the custom officer would

not hold the agent but they would catch hold of the company for the payments. The

custom house agent posses the license issued to him by the customs commissioner.

Firstly the applicant has to clear the examination and then accordingly he is given the

temporary license and then gradually the regular license.

The role of the CHA includes getting all the papers prepared for the goods to be cleared

as soon as possible and also to get the custom duties paid. He does this on behalf of

the company and the company in return gives him the commission. The commission

that has to be given to the agent is pre-decided. The major role of an agent is to lessen

the burden of the importers and that of the commissioners at the custom office and

make the entire process look smooth. The CHAs play an important role in educating the

people and the entire community of export-import about how to get the clearance work

done with ease and at a faster speed. The custom agents act as the main link between

the department and the importers and exporters in the clearance of the cargo. So the

role of a custom agent is very well defined.

Duties of a Custom House Agent

The principal (the importer) has to authorize the CHA for the clearance work to be done.

The CHA can only clear the goods for import and export if he is authorized by the

principal. And also he has to produce the required letter of authorization before the

Deputy assistant commissioner as and when asked for.

· The methods Used It is not compulsory for the CHA himself to get the goods cleared.

He can get the word done even by his employee. But the employee who does that work

should be approved by the assistant commissioner who is designated for the particular

work. The CHA should not try to bribe the custom officers. He should in no case try and



influence the officers to get the work done. The USP of any CHA should be the speed

that he works with and the delays that he avoids. The charges for his work should be

pre decided.

· Personal interests of the Agent

The CHA would not be allowed to represent the matter before the custom officer if he

himself was a officer formerly. He can also not use the facts and theories that he used

for the similar case when he himself was the officer.

· Giving the right Advice

It is the duty of the CHA to ask the clients to properly follow the rules and regulations as

laid down by the custom houses. And if in any case the client refuses to comply with the

regulations then the agent need to inform the custom officer or the assistant officer

regarding the non compliance. The CHA is liable to give the information to the

department. Also the CHA has to provide the correct and exact information to the clients

regarding their goods. And the duties that are to be paid. And he has to inform the client

regarding the procedures that has to be followed for the clearance of the goods.

·

Should provide proper accounts for the money received

The CHA collects the money from the principal and gives it to the government. And also

he collects the money from the government (in case of excess) and passes it on to the

client. Now it’s the duty of the CHA to honestly pass on the entire amount to the

government or to the client.

· Liable for the information



The CHA has to maintain complete records of the work done by him as directed by the

commissioner. The CHA should not in any case try to steal the records or gather the

records by wrong means if the same are denied to him by the working officer. And the

records that are maintained by him should not be denied to any of the custom officer for

scrutiny. The records have to be produced before them. Also all the documents should

be prepared according to the rules laid down. And if the CHA has lost his license he has

to inform the same to commissioner as soon as he knows about it. And in case the CHA

does not provide the proper information or conceals it from the commissioner, the

commissioner has the right to prohibit him from further acting as a CHA. (with

obligations under regulation 14).

Liabilities of a Custom House Agent

As discussed above the CHA works on behalf of the company so there are many things

that a CHA is liable for. He is considered liable for all the actions that he takes. The

work of a CHA is important because of the high level of technicality included in the

clearing work. And also the businessmen themselves do not have the time and

knowledge to carry out the work. The Custom House Agents licensing regulations 1984

regulates the work of the agents. The Section 147 fastens certain liabilities on the

agents of the importers and exporters. An agent is empowered to do everything that the

company can do like he can file the bill of entry also the shipping bill. He has to decide

regarding the warehousing of the goods and when the goods need to be taken out of

the warehouses. He can help in examining the goods. He is also empowered to pay all

the duties to the custom officers. Putting these liabilities on the CHA reduces the work

burdens from the company’s shoulders. All the paper work has to be done by the CHA.

Now that the CHA works on behalf of the company, the company is bound by the

actions of the Agent. They are equally liable for the deeds done. Legally the agent is

considered the owner of the goods. But if in case the duty is not paid by the importer

than the agent cannot be held liable for the same. But there are some exceptions to it.

In some cases the Agent has to pay the duties that are not paid by the principal.



Status of a Multi Modal Transporter Operator (MTO)

The MTO is a new legal entity which has emerged out of the introduction of multi modal

transport. MTO acts as the principal for the performance of the multi modal transport

(MT) contract and, in that capacity, undertakes to contract and provide for the different

modes of transport required for the healthy transportation of the goods that he has to

deliver to the destination according to the contract.



In this process he has to use different carriers. So some of them are:-

1. Ship-owner

2. Road operators

3. Railways

4. Airlines

5. Inland waterway operators

The non-carriers may be those who own or control;

1. Container terminals (in which case they may be called terminal operators)

2. Warehouses

3. Container freight stations (CFSs) or group age of consolidation depots

4. Container leasing organizations

5. Organizations like freight forwarders attending to packaging, customs clearance.

The MTO enters into separate contract with each of the persons or organizations whose

services he engages, subject to the applicable international conventions; national law or

customary practice, but the terms of such contracts in to way affects his obligation to the

consignor of the goods under the MT contract. Some MTOs have subsidiary

organization instead of sub-contractors for rendering such services.

The work of the multimodal transport operators involves the carriage of the goods by

different means of transport. Their work is quite different from that of the CHAs. They

majorly handle the stuffing and the destuffing of the cargo. They do not automatically

receive the status of the steamer agent or that of the CHA but this is done only if they

are qualified enough for the same.



Other important things for a Custom House Agent

Any person who has the CHA license (regular or temporary) can work at all the custom

stations. There is no need to get a different license for the airport customs. The

applicant just has to pay the surety fee to the commissioner of that particular port and

also he has to convince him regarding the clients that he has He has to show him that

he has got enough clients to carry his business and also that he is financially sound for

the business he is undertaking at the port. The regular license holder will get the license

at any port he wants to work at. Its not compulsory for him to be present at the same

custom station where he got his license from.

CHAPTER 4 – CUSTOM CLEARANCE OF IMPORT

GOODS AND PAYMENT OF CUSTOM DUTY

All the cargo or the goods imported into India has to pass through the procedure of

customs clearance after they cross the Indian Border. The goods are then examined,

appraised, assessed, evaluated and then allowed to be taken out of customs charge for

use by the importer. The process of custom clearance is complex and to carry out this



procedure smoothly, the help of accredited custom clearing agent has to be taken.

These agents are licensed by the commissioner of customs. They are experienced and

capable of handling the documents/goods.

Procedure in general

After receiving the information of the arrival of the vessel, the importers has to present a

bill of entry. This bill of entry can be of two types. It can either be for the 1.Home

consumption or it can be for 2. The warehousing of the goods.

The bill of entry is then given in import department, with the proper entry made against

the consignment entry in the IGM. There is a difference in the rate applicable to the

goods for home consumption or for the warehoused goods because of the date on

which the bill of entry is noted in the import department. The date is very important

because of the rates applicable on that date would be the basis of the customs charged.

In case of warehoused goods the rates would be charged for the date when the goods

are physically cleared. After the import department the bill of entry is passed on to the

appraising department of the appraisal of the goods. The bill of entry is furnished with

many different documents. The documents that are to be attached with the bill of entry

are commercial invoice, certificate of origin. Certificate of quality, import license and

also the catalogue literature is asked for.

The documents that are given in the appraisal department goes to the appraiser or the

assistant commissioner and if they find it adequate for the Valuation of the goods and

for the classification then it signed by the commissioner and passed on. The bill of entry

is the main document which is passed on from one department to the other. The

documents are given to the licensing department which audits the license and then

debit the work in the licensee account and then they give back the bill to the agent or to

the importer for the payment to be made in the cash department of the customs.

Examining of the goods is the next step. The appraising commissioner keeps the

original copy of the bill of entry with himself and passes on the duplicate copy and

triplicate copy to the importer and the importer then has to get the cargo examined. It is



then the duty of the shed appraiser to examine the goods and if he does not find any

problems or any hazardous nature of the goods he has the right to grant the out of

charge to the goods. But before the out of charge is issued to the importer he has to

clear the port charges. There are two procedures under which the cargo is given the out

of charge. One is known as the

Second Check Procedure.

Most of the consignments i.e. 80 to 90% of the consignments are cleared or are given

the out of charge under the second check procedure. But in certain cases the goods

need to be check. Or the goods are of the nature that is difficult to assess. So they go

for First Check. In this process the bill of entry is send to the appraising commissioner

and is then send to the scrutinizing officer and then after examining the goods the bill of

entry is returned. And the out of Charge is granted after paying the port duties. The

goods after reaching the ports are transferred to the customs area. No person can open

the goods or in any case do any changes in the goods without the permission of the

proper officer from the customs. There are different officers’ assigned different works.

Also there is a hierarchy of these officers based on the liabilities and their duties. The

work of examination of the goods/cargo is carried out by the appraising officer who is

the chief of the appraising department. The grant of the Out Of Charge depends on the

results of the examination of the cargo. Whatever the result is, it is written on the back

of the bill of entry. Also the entire cargo is weighed. And the weight of the goods is also

written on the back of the bill of entry. The examination sometimes takes more than one

day. And if this happens the records and the results of each day are properly recorded

at the custom house. The CHA has to be present before the officer as and when

required. The records that the officer has to keep regarding the day to day checking of

the cargo has to be signed by the representative of the importer or the importer himself.

And on the weighment slip also the representative has to give his initials.

The Code Number



There is A code number that is given to the importer for importing the goods. If the

importer does not have the code number he is not allowed to import any cargo into the

country. The custom authorities have the right to ask for the code number whenever

they feel to. This code number known as the ‘IE code number’ is allotted to the importer

by the import trade control authorities.

Authority The CHA has the authority and the right to clear the cargo or the goods at any

of the ports in India. He just has to fulfill certain things. Also he can carry the clearance

procedure at the airport customs. And also at the container freight stations that are

built near the ports for the dry cargo. The goods that are imported to the country are first

unloaded at the port. The goods are then transferred to the customs area. These goods

are kept under the supervision of a person authorized by the commissioner of that port.

The goods can only be taken out if the it is cleared of the customs duty and the port

charges. For example: - at the Kandla Port the goods after being unloaded are kept at

the plots of the port and under the Kandla port trust. And are released only after the

duties and the port charges are cleared.

Central Board of Excise and Custom

The Central Board of Excise and Customs is the main authority deciding upon the rules

and regulation. So for this they have implemented the Customs Act 1962 for the

customs. They have incorporated two main things for the healthy working of the ports

and the clearance procedures. The first one being the ‘Appraisement’ and this

department is assigned the work of collecting of the revenues from the importers and

different working bodies at the ports and other custom stations. And the second wing is

the ‘Preventive department’ and the work of this department is to see that there is no

smuggling being done at the ports.

Assessment of Duty for goods

The duty (Custom duty) on the goods depends on the nature and type of the goods. The

goods are firstly classified according to their nature and then the duty payable is

decided based in the use of the goods. Validity of the goods there are certain goods that



are not allowed to be imported according to the custom laws of India. So the goods are

checked on the basis of the import policy that if the import of the particular goods is

allowed or not. So the validity of the goods imported depends on the parameters that

are prescribed in the Import Policy. And if the goods fulfill those parameters then they

are considered as valid imports. And in case there are some goods that fail to qualify

under the import policy then there is a very heavy penalty charged for those goods and

also those goods are ceased by the ports or the authorities of the ports.

Custom Duties

There are different kinds of duties that are to be levied from the importers as well as the

exporters. It is the Union Government that decides upon the duties that are to be levied

from the importers based on the goods. The different duties are as follows:-

a. Basic Duty: - All the goods imported into the country are charged a basic duty as per

the customs tariff act. This duty can be a certain percentage of the total value of the

goods or it can be a specified rate. Every year or in every 2-3 years there is a change in

this rate.

b. Additional Duty:- The import of the goods is an opportunity cost for the country. The

additional duty charged on the goods imported is equal to the excise duty that is

charged on the goods that are of the same nature and are produced in India. Additional

duty is also known as countervailing duty. And the additional duty is levied on the total

valuation of the imported goods.

i. When the goods are imported into the country there is a risk that is faced by the

domestic producers. Excise duty is levied from the domestic producers of the goods. So

to belittle their risks, an equal or an equivalent amount of duty is charged on the similar

goods when imported. By doing this there is no risks in terms of duties levied between

the two.

c. A Special Additional Duty of 4%



d. Safeguard Duty wherever warranted

e. Antidumping Duty is also levied on certain goods that are imported from certain

countries because of the damage they produce due to their dumping.

f. Education cess is also collected at 2% and secondary and also higher secondary

cess at 1% is levied of the aggregate of the custom duties.

Ways in Which Duty is levied

There are different ways in which the custom duties are levied. There are threedifferent

ways in which the custom duties are to be paid.

a. At a specified rate: - This rate is levied at a specific rate prescribed depending on the

number of goods or on the weight of the goods. Sometimes the duty is levied based on

the length of the goods as well.

b. Duty on Ad-valorem:- In this case the duty is levied based on the total value of the

goods.

c. In some cases the duty is charged in both the ways i.e. at a specified rate and on Ad-

valorem basis.

Goods Valuation

As discussed above that the duty can be levied either at a specific rate or at the value of

the goods. So it is very important to calculate the valuation of the goods. The importer

would always like to pay less amount of duty to the customs. So for that he will show the

value of the goods at a low amount. And this leads to a dispute between the importer

and the valuation officer. So to avoid this dispute there is valuation principles laid down

by the union government with the central board pf excise and customs. Goods therefore

are valued according to the principles that are laid down in the customs valuations rules

1988.



Appraisal of the custom duty

There are certain criteria for the assessment of the duty on the goods based on:-

· If the goods to duty are the one which are regularly imported or

· If the goods are to be tested in the laboratory of the custom house for thefulfillments of

the conditions of the license

· In some cases the appraiser takes a sample of the goods and then assesses the

custom duty levied on the nature of the goods.

The goods are examined by the officer at the site and then the message and the

records are send to the duty assessing officer who then based on the reports decides

the duty to be taken from the importer. The importer pays the duty and gets the out of

charge. This process is followed only if the goods are not of the regular import nature.

Now if the same goods are regularly imported then the assessing officer does not need

to take the sample or do the checking. If the officer is very well satisfied by the importer

and the goods and if all the documents are properly arranged without any faults then the

importer can pay the duty even before the vessel is arrived. In most the cases the

importer tries to pay the duty before the vessel arrives to escape the demurrage. The

goods then just get examined by the officer at the site and the out of charge is given.

There are also cases where the assessment may take some time due to the nature of

the goods. If the goods are of hazardous nature then the assessment may take time.

Custom Duty and the Rate

The CHAs should have the complete knowledge regarding the rates at which the

custom duties are to be charged from the importer on the goods that are imported. Now

at the time of deciding the custom duty the most important factor is the exchange rate.

The duty is charged based on the invoices produced before the customs. In case where

the invoice has the currency other than rupees, the custom has fixed the exchange rate



for the same. These exchange rates are published on day to day basis in the custom

house for the calculation of the custom duty. There are certain countries from which the

importers, if import, enjoy a preferential duty.

The custom duties on different products or different goods and on from different

countries varies a lot. Each good imported has a different duty imposed on it. Even the

CHAs and the officers can not remember all the rates applicable. And also it becomes

difficult to remember the rate at which the custom duty is imposed on the goods. So to

write all the custom duties and the rates applicable here in this report is not possible.

But to explain how the calculation of the custom duty is done we can take a short

example:-

Cost on landed including C.I.F of hinges of brass Rs. 100

Basic custom duty as per the Customs tarrifs act 7.5% Rs. 7.5

Add: Excise duty 16.00% Rs. 17.2

Add: Cess on excise 2.00% Rs 0.344

Add: Education cess 1.00% Rs 0.172

Add: Additional cess 2% Rs 0.501

Add: Cess 1% Rs 0.257

Ass: SAD 4% Rs 5.039

Duty Payable Total Rs. 31.013

Import license and the Checking of the License



The importer of the vessel or of the goods must posses the import license. The

appraising officer asks for the license from the importer before the arrival of the vessel.

The officer checks the name of the importer the validity of the license, the commodity

imported etc. The import license held by the importer should notify that the goods

imported by him are legally approved in the license. If the officials are not satisfied then

the importer cannot import the goods. And if everything is in place and if all the

conditions are satisfied then the import license is passed on to the license section along

with the bill of entry. The work of the license department is to maintain a complete

record of all the licenses that are accepted. And also they show the last balance of the

license.

The importer should necessarily know about all the goods that he can legally import

under the license granted to him. He should not try to import the goods that are not

binding under the license he is granted. And in case if the importer imports the goods

illegally and if he escapes the punishment from the officials that does not mean that he

can import the goods again for the second time on the same license.

CHAPTER 5 – IMPORTANT TERMS IN SHIPPING

THE THREE IMPORTANT INCO TERM

1. FREE ON BOARD (FOB)



Under the FOB contract, the seller quotes a price which includes all the expenses

incurred until the goods are actually delivered on board the ship at the port of

shipment, it constitutes:

a) Ex- factory price

b) Packing charges

c) Inland transportation cost.

d) Customs and port dues

e) Export duty, if any

f) Documentation charges

g) Cost of quality control and any other expenses,if any

h) Profit margin of the seller is added and if export incentives are received

form government, that directly affect the price, then such incentives are deducted

Thus, FOB price is calculated by adding the cost of goods, the expenses up to the

board of the ship plus profit. Export incentives received form the government are

deducted

FOB PRICE = COST OF GOODS + EXPENSES UPTO BOARD OF SHIP +PROFIT

– EXPORT INCENTIVES

Usually the FOB contract requires the following seller and buyer OBLIGATIONS:

The Seller must :

A) Supply of goods in conformity with the contract of sale.

B) Deliver the goods on board the vessel named by the buyer at the port of

shipment.

C) Bear all the cost payable on or for the goods until they have been placed

aboard the ship.

D) Suitably pack the goods for mode of transportation.



E) Provide documentation indicating proof of delivery of goods aboard the

vessel.

F) Inform the buyer without delay that the goods have been delivered on

board the vessel

The Buyer must:

A) At his own expenses, book necessary space on board a vessel and give

the seller notices in respect of the name of the vessel, loading berth, and delivery

date .

B) Payment of insurance premium to the insurance company

C) Payment of freight to the shipping company.

D) Bear any other cost and risk form the time the good have been placed on

board the vessel.

E) Make payment to the exporter as per the terms of contract.

Under FOB quotation, the seller loses his right lien on the goods and right of stoppage

in transit. This is because the shipping company is under the contract of the buyer. In

India, export incentives such duty drawback, are given on the basis of FOB proce.

2. COST AND FREIGHT (C & F)

The importer may request the exporter to quote C&F price which means FOB price plus

cost of transportation of the goods to the port of destination.

C&F= FOB PRICE + FREIGHT

The charges like cartage, unloading charges etc, are requires to be paid by the importer

to bring the goods to his warehouse. insurance charges also to be borne by the importer

Seller and Buyer OBLIGATIONS under C&F contract:

The Seller must:



In addition to obligations under FOB (A to F), the seller must pay freight charges of the

shipping company .

The Buyer must :

a) Arrange and pay insurance

b) Pay clearing charges, import duties etc.

c) Make payment to exporter as per the commercial invoice.

3) COST INSURANCE AND FREIGHT (CIF)

It includes FOB price plus freight plus marine insurance upto the port of destination. It is

preferred by the importer over FOB because there are fewer responsibilities for him as

the exporter takes all risk for the fluctuation in rates and insurance unless otherwise

specified in the contract.

CIF = FOB PRICE + FREIGHT + INSURANCE

The Seller must:

In addition to obligations mentioned under FOB (A to F), the seller must pay freight and

insurance cover.

The buyer must:

a) Pay clearing charges, import duties etc.

b) Make payment to exporter as per the commercial invoice.

METHODS OF PAYMENT/ TERMS OF PAYMENT



1) PAYMENT IN ADVANCE

This method does not involve any risk of bad debts, providing entire amount has been

received in advance. At times, a certain percent is paid in advance, say 50 % and the

rest on delivery. This method of payment is desirable when :

a) The financial position of the buyer is weak or credit worthiness of the

buyer is not known.

b) The economical/political condition in the buyer’s country is unstable.

c) The seller is not willing to assume credit risk , as in the case of open

account method.

However, this is the most unpopular method as a foreign buyer would not be willing to

pay in advance of shipment unless:

i. The goods are specifically designed for the customer, and

ii. There is heavy demand for the goods (a seller’s market situation ).

2) PAYMENT AGAINST SHIPMENT ON CONSIGNMENT

The exporter supplies the goods to the overseas consignee or agent, without

actually giving up the title. Payment is made only when the goods are ultimately sold

by the overseas consignee to the other parties.

This method is costly, because of commission to be paid to the consignee, apart

from the other charges and at the same time it is very risky. The consignee may

return the goods back if remained unsold and even the consignee may not clear off

dues in time. The price to be realized is also uncertain as it depends on the market

conditions in buyer’s country.



However, this method offers an advantage to the buyer as the buyer can examine

the goods before purchasing and the seller may get a higher price if the buyer is

satisfied about quality.

In India prior approval is required to be taken from the exchange control department

of RBI for shipment on consignment basis.

3) DOCUMENTARY BILLS

Under this method, the exporter agrees to submit the documents to this bank along

with bills of exchange. The documents required are (a) a ful set of bill of lading (b)

invoice (c) marine insurance policy and other documents if required.

There are two main types of documentary bills

DOCUMENTS AGAINGST PAYMENT (D/P)

The documents are released to the importer against payment. This method

indicates that the payment is made sight draft. Necessary arrangements will have

to be made to store the goods, if a delay in payment occurs.

The risk involved is that the importer may refuse to accept the documents and to

pay against them. The reasons for non-acceptance may be political or

commercial ones. In India, ECGC (EXPORT CREDIT GAURANTEE

CORPORATION INDIA LTD) covers losses arising out of such risk.

Under this system, as compared to D/A the exporter has certain advantages

a) The documents remain in the hands of the bank and the exporter does not

lose possession or the ownership of goods till the payment is made.

b) Other reasons may include that the exporter may not able to allow credit

and wait for payment.



DOCUMENTS AGAINST ACCEPTANCE (D/A)

The documents are released against acceptance of the time draft i.e. credit is allowed

for certain period, say 90 days, however, the exporter need not wait for payment till the

bill is met on due date, as he can discount the bill with negotiating bank and avail of

funds immediately after shipment of goods.

In case of D/A as compared to D/P bills, the risk is involved is much greater, as importer

has already taken the possession of goods which may or may not be in his custody on

the maturity date of the bill. If the importer fails to pay on due date, the exporter, will

have to start civil proceedings to receive his payment, if all other alternatives fails. The

risk involved can be insured with ECGC.

LETTER OF CREDIT (L/C)

This method of payment has become the most popular form in recent times, as it is

more secured as compared to other methods of payment. A letter of credit can be

defined as “an undertaking by importer’s bank stating that payment will be made

to exporter if the required documents are presented to the bank within the validity

of the L/C.

PROCEDURE FOR OPENING LETTER OF CREDIT:

The following are the steps in the process of opening of a letter of credit:



1. Exporter’s Request: The exporter’s requests the imported to issue LC in

his favour. LC is the most secured form of payment in foreign trade.

2. Importer’s Request to his Bank: The importer requests his bank to

open a L/C. He may either pay the amount of credit in advance or may request

the bank to open credit in his current account with the back.

3. Issue of LC: The issuing bank issues the L/C and forwards it to its

correspondent bank with a request so inform the beneficiary that the L/C has

been opened. The issuing bank may also request the advising bank to add its

confirmation to the L/C, if so required by the beneficiary.

4. Receipt of L/C: The exporter takes in his possession the L/C. He should

see to it that the L/C is confirmed.

5. Shipment of goods: Then the exporter supplies the goods and presents

the full set of documents along with the draft to the negotiating bank.

6. Scrutiny of goods: The negotiating bank then scrutinizes the documents

and if they are in order makes the payment to the exporter.

7. Realization of payment: The issuing bank will reimburse the amount

(which is paid to the exporter) to the negotiating bank.

8. Documents to importer: The issuing bank in turn presents the

documents to the importer and debits his account for the corresponding amount.

IMPORTANT TYPES OF LETTER OF CREDIT



I. Revocable and Irrevocable letter of Credit:

1. Revocable LC- In this type of LC, the issuing bank reserves the right to

withdraw, cancel or modify the credit, at any time without the prior consent to

beneficiary. However, after revoking the LC, the issuing bank has to give notice

to the beneficiary. Revocable LCs is risky and as such the exporters do not want

to accept a revoking LC.

2. Irrevocable LC- This type of LC is preferred to revocable letter of credit.

In this type, once the LC is accepted by the exporter, it cannot be cancelled or

modified by the buyer or issuing bank without prior permission of the beneficiary.

With Recourse and without Recourse Letter of Credit

3. With recourse L/C: In this type, the exporter is held liable to the

paying/negotiating bank, if the draft/bill drawn against LC is not honored by the

importer/issuing bank. The negotiating bank can make the exporter to pay the

amount along with the interest, which it has already paid to the beneficiary.

4. Without Recourse LC: In the case of without recourse L/c, the

negotiating bank has no recourse to the exporter, but only to the issuing bank or

to the confirming bank.

However, in the case of with recourse L/C, the negotiating bank can

ask the exporter to pay back the money along with certain

expenses.

Confirmed and Unconfirmed Letter of Credit



5. Confirmed L/C: When the issuing bank is practically unknown in the

beneficiary’s country, the exporter may ask the issuing bank to make

arrangements to confirm the credit by a local bank. The confirming bank

undertakes to honour all the drafts/bills drawn and presented with the terms L/C.

6. Unconfirmed L/C: An unconfirmed L/C is one to which the correspondent

bank in the exporter’s country does not add its conformation, and thereby, does

not accept liability to make payment under L/C.

Other types

7. Back to Back L/C: Back to back L/C is a domestic letter of credit. It is an

ancillary credit created by bank based on a conformed export LC received by the

direct exports. The direct exporters keep the original LC with negotiating bank or

some other bank in India, as a security, and obtain another LC in favour of

domestic supplier. Through this route the domestic supplier gains direct gains

direct access to the preshipment loan based on the receipt of domestic or back to

back LC.

8. Documentary LC: Most of the LC’s are documentary LC’s. payment is

being made by the bank against delivery of the full set of documents as laid down

by the terms of credit. The important documents required to be submitted by the

exporter under documentary LC includes the following:

Bill of Lading

Commercial invoice

Insurance policy

Shipping bill

Certificate of origin

Packing list, etc.



Bill Of Entry

The document on the strength of which clearance of imported goods can be effected is

known as the Bill of Entry (B/E), the form of which has been standardized by the Central

Board of Excise and Customs. The Bill of Entry should be type-written.

No bill of entry is, however, required in the following cases:

· Passengers baggage

· Favour parcels

· Mail bags and port parcels.

· Boxes, kennels or cages containing live animals or birds.

· Ship’s stores in small quantities for personal use.

· Cargo by sailing vessels from Customs ports when landed at open bunders only.

Types of bill of entry

All goods discharged from a vessel, from foreign or coastal ports, are cleared on Bills of

Entry in the prescribed forms presented under the Bill of Entry Regulations,1971.

a. Goods entered for home consumption are cleared on ‘White’ Bills of Entry.

b. Goods entered for warehousing are removed into bond on ‘Into Bond’ Bills of Entry

(‘Yellow’ Bills of Entry).

c. Goods cleared ex-bond for home consumption on payment of duty on ‘Ex-Bond’ Bills

or ‘Green’ Bills of Entry.

Printed Bill of Entry forms are available with government authorized agents. For imports

through the medium of post there is no B/E. Instead a waybill is prepared by the foreign

post office for assessment of duty.



The time to present the bill of entry It should be presented for ‘noting’ in the import

department of the Customs House after the Import General Manifest which gives a

detailed description item-wise of the goods brought by the concerned vessel is filed by

the ship’s agent. A facility has been afforded to the ship’s agents to lodge this manifest

14 days in advance prior to arrival of the vessel. This concession has been given to

facilitate the importer’s Custom House Agent to keep the documents ready so that

immediately on arrival of the vessel and landing of the cargo, the same could be cleared

on examination and payment of duty thereon without any loss of time. The date of

presentation of the Bill of Entry is very important as the rate of duty applicable to the

imported goods will be the rate which is in force on the date of presentation.

Features of the Bill of entry

Salient features of the Bill of Entry which is to be presented for clearance of goods for

home consumption are mentioned below:

1. Origin & Vessels Particulars: The importer or his Clearing Agent has to give relevant

particulars of the origin of the consignments and the vessel e.g. port of Shipment,

country of origin (and country consignment if different), vessel’s name and rotation

number and also Bill of Lading date.

2. Particulars of the Goods: In regard to the goods covered by the Bill of Entry, certain

basic information has to be furnished by the importer which includes

(I) Number and description, as well as marks and numbers of the packages;

(ii)weight/volume/or number in so far as quantity is concerned;

(iii) Description of the goods imported – details to be given separately for each separate

class of goods;

(iv)Gross weight and total number of packages have also to be given.



3. Value: The importer has also to indicate assessable value in terms of Section 14 of

the Customs Act, 1962. For arriving at this assessable value he has also to give further

break-up of invoice value, freight, insurance, exchange rate, loading and local agency

commission, miscellaneous charges and landing charges (taken into consideration for

the assessable value)

4. Duties Leviable: The form has separate columns for indicating Customs tariff heading

and exemption notification No. if any applicable. For purposes of contravening duty,

there is separate column indicating the value, the rate and amount and the total amount

of duty on the goods both in figures and words to be indicated by pin-point typewriter.

5. Codes: For certain statistical purposes (which is the basis of Foreign Trade

Statistics), certain code numbers have also to be indicated by the importer while filing

the Bill of Entry which include Port Code, Custom House Agent Code, Importer Code,

Country of origin/Consignment Code, Unit Code, Currency Code, etc.

6. Declaration of Importers/Clearing Agent: Besides the information of the type

referred to above, certain declarations have to be furnished by the importer and

his authorized Custom House Clearing Agent wherever the Bill of Entry is

processed through a Clearing Agent. Some of these declarations

have to be signed by the importer himself. These specifically include declaration

about correctness of the contents of the goods described in the Bill of Entry

(being in accordance with the invoice and other documents), corrections of the

price/value. Declaration whether the goods have been purchased on outright

purchase/consignment basis and whether the importer has any connection with

the supplier/manufacturer. Importer’s declarations are furnished and signed by

him on the reverse of the Bill of Entry. In cases when an importer clearing his

goods through a Custom House Agent, does not have his office at the port, the

declarations may be signed by the importers on a separate sheet of paper which

may be attached to the reverse of the bill of entry. The Appraiser may make the



final assessment after the C.H.A pastes the declaration on the reverse of the Bill

of Entry.

Documents presented along with the bill of entry

Apart from filing up various columns of this prescribed bill of entry form, the importer is

supposed to submit certain essential documents which may be required for checking

the correctness of the declarations made and for completing the assessment (for

checking value and for determining permissibility of import etc. The documents

presented along with the Bill of Entry generally include Invoice, Packing List, Bill of

Lading or Delivery Order, Import License(s) / Customs Clearance Permit, Insurance

Policy, Certificate of Origin, etc.

A. Bill of lading

The document under which cargo is carried on board vessels is a bill of lading, and may

be defined as a receipt for goods, signed by the master or other duly authorized person

on behalf of the ship-owner, and constitutes a document of title to the goods specified

therein.

For over three hundred years, bills of lading have been most important documents in a

variety of international trade transactions. Their format has varied in accordance with

the particular trade and the requirements of individual ship owners. Whilst it is primary a

receipt, and not strictly speaking a contract of carriage, it is nevertheless good, and

sometimes the only evidence of the terms and conditions of carriage. There has been

some divergence of opinion as to whether a bill of lading is in fact a receipt or a

contract, but in the case of it has been clearly stated:

“There is I think another inaccuracy in the statute (Bill of Lading Act 1855) which is

indeed universal. It speaks of the contract contained in the bill of lading. To my mind

there is no contract in it. It is a receipt for goods stating the terms on which they are to

be received and carried by the ship, and, therefore, excellent evidence of those terms,

but it is not a contract. That has been made before the bill of lading has been given” The



words of his Lordship put the question in its proper perspective and eliminate all doubt.

The indispensable features of every contract are of course offer and acceptance. When

a ship owner advertises his vessel for the carriage of cargo, and the shipper signifies his

offer by requesting the owner to reserve, space in the vessel, he thereby makes an

offer. It is only when the ship owner has accepted the cargo on board that the contract

of freightment is concluded His liability would, however, be limited by the provisions of

the Merchant Shipping Acts. The ship owner is at liberty to restrict his liabilities, and this

he seeks to do by concluding special contracts as evidenced by the terms, conditions

and exceptions of the bills of lading. A glance at a modern general cargo bill of lading

will convince one that the ship owner takes every Topic: precaution to minimize his

liabilities by inserting protective clauses exempting himself from responsibility for a very

exhaustive range of losses, including those arising from the negligence of his servants,

etc. Bills of lading for goods shipped from the United Kingdom and Northern Ireland,

however, are in this respect subject to the Carriage of Goods by Sea Act 1971.

The act establishes the responsibilities, liabilities, rights and immunities attaching to

carriers under bills of lading, and in effect prescribes a standard form of bill of lading

which has the force of law. It removes the difficulties and uncertainties which were

associated with the plethora of protective clauses which ship owners were accustomed

to insert in bills of lading and has bestowed a considerable advantage on the mercantile

community, particularly banks & insurance companies, as, now that they know exactly

the extent of the ship owners liabilities, etc, they can make advances and adjust

insurance premiums on cargo with greater facility. It is not necessary specifically to

incorporate fully the terms and conditions of the Carriage of Goods by sea Act 1971 in

bills of lading. It is the shipper’s duty to supply the shipping company with the bills of

lading. As soon as the shipper ascertains the number of packages he wishes to ship by

the vessel, he completes the bills of lading and lodges these with the shipping company

for their attention. He may, however, request the carrying company to make out bills of

lading for him, in which case he supplies an invoice and instructions, and the shipping

company undertakes this business. A small charge is made for the extra work entailed.

The bills of lading are made out in ‘sets’, and any number may constitute the set



according to the requirements of the particular trade. It is essential that at least one bill

of lading be supplied, together with a copy bill of lading, known as the captain’s copy,

which is retained by the master for record purposes. While the bill of lading is the

document proper, the copy is of no value, and as many copy bills of lading may be

included in the set as are desired either for the shipping company purpose’s or for the

shipper’s own requirements.

The bills of lading, however, are of equal standing, and it is usual to find at the foot of

the bill of lading the term – ‘in witness whereof the master or agent hath

affirmed………… bills of lading all of this tenor and date, the one of which being

accomplished the others stand void.’ The numbers of bills of lading which constitute the

set are entered in the blank space. The shipper usually affirms to three bills of lading,

one for his own records, one for his consignee, and the second copy for the consignee

sent usually by the following mail in case the first copy forwarded him is lost or delayed.

The master of the ship is instructed to deliver the goods to the person who produces a

bill of lading, and therefore it is in the interest of all shippers, where more than one bill of

lading is issued, to see that the consignee is the person who receives it. The master, in

the absence of knowing that the holder of the bill of lading has no right to it, in the

absence of known fraud, has the authority to deliver the goods. In the event of any

goods being so delivered, to another person who holds the document of title but is not

authorized, the master is free from liability for wrongful delivery. In describing bills of

lading it must be remembered that nearly all bills of lading were originally ‘received for

shipment’ bills of lading, which state that the goods have been received for shipment on

board the vessel. Here, there is no actual receipt for goods which have been shipped.

The Carriage of Goods by Sea Act contains a stipulation that if a shipper so demands,

he shall have issued to him a shipped bill of lading when the cargo is loaded. This

commences ‘shipped on board the vessel…’, and states that the goods are actually on

board.

Bankers are reluctant to accept documents that do not clearly set out this important

statement, and many demand ‘shipped’ bills of lading. Many shipping companies now

only print shipped bills of lading. As there is no implied or express demand for a



seaworthy ship, the term ‘shipped on board the good ship’ is rarely seen, it being

‘shipped on board the vessel…’ The next clause for consideration is that of ‘apparent

good order and condition’.

The full opening phrase on a bill of lading is ‘Shipped (or received) in apparent good

order and condition on board the vessel.’ This phrase means that the outward condition

of the goods on being received by the ship is in good order, the ship owner in effect

says: ‘I can only judge by exterior proof as to the soundness of the goods received, and

apparently they are in good order.’ To earn his freight carrier is only bound to carry the

goods and deliver them in the same order in which he received them. If they were in

apparent good order, on shipment, it is his duty to deliver them in like apparent good

order and condition. Should the goods have any defects, then the carrier will qualify the

Topic: Clearing and forwarding of imports term ‘apparent good order’ by including in the

margin of the bill such terms as ‘old case’, ‘stained case’, ‘straw wrapped pieces only’,

or ‘unprotected’. The addition of any similar qualifying clause makes the bill of lading

‘unclean’, and conversely, the expression ‘clean bill of lading’ means any bill of entry

which has the clause ‘apparent good order and condition’ unqualified.

Shipping companies in their own interest insert these clauses when necessary as a

safeguard against unwarranted claims. There is a practice of issuing letter of indemnity

against clean bills of lading, which is adopted by number of companies. These letters of

indemnity state that in consideration of being given a clean bill of lading the holder

indemnifies the carrier against all risks and claims arising from the defect. This,

although practiced, is legally wrong, and the holder of a letter of indemnity in this case

has no right other than that of good faith. The master of the vessel having signed for so

any cases in apparent good order and condition, when he knows they are not so by

being given a letter of indemnity to that effect, issues a legal document in the form of the

bill of lading with a misstatement of fact upon it, which is nothing less than a common

fraud, and on these grounds numerous cases fail because the owners are unable to

seek the assistance of the letter of indemnity. The bill of lading is made out in the name

of the shipper, or, if an agent, as ‘A.B. as agents’, and consigned to the consignee or

receiver. For many reasons, such as confidentiality, some shippers are anxious that the



name of the consignee shall not become known, and in this case the bill of lading is

consigned to ‘order’ or ‘shipper’s order’ When goods are consigned to a named

consignee, the shipper has no need to endorse the bill of lading before forwarding to his

consignee, but when it is consigned ‘to order’ he must endorse the bill over to the

consignee to whom he wishes delivery made. Other clauses appear in the body of the

bill, but the clause paramount of the Carriage of goods by Sea Act makes it

unnecessary to deal with these here. The bill is signed at the foot by, or for, the master.

He, as the agent for the owners in the care of the vessel, and bailee for the cargo during

the period of its shipment, is personally responsible for the goods while in his care. If a

bill of lading is signed for goods which are not actually on board, the liability of the

master is increased, for it may happen that the bill is issued, and therefore the prima

facie evidence is that the goods were actually shipped, and the carrier may have great

difficulty in proving that this was not so. It is conclusive to a holder for value. It is

therefore the master’s duty, or the duty of anyone having authority to sign for the

master, to see that the particulars in the bill of lading are accurate, before the bill is

issued. The date which appears at the foot of the bill should of course be the actual date

of shipment, or receipt of the goods. This traditional bill of lading is now known as the

‘long form’ bill of lading.

In the body of the bill the ports of shipment and delivery are mentioned, and the contract

is therefore to carry the goods with all reasonable speed from the one place to other. A

clause is found in many bills allowing carrier the privilege of deviating to other ports ‘in

any order whatsoever, backwards forwards in any directions’. This clause is valueless

as there is no permission at any time for the owner to leave his course. Where this route

is an advertised one, and the shipper is aware that by custom of trade the vessel calls

at intermediate ports, e.g. London – South Africa, calling at Cape Town, Durban and

Port Elizabeth, he accepts this route, but does not give the carrier permission to take his

vessel to Liverpool after leaving London. Through bills of lading are issued when a

shipper wishes the carrying company to make arrangements for a complete journey,

and these bills of lading in addition to the agreement to carry goods from port to port

include a further journey (by sea or land) from the port of ship’s destination to a distant



place. In this case the carrier incorporates in the bill of lading a clause stating that the

goods are to be ‘transhipped and forwarded to ……at ship’s expense but at shipper’s

risk.’ An additional charge is made for the extended journey, and the carrier bears all

the expenses of shipping and transshipping, but from the time the goods leave his care

he repudiates all responsibility for their safe carriage. This extra journey is outside the

contract of affreightment, and the terms and conditions of the bill of lading do not apply.

The carrying company is merely acting as agent in arranging the on carriage.

Combined transport bill of lading. This is comparatively recent development. It is

negotiable document (or can be) and the combined transport operator takes charge of

the goods at a place of acceptance and provides an undertaking to deliver the goods at

a designated place of delivery against surrender of the document. A clause in the

document that the goods are to be delivered to the order of a named person, or to the

bearer, constitutes the undertaking. The combined transport operator accepts full

responsibility for the entire journey and acts as principal vis-à-vis the shipper and other

carriers. Since the repeal in 1949 of stamp duty on bills of lading, copy bills (i.e bills

other than the number of bills on the set) are stamped ‘Copy bill of lading – not

negotiable’ or similar wording . In some cases different coloured bills are used to

distinguish copies from negotiable bills. For bills of lading under charter parties, the

above conditions apply with a few exceptions, the most important of which is that the

conditions of a bill of lading are always subservient to the charter party clauses. When a

charter party is issued, this is a contract pure and simple, and the bill issued under such

document is only a receipt with all terms as per charter party.

The Bill of lading Act 1855 is a small but valuable act, and its provisions are briefly:· It

gives the consignee or endorse to whom the property passes, all rights

of suit as if the contract had been made with him originally. it preserves the right of

stoppage in transit, the right to claim freight against the shipper, or any other liabilities of

the consignee. It provides that the bill of lading in the hands of the consignee for

valuable consideration is conclusive evidence of the shipment having been made, even

though the goods were not shipped, unless the holder has been advised that the goods



were never on board. Considerable national and international thought has been given to

the problem of simplifying the paper work entailed in the production of the commercial

documents relating to an export consignment. These are the various forms required by

the carriers, customs authorities, port authorities, forwarding agents, banks, and

insurance companies. These efforts resulted in two documents, the ‘common short form

of bill of lading’ and the ‘sea waybill’. The short form of bill of lading came from a more

general rationalization in maritime transport documents as recommended by the United

Nations. This short form was recognized by the international chamber of commerce in

1974.

It was agreed that, unless specifically prohibited by the terms of an individual credit,

‘short form’ bills of lading could be used in credit’s issued in accordance with ICC’s

Uniform customs and practice for Documentary credits. On 2 April 1979 the General

Council of British Shipping (GCBS) and the Simplification of International Trade

Procedures Board (SITPRO) took these developments a stage further and introduced a

common short form of bills of lading, it being recommended by both organizations. This

short form retains the legal protection afforded by the ‘long form’ bill of lading. Instead of

conditions and clauses in small print, it has on the front a short incorporation clause

which advises ship owners that details of the conditions of carriage are available

separately. This clause has been agreed between the GCBS and underwriters and

should be given equal effect under English Law as if the conditions had been printed in

full on the form. This common short form bill of lading is a ‘received for carriage’

document, which can be converted into a ‘shipped’ or ‘loaded on board’ document by

notation of the carrier as stated in the Carriage of Goods by Sea Act.

The common short form of bill of lading is not only for ship owners who are members of

GCBS but is available for outward liner shipments from the UK. By agreement it can be

used instead of the ship owner’s own form and act as a port to port or through bill of

lading, for containerized, group age or general cargo. A common short form of bill of

lading is a document of title to the goods by endorsement and transfer, or the goods

pledged or mortgaged as security for an advance. Like the ‘long form’, this does not

give the transferee a better title than that held by the person making the transfer. The



sea way bill is nonnegotiable document. It came into being largely because of faster

ship’s and the very swift turn-round particularly of container ships on the short sea

routes between the UK and the Continent and Scandinavia, which had lead to a

situation where ordinary bills of lading were failing to arrive in time. In January 1977 the

GCBS and SITPRO introduced the common short form sea waybill. It provides a receipt

for goods by the carrier and is evidence of the contract of carriage as described .It has

the protection vis-à-vis its construction in English Law with underwriters and it also

possesses the incorporation clause regarding conditions of carriage similarly to the

short form of bill of lading. Care should however be exercised to ensure that the country

of destination does not prevent the use of waybills. In a similar way to bills of lading, sea

waybills can be converted into a ‘shipped’ or ‘loaded on board’ document by the carrier,

and then can be transmitted through a bank for collection, but if a UK bank is required to

advance finance on the strength of the document, a shipped bill of lading is normally

required. Both the common short form of bill of lading and the sea waybill contribute to

economies in that carriers do not insist on their own forms and therefore the forms can

be used for various lines and trades and also much time can be saved in preparing

documents. This time factor is important in avoiding delayed documentation and should

benefit commerce by being both quicker and cheaper.

B. Commercial invoice.

There is no document in the process of clearance that can be said the most important

document. But the commercial invoice is one of the most important documents for the

process of clearance. It is an international trade document which has to be prepared as

accurately as possible. The document helps the custom broker in getting the entry

prepared by him accepted by the customs. If there is any small or minor problem in the

invoice then the customs reject the customs entry. There are instances when the goods

are just shipped for the sampling. But even for the sample shipment the commercial

invoice has to be prepared with properly mentioning that the goods are just for the

sample and no re-sale of it can be done. The agreement between the buyer and the

seller has many terms and conditions. All the terms and nature of the agreement

between the buyer and the seller should be properly reflected in the commercial invoice.



As we have discussed regarding the duties applicable on the basis of the advalorem

basis and on the weigh basis. Duties on most of the vessels are calculated on the

advalorem basis. Ad- valorem means the total value of the goods. The commercial

invoice would be totaled to find out the value of the goods. In certain cases there is

manipulations done by the importer in the value of the goods so as to reduce the

amount of the duty to be paid. The value of the goods is mentioned upon the arrival of

the vessel. It is usually counted on CIF i.e. Cost Insurance and Freight. The commercial

invoice is prepared when the goods are being shipped. the seller prepares the

commercial invoice as per the trade term and totals it. The invoice is then sent to the

buyer through some banks or the seller directly sends the invoice to the buyer.

There is no standard form of preparing a commercial invoice. But there are certain

information that has compulsorily to be included in the invoice. The information is as

follows: -

· The name of the seller and the address

· The name of the buyer and the address

· Exact description of the goods

· The price agreed upon in U.S dollars

· The package description

· Container type

· Point of delivery

· The payment terms

· Place and date of shipment

· Method of shipment



· The shipper/sellers signature

The commercial invoice has its own importance for different parties. All the parties

involved in the import and the export of the vessel and the goods have their own reason

of demanding the commercial invoice. The exporter needs the commercial invoice to

keep it as a record for the shipment and how the payment needs to be made to him. On

the other hand the importer needs the commercial invoice for the process of clearance

of the cargo at the port of destination. Also with the help of the invoice they know about

the payment mechanism. The invoice has its importance for the freight forwarder as

well. They use it for the preparation of the documentation as the part of their services.

The customs entry is prepared by the custom broker using this invoice. There are

sometimes questions on the integrity of the shipment. So for checking the integrity of

the shipment the U.S customs needs the commercial invoice. The foreign customs may

also require the invoice for being able to calculate the duty and to clear the cargo.

Sometimes the invoice is not directly sent to the buyer.

Some banks are involved in the process. So the seller’s bank uses the document for

their reviews. And also the buyer’s bank uses the same invoice for their records. In case

of CIF the insurance company also needs a copy of the invoice so as to know the exact

value of the goods that needs to be insured. There are other documents similar to the

commercial invoice with a minor change in the format and also some changes in the

duties payable. Taking an example of the excise invoice and comparing it to the

commercial invoice we know the major difference between the two. In case of

commercial invoice we just need to pay the VAT (value added tax) tax. This VAT tax to

be paid is mentioned on the commercial invoice. On the other hand the excise invoice

states that there is another tax to be paid named the cenvat tax. The VAT tax is also to

be paid in the case of excise invoice. The entire details of the tax to be paid are given in

the excise invoice unlike the commercial invoice. If I am purchasing some goods from a

trader and the quantity of those goods is 10 in number and the same trader has

purchased in all 100 goods then the excise invoice that I receive will show all the details

of the total 100 goods and also the amount of excise duty that the trader has paid. So

the duty that will be charged from me will be that on 10 goods but will be calculated on



the basis of the duty that the trader has paid for the 100 goods that he had purchased.

And this detail of the trader is not shown in the commercial invoice that we are given.

This is the major difference between the commercial invoice and the excise invoice. And

the commercial invoice should have the statement that mentions that the invoice

received is hindered percent true and should have a signature of the parties related to

the invoice. The commercial invoice is useful for the calculation of the tariffs. The

valuation of the goods can only be done on the basis of the commercial invoice.

C. Packing list

This is another document that is to be attached with the bill of entry. The goods that are

imported do not necessarily be in the form of bulk cargo. The goods can be in the

containers as well. So when the goods are sent in the containers they need to be

packed properly. And when these are packed the details regarding their packing should

be properly mentioned. The number of packs the methods used for packing and the

other details are mentioned in the packing list. It is very important for the custom officer

to know about the contents that the packs are carrying. The examination of the goods is

done and the goods are only discharged if the officer find it to be safe enough and if it

not violating the customs law. So the content of each of the packs are mentioned in the

packing list. Also the weights of the packets are mentioned in the packing list to ensure

that the weights mentioned in the weighment slip are accurate. In case the officer does

not find the content on the packing list accurate he has the complete authority to check

the goods by re-opening them. For the imports of the goods you need to have an HS

number. HS number means the harmonized number. It is very important for the packing

list to contain the HS number because it is on this HS number that the product is

identified and the duty levied is decide. If the appraising officer does not find the packing

list appropriate he has the right to identify and inspect any of the packs.

D. Pro forma invoice

The pro forma invoice is a document that is just a formality that needs to be fulfilled by

CHA. This invoice shows that the importer is the person who should receive the goods.



Sometimes some of the countries do not produce the commercial invoice and instead of

that they produce the pro forma invoice which acts as the commercial invoice. Banks

usually prefer a pro forma invoice to a quotation for establishment of a letter of credit or

for advance payment by the importer through his bank. In some of the countries the

customs accept the pro forma invoice if the commercial invoice is not prepared. The pro

forma invoice is prepared not by the exporter but by the importer. It is prepared by the

importer incase the commercial invoice is not received by him. The importer can take

the out of charge order form the commissioner once the pro forma has been shown to

them and if they are fully satisfied by the invoice. There are certain contries that accept

the pro forma invoice instead of the commercial invoice. U.S customs for example

accept the pro-forma invoice to calculate the duty that is to be levied on the goods that

are imported. But the customs accepts the pro forma only on the condition that the

importer will have to show them the commercial invoice within 120 days from which the

pro forma has been produced. There has to be a bond between the importer and the

U.S customs regarding the same. The records have to be made in the customs

department. So in case the commercial invoice is required by the customs for some

statistical records then the importer will have to produce the commercial invoice within

the 50 days instead of 120 days.

H. Certificate of origin

The document that certifies that the products that are sent to the other country are

actually originated or are produced in the same country from which they are exported is

known as the certificate of origin. This document is majorly used for the export purpose.

The certificate of origin certifies that the goods are wholly obtained the country from

where the export has been done from. For example if the goods are exported from India

the certificate should mention that the goods in the vessel are produced in India or are

obtained wholly from India. The certificate of origin is very important from the Indian

point of view. India is a registered member of the world trade organization. And also

India has its trade pacts with many other countries. And we have discussed earlier

about the concessional benefits that the importing party receives if the goods are

imported from the developing country. India is a developing country and the goods



exported from the Indian country would attract concessional duty payments in the

importing country. So the certificate of origin when prepared by the exporters of India

should mention that the goods are prepared, produced or are obtained wholly from

India. The same is the case with the imports. If the customs in Indian sub continent

allows some concessional duty payments on the imports from certain countries then the

certificate of origin from the exporting country should certify that the goods are produced

there. There are many schemes offered by the government for the import of goods. The

various schemes are like generalized system of preferences, common wealth

preference, and global system of trade preference. Under these schemes the importer

gets some benefits on the duty payable. But for availing the benefit of the duty the

importer should produce the certificate of origin before the custom officials that is

prepared by the officials of the exporting country. And if the custom people are satisfied

by the certificate then the importer would get the preferential tariff benefit.

Generally there are two different categories of certificate of origin. They are classified as

the preferential certificate of origin and non-preferential certificate of origin. In most the

countries they demand the non-preferential certificate of origin.

Any chamber of commerce cannot prepare the certificate of origin. The certificate of

origin is an important document which involves the country into the trade. So it can only

be prepared by the directorate general of foreign trade. It can also be produced by the

union ministry of commerce and industry. The DGFT has authorized certain agencies

who can issue the certificate of origin to the exporter. So the certificate of origin is an

important document to be attached with the bill of entry. it is an important document

from the perspective of the importer. For the exporter the document does not hold much

importance. And for the custom officials the document helps in the calculations of the

duty that is to be levied on the goods imported.

PRESENTATION OF BILL OF ENTRY AND NOTING THEREOF

The Bill of Entry after completing all the relevant columns and with proper declarations

signed by the importer (and or his Clearing Agent if any) is presented in the import



noting department. After its proper scrutiny, vis-à-vis, the import manifest and also with

respect to the various particulars declared on the bill of entry and the attached

documents (which normally covers invoice and the bill of lading at that stage), if no

descriptions are noticed, the bill of entry is deemed to have been presented and the

date of presentation is satisfied and bill of entry noted against the relevant entry in the

manifest. This date of presentation becomes crucial for determining the rate of duty (if

the vessel has already entered) as well as rate of exchange. After a bill of entry is

‘noted’ in the Import Department, the same is routed through the Appraising Main

Section to the Appraising group concerned for dealing with ‘love’ documents for

scrutinizing the bill of entry and noting the rate of duty. The Bill of Entry is scrutinized to

ensure that:

· All the columns have been duly filled in by the importer.

· The Bill of Entry is accompanied by relevant documents.

CHATER 6 - DETAILS REGARDING EXPORT

EXPORT PROCEDURE

STAGES IN EXPORT PROCEDURE

I. PRELIMINARY STAGE:

1. Organizing: The exporter should have an organization to look after

export. Exporters may set up a complete new organization or add an export



section to an existing one. At this stage the exporter may take a decision to

select the right product to sell abroad.

2. Registering with various Authorities: The exporter should register his

organization with various authorities:

a. Income Tax Authorities- to obtain Permanent Account Number (PAN).

b. Jt. DGFT- to obtain Importer’s Exporter’s Code Number (IECNO).

c. EPC- to obtain Registration-Cum-Membership-Certificate (RCMC).

d. Other authorities, such as FIEO, Sales Tax authorities, Chamber of

Commerce, etc.

3. Appointing Agent/ Distributors: It is advisable to appoint agents or

distributors in the selected overseas markets. The exporter may also open

branches or sale divisions or depute permanent representative abroad.

4. Approaching Foreign Buyers: The overseas agents/ representatives

approach foreign buyers with a quotation. The foreign buyer, if satisfied with the

quotation and after clarifications, if any, will place an order with the exporter.

II. PRE – SHIPMENT STAGE:

5. Confirmation of Order: When the buyer is satisfied with the terms and

conditions of the seller, he will place either a formal or confirmed order along with

a signed copy of the contract. The exporter should acknowledge confirm the

receipt of such order.

6. Obtaining Letter Credit: Along with the acknowledgement letter

confirming the receipt of export order, the exporter may send a formal request to

issue a letter of credit in his favour.

7. Obtaining Pre-Shipment Finance: As soon as the exporter receives the

confirmed order and the letter of credit, he should approach his bank to secure

pre-shipment finance to meet working capital requirements.

8. Production and Procurement of Goods: As soon as the export order is

finalized and pre-shipment credit is obtained, preparations are made for the

production and procurement of goods to be exported.



9. Packing and marketing: The goods must be packed properly and

attractively depending upon the type of product, transit coverage etc. If required,

necessary assistance can be obtained from IIP(INDIAN INSTITUE OF

PACKAGING). The exporter should prepare a packing list. The goods must be

appropriately marked with country of origin, net and gross weight port of

entry/destination, port of shipment and other details, if any.

10. Pre-shipment Inspection: The exporter apply to EIA, if the exporter

cargo is subject to quality control and pre-shipment inspection. The EIA issues

an Inspection Certificate, if satisfied with quality and if not, Rejection Note. (At

present, exporters who have obtained ISO 9000 certification or equivalent

do not have to get their goods inspected by EIA).

11. Central Excise Clearance: Export goods are exempted from central

excise. However, clearance has to be obtained from excise authorities. There are

two ways of excise (a) Export under rebate (b) Export under bond.

12. ECGC Cover: The exporter should obtain ECGC cover to protect against

credit risk. The exporter may obtain either standard policy or specific policy,

depending upon, the type of product/service and period of credit extended to

overseas buyer.

13. Marine Insurance Policy: As soon as the goods are ready for export, the

exporter has to apply to insurance company for insurance cover- if it is a CIF

quotation or if the exporter wants the exporter to obtain cover on his behalf.

14. Appointment of C & F Agent: It is always advisable to appoint C & F

agent to look forwarding work which includes booking of shipping space,

preparing and submitting various documents to customs.

15. Instruction to C & F agent: The exporter should issue detailed

instruction to the C & F agent for the shipment of cargo. The instruction should

be accompanied by certain documents such as :

A) Commercial Invoice

B) GR form (original and dupicate)

C) AR4 form

D) Packing list



E) Original L/C

F) Other export documents

III. SHIPMENT STAGE

16. Processing of shipping documents in the custom house: On

receiving of documents form the exporter, the C & F agent prepares shipping bill

in 5 copies and then present the shipping bill and other documents to Customs

Appraiser at the Custom house. If everything is in order he endorses duplicate

copy of shipping bill. All documents, except the original copy of GR form, original

copy of shipping bill and one copy of commercial invoice, are returned to C & F

agent after verification.

17. Physical examination of goods at the port: The C & F agent obtains

the carting order form the port trust to cart the goods inside the docks. He then

approaches the custom examiner, who may physically inspect the goods. The

custom examiner then gives LET EXPORT ORDER.

18. Loading of goods: the duplicate copy of shipping bill which is endorsed

by the custom examiner is handed over to the custom preventive officer, who

endorses it with LET SHIP ORDER. The goods are then loaded on the board the

ship, for which Mate receipt is handed over to the shipping company, to obtain

Bill of Lading.

IV. POST – SHIPMENT STAGE

19. Dispatch of documents by C & F agent to the Exporter: The C & F

agent then proceeds to submit the necessary documents to the exporter for

further action. These documents include:

a) Commercial invoice, attested by customs

b) Shipping bill

c) Original L/C

d) Bill of lading

e) GR form

f) Form AR-4

g) Railway freight rebate form



20. Shipment advice to importer: The exporter then issues shipment advice

to the importer, indicating the date of shipment, the name of vessel and so on. A

few documents are also enclosed (a) A nonnegotiable copy of B/L (b ) packing

list (c ) commercial invoice.

21. Presentation of documents to the bank: All the required documents are

handed over to the bank by the exporter for processing. The bank then sends a

set of documents to the importer, which normally includes – commercial invoice,

certificate of origin, bill of lading and insurance policy. The bank then sends a

copy of bank certificate and attested copies of commercial invoice to the

exporter.

22. Realization of export proceeds: After the receipt of bank certificate and

commercial invoice, the exporter collects the export proceeds from the importer

through his bank. Generally export proceeds, in India must be realized within 180

days from the date of shipment, otherwise, special permission must be obtained

from RBI.

23. Follow – up of export sales: A good exporter should always have

follow-up after sales i.e. he should provide necessary after sales service, find out

buyer’s opinion towards the product and so on.

ROLE OF CUSTOM HOUSE AGENTS REGARDING EXPORTS

The CHA provides a number of services. The services of the CHA includes the following

1. Obtaining Shipping Order: The CHA may obtain shipping order from the

shipping company. The shipping order enables booking the space on the vessel.

At times, the importer does the booking space on the ship.

2. Arrangement for Internal Transport: The CHA agent would make

necessary arrangement of internal transport. Such transport is required to

transport the goods from the exporter’s factory or warehouse to the docks/airport.



3. Preparation of shipping bill: The CHA prepares the shipping bill in five

copies. The shipping bill is an important document required for the customs

clearance. The shipping bill is prepared on the basis of other documents

provided by the exporter such as commercial invoice, packing list, etc.

4. Submission of documents to customs: The CHA submit the relevant

documents to the customs house for the purpose of verification. The documents

include required number of copies of:

i. Commercial invoice

ii. Packing list

iii. Shipping bill

iv. ARE-1 form

v. GR form

5. Obtaining Carting order: The CHA has to obtain the carting order form

the port trust authorities. Carting order is required to get the goods inside the

docks for the purpose of examination and shipment.

6. Storing of goods: After obtaining the carting order, the CHA would then

make arrangement to store the goods in the sheds at the docks. Such storing is

required for the purpose of examination of goods.

7. Obtaining Let Export order: The CHA gets the goods examined by the

custom Examiner. If the customs examiner is satisfied, then he will issue the Let

export order.

8. Obtaining Let Ship Order: The agent shows the let export order to the

custom preventive officer before loading the goods on the ship. The custom

preventive officer may check the Let Export Order and goods. If satisfied he will

issue let ship order.

9. Loading of goods: The agent then makes arrangement to load the goods

on the ship. The agent has to see it that the goods are loaded in good condition

in the ship.

10. Payment of port dues: The agent would then make payment of port

dues for making the use of docks. After that he will collect the mate receipt from

the port authorities.



11. Obtaining Bill of Lading: The agent then goes to the shipping company

and exchanges the mate receipt to the bill of lading. The bill of lading is the

important document required by the importer for the customs clearance at the

port of destination.

Export Promotion Schemes

1. Duty Drawback Scheme:

Under Duty Drawback Scheme relief of Customs and Central Excise Duties suffered on

the inputs used in the manufacture of export product is allowed to Exporters. The

admissible duty drawback amount is paid to exporters by depositing it into their

nominated bank account. Section 75 of the Customs Act, 1962 and Section 37 of the

Central Excise Act, 1944, empower the Central Government to grant such duty

drawback. Customs and Central Excise Duties Drawback Rules, 1995 have been

framed outlining the procedure to be followed for the purpose of grant of duty drawback

(for both kinds of duties suffered) by the Customs Authorities processing export

documentation.

Under Duty Drawback Scheme, an exporter can opt for either All Industry Rate (AIR) of

Duty Drawback Scheme or brand rate of Duty Drawback Scheme. Major portion of Duty

Drawback is paid through AIR Duty Drawback Scheme which essentially attempts to

compensate exporters of various export commodity for average incidence of customs

and Central Excise duties suffered on the inputs used in their manufacture. Brand rate



of duty drawback is granted in terms of rules 6 & 7 of Customs and Central Excise

Duties Drawback Rules, 1995 in cases where the export product does not have any AIR

or duty drawback rate, or where the AIR duty drawback rate notified is considered by

the exporter insufficient to compensate for the Customs/Central Excise duties suffered

on inputs used in the manufacture of export products. For goods having an AIR the

brand rate facility to particular exporters is available only if it is established that the

compensation by AIR is less than 80% of the actual duties suffered in the manufacture

of the export goods.

Duty Drawback facilities on re-export of duty paid goods is also available in terms of

Section 74 of Customs Act, 1962. Under this Scheme part of the customs duty paid at

the time of import is remitted on re-export of the goods subject to identification and

prescribed procedure being followed.

A. Scheme for All Industry Rate(AIR) of Duty Drawback:

2. AIR of Duty Drawback for a large number of export products are notified every

year by the Government after an assessment of average incidence of Customs and

Central Excise duties suffered on Inputs utilized in the manufacture of export products.

This facility is generally availed by the exporters as no proof of actual duties suffered on

inputs used is required to be produced.

After announcement of Union Budget every year, new AIR of drawback are notified

every year usually with effect from 1st June, after factoring in the changes in duty rates

effected by the budget. The Directorate of Drawback requests all Export Promotion

Councils/Associations, etc. to collect, collate and furnish representative data in respect

of the existing export products as also for any new product which the Councils feel have

sufficient export from the country. After the announcement of the Budget various Export

Promotion Council/Associations are also consulted by the Joint Secretary (Drawback),

and their suggestions as well as their requests and justification for suitable

enhancement of rates and also any changes sought in the scheme of the Drawback

Table or the entries therein are taken note of while finalizing and announcing new AIRs.



The AIRs are generally fixed as a percentage of FOB price of export product. Often very

good export prices are obtained for a product or class of products which have no co-

relation with the actual duties suffered on inputs used – which is sought to be refunded

to Exporters as drawback. In order to safeguard Government revenue but also be fair to

exporters, reasonable duty drawback caps have been imposed in respect of many

export products having rates on FOB basis. These caps essentially reflect the average

duty incidence suffered on the inputs used in the manufacture of the particular goods

exported by several exporters with different prices and they are fixed on the basis of

data supplied by the export promotion councils and collected by Directorate from other

sources.

The duty drawback claim scrutiny, sanction and payment in 23 Custom Houses is now

done through the Electronic Data Interchange (EDI) System. This system facilitates

credit/disbursal of drawback within 72 hours from the date of shipment and electronic

filing of Export General Manifest (EGM) in respect of related aircraft/vessel, directly to

the exporter’s, accounts in the specified bank branches

Customs notification Nos. 29/2001(NT) dated 1.6.2001 and 30/2001(NT) dated

22.6.2001 refer for ascertaining the details of current All Industry Rates of drawback for

various export products.

B. Brand Rate of Duty Drawback Scheme:

3. In respect of export products where AIR of duty drawback is not notified or where the

AIR of duty drawback in considered by the exporter to be insufficient to fully neutralize

incidence of duties suffered on the inputs utilized in the production/manufacture of the

export product, the exporters opt for Brand Rate Duty Drawback Scheme. Under this

Scheme, the exporters are compensated by paying the amount of Customs & Central

Excise Duty incidence which is actually incurred on the inputs used in the manufacture

of export products. For this purpose, the exporter has to produce documents/proof

about the actual quantity of inputs utilized in the manufacture of export product along

with evidence of payment of duties thereon



The exporter has to make an application to the Directorate of Drawback in prescribed

format along with enclosures (in the form of 3 drawback statements called DBK-I, II &

III), within 60 days from the date of export of goods. The application has to be submitted

to Directorate of Drawback with copies to the concerned Central Excise Commission

rate which has jurisdiction over the factory of production of export product. The Central

Excise Authorities conduct verification of the authenticity/fact of utilization of

inputs/payments of duties on the inputs on the basis of records maintained by the

factory of the exporter, current production of identical goods, if being effected, etc. A

verification report has to be sent to the Directorate of Drawback. The Directorate of

Drawback, on the basis of verification report and other relevant documents submitted by

the exporter, process and issue drawback Brand Rate Letter to the exporter on the

basis of which the concerned Custom House (from where the goods were exported)

makes payment of duty drawback. The Brand Rate Letter may be valid for particular

export shipment or series of shipment and may also be extended for future shipments

for one or more ports on request subject to proof of availability of related raw materials

and duty evidence, etc., when verification was carried out.

C. Simplified Scheme of Brand Rate:

4. Under Brand Rate of Duty Drawback Scheme, a "Simplified Scheme" is also

available to limited companies and registered partnership firms. Under this Scheme, a

rate letter for duty drawback is issued prior to receipt of verification report from the

jurisdictional Central Excise Authorities on the basis of application made by the exporter

subject to certain certification etc. For this purpose, besides application in the

prescribed format along with enclosures, the exporter is also required to submit

Chartered Accountant/Chartered Engineer’s certificate about the authenticity of

consumption pattern and duty payments as claimed. An indemnity bond undertaking to

pay back the duty drawback being claimed by him if it is found later on verification that

the drawback amount paid to him is in excess of the admissible amount, has also to be

furnished. In all cases where duty drawback is paid under Simplified Scheme, after

receipt of the verification report from jurisdictional Central Excise Authority, the veracity



of the application is counter checked with the said verification report and recovery action

taken, where ever found necessary.

D. Section 74- Drawback:

5. In case of goods which were earlier imported on payment of duty and are later sought

to be re-exported within a specified period, customs duty paid at the time of import of

the goods with certain cut can be claimed as duty drawback by the exporter at the time

of export of such goods. Such duty drawback is granted in terms of Section 74 of the

Customs Act, 1962 read with Re-export of Imported Goods (Drawback of Customs

Duty) Rules, 1995. For this purpose, at the time of import, the identity particulars of the

goods are recorded at the time of examination of import goods; at the time of export,

cross verification of the goods under export is done with the help of related import

documents to ascertain whether the goods under export are the very ones which were

imported earlier.

Where the goods are not put into use after import, 98% of duty drawback is admissible

at the maximum under Section 74 of the Customs Act, 1962. In cases where the goods

are put into use in India after import (and prior to its export), duty drawback is granted

on a sliding scale basis depending upon the extent of use of the goods. No duty

drawback is available if the goods are put into use for a period exceeding 36 months

after import. Application for duty drawback is required to be made within 3 months from

the date of export of goods.

E. Limitations on Drawback Admissibility:

6. The Customs Act lays down certain limitations and conditions which exporters

claiming drawback have to meet/fulfill. Thus, no drawback is admissible under Section

75 if the market price is less than the amount of drawback claimed. Drawback is also

not admitted if the claim is less than Rs.50/- in individual shipments. Government has

also powers to deny or admit drawback claim subject to laid down conditions where

there is likelihood of goods exported being smuggled back. These powers have been

used for exports to Nepal where normal provisions of duty drawback are not applied.



The Drawback Rules also further lay down in Rule 8 some further limitations, where rate

is less than 1%, and this may be referred to. Government has also powers to deny

drawback facility in such cases where export of goods if less than the value of imported

material used in their manufacture. If necessary, certain minimum value addition over

the value of imported materials can also be prescribed before granting drawback.

It is also pertinent to note that the drawback is permitted to encourage exports and

essentially there must be export proceeds repatriation. Though prior repatriation of

export realization is not pre-requisite, the law prescribes that if sale proceeds are not

received within the stipulated period, the drawback paid will be recoverable by the

Government as per procedure laid down in drawback.

F. Procedure for Claiming Drawback:

7. The drawback on export goods – whether under AIR or Brand Rate is to be claimed

at the time of export and requisite particulars have to be filled in the prescribed format of

shipping bill/bill of export under Drawback. Triplicate copy of the Shipping Bill is treated

as claim for Drawback. The claim is also to be accompanied by certain documents as

laid down in the Duty Drawback Rules. If the requisite documents are not furnished or

there is any deficiency, the claim may be returned after shipment for complying with the

requirements and furnishing requisite information/documents (e.g. Brand Rate letter

which may not be available at the time of export but becomes available after shipment).

(Reference: Customs notification No.19 dated 6.2.1965)

2. Duty Exemption Scheme:

8. Duty Exemption Scheme is an export promotion scheme and it enables import of

inputs required for export production free of Customs duty. Advance Licences are

issued under Duty Exemption Scheme to allow import of inputs, which are physically

incorporated in the export product (after making normal allowance for wastage). In

addition, fuel, oil, energy catalysts, etc., which are consumed in the course of their use

to obtain the export product can also be allowed under the scheme. Value and quantity



of each item permitted duty free import are specified in the Advance License. Standard

input-output norms (SIONs) notified by the DGFT under Para 7.8 of the Handbook of

Procedures (Vol.I) or as modified under Para 7.10 of the said Handbook facilitate

determination of the proportion of various inputs which can be used or are required in

the manufacture of different resultant products.

Advance Licences are issued for Physical exports, Intermediate supplies and Deemed

exports. Advance Licences are also issued on the basis of annual requirement for

exports/supplies. This enables the exporter to plan out his manufacturing/export

programme on long term basis. Advance Licences for deemed exports are issued to (i)

manufacturer exporter or main contractor in case of deemed exports, and (ii) Merchant

exporter having supporting manufacturer.

All Advance Licenses and/or materials, imported there under are not transferable even

after completion of export obligation. Advance Licenses are issued with a positive value

addition stipulation. However, for exports for which payments are not received in freely

convertible currency, the same are subject to higher value addition.

In order to ensure proper monitoring and utilization of inputs imported against Advance

Licenses (except Advance License for deemed exports), a Duty Entitlement Exemption

Certificate (DEEC) Book is issued along with the Advance License by DGFT authorities.

At the time of import and export against Advance License, entries are made in the

DEEC Book by Customs to keep record of the import/export made against it. After

completion of export obligation and imports against the Advance License, the DEEC

book, Advance License and relevant export/import documents are submitted to

Customs for logging (reconciling) of DEEC Book. Thereafter the Advance License,

DEEC book and export/import documents are submitted to DGFT authorities for issue of

export obligation (EO) discharge certificate. On the basis of EO discharge certificate

issued by DGFT, redemption of bond/B.G. filed by the Advance License holder with

Customs is allowed.



Advance License are issued on pre-export or post export basis in accordance with the

Export/Import Policy and procedure in force on the date of issue of license and are

subject to the fulfillment of a time bound export obligation as in the license. The

Advance License holder fulfils export obligation (EO) by exporting the resultant product

specified in the Advance License upto specified quantity/value. In order to ensure

fulfillment of such export obligation, the Advance License holder executes a bond with

or without Bank Guarantee (B.G) with Customs undertaking to fulfill the specified export

obligation. In the event of failure to fulfill the specified EO. The license holder becomes

liable to pay differential Customs duty with interest @ 24% per annum on such duty.

Exemption from furnishing of bank guarantee is given in the following categories of

cases:-

(i) where the license holder is a manufacturer exporter having export turnover of

Rs.1 crore or above during preceding financial year and he has a clean track

record; and

(ii

)

Where the license holder is certified as a super star trading house, star trading

house, etc. by DGFT.

In such cases a bond is considered sufficient. In all other cases the Advance

License holder is required to furnish 100% bank guarantee for the duty difference.

Advance License holder for intermediate supply is required to fulfill his export obligation

by supplying the intermediate goods, which are required in the manufacture of resultant

export product to the advance license holder. In order to ensure such fulfillment of EO

the license holder is required to give bond with or without bank guarantee and in the

event of failure to fulfill the EO he becomes liable to pay differential Customs duty with

interest @ 24% per annum on such duty.

Advance License holder for deemed export is permitted import of materials which are

required in the manufacture of resultant product free of Customs duty. The license

holder is required to fulfill his EO by supplying the resultant product to the project,



specified in the said license, in India and in the event of failure to do so, he is required

to pay differential Customs duty with interest @ 24% per annum on such duty.

All Advance Licenses are normally valid for import of goods upto 18 months from the

date of issue and the relevant DGFT authority (who issues the license) is competent to

grant revalidation. DGFT authority (who issues the license) is also competent to grant

extension of EO period beyond the normal EO period of 18 months. No duty drawback

is normally admissible to an Advance License holder. However the license holder is

entitled to claim brand rate of duty drawback in respect of inputs which are not imported

against the advance license and on which Customs/excise duty has been paid.

Since Advance License Scheme involves technicalities, its operation has been

restricted to limited ports, airports, ICDs, etc. which are notified for the purpose.

Commissioners of Customs have, however, been empowered to permit export/import

under the Scheme from any other place which has not been notified, on case to case

basis by making suitable arrangements at such other places.

(Reference: Customs notification No.48/99-Customs, dated 29.4.99 and 50/2000-Cus.,

and 51/2000-Customs, both dated 27.4.2000 )

3. Duty Remission Scheme:

Duty Remission Scheme consists of ;

(a) Duty Free Replenishment Certificate and

(b) Duty Entitlement Passbook Scheme.

A. Duty Free Replenishment Certificate (DFRC) Scheme:

9. DFRC Scheme was announced on 1.4.2000 under the EXIM Policy 1997-2002. It

is an export promotion scheme under which DFRC licenses are issued permitting duty



free import of inputs which were used in the manufacture of export product on post

export basis as replenishment.

Duty Free Replenishment Certificate (DFRC) License is issued to a merchant-exporter

or manufacturer-exporter. DFRC licenses are issued only in respect of export products

covered under the Standard Input Output Norms (SION) as notified by DGFT. DFRC

Licenses are issued for import of inputs, as per SION, having same quality, technical

characteristics and specifications as those used in the export product and as indicated

in the shipping bills. The validity of such licenses is normally 18 months and relevant

DGFT authority (who issues the license) is competent to grant extension of validity

period. DFRC license and or the material(s) imported against it are freely transferable.

Exporters operating under DFRC Scheme are entitled for availing AIR of duty drawback

in respect of that duty paid materials, whether imported or indigenous, used in the

export product, which are not specified in the DFRC license. Brand rate of duty

drawback can also be availed in respect of such inputs.

Since DFRC Scheme involves technicalities like Advance Licence Scheme, its

operation has been restricted to limited ports, airports, ICDs, etc. which are notified for

the purpose. Commissioners of Customs have, however, been empowered to permit

export/import under the Scheme from any other place which has not been notified, on

case to case basis by making suitable arrangements at such other places.

(Reference: Customs notification No.48/2000-cus., dated 25.4.2000)

4. Duty Entitlement Pass Book (DEPB) Scheme:

10. DEPB Scheme was first announced on 1.4.1997 under EXIM Policy 1997-2002. It

is an export promotion scheme and envisages grant of DEPB Credit Entitlement to an

exporter at the time of export at an ad-valorem rate notified by DGFT, in relation to FOB

value of the export product. The DGFT have so far notified DEPB rates for nearly 2000

export products. These rates are based on the computation of Basic Customs Duty

suffered by the exporters on the inputs listed in the Standard Input-Output Norms



(SION) applicable to the export product. The crucial feature of the DEPB Scheme is that

all the inputs listed in the Standard Input-Output Norms are deemed to have been

imported and to have suffered Customs duties. DEPB rates are finalized by the DEPB

Committee, chaired by Additional DGFT and consist of representative from Ministry of

Finance also. Value caps have been imposed on export products having DEPB rates of

15% or more to curb the tendency of unscrupulous exporters to avail most of the

runaway benefits by over-invoicing export.

The normal validity period of a DEPB Scrip is 12 months and DGFT authority (who

issues the scrip) is empowered to grant revalidation. These scripts are for a certain

amount of DEPB credit and can be utilized for adjusting Customs Duties (Basic or CVD)

against import of any products into India, without the necessity of any co-relation

between the export product and the import goods, i.e. it is not necessary to import only

the relevant inputs corresponding to the export product.

Since DEPB Scheme also involves technicalities like DFRC Scheme, its operation has

also been restricted to limited ports, airports, ICDs, etc. which are notified for the

purpose. Commissioners of Customs have, however, been empowered to permit

import/export under the scheme from any other place which has not been notified, on

case to case basis. The DEPB and/or the items imported against it are freely

transferable. Import against DEPB scripts is allowed at the port specified in the DEPB

which is the port from where exports have been made. Imports from a port other than

the port of export are also allowed under TRA (Telegraphic Release Advice) facility as

per the terms and conditions of the notification issued by Department of Revenue.

No duty drawback is allowed on exports made under DEPB Scheme. However, in cases

where CVD is paid in cash on imported inputs, or where indigenous duty paid inputs,

not specified in SION, are used in the manufacture of export product, in such cases

brand rate of duty drawback is admissible as per circular issued by the Ministry of

Finance, provided CENVAT Credit in respect of such duty incidence is not availed.

(Reference: Customs notification No.34/97-cus., dated 7.4.97)



5. Export Promotion capital Goods (EPCG) Scheme:

11. Under EPCG Scheme import of capital goods which are required for the

manufacture of resultant export product specified in the EPCG License is permitted at

concessional rate of Customs duty. This Scheme also enables up-gradation of

technology of the indigenous industry. For this purpose EPCG Licenses are issued on

the basis of approval granted by EPCG Committee. The EPCG Committee comprises of

officers from DGFT, MOF and concerned Administrative Ministry. At present the EPCG

license holder is permitted to import capital goods at 5% or 10% Customs duty.

Whereas under 5% duty EPCG Scheme the license holder is required to undertake to

fulfill export obligation equivalent to 5 times the CIF value of imported capital goods

within a period of 8 years reckoned from the date of issue of license, under 10% duty

EPCG Scheme, the license holder has to fulfill export obligation equivalent to 4 times

the CIF value of imported capital goods in five years. EPCG licenses are issued to

manufacturer exporters and merchant exporter with or without supporting manufacturer,

and service providers. The license specifies the value/quantity of resultant export

product to be exported against it. In the case of manufacturer/merchant exporters, such

Export Obligation (EO) is required to be fulfilled by exporting resultant products

manufactured with the help of imported capital goods. In the case of service providers

the export obligation is required to be fulfilled by earning foreign exchange through

rendering service. In order to ensure fulfillment of specified export obligation as also to

secure interest of revenue, the license holder is required to file bond with or without

bank guarantee with the Customs Authority prior to commencement of import of capital

goods. Bank guarantee equal to 50% of the differential duty is required to be filed by the

license holder excepting the following cases;

(i) where the license holder is a manufacturer exporter having export turnover of

Rs.1 crore or above during preceding financial year and he has a clean track

record; and

(ii

)

Where the license holder is certified as a superstar trading house, star trading

house, etc. by DGFT.



In such cases, a mere bond is sufficient.

Capital goods imported under EPCG Scheme are subject to actual user condition and

the same cannot be transferred/sold till the fulfillment of export obligation specified in

the license. In order to ensure that the capital goods imported under EPCG Scheme are

utilized in the manufacture of resultant export product, after importation/clearance of

capital goods from Customs, the license holder is required to produce certificate from

the jurisdictional Central Excise Authority (CEA) or Chartered Engineer (CE) confirming

installation of such capital goods in the declared premises.

The normal validity period of EPCG license is 24 months and DGFT authority (who

issues the license) is empowered to grant further revalidation. In order to ensure proper

accountable of fulfillment of export obligation, the EPCG license holder is required to

indicate the EPCG license No/date on the body of the Shipping Bill. After fulfillment of

specified export obligation, the license holder submits relevant export documents along

with EPCG license to the DGFT authorities for the purpose of obtaining EO discharge

certificate. After obtaining EO discharge certificate from DGFT, the license holder

produces the same before Customs for the purpose of obtaining redemption of

bond/B.G. filed by him. In order to ensure that the license holder maintains a specified

level of export obligation throughout the EO period of 5/8 years, in addition to overall

EO, year wise/block wise EO are also specified. A gestation period of 1/2 years is

allowed for the purpose of installation of capital goods and commencement of

production.

In cases where the EPCG license holder is unable to maintain the specified level of year

wise/block wise EO or overall EO., extension of year wise/block wise EO period upto a

maximum of 1 year/block is allowed by DGFT Authority. Similarly in cases where the

license holder is not able to fulfill overall EO within specified period, extension of 1 year

is allowed. In case of default in EO the license holder has to pay differential Customs

duty along with 24% interest per annum on such duty.



Exporter of goods manufactured with the help of Capital Goods imported under the

EPCG Scheme is entitled to input duty incidence neutralization benefits like Drawback,

DFRC, Advance License, etc. in accordance with the terms of the individual scheme(s).

(Reference: Customs notification Nos.28/97-cus.,dated 1.4.97 (10% duty) and 49/2000-

cus. dated 27.4.2000 (5% duty))

CHAPTER 7- OTHER BUSINESS IN SHIPPING SECTOR

Shipping Management

Ship management is the business of manning, equipping, provisioning and maintaining

a ship. It broadly includes technical, commercial, and crew management of ships.

Maintenance, dry-docking and technical up-gradation of ship is the responsibility of

technical management. Commercial management involves decisions regarding vessel

deployment and sale and purchase while, crew management takes care of recruitment

and selection of technical, deck side officers and ratings people.



Classification and Survey

Ship survey concentrates on ship classification societies that register the ships under a

particular class and flag. The technical rules, regulations, standards, guidelines and

associated surveys and inspections covering the design, construction and through-life

compliance of a ship's structure and essential engineering and electrical system are the

main concerns of the classification societies. International Maritime Organization (IMO),

through their various conventions requires certification that the above mentioned

elements are satisfactory for the service for which the ship is intended. To attain the

highest structural and engineering standards in the merchant ships, classification

societies form the basis on which the statutory certification is issued. It also provides the

technical support, compliance verification and research and development. Periodic



surveys are carried out to ensure the continued compliance of rules after the

construction of the ship. These include various surveys of hull and machinery on a

continuing basis.

Ship Supplier

Operation of the vessel needs various consumables in the form of bunker, lubricants,

fresh water, stores and others. Ship chandeliers provide food and provisions to the ship

for the next journey in the sea. It also arranges for the services of the doctor, washer

man and others when the ship is at port. The shipping agent of the company or the ship

manager normally arranges for the ship chandelier to serve its client. Increasingly these

shipping agents and ship managers are entering into the field of supplies.

Ships have to have the adequate supply of fresh water on it, which they purchase on

the port they visit. Many of these fresh water suppliers own the barges to supply water

for the vessels like tankers, which does not come inside the port for berthing. The

vessels at the lighter age port also take services from the fresh water supplying barges.

The industry of ship suppliers is highly fragmented with a significant number of small

companies active in this sector. Various other specialized players like dredging

companies, shipping agents, ship managers, stevedores etc. are also entering into the

business of ship suppliers to leverage on their experience and good contacts within the

shipping industry. However, bunker and lubricant supply to the ship is dominated by the

large sized players like Castrol, Shell, Indian Oil Corporation and other public limited

companies. These companies supply bunker or lubricant to the ship owner either

directly or through their agents.

Logistics

Container lines 'Containerization', the term very familiar to present day shipping



industry was a completely unknown concept a few decades back. It was Malcolm

McLean, owner of a huge trucking company in USA, who first conceived the idea of

containerization by transporting containers through 'Ideal - X' in 1956 and initiated a

revolution in the history of shipping industry. Over the years, the industry has created a

separate identity within the shipping world through continuous development and Maersk

Lines, P&O Nedlloyd, Zim lines, Sealand Services (CSX), APL, Hapag Lines and others

have come up as international major serving customers all over the globe.

ICD/CFS

Container Freight Station (CFS) or Inland Container Depot (ICD) also referred to as dry

ports, provide various services for handling containers outside the port. The terms ICD

and CFS are used interchangeably as there is not much of difference in their

functioning. Generally, a dry port located in the hinterland is called ICD; while if located

in the port city, it is known as CFS. Dry ports are the hubs, which facilitate the

aggregation and transportation of export containers from hinterland to the gateway

ports. Similarly, they act as receiving hubs for the import containers meant for

hinterland. Other associated functions include cargo consolidation, stuffing and

destuffing, warehousing, custom clearance and duty collection, processing of custom

documents, cargo and container handling and others.

Integrated Logistics

The term logistics is defined as "the process of planning, implementing and controlling

of the efficient, cost effective flow and storage of raw material, in-process inventory and

finished products and related information from the point of origin to the point of

consumption as per customer demand". The entire process involves a large number of

activities to be done in accordance with user requirement and requires proper

integration of different activities, which would lead to the smooth flow of operations

across the value chain. Integrated logistics co-ordinates all the logistical activities taking

place in valuable chain to provide optimum benefit to the user. The concept of



integrated logistics service is new; traditional transport companies, courier companies

and freight forwarders have emerged as integrated logistics service provider by

leveraging on their existing infrastructure and experience. They not only provide the

prime functions like transportation, warehousing, packaging, clearing and forwarding but

also handle other activities like order processing, sales tax and excise duty

documentation, invoicing, collection of bills, inventory management, and others. With

the strategies taken up by traditional industrial firms to reduce operational costs and

enhance value addition throughout the value chain, importance of integrated logistics

has got a new dimension. Outsourcing of logistics service to specialized service

provider having considerable expertise over the industry becomes the trend.

Transportation

Transportation, an indispensable component of economic progress, is an essential and

major sub-function of logistics, creating time and place utility in goods. It serves as the

backbone of supply chain management. Though traditionally, transportation involves

physical movement of goods, however, in the new economy era, it is largely influenced

by information and communication technologies with the focus being on knowledge of

customer needs and value added services in order provide maximum benefits to user.

Warehousing

Traditionally, warehousing involves the storage of raw material, work-in-process

inventory or finished goods in a covered space in the most suitable way for a specific

time period. It also adds temporal and spatial significance to the value of the

commodity. With the growing importance of logistics and supply chain management

throughout the world, warehousing has emerged as one of the vital component of the

supply chain. Globally, the USD100 billion warehousing industry has undergone

significant changes in the last decade owing to the growth in world trade and expansion

of international markets as well as increasing application of new technology.

Internationally, warehousing industry is classified into three different types : Public

warehousing, Private warehousing and Contract warehousing. Of these, contract



warehousing, which has dedicated customers with long-term agreement, is the fastest

growing segment of the industry internationally and is expected to grow at a rate of 12-

15 percent over the next couple of years. Ports act as the interface for seaborne trade

movement. Most of the major ports of a country provide warehousing facilities to users

through its own warehouses and also by privately-owned warehouses located within or

outside the port arena. Increased liberalization of the economy has boosted private

sector participation in ports.

FRIEGHT FORWARDING

Freight forwarding is a service used by companies that deal in international or multi-

national import and export. While the freight forwarder doesn't actually move the freight

itself, it acts as an intermediary between the client and various transportation services.

Sending products from one international destination to another can involve a multitude

of carriers, requirements and legalities. A freight forwarding service handles the

considerable logistics of this task for the client, relieving what would otherwise be a

formidable burden.

Freight forwarding services guarantee that products will get to the proper destination by

an agreed upon date, and in good condition. The freight forwarding service utilizes

established relationships with carriers of all kinds, from air freighters and trucking

companies, to rail freighters and ocean liners. Freight forwarding services negotiate the

best possible price to move the product along the most economical route by working out

various bids and choosing the one that best balances speed, cost and reliability.

A freight forwarding service generally provides one or more estimates to the client along

with advisement, when necessary. Considerations that effect price will range from origin

and destination to special requirements, such as refrigeration or, for example, transport

of potentially hazardous materials. Assuming the client accepts the forwarder's bid, the

freight is readied for shipping. The freight forwarding service then undertakes the

responsibility of arranging the transport from point of origin to destination.


http://www.wisegeek.com/what-is-a-freight-forwarder.htm


One of the many advantages of using freight forwarding is that it handles ancillary

services that are a part of the international shipping business. Insurance and customs

documentation and clearance are some examples. As a consolidator, a freight

forwarding service might also provide Non-Vessel Operating Common Carrier (NVOCC)

documentation, or bills of lading. Warehousing, risk assessment and management, and

methods of international payment are also commonly provided to the client by the

freight forwarding service.

A good freight forwarding service can save the client untold time and potential

headaches while providing reliable transportation of products at competitive rates. A

freight forwarding service is an asset to almost any company dealing in international

transportation of goods, and is especially helpful when in-house resources are not

versed in international shipping procedures.

Freight Forwarding Services:

Sending products from one international destination to another can involve a multitude

of carriers, requirements and legalities. A freight forwarding service handles the

considerable logistics of this task for the client, relieving what would otherwise be a

formidable burden.

The major cause often involves negotiating the best rate for services. A

successful freight forwarder normally has strong contacts within the shipping industry

and is often privy to options not available to the general public.

International Freight Forwarders:

Additionally, they will submit the appropriate documentation, such as bills of lading,

commercial invoices or certificates of origin. Air freight forwarders will work closely

with international customs brokers to guarantee full compliance with all import and

export regulations.


http://www.wisegeek.com/what-is-warehousing.htm

http://www.wisegeek.com/what-is-a-common-carrier.htm


Freight forwarding is a service used by companies that deal in international or multi-

national import and export. While the freight forwarder doesn't actually move

the freight itself, it acts as an intermediary between the client and various transportation

services.

New Technologies and The shipping industry

Internet and Information Technology have revolutionized the maritime industry which

uses more and more software to better serve (rapidly and efficiently) its clients in

reducing time and administrative procedures.



Traditionally, a transportation chain involves a multitude of activities taking place at

different points and performed through the transfer of paper documents and manual

processes. The application of Internet and IT has changed the entire scenario by

integrating the different processes and bringing considerable efficiency across the

chain. Internet is fostering new ways in which business is done. The maritime industry

has been laggard in adopting Internet technology, especially in Developing countries.

However, adoption of Internet has become the choice of the industry to substantially

increase the efficiency level and reduce cost of operations. Business processes within

the maritime sector are increasingly become web-enabled to take advantage of the new

technology. As a result, the fragmented nature of the industry, the lack of transparency

and usual geographical dispersion of various parties involved in the trade and shipping

industries have been reduced. Information technology (IT) has increased the efficiency

and productivity of different economic activities and has taken the center-stage in

today's world. IT includes not only software’s required for ship operations and cargo



handling at ports but also other software products reducing substantially the volume of

paper transfer and increasing transparency of operations.

The software required for a ship operation can be divided into technical software and

commercial software. The technical software are power plant maintenance software,

loading software, navigational software, marine software etc, while, commercial

software includes cargo management software, port information software and others.

The loading software is mandatory for any vessel as per the International Maritime

Organization (IMO) and is generally required at the construction stage of the vessel.

The software requires the generic approval as well as specific approval with which the

ship is classified from the ship classification societies. Other software products include

Electronic Data Interchange (EDI), which eliminates duplication of manual data by

replacing it with electronic data entry, increases accuracy and eliminates processing

delays. Vessel Traffic Management Information System (VTMIS), monitors all the vessel

traffic with the goal of improving safety and security and optimizing overall port

operations. Use of Internet as a medium of information and communication reduces the

gap between the service provider and client resulting into lower demand for the

intermediaries and more assurance of profitability.

CHAPER 8 – ENCHANCING EFFIECIENCY FOR CHA

EDI SYSTEM

Over the time there have been many changes in the technologies used in the custom

stations for maintaining the records and for transferring the records. There has been a



revolution in the maritime industry with the coming up of the internet and IT. More and

more software are being introduced to reduce the time taken in the clearance procedure

and the work burden has been reduced to a great extent. Traditionally the work of the

customs was done manually. The documents and other important files were sent from

one table to the other or from one custom station to the other by means of different

transport. But with new technologies coming up the manual process is being vanished.

The internet application has integrated different process of clearance and has brought

efficiency in the entire chain of work. Also the industry chooses the internet application

to reduce the cost of the work. The manual work initially used involved many people and

the cost of employing those people was very high. So with the introduction of these

internet applications the work burden has been reduced and the cost has been cut. The

entire clearing sector has become web enabled. The industry used to be fragmented

and there was even lack of transparency in the clearing sector. But the use of internet

has removed all the geographical dispersion between the different parties involved in

the transaction like the exporters and the importers and also the CHA and the custom

officials. The productivity of the custom officers has also increased with the use of new

technologies. IT does not only include the software for easy paper transfers but also an

easy mechanism for the freight forwarding business.

There are different software introduced like the commercial software and the technical

software. The commercial software helps the management of the cargo that has been

imported into the country and the cargo that is to be exported from the country. Also

there has been port information software launched. There is software installed on the

ports for the vessel traffic management as well. The international maritime organization

has made a compulsion for the use of some software like the loading software. During

the construction of the vessel it is mandatory to have the loading software installed in

the ships. The main revolution in the clearing and

Forwarding industry was done by the launch of the EDI (electronic data interchange).

There are many business forms that are used in the process of clearing the cargo form

the customs. Initially those forms were exchanged using paper but with the coming up



of electronic data interchange the business forms will be exchanged electronically. The

simplicity of the process of the EDI has motivated many organizations of government to

put this into practice. The EDI and the electronic commerce is now viewed by most of

the people in the same way. The tedious procedure of transferring of the paper from

one place to the other has been removed. There are several other benefits of the

electronic data interchange but at the same time there are disadvantages of the same.

There are several documents required by the commissioners for the process of clearing

the cargo and these documents are required not only for the process but also for

maintaining the records. So the documents will be submitted once to the agency and

then these documents will be passed on to the other agencies electronically. If the

documents so are manually shifted form one table to the other the errors keeps on

creeping at each stage.

The entire system would look very good if the EDI is successfully introduced. All the

work would become automated. The importer would just once file the documents with

the custom agency and then it will be transferred automatically from one department to

the other. The same would be transferred to the port trusts and then to the sales tax

department. And with the use of EFT (electronic fund transfer) the custom duty for the

clearance of the goods would be paid by the importer directly to the customs without

him physically present before the officials. Also there are times when the custom

refunds have to be taken from the government. So the custom refunds would also be

directly transferred to the importers account using the electronic fund transfer. The

process of EDI is based entirely on trust and contractual obligations. Once the act

is passed, no bill of entry, packing list and the commercial invoice will have to be

presented in paper. Each of the documents will have to be kept with the

importer/exporter/CHA for a minimum period just for the verifications purpose. There

would not be any examination of the goods on regular basis. Only the goods that are of

hazardous nature would be examined. The Green channel system would be applied to

80% of the clearing procedure. But for this it is very important that the government at all

the ports understands the benefits of the same.



The EDI has already been installed in the major ports of the country like the Kandla

customs house, Chennai port, Mangalore port, Haldia, Goa, Vizag and Mumbai. If EDI

is not adopted properly by the custom board in all the departments and at all the custom

station we would be left behind in the nation’s economic prosperity as compared to the

global scenario. And if done properly we would be one of those using the paperless

transaction system.

DRAWBACKS OF EDI SYSTEM

There are some drawbacks of the EDI system. Unlike the manual system the EDI has a

specific working time. So if the CHA is late in applying or submitting the documents he

will have to wait for one more day to get the documents cleared. And in time of

congestion there is a heavy demurrage that has to be borne by the importer for the

delay. While in the case of manual system the documents could be submitted at any

hour of the day. Also for the successful working of the EDI the entire system needs to

be changed. People need to be deployed. Sincere efforts have to be put in by the

government to make the process of EDI a success.

CHAPTER 10- RESEARCH METHODOLGY

Research methodology:

“Research is a tool of science and that its purpose is to ‘advance human knowledge’ –

features which distinguish research from other investigatory activities. Research and

research methods might be studied for a variety of reasons. First, it is useful to be able



to understand and evaluate research reports and articles which one might come across

in an academic or professional context. It is therefore advantageous to understand the

basis of such reports and articles. Second, in an academic environment, research is

conducted for its own sake, in the interests of the pursuit of knowledge for example for a

thesis. Third, most readers who are managers will find themselves conducting or

commissioning research for professional reason.

Qualitative and Quantitative

“The quantitative approach to research involves statistical analysis. It relies on

numerical evidence to draw conclusions or to test hypotheses. To be sure of the

reliability of the results it is often necessary to study relatively large numbers of people

and to use computers to analyze the data. The data can be derived from questionnaire

surveys, from observation involving counts or from secondary sources. The qualitative

approach to research is generally not concerned with numbers. It involves gathering a

great deal of information about a small number of people rather than a limited amount of

information about a large number of people. The information collected is generally not

presentable in numerical form. It is used when a full and rounded understanding of the

leisure or tourist behaviour and situation of a few individuals, however ‘unrepresentative’

they may be, is required, rather than a limited understanding of a large, ‘representative’

group.”

Primary and Secondary Research

“Primary data collection is the collection of data which is done by using methods such

as interviews and questionnaires.

There are many methods of collecting primary data and the main methods include :

Questionnaires

Interviews



Focus group interviews

Observation

Case-Studies

Diaries

Critical incidents

Portfolios

Questionnaires

Questionnaires are a popular means of collecting data, but are difficult to design and

often require many rewrites before an acceptable questionnaire is produced.

Interviews

Interviewing is a technique that primarily used to gain an understanding of the

underlying reasons and motivations for people’s attitudes, preferences or behaviour.

Interviews can be undertaken on a personal one-to-one basis or in a group. They can

be conducted at work, at home, in the street or in a shopping centre, or some other

agreed location.

Secondary Data Collection

Secondary data are easy to obtain as compared to the primary data. And also the data

can be obtained at a far cheaper cost than that of primary data. Secondary data means



the information that has been already obtained by different people and can be gained

from different sources. The main sources of obtaining the secondary data is internet

sites, books, magazines, journals and articles etc. sometimes for specific subjects the

primary data cannot be collected or is not feasible to get, so for those subjects the

secondary data can be obtained. For the research on the topic of ‘Enhancing the

Efficiency of Custom House Agents ’ there has been data collected from many

government websites relating to the imports in the Indian economy and also there is

reference to many of the articles from the journals. Also there are some limitations to

the secondary data. All the secondary data might not be original and may have some

manipulations in it. So it is sometimes not feasible to completely rely on such data.

ANALYSIS

The questionnaire was filled by business people of different age group. The nature of

the business was same but the age group was different. So on the basis of the age of

the respondent the above chart has been prepared. The age group of the respondent is

an important thing to be noticed.

· Out of 50 respondents 12 respondents were of the age group of between 20

years and 30 years.

· 20 were of the age group of 30-40.

· And 18 people were of the age group above 40 years but were younger than 50

years of age.

QUES 1: How much do you think has the ‘Liberalization of imports’ changed the

business of clearing of imports?



Drastically Some what Not At All

78%

20%

2%

Impact of Liberlisation Of Imports

The liberalization of imports by the government played a very helping hand to the

business of clearing and forwarding. With business of clearing was given a boost and

the freight forwarding was a lucrative business to start along with. There were many

new businesses started relating to the clearance of customs.

· Out of 50 respondents 78% of them believed that the liberalization of imports had a

very drastic change in their business.

· Another 20% said that there was a little impact on their business due to the

Liberalization.

· But there was only 2 % who said that there was no impact due to liberalization.

Ques 2: Do you think the CHA plays an important role in custom clearance of ex-Im?



Yes No0%

20%

40%60%

80%100%

CHA Plays An Vital Role

. There are 65% who said that CHAs plays an very vital role in clearing of goods from

customs.

. There are 35% who were exporters/importers himself do the self clearance where

there turnover is very high.

Ques3: The business of clearing of which of the two is more in India?

68%

32%

Clerance of EX-IM

Clearing of ImportsClearing of Exports



The income that the clearing and forwarding agent generates from the clearing of the

goods is different in the case of imports and from that of exports. Previously the income

from the imports was quite less. But due to the reduction in the duty of the imported

goods and due to increase in the imports the clearing business of imports has become

more lucrative.

· 68% respondents out of 50 believed that the income from the clearance of imports

is high as compared to that of exports.

· 32% of them said that the business of clearance of exports is more lucrative when

compared among the two.

Ques4: How much time does it take to get the documents cleared from the custom

house?

One working day 2-3 Working days A week More than a Week

12%

45%

32%

11%

Time taken for Clearance



. The CHAs who have a heavy volume, they have great contact with customs and do

the work very easily, so 12% of people can clear the goods in one working days and

45% of CHAs need 2-3 working days.

. Remaining CHAs who have volume very less, so they need time and also have less

knowledge regarding the procedures so they take around a week,32% of CHAs are

included in this category.

. If the cargo has some problem regarding weight, valuation etc. so that need a time

may be more than a week. So 11% of CHAs need that much time to clear that cargo.

Ques5: How strict is the licensing policy to get the license for a custom house agent?

10%

35%

35%

20%

Licencing Policy

1 Very Strict 2 Strict3 lenient4 very lenient

The CHA before starting the work of clearing and forwarding should have the license for

the business. And for having the license he should qualify for the same as per the



governments’ rules and regulations laid down. Majority of the respondents were not

satisfied by the licensing policy.

· 35% of the respondents believed that the policies and the requirements by the

government for the licensing are very strict.

· 35% of the respondents said that the rules were strict.

· 20% of the people out of 50 believed that the rules for getting the license were lenient

· And only a 10% out of all believed that the qualification policies laid down by

the government are very lenient.

Ques 6: Has the government taken appropriate and adequate steps to help boost the

business of a Clearing and forwarding?

Yes No

0%10%20%30%40%50%60%70%80%90%

Government Initiative

The respondents had mixed views for this question. The government policies play an

important role in the success or failure of this business. And also the rules and

regulations made by the government affects the working of the custom and the freight



agents. So the steps taken by the government each year or the amendments made are

important for the CHAs.

· 70% of the respondents out of 50 said that the steps taken by the government are

adequate enough and has helped them a lot.

· Another 30% believed that the government has not taken the right steps for the

helping boost the business of custom agents.

Ques 7: Do you agree that the bureaucracy in the custom department has lead to the

slow Procedure of the clearance of imports?

Agree 76%

Disagree24%

Bureaucracy in Customs results slow Procedure

The bureaucracy in the custom department has lead to the slow procedure of clearing.

Most of the respondents very firmly believe with this. The documents pass on from one

table to the other and resulting in the delay.



· 76% of the respondents firmly believe that it is the bureaucracy that has lead to the

slow procedures.

· 24% of the people strongly disagree to the bureaucracy of custom officials.

Ques8: . Which of the following do you think is the most complex work in the entire

Procedure of clearing the imports?

45%

34%

21%

Difficult Part in Clearance1 Documentation 2 clearance for warehousing3 Calculation of custom duty

There are many complex works in the clearing and forwarding business. Each work has

its own set of complexities. So to know about the most complex of some of the

processes the CHAs were asked about it and the following outcomes have been

reached at:

· 45% the respondents said that the documentation is the most complex of all the works

done under the clearing business.



· While 34% of respondents believed that the calculations of the customs duty was more

difficult as compared to documentation.

· And the rest 21% said that the clearance procedure for the warehouses is a more

complex job than the other two.

Ques9: How much is the bureaucracy in custom department?

Yes No

85%

15%

Bureaucracy in customs

In every custom department at Indian ports there is lot of bureaucracy. Without

this the work is not done. Even if the goods and all the documents are proper

then also the CHAs bribe to the customs for ease work.

. 85% of the respondents believe there is bureaucracy at customs.

. The huge companies who are doing the business for more than 40 years they all are

registered and their goods imported/exported are fixed so they do not need to bribe

them. Only 15% are there such.



Ques10: EDI software is really helpful or manually it was better?

Yes No

0%

10%20%30%

40%50%60%

70%80%90%

100%

EDI Feasablity

The manual work has been replaced by the electronic software’s at all the ports. . So

the respondents were about the effects that EDI would have on the documentation

process. And the results are:

· 90% people were assertive in their reply and said that the paper procedures would be

lessened by the electronic data interchange software.

· There were still 10% who did not agree to this. They believed that manually is far

better than the EDI software.

FINDINGS

RESEARCH FINDINGS



The research conducted in the primary form and the secondary form has given a

detailed insight of the business of clearing and forwarding. There are different aspects

of the business looked into. The scope to the business and the blockage in the path of

the business were understood. Some of the key findings from the research are:

o The business of clearing and forwarding was given a boost and the

businessmen were motivated to start the business due to the government

policy of liberalization of imports.

o Most of the businessmen found the business of clearing of the imports

more lucrative as compared to that of clearing the exports

o The licensing policy of the government relating to the issuance of license

to the custom house agent was very stringent and needs to be liberalized.

o EDI software is most convenient for the CHAs rather than doing manual.

o The bureaucracy in the custom department has lead to the slow

procedures of the clearance of goods while imported. The entire process

takes more time due to the laziness of some of the officers.

o As per the research conducted it was found that most of the CHA did not

take more than one day to get the papers cleared. But there were other

reasons such as documents are not proper, valuation of goods, weight of

cargo, etc.

o The cases of manipulations done in the payment of customs are

continuously increasing over the years. What is found is that these

manipulations are due to the ignorance of the importers relating to the



policies or due to the selfish motives of importer and also due to the

misleading of the CHAs.

o Documentation procedure is the most complex procedures according to

most of the custom house agents. The complexity of the procedure arises

due to the more paper work and less use of the software.

o The hierarchy of the custom officials is very well defined and the reporting

structure is up-to-date.

o The licenses required by the importer to import a specific good are easily

available from the board if the requirements are fulfilled.

o It was also found that the CHAs knowingly get into the clearance of the

cargo which is disputable in nature so that they can charge a high sum of

money for the same.

o The importers find it very difficult to comply with the complicated norms of

the excise and customs in the manufacturing units.

The bureaucracy is so much in custom department that without it CHA could not

proceed it, even if all the things are proper they have to bribe them.

There is also a good scope of other shipping business other than clearing and

forwarding .

RECOMMENDATIONS



From the research conducted and the study done on the business of enhancing the

efficiency clearing and forwarding of imports, we have found that there are many things

that have been improved over the years and there are still many things which need to

be changed.

There are loop holes in the system that has to be changed. Some policy changes have

to be made. So there are some recommendations for the proper running of the system

and for the better future of the business. And they are as follows:

. The EDI software has helped for CHAs to enhance and increase the efficiency

in clearing of goods within short period of time.

o At the Kandla port there are more than 700 CHAs working. Most of the

custom agents are into the business of custom clearing and also at the

same time are engaged in the business of freight forwarding. So there

should be strict licencing policy to CHAs to get licence due due that less

completion occurs.

o Also the norms of the CHA license procedure should be liberalized.

o More expense should be done on the development of the port

infrastructure so that the port can work on its full capacity.

o Steps should be taken by the government to reduce the manipulation in

the documents by the importer or by the CHAs.

o Seminars should be conducted for imparting knowledge regarding the

import procedures and the custom payments for the importers.

o There should be transparency in the process of customs calculations.



o Information about the amendments made by the government in the rules

and regulations should be immediately imparted to the CHA and also to

the importers.

o New technologies should be used time to time so that the domestic ports

remain in the competition as to the international ports.

o There should be a regular inspection (disguised) in the customs offices so

as to reduce the amount of corruption prevalent.

o The CHA should try and avoid getting into the clearance of the imports

which are illegal in nature.

o Some benefits should be awarded to the custom agents based on the

performance of the agents. The performance measurement should be on

the basis of the custom duty paid by him over the last years.

o The norms that the custom people impose on the manufacturing units for

the imports should also be liberalized also making sure that the units do

not take advantage of the same.

The infrastructure of the Indian ports is not good enough. There are certain things

needed to be changed at the ports. The capacity has to be increased. And this would

help boosting up the balance sheets of the custom agents.

The licensing policy by the government for the importers should be made more

transparent and lucid.

RESEARCH LIMITATIONS



There is also a limitation to every research conducted. The research conducted and the

study done for the information gathering on the topic of clearing and forwarding of

imports has some limitations to it. The data collected from the secondary source was

assumed to be correct. But all the data was from the government website and there are

some manipulations to these data some of the times. So making out what data is

correct and what is wrong was not feasible. Also there were some limitations to the

primary search. The field of clearing and forwarding is vast. And there are many

business people into the business of same nature. So it was not possible to get to each

and every individual and get the information. And thus the input was collected from just

50 randomly selected businessmen. Also due to the rules and regulations at the port it

was not possible to take a formal interview from the custom officer at the custom

department.

So the data of the customs authorities was just put based on the unstructured question

and informal interview from them. Also the data is basically from the Kandla port and the

Mundra port. There are other major ports in India but the data could not be collected by

visiting all the ports due to the geographical limitations as well. Looking at the size of the

industry and the complicated nature of the business even the time for the study acted a

major limitation to the research.

BIBLIOGRAPHY



Web sites

· http://www.indiacore.com/ports.html

· http://www.cbec.gov.in//

· http://indiadata.com

· http://kandlaport.gov.in/

· http://indiatrade.com

Articles

· ‘Import tax in India’ – Hindu business line

Books

· ‘HOW TO IMPORT’ as per new foreign trade policy & procedures 2009-2014,

august 2009 and RBI guide lines for imports - Nabhi Publications

· ‘CUSTOMS LAW MANUAL’ 2005-2006 30th edition – R.K Jain

· ‘SHIPPING PROCEDURES’ – Narsee Munjee Institute

. ‘EXPORT MARKETING – MICHAL VAS

ANNEXURE



NAME:

AGE:

GENDER:

NATURE OF BUSINESS

1. How much do you think has the ‘Liberalization of imports’ changed the business of

clearing of imports?

[ ] Drastically [ ] Some what [ ] Not at all

2. Do you think the CHA plays an important role in custom clearance of ex-Im?

[ ] yes [ ] no

3. The business of clearing of which of the two is more in India?

[ ] clearing of imports

[ ] clearing of exports

4. How much time does it take to get the documents cleared from the custom house?

[ ] One working day [ ] 2-3 Working days

[ ] A week [ ] more than a week

5. How strict is the licensing policy to get the license for a custom house agent?

[ ] Very Strict [ ] Strict [ ] lenient [ ] very lenient

6. Has the government taken appropriate and adequate steps to help boost the

business?

of a Clearing and forwarding?

[ ] Yes [ ] No



7. Do you agree that the bureaucracy in the custom department has lead to the slow

Procedure of the clearance of imports?

[ ] Agree

[ ] Disagree

8. Which of the following do you think is the most complex work in the entire Procedure

of clearing the imports?

[ ] Documentation [ ] Calculation of custom duty

[ ] clearance for warehousing

9. How much is the bureaucracy in custom department?

[ ] High [ ] Low

10. EDI software is really helpful or manually it was better ?

[ ] Yes [ ] No

Response Sheet 1



1. NAME: Priyesh Nagda

2. ID number: SS/09-11/AHD/GM/2

3. The Topic of the Study: ENHANCING THE EFFIECIENCY OF CUSTOM HOUSE AGENTS AT INDIAN PORTS

4. Date when Guided: 16-02-2011

5. The outcome of discussion: The clarity about topics which were to be covered.

6. The progress of the thesis: Questionnaire to be made

Signature:

Guide:GAURAV VATS



Response Sheet 2





5. The outcome of discussion: some changes to be made in questionnaire, details regarding custom house agents

6. The progress of the thesis: Rules and regulation of CHA, procedure to obtain license for CHAs.

SIGNATURE,

Guide : GAURAV VATS

Response Sheet 3







5. The outcome of discussion: Questionnaire been approved, next step decided

6. The progress of the thesis: Basics findings of shipping terms

SIGNATURE,

Guide : GAURAV VATS

Response Sheet 4







5. The outcome of discussion: Books to be read , personal interviews to be taken

6. The progress of the thesis: important documents to be needed for clearance of goods. Questionnaire is done.

SIGNATURE,

Guide : GAURAV VATS

Response Sheet 5







5. The outcome of discussion: Ask from different CHAs regarding import and export procedure

6. The progress of the thesis: All is done regarding import and export procedures, documentations, basics shipping terms, and to found more shipping business other than clearing and forwarding.

SIGNATURE,

Guide : GAURAV VATS

Response Sheet 6







5. The outcome of discussion: How can the efficiency are increased for CHAs.

6. The progress of the thesis: Editing part to be done.

SIGNATURE,

Guide : GAURAV VATS


Final Thesis 1

Documents

Transcript of Final Thesis 1