Introductory

Indian Customs are assigned a number of tasks more important of which are:-

(i) collection of customs duties on imports and exports as per basic Customs laws (Customs Act, 1962 and Customs Tariff Act, 1975);

(ii)

enforcement of the various provisions of the Customs Act governing imports and exports of cargo, baggage, postal articles and arrival & departure of vessels, air crafts etc.;

(iii)discharge of various agency functions and enforcing various prohibitions and restrictions on imports and exports under Customs Act and other allied enactments;

(iv) prevention of smuggling including interdiction of narcotics drug trafficking; and

(v) International passenger processing.

2.        The Constitutional provisions have given to Union the right to legislate and collect duties on imports and exports as per the entry at Sl.No.83 of list 1 to Schedule VII of our Constitution. The Customs Act, 1962 is the basic Statute, effective from 1.2.1963 which empowers, under Section 12, duties to be levied on goods imported into or exported from India. The categories of items and the rates of duties which are leviable have been specified in two schedules to the Customs Tariff Act, 1975. The first Schedule to the said Act specifies the various categories of import items in a systematic and well considered manner, in accordance with an international scheme of classification of internationally traded goods – termed ‘harmonized system of commodity classification’. Different rates of duties are prescribed by the legislature on different commodities/group of commodities mentioned in the first Schedule. The duties are levied both on specific and ad-valorem basis, while there are few cases where at times specific-cum-ad valorem duties are also collected on imported items. Second Schedule to Customs Tariff Act, 1975 incorporates items subject to exports duties and rates thereof.

3.        Where ad-valorem duties (i.e., duties with reference to value) are collected, which are the predominant mode of levy, the value of the goods has to be determined for customs duty purposes as per provisions laid down under Section 14 of the Customs Act and the Customs Valuation (determination of prices of imports goods) Rules, 1988 issued there under. These provisions are essentially adoption of GATT based valuation system and followed internationally (now termed WTO Valuation Agreement) and were incorporated in our law in 1988. The importer as well as the assessing officer has to carefully study and apply these provisions so that the duties as due after proper valuation as per law get discharged before the goods get out of customs control.

Control and regulatory provisions under Customs Act:

4.        To handle growing international traffic properly and effectively and to make it administratively possible that all the cargo/goods/passengers etc., imported/coming into India or exported/going out of the country by sea, air, land or rail routes are checked by the Customs (for ensuring that they are complying with all the related laws before entry/exit into/from India) unrestricted freedom of access into the country or exit out of the country is not permitted. In tune with international practice the entry/exit of carriers/passengers etc., is therefore regulated in this county by law and the Customs Act, 1962 is the basic statute which governs/regulates this entry/exit of different categories of vessels/crafts/goods/passengers etc., into or outside the country.

5.        Under the Customs Act, Government is given the powers to appoint Customs ports and airports where alone the imported goods can be brought in for unloading or export goods loaded on ships or air crafts. Similar powers have been given to the Government to notify the places which alone shall be the Land Customs Stations for clearance of imported goods or goods to be exported by land or by inland water. Even the routes of passage by land and inland water into or out of the country can be regulated and these provisions have been made use of specially for regulating traffic for our neighboring countries like Nepal.

6.        Suitable powers have also been vested to further approve at a Customs port/airport, specific places where only loading and unloading can take place as also specify the limits of customs area (which essentially is the area of a Customs Port/Airport/Land Customs Station) where the imported goods or the export goods are ordinarily kept before clearance by the Customs authorities.

Role of Custodians:

7.        Both in regard to sea cargo as well as air imports, the Customs authorize and appoint "custodians" and all imported goods unloaded in a Customs area remains in their custody & till these are cleared for home consumption, or are warehoused or transshipped as provided in the law. With the growth of containerized traffic the facility of customs clearances at the interior centers in the country has been provided by opening various Inland Container Depots (ICDs) which act like Dry Ports. The goods also move to these internal Dry ports where they remain with the appointed custodian till these are customs cleared. The custodian after taking over the goods from the carrier, arranges its proper storage and safety and allows clearance to the importers only after they fulfill all the customs formalities, pay up requisite duties and other charges/fees and discharge various other obligations before their goods are allowed entry into the country and the customs have given clear permission for clearance out of customs area.

8.        Various port trusts and other authorities in the public and private sectors handle the import and export cargo when kept in their custody at various ports, international airports/ICDs. The cargo handling and custody at the international airports is generally entrusted to International airport authority of India. A number of cargo complexes have been set up at most international airports with appropriate storage facilities for imported cargo pending customs clearance. New ICDs are being opened at various industrial centers as a facilitation measure, as per detailed guidelines laid down by the Government, and Customs Cargo clearances – both for imported and export cargo, from interior centers has expanded substantially in recent years.

9.        Maximum import and export cargo is handled at different sea ports; increasing part of import cargo from some ports like Nhava Sheva also moves by transhipments to interior ICDs for final clearance by various importers almost at their door steps. In the ports which have vast Dock area and which are appropriately walled, security arrangements are provided to ensure that there is no pilferage/theft or carrying away of the cargo without proper customs clearance. Requisite arrangements of loading and unloading of cargo at different berths in various docks, their movement to different places including container yards/storage godowns etc., are arranged by the port authorities. They deploy a large work force and different & modern material handling equipments for movement of cargo which now is increasingly becoming containerized. As per the provisions of the Customs Act, the custodians are under obligation to ensure safe custody of the goods till delivery and in fact for unaccounted imported cargo duties are also recoverable by Customs from the custodians.

10.        The customs authorities are given appropriate office place and requisite facilities in the dock area as well as international cargo complexes/ICDs etc., to discharge their functions in relation to imports and exports such as supervision on loading/unloading from vessels/crafts etc., supervisions on stuffing or de-stuffing of containers, inspection and suitable examination of the goods which are imported/presented for exportation before customs clearance formalities etc.

Customs law and Obligations of Carrier:

11.        To regulate and have a proper and effective control on imports and exports the Customs Act enjoins certain liabilities on the carrier. Thus, they have to bring in the cargo imported into the country for unloading only at notified ports/airports/land custom stations - as mentioned earlier. Further obligation has been cast on the carrier for giving detailed information to customs about goods in their vessels/air crafts which have been brought in at any port/airport for unloading at that particular port/international airport as also that which would be carried further for other ports/airports. Declarations of such cargo have to be made in a prescribed form (which is termed ‘Import General Manifest’). This declaration/filing of IGM has to be made within 24 hours of entry of the vessel at the customs station. In the case of imports through Land Custom Stations the person in charge of the vehicle has to give similar import report. Since the cargo clearance formalities are linked generally with the availability of this information about cargo being brought by a vessel for unloading at any port, provisions have also been made in law for prior filing of IGMs if all details of relevant cargo for any port are available even before the vessel arrives. The final manifest can be filed again after arrival of the vessel.

12.        Unless, the aforesaid details and IGM have been furnished in the prescribed form, no unloading of cargo can be undertaken from any vessels/air crafts/vehicles in normal circumstances. After the manifest is duly delivered the unloading takes place under the supervision of the preventive staff of customs. The law prohibits unloading of any goods at a customs station which is not mentioned in the manifest/import report. Similarly, there are restrictions on loading for export. No vessel/air craft can start loading goods for export unless an intimation has been given to customs and customs have given permission for loading – what is also called ‘entry outward of the vessel’. All loading, as mentioned, of cargo on such vessels (and even air crafts) has to be checked and supervised by preventive customs staff and they have to essentially ensure that cargo loaded has discharged the prescribed customs formalities such as payment of duties or cess where leviable, and any other formalities enjoined by the law before the exports are permissible, and authorization for exports has been duly given by the proper appraising staff posted in the docks/cargo complexes/ICDs as a part of customs clearance formalities.

13.        The persons in charge of the vessels/air crafts are also required to furnish details of all the goods loaded on a vessel or air craft in a prescribed form which is termed ‘Export General Manifest’. This EGM can be furnished before the vessel/air craft departs or within 7 days of departure of the vessel/air craft and is essentially taken as the final proof of shipment/export once the ship/aircraft leaves the country. Similar provisions exist for export by land route where the export manifest is called export report.

Preventive Control:

14.        It is worth noting that no conveyance can leave a customs station unless a written order for port clearance for the vessel has been given by the proper officer of customs. The permission for departure of any vessel is given subject to the satisfaction of the proper officer that all the prescribed formalities have been fulfilled, duties/penalties etc., have been paid or secured. The preventive officers are also authorized to go on board the vessels/air crafts to take suitable declarations, Crew property list etc., and to check whether there are any goods which are not declared for unloading at a particular station in the manifest with an intention to smuggle them without following the prescribed formalities and payment of duties. A thorough examination and checking of the vessels/air crafts is also undertaken – by what is known as rummaging staff generally on selective basis taking due note of the past history of the vessel, the area/country from which the vessels are arriving, the intelligence report etc.

15.        The preventive staff of the customs also keeps a very careful vigil in the port areas for checking any illegal activities and develops intelligence to guard against any possible attempts of unauthorized removals from the docks and unloading of unmanifested cargo etc.

Customs Clearance of cargo:

16.        Before any goods imported and kept with the custodians as mentioned earlier can be cleared for home consumption in the country immediately – or for warehousing and customs clearances as and when needed etc., the importers have to comply with prescribed customs clearance formalities. Essentially, these involve presentation of certain documents along with a prescribed application (normally termed ‘bill of entry’, which gives essential particulars in relation to imported goods, its country of origin, particulars of vessel/aircraft etc.) seeking clearance of goods for home consumption/warehousing etc. The importer either himself handles the import clearance documents vis-à-vis Customs or appoints an authorized agent in the Custom House. Major part of Customs clearance work is handled on behalf of importers/exporters by CHAs or Custom Houses Agents – who are trained and experienced in Customs clearance work and are licensed by Customs for such work subject to certain conditions as laid down in CHA Regulations.

17.        The clearance documentation presentation and processing is handled in the main Custom Houses where staff trained in assessment matters (termed appraising staff) handles this import clearance work. After a tally has been made with related IGM to ensure that the goods sought for clearance have arrived and declared in the particular manifest of the vessel/air craft mentioned in the Entry (or even where the prior manifest is filed, that they are expected to be landed by particular vessel) the scrutiny of documents – manually or through EDI system is taken up. One of the main functions of the appraising staff in the Custom Houses is careful scrutiny of the entry and the related particulars, and information on various documents with a view to checking the import permissibility in terms of the EXIM policy and any other laws regulating imports/exports. The more important job specially after the liberalization of import regime, is determining classification and duties leviable on the goods on import – (Basic, Additional, Anti-dumping, Safeguards etc.) and value of the goods (where the duties are assessable on value basis), to assess the duty liability which is required to be paid by the importer. Permissibility of various benefits of duty free clearances under different schemes or applicability of any exemption notification benefits – where claimed is also checked and decided.

18.        For determining this duty liability and even permissibility of import it may become necessary to examine the goods in advance. Normally, however, the declarations made are scrutinized without prior examination with reference to documents made available and the other information about the values/classification available with Customs and duties chargeable on the goods are assessed and paid up by the importer or his authorized representative. It is only at the time of clearance from the custody of the port trusts/international airport authority or other custodians that the examination of the goods on percentage basis is carried out. For expediting assessment and clearance formalities, separate staff for checking assessment related work is posted in the custom houses as well as in the premises where the goods are stored pending customs clearance; the later said officers undertake checking of nature of goods, valuation and other part of declaration, or draw samples as may be ordered by the scrutinizing officers of the Custom House/Cargo Complexes/ICDs.

19.        In majority of the cases the assessment is completed and duties also paid without prior examination. If no discrepancies in relation to the nature of goods, quantity, value etc., are observed at the time of examination of the cargo by the appraising officers in the dock/cargo complex etc., out of Customs control orders are issued, and thereafter goods can be cleared after discharging any other fees/charges etc., of the custodians.

20.        Where prior examination, at times becomes necessary before assessment is finalized or permissibility of import determined, goods are got examined first after filing of Bill of entry and

other documents. Based upon the report of the examining staff, duties etc. are assessed and if there is no prohibition etc., on payment of duty the goods are taken clearance from the custodian without the need for further examination.

21.        Where disputes arise in the matter of classification/valuation or any violations of any laid down provisions of law are observed, where the goods cannot be allowed clearance finally without further investigations and following adjudication proceedings - where necessary, the law and instructions provide for even provisional clearances subject to suitable bond/security. Only where the goods are of prohibited nature or in certain other exceptional cases, where release on provisional basis is not considered advisable, and the final decision may be taken after results of enquiries etc., are known & where necessary adjudication proceedings completed.

22.        Similar customs clearance formalities for goods meant for export have to be fulfilled by presenting what are termed as ‘shipping bills’ and other related documents to the export wing of the custom houses or EDI service Centers. The appraising staff in the Custom House/Air Cargo Complex checks the declarations to assess the duties/cess if leviable, propriety of export incentives where claimed under different schemes like duty drawback or duty free exemption schemes etc. Appropriate orders for examination before shipments are allowed are given on the Shipping Bill. The staffs in the docks/cargo complexes/ICDs examines the goods meant for export on percentage basis, and allow shipment if there are no discrepancies/ mis-declarations etc., and no prohibitions/violations come to light. Appropriate penal action as per law is initiated where any fraudulent practices get detected during initial stage of scrutiny or at the time of examination etc.

23.        Thus, aforesaid provisions in the law and the various functions assigned to the customs are essentially provided to ensure that all cargo which is brought into the country passes through authorized points, is reported to customs and the concerned importers fulfill the prescribed legal and procedural requirements laid down under Customs Act and allied laws, paying up the duties leviable if any before the goods enter into the country. These provisions similarly help customs to regulate the outflow of the goods out of the country and enable them to subject the goods to proper checks before allowing final exit out of the country by sea/air/land/rail routes. They also help detect any attempts of smuggling or commercial frauds by unscrupulous parties.

Smuggling & Other Violations and Penal Provisions:

24.        Unscrupulous parties do attempt to evade the duties leviable and bypass various prohibitions/restrictions in relation to imports by attempting to bring the goods into the country from places other than the notified ports/airports/Land Custom Stations without reporting or presenting the goods to customs. Similar attempts are made to take out goods out of the country unauthorized. This is essentially what is termed ‘smuggling’ and customs officers have very important role to play in ensuring that they detect any such attempts of smuggling into or out of the country and take appropriate action both against the goods as well as against the persons involved in smuggling or violation of various restrictions/prohibitions for personal gains at the cost of exchequer unmindful of various other harmful effects which the prohibited and sensitive goods may have, if these are allowed entry into the country. Strict penalties in relation to the goods/persons – involving seizure/absolute confiscation of the prohibited goods, fines and penalties on the persons involved in the offence as well as those abetting the offence are provided. The law also empowers Customs for carrying out searches, arrests and prosecution of persons involved in smuggling and serious commercial frauds and evasion of duties or misuse of export incentives by fraudulent practices (mis-declaration of nature, and value of the goods or suppression of quantities etc.)

25.        The customs law provides deterrent penal provisions for all such violations but due processes of law have to be followed before any action is taken against the offending goods or persons/conveyance etc. involved. The customs officers have to act as quasi-judicial authorities and the liabilities for duty evaded or sought to be evaded, fines and penalties etc., are adjudged

by adjudication action wherein the persons concerned are duly given notice of the contemplated action against the goods/persons/conveyance etc. including the gist of the charges and their basis, and they are provided opportunity for representation as well as personal hearing. The adjudication powers are vested in the customs officers of different specified ranks.

26.        In grave offence cases prosecution action with imprisonment up to 7 years is also permissible under the Customs Act, but this action is to be taken following the usual criminal proceedings in a court of law, after prosecution sanction has been given by the competent Customs officer.

Appellate Remedies:

27.        The parties aggrieved with the departmental adjudication action are also given the right to appeal – at the departmental higher level [Commissioner (Appeal)] as well as at independent tribunal level. On questions of law, the orders of tribunal could also be considered for reference to the High Court and certain categories of decisions involving matters relating to classification or valuation can be appealed even before the Supreme Court.

Passenger Processing:

28.        Apart from the aforesaid functions in relation to control/regulation/ clearance of import/export of goods international passenger processing is another important area of work handled by the Indian customs authorities. All incoming passengers after immigration clearance have to pass through Customs who have the onerous duty to ensure that there is maximum facilitation and quick passenger clearance, but at the same time the passengers do not try to smuggle goods into the country which are sensitive and otherwise prohibited/restricted or where substantial duties may be involved which are sought to be evaded by non-declaration/mis-declaration to Customs. Similarly, though duties are not very relevant for outgoing passengers, Customs have to ensure that outgoing passengers do not smuggle out foreign currency, antiques or other wildlife & prohibited items or narcotics drugs or psychotropic substances – and this later part, i.e., checking of drug smuggling is becoming of considerable importance in recent years. The customs have also to ensure enforcement of various other allied laws before any goods carried by the passengers on person, in hand bag or accompanied baggage enter into the country or get out of the country.

Import/Export by Post/Courier:

29.        Another important role performed by Customs, though not very visible, is necessary coordination with Postal authorities and giving customs clearances after appropriate checking on selective basis of various goods coming by post parcels, etc. They have to ensure that these postal mail/packets/parcels enter into the country following the provisions of the Customs Act. The goods brought by parcels unless these are within permissible free gift limits or free sample limits have to be assessed to duties by customs & indicated to postal authorities. The duties are collected before the postal authorities deliver the goods to the addressees. Lastly, it may also be mentioned that small item imports/exports through couriers is fast catching up in this country and customs have made appropriate provisions by Regulations for ensuring that goods brought in by courier get customs cleared quickly – discharging duties where leviable on import before these are forwarded for delivery to the consignees. The regulations framed are reviewed to meet the changing needs of trade & industry/general public.

30.        These are some of the basic areas of work which are handled by the Indian Customs. As could be seen it covers substantial areas of activities affecting trade and industry and general public. Customs officials come in contact with international passengers and general public, importers and exporters, traders and manufacturers, the carriers, the port and airport authorities,

postal authorities and various other Government/semi-Government agencies, Banks etc. The importers and exporters have to realize that various agencies get involved in any customs clearance work in relation to cargo. Even international passenger processing and faster clearances depend upon various agencies working at Air Ports. Indian Customs authorities are very conscious of the various onerous tasks assigned to it and is attempting, consciously in recent years, to rationalize and modernize its Customs procedures for customs clearance of cargo/passenger processing etc. India is an active member of the World Customs Organization and has adopted various international Customs Conventions and procedures; the Harmonized Classification System, the GATT based Valuation system in relation to valuation etc. It is moving fast in direction of total automation of the imports and exports clearance work. The use of Electronic Data Interchange System for customs clearance for imports and exports & disbursement of duty drawback etc. started from 1995 and is now operative at 23 customs stations/ports/ICDs (covering almost 90% of cargo). With the Customs Gateway Project, under serious & advance stage of implementation, it should be possible to have connectivity of all Customs stations by the end of the year or January, 2002 and there may be substantial further speeding up of the customs clearance work in not distant future.

31.        Customs in this country are committed in its Citizen Charter, to provide to trade & industry time bound and speedy cargo clearance facility, quick redressal of grievance, and inculcating in its officers’ sense of service with stress on courtesy, understanding, integrity. Objectivity and transparency. Steps are afoot to further professionalize Customs to be able to render efficient and prompt service to our clients almost at par with those rendered by other customs services in developed countries.

32.        It is difficult to have a manual which could cover all aspects of the customs functions in one place or to explain the changes contemplated taking due note of demand of trade & industry and in tune with international practices. But an attempt is made in the following chapters, briefly to further explain some of the more important aspects and areas of work of Customs for the benefit of all concerned - with focus on the importers/exporters and the concerned agencies including the international passengers and general public. Considering the importance the country attaches to the export promotion, the various export promotion schemes have been elaborated somewhat at length. It is hoped that the information would be found useful. Taking into account the demands/suggestions from the trade and industry and general public and even departmental officials, areas which are not covered by this first edition of the manual, would be taken up for coverage in the next edition.

Arrival of Goods and Procedures Prior to Lodgment of Goods Declaration

 Conveyances to call only at Notified Customs Ports / Airports:

Customs Act, 1962, envisages that only places notified by the Government shall be Customs ports or Customs airports for the unloading of imported goods and loading of export goods. At each such customs ports, the Commissioner of Customs is empowered to approve proper places for the unloading and loading of goods and he also specifies the limits of any Customs area. The law further provides that the person in charge of the vessel or an aircraft shall not call or land at any place other than the Customs port/airport, except in cases of emergencies.

Power to board conveyance, to question and to demand documents:

2.        Section 37 empowers the proper officer to board any conveyance carrying imported goods or export goods. He may remain on board as long as he decides to remain. The proper officer may question the person in charge of the vessel or aircraft. He may demand production of documents and also ask questions, to be answered by such person. The person in charge of the conveyance is bound to comply with these requirements [Section 38].

Delivery of Import Manifest:

3.        The Master / Agent of the vessel or an aircraft has to deliver an import manifest (an import report in case of a vehicle), within 24 hours after arrival in the case of a vessel and 12 hours after arrival in the case of an aircraft or a vehicle in the prescribed form. The time limit for filing the manifest is extendable on showing sufficient cause. In the case of a vessel or an aircraft, a manifest may also be filed even before arrival of the vessel or aircraft (known as Prior Entry Manifest). In the case of vessels, for administrative convenience, such advance manifests are accepted on any day within 14 days before the expected arrival of the vessel.

4.        If the vessel does not arrive within the stipulated time of 14 days or such extended time as may be granted by the Assistant Commissioner (Imports), the manifest accepted provisionally is cancelled and the fact circulated through public notices. All the Bills of Entry filed against the cancelled manifest, become void. The importers have to return those Bills of Entry to the Import Department and to claim refund of duty, if paid on any such Bills of Entry. If the same vessel enters the port after the cancellation of the original manifests, it will be treated as a fresh entry and a fresh manifest is insisted upon.

General conditions:

5.        A person filing declarations under this section has to declare the truthfulness of contents. This declaration has legal consequences, which bind the carrier. [Section 30(2)].

Amendments:

6.        If for any reason, the carrier desires to amend or supplement the IGM, it will be permitted by the proper officer on payment of prescribed fees, if he is satisfied that there is no fraudulent intention behind the move. [Section 30(3)].

Penal liability:

7.        Any mis-declaration in this document will attract the penal provisions of Section 111(f) and Section 112.

Excision from IGMs of items originally manifested:

(a) Excision from I.G.Ms of items originally manifested are permitted only:

(i) On application in writing from the ship’s Agents;

(ii) On production of the documentary evidence of short shipment of goods;

(iii)

On payment of a fee as prescribed.

(b)

(i) Excisions or amendments of items in the Import Manifest involving reduction in

number of Packages:

8.        An application from the steamer agents for excisions or amendments in the Import Manifest involving reduction in the number of packages or quantity or weight thereof, should be submitted with the connected documentary evidence. Such excisions or amendments will only be

allowed; if after due investigation, it is proved that the excess quantity was originally shown in the import manifest as a result of an error. In the absence of such proof, the application will be kept over for being dealt with by the Manifest Clearance Section at the time of closure of the ship’s file.

(ii)        Applications for the excision or amendments of items for which Bills of Entry have been noted will be dealt with by the Manifest Clearance Section if made two months after the arrival of the vessel.

            Matters such as the number of copies of manifests to be filed, nature of forms, manner of declaring cargo etc. are governed by the following Regulations:

(i) Import Report (Form) Regulation, 1976;

(ii) Import Manifest (Aircraft) Regulation, 1976; and

(iii)

Import Manifest (Vessels) Regulation, 1971;

Generally speaking, the above Regulations stipulate declaring separately cargo to be landed, unaccompanied Baggage, goods to be transported and same bottom or retention cargo. Separate declarations are also to be filed in respect of dangerous/prohibited/ sensitive goods such as Arms and Ammunitions, Narcotics, Gold etc. The prime condition in the Regulations is that the manifest shall cover all the goods carried in the conveyance.

            In respect of a vessel, an import manifest shall, in addition, consist of an application for entry inwards.

Entry Inwards:

9.        The Master of the vessel is not to permit the unloading of any imported goods until an order has been given by the proper officer granting Entry Inwards of such vessel. Normally, Entry Inwards is granted only after the import manifest has been delivered. This entry inward date is crucial for determining the rate of duty, as provided in section 15 of the Customs Act, 1962. Unloading of certain items like accompanied baggage, mail bags, animals, perishables and hazardous goods are exempted from this stipulation.

Enclosures to Import General Manifest:

10.        The amendment made in 1995 (w.e.f. 1-7-1995) introduces a new form for obtaining entry inwards. The forms are designed according to IMO-FAL Convention. The forms have to be filed in prescribed sizes only. Host of enclosures are sought along with these forms. This practice has its origin in other statutes such as Merchant Shipping Act, 1880. However, keeping the said convention in view, Board has issued instructions dispensing with submission of various documents. The following declarations have, however, to be filed along-with IGM:

(a) Deck Cargo Declaration / Certificate.

(b)

Last port clearance copy.

(c) Amendment application (when relevant).

(d) Income Tax Certificate in case of Export Cargo.

(e) Nil export cargo certificates.

(f) Port Trust "No Demand" certificate.

(g) Immigration certificate.

(h) Application for sign on/sign off of crew (when relevant).

(i) Application for crew baggage checking when they sign on (When relevant).

[C.B.E & C. Circular No.36/95-Cus., dated 10-4-1995, 1995 (77) E.L.T. T51. Refers. ]

Procedure for filing IGM at Custom Houses operating EDI service centers:

(i)        IGM by shipping lines:

11.        The shipping line/steamer agent needs to submit the manifest in prescribed form at the Service Centre. The shipping lines are required to submit the electronic version of the Import General manifest in floppies, containing all the details and particulars. It is to be ensured by the Shipping Lines that all the particulars and details of the Import general manifest submitted either manually or through floppies is correct. The shipping agents who do not have arrangement for data in floppy, may approach the Service Center of Customs and get the data of IGM submitted in system. They are also to ensure that details of House Bill of Lading are also incorporated in the IGM in case of consol cargo.

12.        On arrival of the vessel, the shipping line needs to approach the Preventive officer for granting entry inwards. Before making the application, the shipping line has to make payment of the Light House dues.

13.        In case the shipping line is filing an IGM after arrival of the vessel, the procedure as mentioned above for prior IGM is to be followed except that the date of arrival of vessel is also indicated. After submission, the shipping line has to approach the proper officer for grant of entry inwards in the system.

(ii)            IGM by Air:

14.        The airlines are required to file IGM in prescribed format. In case of Air Cargo Complexes having EDI, the IGMs may be filed through electronic mode. The IGMs to be submitted need to contain all details and particulars. In other words, the airlines would not only be furnishing the details of the Master Airway Bills but also the House Airway bills in the case of console cargo. The airlines are also to furnish the additional information, namely, the ULD Nos. for use by the custodians.

Filing of Stores List:

15.        When entering any port, all ships are required to furnish to the Commissioner of Customs, a list (or nil return) of ships stores intended for landing (excluding any consumable stores issued from any dutified shops in India). Retention on board of imported stores is governed by Import Store (Retention on board) Regulations, 1963. The consumable stores can remain on board without payment of import duties during the period the vessel/Aircraft remains foreign going. Otherwise, such consumable stores are to be kept under Customs seal. Even in respect of foreign going vessels, only the stores required for immediate use of the personnel may be left unsealed. Excessive stocks of stores such as liquor, tobacco, cigarettes, etc are kept under Customs seal.

Unloading and Loading of Goods:

16.        Imported goods are not to be unloaded from the vessel until Entry Inwards is granted. No imported goods are to be unloaded unless they are specified in the import manifest/report for being unloaded at that Customs station. No imported goods shall be unloaded at any place other than the places provided for such unloading. Further, imported goods shall not be unloaded from any conveyance except under the supervision of the proper officer. Similarly, for unloading imported goods on any Sunday or on any holiday, prior notice shall be given and fees prescribed in this regard shall be paid.

Other liabilities of carriers:

17.        Under Section 115 and 116, the persons in charge of vessel or aircraft have other liabilities, which are important and noteworthy. Section 115 provides for confiscation of vessel or other conveyance under the following circumstances:

(a) A conveyance within Indian waters or port or customs area which is adopted, fitted, modified or altered for concealing goods.

(b) A conveyance from which goods are thrown overboard, staved or destroyed so as to

prevent seizure by customs officers.

(c) A conveyance which disobeys any order under Section 106 to stop or land, without sufficient cause.

(d) A conveyance from which goods under drawback claim are unloaded without proper officer’s permission.

(e) A conveyance which has entered India with goods, from which substantial portion of goods are missing and failure of the master to account therefore.

Any vessel when used as means of transport for smuggling of any goods or in the carriage of any smuggled goods is liable to confiscation, unless the owner establishes that it was used without the knowledge or connivance of the owner, his agent and the person in-charge of the vessel. When any such conveyance is confiscated, an option to pay redemption fine has to be given to the owner of the conveyance. The upper limit for imposing the redemption fine is the market value of impugned goods.

18.        Under Section 116, penalty may be imposed on the person in charge of vessel if there is failure to account for all goods loaded in the vessel for importation into India or transshipped under the provisions of Customs Act and these are not unloaded at the place of destination in India or if the quantity unloaded is short of the quantity to be unloaded at particular destination. Penalty may be waived if failure to unload or deficiency in unloading is accounted for to the satisfaction of competent officer. Thus, if there is any shortage which is not satisfactorily accounted for, the person in charge of the vessel will be liable to penalty, which may be twice the duty payable on the import goods not accounted for.

Procedure for Clearance of Imported and Export Goods

I. Import:

Bill of Entry – Cargo Declaration:

Goods imported in a vessel/aircraft attract customs duty and unless these are not meant for customs clearance at the port/airport of arrival by particular vessel/aircraft and are intended for transit by the same vessel/aircraft or transshipment to another customs station or to any place outside India, detailed customs clearance formalities of the landed goods have to be followed by the importers. In regard to the transit goods, so long as these are mentioned in import report/IGM for transit to any place outside India, Customs allows transit without payment of duty. Similarly for goods brought in by particular vessel/aircraft for transshipment to another customs station detailed customs clearance formalities at the port/airport of landing are not prescribed and simple transshipment procedure has to be followed by the carrier and the concerned agencies. The customs clearance formalities have to be complied with by the importer after arrival of the goods at the other customs station. There could also be cases of transshipment of the goods after unloading to a port outside India. Here also simpler procedure for transshipment has been prescribed by regulations, and no duty is required to be paid. (Sections 52 to 56 of the Customs are relevant in this regard)

2.        For other goods which are offloaded importers have the option to clear the goods for home consumption after payment of the duties leviable or to clear them for warehousing without immediate discharge of the duties leviable in terms of the warehousing provisions built in the Customs Act. Every importer is required to file in terms of the Section 46 an entry (which is called Bill of entry) for home consumption or warehousing in the form, as prescribed by regulations.

3.        If the goods are cleared through the EDI system no formal Bill of Entry is filed as it is generated in the computer system, but the importer is required to file a cargo declaration having prescribed particulars required for processing of the entry for customs clearance.

4.        The Bill of entry, where filed, is to be submitted in set, different copies meant for different purposes and also given different color scheme, and on the body of the bill of entry the purpose for which it will be used is generally mentioned in the non-EDI declaration.

5.        The importer clearing the goods for domestic consumption has to file bill of entry in four copies; original and duplicate are meant for customs, third copy for the importer and the fourth copy is meant for the bank for making remittances.

6.        In the non-EDI system along with the bill of entry filed by the importer or his representative the following documents are also generally required:-

Signed invoice Packing list Bill of Lading or Delivery Order/Airway Bill GATT declaration form duly filled in Importers/CHA’s declaration License wherever necessary Letter of Credit/Bank Draft/wherever necessary Insurance document Import license Industrial License, if required Test report in case of chemicals Adhoc exemption order

DEEC Book/DEPB in original Catalogue, Technical write up, Literature in case of machineries, spares or chemicals as

may be applicable Separately split up value of spares, components machineries Certificate of Origin, if preferential rate of duty is claimed No Commission declaration

7.        While filing the bill of entry and giving various particulars as prescribed therein the correctness of the information given has also to be certified by the importer in the form a declaration at the foot of the bill of entry and any mis-declaration/incorrect declaration has legal consequences, and due precautions should be taken by importer while signing these declarations.

8.        Under the EDI system, the importer does not submit documents as such for assessment but submits declarations in electronic format containing all the relevant information to the Service Centre. A signed paper copy of the declaration is taken by the service centre operator for non-repudiability of the declaration. A checklist is generated for verification of data by the importer/CHA. After verification, the data is submitted to the system by the Service Centre Operator and system then generates a B/E Number, which is endorsed on the printed checklist and returned to the importer/CHA. No original documents are taken at this stage. Original documents are taken at the time of examination. The importer/CHA also needs to sign on the final document after Customs clearance.

9.        The first stage for processing a bill of entry is what is termed the noting of the bill of entry, vis-à-vis, the IGM filed by the carrier. In the non-EDI system the importer has to get the bill of entry noted in the concerned unit which checks the consignment sought to be cleared having been manifested in the particular vessel and a bill of entry number is generated and indicated on all copies. After noting the bill of entry gets sent to the appraising section of the Custom House for assessment functions, payment of duty etc. In the EDI system, the Steamer Agents get the manifest filed through EDI or by using the service centre of the Custom House and the noting aspect is checked by the system itself – which also generates bill of entry number.

10.        After noting/registration of the Bill of entry, it is forwarded manually or electronically to the concerned Appraising Group in the Custom House dealing with the commodity sought to be cleared. Appraising Wing of the Custom House has a number of Groups dealing with earmarked commodities falling under different Chapter Headings of the Customs Tariff and they take up further scrutiny for assessment, import permissibility etc. angle.

Assessment:

11.        The basic function of the assessing officer in the appraising groups is to determine the duty liability taking due note of any exemptions or benefits claimed under different export promotion schemes. They have also to check whether there are any restrictions or prohibitions on the goods imported and if they require any permission/license/permit etc. and if so whether these are forthcoming. Assessment of duty essentially involves proper classification of the goods imported in the customs tariff having due regard to the rules of interpretations, chapter and sections notes etc., and determining the duty liability. It also involves correct determination of value where the goods are assessable on ad valorem basis. The assessing officer has to take note of the invoice and other declarations submitted along with the bill of entry to support the valuation claim, and adjudge whether the transaction value method and the invoice value claimed for the basis of assessment is acceptable, or value needs to be predetermined having due regard to the provisions of Section 14 and the valuation rules issued there under, the case law and various instructions on the subject. He also takes note of the contemporaneous values and other information on valuation available with the Custom House.

12.        Where the appraising officer is not very clear about the description of the goods from the document or as some doubts about the proper classification which may be possible only to determine after detailed examination of the nature of the goods or testing of its samples, he may give an examination order in advance of finalization of assessment including order for drawing of representative sample. This is done generally on the reverse of the original copy of the bill of entry which is presented by the authorized agent of the importer to the appraising staff posted in the Docks/Air Cargo Complexes where the goods are got examined in the presence of the importer’s representative.

13.        On receipt of the examination report the appraising officers in the group assesses the bill of entry. He indicates the final classification and valuation in the bill of entry indicating separately the various duties such as basic, countervailing, anti-dumping, safeguard duties etc. that may be leviable. Thereafter the bill of entry goes to Assistant Commissioner/Deputy Commissioner for confirmation depending upon certain value limits and sent to comptist who calculates the duty amount taking into account the rate of exchange at the relevant date as provided under Section 14 of the Customs Act.

14.        After the assessment and calculation of the duty liability the importer’s representative has to deposit the duty calculated with the treasury or the nominated banks, where after he can go and seek delivery of the goods from the custodians.

15.        Where the goods have already been examined for finalization of classification or valuation no further examination/checking by the dock appraising staff is required at the time of giving delivery and the goods can be taken delivery after taking appropriate orders and payment of dues to the custodians, if any.

16.        In most cases, the appraising officer assesses the goods on the basis of information and details furnished to the importer in the bill of entry, invoice and other related documents including catalogue, write-up etc. He also determines whether the goods are permissible for import or there is any restriction/prohibition. He may allow payment of duty and delivery of the goods on what is called second check/appraising basis in case there are no restriction/prohibition. In this method, the duties as determined and calculated are paid in the Custom House and appropriate order is given on the reverse of the duplicate copy of the bill of entry and the importer or his agent after paying the duty submits the goods for examination in the import sheds in the docks etc., to the examining staff. If the goods are found to be as declared and no other discrepancies/mis-declarations etc., are detected, the importer or his agent can clear the goods after the shed appraiser gives out of charge order.

17.        Wherever the importer is not satisfied with the classification, rate of duty or valuation as may be determined by the appraising officer, he can seek an assessment order. An appeal against the assessment order can be made to appropriate appellate authority within the time limits and in the manner prescribed.

EDI Assessment:

18.        In the EDI system of handling of the documents/declarations for taking import clearances as mentioned earlier the cargo declaration is transferred to the assessing officer in the groups electronically.

19.        The assessing officer processes the cargo declaration on screen with regard to all the parameters as given above for manual process. However in EDI system, all the calculations are done by the system itself. In addition, the system also supplies useful information for calculation of duty, for example, when a particular exemption notification is accepted, the system itself gives the extent of exemption under that notification and calculates the duty accordingly. Similarly, it

automatically applies relevant rate of exchange in force while calculating. Thus no comptist is required in EDI system. If assessing officer needs any clarification from the importer, he may raise a query. The query is printed at the service centre and the party replies to the query through the service centre.

20.        After assessment, a copy of the assessed bill of entry is printed in the service centre. Under EDI, documents are normally examined at the time of examination of the goods. Final bill of entry is printed after ‘out of charge’ is given by the Custom Officer.

21.        In EDI system, in certain cases, the facility of system appraisal is available. Under this process, the declaration of importer is taken as correct and the system itself calculates duty which is paid by the importer. In such case, no assessing officer is involved.

22.        Also, a facility of tele-enquiry is provided in certain major Customs stations through which the status of documents filed through EDI systems could be ascertained through the telephone. If nay query is raised, the same may be got printed through fax in the office of importer/exporter/CHA.

Examination of Goods:

23.        All imported goods are required to be examined for verification of correctness of description given in the bill of entry. However, a part of the consignment is selected on random selection basis and is examined. In case the importer does not have complete information with him at the time of import, he may request for examination of the goods before assessing the duty liability or, if the Customs Appraiser/Assistant Commissioner feels the goods are required to be examined before assessment, the goods are examined prior to assessment. This is called First Appraisement. The importer has to request for first check examination at the time of filing the bill of entry or at data entry stage. The reason for seeking First Appraisement is also required to be given. On original copy of the bill of entry, the Customs Appraiser records the examination order and returns the bill of entry to the importer/CHA with the direction for examination, which is to take it to the import shed for examination of the goods in the shed. Shed Appraiser/Dock examiner examines the goods as per examination order and records his findings. In case group has called for samples, he forwards sealed samples to the group. The importer is to bring back the said bill of entry to the assessing officer for assessing the duty. Appraiser assesses the bill of entry. It is countersigned by Assistant/Deputy Commissioner if the value is more than Rs. 1 lakh.

24.        The goods can also be examined subsequent to assessment and payment of duty. This is called Second Appraisement. Most of the consignments are cleared on second appraisement basis. It is to be noted that whole of the consignment is not examined. Only those packages which are selected on random selection basis are examined in the shed.

25.        Under the EDI system, the bill of entry, after assessment by the group or first appraisement, as the case may be, need to be presented at the counter for registration for examination in the import shed. A declaration for correctness of entries and genuineness of the original documents needs to be made at this stage. After registration, the B/E is passed on to the shed Appraiser for examination of the goods. Along-with the B/E, the CHA is to present all the necessary documents. After completing examination of the goods, the Shed Appraiser enters the report in System and transfers first appraisement B/E to the group and gives 'out of charge' in case of already assessed Bs/E. Thereupon, the system prints Bill of Entry and order of clearance (in triplicate). All these copies carry the examination report, order of clearance number and name of Shed Appraiser. The two copies each of B/E and the order are to be returned to the CHA/Importer, after the Appraiser signs them. One copy of the order is attached to the Customs copy of B/E and retained by the Shed Appraiser.

Green Channel facility:

26.        Some major importers have been given the green channel clearance facility. It means clearance of goods is done without routine examination of the goods. They have to make a declaration in the declaration form at the time of filing of bill of entry. The appraisement is done as per normal procedure except that there would be no physical examination of the goods. Only marks and number are to be checked in such cases. However, in rare cases, if there are specific doubts regarding description or quantity of the goods, physical examination may be ordered by the senior officers/investigation wing like SIIB.

Execution of Bonds:

27.        Wherever necessary, for availing duty free assessment or concessional assessment under different schemes and notifications, execution of end use bonds with Bank Guarantee or other surety is required to be furnished. These have to be executed in prescribed forms before the assessing Appraiser.

Payment of Duty:

28.        The duty can be paid in the designated banks or through TR-6 challans. Different Custom Houses have authorized different banks for payment of duty. It is necessary to check the name of the bank and the branch before depositing the duty. Bank endorses the payment particulars in challans which is submitted to the Customs.

Amendment of Bill of Entry:

29.        Whenever mistakes are noticed after submission of documents, amendments to the of entry is carried out with the approval of Deputy/Assistant Commissioner. The request for amendment may be submitted with the supporting documents. For example, if the amendment of container number is required, a letter from shipping agent is required. Amendment in document may be permitted after the goods have been given out of charge i.e. goods have been cleared on sufficient proof being shown to the Deputy/Assistant Commissioner.

Prior Entry for Bill of Entry:

30.        For faster clearance of the goods, provision has been made in section 46 of the Act, to allow filing of bill of entry prior to arrival of goods. This bill of entry is valid if vessel/aircraft carrying the goods arrive within 30 days from the date of presentation of bill of entry.

31.        The importer is to file 5 copies of the bill of entry and the fifth copy is called Advance Noting copy. The importer has to declare that the vessel/aircraft is due within 30 days and they have to present the bill of entry for final noting as soon as the IGM is filed. Advance noting is available to all imports except for into bond bill of entry and also during the special period.

Mother Vessel/Feeder vessel:

32.        Often in case of goods coming by container ships they are transferred at intermediate ports (like Ceylon) from mother vessel to smaller vessels called feeder vessels. At the time of filing of advance noting B/E, the importer does not know as to which vessel will finally bring the goods to Indian port. In such cases, the name of mother vessel may be filled in on the basis of the bill of lading. On arrival of the feeder vessel, the bill of entry may be amended to mention names of both mother vessel and feeder vessel.

Specialized Schemes:

33.        The import of goods is made under specialized schemes like DEEC or EOU etc. The importer in such cases is required to execute bonds with the Customs authorities for fulfillment of conditions of respective notifications. If the importer fails to fulfill the conditions, he has to pay the duty leviable on those goods. The amount of bond would be equal to the amount of duty leviable on the imported goods. The bank guarantee is also required along with the bond. However, the amount of bank guarantee depends upon the status of the importer like Super Star Trading House/Trading House etc.

Bill of Entry for Bond/Warehousing:

34.        A separate form of bill of entry is used for clearance of goods for warehousing. All documents as required to be attached with a Bill of Entry for home consumption are also required to be filed with bill of entry for warehousing. The bill of entry is assessed in the same manner and duty payable is determined. However, since duty is not required to be paid at the time of warehousing of the goods, the purpose of assessing the goods at this stage is to secure the duty in case the goods do not reach the warehouse. The duty is paid at the time of ex-bond clearance of goods for which an ex-bond bill of entry is filed. The rate of duty applicable to imported goods cleared from a warehouse is the rate in-force on the date on which the goods are actually removed from the warehouse.

(References: Bill of Entry (Forms) Regulations, 1976, ATA carnet (Form Bill of Entry and Shipping Bill) Regulations, 1990, Uncleared goods (Bill of entry) regulation, 1972,, CBEC Circulars No. 22/97, dated 4/7/1997, 63/97, dated 21/11/1997).

 

II. Export:

For clearance of export goods, the export or his agents have to undertake the following formalities:

(a)        Registration:

35.        The exporters have to obtain PAN based Business Identification Number(BIN) from the Directorate General of Foreign Trade prior to filing of shipping bill for clearance of export goods. Under the EDI System, PAN based BIN is received by the Customs System from the DGFT online. The exporters are also required to register authorized foreign exchange dealer code (through which export proceeds are expected to be realized) and open a current account in the designated bank for credit of any drawback incentive.

36.        Whenever a new Airline, Shipping Line, Steamer Agent, port or airport comes into operation, they are required to be registered into the Customs System. Whenever, electronic processing of shipping bill etc. is held up on account of non-registration of these entities, the same is to be brought to the notice of Assistant/Deputy Commissioner in-charge of EDI System for registering the new entity in the system.

(b)        Registration in the case of export under export promotion schemes:

37.        All the exporters intending to export under the export promotion scheme need to get their licenses/DEEC book etc. registered at the Customs Station. For such registration, original documents are required.

(c)        Processing of Shipping Bill - Non-EDI:

38.        Under manual system, shipping bills or, as the case may be, bills of export are required to be filed in format as prescribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. The bills of export are being used if clearance of export goods is taken at the Land Customs Stations. Different forms of shipping bill/bill of export have been prescribed for export of duty free goods, export of dutiable goods and export under drawback etc.

39.        Shipping Bills are required to be filed along with all original documents such as invoice, AR-4, packing list etc. The assessing officer in the Export Department checks the value of the goods, classification under Drawback schedule in case of Drawback Shipping Bills, rate of duty/cess where applicable, exportability of goods under EXIM policy and other laws enforce. The DEEC/DEPB Shipping bills are processed in the DEEC group. In case of DEEC Shipping bills, the assessing officer verifies that the description of the goods declared in the shipping bill and invoice match with the description of the resultant product as given in the DEEC book. If the assessing officer has any doubts regarding value, description of goods, he may call for samples of the goods from the docks. He may also call for any other information required by him for processing of shipping bill. He may assess the shipping bill after visual inspection of the sample or may send it for test and pass the shipping bill provisionally.

40.        Once, the shipping bill is passed by the Export Department, the exporter or his agent presents the goods to the shed appraiser (export) in docks for examination. The shed appraiser may mark the document to a Custom officer (usually an examiner) for examining the goods. The examination is carried out under the supervision of the shed appraiser (export). If the description and other particulars of the goods are found to be as declared, the shed appraiser gives a ‘let export’ order, after which the exporter may contact the preventive superintendent for supervising the loading of goods on to the vessel.

41.        In case the examining staff in the docks finds some discrepancy in the goods, they may mark the shipping bill back to export department/DEEC group with their observations as well as sample of goods, if needed. The export department re-considers the case and decides whether export can be allowed, or amendment in description, value etc. is required before export and whether any other action is required to be taken under the Customs Act, 1962 for mis-declaration of description of value etc.

(d)        Processing of Shipping Bill - EDI:

42.        Under EDI System, declarations in prescribed format are to be filed through the Service Centers of Customs. A checklist is generated for verification of data by the exporter/CHA. After verification, the data is submitted to the System by the Service Center operator and the System generates a Shipping Bill Number, which is endorsed on the printed checklist and returned to the exporter/CHA. For export items which are subject to export cess, the TR-6 challans for cess is printed and given by the Service Center to the exporter/CHA immediately after submission of shipping bill. The cess can be paid on the strength of the challans at the designated bank. No copy of shipping bill is made available to exporter/CHA at this stage.

(e)        Octroi procedure, Quota Allocation and Other certification for Export Goods:

43.        The quota allocation label is required to be pasted on the export invoice. The allocation number of AEPC is to be entered in the system at the time of shipping bill entry. The quota certification of export invoice needs to be submitted to Customs along-with other original documents at the time of examination of the export cargo. For determining the validity date of the quota, the relevant date needs to be the date on which the full consignment is presented to the

Customs for examination and duly recorded in the Computer System. In EDI System at Delhi Air cargo, the quota information is automatically verified from the AEPC/TEXPROCIL system.

44.        Since the shipping bill is generated only after the 'let export order' is given by Customs, the exporter may make use of export invoice or such other document as required by the Octroi authorities for the purpose of Octroi exemption.

(f)        Arrival of Goods at Docks:

45.        The goods brought for the purpose of examination and subsequent 'let export' is allowed entry to the Dock on the strength of the checklist and other declarations filed by the exporter in the Service Center. The Port authorities have to endorse the quantity of goods actually received on the reverse of the Check List.

(g)        System Appraisal of Shipping Bills:

46.        In many cases the Shipping Bill is processed by the system on the basis of declarations made by the exporters without any human intervention. In other cases where the Shipping Bill is processed on screen by the Customs Officer, he may call for the samples, if required for confirming the declared value or for checking classification under the Drawback Schedule. He may also give any special instructions for examination of goods, if felt necessary.

(h)        Status of Shipping Bill:

47.        The exporter/CHA can check up with the query counter at the Service Center whether the Shipping Bill submitted by them in the system has been cleared or not, before the goods are brought into the Docks for examination and export. In case any query is raised, the same is required to be replied through the service center or in case of CHAs having EDI connectivity through their respective terminals. The Customs officer may pass the Shipping Bill after all the queries have been satisfactorily replied to.

(i)        Customs Examination of Export Cargo:

48.        After the receipt of the goods in the dock, the exporter/CHA may contact the Customs Officer designated for the purpose present the check list with the endorsement of Port Authority and other declarations as aforesaid along with all original documents such as, Invoice and Packing list, AR-4, etc. Customs Officer may verify the quantity of the goods actually received and enter into the system and thereafter mark the Electronic Shipping Bill and also hand over all original documents to the Dock Appraiser of the Dock who many assign a Customs Officer for the examination and intimate the officers’ name and the packages to be examined, if any, on the check list and return it to the exporter or his agent.

49.        The Customs Officer may inspect/examine the shipment along with the Dock Appraiser. The Customs Officer enters the examination report in the system. He then marks the Electronic Bill along with all original documents and check list to the Dock Appraiser. If the Dock Appraiser is satisfied that the particulars entered in the system conform to the description given in the original documents and as seen in the physical examination, he may proceed to allow "let export" for the shipment and inform the exporter or his agent.

(j)        Variation between the Declaration & Physical Examination:

50.        The check list and the declaration along with all original documents are retained by the Appraiser concerned. In case of any variation between the declaration in the Shipping Bill and

physical documents/examination report, the Appraiser may mark the Electronic Shipping Bill to the Assistant Commissioner/Deputy Commissioner of Customs (Exports). He may also forward the physical documents to Assistant Commissioner/Deputy Commissioner of Customs (Exports) and instruct the exporter or his agent to meet the Assistant Commissioner/Deputy Commissioner of Customs (Exports) for settlement of dispute. In case the exporter agrees with the views of the Department, the Shipping Bill needs to be processed accordingly. Where, however, the exporter disputes the view of the Department principles of natural justice is required to be followed before finalization of the issue.

(k)        Stuffing / Loading of Goods in Containers

51.        The exporter or his agent should hand over the exporter copy of the shipping bill duly signed by the Appraiser permitting "Let Export" to the steamer agent who may then approach the proper officer (Preventive Officer) for allowing the shipment. In case of container cargo the stuffing of container at Dock is dome under Preventive Supervision. Loading of both containerized and bulk cargo is done under Preventive Supervision. The Customs Preventive Superintendent (Docks) may enter the particulars of packages actually stuffed in to the container; the bottle seal number particulars of loading of cargo container on board into the system and endorse these details on the exporter copy of the shipping bill presented to him by the steamer agent. If there is a difference in the quantity/number of packages stuffed in the containers/goods loaded on vessel the Superintendent (Docks) may put a remark on the shipping bill in the system and that shipping bill requires amendment or changed quantity. Such shipping bill also may not be taken up for the purpose of sanction of Drawback/DEEC logging, till the shipping bill is suitably amended for the changed quantity. The Customs Preventive Officer supervising the loading of container and general cargo in to the vessel may give "Shipped on Board" endorsement on the exporter’s copy of the shipping bill.

(l)        Drawal of Samples:

52.        Where the Appraiser Dock (export) orders for samples to be drawn and tested, the Customs Officer may proceed to draw two samples from the consignment and enter the particulars thereof along with details of the testing agency in the ICES/E system. There is no separate register for recording dates of samples drawn. Three copies of the test memo are prepared by the Customs Officer and are signed by the Customs Officer and Appraising Officer on behalf of Customs and the exporter or his agent. The disposal of the three copies of the test memo is as follows:-

i)      Original – to be sent along with the sample to the test agency.ii)     Duplicate – Customs copy to be retained with the 2nd sample.iii)    Triplicate – Exporter’s copy.

53.        The Assistant Commissioner/Deputy Commissioner if he considers necessary, may also order for sample to be drawn for purpose other than testing such as visual inspection and verification of description, market value inquiry, etc.

(m)        Amendments:

54.        Any correction/amendments in the check list generated after filing of declaration can be made at the service center, provided, the documents have not yet been submitted in the system and the shipping bill number has not been generated. Where corrections are required to be made after the generation of the shipping bill No. or after the goods has been brought into the Export Dock, amendments is carried out in the following manners.

i)        If the goods have not yet been allowed "let export" amendments may be permitted by the Assistant Commissioner (Exports).ii)        Where the "Let Export" order has already been given, amendments may be permitted only by the Additional/Joint Commissioner, Custom House, in charge of export section.

55.        In both the cases, after the permission for amendments has been granted, the Assistant Commissioner/Deputy Commissioner (Export) may approve the amendments on the system on behalf of the Additional /Joint Commissioner. Where the print out of the Shipping Bill has already been generated, the exporter may first surrender all copies of the shipping bill to the Dock Appraiser for cancellation before amendment is approved on the system.

(n)        Export of Goods under Claim for Drawback:

56.        After actual export of the goods, the Drawback claim is processed through EDI system by the officers of Drawback Branch on first come first served basis. There is no need for filing separate drawback claims. The status of the shipping bills and sanction of DBK claim can be ascertained from the query counter set up at the service center. If any query has been raised or deficiency noticed, the same is shown on the terminal. A print out of the query/deficiency may be obtained by the authorized person of the exporter from the service center. The exporters are required to reply to such queries through the service center. The claim will come in queue of the EDI system only after reply to queries/deficiencies is entered by the Service Center.

57.        All the claims sanctioned on a particular day are enumerated in a scroll and transferred to the Bank through the system. The bank credits the drawback amount in the respective accounts of the exporters. Bank may send a fortnightly statement to the exporters of such credits made in their accounts.

58.        The Steamer Agent/Shipping Line may transfer electronically the EGM to the Customs EDI system so that the physical export of the goods is confirmed, to enable the Customs to sanction the drawback claims.

(o)        Generation of Shipping Bills:

59.        After the "let export" order is given on the system by the Appraiser, the Shipping Bill is generated by the system in two copies i.e., one Customs copy, one exporter’s copy (E.P. copy is generated after submission of EGM). After obtaining the print out the appraiser obtains the signatures of the Customs Officer on the examination report and the representative of the CHA on both copies of the shipping bill and examination report. The Appraiser thereafter signs & stamps both the copies of the shipping bill at the specified place.

60.        The Appraiser also signs and stamps the original & duplicate copy of SDF. Customs copy of shipping bill and original copy of the SDF is retained along with the original declarations by the Appraiser and forwarded to Export Department of the Custom House. He may return the exporter copy and the second copy of the SDF to the exporter or his agent.

61.        As regards the AEPC quota and other certifications, these are retained along with the shipping bill in the dock after the shipping bill is generated by the system. At the time of examination, apart from checking that the goods are covered by the quota certifications, the details of the quota entered into the system needs to be checked.

(p)        Export General Manifest:

62.        All the shipping lines/agents need to furnish the Export General Manifests, Shipping Bill wise, to the Customs electronically within 7 days from the date of sailing of the vessel.

63.        Apart from lodging the EGM electronically the shipping lines need to continue to file manual EGMs along with the exporter copy of the shipping bills as per the present practice in the export department. The manual EGMs need to be entered in the register at the Export Department and the Shipping lines may obtain acknowledgements indicating the date and time at which the EGMs were received by the Export Department.

64.        The above is the general procedure for export under EDI Systems. However special procedures exist for specified schemes, details of which may be obtained from the Public Notice/Standing Orders issued by the respective Commissionerates.

System of classification of Goods

Customs duties are chargeable on the act of importation of Goods. On some goods, customs duties are also charged on the act of exportation. The Goods that enter international trade are not charged to a single rate of customs duty by the importing / exporting country. It is required that such goods which enter the international trade are grouped into exclusive similar categories / class of goods [chemicals, metals, textiles, machinery, etc.] and enumerated on the basis of well defined criteria. The sub division and enumeration of all goods entering International trade along with well defined rules of interpretation, form what is normally termed as the nomenclature of goods, in a country. Governments utilize the nomenclature as the basis for prescribing appropriate duty on goods imported / exported. The nomenclature combined with the duty rates is called the Tariff. As the tariff is normally a part of the Tariff Act in a country, it is called the ‘Tariff Schedule’.

2.        A good nomenclature of goods should ensure;

(i)That every product manufactured or otherwise, will get covered under a code number uniformly applied the world over.

(ii) That a set of rules is available for interpretation.

(iii)That the nomenclature is accepted internationally as a technical and legal basis for improving trade relations amongst countries.

(iv)

That a statistical base, suitable for computerization is available.

3.        The need of the nomenclature was largely fulfilled by the Brussels Tariff Nomenclature (BTN) evolved by the world body, Customs Cooperation Council. However, with a view to facilitate trade flow and analysis of trade statistics in a much more coordinated manner, the Customs Cooperation Council (since renamed as World Customs Organization) developed the Harmonized Commodity Description and Coding System (HS) in 1986. India adopted this nomenclature for tariff purposes with effect from 28.2.86. The Customs Tariff is fully aligned with the HS. The Central Excise Tariff is fully aligned with the HS at the four digit level, and at the six digit level, proper enumeration and subdivision of products is done keeping in view the goods that enter the trade, our experience with the concept of manufacture and the level of growth of the indigenous industry.

4.        The World Customs Organization (WCO), for purposes of uniform interpretation of the HS, has published detailed Explanatory notes to various headings / subheadings explaining their scope. This forms the basis for interpreting the HS. The WCO, in its various committees

discusses about the classification of individual products and gives classification opinion on them. Such information, though not binding in nature provides a useful guideline for classifying goods.

5.        In the Tariff Schedule, commodities are arranged in a fixed pattern with the duty rates specified against each of them. The pattern of arrangement of goods in the Tariff is in the increasing degree of manufacture involved. The pattern of arrangement of goods is in the following sequence. Natural products, raw materials, semi finished goods and fully finished goods / article / machinery, etc. The legal text of the Tariff consists of Sections, Chapters, Headings, Subheadings, subheading notes and the General Interpretative Rules (GIR). The Indian Customs Tariff has 21 sections and 99 chapters. A Section is a grouping together of a number of Chapters which codify a particular class of goods. The Section notes explain the scope of chapters / headings, etc. The Chapters consist of chapter notes, brief description of commodities arranged at four digit and six digit levels. Every four digit code is called a ‘heading’ and every six digit code is called a ‘subheading’.

6.        The process of arriving at a particular heading / Subheading code, either at four digit or six digit level for a commodity in the Tariff Schedule is called ‘classification’. This helps in determining the rate of duty leviable as prescribed by the legislature. However goods intended for a ‘project’ or goods imported by post / baggage for personal use, are earmarked a separate heading in the Indian Customs Tariff, under which they will be classified straightaway. These provisions are explained separately.

7.        Goods are classified taking into consideration the scope of headings / subheadings, related Section Notes, Chapter Notes and the General Interpretative Rules (GIR). The GIR is a set of 6 rules for classification of goods in the Tariff Schedule. These rules have to be applied sequentially.

8.        The Interpretative Rules play a very important role in the classification of the goods. Rule 1 of the GIR gives precedence to the Section notes / Chapter notes while classifying a product. Rule 2(a) applies to goods imported in assembled / unassembled condition. Such goods may be in incomplete or finished form. Rule 2(b) is applicable to ‘mixtures’ and ‘composite goods’. Goods which are not classifiable by application of Rule 2(b) will have to be classified by application of Rule 3. Rule 3 has three sub rules. Rule 4 states that goods which cannot be classified by application of the preceding rules may be classified under the heading appropriate to the goods to which they are most akin. Rule 5 applies to packing materials / articles in which the goods are carried. Rule 6 provides the general guideline for classification of goods under the appropriate sub heading.

9.        While classifying goods, the foremost consideration is the ‘statutory definition’. In the absence of any statutory definition, and any guideline provided by HS explanatory notes, the cardinal principle would be the way goods are known in ‘common parlance’. Many times statutes contain definitions and meanings of only a restricted number of words, expressions or phrases. While interpreting the common words used in the statute, giving more importance than due to common dictionary meanings may be misleading many a times as the dictionary gives all shades of meaning of a particular word. Similarly, meanings assigned in technical dictionaries will also have limited application.

10.        The ‘trade meaning’ should be given due importance unless the Tariff itself requires that the terms should be interpreted in a strict technical sense. Technical dictionaries should be used in such circumstances. If any scientific test is to be performed, the same has to be carried out as prescribed to arrive at the classification of goods. The common dictionary meaning of technical words should not be accepted in such cases. Normally, the common parlance understanding is indicative of the functional character of the goods. Further, in matters of classification it makes no difference whether the quality of goods is prime or defective. There is no prohibition on customs

authorities in revising the classification once decided. However revision of classification should be only done for good and sufficient reasons. In case of difficulty in understanding the scope of the headings / subheadings, reference should be made to supplementary texts like the Explanatory Notes to the HS.

11.        The rate of duty specified in the Tariff Schedule is called ‘Tariff rate of duty’. Goods which are not identified for concessional rate of duty / exemption from duty by issue of an exemption notification issued in terms of Customs Act provisions are levied to the tariff rate of duty. In the export tariff schedule, only the commodities on which export tariff is levied are stated which does not involve the rigorous process of classification. In fact export duties are leviable only on listed 26 commodities but by exemption notifications, all but one set of item (i.e., leather items) are completely exempt from export duties. In the Central Excise Tariff, an Excise Duty is specified against each subheading. Goods which are prescribed ‘nil’ rates of duty in the Tariff are those goods which are levied to ‘free’ rates of duty.

12.        In the Tariff Schedule, over the years, a systematic effort has been done to unify rates on similar products to achieve economic rationality and reduction in the scope of classification disputes. As far as possible, similar goods are subjected to uniform duty rates. Various class goods are also levied to different ‘Slabs of rates of duty’. These slabs have also been reduced progressively. There are four different duty slabs in general and these are 5%, 15%, 25% & 35% at present.

13.        The CBEC issues Tariff advices in the form of circulars on classification matters to ensure uniformity in classification of goods at an all India level. Such issues also get discussed in the Conferences of Commissioners of customs on Tariffs and Allied Matters (Tariff conferences) held periodically at various Custom Houses in which all the Commissioners / Chief Commissioners of customs participate. The decisions of the Tariff conferences is published in the form of minutes (in printed book form) and circulated to all the Custom Houses for compliance. An Advance Ruling Authority has been set up for giving binding tariff information to Joint Ventures set up by Non residents.

14.        Permissibility of import and export of Goods is governed by the nomenclature, ITC (HS) classification of import and export goods, published by the Directorate General of Foreign Trade (DGFT). In this nomenclature, goods are arranged as they are in the HS but are codified by ten digit numerical code to identify goods with more precision for purposes of import / export control.

15.        CBEC has undertaken an exercise for unifying the classification codes under the Customs tariff, Central Excise tariff, ITC (HS) and the statistical schedule to evolve a Combined Nomenclature at the eight digit level to make it in tune with international statistical schedule. Once legislated, it will provide a base for collecting comprehensive trade data for statistical purposes.

16.        The process of classification of goods is of paramount importance now, as both industrialized and developing countries use it as a tool for implementation of various trade policy instruments, international commercial arrangements, and multilateral Tariff agreements. Further, as the variety of products traded internationally grows rapidly, it is all the more necessary that the nomenclature keeps up with the technological progress. The HS, taking note of the trade flow, technological progress, etc., is amended from time to time. The amended version is incorporated in the Indian Tariff Schedule, periodically.

Special Classification Schemes for Imported Goods; for a Project, Baggage and Postal Articles

(A)        Project Import:

The ‘Project Import Scheme’ is an Indian innovation to facilitate setting up of and expansion of industrial projects. Normally, imported goods have to be classified ‘on merits’ under the Customs and Excise Tariffs for levy of duty. This implies that each individual article has to be classified separately and assessed to appropriate duty not only for the purposes of customs duty but also for the purposes of Countervailing Duty (CVD). For setting up of a ‘Project’, a number of goods may be imported in one or many consignments. If all goods required for the project are to be classified and valued separately for assessment to duty, the process becomes cumbersome. This may lead to delay in clearance of goods. Further, the suppliers, while sending goods for a contracted project, do not value each and every item or parts of machinery manufactured and supplied in stages. Ascertaining values for different items further delayed assessment on merits and leading to demurrage and time and cost overruns for the project. The project import assessment provisions introduced in Customs Tariff in 1965 and continued ever since facilitate early and quick assessment by simplifying the process of classification and valuation of goods required for a project.

2.        The Project Import Scheme seeks to achieve the objective of simplifying the assessment in respect of import of capital goods and all the related items required for setting up of a project by levy of a flat rate of duty in respect of such goods. This objective has been achieved by incorporating a heading 98.01 under Chapter 98 of the Customs Tariff and prescribing a uniform customs duty rate under this heading. All the goods approved for importation in connection with an industrial project are classified under this heading. Goods classified under this heading cannot be classified under any other heading which may cover the product more specifically.

3.        The different projects to which heading 98.01 applies are; irrigation project, power project, mining project, oil / mineral exploration projects, etc. Such an assessment is also available for an industrial plants used in the process of manufacture of a commodity. However this benefit is not available to hotels, hospitals, photographic studios, photographic film processing laboratories, photocopying studios, laundries, garages and workshops. This benefit is also not available to a single or composite machine. The Central Government can also notify projects in public interest keeping in view the economic development of the country to which this facility will apply. This is achieved by issuing a notification. A number of notifications have been issued notifying a large number of projects for assessment under heading 98.01.

4.        Goods that can be imported under this scheme are machinery, prime movers, instruments, apparatus, appliances, control gear, transmission equipment, auxiliary equipment, equipment required for research and development purposes, equipment for testing and quality control, components, raw materials for the manufacture of above items, etc. In addition, raw material, spare parts, semi finished material, consumable unto ten percent of the assessable value of goods can also is imported.

5.        The purposes for which such goods can be imported are for initial setting up’ or for ‘substantial expansion’ of a unit of the project. The ‘unit’ is any self contained portion of the project having an independent function in setting up the project. A project falls under the category of ‘substantial expansion’ if the installed capacity of the unit is increased by not less than twenty five percent, as per the Project Import Regulations.

6.        The Central Government has formulated the Project Import Regulations (PIR) prescribing the procedure for effecting imports under this scheme. The procedure is as follows:

Procedure for Availing Benefits under Project Imports

7.        Registration of Contracts: The basic requirement for availing the benefit of Project Import Regulations is that the importer should have entered into one or more contracts with the suppliers of the goods. Such contracts should be registered prior to clearance in the Customs House

through which the goods are expected to be cleared. The importer shall apply for such registration in writing to the proper officer of Customs.

8.        As per Regulation 4, the assessment under Heading No.98.01 is available only to those goods which are imported against one or more specific contracts, which have been registered with the appropriate Custom house in the manner specified in Regulation 5 .The contract is required to be registered.

i) before any order is made by the proper officer of customs permitting the clearance of the goods for home consumption;

ii)

in the case of goods cleared for home consumption without payment of duty subject to re-export in respect of fairs, exhibitions, demonstrations, seminars, congresses and conferences, duly sponsored or approved by the Government of India or Trade Fair Authority of India, as the case may be, before the date of payment of duty.

To expedite early registration, the importers are advised to submit the following documents at the time of registration:-

a)

An application for registration of the contract.

b)

Original deed of contract together with true copy thereof.

c) Industrial License and letter of intent, SSI Certificate granted by the appropriate authority with a copy thereof.

d)

Original Import license, if any, with a list of items showing the dimensions, specifications, quantity, quality, value of each item duly attested by the Licensing Authority and a copy thereof.

e)

Recommendatory letter for duty concession from the concerned Sponsoring Authority, showing the description, quantity, specification, quality, dimension of each item. Sponsoring authority should indicate whether the recommendatory letter is for initial set-up or substantial expansion, giving the installed capacity and proposed addition thereto.

f) Continuity Bond with Cash Security Deposit equivalent to the 2% of CIF value of contract sought to be registered subject to the maximum of Rs.50,00,000/- and the balance amount by Bank Guarantee backed by an undertaking to renew the same till the finalization of the contract. The said continuity bond should be made out for an amount equal to the CIF value of the contract sought to be registered.

g)

Process flow chart, plant layout, drawings showing the arrangement of imported machines along with an attested copy of the Project Report submitted to the Sponsoring authorities, Financial Institution, etc.

h)

Write up, drawings, catalogues and literature of the items under import.

i) Two attested copies of foreign collaboration agreement, technical agreement, know-how, basic/detailed engineering agreement, equipment supply agreement, service agreement, or any other agreement with foreign collaborators/suppliers/persons including the details of payment actually made or to be made.

j) Such other particulars as may be considered necessary by proper officer for the purpose of assessment under Heading No. 98.01.

Procedure Followed in Custom Houses:

9.        After satisfying that goods are eligible for project imports benefit and importer has submitted the entire required document, the contract is registered by the Custom House and as a token of registration the provisional duty bond is accepted by the Asst. / Dy.Commissioner of Customs, Project Group. The details of the contracts are entered in the register kept for the purpose and a project registration number is assigned and is communicated to the importer. The importer is required to refer to this number in all subsequent correspondence.

Clearance of Goods after Registration:

10.        On every Bill of Entry filed for clearance of goods under the Project Import Scheme, the importer/clearing agent is required to indicate the Project Contract number allotted to it. After noting, the Bill of Entry is sent to the project group, which is required to check the description, value and quantity of the goods imported vis-à-vis the description, value and quantity registered. In case these particulars are found in order, the bill of entry is assessed provisionally and handed over to the importer or his agent for payment of duty. The Project Group keeps a note of the description of the goods and their value in the project contract register and in the file maintained in the group for each project.

Finalization of Contract:

(a)        Submission & Reconciliation Statement by Importer:

11.        Under Rule 7 of the PIR, 1986 the importer is required to submit, within three months from the date of clearance of the last consignment or within such extended time as the proper officer may allow the following documents for the purpose of finalization of the assessment:

(i) a reconciliation statement i.e. a statement showing the description, quantity and value of goods imported along with a certificate from a registered Chartered Engineer certifying the installation of each of the imported items of machinery;

(ii)

Copies of the bills of entry, invoices, and final payment certificate.

The final payment certificate is insisted upon only in cases where the contract provides that the amount of the transaction wilt be finally settled after completion of the supplies.

(b)        Plant Site Verification:

12.        To ensure proper that the imported goods have actually been used for the projects for which these have been imported, plant site verification may be done in cases where value of the project contract exceeds Rs.1 crore. In other cases plant site verification is normally done selectively.

(c)        Action by the Assessing Group:

13.        In the normal course after submission of the reconciliation statement and other documents by the importers, the provisional assessments are finalized within a period of three months where plant site verification is not required and within six months where plant site verification is required. In cases where a demand has been issued and confirmed on such finalization and importer has not paid the duty demanded, coercive steps are taken to realize the amount.

(B)        Baggage:

14.        Similar to project imports, all goods imported by a passenger or a member of crew in his baggage are classifiable under one heading / subheading 98.03 and levied to a single rate of duty. Such goods need not have to be classified separately in the Tariff. [Except motor vehicles, alcoholic drinks, goods imported through courier service]. Such assessment will however not apply to goods imported by a passenger or a member of the crew under an import license or a customs clearance permit.

(C)        Postal goods:

15.        Similar to project imports and baggage, all goods imported by post/ air or for personal use are classifiable under a single heading, i.e., 98.04 and levied to duty accordingly. This heading has been sub divided into two subheadings. One applicable to drugs & medicines and other, the rest. Such goods will however be governed by the Exim policy as far importibility is concerned. Motor vehicles, alcoholic drinks and goods imported through courier service can however not be classified under this heading. Goods imported under an import license or a customs clearance permit will however not be classified under this heading.

Customs Valuation

The rates of customs duties leviable on imported goods (& export items in certain cases) are either specific or on ad valorem basis or at times specific cum ad valorem. When customs duties are levied at ad valorem rates, i.e., depending upon its value, it becomes essential to lay down in the law itself the broad guidelines for such valuation to avoid arbitrariness and to ensure that there is uniformity in approach at different Customs formations. Section 14 of the Customs Act, 1962 lays down the basis for valuation of import & export goods in the country. It has been subject to certain changes – basic last change being in July-August, 1988 when present version came into operation. Briefly the provisions are explained in the following paragraphs.

Tariff Value:

2.        The Central Government has been empowered to fix values, under sub-section (2) of Section 14 of the Customs Act, 1962 for any product which are called Tariff Values. If tariff values are fixed for any goods, ad valorem duties are to be calculated with reference to such tariff values. The tariff values may be fixed for any class of imported or export goods having regarded to the trend of value of such or like goods and the same has to be notified in the official gazette. Recently tariff values have been fixed in respect of import of Crude Palm Oil, RBD Palm Oil, RBD Palmolein under Notification No.36/2001-CUS (N.T.), dated 3.8.2001 and for RBD Crude Palmolein under Notification No. 40/2001-CUS (N.T.) dated 28.08.2001.

Valuation of Imported/Export Goods where no Tariff Values fixed:

3.        Section 2(41) of the Customs Act, 1962 defines ‘Value’ in relation to any goods to mean the value thereof determined in accordance with the provisions of sub-section (1) of Section 14 thereof.

4.        Sub-section (1) of Section 14 in turn states that when a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be: -

"the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international

trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale".

5.        As far as export goods are concerned, provisions of sub-section (1) of Section 14 provide a complete code of valuation by itself. On the other hand, for imported goods, as per sub-section (1A) of Section 14, the value is required to be determined in accordance with rules made in this behalf. Accordingly, the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 have been framed and notified under Notification No.51/88-CUS (N.T.) dated 18.7.1988.

6.        The provisions of sub-section (1) of Section 14 follow the provisions contained in Article VII of GATT. The Customs Valuation Rules closely follow the WTO Customs Valuation Agreement to implement Article VII of GATT. The methods of valuation prescribed therein are of a hierarchical order. The importer is required to truthfully declare the value in the B/E and also provide a copy of the invoice and file a valuation declaration in the prescribed form to facilitate correct and expeditious determination of value for assessment purposes.

Methods of Valuation:

7.        According to the Customs Valuation Rules, 1988, the Customs Value should normally be the "Transaction Value", i.e., the price actually paid or payable after adjustment by Valuation Factors (see below) and subject to (a) Compliance with the Valuation Conditions (see below) and (b) Customs authorities being satisfied with the truth and accuracy of the Declared Value.

Transaction Value:

8.        Rule 3(i) of the Customs Valuation Rules, 1988 states that the value of imported goods shall be the transaction value. Rule 4(i) thereof states that the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9.

9.        The price actually paid or payable is the total payment made or to be made by the buyer to the seller or for the benefit of the seller for the imported goods. It includes all payments made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller.

10.        If objective and quantifiable data do not exist with regard to the Valuation Factors, if the Valuation Conditions are not fulfilled, or if Customs authorities have doubts concerning the truth or accuracy of the declared value in terms of Rule 10A of the Customs Valuation Rules, valuation has to be carried out by another method in the following hierarchical order:

Comparative Value Method – Comparison with Transaction Value of Identical goods (Rule 5);

Comparative Value Method – Comparison with Transaction Value of Similar goods (Rule 6);

Deductive Value Method – Based on sale price in the importing country (Rule 7); Computed Value Method – Based on cost of materials, fabrication and profit in the country of production (Rule 7A);

Fallback Method – Based on previous methods with greater flexibility (Rule 8).

VALUATION FACTORS:

11.        Valuation Factors are the various elements which must be taken into account by addition (Dutiable factors) to the extent these are shown to be not already included in the price actually paid or payable or deduction (Non-dutiable factors) from the total price incurred in determining the Customs Value, for assessment purposes.

Dutiable Factors:

Commissions and brokerage, except buying commissions;

The cost of containers which are treated as being one for Customs purposes with the goods in question;

The cost of packing whether for labor or materials;

The value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, to the extent that such value has not been included in the price actually paid or payable:-

material, components, parts and similar items incorporated in the imported goods;

tools, dies, moulds and similar items used in the production of the imported goods;

materials consumed in the imported goods;

engineering, developing, artwork, design work, and plans and sketches undertaken elsewhere than in the importing country and necessary for the production of imported goods;

Royalties and license fees related to goods being valued that the buyer must pay either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable;

The value of any part of the proceeds of any subsequent resale, disposal or use of the goods that accrues directly or indirectly to the seller;

Advance payments;

Freight charges up to the place of importation;

Loading, unloading and handling charges associated with transporting the goods;

Insurance.

Non-dutiable Factors:

The following charges provided they are separately declared in the commercial invoice:-

Interest charges for deferred payment;

Post-importation charges (e.g. inland transportation charges, installation or erection charges, etc.);

Duties and taxes payable in the importing country.

Cases where transaction value may be rejected:

12.        The transaction value may not be accepted for customs valuation in the following categories of cases as provided in Rule 4(2):-

(a)        If there are restrictions on use or disposition of the goods by the buyer. However, the transaction value not to be rejected on this ground if restrictions:

(i)are imposed by law or public authorities in India;

(ii)limit geographical area of resale;

(iii)

Do not affect the value of the goods substantially.

(b)        If the sale or price is subject to a Condition or consideration for which a Value cannot be determined. However, conditions or considerations relating to production or marketing of the goods shall not result in rejection.

(c)        If part of the proceeds of the subsequent resale, disposal or use of the goods accrues to the seller, unless an adjustment can be made as per valuation factors.

(d)        Buyer and seller are related; unless it is established by the importer that –

(i)

The relationship has not influenced the price;

(ii) The importer demonstrates that the price closely approximates one of the test values.

13.        The transaction price declared can also be rejected in terms of Rule 10A, when the proper customs officer has reasons to doubt the truth or accuracy of the value declared & if even after furnishing of further information/documents or other evidence produced, proper officer is not satisfied & has reasonable doubts about the value declared.

Rights of appeal:

14.        The principles of natural justice are also required to be followed in valuation matters. When the Customs authorities do not accept the declared value and re-determine the Customs value, the importer or his representative is required to be given a written notice normally and even a personal hearing. An adjudication order giving in detail the basis of determination of the value can be obtained if the importer is aggrieved with the re-determination of value. Under the

Customs Act, 1962, an importer can appeal against a decision on valuation to the Commissioner (Appeal) in the first instance. A second appeal lies to the Tribunal consisting of administrative and judicial members. A third appeal lies to the Supreme Court of India. The importer is informed regarding his rights of appeal by each of the adjudicating and appellate authorities.

Provisional clearance of imported goods:

15.        Section 18 of the Customs Act, 1962 and Customs (provisional duty assessment regulation), 1963 [M.F. (D.R.) Notification No.181-Cus., dated 13th July, 1963], allows an importer to provisionally clear the imported goods from Customs pending final determination of value by giving a guarantee in the form of surety, security deposit or bank guarantee.

Valuation of Imported goods in case of related party transaction:

16.        Sub-rule 2 of Rule 2 of Customs Valuation Rules, 1988 has enumerated the persons who shall be deemed to be "related". Sub-Rule 3 of Rule 4 provides that where buyer and seller are related, the transaction value can be accepted if the examination of circumstances of the sale of the imported goods indicate that the relationship did not influence the price or if the importer demonstrates that the declared value of the goods being valued, closely approximately to one of the test values namely transaction value of identical/similar goods, deductive value for identical/similar goods or computed value for identical/similar goods ascertained at or about the same time.

17.        The related party transactions are examined by Special Valuation Branches located at four major Custom Houses namely Mumbai, Calcutta, and Chennai & Delhi. The guidelines for examination of the circumstances of the sale of the imported goods in case of related parties have been laid down vide Ministry’s Circular No.11/2001-Cus., dated 23.2.2001. The circular provides a questionnaire to be filed up and a list of documents to be furnished and the same could be studied for ensuring timely action by concerned importers so that finalization of provisional assessments is expedited.

Provisional Assessment

Once goods declaration is submitted in the prescribed form (Bill of Entry or Shipping Bill ) containing all the relevant information/details and along-with all the relevant documents, the duty leviable on the imported goods or export goods, if any, is assessed by the Customs officer. Sometimes, it is not possible to assess the duty due to non-availability of some relevant information/document or any other reason. Withholding clearance of goods in such cases may cause hardship to the importers by way of payment of demurrage/detention charges, disturbance in production schedule and other financial losses. Similarly in exports, delay in clearance may cause cancellation of export order, increase in interest liability and other financial losses to the exporters. To meet such exigencies, provisions have been made in section 18 of the Customs Act, 1962 to assess the duty provisionally and allow clearance of the goods by taking a bond with appropriate security.

Conditions for allowing provisional assessment

2.        The provisional assessment may be resorted to in following situations: (a)

where the proper officer of Customs is satisfied that an importer or exporter is unable to produce any document or furnish any information necessary for the assessment of duty on the imported goods or the export goods, as the case may be; or

(b where the proper officer of Customs deems it necessary to subject any imported goods or

) export goods to any chemical or other test for the purpose of assessment of duty thereon; or

(c) Where the importer or the exporter has produced all the necessary documents and furnished full information for the assessment of duty but the proper officer of Customs deems it necessary to make further enquiry for assessing the goods.

3.        In above situations, pending the production of such documents or furnishing of such information or completion of such test or enquiry, the proper officer of Customs may order that the duty leviable on goods be assessed provisionally. The importer (or exporter), has to execute appropriate bond and furnish requisite security to the satisfaction of officer for payment of the deficiency, if any, between the duty finally assessed and duty provisionally assessed. On final assessment of duty in case of goods cleared for home consumption or exportation, the amount paid provisionally is adjusted against the duty finally assessed. If the amount so paid falls short of the duty finally assessed, the importer or exporter has to pay the deficiency; however, if amount so paid is in excess of duty finally assessed, the importer or exporter is entitled to a refund. In the case of goods being warehoused, if duty finally assessed is in excess of the duty provisionally assessed, the proper officer of Customs may require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty.

Terms of the Bond

4.        (i)        Where the provisional assessment is allowed pending the production of any document or furnishing of any information by the importer or exporter, as the case may be, the terms of bond generally are that required document/information shall be furnished within one month or within such extended period as the proper officer may allow, and that the person executing the bond shall pay the deficiency, if any, between the duty finally assessed and the duty provisionally assessed.

(ii)        Where the provisional assessment is allowed pending the completion of any test or enquiry, the terms of bond generally are that the person executing the bond shall pay the deficiency, if any, between the duty finally assessed and the duty provisionally assessed.

Determination of amount of bond for provisional assessment

5.        The provisions of the Customs (Provisional Duty Assessment) Regulations, 1963 lay down that the importer or exporter claiming provisional assessment is required to execute a bond for the difference between the duty that may be finally assessed and the provisional duty. The same regulations also provide that the proper officer of Customs may require that the bond to be executed under these regulations may be with such surety, or security or both as the proper officers deems fit. There may of course, be cases where calculation of exact difference between duty provisionally assessed and duty finally assessed may not be possible. But, even in such cases invariably, it would be possible to make some estimate of the same. In all the cases, the amount of surety and security for provisional assessment is normally restricted to the difference of duty provisionally assessed and duty which may be finally assessed.

Surety and Security of the bond

6.        The Customs (Provisional Duty Assessment) Regulations, 1963 allows proper officer of Customs to accept bond for provisional assessment with such surety or security or both, as he deems fit. Normally requirement of surety/security is dispensed with in respect of Government Departments (or even Government Undertakings).

Finalization of provisional assessment

7.        It is to be ensured that most of the ordinary type of cases of provisional assessment are finalized expeditiously well within six months of the date of provisional assessment. In respect of machinery contract cases or registered large project import cases, where imports take place over long periods, some times extending over a number of years and where action to finalize the case can be taken only after all the imports under the contract have been made, every effort should be made to finalize the cases within six months of the date of import of the last consignment covered by the contract.

(Ref. Customs (Provisional duty Assessment) Regulations, 1963 issued vide M.F.Director (ICD).R) Notification No. 181-Cus., dated 13/7/1963 and instructions issued vide Board's letters F.No. 512/5/72-Cus.VI dated 23/4/1973 and F.No. 511/7/77-Cus. VI dated 9/1/78).

Import / Export Restrictions / Prohibitions under Customs law

Under sub-section (d) of section 111 and sub-section (d) of Section 113, any goods which are imported or attempted to be imported and exported or attempted to be exported, contrary to any prohibition imposed by or under the Customs Act or any other law for the time being in force shall be liable to confiscation. Section 112 of the Customs Act provides for penalty for improper importation and Section 114 of the Customs Act provides for penalty for attempt to export goods improperly. In respect of prohibited goods the Adjudicating Officer may impose penalty up to five times the value of the goods. It is, therefore, absolutely necessary for the trade to know what are the prohibitions or restrictions in force before they contemplate to import or export any goods.

2.        The terms "Prohibited Goods" have been defined in sub-section 33 of Section 2 of the Customs Act as meaning "any goods the import or export of which is subject to any prohibition under the Customs Act or any other law for the time being in force".

3.        Under section 11 of the Customs Act, the Central Government has the power to issue Notification under which export or import of any goods can be declared as prohibited. The prohibition can either be absolute or conditional. The specified purposes for which a notification under section 11 can be issued are maintenance of the security of India, prevention and shortage of goods in the country, conservation of Foreign Exchange, safeguarding balance of payments etc. The Central Govt. has issued many notifications to prohibit import of sensitive goods such as coins, obscene books, printed waste paper containing pages of any holy books, armored guard, fictitious stamps, explosives, narcotic drugs, rock salt, saccharine, etc.

4.        Under Export and Import Policy, laid down by the DGFT, in the Ministry of Commerce, certain goods are placed under restricted categories for import and export. Under section 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992, the Central Government can make provisions for prohibiting, restricting or otherwise regulating the import of export of the goods. As for example, import of second hand goods and second hand capital goods is restricted. Some of the goods are absolutely prohibited for import and export whereas some goods can be imported or exported against a license. For example export of human skeleton is absolutely prohibited whereas export of cattle is allowed against an export license. Another example is provided by Notification No.44 (RE-2000) 1997 dated 24.11.2000 in terms of which all packaged products which are subject to provisions of the Standards of Weights and Measures (Packaged Commodities) Rules, 1997, when produced/packed/sold in domestic market, shall be subject to compliance of all the provisions of the said Rules, when imported into India. All packaged commodities imported into India shall carry the name and address of the importer, net quantity in terms of standard unit of weights measures, month and year of packing and maximum retail sale price including other taxes, local or otherwise. In case any of the conditions is not fulfilled, the import of packaged products shall be held as prohibited, rendering such goods liable to confiscation.

5.        Another restriction under the aforesaid Notification issued by the Ministry of Commerce is that the import of a large number of products, presently numbering 133, is required to comply with the mandatory Indian Quality Standards (IQS) and for this purpose exporters of these products to India are required to register themselves with Bureau of Indian Standards (BIS). Non-fulfillment of the above requirement shall render such goods prohibited for import.

6.        Import and export of some specified goods may be restricted/prohibited under other laws such as Environment Protection Act, Wild Life Act, Indian Trade and Merchandise Marks Act, Arms Act, etc. Prohibition under those acts will also apply to the penal provisions of the Customs Act, rendering such goods liable to confiscation under section 111(d) of the Customs Act (for import) and 113 (d) of the Customs Act (for export).

7.        Any Importer or Exporter for being knowingly concerned in any fraudulent evasion or attempted evasion of any prohibition under the Customs Act or any other law for the time being in force in respect to any import or export of goods, shall be liable to punishment with imprisonment for a maximum term of three years (seven years in respect of notified goods) under section 135 of the Customs Act. Any person who is reasonably believed to be guilty of an offence, punishable under section 135, may be arrested under the provisions of section 104 of the Customs Act.

8.        Keeping in view the above penal provisions in the Customs Act to deal with any deliberate evasion of prohibition/restriction of import of export of specified goods, it is advisable for the Trade to be well conversant with the provisions of EXIM Policy, the Customs Act, as also other allied Acts. They must make sure that before any imports are effected or export planned, they are aware of any prohibition/restrictions and requirements subject to which alone goods can be imported/exported, so that they do not get penalized and goods do not get involved in confiscation etc. proceedings at the hands of Customs authorities.

Customs Clearance Procedure for Food Items, Livestock Products, Plant and Plant Materials.

The Government has enacted several laws to regulate importation of food items, livestock products, plant materials and other agricultural commodities into the country. The import of plants and plant materials is regulated as per the Plants, Fruits, Seeds (Regulation of Import into India) Order {PFS} Order, 1989 issued under the Destructive Insects & Pests Act, 1914 to prevent introduction of exotic pests and diseases into the country. The Livestock Importation Act, 1898 regulates the imports of livestock and livestock products in a manner that such imports do not adversely affect the health of human and animal population of the country. As per the Prevention of Food Adulteration Act, 1954, any product not fulfilling the statutory provisions is not allowed to be imported into the country. Likewise, there are several rules, regulations, orders, notifications, etc. issued by the Government, laying down procedures as to how the imports of above products are to be dealt with. The Customs has a pivotal role to play because, it is the agency stationed at the border to enforce the rules, regulations and orders issued by various administrative Ministries.

2.        Until very recently, the general awareness about various rules and regulations on importation of food items, livestock products, plant materials and other agricultural commodities was somewhat limited because, the bulk of the items were not allowed to be imported into the country. The licensing mechanism itself acted as a check on unbridled imports. The situation has changed after removal of Quantitative Restrictions with effect from 1.4.2001. Now there is a real danger of import of these items flooding the market which could, unless regulated properly, adversely affect the health and safety of our human and animal population. The WTO Agreement on the Application of Sanitary and Phytosanitary Measures enables member countries to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health, provided that such measures are not inconsistent with the provisions of this Agreement. The Agreement permits the member countries to carry out a detailed import risk analysis for

applying sanitary and phytosanitary measures. Consistent with our obligations under the WTO, the Government has issued several orders, notifications, etc. in recent months to regulate the importation of food items, livestock products, plant materials and other agricultural commodities, more important of which are mentioned below.

Notification No.44 (RE-2000)/1997-2002, dated 24.11.2000:

3.        In November, 2000, the Director General of Foreign Trade (DGFT) had issued a notification {No.44 (RE-2000)/1997-2002, dated 24.11.2000} to regulate the imports of packaged commodities into India. As per this notification, all packaged products, which are subject to the provisions of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, when produced/packed/sold in the domestic market, shall be subject to compliance of all the provisions of the said Rules, when imported into India. It is provided that compliance of the provisions of the notification shall be ensured by the Customs before the consignments are cleared for home consumption. The notification further states that all pre-packaged commodities imported into India shall, in particular, carry the declarations, such as, name and address of the importer, net quantity, month and year of packing and maximum retail price. It has been clarified by the DGFT vide Circular No.38 (RE-2000)/1997-2002, dated 22.1.2001 that the labeling requirements is applicable only to imports of those pre-packaged commodities which are intended for retail sale. As imported raw materials, components, bulk imports, etc. would invariably undergo further processing or assembly before they are sold to consumers, these imports shall not invite the application of labeling requirements.

Notification No.3 (RE-2001)/1997-2002, dated 31.3.2001:

4.        In the wake of removal of quantitative restrictions, the DGFT has issued a notification No.3 (RE-2001)/1997-2002, dated 31.3.2001 for regulating import of meat and poultry products, edible/food products and primary agricultural products. As per this notification import of meat and poultry products will be subject to the compliance of conditions regarding manufacture, slaughter, packing, labeling and quality conditions as laid down in Meat Food Products Order, 1973. The notification also states that all manufacturers of meat/poultry products exporting their goods to India shall be required to meet the sanitary and hygienic requirements as stipulated under Schedule-II of the aforementioned Order. The imported product shall also comply with the specified packaging, labeling and quality standards as laid down in Schedule-IV of the Order. It is provided that the Customs has to ensure compliance of these conditions before allowing clearance of the consignments.

5.        In regard to edible/food products, the notification stipulates that the import of such products, domestic sale and manufacture of which are governed by Prevention of Food Adulteration Act, 1954, shall be subject to all the conditions laid down in the said Act. Import of all these products thus will have to comply with the quality and packaging requirements as laid down in the aforesaid Act. The notification enjoins Customs to ensure compliance of these conditions before allowing clearance of the consignments.

6.        Further, as per the aforesaid notification, import of all primary agricultural commodities will be subject to a Bio Security & Sanitary-Phytosanitary Import Permit, to be issued by Department of Agriculture and Co-operation, as per conditions of PFS Order, 1989. The Permit will be based on import risk analysis of the product, to be conducted on scientific principles, in accordance with the WTO Agreement on the Application of Sanitary and Phytosanitary Measures. The import risk analysis will be conducted based on various scientific principles, including inter alia, (a) the type of pests etc. known to be associated with the particular product in the exporting country; (b) the organisms already established in India; and (c) the potential impact of such organisms on India’s international trade.

The PFS Order, 1989:

7.        As mentioned earlier, import of plants and plant materials into the country is regulated under the Destructive Insects & Pests (DIP) Act, 1914 and the PFS Order, 1989. The PFS Order, 1989 was amended in 1992 to exempt the requirement of Import Permit in respect of plants, fruits, seeds and any other material of plant origin imported for consumption. Further, such material imported as accompanied baggage and through international postal channels was also allowed to be imported without a Phytosanitary Certificate or an Import Permit. The Ministry of Agriculture (Department of Agriculture & Co-operation) has since issued a notification on 1.5.2001 amending the provisions of the PFS Order introduced in 1992. As per the amendment made, with effect from 1.6.2001 no consignment shall be imported even for consumption unless it is accompanied by an Import Permit (and also, of course by an Official Phytosanitary Certificate) issued by the authorized officer. However, cut flowers, garlands, bouquets, fruits and vegetables weighing less than 2 Kgs. imported for personal consumption is allowed without a Phytosanitary Certificate or an Import Permit. Likewise, the relaxation of Import Permit for import of (a) Mushroom Spawn Culture by 100% Export Oriented Units; (b) tissue culture materials of any plant origin and flower seeds granted earlier will continue.

The Livestock Importation Act, 1898:

8.        The Livestock Importation Act, 1898 has been recently amended vide the Livestock Importation (Amendment) Ordinance, 2001 which was promulgated on 5.7.2001. Prior to amendment, the said Act was applicable only for livestock whereas the livestock products were not regulated under the Act. The amendment to the said Act has been made to regulate the import of livestock products in such a manner that these imports do not adversely affect the human and animal health population of the country. Under the said Livestock Importation Act, 1898, the Department of Animal Husbandry and Dairying has issued a notification on 7.7.2001 to regulate the import of livestock products, namely, (i) meat and meat products of all kinds including fresh, chilled and frozen meat, tissue or organs of poultry, pig, sheep, goat; (ii) egg and egg powder; (iii) milk and milk products; (iv) bovine, ovine and caprine embryos, ova or semen; and (v) pet food products of animal origin. A procedure has also been laid down to regulate such imports. The notification, inter-alia, provides that import of livestock products will be allowed against valid sanitary import permit issued by the Department of Animal Husbandry and Dairying and the same will be allowed only through the airports and seaports at Delhi, Mumbai, Kolkata and Chennai which have Animal Quarantine and Certification Services Stations.

9.        Taking note of various developments referred to above, the Central Board of Excise & Customs has issued detailed instructions, laying down procedures for clearance of food articles, livestock products, plant and plant materials.

Customs Clearance Procedure for Food Items:

10.        Circular No.36/2001-Customs dated 15.6.2001 (issued from F.No.450/21/98-CUS.IV) lays down detailed guidelines for examination and testing of food items prior to customs clearance. This circular enjoins Customs to undertake certain general checks in addition to testing of samples. First, the Customs should check the condition of the hold in which the products were transported. This is basically to see whether they meet the requirements of storage as per the nature of the product, and does not in any way cause deterioration or contamination of the products. In the second place, the Customs is required to check the physical/visual appearance of goods in terms of possible damage – whether it is swollen or bulged in appearance and also for rodent/insect contamination or presence of filth, dirt, etc. The third important thing is compliance of labeling requirements under the Prevention of Food Adulteration Rules and the Packaged Commodities Rules. This includes ensuring that the label is written not only in any foreign language, but also in English. The details of ingredients in descending order, date of manufacture, batch number, and best before date, etc. are other mandatory requirements.

Further, all products will also have to indicate details of best before on all food packages. The Customs should check that imported food articles meet the above labeling requirements. Recently, the DGFT has issued a notification {No.22(RE-2001/1997-2002) dated 30.7.2001 to the effect that the imported food item, at the time of its import, should have a valid shelf life of not less than 60% of original shelf life. In other words, the time period between ‘best before date’ and ‘date of import’ should be at least 60% of time period between ‘date of manufacture’ and ‘best before date’. The Customs has to ensure that the food articles which do not meet this condition are not allowed clearance for home consumption.

11.        Apart from the general checks referred to above, all the consignments of edible/food products imported through Ports, Inland Container Depots (ICDs), Air Cargo Complexes (ACCs), Container Freight Stations (CFSs) and Land Customs Stations (LCSs) are required to be referred to the Port Health Officer (PHO) for testing. For alleviating the difficulties of importers it has been decided that pending receipt of the test report, such consignments can be allowed to be stored in warehouses under section 49 of the Customs Act, 1962. The circular makes it clear that clearance for home use will be allowed only after receipt of the test report. If the product fails the test, the Customs authorities will ensure that the goods are re-exported out of the country by following the usual adjudication procedure or destroyed as required under the relevant rules. As regards ICDs/CFSs/Ports/ACCs/LCSs where PHOs are not available, the Customs is required to draw the samples and get them tested from the nearest Central Food Laboratory or a Laboratory authorized to conduct such testing by the Directorate General of Health Services.

12.        In addition to testing of food items under the PFA Act, 1954, these items shall also be subject to examination/testing to ensure compliance of the requirements of other Acts, Regulations and Orders such as Meat Food Products Order, 1973, PFS Order, 1989, the Livestock Importation Act, etc., if applicable, before these are allowed clearance into the country.

Customs Clearance Procedure for Livestock Products:

13.        The livestock products, namely, (i) meat and meat products of all kinds including fresh, chilled and frozen meat, tissue or organs of poultry, pig, sheep, goat; (ii) egg and egg powder; (iii) milk and milk products; (iv) bovine, ovine and caprine embryos, ova or semen; and (v) pet food products of animal origin are allowed to be imported only against a sanitary import permit issued by the Department of Animal Husbandry and Dairying. For this purpose, a detailed import risk analysis is carried out and a sanitary import permit is issued only after the concerned authorities are satisfied that the import of the consignment will not adversely affect the health of the animal and human population of this country. The Import Permit lays down the specific conditions that will have to be fulfilled in respect of the consignment, including pre-shipment certifications and quarantine checks. The Permit also specifies the post-import requirements with regard to quarantine inspection, sampling and testing. The Import Permit is generally issued for a period of six months and can be extended by the concerned authorities for a further period of six months.

14.        As mentioned earlier, the livestock products are allowed to be imported into India only through the sea ports or airports located at Delhi, Mumbai, Kolkata and Chennai, where the Animal Quarantine and Certification Services Stations are located. On arrival at the port/seaport, the livestock product is required to be inspected by the officer in-charge of the Animal Quarantine and Certification Services Station or any other veterinary officer duly authorized by the Department of Animal Husbandry and Dairying. After inspection and testing, wherever required, quarantine clearance is accorded by the concerned quarantine or veterinary authority for the entry of the livestock product into India. If required in public interest, the quarantine or veterinary authority may also order the destruction of the livestock product or its return to the country of origin.

15.        Wherever any disinfection or any other treatment is considered necessary in respect of any livestock product, it is the importer who on his own or at his cost has to arrange for

disinfection or other treatment of the consignment under the supervision of a duly authorized quarantine or veterinary officer.

16.        The Customs will have to ensure that the livestock products are granted clearance for home consumption only after necessary permission is granted by the concerned quarantine or veterinary authorities. It may be noted that the Government has recently issued a notification on 30.5.2001 prohibiting import of all poultry products from Honking (China), Honduras, Italy, Laos and Pakistan for a period of six months from the date of issue of this notification in view of reported outbreak of Avian Influenza (Fowl Plague) in these countries. The products prohibited for import are domestic and wild birds, day-old chicks, turkeys, poultry and other newly hatched avian species, hatching eggs, semen of domestic and wild birds, fresh meat of domestic and wild birds, products of animal origin (from birds) destined for use in animal feeding or for industrial use, pathological material and biological products (from birds) which have not been processed to ensure the destruction of Avian Influenza (Fowl Plague) virus. The question of allowing clearance of these products for home use, therefore, does not arise.

Plant/Plant Materials for Sowing/Planting/Propagation/Consumption:

17.        The above products are allowed to be imported only on the basis of an Import Permit issued by the Department of Agriculture & Co-operation. The Import Permit is issued after conducting a detailed import risk analysis. This Permit is generally issued for a period of six months and can be extended by the concerned authorities for a further period of six months. The Department of Agriculture & Co-operation has issued detailed guidelines for inspection and clearance of plant/plant materials. The basic features of the guidelines are given below:-

(a)        Registration of application: The importer or his authorized Custom House Agent is required to file an application at the Plant Quarantine Station in respect of each consignment immediately upon arrival at the port. In case of perishable consignments, such application can be filed in advance to enable the Plant Quarantine authorities to organize inspection/testing on priority. Along with application for registration, copies of documents namely, import permit, phyto-sanitary certificate issued at the country of origin, copy of bill of entry, invoice, packing list and fumigation certificate, etc. are required to be submitted. After scrutinizing the application, the Plant Quarantine Officer registers the application. The assessed inspection fee is required to be paid by the importer or his authorized agent.

        In the case of import of plant and plant materials through passenger baggage and post parcels, no such application is required to be filed.

(b)        Sampling/inspection/fumigation of consignments: The importer or his authorized Custom House Agent is required to arrange for inspection/sampling of the consignment. In the event of live insect infestation having been noticed, the importer or his authorized Custom House Agent shall arrange for fumigation of consignment by an approved pest control operator at his own cost under the supervision of the Plant Quarantine officer.

(c)        Release/detention of consignments: A release order is issued to Customs, if a consignment on inspection is found to be free from pests. However, in case a consignment is found to be infested with live pests, the same is permitted clearance only after fumigation and re-inspection. The detention order is issued, if the consignment is imported in contravention of the PQ Regulations, for arranging deportation failing which the same shall be destroyed at the cost of importer under the supervision of the Plant Quarantine Officer, in presence of Customs Officers after giving due notice in advance i.e. for perishable plant material 24-48 hours and 7 days in other type of plant material.

18.        The Customs will have to ensure that plant/plant material (primary agricultural products) are granted clearance for home consumption only after necessary permission is granted by the concerned Plant and Quarantine Officer.

Reference:

Circular No.36/2001-Cus., dated 15.6.2001 (issued from F.No.450/21/98-Cus.IV); Circular No.43/2001-Cus., dated 6.8.2001 (issued from F.No.450/44/2001-Cus.IV); CBEC letter F.No.450/80/2000-Cus.IV dated 24.7.2000; DGFT Notification No.44(RE-2000)/1997-2002, dated 24.11.200; DGFT Policy Circular No.38(RE-2000)/1997-2002, dated 21.1.2001; DGFT Notification No.3(RE-2001)/1997-2002, dated 31.3.2001; Department of Animal Husbandry and Dairying Notification dated 7.7.2001 (issued from F.No.109-6/2001-Trade); Department of Animal Husbandry and Dairying Notification dated 30.5.2001 [issued from F.No.50-4/84-LDT (AQ)]; Department of Agriculture & Co-operation letter F.No.82-2/2001-P&D, dated 11/15.5.2001; Department of Agriculture & Co-operation Notification No.[GSR378(E)] dated 1.5.2001 and Press Note communicated vide letter F.No.8-26/2000-PP-I dated 9.5.2001.

Warehousing

The facility of warehousing of imported goods in Customs Bonded Warehouses, without payment of Customs duty otherwise leviable on import, is permitted under the Customs Act, 1962. Apart from specific provisions in the said Act (specially under Chapter IX), certain Regulations have been also framed and provisions of Warehoused Goods (Removal) Regulations, 1963 and Manufacture and Other Operations in Warehoused Regulations, 1966 could be referred to in this regard. Basically, goods after landing are permitted to be removed to a warehouse without payment of duty and duty is collected at the time of clearance from the warehouse. The law lays down the time period up to which the goods may remain in a warehouse, without incurring any interest liability and with interest liability.

Warehousing Stations:

2.        The warehouses are to be appointed/licensed at particular places only which have been so declared by Central Board of Excise and Customs. The Board has delegated its power for declaring places to be Warehousing Stations to the Chief Commissioners of Customs. In respect of 100% EOUs, the powers to declare places to be Warehousing Stations have been delegated to the Commissioners of Customs.

3.        After the declaration of any place as a Warehousing Station, the Assistant/Deputy Commissioner of Customs may appoint a Public Bonded Warehouse where imported dutiable goods may be deposited. Under section 58, the Assistant/Deputy Commissioner of Customs can license Private Bonded Warehouses where goods imported by or on behalf of the licensee, or other imported goods where facility for Public Warehouse is not available, may be deposited. The following guidelines are generally followed for ensuring uniformity in the practice in the declaration of Warehousing Stations:-

i)        The industrial development of the proposed area and the need for warehousing of imported goods should be assessed;

ii)        Only those places be notified as warehousing Stations where adequate facilities are available for appointing Public Bonded Warehouses;

However, this condition can be relaxed in case of 100% EOUs, subject to use by 100% EOUs only.

iii)        Adequate Customs/Central Excise staff should be available in the vicinity of the proposed Warehousing Stations and necessary arrangements for training echo the staff should be made.

        Cases not fulfilling the aforesaid criteria are to be decided in the Board.

Appointing of Public Bonded Warehouse:

4.        In respect of Public Bonded Warehouses, other than the Central Warehousing Corporation and the State Warehousing Corporations, private operators can also be appointed as custodians. For this purpose, all such applications for custodianship are to be carefully scrutinized and due consideration given to factors such as the feasibility and financial viability of the warehouse operator, his credibility, his financial status, his past record to comply with Customs & Excise laws, expertise in warehousing field, etc. The applicant should accept to pay cost-recovery charges on payments of Merchant Overtime/Supervision Charges for obtaining services of Customs officers.

Licensing of Private Bonded Warehouses:

5.        In case of Private Bonded Warehouses, the applications for such licenses have been classified into two categories viz., storage of sensitive goods such as liquor, cigarettes, foodstuffs, consumables, etc. and other non-sensitive goods. Under Board’s Circular No.99/95 dated 20.9.1995, the following guidelines in case of storage of sensitive goods have been provided:-

i) Applicants should produce a Solvency Certificate from a Scheduled Bank of repute for a value not less than Rs. 50 lakhs;

ii) Such warehouses may not be located in residential areas;

iii)

The premises should be secure, possess fire-fighting provisions and easily accessible to the Customs Officers;

iv) Goods deposited should be fully insured for a value at least equal to the customs duty;

v)The proprietor/partner/director must not be involved in any Customs or Excise offence. In case of any involvement in such offences, the license may be terminated after following the prescribed procedure;

vi)

In the case of individual consignments to be warehoused, a double duty-bond as prescribed under section 59 should be given by the licensee. In case of sensitive goods, a cash deposit/ bank guarantee equal to 25% of the duty liability (effective duty foregone) will be taken for each consignment. At the same time, a revolving bond with a single bank guarantee for a higher amount can be accepted if so requested for a number of consignments.

            In the case of non-sensitive goods, applicants for Private Bonded Warehouses have to abide by all provisions as pertaining to sensitive goods discussed above, except that the requirement of furnishing a Solvency Certificate has been waived. The applicant, however, should be solvent for Rs. 10 lakhs and should possess a good record. A double duty bond with surety would suffice for storage of non-sensitive bonded goods. In case the Customs are not satisfied about the transactions of a particular bonder, the applicant may be asked to furnish a bank guarantee [Details of the guidelines are available under Board’s Circular No.99/95 dated 20.9.1995].

6.        A license granted by the Customs under section 58 may be cancelled or suspended under certain conditions after observing the procedure prescribed under section 58 of the Customs Act.

Bonding of Import Goods:

7.        Where bonding facility is desired on importation, the importer or his representative is required to present to the Customs a Bill of Entry for warehousing (also known as Into-Bond Bill of Entry) in the prescribed form along with relevant documents required. The duties liable are assessed but not required to be paid. A suitable bond has to be executed with the Bond Section before Customs allow bonding. Once the warehousing bond has been executed by the importer, the Customs may order the deposit of the goods in the warehouse. The goods are normally escorted to Bonded Warehouse if the warehouse is at the same port/airport station where goods landed. Otherwise these are allowed to be moved under a transit bond - without escort.

            The whole of the bonded goods are to be fully accounted for - by way of home consumption/export etc. Once all the goods brought under any bond have been accounted for to the satisfaction of the Customs officer, after payment of all duties etc., the Customs officer cancels and returns the bond executed as discharged in full.

Storage Period of Warehoused Goods:

8.        Any goods deposited in a warehouse may be stored up to a period of one year in the Bonded Warehouse. In the case of capital goods intended for use in any 100% EOU, such goods can however be stored up to a period of 5 years. The warehousing period can be extended by the Commissioner of Customs for a period of 6 months and by the Chief Commissioner of Customs for such further period as is deemed fit by him. The importers should file their applications for extensions well before the expiry of the initial/extended period of warehousing.

        Before granting extensions, officers have to examine the condition of the goods to see that they are not likely to deteriorate during the extended period. A somewhat liberal approach in extending warehousing period in the following categories of cases is considered, if the interests of revenue are not likely to be jeopardized:-

i) Goods supplied as ship stores/aircraft stores.

ii) Goods supplied to diplomats.

iii) Goods used in the units operating under manufacture-in-bond scheme.

iv)

Goods imported by 100% EOUs.

v) Goods warehoused and sold through duty free shops.

vi)

Machinery, equipment and raw material imported for building and fitment to ships.

            Extensions in warehousing period are not meant to be granted routinely but only in such cases where the goods have to be kept in the warehouse under circumstances beyond the control of the importer. Lack of finance to pay the duty is not considered as valid and good ground of seeking extensions which are otherwise given for short period.

            In case the warehoused goods are likely to deteriorate, the Commissioner of Customs may reduce the one year’s period of warehousing to such shorter period as he may deem fit.

Rate of Interest on Customs Duty in case of Bonded Goods:

9.        In cases where the capital goods for 100% EOUs remain in a warehouse beyond a period of 5 years, interest at the rate of 24% per annum (as applicable currently under notification No.10/2001-Cus. (N.T) dated 1.3.2001) shall be charged on the customs duty payable at the time of clearance of the goods for the period from the expiry of the said warehousing period till the date of payment of duty on the warehoused goods. In the case of all other goods, i.e. 1.6.2001, interest at the rate of 24% per annum is payable after the expiry of thirty days in the warehouse under notification No.23/2001-Cus. (N.T.) dated 22.5.2001.

Waiver of Interest:

10.        Under section 61(2) of the Customs Act, if necessary in the public interest, the Board may by order and under circumstances of an exceptional nature to be specified in that order, waive the whole or a part of any interest payable in respect of warehoused goods. In this regard, the power to grant waiver of interest up to an amount of Rs. 15 lakhs has been delegated to the Chief Commissioners of Customs, and guidelines framed by the Board, specifying cases where the interest waiver would be considered. The types of such cases are: -

i) Goods supplied as ship stores/aircraft stores;

ii) Goods supplied to diplomats;

iii) Goods used in the units operating under manufacture-in-bond scheme;

iv) Goods imported by 100% EOUs;

v) Goods warehoused and sold through duty free shops;

vi) Machinery, equipment and raw materials imported for building and fitment to ships;

vii) Petroleum products;

viii)

Plant and Machinery imported for projects;

ix) Machinery, equipment and raw-materials imported for manufacture and installation of power generation units;

x) Goods imported under OGL and warehoused for subsequent clearance against valid advance licenses/Import-Export Pass book scheme or any similar scheme;

xi) Goods imported in bulk by canalizing agencies/public sector trading or service agencies and warehoused for subsequent release for export production; and

xii) Goods warehoused and subsequently re-exported under section 69 of the Customs act, 1962 subject to the conditions that –

a) The re-export realizes the full foreign exchange spent in import in hard currency (in case the import is paid for in that currency); and

b) The import in the first instance was not unauthorized or in contravention of the Import-Export Policy.

        In all the above categories of cases, which are export related, Customs officers are required to raise the demand for interest due, but the demands are not to be enforced immediately. The activity of the importers, including clearance of goods etc., is allowed to continue and only at the stage after the goods have been cleared or at the time of de-bonding of 100% EOUs, the request for waiver of interest is to be decided. 100% EOUs which have not fulfilled their export obligations and have been allowed to debond their warehoused goods prematurely are not granted waiver of

interest except under very exceptional circumstances. Cases of waiver of interest not covered under the aforesaid guidelines have to be referred to the Board for decision.

        Vide notification No. 67/95- Cus. (N.T.) dtd. 1.11.1995, interest accrued on customs duties payable on certain specified bonded goods like capital goods, components/spares, office equipments, captive power plants, tools etc. have been exempt at the time of clearance in the following cases:-

i)        Goods imported by 100% EOUs under notification No. 13/81-Cus.

ii)        Goods imported by 100% EOUs in EHTPs under various notifications and

iii)        Goods imported by 100% EOUs in STPs under certain notifications.

Operations on Warehoused Goods:

11.        All warehoused goods are subject to the control of the Customs officers. The owner of the warehoused goods may inspect, sort, show for sale, and take samples etc. from the bonded goods with the permission of the proper officer. The owner of the bonded goods shall also pay warehouse-keeper rent and warehouse charges at the rates fixed under law.

Manufacture-in-Bond Operations:

12.        With the permission of the Assistant/Deputy Commissioner of Customs, the owner of any bonded goods may carry on any manufacturing process or other operations in the bonded warehouse in relation to such goods. As a policy, it has been decided to extend in-bond manufacture facility under section 65 of the Customs Act mainly to EOUs or to units which are primarily engaged in exports. Manufacture-in-bond operations are to be carried out under Customs supervision on cost-recovery basis. Customs may grant a license under section 65 after scrutinizing the application and satisfying itself that the applicant is financially secure, has good credibility and has not been involved in Customs or Excise duty-evasion in the preceding five years. The premises should be adequately secure and the provisions of Manufacture and Other Operations in Warehouse Regulations, 1966 which provide the detailed procedure for application and operation etc. must be observed.

Movement under Bond:

13.        With the permission of the Customs Officer, the owner of bonded goods may remove the said goods from one warehouse to another either under the supervision of the Customs officer or by executing a bond equal to the amount of import duty leviable on such goods if the goods are to be removed to a warehouse in another town. Details of the procedure to be followed and terms of the bond to be executed are provided under Warehoused Goods (Removal) Regulations, 1963. Under Circular No.99/95-Cus. Dated 20.9.1995, customs duty is to be secured by a transit bond backed by a bank guarantee/cash security for 50% of the duty involved in case the goods are of sensitive nature. In respect of non-sensitive goods, transit bonds would be covered by a Bank Guarantee or a cash security for 25% of the duty involved. Commissioners of Customs may demand greater guarantee/security if felt necessary in certain cases.

        In the case of 100% EOUs/EHTP/STP and EPZ units, the requirement of bank guarantee for transfer of imported goods has been waived vides Board’s Circular No.41/97-Cus. Dated 19.9.1997, subject to the conditions prescribed in the said Circular.

Clearance of imported goods:

14.        The importer of any warehoused goods can clear the goods for home consumption by filing an ex-bond Bill of Entry and after payment of duties etc. in terms of section 68 of the Customs Act.

Rate of Duty/ Value for Assessment:

15.        The rate of duty applicable is as per provisions of Section 15 of the Customs Act i.e. on the date on which the goods are actually removed from the warehouse. However, when the warehousing period or the extended warehousing period has expired, the duty payable is with respect to the date when the warehousing/extended warehousing period expired and not the actual date of removal. Insofar as value for assessment of duty for warehoused goods is concerned, it is not required to be redetermined and it is the original value as determined at the time of filing of into Bond Bill of Entry and assessments before warehousing.

Transfer of Bonded Goods:

16.        Section 59 (3) of the Customs Act, 1962 provides for the transfer of bonded goods to another person. The sale of the warehoused goods to holders of duty exemption or duty concession license for the goods is permitted under the law (Board’s instructions issued from F. No. 473/43/94 dtd. 22.9.1994 refers in this regard).

Export of bonded goods:

17.        Warehoused goods may also be exported out of India without payment of duty after the filing of a Shipping Bill/Bill of Export and the payment of relevant export duties etc. However, in view of the apprehension that warehoused goods when exported from India to certain neighboring countries are likely to be smuggled back to India, the Government has directed vide Notification No.45-Cus. Dated 1.2.1963 (as amended) that warehoused goods shall not be exported without payment of import duty to any place in Bhutan or Nepal. Similar restrictions are placed in the case of warehoused goods to be exported by land to any place in Myanmar, Sikang, Tibet or Sinkiang.

        A ban has also been placed on export from bond of vessels of less than 1000 tons (subject to conditions prescribed under notification No.46-Cus. dated 1.2.1963). The following items viz., alcoholic liquors, cigarettes, cigars and pipe tobacco are also not permitted to be taken on board any foreign-going vessel of less than 200 tons without payment of import duty leviable (notification No.47-Cus. dated 1.2.1963).

Recovery of Duty on Bonded Goods:

18.        Customs Officers may demand from the owner of bonded goods the full amount of duty chargeable on such goods, along with all penalties, rent, interest and other charges payable in the following cases:-

i)        Where any warehoused goods are removed in contravention of the Customs Act, 1962;

ii)        Where such goods have not been removed from a warehouse at the expiry of the period permitted under section 61;

iii)        Where any warehoused goods have been taken under section 64 as samples without payment of duty; and

iv)        Where any bonded goods have not been cleared for home consumption or exportation or are not duly accounted for to the satisfaction of the Customs.

        In case the owner fails to pay the amount as demanded above, Customs may detain and sell, after notice to the owner, such sufficient portion of the bonded goods as may be selected.

Transshipment of Cargo

In India, a number of ports, airports, Inland Container Depots(ICD), Container Freight Stations(CFS) having Customs clearance facilities have been developed to reduce congestion at the gateway ports/airports and to allow importers and exporters to take Customs clearance of imported and export goods at their door steps. Sometimes, cargo meant for third country lands at an Indian port or airport. It has to be carried to its actual destination. The objectives of bringing the Customs facility to door step of importing community & decongesting the gateway ports/ airports can be achieved only if movement of imported cargo or export cargo is allowed between a port/airport and other ports/airports, ICDs/CFSs in India or a port/airport abroad.

2.        As per the Customs Act, duty becomes payable immediately after imported goods are landed at a port or airport. To avoid payment of duty at the port of landing in cases where goods are to be carried to another port/airport or ICD/CFS or to a port/airport abroad, the Customs Act provides a facility of transshipment of cargo without payment of duty. The goods can be transshipped from one port/airport to another port/airport/ICD/CFS either by vessel, air, rail or road or by combination of more than one such mode of transport...

3.        The procedure for transshipment provided in section 54 of the Act is applicable for imported cargo only. In regard to export cargo cleared from a port/ACC or ICD/CFS and exported through some gateway port/airport, a similar procedure is being followed to allow carriage of Customs cleared export cargo from port/airport/ICD/CFSs to another port/airport.

Procedure for transshipment of containerized imported cargo

A. from gateway port to another port/ICD/CFS in India

4.        The imported cargo unloaded at a port is allowed to be transshipped to another port/ICD/CFS or a port abroad, if the cargo is mentioned in the import manifest for such transshipment. The transshipment procedure of imported cargo is governed by the provisions of section 54 of the Customs Act and the Goods Imported (Conditions of Transshipment) Regulations, 1995. Broadly, the transshipment procedure is as follows:

(i)        Transshipment Permit:

5.        A 'transshipment permit' is the permission granted by the Customs, at the port/airport of unloading of imported goods, to shipping agents for carriage of goods to another port/airport/ICD/CFS in India. The shipping agent submits an application along-with transshipment forms (5 copies), sub-manifest and a copy of IGM to the Customs. The Customs scrutinizes the details furnished by the shipping agents in the application for transshipment. In case, the documents are in order and there is no alert notice against the shipping agent, permission for transshipment is granted by the Customs.

(ii)        Execution of Bond and Bank Guarantee:

6.        To ensure that imported cargo, on which duty has not been paid, are not pilfered en-route to another port/airport/ICD/CFS and reach there safely, a bond with bank guarantee (@ 15% of

bond value) is executed by the carrier engaged for the transshipment of the goods. The carriers in public sector i.e. CONCOR and CWC are exempted from the requirement of bank guarantee for transshipment of goods. The terms of the bond is that if the carrier produces a certificate from Customs of the destination port/airport/ICD/CFS for safe arrival of goods there, the bond stands discharged. In case such certificate is not produced within 30 days or within such extended period as the proper officer of Customs may allow an amount equal to the value, or as the case may be, the market price of the imported goods is forfeited.

7.        The bond value should be equal to the value of the goods. However, considering the difficulties of shipping agents in producing documents for determination of value of the goods sought to be transshipped, the bond value is determined on the basis of notional value of the goods, which is an average value of cargo per container transshipped in the past.

8.        To avoid multiplicity of bonds, the carriers are allowed to execute mother bonds instead of individual bonds. The mother bonds are like running bonds. The value of mother bond can be arrived on the basis of the average number of containers carried per trip, the average time taken for submission of proof of safe landing of containers at the destination ICDs/CFSs, frequency of such transshipment as well as notional value of cargo per container. As mother bond is a running bond, its amount may be high. If a running bank guarantee @ 15 % of total bond amount is taken, it may block huge sum of money. To avoid blockage of money of carriers, an option has been given to them to furnish either a running bank guarantee or individual bank guarantees for each transshipment. Individual bank guarantee for each transshipment is released as soon as the landing certificates from destination Customs are produced.

9.        The bond or, as the case may be, mother bond and bank guarantee are debited at the time of transshipment of import/export containers at the port of origin, and the same is credited on receipt of proof of safe landing of containers at the port/ICD/CFS of destination.

(iii)        Execution of Bond for Re-export of Containers:

10.        As the containers themselves are liable to duty, Customs duty exemption is provided vide notification No. 104/94-Cus. Dated 16/3/94 which, inter-alia facilitates its being taken out of the port without duty payment subject to execution of bond. The shipping agents are required to file this bond with the container cell of the Custom house in terms of the notification No. 104/94-Cus. Dated 16/3/94, binding themselves to re-export containers within six months of their import into India. The period of six months may be extended by the Deputy/Assistant Commissioner of Customs.

(iv)        Sealing of Containers:

11.        After issuance of transshipment permit and execution of bonds as mentioned above, containers are sealed with 'one time bottle seal' by the Customs. In case, containers are already sealed with 'one time bottle seal' by the shipping agents, containers are not required to be sealed again by the Customs. In such cases, shipping agents are required to inform the serial number of seals to Customs, which is just verified by the Customs.

(v)        Carriage of Containers:

12.        After sealing and/or checking of seals by Customs, containers are moved from the gateway port and carried by the shipping agents to destination port/ICD/CFS by vessels, rail or road.

(a)        Carriage by Rail:

13.        Presently, rail movement is undertaken only by CONCOR, a Public Sector Undertaking (PSU) under the Ministry of Railways. The CONCOR, being a PSU, is exempt from execution of bank guarantee for transshipment. However, a bond is required to be executed by them. After completing all the above-said formalities, containers are allowed to be loaded on wagons under the supervision of Customs. The fact of such loading of the containers is endorsed by the preventive officer on all copies of transshipment permit and one copy of the permit is given to the steamer agent. One copy is retained for record, one copy accompanies the container and the fourth copy is handed over in a sealed cover to the carrier i.e. CONCOR. The carrier has to hand over the sealed cover to the Customs authorities at the destination.

(b)        Carriage by Vessels:

14.        The CBEC Circular 31/99-Cus. Dated 27/5/1999 allows carriage of imported container from gateway port to another port by vessels. For transshipment through a vessel, procedure as explained above, i.e. issue of transshipment permit, execution of bond, sealing of containers etc., needs to be followed. The formalities required to be followed for transshipment through vessels are similar to those followed for transshipment by rail.

15.        To optimize the capacity utilization of vessels, carriers have been allowed to carry domestic cargo along-with the transshipment containers. However, to guard against the possibility of replacement of transshipment goods with domestic containerized cargo, some safeguards have been prescribed. All the transshipment containers as well as domestic containers are required to be sealed by 'one time bottle seal' at the port of loading. The domestic containers are required to be suitably painted with bold letters ' For Coastal Carriage only' for their identification. Further, carriers are required to file a manifest for domestic containers.

(c)        Carriage by Road:

16.        The containers are also allowed to be carried from the gateway ports to ICDs/CFSs by road. Many custodians of ICDs/CFSs, particularly those which are not connected by rail, carry the container by road. The formalities to be followed are similar to those followed for transshipment by rail.

(vi)        Formalities at the Destination:

17.        At the destination, carrier is required to present the sealed cover containing a copy of transshipment permit to Customs. The Customs checks the particular of containers, seals etc. with reference to transshipment permit. The carrier is required to obtain a certificate regarding landing of container from the Customs.

18.        In case, the seals are found to be broken at the time of examination of containers by the Customs, a survey of contents of the containers is conducted in presence of Customs officer, carrier, importer or his representative and representative of insurance company. Shortage if any, noticed is recorded and is signed by all those present. The carriers are required to pay the duty for pilferage in terms of the condition of bond executed by them with the Customs at the port of loading. This is apart from other action which can be taken under section 116 of the Customs Act, 1962.

(vii)        Submission of Landing Certificates to Customs at the Originating Port:

19.        The carriers have to obtain the landing certificates of containers from the Customs at the destination port/ICD/CFS and submit the same to the Customs at the originating port. The Customs reconciles its record and closes IGMs on the basis of these certificates.

(viii)        Clearance of the Goods:

20.        After safe landing of containers at the destination port/ICD/CFS, the importers or their authorized agents are required to follow all Customs formalities such as filing of bill of entry, assessment, examination of goods etc., for clearance of the goods.

B.        from Gateway Port to a Port Abroad:

21.        For transshipment of containers from a port in India to a port abroad, shipping agents have to file transshipment application along-with relevant documents to Customs. The Customs scrutinizes the application and if these are found to be in order, permission to transship the cargo is granted. In such cases, execution of bond or bank guarantee is not required. After issuance of transshipment permit, goods are allowed to be loaded on to the ship under the Customs supervision. The preventive officer supervising the loading is to acknowledge loading of such cargo. The record is reconciled on the basis of endorsement of the preventive officer and copy of EGM showing details of such transshipment.

A.        from Gateway Port to EPZ and SEZ:

22.        The procedure for transshipment of cargo from gateway port to Export Processing Zones (Epps) and Special Economic Zones (Seas) is similar to what has been stated above for transshipment of cargo from port to another port/ICD/CFS above. For transshipment to EPZs and SEZs, a bond with bank guarantee is required to be furnished. The Customs in EPZ/SEZ give suitable landing certificate after checking, which is to be submitted to Customs at the originating port.

Movement of export cargo from port/ICD/CFS to gateway port

23.        The export cargo, after its clearance at a port/ICD/CFS, may be carried in sealed containers to the gateway port for export. Broadly, the procedure in this regard is as follows:

(a)        The exporters are required to bring their goods meant for exports to the Port/ICD/CFS and file six copies of Shipping Bill with all necessary documents like GR form, AR-4 Form, Certificate issued by Export Promotion Councils, documents regarding quotas wherever applicable etc.. In addition to the usual information given in the shipping bill, the exporter is required to mention the gateway port of export on the shipping bill along-with the serial number(s) of the container(s). The Shipping Bills are assessed as usual, the goods are examined, samples drawn, and if required, inspection carried out by other agencies to check compliance with provisions of various Allied Acts before export is permitted. The original GR form is forwarded to the concerned branch of Reserve Bank of India.

            The examination order is given on the duplicate and two transference copies of the Shipping Bill. The examination report is required to be recorded on all these copies. After examination of the goods, container is sealed by the Customs with 'one time bottle seal'. The duplicate copy of Shipping Bill is retained at the ICD/CFS/port and the transference copies are forwarded to the gateway port. The E.P. copy of shipping bill is required to be suitably endorsed/stamped by the Customs officer to the effect that the goods are to be transshipped at the gateway port mentioned on the shipping bill for their destination outside India.

            The goods cleared for export at the port/ICD/CFS is allowed to be carried to the gateway port for export subject to the conditions of execution of bond similar to that provided for transshipment of import goods under relevant Regulations, and if export goods are manifested for the final destination through the gateway port. The FOB value of goods is to be debited from the

continuity bond executed by the custodians. The carriers/custodians transporting the goods are to be handed over the transference copies of Shipping Bills in a sealed cover.

            The containers are allowed to be carried from a port/ICD/CFS to the gateway port by vessel or rail or road or by combination of two or more of these modes of transport.

            The drawback is required to be paid to the exporters as soon as the shipping bills are passed and goods are shipped at the originating port/ICD/CFS subject to the condition that the necessary bond has been executed by the Steamer Agent/carrier to bring back and submit the proof of export to the Customs within 90 days.

            At the gateway port, the containers are normally allowed to be exported under Customs supervision after checking the seals. In case seals are intact and documents are in order, no further examination of goods is undertaken. The preventive officer supervising the export of container endorses the fact of shipment in both the transference copies. Steamer agent has to file Export General Manifest (EGM) in duplicate.

            One copy of transference shipping bill along-with a copy of EGM is sent back to the originating port/ICD/CFS.

            At the originating port/ICD/CFS, export manifest and transference copy of shipping bill, received from the gateway port, are co-related with the duplicate copy of the shipping bill and other relevant documents for closure of export manifest and cancellation of bond.

Bonded Trucking facility:

24.        To give flexibility to trade to choose mode of transport and to facilitate movement of LCL cargo, a scheme has been introduced to allow movement of export cargo and imported cargo between a port/ICD/CFS and gateway port in closed trucks. Broadly, the features of the scheme for movement of export and imported cargo are as follows:

A.        Export:

25.        A procedure allowing carriage of export goods in truck from manufacturing factories/ICDs/CFSs to the airport for further shipment by air or to the port for further consolidation of such goods into a container and subsequent export has been laid down. Prior to introduction of the facility, full container load (FCL) cargo was allowed to be transferred under Customs/Central Excise seal from ICD/CFS or from the factories (in case of container stuffed inside the factory) to the gateway port. The truck movement of export cargo allows carriage of smaller packages belonging to more than one exporter in one truck which is to be sealed after stuffing in the ICD/CFS. In case the goods are moving in truck from the manufacturing factory, factory owner or exporter is responsible to account for the goods, whereas in case of goods moving from ICD/CFS, the custodian of the ICD/CFS is responsible to account for the goods. The procedure for movement of export cargo by truck has been prescribed in the CBEC Circular No. 57/98-Cus., dated 4/8/1998. Broadly, the procedure is as follows:

(a)        Under the scheme, shipping bills in six copies along-with all necessary documents like GR form, AR form, certificates issued by Export promotion Councils, documents regarding quotas wherever applicable, etc. are to be filed by the exporters. The shipping bills are assessed and examined at the ICD/CFS as is being done for cargo to be carried in containers to the gateway port. The examination report is recorded on the duplicate copy as well as on the two transference copies of shipping bills. The duplicate copy of shipping bill is retained in the ICD/CFS and

transference copies are sent to the gateway airport or port. FOB value of the goods is debited from the continuity bond executed by the custodians.

(b)        After the examination of goods is over, all the packages are handed over by the Customs authorities to the custodians along-with two transference copies of the shipping bills, certified copy of invoice, packing list and other documents in a sealed envelope. All the packages are stuffed in the trucks under the supervision of Customs and representative of custodians. After the stuffing, trucks are sealed with temper proof bottle seals. The endorsement that the trucks are sealed, are made on both the transference copies of shipping bill. The seal number of seals is endorsed on all the documents.

(c)        At the gateway port or airport, documents are presented to the Customs, who verifies the genuineness of documents and checks the marks and numbers of the seals on the truck. If the seals are found intact and documents in order, the goods are allowed to be de-stuffed from the trucks under Customs supervision. The goods are then stuffed in containers by the shipping agents under Customs supervision. In case of export by air, goods after de-stuffing from the truck, are palletized and loaded in the aircraft under the Customs supervision. The preventive officer, supervising de-stuffing of goods from the trucks and stuffing of such goods in containers or as the case may be, palletisation of goods, endorses the transference copies of shipping bills with 'shipment allowed' endorsements. At the time of actual shipment endorsement 'let export' is made on the transference copies of the shipping bills and AR-4. One copy of shipping bill is retained at the gateway port/airport and the other is sent back to originating ICD/CFS.

(d)        In case seals are found broken or some discrepancy is noticed, goods are subjected to 100% examination. Action in terms of the bond can be taken against the carrier in such cases.

B.        Imports:

26.        Movement of import cargo from the airports/air-cargo complexes to another airport/air-cargo complex/ICD/CFS by truck has also been allowed vide CBEC Circular No. 69/99-Cus. Dated 6/10/1999. Broadly, the procedure is as follows:

(a)        Under the scheme, the airlines or their agents or custodians of gateway airport/air-cargo complex or the custodians of destination ICDs/CFSs/airports/ACCs are appointed as custodians of imported cargo to be transshipped in bonded truck from an airport/ACC to another airport/ACC/ICD/CFS. The transshipment under the scheme is governed by the provisions of the Goods Imported (Conditions of Transshipment) Regulations, 1995. The cargo to be transshipped needs to be manifested as for transshipment by the incoming international carrier.

(b)        The custodian executes a suitable running bond with a bank guarantee for an amount approved by the jurisdictional Commissioner of Customs for proper accountable of goods. The amount is debited from the bond when transshipment cargo is taken by the custodians and the bond is credited when the proof of handing over of the cargo to Customs at final destination is produced.

(c)        The custodians are required to submit the list of trucks together with registration numbers to be used for movement of each transshipment cargo. The cargo to be transshipped, after its unloading at the airport, is immediately shifted to transshipment warehouse of airlines or custodian. In case, the airlines/custodian does not have a transshipment warehouse, the import cargo duly passed with transshipment application is received by them from the Airport Authority of India's (AAI) custody to their make up area specially earmarked for the purpose of palletisation/containerization on the same day under the Customs supervision.

(d)        The custodian has to submit transshipment application along-with a copy of airway bill to Customs. After scrutiny of the application, transshipment permit for transshipment of cargo is issued. On getting the permission for transshipment, goods are shifted from the warehouse into truck under the supervision of Customs. After loading of goods, truck is sealed with one time bottle seal by the Customs.

(e)        The Customs at the destination check the Customs seal and description of packages as per the transshipment permit. The custodian is responsible for the safety and security of the cargo. After unloading of the goods at the destination airport/ACC/ICD/CFS, the Customs makes suitable endorsement on the copies of transshipment permit, a copy of which is retained by the Customs at the destination airport/ACC/ICD/CFS and other copy is returned to the originating airport. The custodians are required to submit proof of safe arrival of goods at the destination, to the Customs at the originating airport/ACC within 30 days from the dispatch of goods, failing which suitable action in terms of the condition of bond may be taken against the custodians.

Transshipment of cargo by air:

27.        The CBEC Circular No.47/96-Cus., dated 16/9/1996 provides a detailed procedure for transshipment of imported cargo by air (i) from an airport in India to another airport in India, and (ii) from an airport in India to an airport abroad. The circular also provides a procedure for movement of export cargo from an inland airport in India to an airport abroad through a gateway airport in India. The movement of cargo between the gateway airport and inland airport is allowed in Indian Airlines flights and also in private sector airlines flights. The procedures in brief are as follows:

(i)        Transshipment of cargo from a gateway airport to an inland airport:

(a)        The transshipment of imported cargo from a gateway airport to an inland airport is governed by the Goods Imported (Conditions of Transshipment) Regulations, 1995. The airlines bringing the import cargo, files an application for transshipment permit along-with copies of airway bills to Customs. The Customs, after scrutiny of details furnished in the application, issues transshipment permit. After issuance of transshipment permit, goods are allowed to be stuffed in closed trucks and taken to transshipment warehouse of the domestic carrier under the Customs preventive escort.

(b)        On receipt of the goods at the warehouse of domestic carrier, the Customs Officer posted in the warehouse has to acknowledge receipt of the goods and make suitable endorsement on the copies of the transshipment permit accompanying the goods. A copy of transshipment permit is returned to the transshipment warehouse of airlines where from the goods originated. The domestic carrier has to execute a bond with security in terms of the said regulations. On receipt of goods, domestic carrier has to prepare EGMs clearly mentioning transshipment cargo as international cargo and submit the same to the Customs. The transshipment cargo is loaded in the aircraft in presence of Customs. Two copies of EGMs are also sent to Customs at the destination airport.

(c)        The Customs at the destination airport has to check the packages with reference to EGM and make suitable endorsement on the EGMs. One copy of EGM is returned to the Customs officer at the warehouse of domestic cargo at the airport where from cargo originated, for reconciliation of their record. One copy is to be retained there.

(ii)        Transshipment of cargo received at an airport in India from an airport abroad to an airport abroad:

        The cargo to be transshipped to any foreign destination is to be sorted out immediately after landing at an Indian airport and is transferred to special enclosure meant for storage of transshipment cargo under Customs supervision by the concerned airlines. Before transshipment of any goods, cargo transfer manifest is required to be presented in triplicate to the Customs. One copy is retained at the warehouse of the airlines. The remaining two copies with cargo are handed over to the carrier, who is to carry the goods to foreign destination. The loading of cargo in the aircraft is undertaken under the Customs supervision. The officer supervising the loading makes suitable endorsement on the bill of transshipment and sends a copy back to the warehouse of the airlines.

(iii)        Movement of export cargo from an inland airport to an airport abroad through an intermediate airport in India:

(a)        The shipping bills are filed, assessed and goods examined as usual at the originating airport. The domestic carrier has to furnish a bond to Customs to ensure that goods are safely exported out of India. The domestic carrier is to carry cargo only under E.G.M. duly certified by the Customs.

(b)        At the gateway airport, the cargo received from the inland airport is removed from the aircraft to the transshipment warehouse of domestic carrier under Customs supervision. The domestic carrier presents the EGM copies brought from inland airport, to the officer in-charge of warehouse.

(c)        After storage of goods in transshipment warehouse, the domestic carrier files cargo transfer manifest to the Customs. After obtaining the permission from the Customs, goods are taken in closed trucks under Customs supervision to the warehouse of foreign airlines. After shipment of cargo, the officer in-charge of warehouse will reconcile his records on the basis of EGM submitted by the foreign airlines. The Customs officer at the warehouse of the foreign airline has to make suitable endorsement evidencing receipt of cargo and subsequent export on the copies of EGM brought by domestic carrier from the originating airport. A copy of the said EGM is to be sent back to the originating airport for accountable of goods by the Customs at the originating airport. In case duly endorsed copy of EGM is not received by the Customs at the originating airport within 30 days, action may be taken in terms of the conditions of the bond.

(Reference: Goods Imported (Conditions of Transshipment) Regulations, 1995 issued vide notification No. 61/95-Customs (NT) dated 26/9/1995. Circulars No. 47/96-Cus. dated 16/9/1996, 57/98-Cus., dated 4/8/1998, 31/99-Cus., 27/5/1999,69/99-Cus., dated 6/10/1999, 34/2000-Cus., dated 3/5/2000, 56/2000-Cus., dated 5/7/2000,61/2000-Cus., dated 13/7/2000).

Consolidation of Cargo

With the development of a number of ICDs/CFSs in the hinterland, importers and exporters have got the option to either get their import/export consignments cleared at the gateway ports or any nearby ICD/CFS. The export goods cleared by Customs at an ICD/CFS are sent to gateway port in sealed containers. At the gateway port, such containers are normally allowed to be exported without any further physical examination of the goods. Similarly, imported cargo meant for any ICD/CFS is allowed to be transshipped in sealed containers from the gateway ports to such ICDs/CFSs and all Customs formalities in relation to clearance of cargo are completed by the importers at ICD/CFS.

2.        The export containers once sealed at the ICD/CFS were not allowed to be re-opened for consolidation at the gateway port. In such a situation, if shipping line did not have full container load of LCL cargoes for a particular destination, he had to either wait for more cargoes for that destination to come or send the container half empty. Carrying half empty container increases

freight charges for exporter and waiting for more cargoes at the ICD delays the export resulting in other problems. To minimize the freight charges on export, the shipping lines used to stuff the containers with LCL cargoes irrespective of their destinations and carry such containers to international hub ports e.g. Dubai, Singapore and Colombo. At the hub ports, they used to re-open the containers of LCL cargoes and consolidate the cargo in containers destination wise. Similarly, import containers stuffed with LCL cargoes irrespective of destinations used to be brought to hub ports, where shipping lines used to consolidate the cargo and stuff in containers destination wise.

3.        There was a consistent demand from the Exporters, Importers, Shipping Lines, Agents and Consolidators of the country to allow the re-working of containers at the Gateway Ports of the country to avoid the extra expenditure incurred by them for undertaking the same job at the foreign hub ports e.g. Dubai, Singapore and Colombo. It was reported that the ports like Colombo are mainly handling Indian transshipment cargo. Considering the difficulties of the trade, the Board has issued a Circular No.55/2000-cus., dated the 30th June, 2000 as amended by circular No.22/2001-Cus., and dated 17.4.2001 laying down a procedure for re-working of containers at Gateway Ports.

4.        This facility allows shipping lines to take the containers stuffed with LCL export cargo, irrespective of destination, from ICD/CFS to a gateway port, where these can be opened and reworked with cargoes received from different ICDs/CFSs. After such re-working, cargoes can be stuffed in containers destination wise. Similarly, LCL import cargo brought from different destinations at any gateway port can be re-worked and consolidated to stuff containers ICD wise. With this facility of re-working of containers at Gateway Ports, the exporters get benefited by way of saving in freight charges, reduction in transit time, better handling and safer delivery of cargo as the activity takes place under the supervision of Indian agencies. The facility reduces freight charges for imported LCL cargo also as it helps in optimum utilization of container capacity, it also helps in attracting business for Indian ports and developing these Ports as transshipment hubs.

Procedure for consolidation of export and import cargo

5.        Broadly, the procedure for consolidation of export and import cargo at the gateway ports is as follows:

B.        Exports :  

(a)

LCL cargo brought to an ICD/CFS is subject to routine documentation, assessment and examination by Customs. After examination and clearance of LCL cargo at the ICD/CFS, the packages opened for Customs examination are sealed by the Customs. The shipping line is required to use identification mark on each package, clearly indicating serial number of package, description of goods, total number of packages covered under that particular shipping bill, exporters identity and their own codified identity;

(b)

After completion of Customs formalities, the packages are handed over to the custodians along with two transference copies of shipping bill, certified copies of invoice, packing list, bill of lading and other documents;

(c) The custodians consolidate the cargo irrespective of shipping line and destination and stuff these in containers. After sealing of such containers in presence of Customs, containers are carried to the gateway port or a CFS near gateway port by the custodian;

(d)

At the gateway port, the documents are handed over to Customs and the containers are opened in presence of Customs. The cargo is handed over to shipping lines/their agents/MTOs/consolidators, etc., who re-work the cargoes received from different ICDs as well as cargo cleared for export at the gateway port or CFSs near the gateway port

and re-stuff the cargo in containers destination-wise in presence of Customs;

(e)

The custodians of the gateway port or CFS near gateway port have to maintain a tally sheet container-wise indicating details of the export consignments, the previous container number, shipping bill number, AR-4 number and the details of new containers in which goods have been re-stuffed;

(f) The container number in which such cargoes are stuffed is to be indicated by the Customs Officer on both the transference copies of shipping bill and AR-4. One copy of shipping bill is retained by the Customs at the gateway port and other copy of shipping bill is returned to the originating ICD/CFS;

(g)

The LCL cargo cleared by Customs at the ICD/CFS under this scheme is normally not to be examined again by the Customs at the gateway port or at the CFS where LCL cargoes are being consolidated;

(h)

The drawback is being paid at the inland ICDs/CFSs immediately after the clearance of LCL cargo by Customs without waiting for actual shipment of cargo from the gateway port.

 

C.        Imports:

(a)

On arrival of the LCL cargo meant for ICDs/CFSs, at the Gateway Port the concerned shipping line files the I.G.M. with the Customs, as per the procedure;

(b)

The de-stuffing and consolidation of the LCL cargo ICD/CFS wise is to be done at the earmarked space under supervision of the Customs and surveyors of the custodians;

(c) After consolidation of LCL cargo (ICD/CFS wise), the custodian at the Gateway Port is to prepare a tally list showing details of the import consignments, the previous container number, IGM No. and the details of the new container. The shipping line has to file sub-IGMs for all LCL (Import) cargo IGM wise;

(d)

After acceptance of sub-IGM by the Customs, the LCL cargo ICD/CFS wise is allowed to be re-stuffed in empty containers. The containers so re-stuffed are sealed by the custodian as per the procedure. The details of the new bottle seal should be indicated in the sub-IGM;

(e)

For transshipment of re-stuffed LCL cargo in new containers to different ICDs/CFSs, the concerned shipping line is to follow the procedure laid down in the Goods Imported (Conditions of Transshipment) Regulations, 1995;

(f) After completion of Customs formalities and clearance of LCL cargo at the respective ICDs/CFSs, a copy of the sub-IGM is to be sent back to the Customs authorities at the Gateway Port for confirmation/closure of IGM.

(Reference Circulars No.55/2000-Cus., dated 30.6.2000, 67/2000-Cus., dated 17.8.2000 and 22/2001-Cus., dated 17.4.2001)

Merchant Overtime Fee

At times, requests are received from trade for providing Customs clearance facilities or for Customs supervision of activities such as loading/unloading of vessels, stuffing, de-stuffing of containers, examination of cargo etc. beyond normal working hours of Customs or on holidays. Sometimes requests are received for posting of officers to supervise activities like stuffing, de-

stuffing of containers etc., at a place beyond the Customs area. Normally, the trade is required to plan its activities requiring Customs supervision or presence during working hours on working days and within the Customs area. However, in certain cases, e.g. in case of perishable cargo, life saving drugs or other consignments required urgently which has landed at an airport after working hours or on holidays, the importer may want immediate clearance. Similarly, the loading/unloading of goods on/from a vessel is to take place even on holidays or after working hours, as ship detention charges may be very high. Further, the trade requests for Customs supervision for factory stuffing of export cargo to avoid hassles of examination and stuffing of cargo at the ports.

2.        Considering the difficulties of the trade, the services of Customs, after normal working hours or on holidays within the Customs area or at any time at a place beyond Customs area, are provided on payment of overtime fee. The overtime fee is collected in terms of section 36 of the Customs Act, 1962 and the Customs (Fees for Rendering Services by Customs officers) Regulations, 1998 made there under. Section 36 of the Customs Act, 1962 allows unloading/loading of imported/export cargo from/on a vessel beyond working hours on a working day or on holidays only on payment of a prescribed fees. The Customs (Fees for Rendering Services by Customs Officers) Regulations, 1998, prescribes the rates and the manner for collection of such fee.

Basic features of the provisions for levy of overtime fee:

3.        The overtime fee is levied for services rendered by the Customs officers to trade beyond normal working hours or on holidays. If the service is rendered by officials at a place which is not their normal place of work or at a place beyond the Customs area, overtime is levied even during the normal working hours. The term 'service' means any function performed by the Customs officer under the Customs Act, 1962 and it includes-

(a)    Examination of the goods and related functions,

(b)    Loading and unloading of goods whether generally or specifically,

(c)    Escorting goods from one Customs area to the other, and

(d)    Any other Customs work authorized by the Commissioner of Customs.

4.        The term 'working hours' means the duty hours prescribed by the Commissioner of Customs in his jurisdiction for normal Customs work. Where different working hours have been prescribed by the Commissioner of Customs for different items of Customs work or for different places within his jurisdiction, such working hours are to be considered as 'working hours' for the purpose of levy of overtime fee.

5.        The prescribed rates of overtime fee for rendering services by the Custom officers are as follows:

Category of officers

Fee per hour or part thereof on working

days (in rupees)

Fee per hour or part thereof on holidays

(in rupees)

 6 AM to 8

PM8 PM to 6

AM6 AM to 8

PM8 PM to 6

AM

(1) (2) (3) (4) (5)

1.   Appraisers, Superintendent (Customs Preventive) and Superintendent (Central Excise)

85 125 140 180

2.   Air Customs Officers, Examiners, Preventive Officers and Inspectors of Central Excise

75 100 105 145

3.   Class IV staff

35 45 55 60

6.        Overtime fee as mentioned above is levied for a minimum of 3 hours in each case, except in cases of overtime postings immediately preceding or immediately following the working hours of the concerned cadre of officers. The period between the midnight and 6 AM is to be treated as a block for calculation of overtime fee whether the services are required for the entire block or for a portion thereof. In regard to services provided by Customs officers during working hours at a place beyond Customs area, the overtime fee is charged for the entire block of working hours before lunch or after lunch, as the case may be, whether the request for the services of Customs officer is for the entire block or a portion thereof.

Procedure for posting of officers on overtime basis

7.        The party desirous of availing of the services of officers on overtime basis is required to make prior request to the Department for such posting. The Customs scrutinizes the application made by the parties and ascertains the requirement of the job. The overtime fee is calculated on the basis of rates prescribed in the said regulations as mentioned above. A separate fee is to be charged if either of the three namely CHA/Vessel /Party (Importer/ Exporter) changes. In case a CHA has more than one Bill of Entry/Shipping Bill of an importer/exporter, he need not pay separate set of fee for each such document. Similarly, if an exporter or importer has more than one activity to be supervised by Customs during the same block, he need not pay overtime fee for each activity separately. Once the party pays the overtime fee, the officers are posted to perform Customs work.

(Reference - The Customs (Fees for Rendering Services by Customs Officers) Regulations, 1998 issued vide notification No.69/98-Cus. (N.T), dated 4th September, 1998).

Procedure for Less Charge Demand

Section 28 of the Customs Act, 1962 provides for recovery of any duty which has not been levied or has been short levied or erroneously refunded or if any interest payable has not been paid, part paid or erroneously refunded provided a notice demanding such duties/interests is issued within the time limit specified in that Section. Where the short levy is by reason of collusion or any willful misstatements or suppression of facts by the Importer the period for issuing the demand notice is five years from the relevant date specified in Section 28.

2.        When the short levy is discovered or pointed out by Audit, a notice is served on the importer or the persons chargeable with duty to show cause as to why the amount due should not be recovered from him. Normally a period of 15 days is given to show cause why he should not pay the amount. The basis and the working of the short levy are required to be clearly stated in the Show Cause Notice. Copies of relied upon documents are also be furnished to the noticee, to enable him to represent his case. All such notices are required to be sent by Registered Post or given to the Agent under receipt/acknowledgement after being entered in the less charge demand register maintained in the respective sections of the Custom House.

3.        It is important that the demand should be served on the importer within the time limit under section 28 of the Custom Act as otherwise the demand shall become time barred and legally not recoverable. In the case of IAD or CRA objections demands are issued immediately on receipt of the objection wherever it appears that there may be a short levy of duty as indicated in the objection.

4.        Demands issued for short levy of duty as a result of audit objection, arising out of assessment etc. are to finalized within 6 months from the date of issue of the demands and cases which could not be finalized should be reviewed for examining the reasons for delay and adopting suitable remedial measures.

5.        Upon receipt of the reply from the Noticee the matter is examined in detail and the Noticee is offered an opportunity of Personal Hearing to explain his case before the adjudicating authority. After the Personal Hearing the adjudicating authority shall examine the material placed before him and shall come to the conclusion after taking into consideration the provisions of Law concerning the issue. Generally, the issues involved are misdeclaration of the description of the goods resulting in wrong classification and levy of lesser duty, misdeclaration of value, quantity and weight having a bearing on duty, calculation error resulting in short levy of duty, non inclusion of certain components of value in the assessable value etc.

6.        The adjudicating authority is required to take an independent decision as an quasi-judicial authority and pass appropriate orders either determining the amount of short levy in terms of section 28 (2) of Customs Act or dropping the proceedings where it is found that there is no short levy. In either case an appealable order is to be issued by the adjudicating authority. The duties, fines and penalties imposed, if any, are required to be paid immediately, unless the party files an appeal and obtains a stay from the competent authority.

7.        As regards breach of condition of the notification after availing of the exemption there under, it has been held by the Apex Court that the obligation under a notification is a continuing one and the Customs authorities are well within their power to recover the duty whenever it comes to their notice that the imported has failed to fulfill the conditions. In such cases the demand can be issued irrespective of the time factor and the amount can be recovered in terms of the provisions of the Customs Act.

8.        The confirmed demands are enforced and recoveries effected in accordance with the provisions under Section 142 of Customs Act, 1962. Where it is not possible to recover the amount by adjusting against any money which the department owes to such persons, or by detaining and selling any goods belonging to such persons which are under the control of the Department, action is initiated to recover the Government dues through the District Collector as if it were an arrears of land revenue. Powers are also vested with Customs for attaching/detaining and selling any movable or immovable property belonging to/or under control of such person, and these can also be resorted to.

Refunds

On import or export of goods, at times, it is found that duty has been paid in excess of what was actually leviable on the goods. Such excess payment may be due to lack of information on the part of importer/exporter or non-submission of documents required for claim of lower value or rate of duty. Sometimes, such excess payment of duty may be due to shortage/short landing, pilferage of goods or even incorrect assessment of duty by Customs. In such cases, refund of excess amount of duty paid can be claimed by the importer or exporter. If any excess interest has been paid by the importer/exporter on the amount of duty paid in excess, its refund can also be claimed. Section 27 of the Customs Act, 1962 refers in this regard. The refund of any duty and interest can be claimed either by a person who has paid the duty in pursuance to an order of assessment or a person who has borne the duty. Any person claiming refund of any duty or interest has to make an application in duplicate in the form as prescribed in the Customs Refund Application (Form) Regulations, 1995, to the jurisdictional Deputy/Assistant Commissioner of Customs. Such application is to be made before the expiry of six months from the date of payment of duty and interest. However, in case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, application for refund can be made before the expiry of one year from the date of payment of duty and interest.

2.        The application for refund is required to be filed with documentary or other evidence including documents relating to assessment, sales invoice and other like documents to support the claim that the duty and interest was paid in excess, incidence of duty or interest has not been passed on by him to any other person, and the refund has not been obtained already.

3.        Where on scrutiny, the application is found to be complete in all respects; the Customs issues an acknowledgement in the prescribed Form as per the Customs Refund Application (Form) Regulations, 1995. However, in case the application is found to be incomplete, the Customs has to return the application to the applicant, pointing out the deficiency. The applicant has to re-submit the application after making good the deficiency, for scrutiny by Customs again for admissibility of the refund claim.

Relevant dates for submission of a refund application:

4.        As stated above, application for refund is required to be filed within six months from the date of payment of duty and interest and in case of any import made by an individual for his personal use or by Government or by an educational, research or charitable institution or hospital, application for refund is to be filed within one year from the date of payment of duty and interest. However, the limitation of one year or six months, as the case may be, does not apply where any duty and interest has been paid under protest. Normally, the time limit of six months or one year is computed from the date of payment of duty; however, in following situations, such time limit is computed differently:

(a)            In case of goods which are exempt from payment of duty by an ad-hoc exemption order issued under sub-section (2) of section 25 of the Act, the limitation of one year or six months, as the case may be, is to be computed from the date of issue of such order;

(b)            Where any duty is paid provisionally under section 18 of the Act, the limitation of one year or six months, as the case may be, is to be computed from the date of adjustment of duty after the final assessment thereof;

(c)            The date of payment of any duty and interest in relation to a person, other than the importer shall be 'the date of purchase of goods' by such person.

Processing of refund claim:

5.        The application of refund found to be complete in all respects by Customs, is processed to see if the whole or any part of the duty and interest paid by the applicant is refundable. In case, the whole or any part of the duty and interest is found to be refundable, an order for refund is passed. However, in view of the provisions of unjust enrichment enshrined in the Customs Act, the amount found refundable has to be transferred to the Consumer Welfare Fund. Only in following situations, the amount of duty and interest found refundable, instead of being credited to the Consumer Welfare Fund, is to be paid to the applicant:

(A)            if the importer has not passed on the incidence of such duty and interest to any other person;

(b)            If imports were made by an individual for his personal use;

(c)            If the buyer who has borne the duty and interest, has not passed on the incidence of such duty and interest to any other person;

(d)            If amount found refundable relates to export duty paid on goods which have returned to exporter as specified in section 26;

(e)            If amount relates to drawback of duty payable under section 74 and 75;

(f)            If the duty or interest was borne by a class of applicants which has been notified for such purpose in the Official Gazette by the Central Government.

Interest on delayed refund:

6.        The Customs has to finalize refund claims immediately after receipt of the refund application in proper form along-with all the documents. In case, any duty ordered to be refunded to an applicant is not refunded within 3 months from the date of receipt of application for refund, an interest @ 15% is to be paid to the applicant. The interest is to be paid for the period from the date immediately after the expiry of 3 months from the date of receipt of such application till be date of refund of such duty. For the purpose of payment of interest, the application is deemed to have been received on the date on which a complete application, as acknowledged by the proper officer of Customs, has been made.

7.        Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal or any Court against an order of the Assistant Commissioner/Deputy Commissioner of Customs, the order passed by the Commissioner (Appeals), Appellate Tribunal or by the Court, as the case may be is deemed to be an order for the purpose of payment of interest on delayed refund.

8.        The interest on delayed refund is payable only in respect of delayed refunds of Customs duty and no interest is payable in respect of deposits such as deposits for project imports, security for provisional release of goods etc.

(Reference: The Customs Refund Application (Form) Regulations, 1995 issued vide notification no. 34/95(NT)-Customs, dated 26/5/1995, Notifications no. 32/95(NT)-Customs, dated 26/5/1995. Circular No. 59/95-Cus. dated 5/6/1995)

Detention of Imported & Export Cargo and Release/Storage Options in Disputed Cases

In the last few years, the Department has taken a number of steps to simplify customs procedures for expeditious clearance of export and import goods. The Department has made a

commitment in its Citizen's Charter & Vision Document that it would take all possible measures to maximize trade facilitation and minimize the grievances of importers/exporters, inter-alia, by ensuring speedy clearance. However, in a number of situations, such speedy clearance is not possible and it becomes necessary to detain the goods for investigation. Normally, the goods liable for confiscation under the Customs Act are seized by the Customs. However, in some cases where seizure is not practicable, the goods are detained.

2.        The provisions for detention of goods are contained in section 110 of the Customs Act. Once order for detention of goods is served to the owner of the goods, he cannot remove, part with, or otherwise deal with the goods except with the prior permission of the proper officer of the Customs. The goods are detained for various reasons and at the instance of various agencies of the Department, such as the Directorate of Revenue intelligence, the Directorate of Central Excise Intelligence, Narcotics Control Bureau and Directorate of Enforcement and even other agencies, like the Central Bureau of Investigation. During such investigation and subsequent adjudication proceedings, sometimes the contravention of provisions of the Customs Act and other allied laws is established, and action is taken against the importers/ offending goods as provided in the law. In some cases, the charges are dropped at initial stages or at the appeal stage.

3.        In respect of goods detained at the port/airport/ICD/CFS/LCS etc, the custodians of goods demand their dues for storing the goods (i.e. the warehousing charges) from the importers/exporters. Likewise the shipping lines demand container detention charges for the period the goods are kept in their custody. In situations where the goods are detained for a long period, the warehousing/demurrage charges and container detention charges become high. In cases where the charges against the importers or exporters are dropped, the Customs usually issues detention certificates for the period when goods were under detention. The custodians normally remit the detention/demurrage charges wholly or partially on the basis of detention certificates issued and recommendation made by the Customs. However, it is not obligatory, as held in some recent Court judgments that custodians must waive the rentals payable to them.

4.        The issues like the quantum of demurrage and pay ability of demurrage, were examined by the Honorable Supreme Court in the case of International Airport Authority of India vs. Grand Slam International (1995 (77) ELT 753 SC) and Trustees of Port of Madras Vs. Nagavedu Lungi & Co., [1995 (80) ELT 241 SC]. The final decision of these two judgments is that the detention charges and warehousing charges are payable to the custodians and shall be paid by the exporter or the importer even where the Customs detention has been finally held as improper/illegal.

Guidelines for expeditious Customs clearance/provisional release:

5.        To avoid delays in the release & minimize hardship to importers which is caused if goods remain detained pending investigation into any dispute in relation to assessment etc., a number of instructions have been issued recently. The stress is on expeditious assessment/investigations and unless the goods are prohibited or involved in serious fraud even if there is a dispute in assessment etc., provisional release option be given to the importers. Broadly the following guidelines are to be followed by importers/officers of the Department to keep a check on unnecessary detention of goods & ensure speedy Customs clearance: -

(a)Import/export goods are not to be detained by the Department unless prohibited as per the EXIM Policy and/or under other allied laws. Goods are not to be detained on simple valuation or classification disputes.

(b)

If it becomes necessary to detain the goods for investigation of any serious suspected fraud etc., the importer/exporter must be intimated in writing that he may shift the

goods to a bonded warehouse under section 49 of the Customs Act, 1962, with a clear indication that if he does not avail of this facility and the goods incur demurrage, etc., he would have to bear the demurrage and other charges levied by the custodian/other agencies.

(c)

But for certain exceptional categories, in any dispute case pending investigation wherever importer or exporter is willing, he should be allowed provisional clearance of the goods by furnishing a bond for full value of the goods supported by adequate bank guarantee as may be determined by the proper officer. (The value of bank guarantee shall not exceed twice the amount of duty). The provisional clearance should be allowed as a rule and not as an exception. However, in the following situations, provisional release may not be resorted to:

(i) The prohibited goods whose import/export are not in the interests of the country;

(ii)

Imports which do not comply with the prescribed specifications/conditions/requirements of various Orders/Acts. (e.g. those laid down under DGFT Notification Nos.3 to 5/ (RE-2001)/1997-2002 dated 31.3.2001); Livestock Importation Act, 1898, Prevention of Food Adulteration Act, 1954, etc.);

(iii)

where gross fraudulent practices are noticed and it is viewed that release of the consignment may seriously jeopardize further investigations as also interests of the revenue ;

            In these situations also, as mentioned earlier, option for storage in warehouses under Sec.49 should be provided to the importers. Goods can be allowed entry into the country only after the laid down quality standards etc. are satisfied.

(a)

In the case of containerized cargo, wherever the parties are not in a position to execute bond and bank guarantee for taking provisional release or the Department is of the view that clearance cannot be allowed, the goods may be even de-stuffed from the containers after giving notice to all concerned and stored in port's godowns and warehouses to avoid container detention charges.

(b)

Wherever in adjudication proceedings, the parties have been allowed to clear the goods on payment of redemption fine and penalty and parties, instead of clearing the goods on payment of fine and penalty, prefer an appeal, they will have to pay demurrage/detention charges, etc. even if they succeed in appeal, as the liability has arisen due to their filing appeal and not clearing the goods for which option was available.

(c) The officers will be held accountable for cases where detention of goods have been ordered on insufficient and weak grounds resulting in unconditional release of detained goods in adjudication stage itself, where importers have to suffer avoidable demurrage charges/loss by pilferage etc.

(Reference Board's instructions issued vide letter F.No. 450/82/95-Cus.IV, dated 7th July, 1997 and circular No. 42/2001-Cus. dated 31/7/2001)

Import and Export through Courier

Imports and exports through courier mode have registered a healthy rate of growth in recent years. For regulating such imports and exports, the Government has framed the Courier Imports and Exports (Clearance) Regulations, 1998. At present, the facility of courier clearance is

available at Customs airports in Mumbai, Delhi, Chennai, Calcutta, Bangalore, Hyderabad, Ahmedabad, Jaipur, and Land Customs Stations at Petrapole and Gojadanga. Under the scheme, the courier goods are cleared through a fast track mode on observance of simple formalities by courier companies. Examination of parcels is kept to the minimum and clearance is allowed on the basis of selective scrutiny of documents. The duty, where leviable, is paid by the courier company on behalf of importers/exporters before taking delivery of the parcels. The weight limit for courier/express material (individual packages) for imports and exports is fixed at 70 kg.

2.        The facility of imports and exports through courier mode is allowed to only to those courier companies which are registered by the Customs. These courier companies are called "Authorized Couriers". The courier parcels are normally carried by passenger/cargo aircrafts. In the case of clearance through Land Customs Stations, other mode of transport is used. The regulations gives option to the courier company to get the goods imported through an on-board courier or the person in-charge of the aircraft (commander of the aircraft). Both of them are allowed to file the Courier Import Manifest. However, due to security reasons the Bureau of Civil Aviation Security (BCAS) insists that courier consignments in an aircraft are accompanied by an on-board courier. On arrival of import goods at the airport or at the Land Customs Station, the on-board courier/the authorized agent of the courier company carrying goods by any other mode of transport hands over the goods to different courier companies for undertaking Customs clearance of their consignments.

Categories of Goods Allowed for Import or Export through Courier :

3.        (A)        Import:    Except for certain excluded categories, all goods are allowed to be imported through the courier mode. The goods which are not allowed to be imported through courier are (a) animals and plants; (b) perishables; (c) publications containing maps depicting incorrect boundaries of India; (d) precious and semi precious stones, gold or silver in any form; and (e) chemicals falling within Chapters 28, 29 and 38 of the Customs Tariff. Perishables and chemicals require testing of samples before clearance. Import of animals and plants is subject to sanitary and phyto sanitary regulations. In either case, the assessment and clearance takes time. These goods, therefore, do not fit into the scheme, which envisages Customs clearance on a fast track mode. Further, passenger terminals and Land Customs Stations are not equipped to handle precious and semi precious cargo.

           (B)        Export:    As in the case of imports, all goods are allowed to be exported though courier except for certain excluded categories. The goods not allowed to be exported through courier mode are those which attract any duty on exports or those exported under export promotion schemes, such as Drawback, DEPB, DEEC, and EPCG etc. Other exclusions include goods where the value of the consignment is above Rs.25, 000/- and transaction in foreign exchange is involved. The limit of Rs.25, 000/- does not apply where the G.R. waiver or specific permission has been obtained from the Reserve Bank of India.

Import and Export of Gems and Jeweler:

4.        Import of gems and jewellery including samples thereof by Export Oriented Units or units in Export Processing Zones is allowed through courier. Likewise, export of cut and polished diamond, gems and jewellery under any scheme of EXIM Policy from Export Oriented Units, units in Export Processing Zones or units in the Domestic Tariff Area is allowed through courier subject to the condition that the value of each export consignment under such export does not exceed Rs. 20 lakhs.

Classification of Goods:

5.        For facilitating Customs clearance, the goods imported by courier have been divided into three categories, viz (a) documents; (b) samples and free gifts; and (c) dutiable or commercial goods. The documents include any message, information or data recorded on paper, cards or photographs having no commercial value, and which do not attract any duty or subject to any prohibition/restriction on their import or export. Samples have been defined to mean any bonafide commercial samples and prototypes of goods supplied free of charge of a value not exceeding Rs.50,000/- for exports and Rs.5000/- for imports which are not subject to any prohibition or restriction on their import or export and which does not involve transfer of foreign exchange. Free gifts means any bonafide gifts of articles for personal use of a value not exceeding rupees 25,000/- for a consignment in case of exports and Rs.5000/- for imports which are not subject to any prohibition or restriction on their import or export and which do not involve transfer of foreign exchange. The third category of imports is dutiable or commercial goods.

Packing Requirements and Procedural Formalities for Clearance of Import Goods:

6.        The Regulations require the above three categories of goods to be packaged distinctively in identifiable courier company bags with appropriate labels. This is because; the scheme of assessment and clearance of the goods is different for the three categories. Essentially, the goods in the first two categories do not attract any customs duty. Therefore, simplified Bills of Entry (Courier Bill of Entry-III for documents and Courier Bill of Entry-IV for samples and free gifts) have been specified for their clearance. One single Courier Bill of Entry is sufficient for clearance of any number of such goods imported by any Authorized Courier on a particular flight. It is, however, necessary that for the purpose of clearance of documents, the manifest filed by the Authorized Courier specifies the nature of document i.e. whether letters, brochures, catalogues, manuals, etc. This is necessary to verify that indeed the item of import viz., ‘document’ is duty free and deserves to be cleared under CBE-III of the regulations. For clearing dutiable or commercial goods, Form Courier Bill of Entry-V is required to be filed. This Form can contain a number of individual consignments imported by one courier on behalf of more than one consignee. There is no limit as regards the quantity of dutiable or commercial goods which can be imported through the courier. These goods are assessed to duty on merits like any other imported goods, and exemption, wherever available, is allowed to such imports when claimed.

7.        It may be mentioned that the value limit prescribed for samples and free gifts is exclusive of freight and insurance element. However, in case of goods valued above Rs.5, 000/-, freight and insurance is added to calculate the duty payable.

8.        The simplified procedure for filing Courier Bills of Entry does not apply to all goods. The regulations stipulate that for certain categories of imports, a regular Bill of Entry prescribed in the Bill of Entry (Forms) Regulations, 1976 is to be filed. These include, (a) goods imported under duty exemption scheme applicable to EOUs and units in EPZs; (b) goods imported under DEPB, DEEC and EPCG Schemes; (c) goods imported against the license issued under the Foreign Trade (Development and Regulation), Act, 1992 and (d) goods imported by a related person defined under the Customs Valuation Rules, 1988.

Procedural Formalities for Clearance of Export Goods:

9.        In case of export goods, the Authorized Courier files Courier Shipping Bills with the proper officer of Customs at the airport or Land Customs Station before departure of flight or other mode of transport, as the case may be. Different Forms have been prescribed for export of documents and other goods. The Authorized Courier is required to present the export goods to the proper officer for inspection, examination and assessment.

10.        However, for certain categories of export goods, a regular Shipping Bill prescribed in the Shipping Bill and Bill of Export (Form) Regulations 1991 is required to be filed. Such Shipping

Bills are processed at the Air Cargo Complex or the EOUs or EPZs or STP or EHTP and thereafter with the permission of Customs; the goods are handed over to a courier agency for onward dispatch. The goods to which the above procedure applies are those – (a) originating from EOUs, units in FTZs/STPs/EHTP; (b) proposed to be exported under DEPB, DEEC, EPCG and Drawback Schemes and (c) which require a license for export under the Foreign Trade (Development and Regulation) Act, 1992.

11.        It may be noted that the scheme of clearance of imports and exports by courier mode introduces certain procedural relaxation in regard to customs clearance procedures. Such imports and exports will, however, continue to be governed by the provisions of the EXIM Policy applicable to such imports and exports. In other words, the courier imports and exports will have to comply with the provisions and requirements of the EXIM Policy or any other law for the time being in force, subject to which only imports or exports may be permissible.

Disposal of Uncleared Goods:

12.        The regulations prescribe a procedure for clearance of uncleared goods. In case of imported goods, a notice is required to be issued to the Authorized Courier and goods can be disposed of after the expiry of 30 days of the arrival of the said goods. The charges payable for storage and holding of such goods are to be borne by the Authorized Courier. In the case of export goods, a similar procedure has been prescribed, the only difference being that such goods can be disposed of if they have not been exported within seven days of arrival into the Customs Area or within such extended period as may be permitted by the Customs.

Registration of Authorized Courier:

13.        A person desirous of operating as an Authorized Courier is required to get himself registered with the jurisdictional Commissioner of Customs. The registration is valid for 3 years and it can be renewed for another 3 years if performance of courier is satisfactory. An Authorized Courier is allowed to have registration at more than one airport or Land Customs Station. However, separate bond and security will have to be furnished at each airport and Land Customs Station. The person applying for registration should be financially viable and in support thereof he is required to produce a certificate issued by a scheduled bank or such other proof evidencing possession of assets of a value not less than Rs. 5 lakhs. Further, he will have to execute a bond with a security of Rs.2 lakhs for registration at Mumbai, Calcutta, Delhi and Chennai. At other airports and Land Customs Stations, the security deposit is kept at Rs. 1 lakh. The security can be in cash or in the form of postal security or National Savings Certificate or Bank Guarantee. A condition of the bond is that the applicant agrees to pay the duty, if any, not levied or short levied with interest, if applicable, on any goods taken clearance by the Authorized Courier.

Obligation of Authorized Courier:

14.        A number of obligations have been cast on the Authorized Courier under the Courier Imports and Exports (Clearance) Regulations. These include obtaining an authorization from the consignees for clearance of import or export goods; advising his client to comply with the provisions of the Customs Act, 1962 and rules and regulations made there-under; exercising due diligence in furnishing information to the Customs in relation to clearance of import or export goods; not withholding any information communicated to him by Customs relating to assessment and clearance of import/export goods from a client; not withholding any information relating to assessment and clearance of import/export goods from the assessing officer and not attempting to influence the conduct of any officer of Customs in any matter by the use of threat, false accusation, duress or offer of any special inducement etc. Further, he is required to maintain records and accounts prescribed by the Customs.

De-registration and Forfeiture of Security:

15.        The registration of an authorized courier can be revoked by the Commissioner and his security can be forfeited on grounds of his failure to comply with the conditions of the bond, the provisions of regulations and misconduct. Revocation of registration can be made only after a notice has been issued to the Authorized Courier and he is given an opportunity to present his case in writing as well as opportunity of being heard in the matter. In cases where an inquiry needs to be conducted to establish prima facie the grounds against the Authorized Courier, the Commissioner of Customs can, pending such inquiry, suspend the registration. An Authorized Courier, if aggrieved by the order of the Commissioner, may represent to the Chief Commissioner within 60 days of communication of the impugned order.

{Reference: Courier Imports and Exports (Clearance) Regulations, 1988; Circular No.56/95-Customs, dated 30.5.95 (issued from F.No.446/18/94-Cus. IV); and Circular No.85/98-Customs dated 13.11.98 (issued from F.No.450/120/97-Cus.IV).

Clearance by Post

The facility for import of goods by Post Parcels has been provided by the Postal Department at its Foreign Post Offices and sub- Foreign Post Offices. Customs facilities for examination, assessment, clearance etc. are available at these Post Offices. Export of parcels can also be affected at the facilities provided at Foreign Post Offices and sub-Foreign Post Offices. Limited facility for export clearances are also available at Export Extension Counters opened by the Postal Department where parcels for export are accepted and cleared by the Customs.

2.        Letter Mail Articles are generally cleared by the Customs at the time of their arrival and sorting unless they appear to contain contraband or dutiable articles. In such cases, the Letter Mail is subjected to further examination at the Foreign Post Offices or sub- Foreign Post Offices, as the case may be.

3.        Goods imported or exported by post are governed by sections 82, 83 & 84 of the Customs Act, 1962. Furthermore, vide Notification No. 53/Cus dated 17.6.1950 (as amended by Notification No. 111/Cus dated 8.7.1955) Rules Regarding Postal Parcels & Letter Packets from Foreign Ports In/Out of India have also been framed.

Importability of items through Post:

4.        Import of dutiable goods by letter, packet or parcel posts is prohibited under Notification No. 78-Cus., dated 2.4.1938 (as amended), read with section 11 of the Customs Act, 1962, except where such letter or packet bears a declaration stating the nature, weight and value of the contents or if such a declaration is attached alongside indicating that the letter/packet may be opened for Customs examination. Dutiable goods may also not be imported by Post in case the Customs is not satisfied that the details as above are incorrectly stated in the declaration.

5.        Items intended for personal use, which are exempt from the prohibitions under the Exim Policy, 1997-2002 or the Customs Act, 1962, can be imported by postal channel on the payment of appropriate duties under Chapter Heading No. 98.04 of the Customs Tariff. This, however, does not apply to items viz. Motor Vehicles, Alcoholic Drinks and goods imported through Courier Service which are to be assessed at merit rates of duty. In case the customs duty payable is not more than Rs. 100/-, the same is exempt vide Notification No. 17/2001-Cus. Dtd. 1.3.2001, as amended.

Import of Gifts:

6.        At the same time, bona fide gifts up to a value-limit of Rs. 5, 000/-, imported by post, are exempt from basic and additional customs duties vide Notification No. 171/93-Cus. Dtd. 16.9.1993. Items imported as gift should not be restricted for importation under Foreign Trade (Development and Regulation) Act, 1992.

7.        The sender of the gift may not necessarily be residing in the country from where the goods have been dispatched. Any person abroad can send the gifts to relatives, business associates, friends, companies and acquaintances. The gifts have to be for bonafide personal use. The purpose of this stipulation is that the person receives the gift genuinely free and the payment is not made for it through some other means. The quantity and frequency of the gifts should not give rise to the belief that it is used as a route to transfer money. The gifts can be received by individuals, societies, institutions, like schools and colleges and even corporate bodies.

8.        For the purposes of calculating the value-limit of Rs. 5, 000/- in case of imports of gifts, postal charges or the airfreight is not taken into consideration. The exemption under the above-referred Notification is subject to revision from time to time. The value of Rs. 5, 000/- is taken as the value of the goods in the country from where the goods have been dispatched.

9.        If the value of the gifts received is more than Rs.5, 000/-, the receiver has to pay customs duty on the whole consignment, even if the goods have been received free, unsolicited. In addition, at the discretion of the Assistant/ Deputy Commissioner, if the goods are restricted or banned for import, the receiver has a liability for penalty for such import, even if the goods have been sent unsolicited.

10.        Customs duty is chargeable on gifts assessed over Rs. 5, 000/- by the Customs. In case of post parcel, the customs department assesses the duty payable and the postal department collects the assessed duty from the receiver of the gift and subsequently deposits it with the customs. In case of imports of gifts by the Courier mode, the courier company deposits the amount with customs and collects the same from the receiver at the time of giving delivery. If the amount is high, the courier company intimates the receiver to contact Customs or make payment of duty for the said goods before release of the goods to the receiver.

Import of Samples:

11.        Bona fide commercial samples and prototypes imported by post are also exempted from customs duty, subject to the value limit of Rs. 5, 000/-, provided that the samples are supplied free of cost by the supplier. Subject to conditions prescribed under Notification No. 154/94-Cus. Dtd. 13.7.1994 (as amended from time to time), samples and prototypes of higher value are also permitted to be imported with a view to help exports.

Parcels containing medicines and life saving drugs:

12.        Life saving drugs and items specified under Sl. No. 371 in the Notification No. 17/2001-Cus. Dtd. 1.3.2001 (as amended), subject to the conditions prescribed therein, may be imported by post free from customs duty for personal use.

13.        In addition to the above, various general exemptions from customs duties on merits would be available on imports made through postal channel.

Procedure in case of Postal Imports:

14.        The Rules prescribed for landing and clearing at notified Ports/Airports/Land Customs Stations of parcels and packets forwarded by the foreign mails or passenger vessels or air liners are as follows: -

(a)

The boxes or bags containing the parcels labeled as "Postal Parcel", "Parcel Post", "Parcel Mail", and “Letter Mail" will be allowed to pass at the Foreign Parcel Department of the Foreign Post Offices and Sub Foreign Post Offices.

(b)

On receipt of the parcel mail, the Postmaster hands over to the Customs the following documents:

(i) a memo showing the total number of parcels received from each country of origin;

(ii) parcel bills in sheet form (in triplicate) and the senders’ declarations (if available) and any other relevant documents that may be required for the examination, assessment etc. by the Customs Department;

(iii) the relative Customs Declarations and dispatch notes (if any); and

(iv)

Any other information required in connection with the preparation of the parcel bills which the Post Office is able to furnish.

(c) On receipt of the documents, the Customs Appraiser shall scrutinize the particulars given in the parcel bill and shall identify the parcels required to be detained for examination either for want of necessary particulars or defective description or suspected misdeclaration or under-valuation of contents. The remaining parcels are to be assessed by showing the rates of duty on the declarations or parcel bill, as the case may be. For this purpose, the Appraisers are generally guided by the particulars given in the parcel bill or Customs declarations and dispatch notes (if any). When any invoice, document or information is required whereby the real value, quantity or description of the contents of a parcel can be ascertained, the addressee may be called upon by way of a notice to produce or furnish such invoice, document and information.

(d)

Whenever necessary, the values from the declarations are entered into the parcel bill and after conversion into Indian Currency at the ruling rates of exchange; the amount of duty is calculated and entered. The relevant copies of parcel bills with the declarations so completed are then returned to the Postmaster immediately. In case of postal imports, duty is calculated at the rate and valuation in force on the date that the postal authorities present a list of such goods to the Customs. In case the list is presented before the arrival of the vessel carrying the goods, the list is deemed to have been presented on the date of the arrival of the vessel.

(e)

All parcels marked for detention in the manner indicated above are to be detained by the Postmaster. Rest of the parcels will go forward for delivery to the addressee on payment of the duty marked on each parcel.

(f) As soon as the detained parcels are ready for examination, they are submitted together with the parcel bill to the Customs. After examining them and filling in details of contents of value in the parcel bills, Customs note the rate and amount of duty against each item. The remarks "Examined" is then to be entered against the entry in the parcel bill relating to each parcel examined by the Customs Appraiser and the Postmaster’s copies will be returned by the Customs.

(g)

In the case of receipt of letter mail bags, the Postmaster gets the bags opened and scrutinized under the supervision of the Customs with a view to identify all packets containing dutiable articles. Such packets are to be detained and are presented in due course to the Customs Appraiser with letter mail bill and assessment memos for assessment.

        As soon as packets so detained are ready for examination and assessment, they shall be submitted together with the relative letter mail bill and assessment memos to the Customs. After examining them and filling the details of contents of value in the bill, the Customs Appraiser will note the rate and amount of duty against each item. He will likewise fill in these details on the assessment memos to be forwarded along with each packet.

(h)

All parcels or packets required to be opened for Customs examination are opened, and after examination, re-closed by the Post Office officials and are then sealed by them with a distinctive seal. The parcels or packets remain throughout in the custody of the Post Office officials.

(i) If on examination the contents of any parcel or packet are found to be misrelated or the value understated or to consist of prohibited goods, such parcels or packets must be detained and reported to the Customs and the Postmaster does not allow such parcels or packets to go forward without the Customs’ orders.

(j) The duties as assessed by the Customs Appraiser and noted in the parcel bill or letter mail bill shall be recovered by the Post Office from the addressees at the time of delivery to them. The credit for the total amount of duty certified by the Customs Appraiser at the end of each bill is given by the Post Office to the Customs Department in accordance with the procedure settled between the two Departments.

(k) The parcel bills or letter mail bills and other documents on which assessment is made remain in the custody of the Post Office, but the duplicates, where these are prepared, are kept in the Customs Department for dealing with claims for refunds, etc.

Procedure in case of Postal Exports:

(a) The rate of duty and tariff value, if any, applicable to any goods exported by post shall be the rate and valuation in force on the date on which the exporter delivers such goods to the Postal Authorities. Goods for exportation may be delivered at Foreign Post Offices (including Export Extension Counters) and Sub-Foreign Post Offices which have been notified by the Customs under section 7 of the Customs Act, 1962.

(b) The articles exported by post are required to be covered by a declaration in the prescribed form.

(c) All exports by post, where the value exceeds Rs. 50/- and payment has to be received, must be declared on the exchange control form viz. P.P. form. When the postal article is covered by a certificate issued by the RBI (with or without limit) or by an authorized dealer in foreign exchange that the export does not involve any transaction in foreign exchange up to Rs. 500/-, the declaration in a P.P. form is not necessary.

(d) Export by post of Indian and Foreign currency, bank drafts, cheques, National Saving Certificates and such other negotiable instruments is not allowed unless accompanied by a valid permit issued by the R.B.I., except incases where such negotiable instruments are issued by an authorized dealer in foreign exchange in India.

(e) Export of all goods is allowed under OGL to all destinations except those that are covered by the Negative List of exports. Goods up to the values of Rs. 15, 000/- are allowed for exports as gifts in a licensing year. Items covered under Negative List are not allowed as gifts without a license except in the case of edible items.

(f) Prohibition/restrictions under the Exim Policy and the Customs Act, 1962 exist on the export of various articles by Post. Some of these articles are viz. arms and ammunitions, explosives, inflammable material, intoxicants, obscene literature, certain crude and dangerous drugs, antiquities, etc.

(g) Export of purchases made by the foreign tourists is allowed subject to proof that the payment has been made in foreign exchange.

(h) If the addressee take delivery of parcels on payment of duty and then wish to have them returned to the senders they can do so only under claim for drawback under the observance of the prescribed procedure. Permitting an addressee

to open a parcel and take the delivery of part contents on payment of duty and repack the balance of the contents for re-export without payment of duty thereon is not authorized and is irregular.

Import of samples

In the International trade it is considered often necessary that samples of goods manufactured in one country be sent to another country for being shown or demonstrated for Customer appreciation and familiarization and for soliciting orders for goods from another country. India is also a signatory to a 1952 convention to facilitate the Importation of Commercial samples and Advertising materials. The notifications issued in this regard enable duty free import of genuine Commercial samples into the country for smooth flow of trade. It is however not a means to avoid paying Customs Duty through repeated imports of samples in smaller lots.

What are samples?

2.        The Commercial samples are basically specimens of goods that may be imported by the traders or Representatives of Manufacturers Abroad in India, to know its characteristics and usage and to assess its marketability in India. Samples include consumer goods, consumer durables, prototypes of engineering goods or even high value equipment, machineries (including agricultural machinery) and their accessories. However, goods which are prohibited under Foreign Trade (Development and Regulation) Act, 1992 are not allowed to be imported as samples e.g. wild animals, wild birds and parts of wild animals and birds, ivory, arms & ammunitions, and Narcotic drugs.

Who can import samples?

3.        Samples can be imported by the trade, industry, individuals, Companies, Associations, Research Institutes or Laboratories. These can also be brought by the Representatives of foreign Manufacturer as a part of their personal Baggage or through port or in Courier. They can also be sent by Manufacturers/Traders abroad to above parties in India.

Value limit

4.        The bonafide trade samples can be imported by Trade and Industry provided the said goods have been supplied free of charge. For duty free clearance the value of individual sample should not exceed Rs.5000/- and aggregate value should not exceed Rs.60, 000/- per year or 15 units of samples in a year. However, the Prototypes of engineering goods can be imported even if the value is more than Rs.5000/-. Such prototype goods can be imported up to a value of Rs. 10,000/- without payment of duty as long as the goods are rendered useless as merchandise by a suitable process. In case the value exceeds Rs.10,000/-, the said goods have to be re-exported within a period of nine months or such extended period as the Assistant Commissioner of Customs may allow. The high valued samples are cleared after depositing duty with Customs and giving an undertaking for their re-export within nine months. The deposited duty is refunded when the machinery is exported back. However, if more than one product is being imported into the India, the value limit is increased proportionately. Similarly, if the samples are consigned to more than one consignee, by any foreign company, and are sent at the same time through the same Port/Airport, it shall not be charged to duty if the value limit of Rs.5000/- per unit is adhered to. The consignments meant for distribution to different parties in India can also be imported together for convenience of transport, if the packets are clearly marked and addressed to different persons in India.

5.        The value of Rs.5000/- is the value of the goods at a country of dispatch excluding local refundable taxes like VAT in the country of dispatch. In case of free samples of Rs.5000/-, it does

not include freight or courier charges. If value is above Rs.5000/-, the freight and insurance charges would be added to calculate the duty payable.

Records

6.        Importers are trusted to declare correctly and adhere to the undertaking of the limit of yearly value and quantity. However, if any person is suspected to contravene the limit or undertaking deliberately he is liable to be investigated, penalized and / or prosecuted.

How will a salesman from a foreign country bring in the samples to India?

7.        A commercial traveler of foreign country is eligible to import bonafide samples if the value of each of the item is not more than Rs.5000/- per unit. He is also not required to produce the IEC code at the time of clearance of these goods.

8.        The importing executive must declare that these goods are meant for securing export order or guidance of exporters, and that the total value does not exceed Rs.60000/- per item during the 12 month period and that he has not imported more than 15 units of the said goods within the last 12 months. He also undertakes that he would not sell these goods and if he sells he will pay the duty leviable on those goods.

Machinery import

9.        Machinery, which are prototypes of engineering goods, imported either for further manufacturing of the said goods or to be used as capital goods for export production or in connection of securing further export orders can also be imported duty free if the value does not exceed Rs.10000/-. The said goods are normally defaced or made un-saleable by punching, cracking, marking with indelible ink etc. In case the machinery is valued more than Rs.10000/- such goods are always chargeable to duty. The goods can be cleared by furnishing a Bank Guarantee (or) deposit of the duty payable and an undertaking from the importer that the said goods would be re-exported within 9 months of import. In case of high valued machinery the importer gave an undertaking that the said goods are utilized for the purpose of demonstration at the place (s) which is declared. The Customs authority may also seal the machinery during its journey from the Port of importation to the place of demonstration and it is unsealed only at the place of operation or place of demonstration

Failure to re-export

10.        The samples have to be re-exported within 9 months. However, the Assistant Commissioner, Customs, may under special circumstances extend the period of 9 months for a further reasonable period.

Import of samples under other scheme

11.        In addition to above the following specific provisions/ schemes are available for duty free import of samples;

(a)        Under 100% EOUs, EPZ, EHTP Schemes the samples of all types of goods manufactured by the Units can be imported duty free.

(b)        Sample can also be imported for Government of India sponsored events viz. Trade and Industry fairs. These machineries are imported under a Carnet (Notification No.57/90).

(c)        Samples can also be imported for Private Commercial exhibition for display or demonstration with the prior permission of Ministry of Commerce and Indian Trade Promotion Organization, (Notification No.3/89).

(d)        Samples are allowed duty free import for promotion of tourism equipment and ancillary goods. (Notification No.113/57)

Re-Importation/Re-Exportation of Goods

Re-importation of indigenously manufactured/imported goods:

Often goods indigenously manufactured when exported are returned back for various reasons including cancellation of export order or after exhibition/display etc., these are returned or the machinery etc. is returned after use in particular project/contract and completion of the contract etc. Imported goods which may have discharged duties at the time of original importation have also to be often sent out for repair, reconditioning etc. Private, personal imported property may also have to be sent abroad for repair within the warranty period and returned. There are also goods which may have to be sent for special processes like electroplating, polishing or coating and re-imported.

2.        It is to be noted that under Section 12 on import duties of Customs are leviable and no distinction is made whether the goods being imported had discharged duties earlier and they are being re-imported after exportation for particular purposes. Similarly, even if goods are indigenously manufactured which had been exported earlier under various export incentive schemes or duty drawback claim or even without any export incentive claim, when these are re-imported they attract and have to discharge the customs duty leviable on like import goods (as the duty is on the act of importation) unless an exemption is issued.

3.        To avoid repeat total duty on the full value of the imported goods when sent abroad for repairs, certain relief from duty liable has been provided. Similarly, where the goods are indigenously manufactured the basic intention is that when re-importation is effected on customs clearance for consumption in the market, they should bear the Central Excise duties which are otherwise leviable and which may not have been discharged at the time of exportation. Further, the exporters should not get away with any benefits which may have been given as an export incentive and these benefits should be recovered by way of duty. Exemption notification has been issued under Notification No.94/96-Cus. Dated 16.12.1996 covering re-importation of indigenously manufactured goods under duty drawback/rebate claims export under bond or under other export incentive claims and the same may be referred to. Thus, certain duties have to be paid equivalent to the export incentives etc., on re-importation. It is only where the goods were exported earlier on payment of Central Excise duty, without claiming any rebate, and without claiming any export incentives such as duty drawback or benefits of the duty exemption schemes, EPCG scheme or under DEPB scheme and where the indigenously manufactured goods are being returned that no customs duties are leviable.

4.        Where the indigenously manufactured goods are exported for repair and returned without claiming any benefits as provided in the said notification, duty is to be paid on a value comprising fair cost of repairs including cost of materials used in repairs, insurance and freight charges both ways.

5.        For availing the benefit of the said notification the Assistant Commissioner has to be satisfied that the goods are the same which were exported earlier and certain other conditions as laid down in the said notification.

6.        Where the gods manufactured in India or parts thereof are re-imported into India for repairs or reconditioning or reprocessing/refining/remaking etc., and returned, complete exemption from the import duties leviable is available in terms of notification No.158/95-Cus dated 14.11.1995 if the re-importation takes place within a specified period, the goods are re-exported within six months of re-importation, the Assistant Commissioner is satisfied as regards the identification of the goods and certain other conditions for ensuring re-export (including execution of bonds etc.) are fulfilled.

7.        A separate exemption notification also has been provided to take care of re-importation of the private personal property which was imported earlier but exported out for any alteration, renovation, repair free of charge etc. If the goods are repaired on free of charge basis in accordance with the terms of warranty given by the manufacturers and in accordance with the established trade practice and subject to certain laid down conditions about non-availment of any drawback or other facilities, the whole duty of customs is exempted in terms of notification No.174/96-Cus. However, if any alterations, renovations or additions or repairs executed subsequent to their export, certain custom duties are payable equivalent to the cost of alterations/renovations/additions.

Re-Exportation:

There are often occasions where imported goods may have to be re-exported. Such situations arise where the import goods found defective after customs clearance or these are not found according to specifications or requirements of the Indian consignee. Various machinery items after import for use in certain projects or otherwise are also often sought to be re-exported by the original owner. Re-exports can be made by sea, air, baggage or post.

2.        Section 74 of the Customs Act provides for grant of 98% of the Customs duties leviable at the time of importation, by way of Drawback if it is re-exported by the importer, subject to laid down conditions to be satisfied. The re-export is to be allowed within two years from the date of import – (which period can be extended on sufficient grounds being shown) and goods have to be identified with the earlier import documents and duty payments - to the satisfaction of the Assistant Commissioner at the time of export. If such goods have been used in India after importation, refund is granted on a proportionate basis under Notification No.19/95-Cus dated 6.2.1995, as amended, and there being no refund admissible if the goods have been used after the re-importation which have been out of customs control for more than 36 months after the date of clearance for home consumption and the date when the goods are placed under customs control for export. For specific categories of goods as mentioned in notification if these are used no drawback of the import duty paid is permissible. In respect of motor vehicles imported for personal and private use drawback formula is slightly different and same is calculated by reducing the import duty paid according to the laid down percentage for use for each quarter or part thereof, but up to four years of use.

Disposal of Unclaimed/Uncleared Cargo

The imported goods are allowed to be cleared for home consumption by the Customs, if there are no restrictions or prohibitions, the assessment formalities have been completed and the duty leviable has been paid by the importers. It is often noticed that the importer files the bill of entry but does not clear the goods due to various reasons such as financial problems, lack of demand for the goods, etc. Such goods are called 'Uncleared goods'. In some cases, the importer does not even come forward to file the bill of entry for clearance of goods. Such goods are known as 'unclaimed goods'.

2.        In terms of the provisions of the Customs Act, 1962, the duty is leviable on imported goods, regardless of whether they are cleared by the importers or not. Similarly, dues of other

agencies, such as, carriers and custodians for carriage and storage of goods respectively, may also arise. Where the importers do not come forward to make payment of such dues, the Customs duty and other dues can be recovered by selling the unclaimed/Uncleared goods.

3.        As per section 48, if any goods brought into India from a place outside India are not cleared for home consumption or warehoused or transshipped within 30 days from the date of unloading thereof at a port, such goods can be disposed of by the custodian. The Act, however, stipulates that the goods can be sold only after a notice is issued to the importer and the permission of the Customs is obtained. The provisions relating to manner of disposal of unclaimed/Uncleared goods and apportionment of sale proceeds thereof are contained in sections 48 and 150 of the Customs Act, 1962.

Procedure for sale of unclaimed/Uncleared goods:

4.        For sale of such unclaimed/Uncleared goods, the custodian first identifies the goods which are lying Uncleared for more than 30 days. He then prepares an inventory of such goods and sends it to the Customs for their 'no objection'. The Customs scrutinizes the list of consignments forwarded by the custodians and withdraws the items which are the subject matter of any investigation/adjudication or court proceedings. The goods prohibited for import, are also withdrawn from the auction as these are subject to adjudication proceedings and goods may get absolutely confiscated. Once goods are confiscated, the ownership is transferred to the Government and the Customs becomes responsible for disposal of such goods. Disposal of certain items such as drugs/pharmaceuticals, chemicals, foodstuffs, insecticides, fertilizers, etc., also requires clearance from the respective authorities regulating import of these items.

5.        Once 'no objection' for disposal is received from the Customs, the custodian gets the fair price of the goods determined by Customs. The price approved by the Customs (inclusive of duty leviable) generally forms the basis of 'reserve price' for the purpose of auction of the goods.

6.        After fixation of reserve price, the custodians arrange public auctions which are held in the presence of proper officer of Customs. In the event of the goods not being disposed of at the 'reserve price' (or within the permissible margin) in the first auction, the 'reserve price' is reduced according to prescribed scale in the subsequent auctions. In case, efforts to sell the goods through public auction fail, these are sold through tender.

7.        Once the goods are sold, the Customs duty on the goods is calculated. For calculation of Customs duty, the sale proceeds from sale of unclaimed/Uncleared goods are taken as cum duty price (value + duty) and customs duty is calculated working backwards on the price realized.

Apportionment of sale proceeds of goods:

8.        On the unclaimed/Uncleared goods, liabilities towards Customs duty as well as carrier's charges and storage charges arise, which are to be recovered from the sale proceeds. In addition, sales expenses incurred on sale of such goods are to be recovered. In most of the cases, the sale proceeds of such goods may not be sufficient to meet liabilities of all the agencies. In such cases, question arises as to which liability is to be met first. To take care of such a situation, provisions have been made in section 150(2) of the Customs Act. The sale proceeds of any such sale of unclaimed/Uncleared goods are to be applied in following manner:-

(a)

first, to the payment of the expenses of the sale,

(b Next to the payment of the freight and other charges, if any, payable in respect of the

) goods sold, to the carrier, if notice of such charges has been given to the custodians.

(c) next to the payment of the duty, if any, on the goods sold,

(d)

next to the payment of the charges in respect of the goods sold due to the person having the custody of the goods,

(e)

next to the payment of any amount due from the owner of the goods to the Central Government under the provisions of this Act or any other law relating to Customs,

After making above-said payments, if any balance remains, that is to be paid to the owner of the goods.