custom house agent
Customs House Agent (CHA) is a person who is licensed to act as an agent for transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any Customs station.
Liabilities on a CHA
Section 146 of the Customs Act is the enabling provision, which allows agents of importers and exporters to act on behalf of importers and exporters. This is necessitated by the highly involved and technical nature of the work to be done in connection with clearance of imports into and exports out of country. The importers and exporters themselves may have neither time nor the requisite knowledge on their own. Therefore, agents are allowed to act on their behalf. The work of the agents is governed by the Customs House Agents Licensing Regulations, 1984 framed under this section read with Section 157.
There are certain liabilities fastened on the agent of the importer or exporter under Section 147. Some of these liabilities are in the nature of extension of and exceptions to the liability of an agent under the Indian Contracts Act, 1872. Sub-section (1) empowers the agent to do everything that an importer or an exporter can do. Filing a bill of entry, shipping bill, submitting supporting documents therewith, helping in examination of goods, payment of duty on behalf of the principal, warehousing of goods, removal from warehouse and the like. The common law principle that an agent’s actions bind the principal is given the status of a legal presumption. The consequences of all actions of a CHA will bind the importers and exporters on whose behalf they act. An agent who is authorized to act on behalf of the importer or exporter is treated as the owner of imported or exports goods. In respect of that particular transaction, a notice could be given to that agent. This does not normally extend to recovery of duty not paid or short paid by the owner, importer or exporter of goods. As an exception, this is permissible when the Deputy/Assistant Commissioner is of the opinion that such recovery from the owner, importer or exporter of goods is not possible.
Essential features of CHA Licensing Regulations, 1984
1. No ceiling for number of CHAs who can be appointed in a Customs House.
2. Issue of regular licence is preceded by a period of grant of temporary licence.
3. Prescribing criteria of experience and financial soundness for appointment.
4. Grant of regular licence is subject to passing examination, satisfying minimum volume of business and complying with obligations under Regulation No.14.
5. Change in the constitution of partnership or firm not to affect the operations of CHA.
6. Commissioners have been empowered to prescribe fees to prevent excess billing by the CHAs.
Application for licence
Under Regulation 4, every January, the Commissioner of Customs has to notify and advertise and call for applications from persons for acting as CHAs within his jurisdiction. Individuals, firms and companies can act as CHAs. In case of firms and companies, the application has to give the particulars of partner or director who will actually do the work of clearance of goods at the Customs station. Application is made in Form A.
Applications made by the firms or companies should contain full details of the directors or partners.
Qualifications of an applicant
The applicant individual working for a firm or a company should be:
- A graduate from a recognized University.
- Should hold a pass in Form G as employee of the firm / company.
- Should have engaged in Customs clearance work for three years.
- Should possess assets of Rs.1 lakhs or Rs.50,000/- as certified by a scheduled bank.
- Reliability of the applicant and soundness of financial status are very important criteria.
- If there are too many applicants than the licenses that can be granted, the Commissioner has to select persons for licensing by seniority of holding G pass. If there are two persons of same seniority, the older person will be preferred [Regulation 8(3)].
Relaxations, which can be granted by the Commissioner:
An applicant need to possess pass in Form G for one year only if permitted by the Commissioner for reasons to be recorded in writing.
Qualification
Various Custom Houses and Commissionerate prescribe certain volume of business as qualification for considering application for regular licences:
1. 150 documents per year (for ex: shipping bill or bill of entry)
2. Clearance or shipment 1500 packages per year.
3. Clearance or shipment of packages of value not less than Rs.60 lakhs.
A G-Pass holder with one year experience may also appear for examination if permitted by the Commissioner for reasons to be recorded in writing.
Other clarifications as to qualification
1. Diploma in “Customs clearance and freight forwarding” offered by Bombay University is not considered as graduation for the purpose of eligibility.
2. An employee or partner or director of a CHA licensee authorized to take examination under Regulation 9(5) is allowed to take three examinations in a period of two years from the date of application by the licensee for examination.
3. Level of knowledge of local language has to be determined by the Commissioners as the Regulations do not prescribe any requirement. Knowledge of local language by the authorized representative is considered sufficient.
4. A person who passes examination under Regulation 9(5) can apply for independent CHA licence when applications are called for, subject to possessing other qualifications.
5. Persons who were granted CHA licence before the amendment of 1997 prescribing graduation as qualification would continue to qualify for renewal of licence.
Multimodal transport operators as CHAs
Multimodal transport operators (MTOs) are appointed under Multimodal Goods Transportation Act, 1993 by the Ministry of Surface Transport. Their work involves carriage of goods by more than one mode of transport between India and any place abroad. They handle export cargo stuffing and destuffing. This does not automatically confer any right on them to obtain appointment as steamer agents or CHAs unless thy are otherwise qualified for such appointment. Their role is different from that of a CHA or a steamer agent.
Temporary licence
After scrutinizing and accepting the application a temporary licence for a period of one year is granted under Regulation 8 in Form B.
Before receiving the temporary or regular licence, the applicant has to go through another important step. He is required to execute a bond and give a surety or bank guarantee in Forms D and E. For major ports , the surety amount is Rs.25000/- For other ports, it is Rs.10000/- Surety may also be given in the form of National Savings Certificates or postal security. In the last two forms of surety, these should be pledged in the name of the Commissioner. It is important to note that since a regular licence holder is allowed to work in more than one Customs station, separate bond and surety have to be given in respect of each Customs station.
Curriculum
[Regulation 9(3)]
1. Preparation of various kinds of bill of entry and shipping bill.
2. arrival entry and clearance of vessels.
3. Tariff classification and rates of duty.
4. Determination of value for assessment.
5. Conversion of currency.
6. Nature and description of documents to be filed with various kinds of bills of entry and shipping bill.
7. Procedures for assessment and payment of duty.
8. Examination of merchandise at the Customs stations.
9. Provisions of the Trade and Merchandise Marks Act,1958.
10. Prohibitions on imports and exports.
11. Bonding procedure and clearance from bond.
12. Re-importation and conditions for free re-entry.
13. Drawback.
14. Offences under the Act.
15. Provisions of allied Acts including Customs Tariff Act,1975, Foreign Trade (Development and Regulation) Act, 1992,Foreign Exchange Regulation Act,1973, Indian Explosives Act,1884, Arms Act,1959, Opium Act, 1878, Drugs and Cosmetics Act,1940, Destructive Insects and Pests Acts, 1914, Dangerous Drugs Act, 1930 insofar as they relate to the clearance of the goods through Customs.
16. Refund procedures, appeals and revision petitions.
Although not a part of curriculum, the Commissioner has to satisfy himself that the applicant-candidate has good knowledge of English and local language of Customs station. For a person working exclusively in docks, knowledge of English is not compulsory. But, knowledge of Hindi will be considered as advantageous. [Regulation 9(4)].
Examinations
Regulation 8 itself refers to two opportunities to a temporary licence holder for writing and passing the examinations. A third opportunity may be given by the Commissioner if the temporary licence holder has met with the minimum work criteria (number of package, value, tonnage, Duty amount etc). This extension of time is granted for minimum six months and maximum one year.
If this extension of time is refused by the Commissioner, a representation can be made to the Chief Commissioner.
The candidate will have three opportunities to pass the examination within two years. One may take examinations as soon as temporary licence is granted. The examination fee is Rs.500/-per appearance.
There will be two examinations each year. There will be both oral and written examinations. A person who passes written examination but fails in oral examination is treated as failed. But, he need not write examination again.
The reference to applicant or candidate or temporary licence holder or regular licence holder must be correctly understood. Where the applicant is an individual, it is the same person who holds the temporary licence and also writes the examination. On the other hand, if the applicant is a firm or company, the person who writes the examination is an employee of the firm or company. But the temporary or regular licence may be issued in the name of the firm or company. This position is clear from Regulations 5 and 6.
Regulation 9(5) allows a CHA to permit one of the employees, or partners or directors to appear in the examination conducted under Regulation 9. This would be in addition to the person already present and who has passed this examination. The person so permitted to appear for examination must be a graduate. But, he need not be a G pass holder or have experience in the capacity of a G pass holder.
Customs House Agent An application for regular licence can be made by a person who has passed the examinations. Application for regular licence is made in Form C. Form A and Form C are almost identical except that while the first form is issued under Regulation 5, the latter form is issued under Regulation10. Licence fee is Rs.5000/-. Regular licence is granted in Form D. The applicant for regular licence has to satisfy following conditions:
A. The applicant must satisfy the norms regarding quantity or value of cargo cleared form the Custom House. This is determined by the Commissioner.
B. The conduct of the applicant during the period of holding temporary licence must be business like. There should be no delay in clearance of goods or in payment of duty on account of conduct of the applicant. There should be no complaint of misconduct of the applicant. There also should not be any complaint of non-compliance of provision of Regulation 14, which casts some important obligations on the CHAs.
Disqualifications for regular licence
Regulation 10(1) specifies that only a person who qualifies in the examination can apply for a regular licence, Nevertheless, sub-regulation (3) provides that the Commissioner may reject the application of a person who fails to qualify in the examination, It further provides that if performance criteria is not satisfied (regarding quantity and value of clearances or conduct), the application may be rejected. A representation can be made against an order of rejection within 30 days to Chief Commissioner. The Chief Commissioner is also empowered to review the procedure of grant of regular licence within one year.
Regular licence granted to a person cannot be transferred [Regulation 13].
Validity of licence
Under Regualtion12 (1), the validity of licence is for a period of five years.
Extension of licence
An applicant seeking revalidation or extension of licence has to apply before the validity expires, to the Commissioner. It will be renewed for a period of five years either from the date of expiration of licence or from the date of last renewal of licence, A CHA seeking renewal has to satisfy the Commissioner that he has conformed to the norms fixed by the Commissioner regarding minimum quantity and value of cargo clearance and that he is not guilty of misconduct or that he has not been the cause of delayed clearance of goods or delayed payment of duty. There should also be no complaint that he has violated the obligations cast on him under Regulation 14 read with Regulation 12.
The renewal fee payable is Rs.3000/-[Regulation 12(3)]
A person who has passed examination can act on behalf of another firm or company which is holding a regular licence. But, at any time, he can act for only one such firm or company.
A CHA who has been granted licence cannot acquire a right to obtain office accommodation in the Custom House [Regulation 24].
Monday, October 5, 2009
CUSTOM HOUSE AGENT
LAST DATE 12 TH OCT. TO SEND BY PARDEEP
SHIPING INDUSTRY
INDIAN SHIPING INDUSTRY BY RASHMI NAYAR SENT ON 23 OCT 2009
Logistics Management Service information available at
Shipping plays an important role in the transport sector of India's economy. Approximately, 90 per cent of the country's trade by volume (70 per cent in terms of value) is moved by sea. India has the largest merchant shipping fleet among the developing countries and ranks 20th amongst the countries with the largest cargo carrying fleet with 8.83 million GT as on 01.06.2008 and the average of the fleet being 18 years. Indian maritime sector facilities not only transportation of national and international cargo but also provides a variety of other services such as cargo handling services, shipbuilding and ship repairing, freight forwarding, lighthouse facilities and training of marine personnel, etc.
Coastal Shipping
Coastal Shipping is an energy-efficient, environment-friendly and economical mode of transport in the Indian transport network and a crucial component for the development of domestic industry and trade. India, with her 7,517 km long cost line studded with 13 major ports and 200 non-major ports provides congenial and favourable conditions for the development of this alternate mode of transport.
Aids to Navigation
Since Independence, India has made rapid growth in aids to Marine Navigation. From 17 Lighthouses prior to Independence, the present strength of aids to Navigation consists of 171 Lighthouses, one Lightship, one Loran-C Chain Stations, 59 Racoons, 21 Deep Sea Lighted Buoys 01 wreck making and 22 installations under Differential Global Positioning System (DGPS). To cater the needs of light stations in the islands and for maintaining the buoys, the Directorate General of Lighthouses and Lightships is maintaining three launches, one mechanised board and two large ocean going vessels, M.V. Sagardeep-II ad M.V. Pardeep.
Maritime Training
The Director General of Shipping is responsible for creation of the trained manpower required for the merchant navy fleet of the country. This national obligation is being met through the Government training institutes and a number of other approved training institutes in the private sector. The importance of organised training was recognised in the year 1927 when the Training Ship "Dufferin" was established. Since then many highly skilled Indian seafarers have been trained in India who have earned commendable reputation at home and abroad.
The four training institutes, which were established by the Government, are:-
Training Ship 'Chanakya' which conducts
Three years B.Sc degree course in Nautical Sciences under the University of Mumbai
Pre-Sea training course for Deck Cadets.
Marine Engineering and Research Institute (MERI), Kolkata which conducts four years degree course in Marine Engineering under Jadavpur University.
Marine Engineering & Research Institute (MERI), Mumbai conduct
one year Training Marine Engineering Course for graduate Mechanical Engineering’s and
Three-year B.Sc. degree course in Maritime Sciences (polyvalent degree) under the University of Mumbai
LBS College of Advance Maritime Studies & Research, Mumbai, conducts almost 46 post-sea training courses for serving Marine Officers.
In addition to the above, there are about 124 training institutes in the private sector approved by the Director General of Shipping, imparting pre-sea and post-sea training in various disciplines.
Shipping Corporation of India Limited
The Shipping Corporation of India Ltd (SCI) was formed on 2nd October 1961. The present authorised capital of the Company is Rs. 450 crore and paid up capital is Rs 282.30 crore. The status of SCI has been changed from a private limited company to Public limited from 18 September 1992. The SCI was conferred 'Mini Ratna' status by the Government of India on 24 February 2000. At present, the Government is holding 80.12 per cent of share capital and the balance is held by financial institutions, public and others (NRIs, Corporate Bodies, etc.). SCI signed Memorandum of Understanding with the Ministry of Shipping, Road Transport & Highways, and Government of India on 27 March 2008.
On 8th March, 2007, SCI was awarded MOU Excellence Certificate for the year 2004-05 and 2005-06 by the Government of India, Ministry of Heavy Industry and Public Enterprises, Department of Public Enterprises. SCI was the winner of the best international solution award and the third annual HBSC global payments and cash management partnership award, which was posted in Bengaluru on 5th November 2007. The SCI won the "Shipowner/operator of the year 2007" at the sea trade middle east and Indian sub-continental award 2007, held in Dubai in November, 2007 SCI also won the "Shipowner of the year 2007" at Lloyds list Middle east and Indian Sub-continental award, held in Mumbai in November 2007
Cochin Shipyard Limited
Situated in the Western coast of India in the city Cochin, State of Kerala, Cochin Shipyard is the largest shipyard in the country. Incorporated in the year 1972, Cochin Shipyard can build ships up to 1, 10,000 DWT and repair ships up to 1, 25,000 DWT. The year has built varied types of ships including tankers, bulk carriers, ports crafts, offshore vessels and passenger vessels. The orders executed by CSL in recent past include carriers for M/s Clipper Group, Bahamas, fire fighting tugs for M/s ATCO, Saudi Arabia and Platform Supply Vessels for M/s Deep Sea Supplies, Norway. The yard is also a leading ship-repairer of the country and has repaired more than 1200 ships of all types. These include up gradation of vessels belonging to ONGC, periodical layup repairs and life extension of ships of Navy and Coast Guard. The yard had been consistently achieving profits for the last several years.
Garden Reach Shipbuilders & Engineers LTD. KOLKATA
The Garden Reach Shipbuilders & Engineers Limited was incorporated as a joint stock company in 1934, under the name M/s Garden Reach Workshop Limited (GRW). The Government of India acquired the company in 1960. It was renamed as "Garden Reach Shipbuilders & Engineers Limited (GRSE)" on 01 January 1977. The company builds and repairs warships and auxiliary vessels for the Navy and Coast Guard. Its present product range includes corvettes, frigates, fleet tankers, patrol-vessels, fast attack craft, high technology ship borne equipment, portable bailey type steel bridges, turbine pumps for the agricultural sector, Marine Sewage Treatment Plants, Diesel Engines etc. "Mini-Ratna Status Category-I" was conferred on GRSE on 5 September 2006.
Hindustan Shipyard Limited, VISAKHAPATNAM
Hindustan Shipyard Limited (HSL), Visakhapatnam as set up in 1941 in the private sector and was taken over by the Government in 1952. In 1962, the shipyard became a central public sector enterprise. The shipbuilding capacity of the yard is 3.5 pioneer class vessels of 21,500 DWT each. The maximum size of vessel that could be built is 50,000 DWT. HSL is the first shipbuilding yard in the country which was awarded ISO: 9001 certification by Lloyds Register of Quality Assurance, London for international standard of quality assurance. For ship repairs, the yard has facilities such as modern dry dock, wet basin, repair shops, etc., and it can undertake repairs of submarine, tankers and ships up to 70,000 DWT. HSL has an exclusive offshore platform construction yard capable of constructing two platforms per annum.
Hooghly Dock and Port Engineers Limited, KOLKATA
Hooghly Dock and Port Engineers Limited (HDPEL), Kolkata became a Central Public Sector undertaking in 1984. The company has two working units in Howrah District of West Bengal, one at Salkia and another at Nazirgunge. The installed capacity in shipbuilding is 1,100 tonnes per annum and in ship repairs 125 ships per annum. Apart from a dry dock and a jetty, it has six shipways. The yard is capable of constructing various types of ships (including passenger ships) and other vessels such as dredgers, tugs, floating dry docks, fishing trawlers, supply-cum-support vessels, multi-purpose harbour vessels, and lighthouse tender vessels, barges, mooring launches, etc., and undertaking repairs of different types of vessels.
INDIAN SHIPPING ON A NEW WAVE
With fleet acquisition by Indian shipping companies happening on a massive scale over the last year, the 10-million-GRT mark may be crossed soon.
A BOOMING freight market and the recent introduction of a Tonnage Tax regime have caught the shipping industry on a high wave, with the Indian fleet tonnage crossing the 7.6 million GRT (gross registered tonnage) mark for the first time ever.
Though the Ninth Plan target was 9 million GRT, only twice in the past has the tonnage crossed the 7 million GRT — once in 1995-96 when it nudged 7.1 million GRT and then in 1999-2000 when it touched 7.06 million GRT.
Says Mr P. K. Srivastava, chairman of the Shipping Corporation of India (SCI) and president of the Indian National Shipowners Association (INSA): "Just in the last one year alone, over 1.5 million GRT has been added to the Indian tonnage. Compared with the tonnage figure of 6.3 million GRT, which stagnated throughout the last decade, this growth is certainly impressive." Undoubtedly, it was the surge in freight markets that prompted Indian ship-owners to go on an acquisition spree.
Consider this: In the dry bulk sector, the Capesize rates hit an unprecedented $100,000 per day in January, before slipping to $68,000 in April and stabilising at $75,000 in October. Even more prominent were the Panamax earnings, which crossed $40,000 per day in January and remained more or less at that level thereafter.
The tanker market also witnessed a dramatic rise in rates, with VLCC (Very Large Crude Carrier) earnings touching $1 lakh per day and Suezmaxes lagging not far behind.
But the real ballast was provided by the introduction of Tonnage Tax, which considerably reduced the tax liability of ship-owners. Just between April and August this year, the fleet increased from 6.9 million GRT to 7.4 million GRT, with eight oil tankers being added, including four by Great Eastern Shipping and one each by SCI, Essar Shipping and Sanmar Shipping, totalling 5.5 lakh GRT.
"With the massive fleet acquisition plans undertaken by the shipping companies, it is hoped that the Indian fleet would cross the 10 million GRT mark shortly and subsequently emerge as one of the top ten maritime nations," Mr Srivastava points out.
The shipping industry feels that with the next fiscal would see a significant jump in tonnage in the wake of the new tax regime.
Says Mr Yudhishthir Khatau, INSA vice-president: "We see lot of possibilities of FDI (foreign direct investments) coming into the Indian shipping sector as a result of the Tonnage Tax. Whether it would be in the form of foreign companies setting up shop here or forging strategic alliances with Indian companies will have to be seen."
According to the INSA's latest annual report, the average age of the Indian fleet was 16.9 years as on August 1. The age profile of the fleet in terms of GRT shows that over 31.2 per cent of the overseas fleet totalling 2.06 million GRT was over 20 years old, while another 26.1 per cent is between 15 and 19 years. "Thus, over 59 per cent of the Indian fleet needs to be replaced within the next five years," the INSA report says.
However, the share of Indian ships in the carriage of the country's overseas trade has been declining over the years, despite the total volume of cargo moving in India's trade expanding progressively. The share of Indian lines in India's overseas trade flagged from 17 per cent to about 15.1 per cent.
While the total volume of trade moving in India's overseas trade has slightly increased from 273.04 million tonnes to 280.34 million tonnes, the share of Indian ships came down from 46.3 million tonnes to 42.43 million tonnes. "One reason is that Indian ship-owners have begun to increasingly adopt a global approach by looking at trading outside," according to a shipping expert. In fact, the inadequacy of the national fleet to support the country's trade has been one of the major problems facing India and other developing countries. And as a result, India had to depend on foreign ships to a significant extent, leading to higher freight payments in the carriage of its trade.
Reports indicate a significant variation in the freight cost rations among the developed and developing maritime nations.
For example, against 6.11 per cent freight cost of the total CIF import value in the world trade, the share of freight costs in the imports of developing countries is about 8.70 per cent, which is significant higher than that of the developed nations' 5.12 per cent.
One aspect that continues to worry the industry is that in spite of the hectic pace of containerisation of cargoes in India, container shipping still faces "procedural irritants". Perhaps, the setting up of the National Coordinating Agency (NGA) to oversee all the activities connected with multi-modal transportation goods will iron out these problems.
The Indian shipping industry has a bright future. To put it in Mr Srivastava's words: "The golden era of Indian shipping is indeed upon us."
REQUIRED CHANGES IN INDIAN SHIPPING
The falling share of the Indian Shipping Industry in carriage of India’s total overseas sea borne cargo has been a cause of concern. The protection of Indian flag vessels carrying imported crude from other locations to Indian ports, strategic port locations in India, and offshore terminals and pipelines is essential from the point of view of energy and national security. There is a strong need for Indian flag vessels to carry imported crude, and maintain supply chains for all essential commodities in times of emergency. Essential support should be given to service the oilfields support sector and port services support sector to minimize risks. There is also an important need for presence of Indian flags for strategic reasons.
COMPETITIVENESS OF THE INDIAN SHIPPING INDUSTRY
SMARTING under a clutch of problems, including a debilitating tax regime, the domestic shipping industry is increasingly facing the threat of market erosion in the face of stiff competition from foreign companies.
Shipping analysts feel that if the Government does not create a conducive investment and operating environment so that it gets a level playing field, the industry's competitiveness in the global market will be severely blunted. Indeed, the industry is currently struggling to cope with the trend of flagging tonnage and thinning margins for the shipping companies, leading to increased deployment of vessels with foreign flags for carrying cargoes to and from India.
Says Mr Srivastava, Chairman of Shipping Corporation of India (SCI): ``It is clear that the shipping industry suffers from some inherent disadvantages, which is depriving it of a level playing field in the global market. This disadvantage is even greater for more capital-intensive segments like containers and tankers due to their higher financing costs.''
The major disadvantage that confronts the industry pertains to ship finance, with lack of adequate price-competitive sources for financing ships posing an awesome challenge and resulting in postponement of ship acquisition programmes — companies are today forced to go in for older and cheaper vessels, which are less cost efficient. As ship acquisition costs are financed primarily through ECBs up to a level of 60 per cent to 80 per cent, ship owners belonging to countries with higher sovereign rating are in a better position to access the ECB market as compared to their Indian counterparts. To make matters worse, the Government has made ECB costlier by about 20 per cent with the withdrawal of the exemption on withholding tax on interest payment on such loans, with this burden resting entirely on the Indian shipping companies as they cannot pass on the increased costs to the users of their services.
A study by Tata Energy Research Institute (TERI) recently has shown that to procure an Aframax tanker, the Indian flag registry will be at a disadvantage of 7.4 per cent of the cost of the vessel as compared to the free flag registry.
To add to the woes of the industry, Indian ship owners are statutorily required to insure their fleet for hull and machinery with domestic insurance companies, with the premium rates, fixed by the tariff advisory committee, having been traditionally much higher than those prevailing internationally. To top it all, the shipping industry, despite being an indispensable sector, has not been given the status of an infrastructure industry, not given any export industry benefits. This has resulted in low depreciation rate at 25 per cent, while transport vehicles like trucks and cars are permitted 40 per cent rate of depreciation.
The biggest problem that the industry faces is the tax regime, which is considered to be among the highest in the global shipping industry. At present, the Indian shipping companies come under the purview of the 35 per cent corporate tax regime, while 94 per cent of the world shipping is under a very low tax structure. Points out the TERI report: ``About 70 per cent of world shipping is owned by a group of countries following the conventional tonnage tax system, under which ship owners have the benefit of paying a very low and fixed amount of tax based on their tonnage.''
The TERI analysis shows that the profitability of operating a 75,000 dwt Panamax bulk carrier aged less than five owned and registered in India is significantly lower than the one owned and registered outside India. The profit after tax for such a vessel owned and registered in India comes to about $405 as against $888 that would come from the same vessel owned and registered outside India.
In fact, after facing an exodus of a large number of ships from their National Registers, major European maritime countries such as Norway, the Netherlands, UK and Germany had modified the tax structure — it was actually Greece which first introduced the tonnage tax regime in 1975.
According to the TERI report, a number of countries have benefited from the tonnage tax regimes. ``For example, in the UK in 2001, 47 companies opted for a TT regime which resulted in 598 ships getting added to the fleet. Similarly, in Norway, in a two-year period under TT regime, 5.5 million GRT (229 ships) were added to the fleet; while in the Netherlands 1.1 million GRT (142 ships) were added within two years of introduction of TT. In Germany, TT has had a stabilising effect on shipping industry with a 2.1 million GRT increase in 2001, while in Greece it stemmed flight of ships being registered abroad.''
What would be the implications of introduction of TT regime in India? The Working Group on Shipping for the Tenth Plan has estimated that about 2.75 million GRT would be deleted by 2007, given the age of the Indian fleet, and to maintain a steady growth an additional tonnage of 3.25 million GRT (156 ships) would be needed, which would require an investment of $3.3 billion. Based on these assumptions, TERI has projected that the tonnage would decline to 5.6 million GRT by 2007 and 4.6 million GRT by 2027.
It has been estimated that as per the tonnage tax rates proposed, a 45,000 GRT ship would attract a tax of about Rs 9.64 lakh, based on the vessels income for the entire year. Based on this, it has been shown that the TT that the entire industry would have to pay would first decrease from Rs 163 million in 2003 (fleet size of 6.87 million GRT) to Rs 147 million by 2010 (6.20 million GRT) and then begin to rise from Rs 150 million in 2011 (6.31 million GRT) to touch Rs 160 million in 2017 (6.71 million GRT) and Rs 180 million lin 2024 (7.56 million GRT). This is based on the assumption that introduction of TT regime would result in addition to the Indian tonnage, as shipping companies would go in for fresh acquisitions.
RECENT DEVELOPMENTS:-
Shipping industry seeks Rs 10 crore bailout ON 3RD APRIL 2009.
Thanks to global recession, the Indian Shipping industry is in dire consequences. Now the Indian Shipping Industry is seeking a bailout package to the tune of Rs 10,000 crore.The credit crisis is the biggest issue for the shipping industry as nobody is willing to lend, lamented S Hajara, chairman and managing director of Shipping Corporation of India."The bulk carrier business has declined by about 95 per cent, container sector is affected badly and rates are down by about 40 to 60 per cent and the least-affected tanker market also has suffered by about 25 to 30 per cent," he said.However, in spite of recession Industry did not witness job cut downs. Reason: There is already acute shortage of manpower.Speaking at a press conference on Thursday, Apr 2 he elaborated on the credit crisis. "For shipping companies, external commercial borrowing was the main funding source, which has dried up completely." he said.He said: "Indian banks are also not interested in lending to shipping companies. We have urged the government to ask banks to provide credit to the shipping companies."
BIBLIOGRAPHY
EXPORT –IMPORT AND LOGISTICS MANAGEMENT BY USHA KIRAN RAI
www.google.co.in
www.indiashippingsummit.com
Coastal Shipping
Coastal Shipping is an energy-efficient, environment-friendly and economical mode of transport in the Indian transport network and a crucial component for the development of domestic industry and trade. India, with her 7,517 km long cost line studded with 13 major ports and 200 non-major ports provides congenial and favourable conditions for the development of this alternate mode of transport.
Aids to Navigation
Since Independence, India has made rapid growth in aids to Marine Navigation. From 17 Lighthouses prior to Independence, the present strength of aids to Navigation consists of 171 Lighthouses, one Lightship, one Loran-C Chain Stations, 59 Racoons, 21 Deep Sea Lighted Buoys 01 wreck making and 22 installations under Differential Global Positioning System (DGPS). To cater the needs of light stations in the islands and for maintaining the buoys, the Directorate General of Lighthouses and Lightships is maintaining three launches, one mechanised board and two large ocean going vessels, M.V. Sagardeep-II ad M.V. Pardeep.
Maritime Training
The Director General of Shipping is responsible for creation of the trained manpower required for the merchant navy fleet of the country. This national obligation is being met through the Government training institutes and a number of other approved training institutes in the private sector. The importance of organised training was recognised in the year 1927 when the Training Ship "Dufferin" was established. Since then many highly skilled Indian seafarers have been trained in India who have earned commendable reputation at home and abroad.
The four training institutes, which were established by the Government, are:-
Training Ship 'Chanakya' which conducts
Three years B.Sc degree course in Nautical Sciences under the University of Mumbai
Pre-Sea training course for Deck Cadets.
Marine Engineering and Research Institute (MERI), Kolkata which conducts four years degree course in Marine Engineering under Jadavpur University.
Marine Engineering & Research Institute (MERI), Mumbai conduct
one year Training Marine Engineering Course for graduate Mechanical Engineering’s and
Three-year B.Sc. degree course in Maritime Sciences (polyvalent degree) under the University of Mumbai
LBS College of Advance Maritime Studies & Research, Mumbai, conducts almost 46 post-sea training courses for serving Marine Officers.
In addition to the above, there are about 124 training institutes in the private sector approved by the Director General of Shipping, imparting pre-sea and post-sea training in various disciplines.
Shipping Corporation of India Limited
The Shipping Corporation of India Ltd (SCI) was formed on 2nd October 1961. The present authorised capital of the Company is Rs. 450 crore and paid up capital is Rs 282.30 crore. The status of SCI has been changed from a private limited company to Public limited from 18 September 1992. The SCI was conferred 'Mini Ratna' status by the Government of India on 24 February 2000. At present, the Government is holding 80.12 per cent of share capital and the balance is held by financial institutions, public and others (NRIs, Corporate Bodies, etc.). SCI signed Memorandum of Understanding with the Ministry of Shipping, Road Transport & Highways, and Government of India on 27 March 2008.
On 8th March, 2007, SCI was awarded MOU Excellence Certificate for the year 2004-05 and 2005-06 by the Government of India, Ministry of Heavy Industry and Public Enterprises, Department of Public Enterprises. SCI was the winner of the best international solution award and the third annual HBSC global payments and cash management partnership award, which was posted in Bengaluru on 5th November 2007. The SCI won the "Shipowner/operator of the year 2007" at the sea trade middle east and Indian sub-continental award 2007, held in Dubai in November, 2007 SCI also won the "Shipowner of the year 2007" at Lloyds list Middle east and Indian Sub-continental award, held in Mumbai in November 2007
Cochin Shipyard Limited
Situated in the Western coast of India in the city Cochin, State of Kerala, Cochin Shipyard is the largest shipyard in the country. Incorporated in the year 1972, Cochin Shipyard can build ships up to 1, 10,000 DWT and repair ships up to 1, 25,000 DWT. The year has built varied types of ships including tankers, bulk carriers, ports crafts, offshore vessels and passenger vessels. The orders executed by CSL in recent past include carriers for M/s Clipper Group, Bahamas, fire fighting tugs for M/s ATCO, Saudi Arabia and Platform Supply Vessels for M/s Deep Sea Supplies, Norway. The yard is also a leading ship-repairer of the country and has repaired more than 1200 ships of all types. These include up gradation of vessels belonging to ONGC, periodical layup repairs and life extension of ships of Navy and Coast Guard. The yard had been consistently achieving profits for the last several years.
Garden Reach Shipbuilders & Engineers LTD. KOLKATA
The Garden Reach Shipbuilders & Engineers Limited was incorporated as a joint stock company in 1934, under the name M/s Garden Reach Workshop Limited (GRW). The Government of India acquired the company in 1960. It was renamed as "Garden Reach Shipbuilders & Engineers Limited (GRSE)" on 01 January 1977. The company builds and repairs warships and auxiliary vessels for the Navy and Coast Guard. Its present product range includes corvettes, frigates, fleet tankers, patrol-vessels, fast attack craft, high technology ship borne equipment, portable bailey type steel bridges, turbine pumps for the agricultural sector, Marine Sewage Treatment Plants, Diesel Engines etc. "Mini-Ratna Status Category-I" was conferred on GRSE on 5 September 2006.
Hindustan Shipyard Limited, VISAKHAPATNAM
Hindustan Shipyard Limited (HSL), Visakhapatnam as set up in 1941 in the private sector and was taken over by the Government in 1952. In 1962, the shipyard became a central public sector enterprise. The shipbuilding capacity of the yard is 3.5 pioneer class vessels of 21,500 DWT each. The maximum size of vessel that could be built is 50,000 DWT. HSL is the first shipbuilding yard in the country which was awarded ISO: 9001 certification by Lloyds Register of Quality Assurance, London for international standard of quality assurance. For ship repairs, the yard has facilities such as modern dry dock, wet basin, repair shops, etc., and it can undertake repairs of submarine, tankers and ships up to 70,000 DWT. HSL has an exclusive offshore platform construction yard capable of constructing two platforms per annum.
Hooghly Dock and Port Engineers Limited, KOLKATA
Hooghly Dock and Port Engineers Limited (HDPEL), Kolkata became a Central Public Sector undertaking in 1984. The company has two working units in Howrah District of West Bengal, one at Salkia and another at Nazirgunge. The installed capacity in shipbuilding is 1,100 tonnes per annum and in ship repairs 125 ships per annum. Apart from a dry dock and a jetty, it has six shipways. The yard is capable of constructing various types of ships (including passenger ships) and other vessels such as dredgers, tugs, floating dry docks, fishing trawlers, supply-cum-support vessels, multi-purpose harbour vessels, and lighthouse tender vessels, barges, mooring launches, etc., and undertaking repairs of different types of vessels.
INDIAN SHIPPING ON A NEW WAVE
With fleet acquisition by Indian shipping companies happening on a massive scale over the last year, the 10-million-GRT mark may be crossed soon.
A BOOMING freight market and the recent introduction of a Tonnage Tax regime have caught the shipping industry on a high wave, with the Indian fleet tonnage crossing the 7.6 million GRT (gross registered tonnage) mark for the first time ever.
Though the Ninth Plan target was 9 million GRT, only twice in the past has the tonnage crossed the 7 million GRT — once in 1995-96 when it nudged 7.1 million GRT and then in 1999-2000 when it touched 7.06 million GRT.
Says Mr P. K. Srivastava, chairman of the Shipping Corporation of India (SCI) and president of the Indian National Shipowners Association (INSA): "Just in the last one year alone, over 1.5 million GRT has been added to the Indian tonnage. Compared with the tonnage figure of 6.3 million GRT, which stagnated throughout the last decade, this growth is certainly impressive." Undoubtedly, it was the surge in freight markets that prompted Indian ship-owners to go on an acquisition spree.
Consider this: In the dry bulk sector, the Capesize rates hit an unprecedented $100,000 per day in January, before slipping to $68,000 in April and stabilising at $75,000 in October. Even more prominent were the Panamax earnings, which crossed $40,000 per day in January and remained more or less at that level thereafter.
The tanker market also witnessed a dramatic rise in rates, with VLCC (Very Large Crude Carrier) earnings touching $1 lakh per day and Suezmaxes lagging not far behind.
But the real ballast was provided by the introduction of Tonnage Tax, which considerably reduced the tax liability of ship-owners. Just between April and August this year, the fleet increased from 6.9 million GRT to 7.4 million GRT, with eight oil tankers being added, including four by Great Eastern Shipping and one each by SCI, Essar Shipping and Sanmar Shipping, totalling 5.5 lakh GRT.
"With the massive fleet acquisition plans undertaken by the shipping companies, it is hoped that the Indian fleet would cross the 10 million GRT mark shortly and subsequently emerge as one of the top ten maritime nations," Mr Srivastava points out.
The shipping industry feels that with the next fiscal would see a significant jump in tonnage in the wake of the new tax regime.
Says Mr Yudhishthir Khatau, INSA vice-president: "We see lot of possibilities of FDI (foreign direct investments) coming into the Indian shipping sector as a result of the Tonnage Tax. Whether it would be in the form of foreign companies setting up shop here or forging strategic alliances with Indian companies will have to be seen."
According to the INSA's latest annual report, the average age of the Indian fleet was 16.9 years as on August 1. The age profile of the fleet in terms of GRT shows that over 31.2 per cent of the overseas fleet totalling 2.06 million GRT was over 20 years old, while another 26.1 per cent is between 15 and 19 years. "Thus, over 59 per cent of the Indian fleet needs to be replaced within the next five years," the INSA report says.
However, the share of Indian ships in the carriage of the country's overseas trade has been declining over the years, despite the total volume of cargo moving in India's trade expanding progressively. The share of Indian lines in India's overseas trade flagged from 17 per cent to about 15.1 per cent.
While the total volume of trade moving in India's overseas trade has slightly increased from 273.04 million tonnes to 280.34 million tonnes, the share of Indian ships came down from 46.3 million tonnes to 42.43 million tonnes. "One reason is that Indian ship-owners have begun to increasingly adopt a global approach by looking at trading outside," according to a shipping expert. In fact, the inadequacy of the national fleet to support the country's trade has been one of the major problems facing India and other developing countries. And as a result, India had to depend on foreign ships to a significant extent, leading to higher freight payments in the carriage of its trade.
Reports indicate a significant variation in the freight cost rations among the developed and developing maritime nations.
For example, against 6.11 per cent freight cost of the total CIF import value in the world trade, the share of freight costs in the imports of developing countries is about 8.70 per cent, which is significant higher than that of the developed nations' 5.12 per cent.
One aspect that continues to worry the industry is that in spite of the hectic pace of containerisation of cargoes in India, container shipping still faces "procedural irritants". Perhaps, the setting up of the National Coordinating Agency (NGA) to oversee all the activities connected with multi-modal transportation goods will iron out these problems.
The Indian shipping industry has a bright future. To put it in Mr Srivastava's words: "The golden era of Indian shipping is indeed upon us."
REQUIRED CHANGES IN INDIAN SHIPPING
The falling share of the Indian Shipping Industry in carriage of India’s total overseas sea borne cargo has been a cause of concern. The protection of Indian flag vessels carrying imported crude from other locations to Indian ports, strategic port locations in India, and offshore terminals and pipelines is essential from the point of view of energy and national security. There is a strong need for Indian flag vessels to carry imported crude, and maintain supply chains for all essential commodities in times of emergency. Essential support should be given to service the oilfields support sector and port services support sector to minimize risks. There is also an important need for presence of Indian flags for strategic reasons.
COMPETITIVENESS OF THE INDIAN SHIPPING INDUSTRY
SMARTING under a clutch of problems, including a debilitating tax regime, the domestic shipping industry is increasingly facing the threat of market erosion in the face of stiff competition from foreign companies.
Shipping analysts feel that if the Government does not create a conducive investment and operating environment so that it gets a level playing field, the industry's competitiveness in the global market will be severely blunted. Indeed, the industry is currently struggling to cope with the trend of flagging tonnage and thinning margins for the shipping companies, leading to increased deployment of vessels with foreign flags for carrying cargoes to and from India.
Says Mr Srivastava, Chairman of Shipping Corporation of India (SCI): ``It is clear that the shipping industry suffers from some inherent disadvantages, which is depriving it of a level playing field in the global market. This disadvantage is even greater for more capital-intensive segments like containers and tankers due to their higher financing costs.''
The major disadvantage that confronts the industry pertains to ship finance, with lack of adequate price-competitive sources for financing ships posing an awesome challenge and resulting in postponement of ship acquisition programmes — companies are today forced to go in for older and cheaper vessels, which are less cost efficient. As ship acquisition costs are financed primarily through ECBs up to a level of 60 per cent to 80 per cent, ship owners belonging to countries with higher sovereign rating are in a better position to access the ECB market as compared to their Indian counterparts. To make matters worse, the Government has made ECB costlier by about 20 per cent with the withdrawal of the exemption on withholding tax on interest payment on such loans, with this burden resting entirely on the Indian shipping companies as they cannot pass on the increased costs to the users of their services.
A study by Tata Energy Research Institute (TERI) recently has shown that to procure an Aframax tanker, the Indian flag registry will be at a disadvantage of 7.4 per cent of the cost of the vessel as compared to the free flag registry.
To add to the woes of the industry, Indian ship owners are statutorily required to insure their fleet for hull and machinery with domestic insurance companies, with the premium rates, fixed by the tariff advisory committee, having been traditionally much higher than those prevailing internationally. To top it all, the shipping industry, despite being an indispensable sector, has not been given the status of an infrastructure industry, not given any export industry benefits. This has resulted in low depreciation rate at 25 per cent, while transport vehicles like trucks and cars are permitted 40 per cent rate of depreciation.
The biggest problem that the industry faces is the tax regime, which is considered to be among the highest in the global shipping industry. At present, the Indian shipping companies come under the purview of the 35 per cent corporate tax regime, while 94 per cent of the world shipping is under a very low tax structure. Points out the TERI report: ``About 70 per cent of world shipping is owned by a group of countries following the conventional tonnage tax system, under which ship owners have the benefit of paying a very low and fixed amount of tax based on their tonnage.''
The TERI analysis shows that the profitability of operating a 75,000 dwt Panamax bulk carrier aged less than five owned and registered in India is significantly lower than the one owned and registered outside India. The profit after tax for such a vessel owned and registered in India comes to about $405 as against $888 that would come from the same vessel owned and registered outside India.
In fact, after facing an exodus of a large number of ships from their National Registers, major European maritime countries such as Norway, the Netherlands, UK and Germany had modified the tax structure — it was actually Greece which first introduced the tonnage tax regime in 1975.
According to the TERI report, a number of countries have benefited from the tonnage tax regimes. ``For example, in the UK in 2001, 47 companies opted for a TT regime which resulted in 598 ships getting added to the fleet. Similarly, in Norway, in a two-year period under TT regime, 5.5 million GRT (229 ships) were added to the fleet; while in the Netherlands 1.1 million GRT (142 ships) were added within two years of introduction of TT. In Germany, TT has had a stabilising effect on shipping industry with a 2.1 million GRT increase in 2001, while in Greece it stemmed flight of ships being registered abroad.''
What would be the implications of introduction of TT regime in India? The Working Group on Shipping for the Tenth Plan has estimated that about 2.75 million GRT would be deleted by 2007, given the age of the Indian fleet, and to maintain a steady growth an additional tonnage of 3.25 million GRT (156 ships) would be needed, which would require an investment of $3.3 billion. Based on these assumptions, TERI has projected that the tonnage would decline to 5.6 million GRT by 2007 and 4.6 million GRT by 2027.
It has been estimated that as per the tonnage tax rates proposed, a 45,000 GRT ship would attract a tax of about Rs 9.64 lakh, based on the vessels income for the entire year. Based on this, it has been shown that the TT that the entire industry would have to pay would first decrease from Rs 163 million in 2003 (fleet size of 6.87 million GRT) to Rs 147 million by 2010 (6.20 million GRT) and then begin to rise from Rs 150 million in 2011 (6.31 million GRT) to touch Rs 160 million in 2017 (6.71 million GRT) and Rs 180 million lin 2024 (7.56 million GRT). This is based on the assumption that introduction of TT regime would result in addition to the Indian tonnage, as shipping companies would go in for fresh acquisitions.
RECENT DEVELOPMENTS:-
Shipping industry seeks Rs 10 crore bailout ON 3RD APRIL 2009.
Thanks to global recession, the Indian Shipping industry is in dire consequences. Now the Indian Shipping Industry is seeking a bailout package to the tune of Rs 10,000 crore.The credit crisis is the biggest issue for the shipping industry as nobody is willing to lend, lamented S Hajara, chairman and managing director of Shipping Corporation of India."The bulk carrier business has declined by about 95 per cent, container sector is affected badly and rates are down by about 40 to 60 per cent and the least-affected tanker market also has suffered by about 25 to 30 per cent," he said.However, in spite of recession Industry did not witness job cut downs. Reason: There is already acute shortage of manpower.Speaking at a press conference on Thursday, Apr 2 he elaborated on the credit crisis. "For shipping companies, external commercial borrowing was the main funding source, which has dried up completely." he said.He said: "Indian banks are also not interested in lending to shipping companies. We have urged the government to ask banks to provide credit to the shipping companies."
BIBLIOGRAPHY
EXPORT –IMPORT AND LOGISTICS MANAGEMENT BY USHA KIRAN RAI
www.google.co.in
www.indiashippingsummit.com
EXPORT FINANCE
EXPORT FINANCE by SHIPRA AND ANCHAL
Introduction
A product is sold and shipped overseas, therefore, it takes longer to get paid. Extra time and energy is required to make sure that buyers are reliable and creditworthy. In addition, foreign buyers - just like domestic buyers - prefer to delay payment until they receive and resell the goods. All sellers want to get paid as quickly as possible, while buyers usually prefer to delay payment, at least until they have received and resold the goods. This is true in domestic as well as international markets.
Increasing globalization has created intense competition for export markets. Importers and exporters are looking for any competitive advantage that would help them to increase their sales. Flexible payment terms has become a fundamental part of any sales package.
Definition :
Exporting activity often places a strain on exporters’ cash flow reserves, limiting the amount of working capital available to fund new orders and to ultimately grow the business. Export finance overcomes these demands, allowing your business to trade without damaging your cash flow.
So financial assistence is extended by the banks to the exporters at pre-shipment and post-shipment stages.
Export finance provides alternative solutions that balance risk and payment. In this overview, we'll outline the two broad categories of trade finance:
Pre-shipment financing to produce or purchase the material and labor necessary to fulfill the sales order; or
Post-shipment financing in order to generate immediate cash while offering payment terms to buyers.
PR
PRE SHIPMENT FINANCE :
Pre Shipment Finance is issued by a financial institution when the seller want the payment of the goods before shipment. A pre requisite to avail of pre-shipment financing is that the Exporter should have a credit facility in place with a bank. Each bank has a credit process that determines the amount of funding the bank can give the company
The main objectives behind preshipment finance or pre export finance is to enable exporter to:
Procure raw materials.
Carry out manufacturing process.
Provide a secure warehouse for goods and raw materials.
Process and pack the goods.
Ship the goods to the buyers.
Meet other financial cost of the business ack the goods.
Types of Pre Shipment Finance :
Packing Credit
Advance against Cheques/Draft etc. representing Advance Payments.
Preshipment finance is extended in the following forms :
Packing Credit in Indian Rupee
Packing Credit in Foreign Currency (PCFC)
Eligibility :
Pre shipment credit is only issued to that exporter who has the export order in his own name. However, as an exception, financial institution can also grant credit to a third party manufacturer or supplier of goods who does not have export orders in their own name.In this case some of the responsibilities of meeting the export requirements have been out sourced to them by the main exporter. In other cases where the export order is E divided between two more than two exporters, pre shipment credit can be shared between them.
Quantum of Finance :
The Quantum of Finance is granted to an exporter against the LC or an expected order. The only guideline principle is the concept of NeedBased Finance. Banks determine the percentage of margin, depending on factors such as:
The nature of Order.
The nature of the commodity.
The capability of exporter to bring in the requisite contribution
Tenor of this funding :
The RBI has allowed banks to grant this funding at a concession for a maximum period of 180 days. This period can be extended by the bank without referring to RBI for a further period of 90 days. Banks grant this extension in cases where the exporter faces genuine hardships in completing his order.
If an extension is required beyond 270 days (i.e. 180+90 days), the RBI has the discretion to grant another (maximum) extension of 90 days. However, if the exports do not take place at the end of this period, the bank will charge interest from day one, at a rate left to the bank’s discretion.
Currency's get :
Most often the pre-shipment borrowal is in the domestic currency, in the case of an exporter based in India, the Indian Rupee. However in some cases, the exporter may want to borrow in foreign currency because his product has a large import component or he finds the cost of borrowing in foreign currency lower than borrowing in the local currency .
Pre-shipment credit :
Upto 180 days - 10%
Between 180 –270 days - 13%
Over 270 days - Commercial rates which are likely to be higher than the rate applicable upto 270 days.
USD Lending (PCFC) - Maximum of Libor + 1.5 pct
Ppp
Post shipment finance:
Post Shipment Finance is a kind of loan provided by a financial institution to an exporter or seller against a shipment that has already been made. This type of export finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds. Exporters don’t wait for the importer to deposit the funds
.
Purpose of Finance:
Postshipment finance is meant to finance export sales receivable after the date of shipment of goods to the date of realization of exports proceeds. In cases of deemed exports, it is extended to finance receivable against supplies made to designated agencies.
Basis of Finance:
Postshipment finances is provided against evidence of shipment of goods or supplies made to the importer or seller or any other designated agency.
Quantum of Finance:
As a quantum of finance, postshipment finance can be extended up to 100% of the invoice value of goods. In special cases, where the domestic value of the goods increases the value of the exporter order, finance for a price difference can also be extended and the price difference is covered by the government. This type of finance is not extended in case of preshipment stage.Banks can also finance undrawn balance. In such cases banks are free to stipulate margin requirements as per their usual lending norm.
Period of Finance:
Postshipment finance can be off short terms or long term, depending on the payment terms offered by the exporter to the overseas importer. In case of cash exports, the maximum period allowed for realization of exports proceeds is six months from the date of shipment. Concessive rate of interest is available for a highest period of 180 days, opening from the date of surrender of documents. Usually, the documents need to be submitted within 21days from the date of shipment.
Various Types of Export:
Postshipment finance can be provided for three types of export :
Physical exports: Finance is provided to the actual exporter or to the exporter in whose name the trade documents are transferred.
Deemed export: Finance is provided to the supplier of the goods which are supplied to the designated agencies.
Capital goods and project exports: Finance is sometimes extended in the name of overseas buyer. The disbursal of money is directly made to the domestic exporter.
Types of Post Shipment Finance :
The post shipment finance can be classified as :
Export Bills purchased/discounted.
Export Bills negotiated
Advance against export bills sent on collection basis.
Advance against export on consignment basis
Advance against undrawn balance on exports
Advance against claims of Duty Drawback.
. Export Bills Purchased/ Discounted.(DP & DA Bills):
Export bills (Non L/C Bills) is used in terms of sale contract/ order may be discounted or purchased by the banks. It is used in indisputable international trade transactions and the proper limit has to be sanctioned to the exporter for purchase of export bill facility.
2. Export Bills Negotiated (Bill under L/C):
The risk of payment is less under the LC, as the issuing bank makes sure the payment. The risk is further reduced, if a bank guarantees the payments by confirming the LC. Because of the inborn security available in this method, banks often become ready to extend the finance against bills under Lc.
3. Advance Against Export Bills Sent on Collection Basis:
Bills can only be sent on collection basis, if the bills drawn under LC have some discrepancies. Sometimes exporter requests the bill to be sent on the collection basis, anticipating the strengthening of foreign currency. Banks may allow advance against these collection bills to an exporter with a concessional rates of interest depending upon the transit period in case of DP Bills and transit period plus usance period in case of usance bill.The transit period is from the date of acceptance of the export documents at the banks branch for collection and not from the date of advance.
4. Advance Against Export on Consignments Basis:
Bank may choose to finance when the goods are exported on consignment basis at the risk of the exporter for sale and eventual payment of sale proceeds to him by the consignee.However, in this case bank instructs the overseas bank to deliver the document only against trust receipt /undertaking to deliver the sale proceeds by specified date, which should be within the prescribed date even if according to the practice in certain trades a bill for part of the estimated value is drawn in advance against the exports.In case of export through approved Indian owned warehouses abroad the times limit for realization is 15 months.
5. Advance against Undrawn Balance:
It is a very common practice in export to leave small part undrawn for payment after adjustment due to difference in rates, weight, quality etc. Banks do finance against the undrawn balance, if undrawn balance is in conformity with the normal level of balance left undrawn in the particular line of export, subject to a maximum of 10 percent of the export value. An undertaking is also obtained from the exporter that he will, within 6 months from due date of payment or the date of shipment of the goods, whichever is earlier surrender balance proceeds of the shipment.
6. Advance Against Claims of Duty Drawback:
Duty Drawback is a type of discount given to the exporter in his own country. This discount is given only, if the inhouse cost of production is higher in relation to international price. This type of financial support helps the exporter to fight successfully in the international markets.In such a situation, banks grants advances to exporters at lower rate of interest for a maximum period of 90 days. These are granted only if other types of export finance are also extended to the exporter by the same bank.After the shipment, the exporters lodge their claims, supported by the relevant documents to the relevant government authorities. These claims are processed and eligible amount is disbursed after making sure that the bank is authorized to receive the claim amount directly from the concerned government authorities.
Post-shipment credit :
Sight Bills - Not more than 10%
Upto 90 days - Not more than 10%
91 days upto 6 months - 12%
Types of EXPORT FINANCE:
Working Capital Loans :
For exporters, working capital loan programs are normally associated with pre-shipment financing. Many small businesses need pre-export financing to cover the operating costs related to a sales order or contract. Loan proceeds are commonly used to finance three different areas:
Labor: The people needed to build or buy the export product.
Materials: The raw materials needed to produce the export product.
Inventory: The costs associated with buying the export product.
Eg: TradePort Export Finance Online (TEFO) offers a Working Capital Loan Program
Term Financing for Foreign Buyers:
Frequently, foreign buyers don't have the cash on hand to pay for major purchases. So the buyers ask for extended credit terms and/or financing. Few exporters can manage the cash flow dilemma or commercial and political risks caused by these long-term contracts.
Buyer Credit Programs are often an effective solution that benefits the exporter, their buyer and commercial lenders providing the loans. Programs typically provide loan guarantees to commercial lenders. These kind of programs benefit all the parties involved. The exporter benefits because they’re paid cash on delivery and acceptance of the product or service. The foreign buyer benefits because they get extended credit terms at markets rates or better. And the lender benefits because guarantees, many backed by the U.S. Government, mean full repayment of the loan and a reasonable return on funds loaned.
Eg: TradePort Export Finance Online (TEFO) provides Term Financing for foreign buyers.
TEFO:
The TradePort Export Finance Online (TEFO) Program is a managed financial network of banks, lenders and brokers focused on the small business market. The TEFO/TradePort partnership brings together the international trade strengths of TradePort, the CalTrade Coalition, California’s trade promotion community, private sector banks and lenders, the U.S. Commercial Service, the U.S. Export-Import (EXIM) Bank and the Small Business Administration (SBA) for the benefit of small business trade development.
Sources of Export Financing:
Commercial Banks
Large multinational banks are generally thought to be the most experienced in trade finance. Frequently these services are reserved for their major clients and maintain transaction minimums of $1M or more. These banks are less interested in working with small businesses because of smaller deal size and volumes accompanied by greater risk. In fact, small importers and exporters often present a business profile that creates obstacles to financing. Even SMEs with large trade deals are not attractive to larger banks due to risk and credit issues such as loan concentration, debt-earnings ratio restrictions or insufficient collateral.
Due Diligence:
As part of your due diligence when selecting a bank and a financial solution, ask the following questions:
What are the charges for confirming a letter of credit, processing drafts, and collecting payments?
Does the bank have foreign branches or correspondent banks? Where are they located?
Can the bank provide buyer credit reports? At what cost?
Does the bank have experience with U.S. and state government financing programs that support small business export transactions? If not, is it willing to consider participating in these programs?
What other services, such as trade leads, can the bank provide?
Assistance from the Federal Government :
Several federal and local government agencies offer programs to assist exporters with their financing needs. Some are guarantee programs that require the participation of an approved lender, while others provide loans or grants to the exporter or a foreign government. Government programs generally are aimed at improving an exporter's access to credit. They are not intended to subsidize the cost of credit at below-market levels. With few exceptions, banks are allowed to charge market interest rates and fees; a portion of those fees are paid to the government agency to cover the agencies' administrative costs and default risks
Government guarantee and insurance programs are used by commercial banks to reduce the risk associated with loans to exporters. Lenders who are concerned with an exporter's ability to perform under the terms of sale, and with an exporter's ability to be paid, often use government programs to reduce the risks that would otherwise prevent them from providing financing.
Export Import Bank of the United States (EXIM Bank):
EXIM Bank is an independent federal government agency responsible for assisting export financing of U.S. goods and services. It offers a variety of information services, insurance, loan, and guarantee programs.
Ex-Im Bank operates an export financing hotline that provides information on the availability and use of export credit insurance, guarantees, direct and intermediary loans extended to finance the sale of U.S. goods and service abroad. Briefing programs are offered by Ex-Im Bank to the small business community. These programs includes regular seminars, group briefings, and individual discussions held both within the Bank and around the country
U.S. Department of Agriculture (USDA):
The Foreign Agricultural Service (FAS) of USDA administers several programs to help make U.S. agricultural exporters competitive in international markets and make U.S. products affordable to countries that have greater need than they have ability to pay.
These programs are designed to make it easier for commodity exporters to obtain bank financing by providing repayment guarantees to the lenders.
The USDA's Commodity Credit Corporation (CCC) operates Export Credit Guarantee Programs to provide United States agricultural exporters or financial institutions a guarantee that they will be repaid for short- and intermediate-term commercial export financing to foreign buyers. These programs protect against commercial or noncommercial risk if the importer's bank fails to make payment. Under one program, the CCC will guarantee credit terms of up to 3 years and under another, credit terms from 3 to 10 years are guarantee
Small Business Administration (SBA):
The SBA has some services specifically designed to help the small business get started in exporting. The SBA provides financial assistance programs for U.S. exporters. Applicants must qualify as small businesses under the SBA's size standards and meet other eligibility criteria. The SBA has two main programs to assist U.S. exporters—the Export Working Capital Program and the International Trade Loan (ITL) program.
The SBA programs provide the small business owner with financing aids that will enable the business to obtain the capital needed to get into exporting.
This program is designed to help small business exporters obtain financing by reducing risks to lenders. The SBA will guarantee up to 90% of a loan from a private bank. The proceeds from the loan can be used for pre-shipment working capital, post-shipment exposure coverage, or a combination of both.
BENEFITS OF EXPORT FINANCE:
Each export finance solution can be tailored to meet a business’ individual funding needs.
While export factoring advances funding against your invoices within 24 hours of their issue, pre-shipment and post-shipment finance will help to fund exporting activity before you receive payment.
Funding can be advanced in the favoured currency to mitigate any fluctuations in exchange rates.
Funders will have a strong knowledge of the overseas countries in which you operate.
BIBLIOGRAPHY
www.importexporthelp.com
www.infodriveindia.com
www.hiltonbaird.com
www.indiamart.com
Introduction
A product is sold and shipped overseas, therefore, it takes longer to get paid. Extra time and energy is required to make sure that buyers are reliable and creditworthy. In addition, foreign buyers - just like domestic buyers - prefer to delay payment until they receive and resell the goods. All sellers want to get paid as quickly as possible, while buyers usually prefer to delay payment, at least until they have received and resold the goods. This is true in domestic as well as international markets.
Increasing globalization has created intense competition for export markets. Importers and exporters are looking for any competitive advantage that would help them to increase their sales. Flexible payment terms has become a fundamental part of any sales package.
Definition :
Exporting activity often places a strain on exporters’ cash flow reserves, limiting the amount of working capital available to fund new orders and to ultimately grow the business. Export finance overcomes these demands, allowing your business to trade without damaging your cash flow.
So financial assistence is extended by the banks to the exporters at pre-shipment and post-shipment stages.
Export finance provides alternative solutions that balance risk and payment. In this overview, we'll outline the two broad categories of trade finance:
Pre-shipment financing to produce or purchase the material and labor necessary to fulfill the sales order; or
Post-shipment financing in order to generate immediate cash while offering payment terms to buyers.
PR
PRE SHIPMENT FINANCE :
Pre Shipment Finance is issued by a financial institution when the seller want the payment of the goods before shipment. A pre requisite to avail of pre-shipment financing is that the Exporter should have a credit facility in place with a bank. Each bank has a credit process that determines the amount of funding the bank can give the company
The main objectives behind preshipment finance or pre export finance is to enable exporter to:
Procure raw materials.
Carry out manufacturing process.
Provide a secure warehouse for goods and raw materials.
Process and pack the goods.
Ship the goods to the buyers.
Meet other financial cost of the business ack the goods.
Types of Pre Shipment Finance :
Packing Credit
Advance against Cheques/Draft etc. representing Advance Payments.
Preshipment finance is extended in the following forms :
Packing Credit in Indian Rupee
Packing Credit in Foreign Currency (PCFC)
Eligibility :
Pre shipment credit is only issued to that exporter who has the export order in his own name. However, as an exception, financial institution can also grant credit to a third party manufacturer or supplier of goods who does not have export orders in their own name.In this case some of the responsibilities of meeting the export requirements have been out sourced to them by the main exporter. In other cases where the export order is E divided between two more than two exporters, pre shipment credit can be shared between them.
Quantum of Finance :
The Quantum of Finance is granted to an exporter against the LC or an expected order. The only guideline principle is the concept of NeedBased Finance. Banks determine the percentage of margin, depending on factors such as:
The nature of Order.
The nature of the commodity.
The capability of exporter to bring in the requisite contribution
Tenor of this funding :
The RBI has allowed banks to grant this funding at a concession for a maximum period of 180 days. This period can be extended by the bank without referring to RBI for a further period of 90 days. Banks grant this extension in cases where the exporter faces genuine hardships in completing his order.
If an extension is required beyond 270 days (i.e. 180+90 days), the RBI has the discretion to grant another (maximum) extension of 90 days. However, if the exports do not take place at the end of this period, the bank will charge interest from day one, at a rate left to the bank’s discretion.
Currency's get :
Most often the pre-shipment borrowal is in the domestic currency, in the case of an exporter based in India, the Indian Rupee. However in some cases, the exporter may want to borrow in foreign currency because his product has a large import component or he finds the cost of borrowing in foreign currency lower than borrowing in the local currency .
Pre-shipment credit :
Upto 180 days - 10%
Between 180 –270 days - 13%
Over 270 days - Commercial rates which are likely to be higher than the rate applicable upto 270 days.
USD Lending (PCFC) - Maximum of Libor + 1.5 pct
Ppp
Post shipment finance:
Post Shipment Finance is a kind of loan provided by a financial institution to an exporter or seller against a shipment that has already been made. This type of export finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds. Exporters don’t wait for the importer to deposit the funds
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Purpose of Finance:
Postshipment finance is meant to finance export sales receivable after the date of shipment of goods to the date of realization of exports proceeds. In cases of deemed exports, it is extended to finance receivable against supplies made to designated agencies.
Basis of Finance:
Postshipment finances is provided against evidence of shipment of goods or supplies made to the importer or seller or any other designated agency.
Quantum of Finance:
As a quantum of finance, postshipment finance can be extended up to 100% of the invoice value of goods. In special cases, where the domestic value of the goods increases the value of the exporter order, finance for a price difference can also be extended and the price difference is covered by the government. This type of finance is not extended in case of preshipment stage.Banks can also finance undrawn balance. In such cases banks are free to stipulate margin requirements as per their usual lending norm.
Period of Finance:
Postshipment finance can be off short terms or long term, depending on the payment terms offered by the exporter to the overseas importer. In case of cash exports, the maximum period allowed for realization of exports proceeds is six months from the date of shipment. Concessive rate of interest is available for a highest period of 180 days, opening from the date of surrender of documents. Usually, the documents need to be submitted within 21days from the date of shipment.
Various Types of Export:
Postshipment finance can be provided for three types of export :
Physical exports: Finance is provided to the actual exporter or to the exporter in whose name the trade documents are transferred.
Deemed export: Finance is provided to the supplier of the goods which are supplied to the designated agencies.
Capital goods and project exports: Finance is sometimes extended in the name of overseas buyer. The disbursal of money is directly made to the domestic exporter.
Types of Post Shipment Finance :
The post shipment finance can be classified as :
Export Bills purchased/discounted.
Export Bills negotiated
Advance against export bills sent on collection basis.
Advance against export on consignment basis
Advance against undrawn balance on exports
Advance against claims of Duty Drawback.
. Export Bills Purchased/ Discounted.(DP & DA Bills):
Export bills (Non L/C Bills) is used in terms of sale contract/ order may be discounted or purchased by the banks. It is used in indisputable international trade transactions and the proper limit has to be sanctioned to the exporter for purchase of export bill facility.
2. Export Bills Negotiated (Bill under L/C):
The risk of payment is less under the LC, as the issuing bank makes sure the payment. The risk is further reduced, if a bank guarantees the payments by confirming the LC. Because of the inborn security available in this method, banks often become ready to extend the finance against bills under Lc.
3. Advance Against Export Bills Sent on Collection Basis:
Bills can only be sent on collection basis, if the bills drawn under LC have some discrepancies. Sometimes exporter requests the bill to be sent on the collection basis, anticipating the strengthening of foreign currency. Banks may allow advance against these collection bills to an exporter with a concessional rates of interest depending upon the transit period in case of DP Bills and transit period plus usance period in case of usance bill.The transit period is from the date of acceptance of the export documents at the banks branch for collection and not from the date of advance.
4. Advance Against Export on Consignments Basis:
Bank may choose to finance when the goods are exported on consignment basis at the risk of the exporter for sale and eventual payment of sale proceeds to him by the consignee.However, in this case bank instructs the overseas bank to deliver the document only against trust receipt /undertaking to deliver the sale proceeds by specified date, which should be within the prescribed date even if according to the practice in certain trades a bill for part of the estimated value is drawn in advance against the exports.In case of export through approved Indian owned warehouses abroad the times limit for realization is 15 months.
5. Advance against Undrawn Balance:
It is a very common practice in export to leave small part undrawn for payment after adjustment due to difference in rates, weight, quality etc. Banks do finance against the undrawn balance, if undrawn balance is in conformity with the normal level of balance left undrawn in the particular line of export, subject to a maximum of 10 percent of the export value. An undertaking is also obtained from the exporter that he will, within 6 months from due date of payment or the date of shipment of the goods, whichever is earlier surrender balance proceeds of the shipment.
6. Advance Against Claims of Duty Drawback:
Duty Drawback is a type of discount given to the exporter in his own country. This discount is given only, if the inhouse cost of production is higher in relation to international price. This type of financial support helps the exporter to fight successfully in the international markets.In such a situation, banks grants advances to exporters at lower rate of interest for a maximum period of 90 days. These are granted only if other types of export finance are also extended to the exporter by the same bank.After the shipment, the exporters lodge their claims, supported by the relevant documents to the relevant government authorities. These claims are processed and eligible amount is disbursed after making sure that the bank is authorized to receive the claim amount directly from the concerned government authorities.
Post-shipment credit :
Sight Bills - Not more than 10%
Upto 90 days - Not more than 10%
91 days upto 6 months - 12%
Types of EXPORT FINANCE:
Working Capital Loans :
For exporters, working capital loan programs are normally associated with pre-shipment financing. Many small businesses need pre-export financing to cover the operating costs related to a sales order or contract. Loan proceeds are commonly used to finance three different areas:
Labor: The people needed to build or buy the export product.
Materials: The raw materials needed to produce the export product.
Inventory: The costs associated with buying the export product.
Eg: TradePort Export Finance Online (TEFO) offers a Working Capital Loan Program
Term Financing for Foreign Buyers:
Frequently, foreign buyers don't have the cash on hand to pay for major purchases. So the buyers ask for extended credit terms and/or financing. Few exporters can manage the cash flow dilemma or commercial and political risks caused by these long-term contracts.
Buyer Credit Programs are often an effective solution that benefits the exporter, their buyer and commercial lenders providing the loans. Programs typically provide loan guarantees to commercial lenders. These kind of programs benefit all the parties involved. The exporter benefits because they’re paid cash on delivery and acceptance of the product or service. The foreign buyer benefits because they get extended credit terms at markets rates or better. And the lender benefits because guarantees, many backed by the U.S. Government, mean full repayment of the loan and a reasonable return on funds loaned.
Eg: TradePort Export Finance Online (TEFO) provides Term Financing for foreign buyers.
TEFO:
The TradePort Export Finance Online (TEFO) Program is a managed financial network of banks, lenders and brokers focused on the small business market. The TEFO/TradePort partnership brings together the international trade strengths of TradePort, the CalTrade Coalition, California’s trade promotion community, private sector banks and lenders, the U.S. Commercial Service, the U.S. Export-Import (EXIM) Bank and the Small Business Administration (SBA) for the benefit of small business trade development.
Sources of Export Financing:
Commercial Banks
Large multinational banks are generally thought to be the most experienced in trade finance. Frequently these services are reserved for their major clients and maintain transaction minimums of $1M or more. These banks are less interested in working with small businesses because of smaller deal size and volumes accompanied by greater risk. In fact, small importers and exporters often present a business profile that creates obstacles to financing. Even SMEs with large trade deals are not attractive to larger banks due to risk and credit issues such as loan concentration, debt-earnings ratio restrictions or insufficient collateral.
Due Diligence:
As part of your due diligence when selecting a bank and a financial solution, ask the following questions:
What are the charges for confirming a letter of credit, processing drafts, and collecting payments?
Does the bank have foreign branches or correspondent banks? Where are they located?
Can the bank provide buyer credit reports? At what cost?
Does the bank have experience with U.S. and state government financing programs that support small business export transactions? If not, is it willing to consider participating in these programs?
What other services, such as trade leads, can the bank provide?
Assistance from the Federal Government :
Several federal and local government agencies offer programs to assist exporters with their financing needs. Some are guarantee programs that require the participation of an approved lender, while others provide loans or grants to the exporter or a foreign government. Government programs generally are aimed at improving an exporter's access to credit. They are not intended to subsidize the cost of credit at below-market levels. With few exceptions, banks are allowed to charge market interest rates and fees; a portion of those fees are paid to the government agency to cover the agencies' administrative costs and default risks
Government guarantee and insurance programs are used by commercial banks to reduce the risk associated with loans to exporters. Lenders who are concerned with an exporter's ability to perform under the terms of sale, and with an exporter's ability to be paid, often use government programs to reduce the risks that would otherwise prevent them from providing financing.
Export Import Bank of the United States (EXIM Bank):
EXIM Bank is an independent federal government agency responsible for assisting export financing of U.S. goods and services. It offers a variety of information services, insurance, loan, and guarantee programs.
Ex-Im Bank operates an export financing hotline that provides information on the availability and use of export credit insurance, guarantees, direct and intermediary loans extended to finance the sale of U.S. goods and service abroad. Briefing programs are offered by Ex-Im Bank to the small business community. These programs includes regular seminars, group briefings, and individual discussions held both within the Bank and around the country
U.S. Department of Agriculture (USDA):
The Foreign Agricultural Service (FAS) of USDA administers several programs to help make U.S. agricultural exporters competitive in international markets and make U.S. products affordable to countries that have greater need than they have ability to pay.
These programs are designed to make it easier for commodity exporters to obtain bank financing by providing repayment guarantees to the lenders.
The USDA's Commodity Credit Corporation (CCC) operates Export Credit Guarantee Programs to provide United States agricultural exporters or financial institutions a guarantee that they will be repaid for short- and intermediate-term commercial export financing to foreign buyers. These programs protect against commercial or noncommercial risk if the importer's bank fails to make payment. Under one program, the CCC will guarantee credit terms of up to 3 years and under another, credit terms from 3 to 10 years are guarantee
Small Business Administration (SBA):
The SBA has some services specifically designed to help the small business get started in exporting. The SBA provides financial assistance programs for U.S. exporters. Applicants must qualify as small businesses under the SBA's size standards and meet other eligibility criteria. The SBA has two main programs to assist U.S. exporters—the Export Working Capital Program and the International Trade Loan (ITL) program.
The SBA programs provide the small business owner with financing aids that will enable the business to obtain the capital needed to get into exporting.
This program is designed to help small business exporters obtain financing by reducing risks to lenders. The SBA will guarantee up to 90% of a loan from a private bank. The proceeds from the loan can be used for pre-shipment working capital, post-shipment exposure coverage, or a combination of both.
BENEFITS OF EXPORT FINANCE:
Each export finance solution can be tailored to meet a business’ individual funding needs.
While export factoring advances funding against your invoices within 24 hours of their issue, pre-shipment and post-shipment finance will help to fund exporting activity before you receive payment.
Funding can be advanced in the favoured currency to mitigate any fluctuations in exchange rates.
Funders will have a strong knowledge of the overseas countries in which you operate.
BIBLIOGRAPHY
www.importexporthelp.com
www.infodriveindia.com
www.hiltonbaird.com
www.indiamart.com
Wednesday, September 30, 2009
PROCESSING OF IMPORT ORDER
Processing of import order BY KUSUM AND KHYATI
IMPORT ORDER –Import order is an open interface that consists of interface tables and set of API’s. By using import order we can new, updated or changed sales order from other applications.
v ORDER IMPORT CAN DO FOLLOWING THINGS FOR US:
1. Validation
2. Defaulting
3. Processing constraints checks
4. Apply & releasing or order holds
5. Scheduling of shipments
with Order management checks all the data during the import process to ensure its validity with order management so is prepared for anything horrible. Valid transactions then converted into order lines,reservations,price adjustments and sales credit in OM base tables.
v FOLLOWING ARE PREREQUISITEES FOR ORDER IMPORT:
1. Set up order management.
2. Customer should be created along with BILL TO & SHIP TO.
3. Pricing should be defined for all those item which are part of upload.
4. Item should be assigned to inventory organisation.
5. Define order import source.
6. Payment term should be setup.
7. Currency shoud be setup if order currency is different from SOB currency then conversion rate and conversion type should be defined.
IMPORT ORDER –Import order is an open interface that consists of interface tables and set of API’s. By using import order we can new, updated or changed sales order from other applications.
v ORDER IMPORT CAN DO FOLLOWING THINGS FOR US:
1. Validation
2. Defaulting
3. Processing constraints checks
4. Apply & releasing or order holds
5. Scheduling of shipments
with Order management checks all the data during the import process to ensure its validity with order management so is prepared for anything horrible. Valid transactions then converted into order lines,reservations,price adjustments and sales credit in OM base tables.
v FOLLOWING ARE PREREQUISITEES FOR ORDER IMPORT:
1. Set up order management.
2. Customer should be created along with BILL TO & SHIP TO.
3. Pricing should be defined for all those item which are part of upload.
4. Item should be assigned to inventory organisation.
5. Define order import source.
6. Payment term should be setup.
7. Currency shoud be setup if order currency is different from SOB currency then conversion rate and conversion type should be defined.
PROCESS OF IMPORT ORDER
IMPORT PROCESSERS –
Procedures have to be followed by ‘PERSON-IN-CHARGE’ of conveyance’ as well as the importer.
Who is 'Person in Charge' - As per section 2(31), 'person in charge' means (a) In case of vessel - its master (b) In case of aircraft - its commander or pilot-in-charge (c) In case of train - its conductor or guard and (d) In case of vehicle or other conveyance - its driver or other person in charge.
The significance of this definition is –
1.He is responsible for submitting Import Manifest and Export Manifest.
2.He has to ensure that conveyance does not leave without written order of Customs authoritie.
3.He has to ensure that goods are unloaded after written order, at proper place. Loading also has to be only after permission.
4.He can be penalised for (a) Giving false declaration and statement (b) shortages or non-accounting of goods in conveyance.
GENERAL PROVISION - Goods are imported in India or exported from India through sea, air or land. Goods can come through post parcel or as baggage with passengers. Procedures naturally vary depending on mode of import or export. Procedures discussed in this Chapter are applicable for imports by sea, air or land, but not as baggage or postal despatch.
v Computerisation of custom work - Work of customs at Delhi airport has been computerised. Work at Mumbai port is also computerised. Whenever the work is computerised, documents like IGM and Bill of Entry have to be filed electronically. Procedure in computerised environment has been specified in CC, New Delhi PN 22/98 dated 8.5.1998. Guidelines for preparing data file for Bill of Entry and shipping bills for Mumbai Customs House has been prescribed vide PN 108/99 dated 30-9-1999 and PN 10/2001 dated 30.1.2001.
v Entry – ‘Entry’ in relation to goods means an entry made in a Bill of Entry, Shipping Bill or Bill of Export. It includes (a) label or declaration accompanying the goods which contains description, quantity and value of the goods, in case of postal articles u/s 82 (b) Entry to be made in case of goods to be exported (c) Entry in respect of goods imported which are not accompanied by label or declaration made as per provisions of section 84. [section 2(16)].
v Amendment of document - Importer, exporter or 'Person In charge' have to submit various documents to customs authorities like Bill of Entry, Import Manifest, Export Manifest etc. Some times, it may become necessary to amend the document due to various reasons like change in classification, clerical mistake in document, change in unloading / loading plan of vessel etc. In such case, permission to amend these documents have to be obtained from customs authorities. [section 149]. Such permission can be given if there are no fraudulent intentions.
In case of bill of entry, shipping bill or bill of export, it can be amended after clearance only on the basis of documentary evidence which was in existence at the time the goods were cleared, warehoused or exported, and not on basis of any subsequent document. [section 149].
v Customs Station - Imported goods are permitted to be unloaded only at specified places. Similarly, goods can be exported only from specified area. In view of this, definitions of ‘Customs Station’ is important.
Customs area means all area of Customs Station and includes any area where imported goods or export goods are ordinarily kept pending clearance by Customs authorities. Thus, ‘Customs Area’ could include some area even outside the ‘Customs Station’. Customs Station means (a) customs port (b) inland container depot (c) customs airport and (d) land customs station.
Section 7 of Customs Act empowers CBEC (Board) to appoint * Customs ports * Customs airports * Places for inland container depots * Coastal ports. These are appointed by issuing a notification. Section 8 authorises Commissioner of Customs to approve proper places in any customs port, customs airport or costal port for unloading and loading of goods or for any class of goods and specify the limits of customs area. Thus, the place (city / town / village etc.) is approved by CBEC, while exact location within that city / town / village is approved by Commissioner of Customs.
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Import manifest is required to be submitted before arrival of aircraft or vessel - Section 30(1) of Customs Act provides that Import Manifest should be filed before arrival of ship or aircraft. Normally, the Agents submit the Import Manifest before arrival, so that maximum possible formalities are completed before vessel or aircraft arrives. This also enables importers to file ‘Bill of Entry’ in advance.
v Grant of Entry Inwards by Customs Officer - Unloading of cargo can start only after Customs Officer grant ‘Entry Inwards’. Such entry inwards can be granted only when berthing accommodation is granted to a vessel. If there is heavy congestion at port, shipping berth may not be available and in such case, ‘Entry Inwards’ cannot be granted. This date is highly relevant for determining rate of customs duty applicable.
v Carrier responsible for shortages during unloading - If the goods are short landed, the carrier is liable to pay penalty upto twice the amount of duty payable on such short landed goods. It has been held that tally sheet prepared by Port Trust authorities on unloading of goods is a statutory document and should be accepted in preference to steamer survey.
v Procedure by Importer - The importer importing the goods has to follow prescribed procedures for import by ship/air/road. (There is separate procedure for goods imported as a baggage or by post.)
BILL OF ENTRY - This is a very vital and important document which every importer has to submit under section 46. The Bill of Entry should be in prescribed form. The standard size of Bill of Entry is 16" × 13". However, for computerisation purposes, 15" × 12" size is permitted. (Mumbai Customs Public Notice No. 142/93 dated 3-11-93).
Bill of Entry should be submitted in quadruplicate – original and duplicate for customs, triplicate for the importer and fourth copy is meant for bank for making
Under EDI system, Bill of Entry is actually printed on computer in triplicate only after ‘out of charge’ order is given. Duplicate copy is given to importer.
TYPES OF BILL OF ENTRY- Bills of Entry should be of one of three types. Out of these, two types are for clearance from customs while third is for clearance from warehouse.
v Bill of entry for home consumption - This form, called ‘Bill of Entry for Home Consumption’, is used when the imported goods are to be cleared on payment of full duty. Home consumption means use within India. It is white coloured and hence often called ‘white bill of entry’.
v Bill of entry for warehousing -If the imported goods are not required immediately, importer may like to store the goods in a warehouse without payment of duty under a bond and then clear from warehouse when required on payment of duty. This will enable him to defer payment of customs duty till goods are actually required by him. This Bill of Entry is printed on yellow paper and often called ‘Yellow Bill of Entry’. It is also called ‘Into Bond Bill of Entry’ as bond is executed for transfer of goods in warehouse without payment of duty.
v Bill of entry for ex-bond clearance -The third type is for Ex-Bond clearance. This is used for clearance from the warehouse on payment of duty and is printed on green paper. The goods are classified and value is assessed at the time of clearance from customs port. Thus, value and classification is not required to be determined in this bill of entry. The columns in this bill of entry are similar to other bills of entry. However, declaration by importer is not required as the goods are already assessed.
Rate of duty for clearance from warehouse - It may be noted that rate of duty applicable is as prevalent on date of removal from warehouse. Thus, if rate has changed after goods are cleared from customs port, customs duty as assessed on yellow bill of entry and as paid on green bill of entry will not be same.
v Mention of BIN on Bill of Entry – A BIN (Business Identification Number) is allotted to each importer and exporter w.e.f. 1.4.2001. It is a 15 digit code based on PAN of Income Tax (PAN is a 10 digit code). [Earlier an EC (Import Export code) number issued by DGFT was required to be mentioned on Bill of Entry].
v Filing of Bill of Entry - Normally, Bill of Entry is filed by CHA on behalf of the importer. Customs work at some ports has been computerised. In that case, the Bill of Entry has to be filed electronically, i.e. through Customs EDI system through computerisation of work. Procedure for the same has been prescribed vide Bill of Entry (Electronic Declaration) Regulations, 1995.
DOCUMENTS TO BE SUBMITTED BY IMPORTER - Documents required by customs authorities are required to be submitted to enable them to (a) check the goods (b) decide value and classification of goods and (c) to ensure that the import is legally permitted. The documents that are essentially required are : (i) Invoice (ii) Packing List (iii) Bill of Lading / Delivery Order (iv) GATT declaration form duly filled in (v) Importers / CHAs declaration duly signed (vi) Import Licence or attested photocopy when clearance is under licence (vii) Letter of Credit / Bank Draft wherever necessary (vii) Insurance memo or insurance policy (viii) Industrial License if required (ix) Certificate of country of origin, if preferential rate is claimed. (x) Technical literature. (xi) Test report in case of chemicals (xii) Advance License / DEPB in original, where applicable (xiii) Split up of value of spares, components and machinery (xiv) No commission declaration. – A declaration in prescribed form about correctness of information should be submitted.
The Noting is now done electronically in large ports, while it is done manually in small ports. Thoka Number (Serial Number) is given while noting the Bill of Entry.
1.ASSESSMENT OF DUTY & CLEARANCE-The documents submitted by importer are checked and assessed by Customs authorities and then goods are cleared. Section 2(2) defines ‘assessment’ as follows – ‘Assessment’ includes provisional assessment, reassessment and any order of assessment in which the duty assessed is Nil. Thus, ‘assessment’ includes ‘Nil’ assessment.
v Noting of Bill of Entry Bill of Entry submitted by importer or Customs House Agent is cross-checked with ‘Import Manifest’ submitted by person in charge of vessel / carrier. It is noted if the description tallies. ‘Noting’ really means taking on record by customs officer. This date is relevant for determining rate of customs duty. Thoka number (serial number) is given in the import section. Otherwise, it is returned for clarifications. In case of EDI system, noting is done by the system itself which also generates bill of entry number.
Date of presentation of bill of entry is highly relevant and the rate of duty as applicable on this date will be considered for calculating the duty payable. Bill of Entry is accepted only after proper scrutiny vis-a vis import manifest and various declarations given in bill of entry and attached documents like invoice, bill of lading etc. If such documents are not attached, the authorities can refuse to accept the Bill of Entry, and hence submission of such incomplete Bill of Entry cannot be taken as date of presentation of Bill of Entry.
v Prior Entry of Bill of Entry - After the goods are unloaded, these have to be cleared within stipulated time - usually three working days. If these are not so removed, demurrage is charged by port trust/airport authorities, which is very high. Hence, importer wants to complete as many formalities as possible before ship arrives. Proviso to Section 46(3) of Customs Act allows importer to present bill of entry upto 30 days before expected date of arrival of vessel. In such case, duty will be payable at the rate applicable on the date on which ‘Entry Inward’ is granted to vessel and not the date of presentation of Bill of Entry, but rate of exchange will be as prevalent on date of submission of bill of entry.
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2.ASSESMENT OF CUSTOM DUTY-Section 17 provides that assessment of goods will be made after Bill of Entry is filed. Date stamp of receipt is put on the ‘Bill of Entry’ and then it is sent to appraising department either manually or electronically.
There are various Appraising groups. Each group is under anAssistant/Deputy Commissioner.
v Appraising the goods - Appraiser has to (a) correctly classify the goods (b) decide the Value for purpose of Customs duty (c) find out rate of duty applicable as per any exemption notification and (d) verify that goods are not imported in violation of any law.
v Valuation of goods - As per rule 10 of Customs Valuation Rules, the importer has to file declaration about full 'value' of goods. If the assessing officer has doubts about the truth and accuracy of 'value' as declared, he can ask importer to submit further information, details and documents. If the doubt persists, the assessing officer can reject the value declared by importer. [rule 10A(1)]. If the importer requests, the assessing officer has to give reasons for doubting the value declared by importer. [rule 10A(2)]. If the value declared by importer is rejected, the assessing officer can value imported goods on other basis e.g. value of identical goods, value of similar goods etc. as provided in Customs Valuation Rules.
v Examination of goods - Examiners carry out physical examination and quantitative checking like weighing, measuring etc. Selected packages are opened and examined on sample basis in ‘Customs Examination Yard’. Examination report is prepared by the examiner.
Payment of Customs Duty - After assessment of duty, necessary duty is paid. Regular importers and Custom House Agents keep current account with Customs department. The duty can be debited to such current account, or it can be paid in cash/DD through TR-6 challan in designated banks.
After payment of duty, if goods were already examined, delivery of goods can be taken from custodians (port trust) after paying their dues. If goods were not examined before assessment, these have to be submitted for examination in import shed to the examining staff. After shed appraiser gives ‘out of charge’ order, delivery of goods can be taken from custodian
FIRST & SECOND SYSTEM OF ASSESSMENT - There are two systems of assessment. Section 17(2) provides for assessment after examination of goods and section 17(4) provides for assessment on basis of documents, followed by inspection and testing of goods.
v “First appraisement system” or 'first check procedure' - is followed if the appraiser is not able to make assessment on the basis of documents submitted and deems that inspection is necessary. Goods are examined first and then these are assessed. This method is followed only if assessment is not possible on basis of documents. - - The importer himself may also request 'first check procedure', if he cannot give all required details regarding description / value of goods. He has to make request for first check examination at the time of filing of Bill of Entry or at data entry stage in case of EDI. He has to give reason for seeking first appraisement. The examination order is recorded on Bill of Entry and then returned to importer. It is then presented to import shed for examination. The shed appraiser / Dock examiner examines the goods as per examination order and records his findings.
v “Second Appraisement System” or 'second check procedure' - which is normally followed, assessment is done on basis of documents and then goods are examined. Such examination is not mandatory. It is done on selective basis on the basis of ‘risk assessment’ or specific intelligence report. Section 17(4) of Customs Act specifically provides that if initially assessment is done on basis of documents, re-assessment can be done after examination or testing of goods or otherwise, if it is found subsequent to examination or testing or otherwise, that any statement made on Bill of Entry or any information supplied is not true in respect of matter relevant to assessment of duty.
First appraisement is generally carried out in following cases - * If complete documents are not submitted * Goods are to be tested for correct classification * Goods are re-imported * Goods are damaged or deteriorated and abatement is claimed * Goods are abandoned and remission of duty is applied for * When goods are provisionally assessed * When importer himself requests for examination of goods before payment of duty.
Examination of Goods - Examiners carry out physical examination and quantitative checking like weighing, measuring etc. Selected packages are opened and examined on sample basis in ‘Customs Examination Yard’. Examination report is prepared by the examiner.
3.PROVISIONAL ASSESSMENT - Section 18 of Customs Act, 1962 provide that provisional assessment can be done in following cases (a) when Customs Officer is satisfied that importer or exporter is unable to produce document or furnish information required for assessment (b) it is deemed necessary to carry out chemical or other tests of goods (c) when importer/exporter has produced all documents, but Customs Officer still deems it necessary to make further enquiry. In such cases, assessment is done on provisional basis. The importer/exporter has to furnish guarantee/security as required by Customs Officer for payment of difference if any. Goods can be cleared after payment of duty provisionally assessed and after providing the security. After final assessment, difference is paid by importer or refunded to him as the case may be. If the imported goods were warehoused after provisional assessment, the Customs Officer may require importer to execute a bond for twice the difference in duty, if duty finally assessed is higher [section 18(2)(a)]. The bond is called as 'P D Bond' (Provisional Duty Bond). The bond is with security or surety. Bank guarantee can also be given as a security.
v Checking of duty drawback / license documents - Documents in respect of Duty Entitlement Pass Book (DEPB), advance license, duty drawback etc. will be checked.
v Execution of bond and payment of duty - Once the duty is assessed, the bill of entry is returned to importer. The Bill of Entry should be presented to comptist for calculation and pinpointing of the duty. If bond has to be executed, it will be taken in bond section.
v Payment of duty - If goods are to be removed to a warehouse, duty payment is not required. The goods can be taken to a warehouse under bond, without payment of duty. However, if goods are to be removed for home consumption, payment of customs duty is required. CHA or the importer can take it for payment of customs duty. Large importers and CHA have P.D. accounts with customs. Duty can be paid either in cash or through P.D. account. P. D. account means provisional duty account. This is a current account, similar to PLA in central excise. The importer or CHA pays lumpsum amount in the account and gets credit on the amount paid. He can pay customs duty by debiting the amount in P.D. (Provisional Duty) account. If the importer does not have an account, he can pay duty by cash using TR-6 challan. Of course, payment through PD account is very convenient and quick.
v The duty should be paid within five working days (i.e. within five days excluding holidays) after the ‘Bill of Entry’ is returned to the importer for payment of duty. [section 47(2)]. (Till 11-5-2002, the period allowed was only 2 days).
v Interest for late payment - If duty is not paid within 5 working days as aforesaid, interest is payable. Such interest can be between 10% to 36% as may be notified by Central Government. [Section 47(2) of Customs Act, 1962.]. - - Interest rate is 15% w.e.f. 13-5-2002. [Notification No. 28/2002-Cus(NT) dated 13-5-2002] Earlier, interest rate was 24% p.a, w.e.f. 1-3-2000, as per notification No. 34/2000-Cus(NT)].
v Disposal if goods are not cleared within 30 days - As per section 48 of Customs Act, goods must be cleared within 30 days after unloading. Customs Officer can grant extension. Otherwise, goods can be sold after giving notice to importer. However, animals, perishable goods and hazardous goods can be sold any time - even before 30 days. Arms & ammunition can be sold only with permission of Central Government.
v Out of Customs Charge Order - After goods is examined, it is verified that import is not prohibited and after customs duty is paid, Customs Officer will issue ‘Out of Customs Charge’ order under section 47. Goods can be cleared from customs area only on receipt of such order. This is an ‘adjudicating order’ within the meaning of Customs Act, even if it is passed by Appraiser and not by Assistant Commissioner.
v Demurrage if goods not cleared - Heavy demurrage is payable if goods are not cleared from port within three days.
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IMPORT PROCESSERS –
Procedures have to be followed by ‘PERSON-IN-CHARGE’ of conveyance’ as well as the importer.
Who is 'Person in Charge' - As per section 2(31), 'person in charge' means (a) In case of vessel - its master (b) In case of aircraft - its commander or pilot-in-charge (c) In case of train - its conductor or guard and (d) In case of vehicle or other conveyance - its driver or other person in charge.
The significance of this definition is –
1.He is responsible for submitting Import Manifest and Export Manifest.
2.He has to ensure that conveyance does not leave without written order of Customs authoritie.
3.He has to ensure that goods are unloaded after written order, at proper place. Loading also has to be only after permission.
4.He can be penalised for (a) Giving false declaration and statement (b) shortages or non-accounting of goods in conveyance.
GENERAL PROVISION - Goods are imported in India or exported from India through sea, air or land. Goods can come through post parcel or as baggage with passengers. Procedures naturally vary depending on mode of import or export. Procedures discussed in this Chapter are applicable for imports by sea, air or land, but not as baggage or postal despatch.
v Computerisation of custom work - Work of customs at Delhi airport has been computerised. Work at Mumbai port is also computerised. Whenever the work is computerised, documents like IGM and Bill of Entry have to be filed electronically. Procedure in computerised environment has been specified in CC, New Delhi PN 22/98 dated 8.5.1998. Guidelines for preparing data file for Bill of Entry and shipping bills for Mumbai Customs House has been prescribed vide PN 108/99 dated 30-9-1999 and PN 10/2001 dated 30.1.2001.
v Entry – ‘Entry’ in relation to goods means an entry made in a Bill of Entry, Shipping Bill or Bill of Export. It includes (a) label or declaration accompanying the goods which contains description, quantity and value of the goods, in case of postal articles u/s 82 (b) Entry to be made in case of goods to be exported (c) Entry in respect of goods imported which are not accompanied by label or declaration made as per provisions of section 84. [section 2(16)].
v Amendment of document - Importer, exporter or 'Person In charge' have to submit various documents to customs authorities like Bill of Entry, Import Manifest, Export Manifest etc. Some times, it may become necessary to amend the document due to various reasons like change in classification, clerical mistake in document, change in unloading / loading plan of vessel etc. In such case, permission to amend these documents have to be obtained from customs authorities. [section 149]. Such permission can be given if there are no fraudulent intentions.
In case of bill of entry, shipping bill or bill of export, it can be amended after clearance only on the basis of documentary evidence which was in existence at the time the goods were cleared, warehoused or exported, and not on basis of any subsequent document. [section 149].
v Customs Station - Imported goods are permitted to be unloaded only at specified places. Similarly, goods can be exported only from specified area. In view of this, definitions of ‘Customs Station’ is important.
Customs area means all area of Customs Station and includes any area where imported goods or export goods are ordinarily kept pending clearance by Customs authorities. Thus, ‘Customs Area’ could include some area even outside the ‘Customs Station’. Customs Station means (a) customs port (b) inland container depot (c) customs airport and (d) land customs station.
Section 7 of Customs Act empowers CBEC (Board) to appoint * Customs ports * Customs airports * Places for inland container depots * Coastal ports. These are appointed by issuing a notification. Section 8 authorises Commissioner of Customs to approve proper places in any customs port, customs airport or costal port for unloading and loading of goods or for any class of goods and specify the limits of customs area. Thus, the place (city / town / village etc.) is approved by CBEC, while exact location within that city / town / village is approved by Commissioner of Customs.
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Import manifest is required to be submitted before arrival of aircraft or vessel - Section 30(1) of Customs Act provides that Import Manifest should be filed before arrival of ship or aircraft. Normally, the Agents submit the Import Manifest before arrival, so that maximum possible formalities are completed before vessel or aircraft arrives. This also enables importers to file ‘Bill of Entry’ in advance.
v Grant of Entry Inwards by Customs Officer - Unloading of cargo can start only after Customs Officer grant ‘Entry Inwards’. Such entry inwards can be granted only when berthing accommodation is granted to a vessel. If there is heavy congestion at port, shipping berth may not be available and in such case, ‘Entry Inwards’ cannot be granted. This date is highly relevant for determining rate of customs duty applicable.
v Carrier responsible for shortages during unloading - If the goods are short landed, the carrier is liable to pay penalty upto twice the amount of duty payable on such short landed goods. It has been held that tally sheet prepared by Port Trust authorities on unloading of goods is a statutory document and should be accepted in preference to steamer survey.
v Procedure by Importer - The importer importing the goods has to follow prescribed procedures for import by ship/air/road. (There is separate procedure for goods imported as a baggage or by post.)
BILL OF ENTRY - This is a very vital and important document which every importer has to submit under section 46. The Bill of Entry should be in prescribed form. The standard size of Bill of Entry is 16" × 13". However, for computerisation purposes, 15" × 12" size is permitted. (Mumbai Customs Public Notice No. 142/93 dated 3-11-93).
Bill of Entry should be submitted in quadruplicate – original and duplicate for customs, triplicate for the importer and fourth copy is meant for bank for making
Under EDI system, Bill of Entry is actually printed on computer in triplicate only after ‘out of charge’ order is given. Duplicate copy is given to importer.
TYPES OF BILL OF ENTRY- Bills of Entry should be of one of three types. Out of these, two types are for clearance from customs while third is for clearance from warehouse.
v Bill of entry for home consumption - This form, called ‘Bill of Entry for Home Consumption’, is used when the imported goods are to be cleared on payment of full duty. Home consumption means use within India. It is white coloured and hence often called ‘white bill of entry’.
v Bill of entry for warehousing -If the imported goods are not required immediately, importer may like to store the goods in a warehouse without payment of duty under a bond and then clear from warehouse when required on payment of duty. This will enable him to defer payment of customs duty till goods are actually required by him. This Bill of Entry is printed on yellow paper and often called ‘Yellow Bill of Entry’. It is also called ‘Into Bond Bill of Entry’ as bond is executed for transfer of goods in warehouse without payment of duty.
v Bill of entry for ex-bond clearance -The third type is for Ex-Bond clearance. This is used for clearance from the warehouse on payment of duty and is printed on green paper. The goods are classified and value is assessed at the time of clearance from customs port. Thus, value and classification is not required to be determined in this bill of entry. The columns in this bill of entry are similar to other bills of entry. However, declaration by importer is not required as the goods are already assessed.
Rate of duty for clearance from warehouse - It may be noted that rate of duty applicable is as prevalent on date of removal from warehouse. Thus, if rate has changed after goods are cleared from customs port, customs duty as assessed on yellow bill of entry and as paid on green bill of entry will not be same.
v Mention of BIN on Bill of Entry – A BIN (Business Identification Number) is allotted to each importer and exporter w.e.f. 1.4.2001. It is a 15 digit code based on PAN of Income Tax (PAN is a 10 digit code). [Earlier an EC (Import Export code) number issued by DGFT was required to be mentioned on Bill of Entry].
v Filing of Bill of Entry - Normally, Bill of Entry is filed by CHA on behalf of the importer. Customs work at some ports has been computerised. In that case, the Bill of Entry has to be filed electronically, i.e. through Customs EDI system through computerisation of work. Procedure for the same has been prescribed vide Bill of Entry (Electronic Declaration) Regulations, 1995.
DOCUMENTS TO BE SUBMITTED BY IMPORTER - Documents required by customs authorities are required to be submitted to enable them to (a) check the goods (b) decide value and classification of goods and (c) to ensure that the import is legally permitted. The documents that are essentially required are : (i) Invoice (ii) Packing List (iii) Bill of Lading / Delivery Order (iv) GATT declaration form duly filled in (v) Importers / CHAs declaration duly signed (vi) Import Licence or attested photocopy when clearance is under licence (vii) Letter of Credit / Bank Draft wherever necessary (vii) Insurance memo or insurance policy (viii) Industrial License if required (ix) Certificate of country of origin, if preferential rate is claimed. (x) Technical literature. (xi) Test report in case of chemicals (xii) Advance License / DEPB in original, where applicable (xiii) Split up of value of spares, components and machinery (xiv) No commission declaration. – A declaration in prescribed form about correctness of information should be submitted.
The Noting is now done electronically in large ports, while it is done manually in small ports. Thoka Number (Serial Number) is given while noting the Bill of Entry.
1.ASSESSMENT OF DUTY & CLEARANCE-The documents submitted by importer are checked and assessed by Customs authorities and then goods are cleared. Section 2(2) defines ‘assessment’ as follows – ‘Assessment’ includes provisional assessment, reassessment and any order of assessment in which the duty assessed is Nil. Thus, ‘assessment’ includes ‘Nil’ assessment.
v Noting of Bill of Entry Bill of Entry submitted by importer or Customs House Agent is cross-checked with ‘Import Manifest’ submitted by person in charge of vessel / carrier. It is noted if the description tallies. ‘Noting’ really means taking on record by customs officer. This date is relevant for determining rate of customs duty. Thoka number (serial number) is given in the import section. Otherwise, it is returned for clarifications. In case of EDI system, noting is done by the system itself which also generates bill of entry number.
Date of presentation of bill of entry is highly relevant and the rate of duty as applicable on this date will be considered for calculating the duty payable. Bill of Entry is accepted only after proper scrutiny vis-a vis import manifest and various declarations given in bill of entry and attached documents like invoice, bill of lading etc. If such documents are not attached, the authorities can refuse to accept the Bill of Entry, and hence submission of such incomplete Bill of Entry cannot be taken as date of presentation of Bill of Entry.
v Prior Entry of Bill of Entry - After the goods are unloaded, these have to be cleared within stipulated time - usually three working days. If these are not so removed, demurrage is charged by port trust/airport authorities, which is very high. Hence, importer wants to complete as many formalities as possible before ship arrives. Proviso to Section 46(3) of Customs Act allows importer to present bill of entry upto 30 days before expected date of arrival of vessel. In such case, duty will be payable at the rate applicable on the date on which ‘Entry Inward’ is granted to vessel and not the date of presentation of Bill of Entry, but rate of exchange will be as prevalent on date of submission of bill of entry.
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2.ASSESMENT OF CUSTOM DUTY-Section 17 provides that assessment of goods will be made after Bill of Entry is filed. Date stamp of receipt is put on the ‘Bill of Entry’ and then it is sent to appraising department either manually or electronically.
There are various Appraising groups. Each group is under anAssistant/Deputy Commissioner.
v Appraising the goods - Appraiser has to (a) correctly classify the goods (b) decide the Value for purpose of Customs duty (c) find out rate of duty applicable as per any exemption notification and (d) verify that goods are not imported in violation of any law.
v Valuation of goods - As per rule 10 of Customs Valuation Rules, the importer has to file declaration about full 'value' of goods. If the assessing officer has doubts about the truth and accuracy of 'value' as declared, he can ask importer to submit further information, details and documents. If the doubt persists, the assessing officer can reject the value declared by importer. [rule 10A(1)]. If the importer requests, the assessing officer has to give reasons for doubting the value declared by importer. [rule 10A(2)]. If the value declared by importer is rejected, the assessing officer can value imported goods on other basis e.g. value of identical goods, value of similar goods etc. as provided in Customs Valuation Rules.
v Examination of goods - Examiners carry out physical examination and quantitative checking like weighing, measuring etc. Selected packages are opened and examined on sample basis in ‘Customs Examination Yard’. Examination report is prepared by the examiner.
Payment of Customs Duty - After assessment of duty, necessary duty is paid. Regular importers and Custom House Agents keep current account with Customs department. The duty can be debited to such current account, or it can be paid in cash/DD through TR-6 challan in designated banks.
After payment of duty, if goods were already examined, delivery of goods can be taken from custodians (port trust) after paying their dues. If goods were not examined before assessment, these have to be submitted for examination in import shed to the examining staff. After shed appraiser gives ‘out of charge’ order, delivery of goods can be taken from custodian
FIRST & SECOND SYSTEM OF ASSESSMENT - There are two systems of assessment. Section 17(2) provides for assessment after examination of goods and section 17(4) provides for assessment on basis of documents, followed by inspection and testing of goods.
v “First appraisement system” or 'first check procedure' - is followed if the appraiser is not able to make assessment on the basis of documents submitted and deems that inspection is necessary. Goods are examined first and then these are assessed. This method is followed only if assessment is not possible on basis of documents. - - The importer himself may also request 'first check procedure', if he cannot give all required details regarding description / value of goods. He has to make request for first check examination at the time of filing of Bill of Entry or at data entry stage in case of EDI. He has to give reason for seeking first appraisement. The examination order is recorded on Bill of Entry and then returned to importer. It is then presented to import shed for examination. The shed appraiser / Dock examiner examines the goods as per examination order and records his findings.
v “Second Appraisement System” or 'second check procedure' - which is normally followed, assessment is done on basis of documents and then goods are examined. Such examination is not mandatory. It is done on selective basis on the basis of ‘risk assessment’ or specific intelligence report. Section 17(4) of Customs Act specifically provides that if initially assessment is done on basis of documents, re-assessment can be done after examination or testing of goods or otherwise, if it is found subsequent to examination or testing or otherwise, that any statement made on Bill of Entry or any information supplied is not true in respect of matter relevant to assessment of duty.
First appraisement is generally carried out in following cases - * If complete documents are not submitted * Goods are to be tested for correct classification * Goods are re-imported * Goods are damaged or deteriorated and abatement is claimed * Goods are abandoned and remission of duty is applied for * When goods are provisionally assessed * When importer himself requests for examination of goods before payment of duty.
Examination of Goods - Examiners carry out physical examination and quantitative checking like weighing, measuring etc. Selected packages are opened and examined on sample basis in ‘Customs Examination Yard’. Examination report is prepared by the examiner.
3.PROVISIONAL ASSESSMENT - Section 18 of Customs Act, 1962 provide that provisional assessment can be done in following cases (a) when Customs Officer is satisfied that importer or exporter is unable to produce document or furnish information required for assessment (b) it is deemed necessary to carry out chemical or other tests of goods (c) when importer/exporter has produced all documents, but Customs Officer still deems it necessary to make further enquiry. In such cases, assessment is done on provisional basis. The importer/exporter has to furnish guarantee/security as required by Customs Officer for payment of difference if any. Goods can be cleared after payment of duty provisionally assessed and after providing the security. After final assessment, difference is paid by importer or refunded to him as the case may be. If the imported goods were warehoused after provisional assessment, the Customs Officer may require importer to execute a bond for twice the difference in duty, if duty finally assessed is higher [section 18(2)(a)]. The bond is called as 'P D Bond' (Provisional Duty Bond). The bond is with security or surety. Bank guarantee can also be given as a security.
v Checking of duty drawback / license documents - Documents in respect of Duty Entitlement Pass Book (DEPB), advance license, duty drawback etc. will be checked.
v Execution of bond and payment of duty - Once the duty is assessed, the bill of entry is returned to importer. The Bill of Entry should be presented to comptist for calculation and pinpointing of the duty. If bond has to be executed, it will be taken in bond section.
v Payment of duty - If goods are to be removed to a warehouse, duty payment is not required. The goods can be taken to a warehouse under bond, without payment of duty. However, if goods are to be removed for home consumption, payment of customs duty is required. CHA or the importer can take it for payment of customs duty. Large importers and CHA have P.D. accounts with customs. Duty can be paid either in cash or through P.D. account. P. D. account means provisional duty account. This is a current account, similar to PLA in central excise. The importer or CHA pays lumpsum amount in the account and gets credit on the amount paid. He can pay customs duty by debiting the amount in P.D. (Provisional Duty) account. If the importer does not have an account, he can pay duty by cash using TR-6 challan. Of course, payment through PD account is very convenient and quick.
v The duty should be paid within five working days (i.e. within five days excluding holidays) after the ‘Bill of Entry’ is returned to the importer for payment of duty. [section 47(2)]. (Till 11-5-2002, the period allowed was only 2 days).
v Interest for late payment - If duty is not paid within 5 working days as aforesaid, interest is payable. Such interest can be between 10% to 36% as may be notified by Central Government. [Section 47(2) of Customs Act, 1962.]. - - Interest rate is 15% w.e.f. 13-5-2002. [Notification No. 28/2002-Cus(NT) dated 13-5-2002] Earlier, interest rate was 24% p.a, w.e.f. 1-3-2000, as per notification No. 34/2000-Cus(NT)].
v Disposal if goods are not cleared within 30 days - As per section 48 of Customs Act, goods must be cleared within 30 days after unloading. Customs Officer can grant extension. Otherwise, goods can be sold after giving notice to importer. However, animals, perishable goods and hazardous goods can be sold any time - even before 30 days. Arms & ammunition can be sold only with permission of Central Government.
v Out of Customs Charge Order - After goods is examined, it is verified that import is not prohibited and after customs duty is paid, Customs Officer will issue ‘Out of Customs Charge’ order under section 47. Goods can be cleared from customs area only on receipt of such order. This is an ‘adjudicating order’ within the meaning of Customs Act, even if it is passed by Appraiser and not by Assistant Commissioner.
v Demurrage if goods not cleared - Heavy demurrage is payable if goods are not cleared from port within three days.
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