Updated on August 25, 2022
After removing trade barriers, there has been an upsurge in India's number of exports and imports. Foreign exchange regulations Act, 1973 was repealed and replaced by the Foreign exchange management Act, Of 1999 to improve the numbers through liberalization and economic reforms. As the shipping continued to rise, there was a dire need for customs clearance services in the country. As per the reports and data published in the Ministry of Commerce and Industry, Government of India, the average value of imported merchandise trade was 3,276,835 cr. representing an increase of 67.51% YoY.
Typically, importing goods and services includes obtaining a license and compliance before shipment. By law, all goods imported to India are examined, appraised, assessed, and evaluated at customs to determine the proper tax and check the imported commodities against illegal imports. We will highlight a few things through this blog:
What is customs clearance?
Customs clearance procedure
Documents required for customs clearance
Customs clearance cost and timeline
Customs clearance is an arduous process in India and could be time-consuming. Most of the customs clearance services documents are alike, though some depend on the nature of imported goods. A customs clearance services procedure includes obtaining, preparing, and submitting the documentation required to facilitate export procedures and imports into the country, informing the client about the customs examination, evaluation, and payment of duty, and bringing the cargo into the country after it has been cleared with documentation.
Customs clearance process is required in the following cases:
Wherever the goods are loaded for exports.
Sea and Airports
International courier services in Airports
Wherever the goods are unloaded for the imports
Land and Sea customs stations
Those places which have inland import of the goods
All investors, manufacturers, and businesses must undergo the import customs clearance process at the time of Import from India. Certain guidelines must be obeyed to import their goods. Let’s take a look at major steps to follow:
Calling of vessels
If the goods reach a country, the person who was there in carrying the vessels shall ensure that the calling of ships is done at the customs port. So, if the goods are being imported via vessel, the pilot is responsible for the call of the vessels at the sea port. There is no requirement for the importer to get involved in this process.
IGM ( Filing Import General Manifest)
The procedures to file IGM (Import General Manifest) are done by the carrier of goods or his agent and can be done electronically before the goods arrive/reach. This file contains all the details of the goods imported by the vessel.
Operations on post verification
On review of the IGM( Import General Manifest) and the post verification of the documents, the customs authorities will grant the goods for entry and will assign an IGM number to the manifest and permit the master to bring the vessel to this land and unload the cargo.
As the vessel arrives, the goods will further remain in the custody of the Custodian until it clears the entire customs procedure. A custodian can be a person that has been approved by the Principal Commissioner or by the Commissioner of Customs for this whole procedure. Imported goods can be unloaded if they fulfill certain conditions.
Bill of Entry
The importer should comply with the import customs clearance formalities as the goods arrive at the customs station. For the other goods that are offloaded, importers can clear the goods for home consumption after payment of duties.
Hence, every importer must file in Section 46 an entry (Bill of entry) for home consumption or warehousing.
If the clearance of the goods is from the EDI system, then there will be no formal Bill of Entry filed that will be generated in the computer system, but it is mandatory for the importer to file a cargo declaration having prescribed particulars that are required for the customs clearance processing.
The Bill of entry, wherever filed, is to be given in a certain set, as different copies are meant for the different meanings and also come in different color schemes. On the body, generally, the purpose for which it will be used is clearly mentioned in the case of a non-EDI declaration.
The importer who wants to clear the goods for consumption has to file a Bill of entry in 4 copies, in which the original and the duplicate are for customs, the 3rd copy for the importer, and the 4th copy is for the bank for making remittances.
There are documents required for the non-EDI system like the Signed invoice, Bill of Lading or Delivery Order/Airway Bill, License wherever necessary, Letter of Credit/Draft/wherever it is necessary, Insurance related document, Industrial License, if required, Test report in case of chemicals, Adhoc exemption order, DEEC Book/DEPB in original, Certificate of Origin, etc.
When you are filing the Bill of entry and giving your information, you have to keep in mind the correctness of the particulars, and it has to be also certified by the importer in the form of a declaration that can be done at the foot of the Bill of entry.
But in case of, any misdeclaration or incorrect declaration by the importer may lead to legal consequences. So all the precautions should be taken care of by the importer while signing/mentioning all the information and the declarations.
Under the Electronic Data Interchange system, the importer shall not submit documents as such for assessment but has to submit its declarations in electronic format as it contains all the necessary information.
A checklist is then developed for the verification process of the data given by the importer. After the verification procedure, the data is further submitted to the SCO(Service Center Operator) system. Then the system generates a B/E Number. This number is endorsed on the printed checklist and then returned to the importer. In this stage, no such original documents are taken/required. Original documents are only taken during the time of examination. On the final document, the importer shall also sign after the import customs clearance.
The value appraising officer of customs then has to verify that the goods that will be imported are the same which the importer reported in submitted documents. If required, an assessing officer of customs can also give his order to inspect a hundred percent of the imported goods. In these cases, all the pieces and packets of the goods are sent to the customs bonded area, and then a thorough inspection of imported goods is arranged. After checking, a report on such a hundred percent inspection is to be delivered to the assessing officer of customs by the deputed inspection team of customs.
After the completion of the above formalities on assessment, the appraising officer of customs specifies the rate of duty on imported goods, in case it is applicable. Once the classification of imported goods is derived, the rate of import duty is reflected electronically on the basis of the software system of Customs Tariffs.
In EDI Assessment of a bill of entry, the declaration of cargo is transferred to the assessing officer and will be assessed by him. Further, the EDI system provides the information regarding the calculation of duty, if required, and it will automatically apply to the relevant rate of exchange while calculating.
After the assessment is over, a copy of the assessed Bill of entry and all the other supporting documents are inspected at the time of examination of goods. The importer has to pay the duty calculated by the system.
Examination of goods
All the imported goods are examined to verify the correctness of the description given in the Bill of entry. However, the part of the consignment is therefore selected and randomly looked. Also, the goods will be inspected prior to assessment in case the importer does not have complete info. At the time of Import or even if the Customs Appraiser or Assistant Commissioner requires the goods are to be examined before assessment. The appraiser examines the goods as per the examination order and then records his approval.
Green Channel facility
Green channel clearance facilities have been given to some major importers. It simply means that the procedure of clearance of goods is done without the routine examination of the goods. A declaration is made in the declaration form during the time of filing of the Bill of entry. The appraisement is usually done as per normal procedure, but there would be no such physical examination of the goods. In such cases, only marks and numbers are to be checked. There are a few rare cases. When some specific doubts regarding the description or quantity of the goods arise, the senior officers/investigation wing-like SIIB may order for the physical examination.
Payment of duty
The duty can be easily paid either in the designated banks or via TR-6 challans. Different Custom Houses have authorized certain banks for payment of duty. It is important to check the name of the bank and its branch before you deposit the duty. Bank approves the payment particulars in the challan, which is then submitted to the Customs.
If there are no such discrepancies at the time of examination of goods “Out of Charge” order is given, the goods can be cleared.
The below-mentioned documents are necessary for the Customs Clearance:
Bill Of Entry
Airway Bill/ Bill of Lading (If the Import of Goods is through Ship)
License related to Import
Purchase order/ Letter of Credit
Technical write-up, literature for some specific goods like machinery, etc.
Information on the Goods or test report of goods (If Required)
Central Excise Duty document (If Any)
Industrial License (If Any)
Import Export and Registration cum Membership Certificate
DEEC(Duty Exemption Entitlement Certificate)/DEPB /ECGC or any other documents for duty benefits
In addition to the import duties, India charges a 1% customs handling fee on all the imports. This cost is charged on the entire/total value of the goods+the freight costs and Insurance.
Here is a simple example to understand the calculation of the import duty.
|Serial No.||Duty Type||Rate||Calculation||Value|
|A||Assessable value of the goods||CIF+ 1%(customs fee)||INR 600|
Basic customs duty
|C||Social Welfare Surcharge||10%||BX10/100||INR 18|
|E||Total duty applicable||B+C+D||INR 341.64|
|Total Amount||A+E||INR 941.64|
PLEASE NOTE: Assessable value might vary depending on the Incoterm used.
Thus, the customs clearance process can be quickly done hassle-free by following all the steps carefully. So I hope that all the points and doubts related to the Customs clearance process in India are clear now, and you are ready for your customs clearance!!