Customs Clearance Procedure & Charges in India

 

Customs Clearance Meaning

Custom clearance is the process through which goods are approved by customs authorities for import or export. This involves submitting required documents, paying customs clearance charges, duties, and ensuring compliance with regulations, allowing the shipment to legally enter or leave a country.

Custom clearance is essential for international trade, ensuring that all legal and regulatory requirements are met. Customs Clearance procedure includes classification of goods, valuation, and inspection. Proper documentation, such as invoices, packing lists, and certificates of origin, must be provided. Efficient custom clearance minimizes delays and avoids penalties, facilitating smooth logistics operations.

Customs Clearance Procedure in India

The customs clearance process in India is crucial for the legal import and export of goods. This procedure begins with the submission of an Import General Manifest (IGM) or Export General Manifest (EGM), detailing the cargo information. Importers or exporters must then file a Bill of Entry (for imports) or a Shipping Bill (for exports) through the Indian Customs Electronic Data Interchange System (ICES).

The next step in the customs clearance process involves classification and valuation of goods according to the Harmonized System of Nomenclature (HSN) codes. Customs authorities assess duties and taxes based on this classification. Importers or exporters must ensure that all required documents, such as invoices, packing lists, licenses, and certificates of origin, are in order.

Goods are then subject to customs inspection, which may include physical examination to verify the contents against the declared information. If everything complies with regulations, customs authorities will clear the goods, and a clearance certificate is issued.

Finally, the payment of any assessed duties and taxes is required. Once cleared, goods can be transported to their final destination. Efficient handling of the customs clearance process is vital to avoid delays and additional costs, ensuring smooth and timely delivery of goods.

Documents Required for Customs Clearance Process

The process requires several essential documents to ensure compliance with regulations and facilitate the legal import or export of goods. The key documents include:

Bill of Entry (for imports) or Shipping Bill (for exports)

These documents provide detailed information about the goods being imported or exported and are filed electronically through the Indian Customs Electronic Data Interchange System (ICES).

Commercial Invoice

This document contains the transaction details between the buyer and the seller, including the description, quantity, and value of the goods.

Packing List

It provides information about how the goods are packed, including the number of packages, weight, and dimensions. This is crucial for customs authorities to verify the shipment.

Bill of Lading or Airway Bill

These are transportation documents issued by the carrier, serving as proof of shipment and providing details about the consignee, consignor, and the goods being transported.

Import/Export License

Certain goods may require specific licenses for import or export, depending on the regulations governing them.

Certificate of Origin

This document certifies the country of origin of the goods, which can affect the duties and taxes applicable during the customs clearance process.

Insurance Certificate

This proves that the goods are insured during transit, providing protection against potential losses or damages.

Customs Clearance Charges & Fees

Custom clearance charges and fees are essential considerations for importers and exporters, covering various services and regulatory requirements. These costs ensure that goods comply with customs regulations and can legally enter or leave a country. Key components of custom clearance charges include:

Customs Duty: A tax imposed on imported goods, varying based on the product type, value, and origin. It is calculated according to the Harmonized System of Nomenclature (HSN) codes.

Goods and Services Tax (GST): Applied to the import of goods, GST rates differ depending on the product category.

Handling and Processing Fees: These fees cover the administrative costs associated with the customs clearance process, including documentation, submission, and processing.

Inspection and Examination Fees: Charged when goods are subject to physical inspection by customs authorities to verify compliance with regulations.

Brokerage Fees: Paid to customs brokers who assist with the clearance process by preparing and submitting necessary documents, ensuring compliance, and liaising with customs officials.

Storage Fees: Incurred if goods are held in a customs warehouse pending clearance. Charges depend on the duration and volume of goods stored.

Port Charges: Include costs for using port facilities, handling cargo, and other related services.

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
B	Basic customs duty	30%		INR 180
C	Social Welfare Surcharge	10%	BX10/100	INR 18
D	IGST	18%	(A+B+C)X18/100	INR 143.64
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!!

Additional Costs in the Customs Clearance Process

In addition to the primary customs clearance charges, there are several additional costs that importers and exporters may incur:

Agent Charges: Customs brokers or agents often charge fees for their services in managing the clearance process. These charges cover their expertise in preparing and submitting documentation, negotiating with customs authorities, and ensuring compliance with regulations.

Demurrage Fees: If goods are not cleared from the port or customs warehouse within the stipulated time, demurrage fees may apply. These charges are for the extended use of port facilities or storage beyond the agreed period.

Penalty Fees: Non-compliance with customs regulations can result in penalties, such as fines or additional charges. These may arise from incorrect documentation, undervaluation, or failure to adhere to import/export restrictions.

Re-export Fees: If goods fail to meet customs requirements and need to be returned to the origin, re-export fees can apply, covering the costs of shipping and processing.

Amendment Fees: Fees for modifying or correcting documentation errors after submission, which may involve additional processing by customs authorities.

Conclusion

Understanding customs clearance charges and the custom clearance process is vital for efficient international trade. The custom clearance procedure involves various steps, from documentation to duty payment, ensuring compliance with regulations. By grasping the custom clearance meaning and being aware of potential additional costs, businesses can better manage their logistics and avoid unexpected expenses. Thorough knowledge of these aspects facilitates a smoother customs experience, ultimately supporting timely and cost-effective import and export operations.