Custom Clearance Procedure

Objectives of Customs Clearance for Exports:

• Legality Check: To ensure the goods being exported are permitted under the country's customs laws.
  • Example: Certain hazardous materials might be restricted or require special permissions for export.
• Exporter Permission: To verify if the exporter has the necessary licenses or permissions from relevant authorities to export the specific goods.
  • Example: Exporting agricultural products might require a phytosanitary certificate.
• Documentation Check: To confirm that all required documents for customs clearance are properly prepared and submitted.
  • Example: Ensuring the shipping bill is correctly filled with all necessary details.
• Duty Determination: To ascertain if any export duty is applicable to the cargo.
  • Example: Some countries might levy a duty on the export of certain raw materials.
• Duty Collection (if applicable): If export duty is applicable, the customs department collects it before allowing the cargo to leave.

General Procedure:

• Responsibility: The exporter, often through a Customs House Agent (CHA), is responsible for obtaining customs clearance.
• Legal Requirement: According to Sec 40 of the Customs Act, a conveyance (vessel, aircraft, or vehicle) cannot load goods without customs permission.
• Mandatory Process: Every consignment leaving the country via sea, air, or land must undergo customs clearance.

Registration Procedure for Exporters:

1. Permanent Account Number (PAN): Every exporter needs a PAN issued by the income tax authority.
2. Business Identification Number (BIN): The Director General of Foreign Trade (DGFT) issues a BIN to the exporter against their PAN. This is sent electronically to customs.
   • Example: Think of BIN as a unique identifier for your export business within the customs system.
3. Bank Account Registration: The exporting company must have a current account in a designated bank and register the authorized foreign exchange dealer code for realizing export proceeds and receiving incentives.
4. Registration of Other Entities: Airlines, shipping lines, airports, and ports handling export-import cargo also need to register with the customs system. This helps in correlating consignment details, especially in EDI-based clearance.
5. Registration for Export Promotion Schemes: Exporters using export promotion schemes need to register their licenses/DEEC books with the customs station where the goods will be cleared.

Processing of Shipping Bill:

• A shipping bill is required for exports by sea or air.
• A bill of export is required for exports by land.
• Different copies of the shipping bill/bill of export exist for dutiable goods, duty-free goods, and goods eligible for duty drawback.

Types of Customs Clearance Procedures:

• Manual Custom Clearance Procedure
• Digital Custom Clearance Procedure (using Electronic Data Interchange - EDI)

Manual Export Clearance Procedure:

Stage I: Document Submission

• The exporter submits the following documents along with the shipping bill to the customs house:
  • (a) Invoice: Details the goods, their price, quantity, etc.
    • Example: A commercial invoice for a shipment of cotton shirts would list the number of shirts, price per shirt, total value, etc.
  • (b) Packing List: Specifies the contents of each package in the shipment.
    • Example: A packing list might show that carton number 1 contains 50 blue shirts, carton number 2 contains 75 red shirts, and so on.
  • (c) Guaranteed Remittance (GR) Form: A declaration that the export proceeds will be realized.
  • (d) Application for Removal of Excisable Goods (ARE) Form: Required for excise clearance if the goods are subject to excise duty.
  • (e) Pre-shipment inspection certificate: Issued by an export inspection agency, certifying the quality of the goods.

Stage II: Assessment

• The assessing officer reviews the submitted documents.
• They check:
  • Value of goods
  • Duty-drawback classification (if applicable)
  • Rate of export duty (if applicable)
  • Compliance with the prevailing EXIM policy (export-import policy).
• There's a separate group for assessing shipping bills related to DEEC/DEPB (export promotion schemes).
• The assessing officer compares the goods' description in the invoice and DEEC shipping bill with the DEEC book.
• Samples of the goods might be drawn for testing to verify their authenticity.

Stage III: Physical Examination

• After the shipping bill is approved by the export department, the cargo is presented to the shed appraiser (export) for physical examination.
• The appraiser supervises the examination, which is conducted by the customs examiner.

Stage IV: "Let Export" Order and Loading

• Once the goods pass the physical examination, the shed appraiser issues a "Let Export" order.
• After this, the exporter or their agent can load the goods onto the vessel under the supervision of a preventive officer.
• Discrepancies: If any inconsistencies are found, the shipping bill is sent back for review or amendment.
• Misdeclaration: If there's a misdeclaration, the export is not allowed, and action is taken against the exporter.

Digital Export Clearance Procedure (EDI):

Stage I: Data Entry and Verification

• The exporter or CHA fills the declaration in the prescribed format through the customs service center (IT system).
• The system generates a checklist for data verification.
• If the data is correct, the system generates a shipping bill number, which is endorsed on the printed checklist and given to the exporter/CHA.
• For dutiable items, the exporter pays the duty along with a TR-6 challan generated by the system.

Stage II: Dock Entry and Document Submission

• The goods are allowed to enter the dock based on the checklist with the shipping bill number.
• The exporter/CHA submits the checklist along with original documents (invoice, packing list, GR forms, ARE forms, etc.) to the customs officer.
• The customs officer verifies the documents against the received goods and hands over the original documents to the shed appraiser for physical examination.

Stage III: Physical Examination by Customs Officer

• A customs officer designated by the shed appraiser physically examines the cargo.
• They enter their observations into the system and return all original documents to the shed appraiser.

Stage IV: "Let Export" Order and Shipping Bill Generation

• If the shed appraiser is satisfied with the customs officer's report regarding the quantity and description, they may issue a "Let Export" order.
• The system generates the shipping bill in two copies: one for customs and one for the exporter.
• A third copy is generated after the submission of the Export General Manifest (EGM) by the shipping line.
• Shipping lines must electronically submit the shipping bill-wise EGM to customs within seven days of the ship's sailing.

Stage V: Loading Permission

• The exporter/CHA submits their copy of the shipping bill, duly signed by the dock appraiser, to the preventive officer.
• The preventive officer then allows the cargo to be loaded onto the ship.
• Containerized Cargo: For containers, the preventive officer supervises the stuffing at the docks, ensures the container is properly sealed, and records the container and seal numbers. They also endorse the shipper's copy of the shipping bill and may stamp a "shipped on board" seal.

Documents Required for Customs Clearance (Export):

1. Shipping Bill: An application for export clearance containing details of the goods, vessel, destination port, exporter details, etc. Crucial for initiating the export process.
   • Example: A shipping bill would state that 100 cartons of mangoes are being exported from Chennai port to Dubai by a specific vessel.
2. ProForma Invoice: Similar to a purchase order, detailing the product being sold based on agreed terms between the exporter and importer.
   • Example: A ProForma invoice might list 50 units of a machine at $100 each, totaling $5000.
3. Bill Of Lading or Airway Bill: Issued by the carrier (shipping line or airline) as evidence of the contract for shipping goods. It contains details of the product, quantity, and destination. Needs signatures from the exporter, carrier, and receiving party. Produced at the destination for shipment receipt and customs clearance.
   • Example: A Bill of Lading for a sea shipment would identify the vessel, port of loading, port of discharge, and details of the cargo. An Airway Bill serves the same purpose for air freight.
4. Letter Of Credit: Provided by the importer's bank, guaranteeing payment to the exporter. Ensures the exporter will receive the invoice amount.
5. Packing List: A detailed list of items in the export shipment, allowing buyers/importers to verify against the ProForma invoice. Mandatory for customs clearance.
   • Example: A packing list might show the dimensions and weight of each package containing electronic components.
6. Export License: Required for exporting specific goods like chemicals, medicines, petroleum products, and precious metals.
7. Insurance Certificate: Confirms that the goods are insured against loss or damage during transit.
8. Certificate Of Origin (COO): Issued by the exporting company, stating the country where the goods were made or processed. Helps determine the origin of the goods.
   • Example: A COO would state that a batch of textiles was manufactured in India.
9. Commercial Invoice: A key customs document containing all essential details about the order, including goods description, selling prices, quantities, packaging costs, weights, and measurements. Used by customs at the destination to determine import value.

New Developments in Customs Clearance Procedures:

• Focus on Speed and Efficiency: Increased global trade necessitates faster customs clearance.
• Kyoto Convention: India is a signatory to the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention), which aims to modernize customs procedures.
• Key Elements of Modern Customs Procedures:
  • Maximum use of automated systems (EDI).
  • Risk management techniques (risk assessment and selectivity of controls).
  • Use of pre-arrival information for selectivity.
  • Electronic funds transfer for duty payments.
  • Coordinated interventions with other agencies.
  • Easy access to information on customs requirements.
  • System of appeals in customs matters.
  • Formal consultation with the trade.