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Custom Clearance Procedure

Customs Clearance Procedure in India

Customs clearance is a structured process designed to ensure that goods entering or leaving India comply with all applicable laws and regulations. The procedures differ slightly for imports and exports, but both aim to facilitate legitimate trade while protecting national interests.

Import Customs Clearance Procedure

The import clearance procedure is a series of steps an importer must follow to legally bring goods into India. It generally involves registration, documentation, examination, duty payment, and final clearance.

Overview of Import Clearance Steps:

  1. Step 1: Importer Registration
  2. Step 2: Arrival of Goods & Filing Bill of Entry
  3. Step 3: Customs Examination & Duty Assessment
  4. Step 4: Physical Examination & Risk-Based Inspection
  5. Step 5: Duty Payment & Customs Out of Charge

Let's delve into each step with explanations and examples:

Step 1: Importer Registration

  • Explanation: Before an entity can import goods into India, it must legally register itself with the relevant authorities. This registration establishes the importer's identity and legal standing for trade activities.
  • Key Registrations:
    • Obtain IEC Code from DGFT (Directorate General of Foreign Trade):
      • Explanation: The Importer-Exporter Code (IEC) is a mandatory 10-digit code required for anyone engaged in import or export activities in India. It's essentially a primary identification number for businesses in the import-export sector.
      • Example: A new company wanting to import electronics into India must first obtain an IEC from the DGFT. This is a one-time registration valid for the lifetime of the entity.
    • Register for GST Compliance:
      • Explanation: Goods and Services Tax (GST) is applicable on most imports. Importers need to register for GST to obtain a GSTIN (Goods and Services Tax Identification Number) to pay and manage GST on their imports.
      • Example: An importer of fabrics needs to have a GSTIN to pay the Integrated GST (IGST) that is levied on imported goods, similar to GST on domestic supplies.
    • Additional Registrations (if applicable):
      • Explanation: Depending on the nature of goods or specific schemes, additional registrations might be necessary.
      • Examples:
        • SEZ (Special Economic Zone) Registration: If operating within or importing into/from an SEZ, specific SEZ registrations are required.
        • FTA (Free Trade Agreement) Registrations: To avail preferential duty rates under FTAs with certain countries, specific certifications or registrations might be needed.
        • APEDA (Agricultural & Processed Food Products Export Development Authority) Registration: For importing certain agricultural and processed food products, registration with APEDA may be mandatory.

Step 2: Arrival of Goods & Bill of Entry Filing

  • Explanation: Once goods arrive at an Indian port (sea or air), the importer must formally declare these goods to customs by filing a "Bill of Entry." This document is a legal declaration for customs purposes.
  • Process:
    • Goods Arrive at Indian Ports/Airports: Physical arrival of the imported consignment.
    • Filing of Bill of Entry (BOE) via ICEGATE (Indian Customs Electronic Gateway):
      • Explanation: The Bill of Entry is filed electronically through ICEGATE, the online portal of Indian Customs. This is a move towards digital customs clearance.
      • Example: An importer of machinery arriving at Chennai port will file the Bill of Entry electronically through ICEGATE before they can take steps to clear the goods.
    • Key Details in Bill of Entry:
      • Importer Details: Name, address, IEC, GSTIN of the importer.
      • HS Code (Harmonized System Code): Classification code of the imported goods as per the global Harmonized System of Nomenclature. This code determines the applicable duty rates.
        • Example: HS Code for "Laptops" will be different from "Mobile Phones," and duty rates can vary based on the HS code.
      • Value: Declared value of the imported goods, which forms the basis for duty calculation.
      • Port of Import: Name of the port or airport where goods have arrived.
      • Duties Payable: Self-assessment of applicable customs duties and taxes.

Step 3: Customs Examination & Duty Assessment

  • Explanation: After filing the Bill of Entry, customs authorities examine the declared information and assess the duties and taxes payable. This step ensures accurate valuation and correct duty application.
  • Process:
    • Verification of BOE & Documentation: Customs officers scrutinize the Bill of Entry and accompanying documents (like invoice, packing list, etc.) for accuracy and completeness.
    • Customs Valuation as per WTO (World Trade Organization) Norms:
      • Explanation: Customs valuation is the process of determining the taxable value of imported goods. India follows WTO valuation norms, primarily based on the transaction value (price actually paid or payable).
      • Example: If an importer declares a very low value for expensive goods, customs may re-assess the value based on comparable prices or other valuation methods to prevent undervaluation and duty evasion.
    • Customs Duties: Assessment and application of various duties:
      • BCD (Basic Customs Duty): The primary customs duty levied on imported goods, rate varies based on HS code and government policy.
      • IGST (Integrated Goods and Services Tax): GST levied on imports, equivalent to GST on domestic goods.
      • CVD (Countervailing Duty): Levied to counter subsidies provided by the exporting country to their manufacturers.
      • Anti-Dumping Duty: Imposed to protect domestic industries from goods being "dumped" (sold at unfairly low prices) by foreign exporters.
      • Social Welfare Surcharge: A surcharge levied on aggregate duties to fund social welfare schemes.

Step 4: Physical Examination & Risk-Based Inspection

  • Explanation: Customs may decide to physically examine the imported goods to verify the declarations made in the Bill of Entry. The level of examination depends on a risk-based approach.
  • Risk-Based Inspection Channels: Indian Customs uses a channel system to streamline inspection based on risk assessment:
    • Green Channel:
      • Explanation: For importers with a good track record and low-risk goods. Shipments under the Green Channel are generally not subject to physical inspection or detailed document checks. Clearance is expedited based on trust and past compliance.
      • Example: A reputed company importing standard components with a history of compliant imports might have their shipments routed through the Green Channel for faster clearance.
    • Orange Channel:
      • Explanation: For shipments considered to be of moderate risk. Only document checks are conducted, no physical examination of goods.
      • Example: A new importer with moderately sensitive goods might be assigned the Orange Channel, where customs will verify the documents thoroughly but not physically inspect the cargo.
    • Red Channel:
      • Explanation: For high-risk shipments or importers with compliance concerns. Detailed physical inspection of goods is mandatory, along with thorough document scrutiny.
      • Example: Shipments of goods that are frequently mis-declared, or from importers with a history of violations, are likely to be routed through the Red Channel for comprehensive examination.
    • Sample Testing (for specific categories):
      • Explanation: For certain goods like chemicals, food products, or pharmaceuticals, sample testing may be required to verify quality, composition, or compliance with standards.
      • Example: Imported food items might be subjected to sample testing by food safety authorities to ensure they meet health and safety standards before being allowed into the market.

Step 5: Duty Payment & Customs Out of Charge

  • Explanation: Once duties are assessed and examination (if any) is completed, the importer must pay the applicable customs duties and taxes. After payment confirmation, customs grants "Out of Charge," which is the final clearance for the goods.
  • Process:
    • Duty Payment via ICEGATE/Banks:
      • Explanation: Duty payments are typically made electronically through ICEGATE or through designated banks authorized by customs.
      • Example: Importers can use net banking or credit/debit cards via ICEGATE to pay customs duties online.
    • Customs Clearance Granted: Upon successful duty payment and completion of all checks, customs authorities grant clearance.
    • 'Customs Out of Charge' Order Issued: A formal order, often electronic in digital systems, is issued by customs, signifying that the goods are cleared and can be moved out of customs control.
    • Goods Transported to Warehouse/Importer's Premises: After obtaining the 'Out of Charge' order, the importer can arrange for the transportation of goods from the port/airport to their warehouse or intended destination.

This step-by-step procedure ensures that all legal and financial formalities are completed before imported goods are released for domestic use in India. Digital platforms like ICEGATE have significantly streamlined this process, making it more efficient than traditional manual methods.

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