Import Custom Clearance Procedure

Import Clearance Procedure in India: A Step-by-Step Guide

This document outlines the step-by-step procedure for import customs clearance in India, from importer registration to final clearance of goods.

Overview

The import clearance process in India involves several stages, primarily focused on ensuring compliance with customs regulations, assessing and collecting applicable duties, and facilitating the smooth flow of goods across borders. The process can be broadly categorized into five key steps:

1. Importer Registration
2. Arrival of Goods & Filing Bill of Entry
3. Customs Examination & Assessment
4. Examination & Inspection
5. Duty Payment & Clearance

Step 1: Importer Registration

Before initiating any import activity, an importer must obtain necessary registrations from various authorities. This step is crucial for legal and compliant import operations.

• Obtain Importer-Exporter Code (IEC) from DGFT (Directorate General of Foreign Trade):
  • The IEC is a mandatory 10-digit code required for anyone involved in import or export activities in India.
  • It's obtained online from the DGFT website.
  • Example: Think of IEC as your business's ID card for international trade in India. Without it, you cannot legally import or export.
• Register for GST (Goods and Services Tax) Compliance:
  • If the importer's aggregate turnover exceeds the threshold limit, GST registration is mandatory.
  • GST registration is essential for claiming Input Tax Credit (ITC) on the Integrated GST (IGST) paid on imports.
  • Example: If you are importing goods for resale within India, you need GST registration to manage your taxes properly and claim credits.
• Additional Registrations (as applicable):
  • SEZ (Special Economic Zone) Registration: Required if operating within an SEZ to avail of SEZ-specific benefits and regulations.
  • FTA (Free Trade Agreement) Registration: May be needed to claim preferential duty rates under specific Free Trade Agreements India has with other countries. This often involves Certificates of Origin.
  • APEDA (Agricultural and Processed Food Products Export Development Authority) Registration: Necessary for importing certain agricultural and processed food products.
  • Other Sector-Specific Registrations: Depending on the nature of imported goods (e.g., pharmaceuticals, chemicals), specific registrations from relevant authorities might be required. Step 2: Arrival of Goods & Bill of Entry Filing Once the goods are shipped and arrive at an Indian port (sea or air), the formal customs clearance process begins with filing the Bill of Entry.
• Goods Arrival:
  • Imported goods physically arrive at designated Indian ports (sea ports, airports, inland container depots (ICDs), or container freight stations (CFSs)).
• Filing of Bill of Entry (BOE) via ICEGATE (Indian Customs Electronic Gateway):
  • The Bill of Entry is a legal document required under the Customs Act for clearing imported goods. It's essentially a declaration by the importer to customs authorities.
  • ICEGATE is the digital platform used for electronic filing of the Bill of Entry and other customs documents. It streamlines the process and reduces paperwork.
  • BOE is typically filed before the goods arrive or within one day of arrival to avoid penalties.
  • Key Details to be included in the Bill of Entry:
    • Importer Details: Name, address, IEC, GSTIN, etc.
    • HS Code (Harmonized System Code): An internationally standardized system of names and numbers to classify traded products. Accurate HS code is crucial for duty calculation and regulatory compliance.
    • Value of Goods: Transaction value of the imported goods, which forms the basis for customs valuation.
    • Port of Entry: The Indian port where goods have arrived.
    • Country of Origin: Country where the goods were produced.
    • Quantity and Description of Goods: Detailed description matching the commercial invoice and packing list.
    • Applicable Duties: Self-assessment of duties payable (can be revised by customs).
    • Supporting Documents: Uploaded electronically through ICEGATE.
  • Key Documents Required (typically uploaded with BOE):
    • Invoice: Commercial invoice from the supplier detailing price, quantity, value, etc.
    • Packing List: Document detailing the contents of each package, weight, dimensions, etc.
    • Bill of Lading/Air Waybill: Transport document issued by the shipping line or airline, evidencing receipt of goods for shipment.
    • Import License (if required): For restricted items, a valid import license is mandatory.
    • Insurance Document: If goods are insured.
    • Certificate of Origin (if required): To claim preferential duty under FTAs.
    • Other documents: Technical write-up, catalogues, test reports (depending on the nature of goods and regulations).
  • Example: Imagine importing electronic components from China. You would file a Bill of Entry on ICEGATE, providing details about your company, the HS code for electronic components, the value as per the invoice, the port where the shipment arrived (e.g., Chennai Sea Port), and upload the invoice, packing list, and bill of lading. Step 3: Customs Examination & Duty Assessment After filing the Bill of Entry, customs authorities verify the submitted documents and assess the applicable duties.
• Verification of Bill of Entry and Documentation:
  • Customs officers scrutinize the Bill of Entry and uploaded documents for accuracy, completeness, and compliance with regulations.
  • They check for discrepancies, valuation issues, or potential misclassification of goods.
• Customs Valuation as per WTO (World Trade Organization) Norms:
  • Customs valuation is the process of determining the taxable value of imported goods for duty calculation.
  • India follows WTO valuation agreement principles, primarily based on the transaction value (price actually paid or payable for the goods).
  • Customs may question the declared value if they have reason to believe it's undervalued.
  • Example: If the customs officer suspects that the declared value of machinery is significantly lower than similar machinery imported recently, they might initiate a valuation inquiry.
• Customs Duties and Taxes: Customs authorities assess the following duties and taxes, as applicable:
  • Basic Customs Duty (BCD): A basic duty levied as per the Customs Tariff Act. Rates vary depending on the HS code and country of origin.
  • Integrated Goods and Services Tax (IGST): Equivalent to GST, levied on imported goods in addition to BCD. Rate is generally similar to the GST rate applicable to the same goods if sold domestically.
  • Compensation Cess (if applicable): Levied on certain luxury and demerit goods.
  • Anti-Dumping Duty (ADD): Imposed to protect domestic industries from unfair pricing of imported goods (dumping).
  • Countervailing Duty (CVD): Levied to counter subsidies provided by the exporting country.
  • Safeguard Duty: Imposed temporarily to protect domestic industries from a surge in imports.
  • Social Welfare Surcharge: A surcharge levied on aggregate duties of customs.
  • Example: For importing furniture, duties might include BCD at a certain percentage, IGST (e.g., 18%), and potentially Social Welfare Surcharge. If furniture from a specific country is being dumped at unfairly low prices, Anti-Dumping Duty might also be applicable. Step 4: Physical Examination & Risk-Based Inspection Customs uses a risk-based inspection system to decide the level of physical examination for each import consignment. This system aims to balance security and trade facilitation.
• Risk-Based Inspection: Customs uses various parameters (importer profile, nature of goods, country of origin, intelligence inputs, etc.) to assess the risk associated with each consignment. Based on this risk assessment, consignments are routed through different channels:
  • Green Channel: For low-risk consignments, generally no physical examination or document scrutiny is conducted. Clearance is expedited.
  • Orange Channel: For consignments requiring document verification only. Customs officers examine documents but typically don't conduct physical inspection unless discrepancies are found in documents.
  • Red Channel: For high-risk consignments. This involves detailed physical examination of goods, along with document scrutiny. This is the most thorough inspection.
  • Yellow Channel (sometimes used): For consignments where duty assessment is to be done by customs, but physical examination may or may not be required.
• Physical Examination (for Red Channel and sometimes Orange/Yellow):
  • Customs officers physically examine the imported goods to verify:
    • Description and Quantity: To match with the declared details in the Bill of Entry and documents.
    • Value: To check for undervaluation and ensure proper valuation.
    • Classification (HS Code): To confirm the correct HS code is used and duties are accurately calculated.
    • Compliance with Regulations: To check for prohibited items, adherence to labeling requirements, standards, and other regulations.
• Sample Testing (for specific categories):
  • For certain goods (e.g., chemicals, food products, pharmaceuticals), customs may draw samples for testing at designated laboratories to verify quality, safety standards, and compliance with regulations.
  • Example: A consignment of textiles from a new importer might be routed through the Red Channel for detailed physical inspection to verify the declared fabric type, quantity, and value. A consignment of food items might be subjected to sample testing for quality and food safety standards. A regular importer with a good compliance record importing standard items might get Green Channel clearance. Step 5: Duty Payment & Customs Out of Charge Once assessment and inspection are complete, the importer needs to pay the assessed duties to get the final "Out of Charge" order and clear the goods.
• Duty Payment via ICEGATE/Authorized Banks:
  • After assessment, the importer can pay the customs duties and taxes electronically through ICEGATE using various online payment methods (net banking, credit/debit cards) or through authorized banks.
  • GSTN (Goods and Services Tax Network): While ICEGATE is the primary portal for customs procedures, GSTN is used for GST-related aspects, including claiming Input Tax Credit (ITC) on IGST paid on imports.
• Customs Clearance Granted & 'Customs Out of Charge' Order:
  • Upon successful duty payment and completion of all formalities, customs authorities issue a "Customs Out of Charge" order.
  • This order signifies that customs has no objection to the clearance of the goods.
• Goods Transported to Importer's Warehouse:
  • After obtaining the "Out of Charge" order, the importer can arrange for the transportation of goods from the port/ICD/CFS to their warehouse or designated location.
  • Example: After customs assesses the duty on your imported electronic components, you pay the duty online through ICEGATE. Once payment is confirmed and all checks are cleared, customs issues the "Out of Charge" order, and you can then arrange for a transporter to pick up your shipment from the port and deliver it to your factory. Digital Platforms:
• ICEGATE (Indian Customs Electronic Gateway): The primary portal for all customs-related electronic transactions, including:
  • Filing Bill of Entry and other customs documents.
  • Online duty payment.
  • Tracking consignment status.
  • Communication with customs authorities.
• GSTN (Goods and Services Tax Network): Used for GST-related activities, including:
  • Claiming Input Tax Credit (ITC) on IGST paid on imports.
  • GST compliance and reporting related to imported goods.

Conclusion

The import clearance procedure in India is a structured process designed to ensure regulatory compliance and revenue collection while facilitating legitimate trade. Understanding each step, utilizing digital platforms like ICEGATE, and ensuring accurate documentation are key to efficient and smooth import operations. Importers should stay updated on the latest customs regulations and procedures to avoid delays and penalties.