detailed import procedure

7/31/2019 Detailed Import Procedure

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IMPORT PROCEDURE

• How to Import -Introduction• Pricinpal Law & Import Export Policy• Registration with Regional Licencing Authority and obtaining IEC

Code •

Licence Application Fees• Validity of Licence• Conditions of Licence• Imports under Special Scheme for Exporters• Selecting the Overseas Supplier• Finalising the Terms of Import• Payment against Imports• Letter of Credit• Scrutiny of documents and Retirement of Documents• Mode of payment & Time limit for Import Remittance• Customs Clearance of imported goods• Classification of Customs tariff and Levy of Customs Duty• Warehousing of Imported goods• Import by Export of Services• Import through Courier• Import for personal use• Import of Samples• Import of Prototype• Import of Computer, Computer parts and Computer Software• Import of Passenger Baggage

How to Import -IntroductionHow to Start Import

[As governed by the Foreign Trade (Development & Regulation) Act,1992]

With the globalisation of Indian economy and consequent uponcomfortable balance of payment position Government of India hasliberalised the Import Policy and practically all Controls on imports havebeen lifted.Imports may be made freely except to the extent they areregulated by the provisions of Import Policy or by any other law for thetime being in force.

Pricinpal Law & Import Export Policy

Principal Law

Imports in to India are governed by Foreign Trade (Development & Regulation) Act 1992. Under this Act, imports of all goods is Free exceptfor the items regulated by the policy or any other law for the time beingin force.In exercise of the powers conferred by the Foreign Trade

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(Development & Regulation) Act 1992 the Government has issued thefollowing Rules & Order:

Foreign Trade(Regulation)Rules, 1993, which inter alia, provide forgrant of special licence, application for grant of licence, fee, conditionsfor licences, refusal of licence, amendment of licence, suspension of alicence, cancellation of licence, declaration as to the value and quality of imported goods, declaration as to the Importer- Exporter Code number,utilisation of imported goods, provisions regarding making, signing of

any declaration/statement or documents, power to enter the premisesand inspect, search and seizure of goods, documents, things andconveyance, settlement, confiscation and redemption and confiscationof conveyance.

Foreign Trade (Exemption from Application of Rules in Certain Cases)Order 1993

Notifications under Foreign Trade (Development & Regulation) Act 1992.

Import Export Policy

The present import policy and procedures in respect of variouscommodities/category of importers, are, inter alia, contained in thefollowing publications issued by the Ministry of Commerce and revisedfrom time to time:

Import - Export Policy, 1997-2002 as modified upto 31.03.1999Handbook of Import - Export Procedures(Volume 1), 1997-2002 asmodified upto 31.03.2000.

Handbook of Import - Export Procedures: (Volume 2) Duty ExemptionScheme:Input - Output and Value Addition Norms, 1997-2002.ITC(HS) Classification of Import and Export Items.

Notifications and Circulars

The Import - Export Policy and Procedure books issued by theGovernment are amended/clarified/ explained by the Ministry of Commerce from time to time. The types of Notifications/Clarifications/Instructions issued by the Ministry for thispurpose are:

Public Notices.NotificationsPolicy Circulars

Select the commodity/Product you wish to import :

Be aware of the import potential and the commercial viability of thecommodity/product.



Check whether the items of your interest fall in the Restricted list of ITC(HS) Classifications of Exports & Imports items.

Prohibited items are not permitted to be imported at all. List of Prohibited items of import are detailed below:

Tallow, Fat or Oils rendered, unrendered or otherwise of any animalorigin, animal rennet and wild animals including their parts and productsand ivory any part and products, including ivory.

For import of items appearing in Restricted list you need secure importlicence. Third category of items comes under the Canalised list of items.Import of items included in Canalised list are permitted to be importedthrough Canalising Agencies.

Thus items not appearing in Prohibited list, Restricted list and or inCanalised list can be imported Freely without any import licence. A largenumber of Consumer goods are freely importable without licence.

Registration with Regional Licencing Authority and obtaining IECCode

Registration with Regional Licensing Authority:

Registration with Regional Licensing Authority is a pre-requisite forimport of goods. The Customs will not allow clearance of goods unless:

The importer has obtained IE Code Number from Regional LicensingAuthority. However, no such registration is necessary for personsimporting goods from/ to Nepal provided Value of a single Consignmentdoes not exceed Rs. 25000/=

Obtaining IEC Code Number

An application for grant of IEC Code Number should be made in theprescribed proforma given at Appendix 3.I. The application duly signedby the applicant should be supported by the following documents:

Bank Receipt (in duplicate)/demand draft for payment of the fee of Rs.1000/- Certificate from the Banker of the applicant firm as perAnnexure1 to the form. Two copies of passport size photographs of theapplicant duly attested by the banker of the applicant.

A copy of Permanent Account Number issued by Income Tax Authorities,if PAN has not been allotted, a copy of the letter of legal authority maybe furnished. If there is any non-resident interest in the firm and NRIinvestment is to be made with repatriable benefits, full particularsthereof along with a photocopy of RBI's approval. If there is NRIinvestment without repatriation benefit, a simple declaration indicatingwhether it is held with the general/specific permission of the RBI on theletter head of the firm should be furnished. In case of specific approval,a copy may also be furnished.



Declaration by the applicant that the proprietors/partners/directors of the applicant firm/company, as the case may be, are not associated asproprietor/partners/directors with any other firm/company the IEC No.is allotted with a condition that be can export only with the priorapproval of the RBI.

Profile of the exporter/importer in a given format at Appendix3.II.

The Registered Office or HO or Branch Office (duly authorized by the HOin this behalf) should apply for allotment of IEC No. However, only oneIEC no. is allotted to a company and the same is valid for all itsbranches/offices/units. The applilcation for grant of IEC No. should bemade to the Regional Licensing Authority concerned as specified inAppendix 3.III.

The application fee shall be deposited by way of deposit in an authorizedbranch of Central Bank of India indicating the head of Account 1453Foreign Trade and Export Promotion Minor Head 102. Import Licence

Application Fee.

The IEC No. is likely to be granted within 3 days of the receipt of thecomplete application and requisite documents.

How to fill up IEC application:

• Application form should be made in the prescribed form induplicate along with the above enclosures, mentioned againstserial 1 to 8 of above paragraph, also in duplicate.

• The form should be neatly typed/handwritten in bold capital

letters only.• Each copy of the application form should be signed in ink by the

authorised person.• Items of information relevant to applicant should only be filled

and remaining items may be marked not applicable.• Modification of particulars of the applicant should also be

furnished on this form by filling the relevant items.

However, in case an IE Code holder no longer wishes to operate underthe allotted code number, the matter should be brought under the

notice of the Regional Licensing Authority to make the Code numberinoperative.

Import Policy:

For items not mentioned as Prohibited, Restricted or Canalised List forimport in ITC(HS) Classification of Export and Import items; import of such items are freely permitted. There is no need to obtain any licenseor permission for importing such goods. The ITC(HS) Classification of Export and Import items contains 99 chapters and in each chapter thereare column heading covering Exim Code, items description, policy and



nature or restriction. The information related to import policy for anyitem can be obtained from our site under Customs Duty CalculatorSchedule.

Procedure to be followed for grant of import license:

An application for grant of an import licence or CCP for import of theitems mentioned as restricted for import in ITC(HS) Classification of Export and Import items may be made to the regional licensing

authority concerned.

Licence Application Fees

Fees for Licence Application:

Every application for import licence or CCP should be accompanied by 2copies of a bank receipt from the Central Bank of India or a Bank Draftfrom any Bank indicating the deposit in accordance with the prescribedscale of fees.

Rs. 200 where the value of goods specified does not exceed Rs. 50,000.

Rs. 2 per thousand or part thereof subject to a minimum of Rs. 200 anda maximum of Rs.1 lakh 50 thousand, where the value of goodsexceeds Rs. 50,000.Rs. 200 where Application is filed be SSI units where the CIF value of goods specified in the application does exceed Rs. 2 lakh.Rs. 200 where application is fro grant of duplicate licence.

The application fee shall be deposited either:

By way of deposit in an authorized branch of Central Bank of Indiaindicating the Head of Accounts 1453 Foreign Trade and ExportPromotion - Minor Head 102, Import Licence Application Fee. The Bankreceipt must show the name of the department viz. "Director General of Foreign Trade". The bank receipt should be drawn in favour of Pay & Accounts Officer concerned. Such fees can also be deposited with IndianMissions abroad.

Or, Crossed DD on a scheduled bank for the requisite amount should bemade in favour of the concerned licensing authority.

Validity of Licence

Besides import licence for import of restricted items there are othervariety of licences and such licences have different period of validity.

Export Promotion Capital Goods Licence validity 24 months

Customs Clearance Permit " 12 months

DEPB " 12 months



Advance License/Special Imprest Licence

For Project/Turnkey Project "18 months or co-terminus with thecontracted duration of the Project

For the cases where the license expires before the last day of themonth, the license shall be deemed to be valid until the last day of thatmonth.

Revalidation of License: License revalidation can be done on meritsbut not beyond 12 months by the concerned licensing authority for aperiod of six months at a time reckoned from the date of expiry of thevalidity period.

Last date for filling applications: the last date for receipt of applications for grant of licenses is 28th February of the licensing yearunless otherwise specified.

Conditions of Licence

Licensing conditionalities: The license for import is taken intoconsideration provided:

• the goods covered by the license shall not be disposed of exceptin accordance with the provisions of the EXIM Policy, 1997-2002or in the manner specified by the licensing authority in thelicense;

• the applicant for a license shall execute a bond for complying withthe terms and conditions of the license.

It shall be deemed to be a condition of every license for import

that -

no person shall transfer or acquire by transfer any license issued by thelicensing authority except in accordance with the provisions of thePolicy;

the goods for the import of which a license is granted shall be theproperty of the licensee at the time of import of which a license isgranted shall be the property of the licensee at the time of import andup to the time of clearance through the Customs;

the goods for the import of which a licensee is granted shall be newgoods, unless otherwise stated in the license;

the goods covered by the license for import shall not be exportedwithout the written permission of the DGFT;

Disposal period for import application: Provided the application iscomplete in all respects along with prescribed documents, the applicant-importer can expect the disposal in:



IEC No. - 3 working daysDuty free license where input-output norms are notified - 5 workingdaysDuty free license where input-output norms are notified but cases are tobe placed before ALC -15 working daysDuty free license where input-output norms are not notified, EPCGlicenses/export licenses/export

licenses/specific import licenses - 15 working days

Revalidation of license and extension of export obligation period by RLA- 5 working daysAcceptance of Bank Guarantee/Legal undertaking - 3 working daysRedemption of Bank Guarantee/Legal undertaking/Endorsement of Transferability - 10 working days

Issuance/renewal of Export House/Trading House/Star TradingHouse/Super Star Trading House - 15 working days

Amendment of any category of license - 5 working days SIL - 7 working

daysFixation of Standard input-output norms - 45 working days

DEPB - 5 working daysAll licenses falling under Chapter 8 - 5 working daysMiscellaneous - 15 working daysFixation of deemed exports drawback rate - 45 working daysN.B. This apart, a " Counter Assistance" service is provided in all theoffices of the DGFT for speedy disposal of applications. A foreign tradedevelopment officer (FTDO), in charge of the counter in each office. Onsubmission of the application at the counter the applicant will be handed

over a token and advised to return the same day when he will beinformed whether his application has been found complete and admittedfor further processing by the office or if there are any deficiency orlacunae. If deficiency is noticed the same is sent back to the applicant.

Counter Assistance may also be availed of, for amendments of minornature/enquiries. Applications in such cases will be received in thelicensing offices at the counter.

Importer's own Identity Card: An application for issuance of an

Identity Card may be made in the prescribed form. In case of loss of anIdentity Card, a duplicate card is issued.

Imports under Special Scheme for Exporters

The Govt. of India has framed the certain schemes to promote exports.

Export Promotion Capital Goods Schemes:

Capital goods including jigs, fixtures, dies and moulds may beimnported at a concessional rate of customs duty as per table givenbelow. Subject to an export obligation to be fulfilled over a period of



time. In addition spares up to 20 per cent of the cost insurance andfreight (CIF) value of the capital goods may also be imported under thescheme.

Under this scheme Customs duty is 5% if the export obligation is 5times the CIF value of the capital goods or 4 times the CIF value of capital goods on NEF basis. The period of fulfillment of the exportobligation is 8 years reckoned from the date of issuance of licence.

Period from the date of issue of licence Proportion of total exportobligation

Block of 1st and 2nd year nil

Block of 3rd and 4th year 15%

Block of 5th and 6th year 35%

Block of 7th and 8th year 50%

The licence holder under EPCG scheme shall fulfill the export obligationover the specified period in the following proportions:

An application for grant of license under this scheme should be made tothe licensing authority concerned in the form given in Appendix 10 A of the Handbook of Procedures, 1997-2002 along with documentsprescribed therein. Before clearance of goods through customs, theimporter has to execute a bond supported by a bank guarantee with theCustoms Authority in the prescribed manner. The license holder will alsohave to submit progress report of the export/supplies made and

services provided, duly certified by a Charted Accountant/Cost andWorks Accountant to the Licensing Authority. The report should besubmitted in the prescribed form 10C of the Handbook of Procedures,1997-2002. For Customs duty exemption exemption in respect of imports under EPCG scheme, the Ministry of Finance has issuedNotification No. 28/97-Cus. & 29/97-Cus., both dated 1st April, 1997.

Duty Exemption Scheme:

According to the EXIM Policy 1997-2000, duty free import of inputs ispermitted under the following schemes:

Advance License - granted to merchant exporter or manufacturerexporter for the import of inputs required for the manufacture of goodswithout payment of basic customs duty. However, such inputs shall besubject to the payment of additional customs duty equal to the exciseduty at the time of import. Reference: Notification No. 30/97-Customsboth dated 1.4.97.

Annual Advance License - Manufacturer exporter with exportperformance of Rs. 1 crore in the preceding year and registered with



excise authorities, except for products which are not excisable for whichno such registration is required, shall be entitled for Annual AdvanceLicense. Export House, Trading House, Star Trading Houses and SuperStar Trading Houses Holding the certificate as merchant exporter wherethey agree to the endorsement of the name(s) of the supportingmanufacturer on the relevant annual advance license shall also beentitled for the annual advance license.

This license and/or material imported thereunder shall not be

transferable even after completion of export obligation. Such annualadvance license shall be issued with positive value addition withoutstipulation of minimum value addition. The entitlement under thisscheme shall be up to 125% of the average FOB value of export in thepreceding licensing year. Imports against this is exempted frompayment of Additional customs duty, Special Additional Duty, AntiDumping Duty, Safeguard duty, if any, in addition to Basic customs dutyand surcharge thereon.

Advance Intermediate License: This license is granted to a manufacturer

exporter for the import of inputs required in the manufacture of goodsto be supplied to the ultimate exporter holding an AdvanceLicense/Special Imprest License.

Special Imprest License: This license is granted for the duty free importof inputs required in the manufacture of goods to be supplied to theultimate exporter holding an Advance License/Special Imprest License.Such Special Imprest License is granted for the Duty Free import of inputs required in the manufacture of goods to be supplied to theEoUs/units in EPZs/STP/EHTP, holders of license under the EPCGscheme, projects financed by multilateral/bilateral agencies/funds as

notified by the Dept. of Economic Affairs, MoF, Fertilizer Plants if thesupply is made under the procedure of International CompetitiveBidding, supply of goods to refineries and proejcts/purposes for whichMpF permits import of such goods on zero customs duty.

Advance Release Order:

A duty free license holder except Advance Intermediate License Holderintending to source the inputs from indigenous sources/canalisingagencies/EOUs/EPZ/EHTP/STP units in lieu of direct imports has the

option to source them against Advance Release Order denominated inforeign exchange/Indian rupees. In such cases, the license is invalidatedfor direct import and permission in the form of ARO is issued which willentitle the supplier to the benefits of deemed exports.

Back to back inland letter of credit: This is an alternative to ARO. Forthis the duty free license holder intending to avail such facility mayapproach a bank for opening an inland L/C in favour of an indigenoussupplier. Before this the bank will ensure that necessary bank guaranteeor Letter of Undertaking has been executed by the license holder andendorsement to this effect has been made on the License. The



indigenous supplier may supply the goods on the strength of L.C.opened in his favour . For the purpose of claiming Deemed Exportbenefits, an indigenous supplier shall produce the copy of the L/Ctogether with a photocopy of the Duty Free License, duly endorsed bythe bank concerned and the said documents shall for all purposes bedeemed to be an ARO.

Duty Entitlement Pass Book scheme: It aims at neutralising theincidence of customs duty and surcharge thereon on the import content

of the export product. This neutralisation is provided by way of grant of duty credit on the deemed import content in the export product as perStandard input output norms and considering the value additionachieved. This scheme is allowed to be operated on pre and post exportbasis by a manufacturer exporter and merchant exporter. The schemeallows exporter to claim credit of customs duty at a specified percentageof the f.o.b. value of the exports made in freely convertible currency.DGFT issues public notice featuring eligible products along with thecredit rates under this scheme. Although items outside the restricted listcan be exported without Customs duty, DEPB holder may pay additional

customs duty in cash, if any. (vide MoF Customs Notification No. 34/97- Cus. Dated 7.4.1997 and Circular No. 10/97-Cus. Dt.17.4.1997). Thirdparty exports are also permissible for grant of credit under this schemeand DEPB is valid for 12 months from the date of issue.

Special Import License(SIL): issued to Export/Trading/StarTrading/Super Star Trading houses; Manufacturers/processors with thequality certification from ISO,HACCP,WHO-GMP or SSI CMM level 2 andabove certification; EOUs/EPZs ; Deemed exporters; exporters of telecom and electronic equipments; small scale exporters(certified);service providers and other exporters. This provision has been

withdrawn from 31.03.2000. No SIL licenses will be issued for exportsmade after 31.03.2000.

Diamond, Gem & Jewellery Export Promotion Scheme: Exporters of gemand jewellery are eligible to import their inputs by obtaining Rep.License and diamond imprest license from the licensing authority.Exporters of gold/silver/platinum jewellery and articles thereof mayimport their essential inputs e.g. precious metals and stones inaccordance with the procedure specified in this regard.

100% EOU/EPZ/FTZ Scheme -This means an industrial unit offering itsentire production, excluding rejects and items otherwise specificallypermitted to be supplied to the domestic tariff area(DTA), for exports.Such units may be set up under the EOU/EPZ scheme. While EOUs canbe set up anywhere in India subject to certain locational conditions,units in EPZ/FTZ can be set up in specific areas separated from the DTAby physical barriers.

Hints/Suggestion for finalisation of import order/contract:



supply of goods from their principal abroad. It is advisable to importthrough such agents as they can be readily contacted in case of anydifficulty with regard to quality of goods, payment and documentation,etc.

Finalising the Terms of Import

This is an important subject and should be handled with extreme careand caution. It is advisable that before finalising the terms of ImportOrder, you should call for the samples or catalogue and other relevant

literatures and the specification of the items to be imported. Import of samples of goods is exempt from import duties under 'Geneva'Convention of 7th November, 1952. Samples are subject to re-exportand other conditions as specified in the Geneva Convention. Besides,vide Customs Notification No. 154/94 dated 13.07.1994, commercialsamples brought into India as personal baggage by bona fidecommercial travellers and businessmen or imported into Into India bypost or by air are exempt from the customs duty. Similarly, videNotification No. 154/94 dated 13.07.1994, prototype of engineeringgoods when imported into India as samples for executing or for use in

connection with-export orders are exempt from customs duty. Likewise,the Central Government has exempted bona fide commercial samplesand prototype of engineering goods when imported into India by post orby air or by courier service by manufacturers of export goods.

Once you are satisfied with the samples and the creditworthiness of theoverseas supplier, you can proceed to finalise the term of the contractto be entered into. For this purpose, the Import Contract should becarefully and comprehensively drafted incorporating therein preciseterms, all relevant conditions of the trade deal. There should not be anyambiguity regarding the exact specifications of the goods and terms of

the purchase including import price, mode of payment, type of packaging, port of shipment, delivery schedule, etc. The differentaspects of an import contract are enumerated as under some of whichmay be relevant and other may not be:

Product, Standards and specifications.Quantity.Inspection.Total value of the Contract.Terms of Delivery.

Taxes, Duties and Charges payable at Exporting Country and payable inIndia on importation.Period of Delivery/Shipment.Packing, Labelling and Marking.Terms of Payment-Amount, Mode & Currency.Discounts and Commissions.Licenses and Permits.Insurance.Documentary Requirements.Guarantee.Force Majeure or Excuse for Non-performance of Contract.



Remedies.Arbitration.

Mode of Pricing and INCO TERMS

While finalising the terms of import contract, the Importer, should, interalia, be fully conversant with the mode of pricing and the manner of payment for the imports. As regards mode of pricing, the overseassupplier normally quote the terms prevailing in international trade.

The importer for his benefits should know the meaning of the technicalterminology. To avoid ambiguity in interpretation of such terms,International Chamber of Commerce, Paris, Has give detailed definitionof a few standard terms popularly known as 'INCO TERMS'. These termshave almost universal acceptance and are explained below:

Ex-work

'Ex-work' means that the seller's responsibility is to make the goods

available to the buyer at works or factory. The full cost and risk involvedin bringing the goods from this place to the desired destination will beborne by the buyer. This terms thus represents the minimum obligationfor the seller. It is mostly used for sale of plantation commodities suchas tea, coffee and cocoa.

Free on Rail (FOR)/Free on Truck (FOT)

These terms are used when the goods are to be carried by rail, but theyare also used for road transport. The seller's obligations are fulfilledwhen the goods are delivered to the carrier.

Free Alongside Ship (FAS)

Once the goods have been placed alongside the ship, the seller'sobligations are fulfilled and the buyer notified. The buyer has to contractwith the sea carrier for the carriage of the goods to the destination andpay the freight. The buyer has to bear all costs and risks of loss ordamage to the goods hereafter.

Free on Board(FOB)

The sellers's responsibility ends the moment the contracted goods areplaced on board the ship, free of cost to the buyer at a port of shipmentnamed in the sales contract. 'On board' means that a Received forShipment' Bill of Lading is not sufficient. Such B/L if issued must beconverted into 'Shipped on Board B/L' by using the stamp 'Shiped onBoard' and must bear signature of the carrier or his authorisedrepresentative together with date on which the goods were 'boarded'.

Cost and Freight (C & F)



The seller must on his own risk and not as an agent of the buyer,contract for the carriage of the goods to the port of destination namedin the sale contract and pay the freight. This being a shipment contract,the point of delivery is fixed to the ship's rail and the risk of loss or of damage to the goods is transferred from the seller to the buyer at thatvery point. As will be seen though the seller bears the cost of carriageto the named destination, the risk is already transferred to the buyer atthe port of shipment itself.

Cost Insurance Freight (CIF)

The term is basically the same as C & F but with the addition that theseller has to obtain insurance at his cost against the risks of loss ordamage to the goods during the carriage.

Payment against imports

Payment under better of Credit is a universally accepted mode of payment. A Letter of Credit is a Signed instrument and an undertakingby the banker of the buyer to pay the seller a certain sum of money on

presentation of documents evidencing Shipment of Specified goodssubject to Compliance with the stipulated terms and Conditions.

Letter of Credit vs Bank Gaurantee

A letter of credit differs from a bank guarantee. An issuing or confirmingbank's obligation is independent of, and unqualified by, the contract of sale under the transaction. A commercial credit is neither a performancebond, nor it is a guarantee of the quantity or quality of the goodsshipped.

Letters of Credit are Separate Transactions

A contract for sale of goods between the seller and the buyerincorporates mode of settlement. Letters of credit by their nature areseparate from the sale contract, and banks are not concerned or boundby such sale contracts even if the credits bear reference to them.

The credits stipulate documents which have to be tendered for paymentand it, therefore, follows that in credits parties deal with documents andnot with goods, services or performances to which the documentsrelate.

It is, therefore, in the interest of all the parties concerned that theconditions and terms of credit are complete and precise and barefit of excessive details.

Payment under a letter of credit does not depend on the performanceobligation on the part of the exporter except those which the creditimposes. Banks accept documents under letters of credit for what thosedocument purport to be on their face. Contract between the buyer andthe seller is obligatory between themselves. The seller(beneficiary)cannot take advantage of any contractual terms in between the buyer



and the opening bank and between the opening bank and theadvising/confirming bank.

Uniform Customs and Practice for Documentary Credit

In the course of time, a number of practices, expressions and termshave evolved between banks dealing with documentary credits. Toensure uniformity of interpretation in international trade, theInternational Chambers of Commerce in Paris has worked out the

"Uniform Customs and Practice for Documentary Credit". These havebeen revised and brought up to date several times in the past. Thelatest in the line of revisions is the UCP 500 (w.e.f. January 1, 1994)which updates and consolidates the previous UCP 400. They are nowapplied by the banks in nearly all countries including India.

Parties to a Letter of Credit:

Following persons are generally parties, to a letter of Credit:

Benificiary : The exporter of goods in whose favour the L/C has beenestablished. Customer/importer : The person we intends to import thegoods and instructs bank to established Letter of Credit.

Issuing Bank: The Banker in the importers Country who opened the L/C.Correspondent Bank or Advising Bank: The banker in the exporterscountry, who is authorised by the issuing bank to advise the beneficiaryof the Credit and to effect such payment or to accept and pay such billsof exchange or to negotiate against Stipulated documents and onCompliance of Stipulated terms and condition specified by the importeron the exporter.

Confirming Bank: The banker in the exporters(beneficiary) country, whoat the desire of the beneficiary adds confirmation to the letter of Creditso that beneficiary can get payment without recourse from theConfirming bank. The Confirming bank may be correspondent bank itself or some other bank.

Generally following types of Letter of Credit are in operation.

Revocable or Irrevocable Letters of CreditConfirmed CreditTransferable CreditWith or without Recourse CreditRevolving Letter of CreditTransit CreditBack to Back CreditThe Sight CreditThe Credit available against Time Draft (Usance Credit)The Deferred payment Credit.



Precautions to be taken at the time of establishing Letter of Credit

Letter of credit offers almost complete protection to the seller but thebuyer is put to many disadvantages and has to make payments againstdocuments only. Before agreeing to open a letter of credit in favour of the seller, the opener must be satisfied with the creditworthiness andgeneral reputation of the seller. Entire success of an L/C transactiondepends on proper conduct of the seller.

Confidential report on the seller must be obtained at the time of firsttransaction with him.

Letter of credit also does not offer any protection for thequality/quantity of goods supplied under the L/C. It would, therefore benecessary to know the nature of goods and specify submission of qualityreports/inspection reports from an independent agency to ensurereceipt of goods of proper quality. This is particularly important in caseof import of chemicals and such other goods. The opener has to submit

an L/C application to the opening bank. The instructions contained inthe L/C application is the mandate for the issuing bank and letter of credit will be issued in accordance with this application. It is, therefore,necessary that complete and precise information must be given in theL/C application form specifying therein the description, unit rate andquantity of the goods covered under L/C and details of documentsrequired in absolute clear and unambiguous terms. The reference tounderlying sale contract must be avoided as far as possible. The L/Capplication must nevertheless contain all the required/information basedon which L/C could be opened by the bank.

After the L/C has been issued by the bank, a copy thereof must beobtained immediately. The L/C must be scrutinized to ensure that it hasbeen properly issued and is in conformity with L/C application.Discrepancy, if any, must be brought to the notice of opening bankimmediately.

Import contact may be concluded either in terms of INR or in foreigncurrency. Where the contracts are in INR, the related documents arealso prepared in INR and no conversion is involved. However, where thebill is drawn in foreign currency, the payment is made in Indian rupees

equivalent to the foreign currency. The equivalent rupee value is arrivedat by applying suitable exchange rate. These rates are applied by banksto standardise the foreign exchange-rupee conversion process.

When the price of foreign currency is quoted in terms of home or localcurrency it is called direct quotation basis. This has been in applicationsince 02.08.1993. However, there is a difference between inter-bankexchange rates and merchant rates.

Merchant rates are the exchange rates applied by the bankers fortransaction with their customers for various purposes, including imports



and exports. These rates are calculated by the banks as per theguidelines issued by the Foreign Exchange Dealers Association of India(FEDAI). Inter-bank rates are the rate for transactions amongst theauthorised dealers in foreign exchange and depend on the marketconditions.

Since exchange rates are volatile, documents delivered by the bank atthe time of a favourable exchange rate will enable the Indian purchaserto pay less of Indian rupees. Forex rates are always quoted as two way

price i.e. at a rate at which the bank is willing to sell foreigncurrency(buying rate) and at a rate at which the bank is willing to buyforeign currency(selling rate). There is always some difference in buyingand selling rates. However, the maximum spread available to bank isrestricted in terms of celling imposed by RBI. All exchange rates byauthorised dealers are quoted in terms of their capacity as buyer orseller.

TT Selling Rate

This rate is applied for all clean remittances outside India. For sellingforeign currency to its customer by the bank such as for issuance of bank drafts, mail/telegraphic transfer etc.

TT Buying Rate

This rate is applied for purchase of foreign currency by banks when thebanks in India have already obtained the cover in India. Thus all foreigninward remittances which are made payable in India are converted byapplying this rate. A mail transfer issued by a bank in Dubai for US $10,000 drawn on any commercial bank having branch at the overseas

destination will be converted into rupees at TT buying rate.

Reading Rates-The rates announced by the banks every day morningare card rates.

Reputed importers can always bargain with the bank for improvement inthe card rates for reducing their rupee liability on conversion of foreigncurrency into Indian rupees. Also a distinction is made between spotrates and forward rates. Spot rates are applicable on the day of transaction, whereas forward rates are fixed in advance for a

transaction that will mature at a specified date or during a specifiedperiod in future imports.

Hedging against Forex risk:

Exchange risk arising on account of adverse movement of the exchangerates, can be avoided by the following methods:

• By requesting the supplier to invoice the goods in Indian rupees(possible only when the seller agrees to it)

• By entering into a forward exchange contract.



This involves booking of forward exchange contract with the bank of theimporter.

For booking forward contract the importer should approach his bankwith which an L/C has been opened. The bank will book a forwardcontract only against genuine trade transaction. The bank will verifysuitable documents to ensure the authenticity and the amount of permitted currency of the underlying transaction. The amount, date andnumber of the forward contract will be marked on such documents

under the stamp and signature of the bank to ensure that more thanone forward contract is not booked in respect of the same underlyingtransaction. A transaction may be covered either in parts or in whole.The period and extent to which an exposure is to be covered is left tothe choice of the customer. Ordinarily, the maturity of the forwardcontract matches with that of the underlying transaction. If thedocuments of import are not received within the agreed period of thecontract, the contract needs to be cancelled(an fresh contract booked if desired) for which the bank will levycancellation charges as per FEDAIrules. In case the documents are received before the stipulated date

and the importer wants early delivery, the bank will again levy chargesfor early delivery, as per FEDAI rules.

The importers should be careful in chosing the period of forwardcontract. Otherwise early delivery or cancellation of forward contractwould lead to unnecessary charges. The RBI allows substitution of animport order on specific request, provided the bank is satisfied with thecircumstance leading to the non-performance of the contract.

Where the documents are under a contract(Non-L/C case), the seller willsubmit the complete set of documents to his bankers with the request

to either purchase/discount the documents to his banker with therequest to either purchase/discount the documents or same oncollection basis to the importer. In the former case the seller's bankfinances the sellers whereas in the latter case, no financial facility isextended to the overseas seller. The seller's banker may advance somemoney against documents sent on collection basis while, treating thedocuments as collateral security.

When the documents are under L/C, the documents are preparedstrictly in conformity with the letter of credit.

After preparing the documents the overseas seller will tender thedocuments to his banker for negotiation. The bank, after receiving thedocuments, will examine them to ensure that they are strictly drawn asper the terms of the credit. Following this the overseas banker will sendthe documents to the importer's banker in India. The impoter's bank willadvise the importer to collect the shipping documents either againstpayment or acceptance as per the terms of the contract.

In case the documents are drawn under L/C, the issuing banker(of theoverseas supplier) will examine the documents and if found in order it



will hand over the same to the importer after debiting his account withamount involved or against acceptance as per the terms of the credit.

If the documents are not in line with the terms of the credit, theoverseas banker can either refuse to negotiate further and ask the sellerto send them on collection basis only; or it can contact the importer'sbank(in the buyer's country) for authorisation; or it can also makepayment under the reserve against seller's indemnity.

Import Policy:

For items not mentioned as Prohibited, Restricted or Canalised List forimport in ITC(HS) Classification of Export and Import items; import of such items are freely permitted. There is no need to obtain any licenseor permission for importing such goods. The ITC(HS) Classification of Export and Import items contains 99 chapters and in each chapter thereare column heading covering Exim Code, items description, policy andnature or restriction. The information related to import policy for anyitem can be obtained from our site under Customs Duty Calculator

Schedule.


An application for grant of an import licence or CCP for import of theitems mentioned as restricted for import in ITC(HS) Classification of Export and Import items may be made to the regional licencingauthority concerned.

Scrutiny of documents

This is a very important function and this should be done with great

care. After receiving the document from the overseas supplier's bankthe importer's bank will scrutinise them to verify the extent of correctness as per the terms of the L/C. For discrepancies in thedocuments following principles are adopted:

If discrepancies are such which violates any of exchange control orimport control regulations, the documents should straightaway berejected.

If the discrepancies are of trivial nature not affecting the character of

the transactions the documents may be accepted on merits.

If the documents are rejected, immediate notice to that effect should begiven to the bank to safeguard the importer's interests.The documentsprescribed by the beneficiary are carefully scrutinised by the issuingbanker. The importer should also scrutinise the documents to ensurethat:

They were presented when the credit was in force and had not expired.The amendments and special instructions have been taken care of The amount of bill does not exceed the value of L/C



All documents required in the L/C have been made availableDocuments carry required endorsements

The documents do not contain discrepancies which violate any exchangecontrol/import control regulations

The invoice is duly signed, tallies with amount of draft, Exact quantitiesare shown and is drawn in appropriate currency of the origin of goods

Bill of leading is presented in full set of negotiable copies and is onboard bill of lading and duly signed In case the goods are imported oncash against documents(CAD), documents against payment(D/P) ordocuments against acceptance(D/A) basis, the importer needs to takedelivery of documents from the banker before completion of thecustoms formalities. This process, known as retirement of documents,needs the importer to apply to authorised dealer/banker who is inpossession of documents. This can be done by tendering the fundsequivalent to the value of documents and the bank charges exchangecontrol copy of import license, where applicable, Form A-1 duly

completed for remittance of foreign exchange.

The documents are released to the importers against payment in case of DP bills and against acceptance in case of DA bills. The payment ineither case is accepted only from the bank account of importer. If thebank is out of funds the interest is charged to the importer's account.For any overdue period a penal interest will be charged.

Checklist for Document (received under L/C) scrutiny:

General-check whether all documents in full sets as per L/C terms have

been receivedDocuments had been presented before the expiry dateAll the documents are dated subsequent to the date of issue of the L/CCancellation/overwriting in all documents are authenticatedBills of Exchange-check whetherDrawn on the person indicated in the L/C and duly signed up by thebeneficiary of the creditDrawing is within L/C amount and in the same currency as per the L/CThe amounts in words and figures are the same and identical with theamount stated in the invoice

Superscription, regarding drawing under L/C has been made and the Billmust have been issued stamped.

Invoice- check whether invoice:Is made out in the name of the person who had opened the L/CQuantity, unit price and value are quoted as per L/CWhether unit price and value are quoted as per L/CThe description of the merchandise corresponds to the description in theL/CThe arithmetical calculations are correct



Import license/OGL/Contract No./Order No./Indent No. mentioned asper L/CNo charge other than stipulated in L/C in includedAdditional copy for Exchange Control purposes is submittedThe date and no. of the License/OGL indicated

Bill of lading is submitted within 21days from the date of shipment, if nospecific time is between the date of issue and expiry of L/C

The date of shipment is between the date of issue and expiry of L/CFull quantity of goods is shipped, if part shipment is not allowedFull set is submittedFreight is shown as prepaid/payable at destination, as per L/CBill of lading shows 'on board shipment'Parties are notified as per L/C termsCarrying vessel's name has been mentioned in Bill of LadingThe beneficiary's name is shown as consignor, unless L/C terms permitsthird party bill of ladingThe consignee's name is as per L/C

The B/L is manually signed

The description of goods is consistent with L/CThe ports of loading/destination are mentioned as per L/CMarks, numbers, quantity and weight agree with the invoiceThe carrying vessel belongs to any particular line as per L/CAdequately stampedProperly endorsedIf AWB, whether flight number and date of departure mentionedIf freight has been added separately in invoice and no separate freightcertificate of shipping company is submitted. B/L shows freight amount.

Scrutiny for Insurance documents-check whether the policy is taken outin the name of the shipper

Certificate/policy is according to Letter of Credit termsRisk commences w.e.f. date of B/LAmount of insurance as per L/C termsWhether drawn in the same currency as the L/CDescription of goods agree with B/LRisks as per L/C are covered

The place where claims are payable is as per L/C termsAdequately stampedDetails such as name of carrying vessel, ports of loading/destination,marks, agree with the B/LCertificate of analysis, weighment,etc.The certificates are issued by the authority stipulated in L/CName of the shipper is properly shownThe samples drawn relate to the goods actually shippedDate of sample verification is within the date of shipment



Certificate of origin

It is issued by the authority stipulated in the L/CThe description of goods agrees with that in the invoice

Checking other documents

All other documents stipulated in the L/C are verified

They are issued by the authorities specified in the L/C

They contain the details as required by the L/C

For matter relating to Documentary Collections and Commercial terms,the importers are likely to be conversant with the brochures issued bythe International Chamber of Commerce(ICC), Paris.

Following are the brochures:

Uniform Customs and Practice for Documentary Collection andCommercial TermsUniform Rules of Collections (ICC522)

Uniform Rules for a Combined Transport Document (ICC298)INCO Terms 1990RBI regulations for Making Payments by importers

Import Policy:

For items not mentioned as Prohibited, Restricted or Canalised List forimport in ITC(HS) Classification of Export and Import items; import of such items are freely permitted. There is no need to obtain any licenseor permission for importing such goods. The ITC(HS) Classification of Export and Import items contains 99 chapters and in each chapter thereare column heading covering Exim Code, items description, policy and

nature or restriction. The information related to import policy for anyitem can be obtained from our site under Customs Duty CalculatorSchedule.



Mode of paymentPayments in retirement of bills drawn under L/C as well as bills receivedfrom abroad for collection against imports into India, must be receivedby authorised dealers, irrespective of amount, by debit to the account of the importer with themselves or by means of a crossed cheque drawnby him on his other bankers. Payment against bills should not beaccepted in cash. This rule also applies to private imports where theamount involved is Rs. 20,000 or more.

Payment for import bills-Where the import bills are drawn in IndianRuppes (INR), an equivalent amount(plus bank charges) is debited to



the account of the importer by the authorised dealer and the amountremitted to the foreign seller. In case the bills are drawn in foreigncurrencies, the INR equivalent is arrived at by applying the appropriateforeign exchange rate.

Fixing of Re. Equivalent-In order to bring uniformity in the handling of import bills under L/C authorised dealers have been directed by the RBIof follow the following procedure:

Sight import bills received under L/C and conforming to credit terms,may be held in foreign currency for a maximum period of 10days fromthe date of receipt of documents by the Bank.

In case of non-payment by the drawee within 10days, the importer'sliability on the foreign currency bill shall be crystallised by convertingthe foreign currency amount in to rupee at the

B.C. Selling rate prevailing on the 10day or the forward exchangecontract rate where applicable. Authorised dealers shall keep a proper

record of the date of receipt of documents.

In case the 10th day is holiday or a Saturday, the importer's liability inrupees shall crystallise in the next following working day.

Authorised dealer shall carry swap costs from the customer.

Authorised dealer shall charge interest at the rate as prescribed by RBIfor advances to non-priority sectors from time to time on rupeesadvances made against the import bills pending retirement by thecustomer. Such interest shall be recovered from the date of negotiation

or the date of crystallisation of the rupee liability and thereafter penalinterest shall be recovered.

When the rupee liability on an import bill is crystallised at the ForwardExchange Contract Rate and it results in early/late delivery, the chargesas per FEDAI rule 9 shall be levied.

Authorised dealers shall charge commission/handling charges at therate of 0.15% on the bill amount at the time of converting foreigncurrency into INR irrespective of the fact whether the bill is retiredwithin 10 days or later.

Time limit for import remittance:

The remittance against imports should be completed not later than 6months from the date of shipment. Accordingly, deferred paymentarrangements involving payments beyond 6months are not permissiblewithout approval of RBI/Gol.

However, no objection to importers withholding a small part of the costof the goods not exceeding 15 percent towards guarantee of



performance etc. Authorised dealers may make remittances of amountsso withheld provided the earlier remittance had been made throughthem. No interest payment should be allowed to be remitted on thesewithheld amounts.

Sometimes, settlement of import dues may be delayed due to disputes,financial difficulties, Authorised dealers are permitted by the RBI tomake remittances in such cases even if the period of 6 months expires,provided-

Authorised dealer is satisfied about the bona fides of the circumstancesleading to the delay in payment.

No payment of interest is involved for the additional period.

In case, where the overseas supplier insists on payment of interest, itmay be allowed in accordance with the provisions contained in para7A.12 up to a maximum period of 60 days beyond 180days from thedate of shipment provided the import bill is paid within that period.

Remittances against import of books may be allowed withoutrestrictions as to time-limit, providedno interest payment is involved norhas the importer forgone any part of the discount/rebate normallyallowed to importers towards compensation for delay in settlement of dues.

Interest remittance on import bills-interest accrued on usance billsunder 'normal interest clause' or of overdue interest paid on sight billsfor a period. not exceeding 6 months from the date of shipment inrespect of imports without prior approval of RBI. In case of pre-paymentof usance import bills, remittances may be made only after reducing the

proportionate interest for the unexpired portion of usance at the rate atwhich the interest has been claimed or the 'prime' rate (or itsequivalent) of the country in the currency of which the goods areinvoiced, whichever is higher. Where interest is not separately claimedremittances may be allowed after deducting the proportionate interestfor the unexpired portion of usance at the prevalling 'prime'.

However, interest under normal interest clause would mean interest atthe prime rate (or its equivalent) of the country in the currency of whichthe goods are invoiced.

Impoter's documents-The importer should comply with certainobligations: submission of Exchange Control Copy of Bill of Entry forHome Consumption/Postal Wrappers to the authorised dealer. This willact as evidence that the goods for which the payment was made, haveactually been imported into India.

Authorised dealers should ensure that in all cases, including cases of advance remittances permitted (Vide para 7A, 10, these are submittedby their importer customers and are verified. In respect of importsmade on D/A basis, since goods would normally be cleared before the



due date of payment, authorised dealers should insist on production of documentary evidence of import i.e. Exchange Control Copy of Bill of Entry for Home Consumption/ postal wrappers at the time of effectingremittance of import bill. Authorised dealers should also advise thisrequirement to their importer customers in writing while delivering thedocuments against acceptance.

Postal Imports

Remittances against bills received for collection in respect of imports bypost parcel may be made by authorised dealers, provided the goodsimported are such as are normally despatched by post-parcel. In thesecases the relative parcel receipts must be produced as evidence of dispatch through the post and on undertaking to submit importersshould furnish post parcel wrappers within three months from the dateof remittance.

If the parcel has already been received in India, the parcel wrappershould be produced in support of the remittance application. Where

goods to be imported are not of a kind normally imported by post parcelor where authorised dealer is not satisfied about the bona fides of theapplications the case should be referred to RBI for prior approval withfull particulars together with relative parcel receipts/or wrappers.

Customs Clearance of imported goods

Customs Authorities and the Clearing agents play the key role in theimport of goods. All goods imported into India have to pass through theprocedure of Customs clearance as they cross Indian border. The goodsare examined, appraised, assessed, evaluated and then allowed to betaken out of charge of the Customs for use by the importer. The entire

process of customs clearance is complex and to carry out this proceduresmoothly, the help of accredited customs clearing agents has to betaken.

The importers need to present a Bill of Entry on receipt of the advise of the arrival ofthe vessel. The B/E is noted in Import Department, withcorresponding endorsementmade against the consignment entry in theIGM along with the date. The B/E will then be presented in theAppraising Department with all the relevant documents like invoice, Billof Lading, Import license and catalogue literature. The appraising

procedure may be of two types.

The First Check Procedure-Applicable only when appraisers/assessinggroup finds it difficult to complete the assessment on the basis of thedocuments made available.

The Scrutinising Appraiser in the group gives the examination order.The goods are then examined in the docks and the B/E rerutned to theScrutinising Appraiser for completion and license debit. In this case theCustoms 'out of charge' is given by the Accounts Department soon afterthe recovery of duty.



The Second Check Procedure-Under this 80 to 90 percent of theconsignments are cleared.

If the documents are adequate for determining the classification, value,ITC license, the form is completed by the Appraiser and thencountersigned by The Assistant Collector. It is then forwarded to theLicense Department for licensing debit and audit. Then it is returned tothe importers for payment of duty in the Accounts/Cash department.After recovery of duty the original B/E is retained in the Accounts

Department and the duplicate and other copies are returned to theimporter for getting the goods examined in the docks.

In the docks, the Shed Appraiser/Examiner shall examine the goods andif in order, shall give the out of charge for taking delivery from thecustodian of the goods viz. Port Trust, after payment of Port Trustcharges.

Irrespective of the procedure, examination of cargo for assessmentpurpose is chiefly the function of the Appraising Department having

special staff of examiners in the docks/Air cargo shed. The records of the examination and weighment should be declared, attested and datedat the time of the examination. If the examination spreads over morethan one day, the result on each day's progress should be disclosed.

These apart some of the Customs house in India have introduced thesimplified computer procedure for speedy clearance of consignmentthrough B/E.

Custom Authorities

The customs administration vests in CBEC for implementing theprovisions of the Customs Act.1962. There are two main wings of Customs House. In the 'Appraisement' wing the job of collection of revenue is assigned, while the 'Preventive' one aims at prevention of smuggling.

The Customs authority functions under the Ministry of Finance (MoF)with the Central Board of Excise & Customs at the apex. The board isheaded by a Chairman and assisted by Members. The Member(Customs) looks after the following matters:

Customs Law and its interpretation and application, policy and broadprocedures(Other than those concerning anti-smuggling)Enforcement of Import Export prohibitionsForeign Travel and Cases on imports and exportsBaggage concessions and rules;Customs Valuations;Tariff Classification and Tariff advices;Customs procedures, CustomsHouseAgents Regulations;Warehousing, inland Bonded Warehouses;



FTZs, EPZs, 100% EOUs etc.Matters relating to Drawback;Customs Co-operations Council, GATT and ESCAP and international talksand agreements, organisations concerning customs;All other works on Customs not specified elsewhere;Supervision and control over Customs Commissionerate of Mumbai,Calcutta, Chennai, Kandla, Bangalore, Cochin, Delhi , Visakhapatnam,Goa and Tuticorin and Customs Divisions of other Central ExciseCommissioners, Assistant Commissionerates regarding Customs work

handled by them.Chemical laboratories andDirectorate of Drawback

The Ministry of Finance (MoF) issues Customs Notifications to levy dutyon the imported goods. The Changes are made each year on the Day of the Fiscal Budget. Customs clearance of the imported goods is done bythe customs Authorities functioning under the overall charge of MoF.The hierarchy of the Authorities:

Central Board of Excise & Customs (CBEC) in the MoFUnder which operates:Customs Commissionerates of Mumbai, Calcutta,Chennai, Kandla, Bangalore, Cochin, Delhi, Vizag, Goa and Tuticorin.

Directorate of DrawbackField Level:Principal Commissioners Customs ,Commissioners,Addl.Commissioners ,Dy. Commissioners,Asst. Commissioners,Port of clearance.

Classification of Customs tariff

The basic legislation is the Indian Customs Act, 1962 read with Customs

Tariff Act, 1975. Section 12 of the Customs Act,'62 empowers levy of duties on goods imported into or exported from India.

However, the rates at which the different import export duties shall beleviable have been respectively specified in the First and SecondSchedule to the Customs Tariff Act, 1975-called the import Tariff andExport Tariff respectively.

With effect from Feb. 28, 1986, the new tariff import schedule based oninternational convention of Harmonised Commodity and Coding system,

commonly known as Harmonised Coding System came into being. Thebasic features of the Import Tariff

Nomenclature are outlined below:The headings, the Section and Chapter Notes and the interpretive Rules,Customs duties are levied in three ways-Specific rate-at the rateprescribed per unit of item i.e. weight or number of length; Ad-valoremduty-levied on the value of the item; Specific and advalorem-levied inboth ways.

Types & Levy of Customs duties:-



Basic duty: all goods imported into India are chargeable to duty asprescribed in the 1st Schedule of Customs Tariff Act. This Schedule isamended from time to time of Customs Tariff Act. This duty can belevied either as a percentage of value of goods or at a specified rate.

Surcharge: It is levied at the rate of 10% of the basic rate on allcommodities except crude oil and petroleum products, GATT-bounditems, gold and silver. Additional Duty: Also known as countervailingduty, is levied on the cost of imported goods and is equal to excise duty

levied on like goods when manufactured in India. The objective is toensure that the protection provided by the import duty to domesticindustry is not eroded.

Special Additional Duty: It is levied at the rate of 4%. Anti-dumpingDuty: This is levied on specified goods imported from specified countriesto protect indigenous industry from injury resulting from USA, Koreaand so on.

Customs Duty Assessment: The assessment of goods to duty is done on

the basis Whether the goods covered by the B/E are such as areregularly imported, or are required to be tested by the customs houselaboratory for fulfilment of license conditions, or The appeaiser desiresto see the representative sample before completing the bill of entry forthe purpose of verification of the value/description, etc. or The requireddocument is not forthcoming.

Customs Duty Rates: When the import invoice is in any currency otherthan Indian rupees, customs fix the exchange rate for conversion intothe Indian rupees at a predetermined rate which is published in customshouses on a daily basis.

Imports from specified countries enjoy preferential duty. This isgenerally the result of special status accepted under bilateral tradeagreements or otherwise. However, the incidence of customs duties onvarious goods imported are obtained as follows:

Total duty payable=(Landed cost including CIF of the item concerned +Basic customs duty under the Customs Tariff Act + Surcharge thereon +Additional duty + Special Additional duty as per Finance Act).

Getting Import License checked-The appraising official checks thelicense for their description, value, validity period, importers name, etc.It is for the importer to establish that the goods satisfied the descriptionin the license unless he is able to establish the fact he would not beentitled to lawful import thereof. If the appraising official is satisfied thatthe license is in order, he will send the license with B/E to licensesection for registration and audit. The department maintains a registerfor every license accepted and debited showing the last balance on thelicense.



The importer is likely to know the term of license, the type of goods andwhether they can be lawfully imported as per the terms of the license.In case there is any error on the part of the appraising authority thenpossession of even a valid license will not confer any right upon theimporters to import such goods again on the basis of similar licenses.

Bill of Entry-This is a document on the strength of which clearance of imported goods can be effected. Its form has been standardised by theCentral Board of Excise and Customs. All goods discharrged from a

vessel, from foreign or coastal Ports, are cleared on this prescribedforms presented under the B/E Regulations, 1971.

It should be presented for 'noting' in the import dept. of the customshouse after theimport General Manifest which gives a detaileddescription item wise of the goods brought by the concerned vessel isfiled by the steamer Agent.

Import Policy:

For items not mentioned as Prohibited, Restricted or Canalised List forimport in ITC(HS) Classification of Export and Import items; import of such items are freely permitted. There is no need to obtain any licenseor permission for importing such goods. The ITC(HS) Classification of Export and Import items contains 99 chapters and in each chapter thereare column heading covering Exim Code, items description, policy andnature or restriction. The information related to import policy for anyitem can be obtained from our site under Customs Duty CalculatorSchedule.



Warehousing of Imported goods

An importer may not like to clear or may have certain problems inclearing the imported goods immediately on payment of duty for homeconsumption. In that case the importer can deposit the goods in a Publicor Private Bonded Warehouse, provided he is satisfied with the

arrangement. Thus, the importer can avail the facility of deferringpayment of duty on imported goods pending their actual clearance.Towards this the importer should file a set of yellow coloured B/E knownas warehousing B/E.

Self-Assessment Scheme: Applicable to goods without any ITClicense/CCP or any restrictions thereof. The objective is to enableimporters effecting repetitive imports of some commodities to assesstheir own B/E and determine their duty liability and pay the dutyaccordingly. Any importer, including Govt. bodies and PSUs, with provenidentity and track record can avail of this.



This process does away with the procedure of processing, and the timeconsumed by the appraising and licensing sections.

When the duty is paid, the goods would be cleared in the docks,provided the goods are partly examined and payment of duty verified.

Green Channel : This fast-track facility has been introduced to simplifyand expedite the process of cargo clearance. Instead of going in for ahundred per cent examination only a part of the cargo is checked. Bulk

importers, Govt. Depts. & PSUs, consignment of a single product of wellknown brand name and importers with identified and unblemished trackrecord are allowed to avail this facility.

Export of services

A new Chapter has been added in the revised EXIM Policy 1997-2002,March 1999 Ed., recognising the importance of export of services andthe potential in the sector. Apart from extending all possible facilitiesapplicable to merchandise exports, the threshold limit for recognition asService Export House etc. has been pegged at 1/3rd of the level

prescribed for merchandise exports.

The salient provisions of EXIM Policy relating to services exports aregiven below :

"Services" include all the 161 tradeable services covered under theGeneral Agreement on Trade in Services where payments for suchservices is received in free foreign exchange.

Facilities for service providers:

The service providers shall be eligible for the facility of EPCG Scheme asdescribed in Chapter 6 of EXIM Policy. The provisions of paragraph6.5(vii) shall also extend to the service providers availing licences underthis scheme.

The service providers shall also be eligible for the facility of EOU/EPZ/EHTP/STP scheme.

Service providers are also permitted to import drawings, designs,integrated circuits and layout designs, software in diskettes and CDsrelated to their line of services as a part of passenger baggage without alicence.

Facility of import of restricted items by service providers:

Service providers shall be entitled to import restricted items up to 10%of the foreign exchange earned by them during the preceding licensingyear for import of essential goods related to their line of business,including office and other equipment required for their own professionaluse.



Import through Courier

As laid down by the current Exim Policy, import of goods through courieris permitted in accordance with the Courier Imports & Exports(Clearance) Regulations, 1998.

If the CIF value of the consignment imported does not exceedRs.100000, the relative Bill of Entry is required to be filed by theregistered courier service.

If the CIF value is Rs.100000 or more, importers are to file separate B/Eas in the case of other imports.

In case of remittances for imports through courier services, authoriseddealers should ensure submission of Exchange Control Copy of Bill of Entry for home consumption in the case of imports valued at Rs.100000 or more.

This is not regarded as baggage for the purpose of assessment of dutyand clearance therof. The practice of charging a uniform duty on articles

imported through courier has been discontinued. Imports by courier arenow classified on merits in the respective customs Tariff headings. Thenew system of assessment and clearance of goods imported by courieris now governed under the Courier Imports & Exports (Clearance)Regulations 1998.

Imports without Forex remittances:

Imports not involving foreign exchange remittance is allowed as givenbelow( vide Para 5.41 of the Handbook of Procedures):

Import of items by United Nations Organisation and SpecialisedAgencies and its officials without payment of Customs duty.

Import of Medical Equipment by Indian Doctors and Professionals isallowed under the Baggage Rules, 1994.

Goods as Baggage by Foreign Mountaineering Expedition Teams andPainting and other Display Articles, except consumables, are allowed.Foodstuffs and Medicines by Charitable organisations are also allowed.

Import of food parcels, except alcohol and tobacco, subject to a limit of Rs. 100 000 per annum is allowed for personal consumption of foreigncitizens.

Import of free gifts and relief supplies by certainorganisations/institutions e.g. Indian Red Cross Society, NationalDefense Fund is allowed.

Also import of equipments, raw-films etc. by foreign publicists likeRadio, Press, Films, Television teams are allowed.



Import of exhibits including construction and decorative materialsrequired for the temporary stands of the foreign exhibitors at theexhibitions, fair or similar show or display for a period of 6 months onre-export basis is allowed provided these fairs are sponsored/approvedby the Govt. of India in the Ministry of Commerce/India TradePromotion Organisation and is being held in public interest.

Import for personal use

Importers under this category do not need any IEC number. Import of

goods by any person as passenger baggage is permitted to the extentadmissible under the Baggage Rules 1994. However, quinine of morethan 500 tablets or = pounds powder or 100 ampules is not permissible.

Also, for any tourist, articles of high value whose re-export is obligatoryunder the Baggage Rules shall be re-exported on his leaving India.Otherwise, those goods shall be deemed to be regarded as prohibitedgoods under the Customs Act, 1962.

Any type of goods for which the c.i.f. value shall not exceed Rs. 2000

can also be imported through Post or otherwise for personal use,provided they are not:

Vegetable seeds exceeding 1 pound in weight, bees, tea, books andperiodicals, alcoholic beverages, consumer electronic items (savehearing aids and life saving equipments and items for which import iscanalised under EXIM Policy.

Nevertheless, the customs duty, as applicable, shall have to be paid. Asregards the procedure for personal imports is concerned the same mayinvolve sending of advance remittance if required by the overseas

supplier, opening of letter of credit, retirement of documents andremittance of foreign exchange, customs clearance of the goods andpayment of customs duty.

Import of Samples

Bona fide technical and trade samples of items, even those in therestricted in ITC(HS)Classifications of Export and Import items isallowed without a license for a value notmore than Rs. 1 lakh(CIF) inone consignment save vegetable seeds, bees and new drugs by anyimporter. Tea samples not above Rs.2000 (CIF) in one consignment is

allowed without a license by any person connected with Tea industry.

Prototype import

This may be allowed on payment of duty without a license to an actualuser, industri;al ecgaged in the production of or hgaving industriallicense/LoI or research, as the case may be, provided the number of items imported does not exceed 10 in number in a year.

Import of Computer/Computer Software

Computers including personal computers, Keyboards or monitor valuedupto Rs. 1.50 lac and Rs. 7000/- respectively can be imported freely



without any licence. Computer Software can also be imported freelywithout licence despite the fact computer software is regarded asConsumer Goods.

Passenger Baggage

Under the Rules various kinds of articles can be imported upto certainvalue limit depending upon the duration of stay of the passenger abroadand on the basis of Resident and Non-Resident Status of the passenger.

Passenger Baggage Rules and import duty structure for baggage asapplicable for such imports under the Baggage Rules has been givenseperately