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“FUNCTIONAL PROCEDURE OF CUSTOM

CLEARANCE”

A PROJECT REPORT SUBMITTED BY

SULABH MAHETA (08084)

AMIN PATTANI (08100)

BATCH – 2008-2010

TO

DIRECTOR (PGDM)

In partial fulfillment of the requirements of

Tolani Institute of Management Studies, Adipur

For the award of the degree of

Post Graduate Diploma in Management

TOLANI INSTITUTE OF MANAGEMENT STUDIES

ADIPUR – 370205

JULY - 2009

1



ACKNOWLEDGEMENT

We are very thankful to Tolani Institute of Management Studies who give us such

opportunity to work out for project on foreign trade. We also express our gratitude to Mr.

Apurva Maheta for his precious help during the entire course.

We are very thankful to all employees of Shakti Forwarders Pvt. Ltd., Gandhidham for

supporting and providing us the necessary knowledge that would help in our future quests.

During our training period, we have not only learnt the standard Custom Clearance

procedure but also learned about other aspects of for running the shipping departments

smoothly.

The various department of the organization work in close co-ordination with each other in

order to achieve a common end.

We would also like to thanks Mr. Suresh Maheta, Mr. Rajesh Naiyer, Mr. Paresh chaturvedi,

Mr.Dharmesh, Mr. Manoj for their guidance which help us to complete our project. Once

again we heartly thankful to Shakti Forwarders Pvt. Ltd who help us in making a project of

procedure of custom clearance for import and export and gives us an opportunity to learn

under kind guidance and learning environment.

2



PREFACE

We know that training is for the development and enhancement of the knowledge in

particular fields. It can never be possible to make a mark in today’s competitive era onlywith theoretical knowledge when industries are developing at global level, practical

knowledge of administration and management of business is very important. Hence,

practical study is of great importance to PGDM student.

With a view to expand the boundaries of thinking, we have undergone 2rd SEM TRAINING

at Shakti Forwarders Pvt. Ltd. we have made a deliberate to collect the required

information and fulfill training objective.

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EXECUTIVE SUMMRY

As a partial fulfillment of PGDM all students are required to undergo training for 2 months.

With respect to that this we have prepared this project report on “Functional Procedure of

Custom Clearance” undertaken at Shakti Forwarders Pvt. Ltd., Gandhidham.

We have selected this topic to know about the custom process. This report also tells about

present scenario of Indian shipping and also tells about development in shipping in Gujarat.

Another objective is to know Documentation process done by CHA (Clearing House Agent)

to clear the goods from CUSTOM.

Our secondary objective is to know the relation between CHA and importer as well as

exporter. The report also describes that why shipping line invest their amount to purchase

ship and type of ship for transportation of goods.

This report also tells that as that how to calculate the DUTY on import-export goods. We

also describe that which Documents are useful for CHA, IMPORTER and EXPORTER.

4



OBJECTIVE OF THE STUDY

To know the present scenario in Indian shipping line.

To know the relation between the CHA and exporter as well as importer.

To know the documentation process done by the CHA.

To know the future of Indian shipping.

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CONTENTS

Description Page No.

Acknowledgement 2Preface 3

Executive Summary 4

Objective of the Study 5

List of tables 7

List of figures 8

Abstract

1. Introduction 9

1.1 Project 9

1.2 Industry 10

1.3. Company 27

2. Methodology 29

3. Data Collection and Explanation 30

3.1 Export 30

3.2 Import 46

4. Recommendations 54

5. Conclusion 55

Appendices 56

Bibliography 56

6



LIST OF TABLES

Sr No. Table Title Page No.

1 Performance of Major Ports 132 Growth of state GDP 13

3 Largest Port by State 13

7



LIST OF FIGURES

Sr No. Table Title Page No.

1 Ports of Gujarat 112 Break Up of Commodities Handled at Major Ports 23

3 Forecast for Container Port Capacity 24

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1. INTRODUCTION

1.1 Project:

In view of the rapidly and constantly changing business environment globally and fast

evolving trade and commerce scenario in India vis-à-vis global market, there is increasing

requirement of reliable and dependable integrated logistics solutions providers who can

provide comprehensive, professional and dependable logistics support to the industry,

keeping the same in mind and with the vision to provide quality and professional

comprehensive logistics solutions to the international & domestic trade.

In the development of any country’s economy, exports play a crucial role. Export is the most

important aspect of earning foreign exchange. A country should have to be equipped with

natural resources, so that it can sell these resources into the international market.

With the opening up of the Indian economy, the international trade has been increased

significantly as there are less restriction on exports and imports.

More and more multinationals are registering their entry into the Indian market. The

imported products are now in well reach of Indian customers. The living standard has been

improved. This results in substantial amount of growth in both exports and imports.

The procedure of both the exports and imports are time consuming and complicated. In this

regard there are several logistic companies and custom house agents providing their services

on the behalf of the exporters and importers to facilitate the trade between them. These

custom house agents and logistics companies take over the responsibility of sending the

goods from the exporter’s premises to the importer premises, which also includes the mostimportant aspect of custom clearance.

Shakti Forwarders Pvt. Ltd. is a leading name for custom clearance. Over the years they

have operated smoothly with their wide spectrum of personalized services.

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1.2 Industry:

Indian shipping scenario:

India has 12 major ports and 185 minor/intermediate ports. Over 90 percent by volume and

70 percent by value of India’s overseas trade, aggregate of exports and imports, is carried out

through maritime transport along its 7617 km long coast line. India has the largest merchant

shipping fleet among the developing countries and its merchant shipping fleet ranks 18 th in

the world, in terms of fleet size. Another silver lining is the average age of the India’s

merchant shipping fleet is only 12.7 years as compared to the international average of 17

years .but, India’s share, sadly, constitutes only 1.45% of the world’s cargo carrying

capacity.

As on April 1, 2005, India has a total of 686 ships comprising 8.01 Million Gross Tonnage

(GT) and 13.28 Million Dead Weight Tonnage (DWT). The shipping corporation of India

(SCI), the country’s largest carrier, owns and manages 82 ships with 2.54 million GT and

accounts for 40 percent of national tonnage. India is also among the few countries that offer

fair and free competition to all shipping companies for obtaining cargo. There is no cargo

reservation policy in India.

Indian shipping has remained a deferred subject till independence. Only after independence,

the development of shipping has attracted the state policy. The subject of shipping, in the

beginning, has been dealt with by the ministry of commerce, till 1949 and subsequently, in

1951, it has been shifted to the ministry of transport and shipping. In 1947, the government

of India has announced the national policy on shipping, aiming at the total development of

the industry. In order to accelerate the developmental efforts, the necessity for a centralized

administrative organization has been felt. Accordingly in September necessity for a

centralized administrative organization has been felt. Accordingly in September 1949, the

directorate general of shipping with its headquarters at Bombay has been established with

the objectives of promotion and development of Indian shipping industry.

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Introduction to Gujarat port:

Along the 1600 kms. of coastline of Gujarat, there are 41 ports, of which Kandla is a major

port. Out of remaining 40 ports, 11 are intermediate ports and 29 are minor ports under the

control of Gujarat maritime board.

Gujarat, situated on the western coast of India, is a principal maritime state endowed with

favorable strategic port locations. The prominence of Gujarat is by virtue of having nearly

1600 kms long coastline, which accounts for 1/3rd of the coastline of India and being thenearest maritime outlet to Middle East, Africa and Europe.

In 1991, government of India initiated various economic, trade and industrial reforms,

through the policy of liberalization to enhance industrial and trading activities. The

rationalization of import duties and stress on export promotion has seen imports increasing

by 24% and exports by 25%. Gujarat state is one of those frontline states that can take up the

policy of liberalization and privatization announced by the government of India through the

process of globalization.

11

Ports of Gujarat



Gujarat itself is experiencing a phenomenal interest in investments both from mega-

industrial sectors within the country and also from top multi-national abroad. Investments to

the tune of $30 billion are already in the pipeline. From an analysis of the present

investments and those that are flowing in, one can perceive a particular trend which ismanifesting itself - investments are converging in and around potential port sites.

Investments of over Rs.16,000 crores are taking place at Hazira, Rs.15,000 crores are

planned at Varga, Rs.20,000 crores are planned in areas near Pipavav and near Jamnagar

port locations. The logic of locating these industries is rather clear, viz. The large business

houses want to import industrial raw-materials and want access to the international market

through sea routes, which is definitely more viable and feasible as against the surface

transport or air transport.

Export of salt and import of coal are other major potential cargo apart from the existing

items of import and export. As indicated earlier, the massive spurt in industrialization also

opens up scope for import of industrial raw materials and export of finished goods to the

global market through ports. The vast coastline of Gujarat, also offers tremendous potential

for marine fisheries and subsequent processing and exports. Over and above this, any

development in the hinterland state has a direct impact on Gujarat ports.

In all over India, Gujarat ports are handling more cargo then other states and by the year by

year cargo handling is increasing. From the below data we can find that Kandla port is

handling more cargo than all over India.

12



In Gujarat, ports are playing major role for growth of state GDP (Gross Domestic Product)

below are the figure for the year 2006-2007

13



Shipping Company:

“Shipping Company is companies which invest his capital in purchase of ships and provide

transport service through the sea to its customers is known as shipping company.”

Basically the shipping companies provide services in two ways

1. TRAMP SHIPS

2. LINER SHIPS

Tramp Ships:-

Tramp ship or general trader, does not operate on a fixed sailing schedule, but merely trades

in all parts of the world in search of cargo, primarily bulk shipments. It is a chartered ship

prepared to carry anything anywhere. Its cargoes include coal, grain, timber, sugar, ores,

fertilizers, etc like which are carried in complete shiploads.

Tramp tankers are specialized vessels. They may be under charter or be operated by an

industrial company, that is oil company, motor manufacturer, etc to suit their own

individual/market needs.

Liner Ships:-

Liner ship operates on a fixed route between two ports or two series of ports. They operate

on a regular scheduled service. They sail on scheduled dates/times whether they are full or

not. The cost of using the service (freight) can be quoted from a fixed tariff.

Container ships in deep sea trades and roe ship in the short sea trades feature prominently inthis field.

Different Types of Ships:-

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1. Container ships

2. Roll-on/roll-off ships

3. Break-bulk ships

4. Crude carries5. Dry-bulk carriers

6. Gas carriers

Container Ship:-

Container ship is also known as a ‘BOX SHIP’

Container ships cater to only containerized cargo and generally have cranes on board.

They can store up to 4 tiers of containers below the main deck and up to 3 tiers above

deck.

Roll – on / Roll - off Ships:-

15



Roll-on/roll-of ships were created to accommodate cargo that was self propelled,

such as automobiles or trucks, or cargo that could be wheeled into a ship, such as railroadcars. They are essentially floating garages. It takes long time to load such vehicles over

the rail it is preferable to load them by rolling them onto the ship.

Roll-on/Roll-of ships therefore have a portion of their hull that opens up and acts as

a ramp on which the vehicles are driven before being parked on the many decks of the

ship and secured with chains. The hull opening is either on the side of the ship or on its

stern (rear).This ship have an advantage in that specialized lifting equipment is not

required, even for the heaviest of loads, since the cargo rolls under its own power or pulled by a tractor.

Break-Bulk Ships:

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Break-bulk cargo ships are multipurpose ships that can transport shipments of

unusual sizes, unitized on pallets, in bags, or in crates.

Due to increasing role of RORO (Roll-on/Roll-off) ships, container ships, break-bulk

ships share of international trade is decreasing.

The advantage of break-bulk ships is that they can call at just about any port to pick

up different kinds of cargo loads, giving them a flexibility that container ships do not yet

have.

The main problem with a break-bulk ship stems from its labor-intensive loading and

unloading because each unit of cargo handles separately.

Crude Carriers:-

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Crude carriers are the bulk ships dedicated to the transport of petroleum products,

whether unrefined or refined, such as gasoline or diesel fuel.

The crude carriers are also known as VLCC (Very Large Crude Carriers) and ULCC

(Ultra Large Crude Carriers).

VLCCs and ULCCs are such large ships that they can call on only a few ports in the

world; since their draft, when loaded, can reach 35 meters(115 feet) they need very deep

ports for berthing.

Dry-Bulk Carriers:

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Dry-bulk carriers operate on the same basis as oil tankers in that they are chartered for a

whole voyage.

Dry-bulk ships have several holds in their hull, in which non-unitized cargo is placed.

Dry bulk ships carry agricultural products, such as cereals, as well as coal, ores, scrap

iron, dry chemicals, and other bulk commodities.

Dry-bulk ships are generally small enough to fit through the PANAMA CANAL.

Gas Carriers:

19



Another important bulk trade is the transportation of Liquefied Natural Gas (LNG) and

of Liquefied Petroleum Gas (LPG). These types of carriers have a very distinctive shape.

These ships hold several spheres of compressed gasses, only part of which are visible

above their main deck.

The LNG and LPG trades tend to be slightly different than the average bulk transport, as

they are used in a particular trade for long periods of time, on long-term contracts-called

time charter parties and therefore nearly have a sailing schedule, not unlike liner ships.

Containerization:

‘Containerization’, the term very familiar to present day shipping industry is a completelyunknown concept, a few decades back. Malcolm McLean, owner of a huge trucking

20



company in USA, who has first conceived the idea of containerization by transporting

containers though ‘ideal-x’ in 1956 and initiated a revolution in the history of shipping

industry.

Before containerization, cargo has to be loaded first into the truck and later truck is to driven

to the port, unload the goods at the port and them into the ship at the port. This has been a

cumbersome process and, in consequence, consumed a lot of time. For completing the

exercise, ships are detained in the port for about ten days for the entire process of unloading

and loading. With the arrival of containerization, shippers have started stuffing into

containers, at their own place, and containers are brought to the container yard (inland

container depot) for shipment. This process has greatly facilitated in two, after unloading the

containers and loading them again into the ship. The process of containerization has

decongested the ports that are heavily crowded.

Shipping is truly the lynchpin of global economy and international trade. More than 90% of

world merchandise trade is carried by sea and over 50% of that volume is containerized. In

today’s era of globalization, international trade has evolved to the level where almost no

nation can be self-sufficient and global trade has fostered an interdependency and inter-

connectivity between countries. Shipping has always provided the most cost-effective meansof transportation over long distances and containerization has played a crucial role in world

maritime transport.

What is meant by containerization?

Containerization is the practice of carrying goods in containers of uniform shape and size for

shipping. Almost anything can be stored in a container, but they are particularly useful for

21



the transport of manufactured goods. It is a method of distribution of goods using containers.

The use of containers has, indeed, facilitated carriage of goods using containers. The use of

containers has, indeed, facilitated carriage of goods. Exporters need to go to the seaport for

export of goods. Instead the goods sent to inland container depot/ container freight stationfor sending to the destination.

Since 1950s, containers have revolutionized sea-borne trade, and now carry around 90% of

all manufactured goods by sea. The transporters in developed countries have started making

use of containerization, early now; developing countries have started making use of

containerization, early. Now, developing countries too are taking a greater advantage in

using containers for transportation of goods. Different countries are giving logistic support,

giving the necessary boost to improve the required infrastructure to containerization, for

encouraging export industry.

Containerization is to contribute about 22.66% to total cargo by 2010-11.

The robust growth of India’s manufacturing industry has pushed up India’s containerization.

India’s containerization has over 70% of total exported cargo, and around 40% imported

cargo. The Government of India has pursued a policy of developing a number of Inland

Container Depots and Container Freight Stations to facilitate modal interchange and

distribution of cargo and most importantly to avoid awkward customs procedures from the

waterfront. Containerization at major ports of India contributed about 11% of total cargo

handled at those ports in 2000-01; it increased to 16% in 2005-06 and is estimated to further

increase to 22.7% by 2010-11.

22



Challenges Container port demand and capacity imbalance:

In view of the buoyant global merchandise trade scenario, container port demand has been

growing rapidly. Globalization has spurted merchandise trade, which is ready for big stride.

During the last four years, world container traffic has been growing at over 9.2% per annum,

while container port capacity is growing at an average 4.5% per annum. There will be

requirement for additional port capacity to be built if the current trend and port utilization

level is maintained by 2010. The projected global container demand and container port

capacity illustrates that there will be a huge difference between container port demand and

capacity in the next four to five years. This is one of the major challenges for global

container trade. Extra capacity should be built to meet the growing demand.

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Types of containers-:

There are different types of containers. The popular types are:

1. General purpose containers-:

There are the most common type of containers and are the ones with which most people are

familiar. Each general-purpose container is fully closed and has width doors at one end for

access. Both liquid and solid substances can be loaded in these containers. Based on length

of the container, the container is generally known as a 20 ft container or 40 ft container, in

practice. Hazardous or dangerous cargo can not be loaded into general-purpose containers.

2. Reefer containers (refrigerated) -:

These play an important role in South - Africa’s exports of perishable products, and are

designed to carry cargoes at temperatures reading down to deep frozen. For refrigeration,

they are fitted with electrical equipment for supply of necessary electricity.

3. Dry bulk containers-:

These are built especially for the carriage of dry powders and granular substances in bulk.

4. Open top/open sided containers-:

These are built for heavy and awkward pieces of cargo. These containers are ideal whereheight of the cargo is in excess of height of the standard general purpose containers.

5. Liquid cargo containers-:

These are ideal for bulk liquids, such as wine, fruit concentrates, vegetable oils, detergents

and various other non-hazardous chemicals. Bulk liquid bags, designed to carry specific

commodities, can fit into these containers.

6. Hanger containers-:

24



They are used for the shipment of garments on hangers.

25



TYPE OF CONTAINER USED IN TYPE OF CONTAINER USED IN

SHIPMENTSHIPMENT

TANKSTANKS OPEN TOPSOPEN TOPSROOLTRALERSROOLTRALERS

DRY CONTAINERDRY CONTAINERFLAT RACKSFLAT RACKS

HIGHCUBEHIGHCUBE

BULKERSBULKERSREEFERSREEFERS

26



Custom House Agent:

“Custom House Agent” means a person licensed, temporarily or otherwise, under the

regulations made under sub-section (2) of section 146 of the Customs Act, 1962.

A person is permitted to operate as a customs house agent, temporarily under regulation 8(1)

and permanently under regulation 10, of the Customs House Agents Licensing Regulations,

1984.

The services rendered by the custom house agent are not merely limited to the clearing of the

import and export consignment. The CHA also renders the service of loading/unloading of

import or export goods from/at the premises of the exporter/importer, the packing,

weighment, measurement of the export goods, the transportation of the export goods to the

customs station or the import goods from the custom station to the importers premises,

carrying out of various statutory and other formalities such as payment of expenses on

account of de-stuffing/ pelletisation terminal handling, fumigation, drawback/ DEEC

processing, survey /amendment fees, dock fees, repairing and examination charges, landing

and container charges, statutory labour etc this expenses paid on behalf of importer and

exporter. The CHA is ordinarily reimbursed by the importer/ exporter for whom the above

services are rendered.

27



COMPANY PROFILE:-

Shakti forwarders Pvt. Ltd. formerly known as Shakti Enterprise was established in 1992. A

leading custom house agent, for import and export, Shakti Forwarders has established its basis at four different places across india. We have offices located at mumbai, kandla, delhi

and vapi.

Major items handled by Shakti Forwarders are as follows:

Exports: sanitary ware, stainless steel utensils, readymade garments, soya, engineering

goods, sesame seeds, groundnuts, rice, textiles etc.

Imports: non ferrous and ferrous metal scrap, consumer goods, soap raw material,

chemicals, fabrics, capital goods, rubber products, dates, dry fruits, auto parts etc.

At Gandhidham Branch the estimate of 400 containers per month in 2009.

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Management Team:

Sr. No. Director's Name Designation

1 MR. KISHORE B. BHAGAT DIRECTOR

2 MR. PRANAV BHAGAT DIRECTOR 3 MR. MAULIK K. BHAGAT DIRECTOR

4 MRS. TEJAL MAULIK BHAGAT DIRECTOR

5 MR. SHAILESH B BHAGAT DIRECTOR

Head office of Shakti Forwarders Pvt. Ltd.:

Gandhidham

“Om Guru Shakti”

Sector no- 1, Plot no -48/8,

Gujarat (kutchh) - 370201

Branches:

Mumbai

Plot no-47/A, Little Malabar hill,

Opp. Sindhi Gymkhana, Near Police Chowki, Chembur, Mumbai - 400071

VAPI OFFICE:

SHAKTI FORWARDERS PVT. LTD.

A/218, GUNJAN GARDENS, G.I.D.C. VAPI – 396195

DELHI OFFICE (NOIDA):

SHAKTI FORWARDERS PVT. LTD.

12, 1ST FLOOR, DHARAM MARKET,

ATTA, SECTOR 27, NOIDA – 201301

2. RESEARCH METHODOLOGY:

29



Research as a term stand for “systematic investigation towards increasing the sum of

knowledge”

Research Methodology is the methods involved in gathering meaningful data.

The data which has been collected from various sources can be categorized into two fields

mainly:-

Primary data:-

Primary data collected through personal interview with the employee of the Shakti

Forwarders pvt. Ltd and we have initiated our research going through the whole step wise

processes of its routine activities.

Secondary data:-

Secondary data is collected through some good articles of shipping times and some sites

from internet.

30



3. DATA COLLECTION

AND

EXPLANATION

31



3.1 EXPORT

Export preliminaries:

In order to enter into export business, certain preliminary steps have to be taken by every

business organization. The setting up of an export firm is completed in two stages. They are:

A) Establishing a business firm-:

There are various formalities and registrations to be made with different authorities before an

exporter can enter into export business and accept an export order.

1) Selection of name of the firm-: An entrepreneur can choose any name for the firm he

wants to start. It is desirable that the name of the firms indicates that the business relates

to export/import.

2) Approval to name of firm-: There is no need to obtain prior approval of regional

licensing authority of DGFT (Directorate General of Foreign Trade) for the proposed

name of business firm. However, if the firm is planning to export readymade garments to

any country; approval from Apparel Export Promotion Council (AEPC) is required. The

entrepreneur has to apply to AEPC in the prescribed application form for the clearance of

the name. Once the name is approved, registration of firm in that name with AEPC is to

be made within a period of three months. After the registration is done, the firm would

become registered exporter.

3) Registration of Organization-: The form of organization can be sole partnership,

partnership firm under Indian partnership act, 1932 or join stock company registered

under the companies act, 1956.

4) Opening of Bank Account-: The firm or company has to open a bank account with

branch of a commercial bank, authorized by reserve bank of India to deal in foreign

exchange. The firm may require pre and post shipment finance for its business.

5) Obtaining Permanent Account Number-: export income is subject to a number of

exemptions and deductions under the income tax act. For claiming those exemptions and

32



deductions, it is necessary for every exporter to obtain permanent account number from

the income tax authority.

6) Registration with Sales Tax Authorities-: exporter need not pay sales tax while

making purchases meant for export. But for availing the benefit, firm has to register withsales tax authorities and secure sales tax number.

B) Obtaining the importer-exporter code number -:

This is required for completing other registrations.

1. Importer - Exporter Code Number (IEC)-: No export or import

transaction can be made without obtaining an importer-exporter code number. IECnumber is a pre-condition for exports from and imports into India. IEC number entitles to

import or export any item of non-prohibited goods. This code number is made

compulsory now. The registered /head office of the applicant shall make an application

for grant of IEC number to the regional office of DGFT (known as Regional Licensing

Authority), having territorial jurisdiction over the firm, along with the following

documents: profile of the exporter/importer, demand draft from a bank for rs.1000 as

fees, certificate from the banker of the applicant, two copies of passport size of the

applicant, declaration on applicant’s letterhead that there is no association of the

applicant’s firm with caution listed firms. The licensing authority shall allot the IEC

number in prescribed format. There is no expiry date for iec number. This number is

invariably used in all documents particularly in bill of entry in case of imports and

shipping bill in case of exports.

2. Registration Cum Membership Certificate (RCMC) -: it is

obligatory for every exporter to register with appropriate Export Promotion Council

(EPC) and obtain registration cum membership certificate. Any person applying for

import or export license or any other benefit under the current exim policy is required to

obtain registration cum membership certificate (RCMC). The benefits provided in the

current EXIM policy are available only to those having valid RCMC with the receipt of

the certificate the exporter will be known as “Registered Exporter”

3. Registration with Export Credit and Guarantee Corporation

(ECGC)-: the exporter should also register with export credit and guarantee corporation

of India (ECGC) in order to secure export payments against political and commercial

33



risks. It also helps to get financial assistance from commercial banks and other financial

organization.

4. Registration with other authorities -: it is desirable for the

exporters to become members of local chamber of commerce, productivity council or anyother trade promotion organization recognized by the ministry of commerce or industry.

Local membership helps the exporters in different ways, including in obtaining certificate

of origin, which is vital for exporter to certain countries.

5. Registration for business identification number (BIN)-: the

exporters have to obtain pan based Business Identification Number (BIN) from DGFT

(Director General Foreign Trade) prior to filling for custom clearance of export goods.

Purpose of bin is to bring a common identification number to all persons dealing with

various regulatory agencies such as custom department, central excise etc.

6. Export Licensing - : many items of goods are free for exports

without obtaining any license, if they do not fall in the negative list. The negative list

consist of goods the import or export of which is prohibited, restricted or canalized.

Prohibited items-: these items can not be exported or imported. These items include wild

life, exotic birds, wood and wood products in the form of logs, timber, pulp and charcoal.

Restricted items -: these are the items, export or import of which is restricted through

license. They can be imported or exported only in accordance with the regulations

governing in this behalf.

Canalized items -: goods which are canalized can be imported or exported through the

canalizing agency, specified in the negative list.

So it is necessary for the exporter to check the nature of the item before he enters into the

contract or even makes efforts to secure the export order. Needless to add, the items of

export agreed upon should not be fall in the negative/ banned list.

Exporter’s incentives & drawback:

Incentives & facilities:

34



Advance license -: inputs required for manufacturing export products can be imported

without payment of custom duty under advance license. Since the raw materials can be

imported before exports of final product, the license issued for this purpose is called

“advance licenses”. An advance license is issued under duty exemption scheme to allowimport of inputs, which are physically incorporated in the export product.

Duty free replenishment certificate (DFRC):- DFRC is issued to a merchant exporter or

manufacturer exporter for the duty free import of inputs such as raw materials, components,

intermediates, consumables, spare parts, including packing materials to be used for export

production. Such license is given subject of the fulfillment of time bound export obligation.

Duty entitlement passbook scheme (DEPB) :- under the DEPB scheme, an exporter

may apply for credit as a specified percentage of fob value of exports, made in freely

convertible currency. The credit shall be available against such export products and at such

rates as may be specified by the director general of foreign trade (DGFT) by way of public

notice issued in this behalf, for import of raw materials, intermediates, components, parts,

packaging materials, etc.

Export promotion capital goods scheme (EPCG) :- EPCG scheme was introduced by the

EXIM policy of 1992-97 in order to enable manufacturer exporter to import machinery and

other capital goods for export production at confessional or no customs duties at all.

This facility is subject to export obligation, i.e., the exporter is required to guarantee exports

of certain minimum value, which is in multiple of tit1e value of capital goods imported.

EXPORT PROCEDURE

35



The different steps involved in export department are as follows:

Step 1:

Exporter sends the following document to Shakti Forwarder:

36



Letter of credit: Assures exporter his payment promise to pay a seller (beneficiary)

upon receipt of goods by a buyer if certain conditions outlined in the letter have been

met.

It is a method of payment for goods in the buyer establishes which his credit with a local

bank, clearly describing the goods to be purchased, the price, the documentation required,

and a time limit for completion of the transaction. Upon receipt of documentation, the

bank is either paid by the buyer or takes title to the goods themselves and proceeds to

transfer funds to the seller.

Types of letter of credit

Clean letter of credit: negotiated against a clean draft without any documents

Documentary letter of credit: documents specified in the letter of credit must accompany the

draft

Revocable letter of credit: can be cancelled or revoked any time without the consent or

notice to the beneficiary

Irrevocable letter of credit: cannot be amended, revoked or modified by the issuing bank

without the express consent of all parties concerned

Thus the issuing bank has definite undertaking to honor drafts drawn under that credit,

provided that the conditions in letter of credit are met.

Confirmed letter of credit: Issuing bank sends letter of credit to the bank located in

beneficiary’s country with a request to add confirmation to the credit

Confirmation involves legal undertaking on the part of the confirming bank that it will duly

honor payment or acceptance on presentation of documents

Back to back letter of credit:

SECONDARY CREDIT: In favour of a domestic supplier. The original credit backs

the secondary credit and facilitates the purchase of goods from a local supplier by the

original beneficiary of L/C

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Red clause letter of credit : Allows exporter to withdraw a predetermined amount so

that he is able to pay his suppliers and purchase relevant letter of credit

Packing list: A list which shows number and kinds of packages being shipped, totals of

gross, legal, and net weights of the packages, and marks and numbers on the packages. The

list may be requested by an importer or may be required by an importing country to facilitate

the clearance of goods through customs.

Invoice: One of the common to both international and domestic transactions is the bill

(invoice) that the exporter sends to the importer. However, the content of an international

invoice is more complex and should be prepared slightly differently for a foreign customer

than for a domestic one.

Step 2:

On the basis of invoice, Shakti Forwarder preparing Annexure – A, Annexure – C, Annexure

– D and SDF ( Statutory Declaration Form ) along with the invoice.

Step 3:

Send these annexure to the custom house. The custom prepares the shipping bill in four

copies on the basis of these annexure.

Step 4:

Custom calculate the duty (CESS) on the value of the goods.

Using the Treasury Challan the duty can be paid. Cargo can enter the port premises.

Step5:

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Custom examined the cargo by using the sample. (Customs examined the cargo only after

the duty is paid) in case of more than one container in one B/L than A.C give some container

no. randomly for examination and that container must be de-stuff by CHA.

Step 6:

The duplicate shipping bill and wharf age duly paid is given to the container agent. The

container agent hand over the duplicate shipping bill to the vessel agent who is here uses it

for the purpose of filling EGM (Export General Manifest).

The container agent gives the wharf age form paid is given to the container agent grants the

loading permission. (But in case of the break bulk cargo, the CHA itself submits the wharf age paid form to the port authority, so that loading can be allowed in the vessel).

Step 7:

In the case of break bulk, after loading the cargo the chief officer issues the mate receipt, on

the basis of which captain of the vessel issues the bill of lading.

Step 8:

Besides all the CHA sends the phytosanitary certificates/pre inspection certificate to the

exporter so that with all documents he can submit this to the bank.

In case of charter, after processing and shipment of the goods following documents are sent

back by the CHA to exporter.

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Full set of bill of lading:

For pre carriage is through ship the bill prepared for export is called bill of lading & if the

shipment is by air then the bill prepared is called airway bill.

A bill of lading is a very important document. It is issued by the logistics service

providers. It can be well explained as a document issued by a common carrier to a shipper

that serves as:

A receipt for the goods delivered to the carrier for shipment.

A definition of the contract of carriage of the goods.

A Document of Title to the goods described therein.

This document is generally not negotiable unless consigned "to order." If we ask to the

logistics companies than a Bill Of Lading is a product for them. They do the whole business

on the Bill of Lading. Increase in Bill of Lading shows increase in company’s turnover.

Bill of Lading, On Board:

A bill of lading acknowledging that the relative goods have been received on board a

specified vessel.

Bill of Lading, Order:

It is a negotiable bill of lading. There are two types:

A bill drawn to the order of a foreign consignee, enabling him to endorse the bill to a third party.

A bill of lading drawn to the order of the shipper and endorsed by him either "in blank" or to

a named consignee. The purpose of the latter bill is to protect the shipper against the buyer's

obtaining the merchandise before he has paid or accepted the relative draft.

To get B/L, software (Visual Samudra) is used. Various details are entered in the software

such as Vessel Name & Number, Consignee, Shipper, Notify Address, Quantity, No. of

Packages, Packing List (Details of Material), Container No. etc.

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The invoice is given to the company by the shipper. And a shipping bill is generated in the

customs clearance on the basis of the invoice and packing list.

The container is stuffed and the required information is received from the port office, such as

the container number, and the Vessel name and No. The details are entered in the Software

(Visual Samudra) also each B/L is given a manual entry if not computerized. Than the

details are entered in the software and the final print of the B/L is taken. In B/L there are two

types.

Receipt for shipment: If the shipper wants a receipt the shipper can get the receipt when the

container is ready to load on a vessel.

HBL – House Bill of Lading

HBL – House Bill of lading is made when the information is received for the port office. If

the shipper wants a bill before the loading of vessel on board, than HBL is provided. HBL is

also sent to shipper for approval.

MBL – Master Bill of Lading

MBL- Master Bill of lading is the final copy of Bill. It is given to the shipper it contains all

the details of everything. The Bill is used to charge the fees from the shipper. It is only given

after the container is loaded on to the vessel for sail.

Now if the freight charges are paid by the exporter then bill of lading is stamped as freight

prepaid & if the freight charges are to be paid by importer then bill of lading is stamped as

freight to pay.

Copy of Mate Receipt:

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Issued by commanding officer of the ship that cargo has been loaded to the ship name of the

vessel, date of shipment, condition of cargo at the time of receipt, berth, and description of

packages.

Mate receipt is handed over to the port authorities so that port dues are cleared by the

exporter. Bill of lading is issued by the shipping company only after the mate’s receipt is

submitted by the exporter

Self Declaration Form or G R Form:

Under customs act, every exporter is required to declare export value of shipment ad give an

undertaking that export proceeds would be realized within a period of six months from the

date of shipment or due date, which ever is earlier. If customs clearance for the shipment is

made manually, declaration is made in GR form, in duplicate. If the clearance is

computerized, SDF form, in duplicate, is used in place of GR form.

Copy of shipping bill (triplicate and quadruplicate).

Bill is generated in the customs clearance on the basis of The invoice is given to the

company by the shipper. And a shipping the invoice and packing list. When cargo is stuffed,

inside the container, in our port office or at factory. The details are given to the corporate

office documentation department via fax. The details as such received are feed in to software

called Visual Impex. Than, the details are sent via Ice gate link to the customs database. In

return, the customs allocate a shipping bill number and print a shipping bill in the port office

which is to be collected from the port office. Further, the procedure goes for carting and

loading the cargo into the vessel.

Following three types of shipping bill with custom authorities

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Dutiable shipping bill: it is used in case of goods, which attract export duty may or may not

be entitled to duty drawback. It is printed on yellow paper.

Free shipping bill: it is used in case of goods which neither attract any export duty nor

entitled for duty drawback. It is printed on simple white paper.

Drawback shipping bill: it is used in case when refund of duties is allowed on the goods

exported generally it is printed on green paper, but when the drawback claim is paid to a

bank, then it is printed on yellow paper.

Certificate of origin.

A document provided by the exporter’s chamber of commerce that attests that the goods

originated from the country in which exporter is located.

Documents submitted by CHA to the customs:

Invoice.

Packing list.

Self Declaration Form Or Gr Form

Acceptance of contract.

Letter of credit.

Quality Control Certificate.

Lists of documents required to be submitted by the exporter to various

authorities, organizations, and agencies.

1) To the custom authority:-

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Commercial invoice

GR Form ( Original and Duplicate )

Shippers Declaration Form

Copy of the Export Contract /L/c/Export Order

Inspection certificate

AR-4 Form Export License

Export license

Weighment Certificate

Shipping bill

2) To the port authorities:-

Port Trust Copy of the Shipping Bill

Wharf age application.

3) To the bank

Letter of credit

Commercial invoice

Bill of lading

Insurance Policy/Certificate

Bill of exchange

GR Form (duplicate copy)

Bank certificate

Export Inspection Certificate

Certificate of Origin

Shipment advice

4) To the RBI:-

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Copy of the invoice

Sales Contract

Bill of lading

Inspection / Analysis Report

5) To the EXIM Bank:

Export contract

Letter of Contract

Balance sheet of the exporter

Statement of profit and loss in the transaction covered by the export contract

Statement regarding the projections of the credit requirement.

Short shipment:

In case of short shipment customs sends the short shipment notice Annexure ‘C’ to the RBI

(Reserve Bank of India) along with G R form.

Short shipment notice is in five copies:-

Original – Customs

Second copy – Agent

Third copy – Exporter

One copy – Wharf age refund

One copy is for CESS

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Treasure Challan:-

This is document is used at the time of payment of the duty to the customs. It shows the

amount to be paid to the customs authority.

It is in four copies:-

Original Duplicate

Triplicate

Quadruplicate

Customs keeps the original and duplicate copies. Triplicate and Quadruplicate copies are

sent to the CHA.

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3.2IMPORT

Import Procedure

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The import procedure is quite different the export procedure. It starts with

The importer asks for the three original bills of lading from the bank. The bank issues the

bill of lading only when the importer cleared all the payments due to the bank.

The importer then sends the following documents CHA :-

a) Bill of lading

b) Invoice

c) Packing list

d) Certificate of origine) Pre shipment inspection certificate

f) Insurance certificate

g) Sales contract

h) Bond copy (if H.S.S)

The CHA shows the bill of lading to the shipping agent in order to get the NOC (Non

Objection Certificate in Kandla Port only).

No objection certificate has been issued by the shipping line to make sure that they have

no objection to open the containers for the examination of goods.

CHA then presents the bill of entry to the customs for noting and then customs gives the

import department the serial no. that comes on all copies of bill of entry.

CHA pays wharf age to the port authority and the original copy of wharf age goes to the

treasury of port trust.

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Customs give the examination order on the back of original bill of entry in case of first

check procedure.

Cargo is inspected in front of the customs. Customs give the examination report at the

back of the bill of entry.

Customs assessed the duty to ensure that the duty evaluated by the CHA is correct.

Prior to this, the CHA on the basis of invoice, packing list prepares the bill of entry. The bill

of entry is a proof that the goods have been imported.

For custom clearance purpose, the importer has to submit to the customs authority a form,which is known as bill of entry.

Bill of entry is in three copies:-

Original copy:-

This is called the customs copy. In first check procedure it contains the examination report

on the back of it.

Duplicate copy:-

It is submitted in port either in container section or in break bulk section along with wharf

age, NOC, Delivery order. It shows charges have been paid to customs and contain on the

back, passed out of custom charges.

Triplicate copy:-

This copy is for central excise for availing certain benefits.

Quadruplicate copy:-

This copy is submitted to the bank.

Port trust copies:-

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Out of 5th, 6th, and 7th copies, one copy is given to the port authority. The other two copies are

kept by the CHA for his record.

Types of bill of Entry:-

I. Bill of entry for home consumption

II. Bill of entry for warehousing

III. Bill of entry for Ex-bond clearance for home consumption

Bill of entry for home consumption:-

This type of bill of entry is used when importer wants to take the delivery of goods on

payment of custom duty.

Bill of entry for warehousing:-

This type of bill of entry is used when importer wants to warehousing the goods in custom

bonded warehouse.

Bill of for ex-bond clearance for home consumption:-

This type of bill of entry is used for clearing the goods from custom bonded warehouse

against warehouse bill of entry on the payment of custom duties.

Another important document that is used in import is bill of lading. It plays an important role

both for the exporter and importer.

Calculation of duty in import:

The duty has been calculated on the basis of assessable value.

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Assessable value in rupees = CIF (Cost Insurance Freight) value + landing charges (1% of

CIF value and H.S.S. (High Seas Sale) CIF+2%+1)

If the case is of FOB (Free on Board) then freight and insurance is to be added. If insurance

is not there then 1.125% of the C & F (Cost and Freight) value is taken as insurance charges.

Duty calculation is done by CHA as per the given rate of duty for a particular product.

There are six kinds of duties, which have to be paid at the time of custom clearance in case

of imports those are:

1. Basic Custom Duty

2. CVD

3. Additional cess on CVD

4. Secondary and higher cess on CVD

5. CESS

6. Custom sec & higher education cess

7. Additional Custom Duty

Let us consider that basic custom duty on the ALL ALUMINIUM SCARP is 0%, CVD 8%,

and additional duty is 4%. Say basic custom duty in rupees be X, Additional custom duty be

Y and CVD be Z (12.826688%)

X = 0% of assessable value

Z = Assessable value *8%(CVD)

Y = Assessable value + 4% of ASS. VAL.+Z+ CESS on CVD 2%+ SEC.&HIGHER

EDU.CESS ON CVD 1%+ CUS. EDU.CESS 2+1%

CESS on CVD = 2% of Z

SEC.& HIGHER EDU.CESS ON CVD = 1% OF Z

Total duty amount (in rupees) = X+Y+Z

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CUS. EDU.CESS on Total duty =

2% of Z +EDU.CESS ON CVD+S&H EDU.CESS ON CVD

1% of Z +EDU.CESS ON CVD+S&H EDU.CESS ON CVD

Documents to be used in import:

I. Bill of lading

II. Invoice

III. Certificate of origin

IV. 59- Bond warehousing bond

V. Wharf age

VI. Bill of entry

VII. Packing list

VIII. NOC (No Objection Certificate)

IX. Delivery order

X. Treasury challan

XI. Gate pass

DOCUMENTS WHICH ARE TO BE USED IN IMPORT AND EXPORT CUSTOM

CLEARANCE.

Letter of Credit

A Letter of credit is a document containing guarantee of a bank to honor drafts drawn on

it by an exporter, under certain conditions and up to certain amounts, provided that the

beneficiary fulfills the stipulated conditions.

Packing list

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Its is a detailed document provided by the exporter that spells out how many containers

there are in the shipment and which merchandise is contained in each container.

Invoice

It is a document which shows the total amount of the goods and the description of goods.

Bill of lading

A generic term used to describe a document issued by the carrier to the shipper.

Mate receipt

Mate receipt is issued by the mate (assistant to the captain of the ship) after the cargo is

loaded into the ship. It is an acknowledgement that the goods have been received on board the ship

Shipping bill

It is issued by the custom authority. Shipping is the main document of the basic of which

the custom permission is given. After the shipping bill is stamped by custom, then only

the goods are allowed to be enter to the deck. It is prepared by EDI system or manually

system.

Certificate of Origin

A document provided by the exporter’s chamber of commerce that attests that the goods

originated from the country in which exporter is located.

Phyto-sanitary certificate

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A document provided by an independent inspection company, or the Agriculture

Department of the exporting country’s government, that attests that the goods confirm to

the agriculture standard of the importing country.

Manifest

A document internal to the shipping company (the carrier) that lists all cargo onboard the

transportation vehicle.

Forms AR-4/AR-4A

These forms are meant for applying for the removal of excisable goods for export by

sea/post. Form AR-4 is used for applying for excise inspection at the factory and form

AR-4A is used when goods are to be exported under a claim for rebate of excise duty or

under bond.

Certificate of Measurement

Freight can be charged either on the basis of weight or measurement. When it is charged

on weight basis, the weight declared by the overseas supplier is accepted. The certificatecontains the name of the vessel, the port of destination description of goods, quantity,

length, breadth, depth etc of the packages.

Shipping advice

A shipping advice is used to inform the overseas customer about the shipment of goods.

There is no particular form of shipping advice. The exporter only advises his importer

about the invoice number, Bill of lading / Airway bill number and date, name of the

vessel with date of sailing of the vessel.

Bill of entry

The bill entry is a document, prepared by the importer or his clearing agent in the

prescribed form under bill of entry regulation, 1971, on which clearance of imported

goods can be made.

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Certificate of insurance

A document providing by the insurance company of the exporter that the goods are

insured during their international voyage.

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4. SUGGESTIONS

The custom clearance for import and export cargo is such a long procedure so it takes time to

clear, so the employee must be try to make their work on time and quick.

Some of the complicated procedure in custom clearance so if we get the support of all

employees it must be easy.

If custom clearance done through online then it should be more simple.

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5. CONCLUSION

The Indian business environment is changing with the rapid growth in infrastructure and

technology. With the increasing inflows of multinationals, trade has been increased, whichresult in stiff competition between the organizations.

Despite of the stiff competition Shakti Forwarfers pvt. Ltd known as the leading custom

clearance agent, because of their effective implementation of quality management system

and customer centric approach.

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APPENDIX

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BIBLIOGRAPHY

Websites:

www.cbec.gov.in

www.kandlaport.com

http://www.cygnusindia.com/pdfs/CONTAINERISATION%20-%20India%20and

%20Global%20Scenario.pdf

http://www.gmbports.org/port_pog.htm

http://www.projectsmonitor.com/NewsImages/photo%207/Transport%20Table.jpg

Articles:

Daily Shipping News

EXIM

http://www.cbec.gov.in/

http://www.kandlaport.com/

http://www.cygnusindia.com/pdfs/CONTAINERISATION%20-%20India%20and%20Global%20Scenario.pdf




http://www.cbec.gov.in/

http://www.kandlaport.com/



