Chapter-1

1

Executive Summary

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

2months. With respect to that this we have prepared this project report on “Service

Analysis of Custom Clearance and Forwarding” undertaken at “ESSKAY Shipping.,

Visakhapatnam.

Generally the customs clearance procedure is a complex and time taking process so the

companies will outsource clearance activities to CHA or end to end logistic service provider to

get facilitation. In this report the complete customs clearance procedures through sea for both

exports and imports are presented in step by step procedure based on the type of clearance.

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

Visakhapatnam. Another objective is to know Documentation process done by CHA (Clearing

House Agent) to clear the goods from CUSTOM.

The research has been carried out on identification of the customer service levels of ESSKAY

Shipping and factors influencing logistics growth in Visakhapatnam.

This report also tells that as that how to calculate the Duty on Import and Export Goods. We

also describe that which Documents are useful for CHA, Importer and Exporter.

Major findings are, the customers expecting proactive and better communication from ESSKAY

to be improved. The other key factors the customers identified are relationship, core competency

and continuous communication with them.

In another scenario the key factors that are effecting the growth of logistics in Visakhapatnam

are poor infrastructure, complex taxation. The other important factors that identified are service

excellence, cost optimization, reliability, transport, information privacy, high labour cost.

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Introduction

In view of the changing business environment globally 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 most important aspect of

custom clearance.

ESSKAY Shipping Agency 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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Need for study

It is not possible to locate the customer near the company or the company near the customer so

there comes the need of logistics to facilitate the movement of goods. Meanwhile in this process

there is lot of complex steps involved as a service provider they should overcome all these

challenges and should provide reliable services in stipulated time.

Objectives

The complete study of customs clearance procedure through sea.

Identification of customer service level.

Factors affecting logistics growth in Visakhapatnam based on the perception of

employees.

Methodology used

The research is to study the customer satisfaction levels of ESSKAY Shipping group and to

study the challenges facing by CHA’s in Visakhapatnam. Based on the objectives, various clients

of ESSKAY Shipping and employees in various CHA’s in Visakhaptnam were targeted. As a

part of this research various categories of employees like HR’s, Executives, Managers, and

Marketers etc were targeted.

Sample size

The sample size is 30 for customer satisfaction survey and sample size is 30 for challenges

facing by CHA’s.

Interview method

For the customer satisfaction levels research and for the challenges facing by CHA’s the

interview method is personal interview method.

Collection of data

The data is primary and collection is directly from source.

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The following tests are used to analyze this data.

1. Factor Analysis

Factor analysis is a statistical method used to describe variability among observed, correlated

variables in terms of a potentially lower number of unobserved, uncorrelated variables called

factors. In other words, it is possible, for example, that variations in three or four observed

variables mainly reflect the variations in fewer such unobserved variables. Factor analysis

searches for such joint variations in response to unobserved latent variables. The observed

variables are modeled as linear combinations of the potential factors, plus "error" terms. The

information gained about the interdependencies between observed variables can be used later to

reduce the set of variables in a dataset.

2. Percentage analysis

In statistics the frequency of an event i is the number ni of times the event occurred in the

experiment or the study. These frequencies are often graphically represented in histograms.

We speak of absolute frequencies, when the counts ni themselves are given and of (relative)

frequencies, when those are normalized by the total number of events:

Taking the fi for all i and tabulating or plotting them leads to a frequency distribution.

The relative frequency density of the occurrence of an event is the score divided by the total

number of observations.

3. KAISER-MAYER-OLKIN – MEASURE OF SAMPLING ADEQUACY

This index compares the magnitude of the observed correlation coefficients to the magnitude of

the partial correlation coefficients. Small values indicate that the correlations between pairs of

variables cannot be explained by other variables and that Factor Analysis will not be appropriate.

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Chapter-2

6

Sector Review

“Logistics is the process of anticipating customer needs and wants; acquiring the capital,

materials, people, technologies and information necessary to meet those needs and wants,

optimizing the goods or services-producing network to fulfill customer requests and utilizing the

network to fulfill customer requests in a timely manner.”

The logistics sector in India has today become an area of priority. One prime reason for the same

stems from the reason that years of high growth in the Indian economy have resulted in a

significant rise in the volume of freight traffic moved. This large volume of traffic has provided

for growth opportunities in all facets of logistics including transportation, warehousing,

industrial packaging, materials handling, inventory handling, order fulfillment, freight

forwarding, express cargo delivery, container services, shipping services etc. Indian logistics

industry is expected to grow annually at the rate of 15 to 20%. A number of infrastructural

projects involving warehouse and logistics parks are being undertaken are expected to be

operational in the next 2-3 years. The growth path has also meant that increase demand is being

placed on the sector to provide the solutions required for supporting future growth. Various

estimates put the market size of the logistics sector in India to be between USD 90-125 billion.

Given that the Indian economy has grown to over USD 1.73 trillion these estimates may already

be well below the actual size of the industry. Sources also estimate that the industry employs

over 45 million people and is growing at the rate of 15% with sub-sector growing at even 30-

40% per annum. Due to its current growth and its future growth potential the Indian logistics

sector is viewed as one of the most attractive in the world. Also India’s rapid growth and market

size were the key factors for global players looking at opportunities in the region.

BOOM SECTORS FOR INDIAN LOGISTICS

The booming sectors which needs the hands of logistics in raising their values are metals,cement,

agricultural, textiles, retail, coal. By 2030, India’s crude steel production is expected to increase

by a factor. The demand for cement in the country is expected to double by 2030.Agricultural

output, although reduced in size as a percentage of the economy, is expected to increase from

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207 million metric tonnes (MMT) to 295 MMT by 2020. The Indian textiles industry is expected

to triple from USD 78 billion currently to US$220 billion by 2020.The share of organized retail

is expected to increase from 5 percent currently to 24 percent by 2020. India’s industrial energy

consumption is expected to double by 2020. In this scenario, the country will need to mine 2

billion tonnes of coal by 2030 and transport 75 percent of mined coal. Further, around 30 percent

of total transported coal will have to be imported through ports. Overall export-import (EXIM)

cargo at Indian ports is projected to increase to around 2,800 MMT by 2020 from approximately

890 MMT currently. Finished consumer goods, both imported and those produced in India, will

have to be transported to the country’s middle-class consumers, which, by 2030, are expected to

increase fourfold from the current middle class population of 160 million.

MODE OF LOGISTICS

The mode of transportation is the key requirement of logistics which equally accounted for

inbound and outbound operations. The distances involved are greater and the number of parties

involved is typically more extensive. Because of the large expanses of water separating most

regions of the world, the major models of global transport are ocean and air. The 4 types of

logistic operations which operated in India physically are

AIR LOGISTICS

ROAD/MOTOR LOGISTICS

MARINE LOGISTICS

RAIL LOGISTICS

CHALLENGES OF INDIAN LOGISTICS

ROAD LOGISTICS

In India road has become the predominant mode of transportation ofcargo. Road and highways

serve as the arterial network of a nation. For a country as large and diverse as India, efficient

road connectivity is essential for both, national integration as well socio-economic development.

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Roads are the most common mode of transportation in the country which reporting for about 86

% of passenger traffic and 73% of freight movement. Road transport comprises a major share of

cargo movement as it is a competitive choice even at higher prices on account of flexibility,

frequency and point-to-point delivery. Estimate of the modal movement of cargo highlights that

in India nearly 61% of the cargo is moved by road, 30% by rail and rest by airway, pipelines and

inland waterways. Of this, the length of district, rural and other roads is 4,455,511 km, followed

by 163,898 km of State highways and only 70,934 km of National Highways .India’s low

average trucking speed of 30–40 km per hour as against the global average of 60–80 km per

hour. Thus be attributed to the constrained and poor quality of the country’s road network.

However the completion of the National Highways Development Programme (NHDP), which is

aimed at developing 50,000 km of National Highways by 2015 in seven phases with an

investment of INR 3,000 billion and modernization of the road cargo transport community boom

to the road logistics.

RAILWAY LOGISTICS

The Indian railways are still a monopolistic organization with a huge network and an integrated

system. It is recognized that movement of long haul bulk traffic by road is less efficient than by

rail. But road is still preferred over rail because there has been little investment in track

infrastructure since independence. Rail freight tariffs are high this has resulted in a sharply rising

trend in railway freight rate over the years compared to an almost stagnant passenger tariff rate.

The result of this has been that Indian rail freight rates have already become one of the highest in

the world, with freight rates in India being nearly 4 times that in United States. If truck

overloading is also taken into account then rail freight rates work out to be higher than road

freight in many instances. Less flexibility in carrying different types of products Special wagons

are not easily available for carrying specialized products.

AIR LOGISTICS

The fast transit times that air transport provides have an impact on global distribution. The speed

of airplanes combined with frequency of scheduling flights has reduced some global transit times

from as many 30 days to 1 or 2 days. These transit times have spurred the development of global

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freight services. The world air carriers have usually focused on passenger services, and air cargo

accounts for a small percentage of international freight by weight.Inadequate cargo handling and

storage infrastructure at airports across India has been a longstanding challenge. Historically,

India’s airports have been primarily developed to cater to passenger traffic; thus, the requirement

of air cargo traffic has not been given significant importance to date. Infrastructure related to

effective cargo handling including satellite freight cities with multi-modal transport, cargo

terminals, cold storage, automatic storage and retrieval systems, and the mechanized

transportation of cargo needs attention not only at metro airports but across the country. Lack of

terminal space and facilities for Express Airlines offered by some Airport Operators are reported

to be key concerns that need to be addressed on priority. As there is no clear cut policy on the

obligations of the airport operators to provide dedicated facilities for air express enterprises, the

existing facilities provided them in some airports are reported to be inadequate to support any

long term growth. Most terminals do not offer separate facilities, except cold roomsInvestment in

cold chain infrastructure (trucks and warehouses) to handle agricultural, pharmaand other

perishable commodities is inadequate.Cargo terminal operators need to have separate license-

handling areas for transshipment handling.

MARINE LOGISTICS

India’s ports serve as gateways to India’s international trade and facilitate 90 percent by volume

and 70 percent by value of India’s external trade via maritime traffic. The country’s long

coastline spans across 7,500 kilometers with 13 major ports governed by the Centre and about

176 non-major ports, of which only 60 are operational, governed by respective state governments

and union territories. Of its major and non-major ports combined, 139 are along the west coast,

while the remaining 50 ports are along the east coast.It intends to encourage private investment

in both major and non-major ports and bring port performance at par with international

standards.

Storage Infrastructure Related Challenges

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The setting up special economic zones (SEZs) has led to increased logistics activities around

them. Several logistics parks have come up at locations like Mumbai, Kolkata, Chennai and

Hyderabad because of their excellent port, rail, and road connectivity and are witnessing

significant investment in infrastructure. Many of the large logistics players are in the process of

setting up warehouses, container freight stations (CFS), inland container depots(ICD), logistics

parks, distribution centers and other facilities to leverage the abundant opportunities. Increase in

foreign trade is expected to further accelerate the demand for logistics services. In addition to the

poor transportation infrastructure the storage infrastructure in India also needs significant

improvement. Regulation of all warehouses is necessary for the standardization of warehouses

and their adoption of good practices. A modern facility for safe storage, material handling,

transport, and communication and adherence to structural standards as the state of ICD/CFS is

poor. The ICD/CFS infrastructure available for EXIM trade is inadequate. The land requirement

for setting up ICD/CFS at an appropriate place is difficult to come by as several hurdles have to

be cleared in the consolidation of land. As a result many logistics companies with an interest in

setting up ICD/CFS’s eventually fail to do so, mostly on account of lack of land availability at an

appropriate place. While it is difficult to set up a facility, at the same time, the existing facilities

themselves are plagued with several issues:

Many of the older facilities today are located within city boundaries restricting day

movement of trucks.

The approach roads to the facilities are poor making evacuation of cargo difficult.

Most facilities have issues of inadequate parking, lack of available land for expansion,

paving etc.

Technology and Skills related challenges

The logistics industry is also hampered by low rates of technology adoption and poor skill levels.

On the technology front the industry now seems to be paying serious attention with use of RFID,

vehicle tracking technologies, warehouse management systems etc. However while acceptance is

perhaps not an issue any more, the linkage between IT and domain requirement needs to be

resolved. Automation in processes is still only in its infancy. Further progress is dependent on a

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certain level of standardization which is made more difficult by the high level of fragmentation

in the industry. In addition to technology-related issues the skill levels of in the logistics industry

also require to be upgraded urgent. Also logistics industry is still not looked at as the industry of

choice for young graduates thereby making hiring of quality professional manpower challenging.

3RD PARTY LOGISTICS

3RDParty Logistics imply that one company acts as an agent to lookafter the logistics aspect of

another company or group of companies. 3RD party logistics entails a study of the customer’s

business, supply chain and distribution network, in order to formulate a comprehensive

integrated logistics strategy, which will help render all supply-related services from a single

window. India's 3PL sector represents 3 percent of the country's total logistics spend. The Indian

3PL market is expected to grow at around 20 percent per annum in the next 3-5 years .The

practice in India reveals that warehousing and outbound transportation, custom clearing and

forwarding are the most frequent outsourced activities. Activities such as packaging, fleet

management and consolidation have started gaining attention for outsourcing.

Company profile ESSKAY SHIPPING

Esskay Shipping (P) Limited, made a humble beginning in India around October, 1994. It

is a service sector Organization providing comprehensive shipping services of Shipping

Agency, Stevedoring, Clearing and Forwarding, Contracts Handling, and Off-Shore support

services at all Indian Ports. Aviation support services to off shore activities at KG basin off

coast Kakinada are also provided from Rajahmundry.

The Company is led by a management with decades of experience in the related service

fields, known for it’s professionalism and dedication to the job. The Company attends to the

Agency and Stevedoring needs of about 540 Vessel per year. It represents a cross section of

principals located globally and handles more than 5.4 MT of Cargoes annually for both Public

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and Private Sector Principals. In the last one and half decade ESSKAY handled a cumulative

total of more than 63 million MT of various Cargoes.

Esskay provides its customers with an unparalleled global resource delivered locally and

tailored to each customer's individual needs.

Its diversified customer base includes clients across the Bulk, Oil, cruise, Container

and various General, Project Cargo sectors as well as serving naval, government and inter-

governmental clients. Additionally, Esskay provides landside commercial and humanitarian

logistics, transit, offshore support and other associated marine services.

With the changing needs and demands of Principals, they have acquired the competitive

technology and professional edge in all spheres of shipping to deliver goods cost effectively.

Esskay’s track record and its reputation as one of the five leading shipping agency companies at

India’s premier major port of Visakhapatnam lend credence to this.As Agents to Principals in

Asia and Europe, Esskay handles nearly 500 vessels in a year at Visakhapatnam, Paradip, Haldia,

Kakinada, Krishnapattinam, Chennai, Ennore, Karaikal Nagapattinam and Tuticorin, with

two million tonnes of diverse cargo like containers, food grains including bagged rice, bulk

fertilizers, coal, steel, timber, general, project and ODC traffic handled at Visakhapatnam alone.

At Visakhapatnam, Esskay has won the trust of several of India’s leading public and private

sector undertakings including Steel Authority of India Ltd., Visakhapatnam Steel Plant (RINL),

etc., Libra Shipping Services FZE, Dubai, Jayaswal Neco Industries Ltd., Agarwal Coal

Corporation, Essar Steel Limited, West Asia Maritime Ltd, and Bhatia International Limited

Indore, to name a few Principals, who nominate us as their agents to the ship owners.

Mile stones

1998 Best shipping agency - winner of Jackleens Press International Rajiv Gandhi Memorial

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Shipping performance award in the year1999 First shipping company in India to receive ISO 9002:1994 quality systems certification

for comprehensive services of shipping agency, stevedoring, C&F and contracts handling services at the ports of Visakhapatnam, Kakinada and Chennai

2000 Handled highest varieties of cargoes at the port of the visakhapatnam as the stevedores2001 Handled first ever container cargo from kakinada deep water port as handling agents to

m/s American president lines India ltd2001 Commenced operations as handling agents to the first Indian pvt. Sector fortune 500

company M/S RELIANCE INDUSTRIES LTD (OIL AND GAS) DIVISION, RENDERING THE SERVICES AS VESSEL AGENTS, CUSTOM Clearing and forwarding agents, stevedores, materials handling at the ports of Kakinada, Visakhapatnam and aviation support services at Rajahmundry, A.P.

2002 First again in receiving the ISO-9001:2000 quality Management Systems certification for comprehensive shipping services by the DNV

2003 The President of the Company has been appointed as Member of the Visakhapatnam Dock Labour Board, as a representative of the Indian National Ship Owners Association, to represent the Employers of dock workers and shipping companies in the Board of Visakhapatnam Dock Labour Board.

2004 The Company has emerged as the handlers of highest quantity of diversified cargoes at the port of Visakhapatnam during the fiscal 2003-04

2005 The company had a repeated his performance for the second time as an handlers of highest quantity of diversified cargoes, Aggregating to 4.86 MT at the port of Visakhapatnam during the fiscal 2004-05

2006 For the third consecutive year, Esskay has been the leading stevedore in the port of Visakhapatnam by handling 5.24 MT of diversified cargoes for the year 2005-06

Objectives:

To provide prompt response, and timely execution of services to all our customers.

To interact with customers & obtain feed backs to understand the stated and

implied needs of all our customers in order to improve the service scope

accordingly.

To periodically review the process efficiency in order to revise, amend, alter the

same to meet the business goals of the Organisation and existing trends.

To improve the competency of our personnel on the strength of internal

communications, training and refresher programmes.

To shape up as a futuristic company, sharpening the competitive edge, reaching out

to the customers world wide with the reputation of being a quality conscious

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company caring for the total customer satisfaction.

MISSION:

Esskay Shipping mission is to provide prompt response and timely execution of services to

all our customers in the most efficient manner ensuring shipping solutions in the industry

trend.

To interact with customers & obtain feed backs to understand the stated and implied needs

of all our customers to improve the service scope accordingly.To review the process

efficiency periodically in order to revise, amend and alter the same to meet the business

goals of the Organisation and existing trends.

VISION: Esskay Shipping envisions itself as a truly world-class shipping Agency and forwarding services company known for quality and it endeavors to become a bench mark in its core areas of expertise worldwide.

SERVICES

Shipping Agency

Stevedoring

Clearing and Forwarding

Contracts Handling

Off-Shore support

Logistics

Steamer Agency

“Steamer agent” means any person who undertakes, either directly or indirectly-

(i) To perform any service in connection with the ship’s husbandry or dispatch including

the rendering of administrative work related thereto; or

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(ii) To book, advertise or canvass for cargo for or on behalf of a shipping line; or

(iii) To provide container feeder services for or on behalf of a shipping line.

Stevedoring/Contracts Handling

With a team of personnel together accounting for a cumulative experience of more than 500 man

years, they are a force to reckon with in the field of stevedoring.

Their range of operations cover different kind of import and export cargoes and a random list

include steel cargoes, dry bulks; new concepts like over side barge operations from capsize

vessels, iron ore fines, coking coal imports, timber logs, containers and food grains.

They facilitate time bound stevedoring operations with trained personnel who take care of the

complicated operations. Experienced supervisory staff and front line executives man the docks

all round when the stevedoring activities are taking place, ably assisted by machinery and gear,

all planned to work towards timely handling of cargoes.

On behalf of reputed organization like M/s Steel Authority of India Ltd., M/s MMTC Ltd., M/s

Essar Steel Ltd., M/s Jayaswals Neco Ltd.., M/s Trimex Industries Ltd., M/s Hind Lever

Chemicals Ltd., M/s Myanma Five Star Line, Myanmar, M/s APL Ltd., M/s Maersk Ltd.

They regularly handle a range of cargoes, like coking coal, LAM coke, Pet coke, Fertilizers,

thermal coal, food grains, steel cargoes, containers, timber logs, CLO, Iron Ore pellets, feldspar,

bentonite, dolomite stone chips, kenaf etc., and so far we have handled a quantity of more than

12 million MT cargoes.

Be it a over side barge operation at the General cum bulk cargo berth at Visakhapatnam, or

timber logs handling in the inner harbor, or coking coal lightering and complete discharge in

record time, or handling of containers including stuffing and de-stuffing matching the schedules

of liner vessels, or anchorage operation of food grains export at the Kakinada Port, whatever the

operation may be, they have left an indelible impression of operational efficiency and imprints of

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quality and commitment towards work, and titans of the industry both in public and private

sector or our principals over a period of years.

We handle regularly

Coking coal for M/s Steel Authority of India Ltd, and Visakhapatnam Steel Plant

LAM Coke for M/s Jayaswals Neco Ltd

Iron Ore Fines from M/s Essar Steels Ltd

Wheat and rice for M/s MMTC Ltd.,

Containers for M/s Maersk India Ltd

Feldspar, Rockphosphate for M/s Trimex Industries Ltd

Fertilizers for Pragathi fertilizes, Priyanka fertilizers , M/s Hind Lever Chemicals Ltd

Timber logs for M/s Amma Shipping Ltd,

Steel products for M/s Steel Authority of India Ltd.,

Off shore equipment and material for M/s Reliance Industries Ltd

C&F Agents

Documentation skills of the company are well proved and demonstrated. So far around 12,000

crores worth cargo documents have been passed by them, keeping a close rapport with the

statutory authorities like Customs, and our documentation unit is manned by personnel with

more 25 years of job experience, and all the latest duty payable guidelines, customs circulars are

regularly monitored by us to keep our knowledge levels latest to render most efficient and

authoritative services to our principals.

Off Shore Support:

As they progressed on the path of committed performance they have added another dimension to

their versatile range of services. When in the KG Basin the oil exploration works have been

commenced, bringing in Indian Majors like M/s Reliance Industries Ltd, on the strength of their

service potential and depth of expertise, and grass root contacts at Kakinada, they have been the

automatic choice against tough contenders, to provide the off shore support services.

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The company’s diversification of activities took a new turn, and a fresh leaf has turned when the

company has been chosen by the titan of the Indian private Sector M/s Reliance Industries Ltd,

and has been assigned the jobs of vessel agency, customs C&F, stevedoring, materials handling

at the Ports of Kakinada and Visakhapatnam, and aviation support services at Rajahmundry,

Andhra Pradesh.

Logistics

As the stevedores and contracts handling professionals they regularly move huge volumes of

cargoes into and from the port to storage sheds spread across the port vicinity and vice versa.

To enable this time bound shore clearance of cargoes or prompt cargo feeding to vessels at

berth, we have a highly focused team of logistics experts who assess the need of the day and its

typical nature, before deploying the adequate number of cargo tippers, handling equipment etc.

so that as per the plan the operation is completed

LIST OF EQUIPMENT

Quantity DESCRIPTION OF THE VEHICLE

Ashok Leyland Trucks

75

Caterpiller Loaders

05

Chinese XCMG Loaders

05

HM 2021 Loaders

09

Excavators (Poclains)

05

Dozers

18

01

Trailers

05

Forklifts

06

Water Tankers

05

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Chapter-3

Indian shipping scenario and Trade

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

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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.

Shipping is a global industry and its prospects are closely tied with the global economy.

Any fluctuation in the global economy has a direct and indirect impact on the shipping

industry. The industry is cyclical in nature and is today struggling to navigate through the

changing economic context. Supply pressure is making matters worse. Indian shipping

industry is also not unaffected by the changing macro -economic factors.

India has one of the largest fleet and is ranked 16th in the world. The total fleet size of the

Indian shipping industry is 10 million GT. Still it forms a marginal share of only 1% of the

global fleet. On the other hand, India’s seaborne trade has been growing at a rate of over 12%

in the last 10 years. Consequently, the share of India’s vessels in carrying country’s cargo has

been declining and is currently only around 8%.

Above statistics raises serious concerns about the problems faced by the Indian shipping

industry. One of the main reasons for the declining share of India’s fleet is the tardy growth in

its size. The Indian shipping tonnage needs to grow at a much faster pace and match the

growth of country’s seaborne trade. Government of India has envisaged an ambitious plan to

grow the Indian shipping fleet from 10 million GT to 40 million GT by the year 2020. Various

initiatives are being taken by the government to address the challenges and promote Indian

shipping.

Why is the Shipping Industry of India bleeding and what can government do?

The shipping industry of India is suffering severely from lack of government support.

There are no policies to back the industry. More than 60% of country’s container trade is

carried out through the JNPT terminal which causes congestion and frequent break down in

port operations. Due to government apathy not many private new players are attracted to this

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industry thereby making the Indian exports more expensive as the entire strain in mostly on

fewer existing ports. There are several cancellations of orders due to delays and high expenses.

Moreover the local taxes on Indian shipping companies makes the exports more

expensive as compared to foreign companies. Under the provision rules in the service tax, if a

foreign shipping company is moving an Indian cargo between Indian cities, they don’t pay the

service tax because their place of residence is outside India. But if an Indian shipping

company was ferrying this cargo, then it will have to pay the 12.5 per cent service tax this

adds to its cost and makes it uncompetitive.

Moreover the Indian government also imposes duties on coastal vessels making them less

attractive and cost efficient as compared to road transport of India which receives some

subsidies in fuel expenses as diesel is subsidised in our country.

There is also an imposition of excise duty at 2% if no CENVAT credit is taken of taxes

and duties paid on inputs and input services; it is 6% in other cases.

Shipping, being capital intensive, requires huge funds for financing ship acquisitions

depending upon the market conditions. Funds are mobilized largely through external

commercial borrowings and internal generations. In the current depressed shipping scenario, it

is uncertain as to how the shipping companies will be able to source the equity and debt

requirement for acquisition of ships. As the shipping industry is in substantial need of funds

for acquiring tonnage, it is essential that the Govt. of India set up a fund to support the national

fleet, thereby enabling access to funds.

3.1 INDIA’S TRADE:

The economy of India is the tenth-largest in the world by nominal GDP and the third-

largest by purchasing power parity (PPP).[1] The country is one of the G-20 major

economies and a member of BRICS. On a per-capita-income basis, India ranked 141st by

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nominal GDP and 130th by GDP (PPP) in 2012, according to the IMF.[10] India is the 19th-

largest exporter and the 10th-largest importer in the world.

India's total merchandise trade has increased over three-fold from $252bn in 2006 to $794 in

2012 - both exports and imports have trebled during this period according to the Export-

Import Bank of India (EXIM bank). The bank is the premier export finance institution of the

country and was set up for the purpose of financing, facilitating, and promoting foreign trade

of India.

i. INDAIN EXPORTS:

A publication on India's trade and investment by EXIM bank highlights the trend in

exports moving towards southern countries, particularly in the Asia and Africa regions. Asia is

a key destination of India's exports - in 2001-02 Asia's share stood at 40.2% but in 2011-12 it

grew to 51.6% Europe, however has seen a decline in its share, down to 19% in 2011-12 from

24.8% in 2001-02.

India's key exports in 2012 were petroleum products which generated $56bn; followed by

gems and jewellery with $47bn. Pharma products, transport equipment, machinery and

readymade garments are also big exports for India.

The 2012 data shows that the United Arab Emirates (UAE) was India's biggest export market,

closely followed by the USA. The latest data available from the Indian Government's Ministry

of Commerce and Industry covering April-September 2012 shows the US to have slightly

overtaken the UAE. Explore the graphic above to see India's imports and exports by value and

year. The UK is the eighth biggest export market for India and held 2.9% of the market share

in April-September 2012.

ii. INDIAN IMPORTS:

Crude petroleum is India's biggest import with $155bn spent on it in 2012. Imports of gold and

silver amounted to $62bn and electronic goods and pearls and precious stones are also top

import items for the country.

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India's top import source is China followed by the UAE, Switzerland and Saudi Arabia. The

UK came in at 21st place in 2011-12 with India importing a total of $7.7bn. In the six months

recorded so far for 2012-13, the UK has dropped a place and has a 1.4% share of the India's

import sources

Economic growth rate slowed to around 5.0% for the 2012–13 fiscal year compared with 6.2%

in the previous fiscal.[11] It is to be noted that India's GDP grew by an astounding 9.3% in

2010–11. Thus, the growth rate has nearly halved in just three years. GDP growth went up

marginally to 4.8% during the quarter through March 2013, from about 4.7% in the previous

quarter. The government has forecasted a growth of 6.1%-6.7% for the year 2013-14, whilst

the RBI expects the same to be at 5.7%.

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VISAKHAPATNAM PORT:

Port of Visakhapatnam is one of the leading major ports of India and is located on the east coast midway between Kolkata and Chennai.

The Port has three harbours viz., outer harbour, inner harbour and the fishingharbour. The outer harbour with a water spread of 200 hectares has 6 berths and the inner harbour with a water spread of 100 hectares has 18 berths.

Bestowed with natural deep water basins, the outer harbour is capable ofaccommodating 150,000 DWT vessels and draft upto 17 meters. The innerharbour berths are PANAMAX compatible and are capable of accommodating vessels upto 230 meters LOA and draft upto 11 meters. The Port is catering to the key industries like the petroleum, steel, power and fertilizers besides other manufacturing industries and playing catalyst role for the agricultural and industrial development of its hinterland spreading from the south to the north.

During the FY 201011 the Port handled a record quantity of 68.01 million tonnes of cargo. The Port is equipped with an array of cargo transfer systems. The mechanical ore handling plant consists of fully mechanized receiving and shipping systems designed to loads iron ore directly into the vessels throughconveyors. The Port is operating its own Railway network of about 200 Kms.,which is linked to the Trunk Railways. The Port is well connected to the NH5 by a 4 lane connectivity road. The Port has Electric Wharf Cranes of capacities ranging from 10 to 20 T and 2 nos., Harbour Mobile Cranes of 140 tonne capacity. Mechanical loading facilities exist for handling Alumina and fertilisers.

The Off Shore Tanker Terminal in the Outer harbour discharges crude oil directly to the tanks of the Refinery. The Container terminal operated by Visakha Container Terminal Private Ltd., is the deepest container terminal among major ports and equipped with modern container handling equipments. The BOT operator, Vizag Sea Port Pvt., Ltd., is operating two berths (EQ8&9) in the inner harbour. These berths are equipped with 3 nos., Harbour Mobile Cranes which can handle cargo at 18,000 tonnes per day per crane.

The Ministry of Shipping has identified Visakhapatnam Port a gateway as well as most preferred port of South East Asia and plans to develop it as a transshipment hub with world class facilities with an investment of Rs.13,940 crore.This was disclosed by Union Minister of State for Shipping Milind Deora.Visakhapatnam Port with 200 km rail network within its facility is the largest coal and iron ore handling port in the country.It is expected to handle 83 million tonne by 2016-17 and 103 million tonne by 2019-20.

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The port management will mobilize Rs 7100 crore through PPP mode in three phases for development.The port has plans to introduce mechanised facilities for handling coal and iron ore. With deepest container terminal facility the port can be developed as a hub.The centre also plans to develop a satellite port near an ancient town Bheemunipatnam to decongest traffic.The centre must consider scrapping cabotage fee to attract more business as it was done in case of Vallarpadam, officials said.

Developments in port:

The Port has ambitious plans for modernization with the vision to become the most preferred Port in South Asian Region. Considerable investments through PPP mode are on the anvil envisaging deepening of channels and berths, construction of new berths, installation of state of art mechanized handling facilities and other logistics.

The major thrust areas of development include deepening of channels, construction of berths, modernization of cargo handling equipments/systems, connectivity and other logistics.

Details of major developments envisaged by the Port which are in different stages of

implementation are given below. These developments would enhance the capacity to 110

million tonnes by 2014-15.

Projects in Progress:

• Phase-II deepening of inner harbour entrance channel and turning circle to cater to vessels of 12.5 meters draft.

• Procurement of 2 nos., 50 T Bollard pull shipping tugs.

• Strengthening of 5 berths(EQ5, EQ6, WQ1, WQ2 and WQ3) in the inner harbour to cater to vessels of 12.5 meters draft.

• Extension of return end of WQ-1 and construction of WQ-8 return end

• Development of SBM facility at outer harbour for import of crude oil as JV with HPCL

Projects in pipeline:

Strengthening and mechanization of the General-cum-bulk cargo berth(GCB) in the outer harbour to accommodate 2 lakh DWT coal vessels(DBFOT). The targeteted output at the facility for Panamax and Cape size vessels is 42,000 TPD and 70,000 TPD respectively.

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Mechanised handling facilities for fertilizer at EQ7 berth(DBFOT) at a targeted output of 28,000TPD with storage sheds, silos and bagging plant.

Development of EQ1 and EQ1A berths in the inner harbour with mechanized handling facilities (DBFOT) at a targeted output of 15,000TPD and 27,000TPD for Handymax and Panamax vessels respectively for steam coal and thermal coal

Installation of mechanized iron ore handling facilities at WQ1 berth in the inner harbour (DBFOT) at a targeted output of 25,000TPD and 43,200TPD for Handymax and Panamax vessels respectively

Development of EQ10 berth in the inner harbour (DBFOT) for handling liquid cargo and chemicals including Bio-diesel at a targeted handling rate of 7,200TPD

Development of WQ6 berth in the inner harbour for multi commodities (DBFOT) such as Calcined PET Coke, Metallurgical coke, Steel, Granite etc.

Development of WQ7 and WQ8 berths in the inner harbour (DBFOT) for handling alumina and other dry bulk

Study of customs clearance procedures through sea

DEFINITION

Clearing and forwarding agents are authorised by the Government of India to not only help the

importers and the exporters but also to bring it to the notice of the custom officials any

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irregularities in the customs rules and regulations optated by the customs, importer and exporter.

The clearing agent should be converse with customs act rules and regulations.

Before the clearing and forwarding agents came into the picture the export-import rules and

procedures were very complex, time-consuming in short difficult to understand so as to make it

easy the commission rate of customs have issued clearing and forwarding license to the people

who have proved themselves convergent with customs rules and regulations. The clearing and

forwarding agents are also known by different names such as custom house agent or freight

forwarders or shipping agents.

The clearing & forwarding agents are the Companies, which have been authorised and issued

License by Customs and Airport authority of India to get the goods inspected at the customs

warehouse.

Where entry of common man or even the exporter is prohibited (exporter can always go to get

his goods inspected, but cannot communicate directly with a custom inspector)

These shipping and clearing agents only prepare the export documents for the client’s

shipments.

As this area is highly sensitive in nature, due to all the stuff meant for export is stocked here

and because of risk of goods being stolen, only authorised people like employees of these

licensed agencies are allowed to interact with custom officials to get the goods inspected, after

which they handover the goods to air/shipping lines for them to airlift the cargo and send it to its

destination.

Logistics is the management of the flow of goods, information and other resources,

including energy and people, between the point of origin and the point of consumption in

order to meet the requirements of consumers. In that customs clearance plays a vital role.

Customs broking or Customs brokerage is a profession that involves the "clearing" of

goods through customs barriers for importers and exporters (usually businesses). This involves

the preparation of documents and/or electronic submissions, the calculation and payment

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of taxes, duties and excises, and facilitating communication between government authorities

and importers and exporters.

Custom brokers may be employed by or affiliated with freight forwarders, independent

businesses, or shipping lines, importers, exporters, trade authorities, and customs brokerage

firms. Customs clearance process is slightly different for Exporting and Importing.

ESSENTIAL SERVICES PROVIDED BY C&F AGENTS

The following are some of the services provided by all kinds of C&F agents:

Providing warehousing facility to the exporters for warehousing the goods before their

transportation to the docks/port.

Transportation of goods to the docks and arrangements of warehousing at the port.

Arrangement of containers required for shipment of the goods.

Booking of shipping space or air freighting.

Advising the exporter as regards the relative cost of sending the goods by different

airlines/shipping lines as well as selection of the route of the flight/ sea route.

Making arrangements for shipment of goods to be on board the ship/plane.

Arranging for marine/cargo insurance of the shipment.

Preparation and processing of shipping documents required for custom clearance.

Arranging for various endorsements/issue of certificates from various agencies.

Providing assistance in the packing of the shipment.

Making arrangements for local transportation of goods to the port/docks.

Forwarding the documents to the exporter for their negotiation with the bank.

OPTIONAL SERVICES PROVIDED BY THE C&F AGENTS:-

The following services are provided by the leading c&f agents at the specific request of the exporter:

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1. Providing warehousing facilities abroad at least in some of the major international markets in case the importer refuses to take the delivery of the goods for any reason.

2. Providing assistance to bring the goods back to India if the situation so demands.

3. Providing assistance to locate the goods in case of shipment is misplaced or the cargo is stranded at some port.

4. Making arrangements for assessment of damage to the goods to title claim with the insurance company.

RESPONSIBILITIES OF CLEARING AND FORWARDING AGENTS

(i) Furnish, whenever required by the Licensing Authority, an authorization from each of the

firms or persons by whom he is employed to act as their Customs Agent;

(ii) Not represent a client before an Officer of Customs in any matter which the licensee dealt as

an officer or employee of the Department or of the facts of which he gained knowledge while in

Government service.

(iii) Not appear, plead or act in any proceedings under Sections 179, 193, 194 or 196 of the

Customs Act’1969, for and on behalf of any person other than the person for whom he acted as

licensee in relation to matters out of which the proceedings have arisen;

(iv) Where he knows that a client has not complied with the law or has made any error in or

omission from any documents which the law requires such client to execute, advise his client

promptly of the fact of such non-compliance, error or omission and immediately bring the matter

to the notice of the appropriate officer of Customs in writing.

(V) Exercise due diligence to ascertain the correctness of any information which he imparts to a

client with reference to any Customs business;

(vi) Not withhold information relating to any Customs business from a client who is entitled to

such information;

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(vii) Promptly pay over to Government when due, all sums received for payment of any duty, tax

or other debt or obligation owing to the Government and promptly account to his clients any

money received for them from Government, or received from them in excess of Governmental,

or the other charges properly payable in respect of the clients Customs business;

(viii) Not attempt to influence the conduct of any officer of Customs in any matter pending

before the Custom House, Station, Port or Airport by the use of threat, false accusation, duress or

the offer of any special inducement or promise of advantage, or of any gift or favor or other thing

of value;

(ix) Not procure or attempt to procure, directly or indirectly, information from Customs records

or other Government sources of any kind to which access is not granted by proper authority;

(x) Not employ in any capacity, with power of attorney, by delegation of otherwise, for the

promotion of or in connection with the work relating the license :-

i. any person whose application for license or Customs permit has been refused; or

ii. any person whose license or permit has been revoked or whose conduct as a partner, manager,

director, officer or servant has been the cause of the revocation of the license or permit;

(xi) Not lend money to any officer or employee in the service of the Custom House or Customs-

station or become surety for the repayment of money borrowed by any such officer or employee;

and

(xii) Intimate to the Licensing Authority any change of address immediately after such change is

affected.

Export procedure

Feeding details of goods in EDI

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Checklist of shipping bill will be obtained

`

Shipping bill no will be assessed by Appraising Officer Assistant Commissioner

(If value more than 10 lakhs)

Examiner officer will check the goods physically in docks

Appraising officer will order “Let Export”

Preventive officer will sign to confirm exports

Shipping Bill and all other relevant documents obtained

Out from CFS

The different steps involved in export department are as follows:

Step 1:

Exporter sends the following documents to ESSKAY Shipping

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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: It 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 favor 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

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.

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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, ESSKAY 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:

Customs 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:

Customs will examine the cargo by using the sample. (Customs will examine the cargo only after

the duty is paid) in case of more than one container in one B/L than Asst. Commissioner 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).

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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.

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.

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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.

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

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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:

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, whichever 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. Then, 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.

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Following three types of shipping bill with custom authorities

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:-

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

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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:-

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.

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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

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.

Import procedure overview

Import Procedure through Sea

B/E

Appraising Officer Assistant Commissioner (If value more than 10 lakhs)

IGM filed by steamer agent

Cross check by Customs Duty payments in bank

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CFS (Container Freight Station)

CFS Appraising Officer (Invoice assessment)

CFS Examining Officer (Verification)

Out of Charge

RMS Open order by Appraising officer

Registered the bill by Examining officer

Out of charge by Appraising officer

Get the print (Customs copy, Gate copy, Custodian)

Endorsement by E.O & A.O on the print

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Passed out sign by Preventive officer

Billing by CFS (storage charges etc)

Job order (All details of cargo like container no, package no etc)

Preparation of driver documents (like Form KK, Call sheet etc required for driver)

Out of CFS

Open Bill

Open order by Appraising officer

Registered the bill by Examining officer

Examining officer examines the cargo and gets the report

Out of charge by Appraising officer

Get the print (Customs copy, Gate copy, Custodian)

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Endorsement by E.O & A.O on the print

Passed out sign by Preventive officer

Billing by CFS (storage charges etc)

Job order (All details of cargo like container no, package no etc)

Preparation of driver documents (like Form KK, Call sheet etc required for driver)

Out of CFS

Green Channel

Open order by Appraising officer

Registered the bill by Examining officer

Examining officer examines the container no & seal no and gets the report

Out of charge by Appraising officer

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Get the print (Customs copy, Gate copy, Custodian)

Endorsement by E.O & A.O on the print

Passed out sign by Preventive officer

Billing by CFS (storage charges etc)

Job order (All details of cargo like container no, package no etc)

Preparation of driver documents (like Form KK, Call sheet etc required for driver)

Out of CFS

First Check procedure

Open order by Appraising officer

Registration of bill by Examining officer

Examining officer marking to Appraising officer

Inspection by Examining officer

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Prepares a report

Appraising officer assess the value and do marking to the assessment group

Assessment of bill and pay the duty

Out of charge by Appraising Officer

Get the print (Customs copy, Gate copy, Custodian)

Endorsement by E.O & A.O on the print

Passed out sign by Preventive officer

Billing by CFS (storage charges etc)

Job order (All details of cargo like container no, package no etc)

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Preparation of driver documents (like Form KK, Call sheet etc required for driver)

Out of CFS

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 origin

e) 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.

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.

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

procedure.

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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:

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:-

1. Bill of entry for home consumption

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2. Bill of entry for warehousing

3. 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.

Documents to be used in import:

1. Bill of lading

2. Invoice

3. Certificate of origin

4. Bond warehousing bond

5. Wharf age

6. Bill of entry

7. Packing list

8. NOC (No Objection Certificate)

9. Delivery order

10. Treasury challan

11. Gate pass

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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

It 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 certificate

contains 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.

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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CALCULATION OF DUTY IN IMPORT:

The duty has been calculated on the basis of assessable value and the product using

Harmonised coding system, to which section and which chapter it belongs to.

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 than 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.

For example: Let us take a ball point pen,

Its HS code is 960810.

Let us take the cost of pen as Rs 20/-

CIF value 20.00

Assessable value

(CIF value +1% Landing

charges) A

20.20

Basic customs duty (% on

Ass.value) B

10% 2.02

CVD: additional duty 12% 2.67

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(% on (Ass.value+ BCD) C

Central Excise edu. Cess

% on additional duty D

3% 0.08

Customs Educational Cess

% on (BCD+ CVD+ Central

Excise cess) E

3% 0.14

Special additional cess

(% on Ass.value+ BCD+

CVD+ central excise+

Customs Cess) F

4% 1.00

Total value (A+B+C+D+E+F) 25.91

TOTAL CUSTOMS

DUTY= (Total value-CIF

value)

5.91

TIME TAKEN FOR CLEARANCE OF EXPORT AND IMPORT PROCEDURE:

Export Clearance procedure1. Through Factory stuffing

StepsTime

(approximately)1 Booking container with the shipping liner and

get the plot paper to move the container from Factory

1/2 hr

2Documents received, docket open and S.B

filled 1/2 hr

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3 Assessment & A.C release S.B from customer 1 hr

4 Factory stuffing and inspection 3hrs

5 Offload CFS to port 24hrs

6 handed over S.B to Shipping Line 1/2 hr

7 preparing B/L draft, Generalised system of preferences (GSP),Vessel Certificate draft, certificate of origin,

1/2 hr

8 Getting B/L draft from the shipping line and giving approval & preparing fright charges cheque and release B/L and send these documents to shipper

3 days

9 Docket closing & sending accounts to billing purpose

1day

10 send export promotion copy to sender 1day

Total days approximately 6 days

Export Clearance procedure1. Through CFS stuffing

StepsTime

(approximately)1 Documents received, docket open and S.B filled 1/2 hr

2 Booking container with the shipping liner and get the plot paper to move the container from CFS

1/2 hr

3 Assessment & A.C release S.B from customer 1 hr

4 CFS stuffing and inspection 12hrs

5 Offload CFS to port 24hrs

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6 handed over S.B to Shipping Line 1/2 hr

7 preparing B/L draft, Generalized system of preferences (GSP),Vessel Certificate draft, certificate of origin,

1/2 hr

8 Getting B/L draft from the shipping line and giving approval & preparing fright charges cheque and release B/L and send these documents to shipper

3 days

9 Docket closing & sending accounts to billing purpose

1day

10 send export promotion copy to sender 1day

Total days approximately 6 days

Import clearance procedure

StepsTime

(approximately)1 Generate check list using commercial invoice,

packing list,B/L copy,freight bill, Certificate of origin, etc.,

1/2hr

2 Filing Procedure 1 hr

3 customs procedure1.Through RMS 15 min2. through self-assessment 2days

4 payment of duty 1hr

5 Clearance from CFS 1day

6 Receives documents from CFS & Job Closing 3hrs

Total time taken (Approximately) 4days

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Chapter-4

55

Data interpretation and Analysis

1)

Services to be improved

Telephone answering -5, Invoicing- 7, Response Times-18

Other factors what customers are suggesting more are

1. Needs to send the documents immediately after clearance.

2. Proactive and better on time communication is required.

3. Quotations –Rate enquiry

Continuous reporting should be required regarding sea shipment, invoice.

2) Customer satisfaction survey

From the question, information obtained for client’s preference about the type of service (through frequency test)

Rating Esskay

Frequency Percent Valid Percent

Cumulative

Percent

Valid Far better 1 3.3 3.3 3.3

Better 7 23.3 23.3 26.7

Same 8 26.7 26.7 53.3

Below 7 23.3 23.3 76.7

Far Below 7 23.3 23.3 100.0

Total 30 100.0 100.0

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Here frequency test is applied to know how the clients opined about the ESSKAY service when compared to competitors.

The clients opined as follows

Far better-3.3%

Better- 23.3%

Same- 26.4%

Below-23.3%

Far Below-23.3%

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3) Rotated Component Matrix

Rotated Component Matrixa

Component

1 2

Esskay safe .929

Communication Satisfactory .825

Provide Information .559

Staff Competent .694

Impression Of Service .771

Esskay Needs To Improve .739

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 3 iterations.

Here from observation two communalities are found and they are named as

1st factor- Relationship (it constitutes Services safe, recommend services, communication satisfactory, Provide Information)

2nd factor- core competency (it constitutes Impression of service, staff competency)

Factors affecting Custom House Agent

Analysis of factors affecting CHA’s growth

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .623

Bartlett's Test of Sphericity Approx. Chi-Square 112.331

Df 45

Sig. .000

Hypothesis testing Null Hypothesis (Ho) - The variables are uncorrelated

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Alternative Hypothesis (H1) - The Variables are correlated

In the above Table Bartlett’s Test of Sphericity and Kaiser Meyer Olkin (KMO) Measure of

Sampling Adequacy are used to test the appropriateness of the factor model.

Bartlett’s test is used to test the null hypothesis that the variables are not correlated.

Since the approximate chi Square statistics is 112.331 which is significant at 1 % level, the test

leads to rejection of the null hypothesis.

The value of KMO statistics (.623) is also large. Thus the factor analysis may be considered as

an appropriate technique for analyzing the correlation matrix.

Rotated Component Matrixa

Component

1 2 3 4

Availability of skilled labour .876

Availability of good

Infrastructure.910

Completion of service on

Time.727

Supply chain Visibility .950

Customer Service .690

Role of Information Tech .511 .642

Good Rail and Road netw .934

Air Transportation .856

Warehouse with Modern

Tech.877

Cost Control .761

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 6 iterations.

From the observations it is found that there are four commonalities and they are named as

1- It constitutes Completion of service on Time, supply chain, Customer Service

2- It constitutes, Air Transportation, Warehouse with Modern Tech, Cost Control

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3-It constitutes of Good Rail and Road netw, Role of Information Tech

4-Availability of good Infrastructure, skilled labour availability

From the research it is found that service excellence is going to be the important factor followed by cost optimization, reliability, transport and infrastructure factors.

Rotated Component Matrixa

Component

1 2

Cost of Logistic services are

been to high in vskp.999

Cost of logistics services are

more than benefits actually

a obtained from those

services

.643

Is it difficult to hire qualified

labour.966

Are the wages of labour

working in logistic industry

are to high

.950

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 3 iterations.

From the observations it is found that there are two commonalities and they can be named as

1- High labor cost (it constitutes costs high in Visakhapatnam)

2-costs high than benefits, difficult to hire qualified labour, wages of labour working in logistic industry are too high

From the analysis it is found that high labour cost is very important factor followed by costs high than benefits factors.

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Chapter-5

61

Findings

From the research it is observed that when compared to competitors, 24% of the clients opined

the service levels of ESSKAY are better and 27% of the clients opined service levels of

ESSKAY are same and 47% of the clients opined that other services are to be improved and the

areas they suggested to improve are Needs to send the documents immediately after clearance,

proactive, better on time communication and quotations rate enquiry, Continuous reporting

should be required regarding sea shipment and invoice.

Research on logistics companies in Visakhapatnam shows that the major factors that are

effecting the logistics growth in Visakhapatnam are poor infrastructure, complex taxation. And

also factors like reliability, service excellence, truck tracing mechanism, information sharing are

going to be key factors which effect the logistics growth in Visakhapatnam.

Conclusion

The Custom House Agents are doing efficient logistics operations to various clients with limited

infrastructural facilities. Though various problems are studied and highlighted in this study, it is

found that the Custom House Agents in Visakhapatnam are performing well.

Good communication process with clients is required, as majority of the clients opined it as a

major factor where ESSKAY has to improve. Integrating all the channel partners like packing,

stuffing, customs staff is very important so that the deliverables can be sent to the consignee in

stipulated time with good condition. Finally improvement in infrastructure facilities, extra costs

on the services provided to be reduced, transit facilities could improve logistics growth in

Visakhapatnam.

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Annexure:

Questioner for relation between ESSKAY Shipping and importer and exporter

Dear Client,In order to evaluate our performance and to further improve our services, we would appreciate if you could spend a few minutes of your time to answer the below questions and give us your valuable input. Thank you

Company Name:

1) In which areas do you think ESSKAY needs to improve? ___

1. Telephone/Email answering 2. Invoicing 3. Response Times

2) Rate the following (use √ or • mark)

. Very Good

Good Average

Poor Very Poor

ESSKAY provide services in a safe, secure and timely mannerI have established a good working relationship with my key ESSKAY contactsI recommend ESSKAY services to my friends and business partners.All communication to and from ESSKAY is satisfactory (e-mail, telephone, fax, etc).ESSKAY provide me with adequate information (market rates, new rules and regulations, etc).ESSKAY staff is competent in their fields.

ESSKAY services continuously live up to my expectations

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3) Your overall impression of our service? ___

1. Very good 2. Good 3. Average 4. Poor 5. Very poor

A Study on challenging issues facing by Customs House Agent

Company:

1. Rate the following based on their importance (use √ mark)

Highly true True Not sure False Highly unaccepted

Cost of logistic services are been too high in VisakhapatnamCost of logistic services are more than benefits actually obtained from those servicesIs it difficult to hire qualified labor

Are the wages of labor working in logistic industry are too high

2. Rate the following items based on services provided by logistic companies in Visakhapatnam (use √ mark)

Very Important Not sure Less Very less

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important important importantAvailability of skilled laborAvailability of good infrastructureCompletion of service on timeSupply chain visibilityCustomer service

Role of information technologyGood rail & road network

Air transportation

Warehouses with modern technologyCost controlling

65

Bibliography

1) CII Institute of logistics, 2011 “Backbone of an economy The Hindu Survey of Indian Industry 2011”

2) Planning Commission of India, Report of the working group on Logisticshttp://planningcommission.nic.in/reports/genrep/rep_logis.pdf

3) Deloitte (2012), “Logistics Sector Present situation and way forward”, January http://www.deloitte.com/assets/DcomIndia/Local%20Assets/Documents/Thoughtware/Logistics%20Sector-Present%20situation%20and%20way%20forward.pdf

4) Karvy (2012),”Logistics wake up & Smell the future”, marchhttps://www.karvy.com/InstitutionalEquitiesReports/Logistics/Files//Karvy_Logistics%20Thematic_22Mar2012.pdf

5) KPMG(2012),”TRANSPORTATION AND LOGISTICS-Logistics game changers”http://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/Logistics-Game-Changers.pdf

6) ESSKAY Shipping pvt.ltdwww.esskayshipping.com/

7) CRISIL, 2009 Economic Times http://articles.economictimes.indiatimes.com/2009-09-23/news/27646750_1_indian-logistics-3pl-supply-chain (Credit Rating and Information Services of India Ltd.)

8) Ernst and young, 2012 Economic Times http://articles.economictimes.indiatimes.com/2012-01-30/news/31005696_1_fdi-inflows-total-fdi-attractiveness-survey

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9) KPMG, Logistics in India part-2

10) Ajaz Mohammed, 2010 Shipping Biz360 http://www.shippingbiz360.com/article/8/2010041920100419182356404bc053900/Growth-drivers-for-Indian-logistics-industry-%E2%80%93-Ajaz-Mohammed-East-West-Freight-Carriers-Private-Limited.html

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