Summer Report on Import Export Procedure

Functional Procedure of Custom Clearance

“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 TOLANI INSTITUTE OF MANAGEMENT STUDIES 1


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

TOLANI INSTITUTE OF MANAGEMENT STUDIES 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 only with theoreti theoretical cal knowled knowledge ge when when industri industries es are developi developing ng at global global level, 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.



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 Procedur Proceduree of Custom Custom Clearance 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 Gujarat.. Another Another objective objective is to kno know w Documen Documentati tation on process 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 import-export goods. We also also descri describe be that that which which Docum Document entss are are usefu usefull for CHA, CHA, IMPO IMPORT RTER ER and EXPORTER.



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.



CONTENTS

Description

Page No.

Acknowledgement

2

Preface

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



LIST OF TABLES

Sr No.

Table Title

Page No.

1

Performance of Major Ports

13

2

Growth of state GDP

13

3

Largest Port by State

13



LIST OF FIGURES

Sr No.

Table Title

Page No.

1

Ports of Gujarat

11

2

Break Up of Commodities Handled at Major Ports

23

3

Forecast for Container Port Capacity

24



1. INTRODUCTION 1.1 Project: In view of the rapidly and constantly changing business environment globally and fast evolving evolving trade and commer commerce ce scenari scenario o in India India vis-à-v vis-à-vis is global global market, market, there is increasi increasing ng requirem requirement ent of reliabl reliablee and dependab dependable le integrat integrated ed logistic logisticss solution solutionss provide providers rs who can provide provide compreh comprehensi ensive, ve, professi professional onal and dependab dependable le logistic logisticss support to the industry, keeping the same in mind and with the vision to provide quality quality and profess professiona ionall compreh comprehensi ensive ve logistic logisticss soluti solutions ons to the interna internation tional al & 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 equi equipp pped ed with with natu natura rall reso resour urce ces, s, so that that it can can sell sell thes thesee reso resour urce cess into into the 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 imported products are now in well reach of Indian customers. 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 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. 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.



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 18th 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 Tonna To nnage ge (GT) (GT) and 13.28 13.28 Mill Million ion Dead Dead Weigh Weightt To Tonna nnage ge (DWT (DWT). ). Th Thee shippi shipping ng 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. India Indian n shippi shipping ng has rema remain ined ed a deferr deferred ed subje subject ct till till indep independ endenc ence. e. Only Only afte after r independence, 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 developmental efforts, the necessity for a centralized centralized administrative administrative organization organization has been been felt felt.. Accor Accordin dingly gly in Sept Septem ember ber necess necessit ity y for for a centr centrali alized zed admi admini nistr strati ative ve organization 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.



Introduction to Gujarat port:

Ports of Gujarat

Along the 1600 kms. of coastline coastline of Gujarat, Gujarat, there are 41 ports, of which 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 the nearest 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 liberal liberalizat ization ion and privatizati privatization on announce announced d by the government of India through the process of globalization. TOLANI INSTITUTE OF MANAGEMENT STUDIES 11


Gujarat itself is experiencing a phenomenal interest in investments both from megaindus industr trial ial secto sectors rs with within in the the countr country y and also also from from top mult multi-n i-nat ation ional al abroad abroad.. Investments Investments to the tune of $30 billion are already in the pipeline. From an analysis analysis of the present investments and those that are flowing in, one can perceive a particular trend which is manifesting manifesting itself - investments investments are converging in and around potential port sites. Investments Investments of over Rs.16,000 crores are taking place at Hazira, Rs.15,000 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 industrial raw-materials raw-materials and want access to the interna internation tional al market market through through sea routes, routes, which which is definite definitely ly more more viable 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 exist existing ing item itemss of impor importt and and expor export. t. As indic indicate ated d earl earlier ier,, the massi massive ve spurt 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.



In Gujarat, ports are playing major role for growth of state GDP (Gross Domestic Product) below are the figure for the year 2006-2007

Shipping Company: TOLANI INSTITUTE OF MANAGEMENT STUDIES 13


“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, 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, 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 in this field.

Different Types of Ships:-



1. Cont ontain ainer shi ships 2. Roll Roll-o -on/ n/ro roll ll-o -off ff shi ships ps 3. Break reak-b -bul ulk k ship shipss 4. Crude rude car carries 5. Dry Dry-bul -bulk k car carri rier erss 6. Gas ca 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.


Functional Procedure of Custom Clearance Roll – on / Roll - off Ships:-



Roll Roll-on -on/r /roll oll-of -of ships ships were were crea created ted to accom accommo modat datee cargo cargo that that was was self self

propelled, such as automobiles or trucks, or cargo that could be wheeled into a ship, such as railroad cars. 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.


Functional Procedure of Custom Clearance Break-Bulk Ships:



Break-bulk Break-bulk cargo ships are multipurpose ships that can transport shipments 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. 

Thee main Th main probl problem em with with a breakbreak-bul bulk k ship ship stems stems from from its its laborlabor-int inten ensiv sivee

loading and unloading because each unit of cargo handles separately.



Crude Carriers:-



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 meters(115 feet) they need very deep ports for berthing.



Dry-Bulk Carriers:



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:



Another Another importa important nt bulk trade is the transpor transportat tation ion of Liquefi Liquefied ed Natural 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 longterm contracts-c contracts-call alled ed time time charter charter parties parties and therefo therefore re nearly nearly have a sailing sailing schedule, not unlike liner ships.



Containerization: ‘Cont ‘Contai ainer neriza izati tion’ on’,, the the term term very very famil familiar iar to presen presentt day shippi shipping ng indust industry ry is a completely unknown concept, a few decades back. Malcolm McLean, owner of a huge trucking 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 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 conta containe inerr yard yard (inla (inland nd conta containe inerr depot depot)) for shipm shipment ent.. Th This is proce process ss has has great greatly ly facilitated 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 interde interdepend pendency ency and inter-co inter-connec nnectivi tivity ty between between countri countries. es. Shippin Shipping g has always always provided the most cost-effective means of transportation over long distances and containerization has played a crucial role in world maritime transport.



What is meant by containerization? Containerizatio Containerization n is the practice practice of carrying carrying goods in containers of uniform shape and size size for shipp shipping ing.. Almo Almost st anythi anything ng can be stored stored in a conta contain iner, er, but they they are are part partic icula ularl rly y useful useful for the the trans transpor portt of manuf manufac actur tured ed goo goods. ds. It is a metho method d 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 Exporters need to go to the seaport for export of goods. Instead the goods sent to inland container depot/ container freight station for 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 transportation of goods. Different countries countries are are giving giving logis logisti ticc suppo support rt,, giving giving the the necess necessary ary boo boost st to impro improve ve the the requir required ed infrastructure to containerization, for encouraging export industry. Containerization Containerization is to contribute about 22.66% to total cargo by 2010-11.

Thee robu Th robust st grow growth th of Indi India’ a’ss manu manufa fact ctur urin ing g indu indust stry ry has has push pushed ed up Indi India’ a’ss 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 procedures from the waterfront. Containerization 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 201011.



Challenges Container port demand and capacity imbalance: In view of the buoyant global merchandise 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 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.



Types of containers-: There are different types of containers. The popular types are: 1. General purpose containers-: 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. containers. Based on length of the container, the container 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. TOLANI INSTITUTE OF MANAGEMENT STUDIES 24


2. Reefe Reeferr contain container erss (refrig (refrigera erated ted)) -:

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 refri refriger gerati ation, on, they they are are fitt fitted ed with with elec electr trica icall equip equipme ment nt for suppl supply y of neces necessar sary y electricity. 3. Dry Dry bul bulk k con conta tain iner erss-::

These are built especially for the carriage of dry powders and granular substances in bulk. 4. Ope Open n top/o top/open pen side sided d conta containe inersrs-::

These are built for heavy and awkward pieces of cargo. These containers are ideal where height of the cargo is in excess of height of the standard general purpose containers. 5. Liquid Liquid cargo cargo conta containe inersrs-::

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. Hang Hanger er cont contai aine ners rs-: -:

They are used for the shipment of garments on hangers.



Custom House Agent: “Custom “Custom House Agent” means a person licensed, temporarily temporarily or otherwise, otherwise, under the regulations made under sub-section (2) of section 146 of the Customs Act, 1962. A perso person n is permi permitt tted ed to operat operatee as a custom customss hou house se agent, agent, temp tempora orari rily ly und under er 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 load loadin ing/ g/un unlo load adin ing g of impo import rt or expo export rt good goodss from from/a /att the the prem premis ises es of the the exporter/importer, the packing, weighment, measurement of the export goods, the transportation 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 formalit formalities ies such such as payment payment of expenses expenses on account account of de-stuff de-stuffing/ ing/ pelleti pelletisati sation on terminal handling, fumigation, drawback/ DEEC processing, survey /amendment fees, dock fees, repairing and examination charges, landing and container charges, statutory labou labourr etc etc this this expen expenses ses paid paid on behalf behalf of impor importer ter and export exporter er.. Th Thee CHA CHA is ordinarily reimbursed by the importer/ exporter for whom the above services are rendered.



COMPANY COM PANY PROFILE: PROF ILE:-Shakti forwarders Pvt. Ltd. formerly known as Shakti Enterprise was established in 1992. A leading custom house house agent, for import import and export, Shakti Shakti Forwarders 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: sanitary ary ware, ware, stainl stainless ess steel steel utensi utensils, ls, ready readyma made de garme garment nts, s, soya, soya, Exports: sanit 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.



Management Team: Sr. No. 1 2 3 4 5

Director's Name MR. KISHORE B. BHAGAT MR. PRANAV BHAGAT MR. MAULIK K. BHAGAT MRS. TEJAL MAULIK BHAGAT MR. SHAILESH B BHAGAT

Designation DIRECTOR DIRECTOR DIRECTOR DIRECTOR 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 VAPI – 396195 DELHI OFFICE (NOIDA):

SHAKTI FORWARDERS PVT. LTD. 12, 1ST FLOOR, DHARAM MARKET, ATTA, SECTOR 27, NOIDA – 201301

2. RESEARCH METHODOLOGY: TOLANI INSTITUTE OF MANAGEMENT STUDIES 28


Research Research as a term stand for “systematic “systematic investigation investigation towards increasing 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.



3. DATA COLLECTION AND EXPLANATION



3.1 3. 1 EXPORT EXP ORT 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. entrepren eur can choose any name for the th e 1) Selection of name of the firm-: An entrepreneur firm he wants to start. It is desirable that the name of the firms indicates that the business relates to export/import. Approval to name name of firm-: There is no need to obtain obtain prior approval approval of 2) Approval 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 Counc Council il (AEP (AEPC) C) is requir required. ed. Th Thee entre entrepre preneu neurr has has to apply apply to AEPC 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. Registr strat ation ion of Orga Organiz nizati ationon-:: Th Thee form form of organ organiza izati tion on can can be sole sole 3) Regi 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.



ex port income is subject to a number 5) Obtaining Permanent Account Number-: export of exemp exempti tions ons and and deduct deduction ionss und under er the incom incomee tax tax act. act. For For claim claiming ing those those exemptions exemptions and deductions, 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 with sales 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 import transac transactio tion n can be made made without without obtaini obtaining ng an importe importer-exp r-exporte orterr code number. IEC number 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 firm,, along along with with the follo followi wing ng docum document ents: s: profi profile le of the the expor exporte ter/ r/im impor porte ter, r, 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 documents particularly in bill of entry in case of imports and shipping bill in case of exports. 2.

Registration Cum Membership Certificate (RCMC) ( 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” Regi Regist stra rati tion on

3.

with with

Expor xportt

Credi reditt

and and

Guar Guaran ante teee

Corporation (ECGC)-: the exporter should also register with export credit and guarantee guarantee corporation of India (ECGC) in order to secure export payments payments against politi political cal and commer commercial cial risks. It also helps to get financial financial assista assistance nce from commercial banks and other financial organization. Registration with other authorities -: it is desirable for

4.

the exporters to become members of local chamber of commerce, productivity council or any other 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. Registration Registration for business identification identification number (BIN)-:

5.

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 persons dealing dealing with with various various regulat regulatory ory agencies agencies such as custom custom departm department, ent, central excise etc. Export Licensing - : many items of goods are free for

6.

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. Prohibi Prohibited ted items-: items-: these items items can not be exported exported or importe imported. d. These These items 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: Advance license -: inputs required for manufacturing export products can be imported 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 allow import 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. production. Such license license is given subject of the fulfillment 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 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



The different steps involved in export department are as follows:

Step 1: Exporter sends the following document to Shakti Forwarder: 

Lett Letter er of credi credit: t: Assur Assures es expor exporte terr his payme payment nt prom promise ise to pay a selle seller r

(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 establishes which his credit with a loca locall bank bank,, clea clearl rly y desc descri ribi bing ng the the good goodss to be purc purcha hase sed, d, the the pric price, e, the 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 Docum Document entary ary lett letter er of credit credit:: docum document entss specif specifie ied d in the the lett letter er of credi creditt must 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 backs the secondary secondary credit credit and facili facilitate tatess the purchase purchase of goods from a local supplier by the original beneficiary of L/C 

Red clause clause letter letter of credit credit: Allows Allows exporte exporterr to withdra withdraw w a predeter predetermine mined d

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 international and domestic domestic transactions is the bill (invo (invoic ice) e) that that the the expor exporte terr sends sends to the the impor importe ter. r. Howe However ver,, the conten contentt 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. TOLANI INSTITUTE OF MANAGEMENT STUDIES 37


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: 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. TOLANI INSTITUTE OF MANAGEMENT STUDIES 38


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. 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 document is generally not negotiable negotiable unless consigned 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 acknowledging that the relative goods have been received on board a specified vessel.


Functional Procedure of Custom Clearance 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, 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 software such as Vessel Vessel Name Name & Number, Number, Consignee, Consignee, Shipper Shipper,, Notify Notify Address, 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 required information is received from the port office, such as the container container number, and the Vessel name and No. The details are entered in the the Soft Softwa ware re (Vis (Visua uall Samu Samudr dra) a) also also each each B/L B/L is give given n a manu manual al entr entry y if not 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:

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 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). 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

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 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: TOLANI INSTITUTE OF MANAGEMENT STUDIES 42

Functional Procedure of Custom Clearance 

Invoice.



Packing list.



Self Declaration Form Or Gr Form



Acceptance of contract.



Letter of credit.



Quality Control Certificate.

Lists Lists of docu docume ments nts requ requir ired ed to be subm submit itte ted d by the the expo exporte rterr to various authorities, organizations, and agencies. 1) To the the cus custo tom m auth author orit ity: y:-

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 the por portt auth author orit itie ies: s:-TOLANI INSTITUTE OF MANAGEMENT STUDIES 43

Functional Procedure of Custom Clearance  

Port Trust Copy of the Shipping Bill Wharf age application.

3) To th 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 the EXIM EXIM Bank 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



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.



3.2IMPORT Import Procedure



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 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 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. 

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.


Functional Procedure of Custom Clearance 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:-

I. II . III. III.

Bill of entry for home consumption Bill of entry for warehousing Bill Bill of entr entry y for for Ex Ex-b -bon ond d clea cleara ranc ncee for for home home cons consum umpt ptio ion n

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: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 clearance for home consumption:-

This Th is type type of bill bill of entry entry is used used for cleari clearing ng the goods from custo custom m bon bonded ded 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. TOLANI INSTITUTE OF MANAGEMENT STUDIES 50

Functional Procedure of Custom Clearance Calculation of duty in import :

The duty has been calculated on the basis of assessable value. 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 asic Cu Custom stom Dut Duty y 2. CVD 3. Additional cess on CVD 4. Secondary and higher cess on CVD

5. CESS 6. Custom sec & higher education cess

7. Addit Additio ional nal Cust Custom om Duty Duty Let us consider that basic custom duty on the ALL ALUMINIUM SCARP is 0%, CVD CVD 8%, 8%, and and addi additi tion onal al duty duty is 4%. 4%. Say Say basi basicc cust custom om duty duty in rupe rupees es 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 CESS on CVD 2%+ SEC.&HIGHER 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 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. I I.

Bill of lading Invoice

I I I.

Certificate of origin

IV.

59- Bond warehousing bond

V.

Wharf age

V I.

Bill of entry

VII.

Packing list

VIII.

NOC (No Objection Certificate)

IX.

Delivery order

X.

Treasury challan

X I.

Gate pass


Functional Procedure of Custom Clearance DOCU DOCUME MENT NTS S WH WHIC ICH H ARE ARE TO BE USED USED IN IMPO IMPORT RT AND AND EXPO EXPORT RT 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

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 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 Phyto-sanitary certificate

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 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, document, prepared by the importer importer or his clearing agent in the p pres rescr cribe ibed d form form und under er bill bill of entry entry regul regulat ation ion,, 197 1971, 1, on whic which h clea clearan rance ce 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.



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.



5. CONCLUSION The Indian business environment is changing with the rapid growth in infrastructure and techn technolo ology gy.. With With the increa increasi sing ng infl inflows ows of mult multin inati ationa onals, ls, trade trade has been been increased, which result in stiff competition between the organizations. Despite of the stiff competition Shakti Forwarfers pvt. Ltd known as the leading custom custom clea clearan rance ce agent agent,, becaus becausee of thei theirr effec effecti tive ve impl implem ement entati ation on of quali quality ty management system and customer centric approach.



APPENDIX



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


Summer Report on Import Export Procedure

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