Documentation and Policy Vol-I

DOCUMENTATION &
POLICY
VOLUME I
CONTENTS
CHAPTER NO.
TOPIC
PAGE NO.
INDIAS FOREIGN TRADE: NOVEMBER, 2013
INTRODUCTION TO CUSTOMS AND

CENTRAL EXCISE SETUP, LAWS AND
PROCEDURE
3
4
VALUATION AND CLASSIFICATION IN

CUSTOMS
FOREIGN TRADE POLICY 2015 20-TRADE FACILITATION AND

EASE OF DOING BUSINESS
11
Exports - Formalities for Commencing
36
Customs - Formalities for Export
42
Customs Formalities for Import & Export Containerisation - ICDs
50
Government policy & initiatives on e-commerce
52
Warehousing Under Customs Act
56
Exports Vis - A - Vis Central Excise
60
10
CHAPTER NO.
11
TOPIC
PAGE NO.
Export Oriented Units, Electronic hardware/

Software Technology Parks & Biotechnology
Park Units
12
63
Special Economic Zones (SEZs)

International Trading Hubs
68
13
Full Convertibility of the Rupee
79
14
Goods Imported or Exported by Post
83
15
Customs House Agents, F r e i g h t F o r w a r d e r

Their Responsibilites
87
16
Quality Control and Pre-Shipment Inspection
91
17
INCO TERMS & Terminology of International Trade
93
Annexure
104
Students and Exporters must please note that they should check with the authorities
regarding the functioning of any of the various schemes enumerated in the following
chapters. This is because additions, deletions and amendments to such promotional
schemes are quite common.
CHAPTER 1
INDIAS FOREIGN TRADE: NOVEMBER, 2013
A. EXPORTS (including re-exports)
Exports during November, 2013 were valued at US $ 24613.29 million (Rs.154160.39 crore)
which was 5.86 per cent higher in Dollar terms (21.04 per cent higher in Rupee terms) than the
level of US $ 23250.94 million (Rs. 127358.88 crore) during November, 2012. Cumulative value
of exports for the period April-November 2013 -14 was US $ 203989.66 million (Rs 1223387.07
crore) as against US $ 191957.75 million (Rs 1045629.09 crore) registering a growth of 6.27
per cent in Dollar terms and growth of 17 per cent in Rupee terms over the same period last
year.
B. IMPORTS
Imports during November, 2013 were valued at US $ 33833.23 million (Rs.211907.66 crore)
representing a negative growth of 16.37 per cent in Dollar terms and a negative growth of 4.37
per cent in Rupee terms over the level of imports valued at US $ 40454.01 million (Rs.
221590.06 crore) in November, 2012. Cumulative value of imports for the period AprilNovember, 2013-14 was US $ 303891.89 million (Rs. 1810680.39 crore) as against US $
321191.66 million (Rs. 1748678.68 crore) registering a negative growth of 5.39 per cent in
Dollar terms and growth of 3.55 per cent in Rupee terms over the same period last year.
C. CRUDE OIL AND NON-OIL IMPORTS:
Oil imports during November, 2013 were valued at US $ 12964.8 million which was 1.1 per cent
lower than oil imports valued at US $ 13107.0 million in the corresponding period last year. Oil
imports during April-November, 2013-14 were valued at US $ 111058.5 million which was 2.8
per cent higher than the oil imports of US $ 108076.3 million in the corresponding period last
year.
Non-oil imports during November, 2013 were estimated at US $ 20868.4 million which was
23.69 per cent lower than non-oil imports of US $ 27347.0 million in November, 2012. Non-oil
imports during April-November, 2013-14 were valued at US $ 192833.4 million which was 9.5
per cent lower than the level of such imports valued at US $ 213115.4 million in AprilNovember, 2012-13.
D. TRADE BALANCE
The trade deficit for April-November, 2013-14 was estimated at US $ 99902.23 million
which was lower than the deficit of US $ 129233.91 million during April-November, 201213.
EXPORTS & IMPORTS : (US $ Million)

(PROVISIONAL)
NOVEMBER
EXPORTS(including re-exports)
2012-13
23250.94
2013-14
24613.29
%Growth2013-14/ 20125.86
2013
APRIL-NOVEMBER
191957.75
203989.66
6.27
3
IMPORTS
2012-13
2013-14
%Growth2013-14/ 20122013
TRADE BALANCE
2012-13
2013-14
40454.01
33833.23
-16.37
321191.66
303891.89
-5.39
-17203.07
-9219.94
-129233.91
-99902.23
EXPORTS & IMPORTS : (Rs. Crore)

(PROVISIONAL)
NOVEMBER
EXPORTS(including re-exports)
2012-13
127358.88
2013-14
154160.39
%Growth2013-14/ 201221.04
2013
IMPORTS
2012-13
2013-14
%Growth2013-14/ 20122013
TRADE BALANCE
2012-13
2013-14
APRIL-NOVEMBER
1045629.09
1223387.07
17.00
221590.06
211907.66
-4.37
1748678.68
1810680.39
3.55
-94231.18
-57747.27
-703049.59
-587293.32
CHAPTER
INTRODUCTION TO CUSTOMS AND CENTRAL EXCISE

SETUP, LAWS AND PROCEDURE
Please refer Central Excise and customs Website: www.cbec.gov.in
The indirect taxes of Central Excise and Customs account for 80
percent of the revenue receipts of the Government of India. The bulk of the revenue
comes from collection of Central Excise and Customs duties.
In a developing country like India, the indirect taxes have necessarily to form
the major source of revenue, so badly needed for planned development and
achievement of other social objectives.
Collection of taxes, however objective and obligatory it be, has an element
of vexation and irritation in its process. When analysed, it would be seen that
such vexation is actually not because of any reluctance on the part of the tax
payer to pay the taxes, but mainly due to the cumbersome formalities involved in the
payment of duties. A proper study of the laws and procedures prescribed would
go a long way in narrowing down the area of misunderstanding or suspicion
between the Tax Payer and Tax Authori- ties.
THE SET UP OF CUSTOMS AND CENTRAL EXCISE
The collection of duties of Customs and Central Excise is attended to by the
Commissionarates of Customs and Central Excise spread all over the country. There
are 11 major Customs Houses and 35 Central Excise Commissionarates. These
Commissionarates function under a common authority known as Central Board of
Excise and Customs, which is a body constituted subordinate to the Ministry of
Finances, Department of Revenue.
The Commissionarates are in charge of officers known as Commissioner of Customs or
Commissioner of Central Excise as the case may be. The Com- missioner is assisted by
other officers such as Additional Commissioners, Deputy Commissioners and
Assistant Commissioners. The Group A is a common cadre of Excise and
Customs. At the lower levels viz. Group B, C and D, there are distinctly separate
cadres attending to specific functions. On the Customs side itself there are two important
divisions viz. Appraising and Pre- ventive, the Appraising Departments being manned
by Appraisers (Group B) and Examiners (Group C). The preventive Dept. is manned
by Preventive Superintendents (Group B) and Preventive Officers (Group C).
On the Central Excise side, the set up is similar up to the level of the Asst.
Commissioner, but below the Asst. Commissioner, there are Superin- tendents and
Inspectors. Unlike in the Customs department, where the administration and, in fact,
the work of assessment is concentrated in the Customs House, the Central Excise is
spread out all over the country. The jurisdiction of Commissionerate of Central
Excise is divided into divisions,
sub divided into ranges in the charge of Superintendent of Central Excise. These
are in some cases, again divided into sectors in the charge of Inspectors see chart below:
FUNCTIONS
The Customs Department's main function is collection of revenue on Im- ports
and Exports. Prevention of smuggling, implementation of various Central and
State enactments and collection of data on Import and Export are among the other
functions. The Customs Act 1962, which guides, controls and regulates
the
functions of the Customs department came into force on
1-3-1963. It had replaced the earlier Central enactments viz. the Sea
Customs Act 1878, Land Customs Act 1924 and provisions of Aircraft Act 1934. The
other Central enactments as far as they relate to Imports and Exports
implemented by the Customs department include, the Foreign Trade (De- velopment &
Regulation) Act 1992, Foreign Exchange Regulation Act, Trade and Merchandise Marks
Act, Arms Act, Monuments Preservation Act, Narcotics Drugs and
Psychotropic Act,
Petroleum
Act,
Conservation
of
Foreign Exchange and Prevention of
Smuggling Activities (COFEPOSA) Act etc.
Duties of customs are levied in terms of Sec. 12 of the Customs Act at the rates
specified under the Customs Tariff Act or any other law for the time being in force.
In terms of Sec. 11 of Customs Act, the Government can also prohibit or restrict import
or export of any goods. There are however many other Acts under which import / export
have been restricted.
each in charge of an Asst. Commissioner of Central Excise and it is again

The Customs Tariff Act / Schedules provides the rates of duty chargeable on goods
imported or exported. The Foreign Trade (Development and Regulation) Act 1992
which superseded the earlier Act known as Import and Export Trade (Control) act
1947 provides for prohibition / restriction on imports and exports to ensure
that
the
balance of trade position is made stronger. To ensure that the full value of
the goods exported is received, the exporters are required to make a declaration in
the prescribed form to that effect in terms of Sec. 18 of the Foreign Exchange
Regulation Act. Agricultural products exported from India attract cess on their
export under the Agricultural Produce Cess Act 1940 and spices under the Spices
Cess Act 1986. Certain scheduled products attract levy of cess also under the
Agricultural and Processed Food Products Exports Cess Act 1985 also.
All the major ports and airports have Customs Houses in the charge of a Commissioner
of Customs but the minor ports, numbering over 200, are manned by Central Excise
Officers.
As for the Central Excise, which had a phenomenal growth from the time of
independence, it is the biggest source of revenue. What was only 78 crores in
1951 is over 42,000 crores reflecting the growth of the country and expansion of
production and manufacturing activities.
The Excise department functions in terms of the provisions of the Central Excises
Act 1944 and the Central Excise Rules. Before that, there was no duty being
levied, but it started at different times from different products. It was first levied
on cotton yarn in 1894, followed by motor spirit in 1917, kerosene in 1922, silver
in 1930, tobacco in 1943 and so on. It was only in 1975 that all items were
brought into the Central Excise tariff.
Electronic Data Interchange between customs and department of commerce is being
updated continuously and online filing without the requirement of submission of hard
copies for claiming various benefits under FTP is being introduced.
Implementation relating to reduction of documents is being done on a continuous basis in
consultation with other stake holders and is brought out in the annual document viz,
Hand Book of Procedures Vol. I which is kept readily available and updated on the DGFT
website.
Amendment in Customs Act will make life tough for evaders
Customs duty evaders will no longer be able to challenge show-cause notices on technical
grounds relating to jurisdiction.
The Union Cabinet has approved an amendment in the Customs Act, 1962 that allows
specified customs officers to be designated as Proper Officers for the assessment of the duty.
CHAPTER
VALUATION AND CLASSIFICATION IN CUSTOMS

To mobilise revenue for running the administration and to implement various welfare
measures, the Union of India depends mainly on two indirect taxes viz. Customs
and Central Excise Duties and one direct tax viz. the Income Tax. Here we
concern ourselves with only the two indirect taxes and we would now deal with
one of them viz. the Collection of Customs duty. The subject of Central Excise
Duty is dealt with separately.
However as we all know, collection of duty is more easily said than done. To
collect the exact levy to the state three issues have to be settled beyond
doubt.
1. Exact description of the goods and the use which they are put to.
2. Correct assessable value of the goods.
3. Classification of the goods.
The trade and the department have to know exactly what the items are that have
to be assessed for duty. To an ordinary citizen a blanket is an apparel for
protection from cold, whereas, to a printer a blanket is a piece of
machinery. The use the goods are put to is also very important to determine
classification. We will illustrate by taking an item just described as scraper. Of
these :
Boot scrapers fall under
73.23
Dental scrapers fall under
90.18
Floor scraper fall under
85.09
Skin scrapers fall under
84.53
Scraper for smoking pipes
96.14
Surgical scrapers
90.18
All FT products are divided into the following product groups.

(A)
Chemicals and Allied
(B)
Products
- 3173
entries
Electronic Products
258
entries
(C)
Engineering Products
- 1886
entries
(D)
Fish and Marine Products
44 entries
(E)
Food Products
111 entries
(F)
Handicrafts Products
11 entries
(G)
Leather Products
48 entries
(H)
Plastic Products
(I)
Sports Products
50 entries
(J)
Textile Products
353 entries
(K)
Miscellaneous Products
159
531
entries
entries
Each of these product groups have sub sections : for example, Chemicals and
Allied Products have sub groups like Drugs and Drug Intermediates, Dyes and
Dyes intermediates, Glass and Glass products, inorganic and Organic
Chemicals etc.
The next issue is determination of the assessable value. Customs duties are
levied (1) at specific rates (2) at ad valorem rates (3) at ad valorem rates
on prefixed tariff values and (4) at combination of specific and ad valorem rates.
Though in respect of levy at specific rates value has no significance, it is still
important for statistical purposes. It may also be noted that in almost all
cases, barring just a handful of cases, even if the main levy is at specific rates,
countervailing duties are collected ad valorem. Hence it is important that the goods
are valued precisely and in a uniform equitable way. This has been a vexatious
field always. At present we follow the WTO code of valuation, with the
introduction of which we changed an age-old concept in Customs valuation.
Formerly the principle was to arrive at a fair value so that a given commodity
during a particular period of time gets valued at the same rate which
becomes the principal yard stick for determination of assessable value. This
value would be the price actually paid or payable if there are no conditions or
restrictions. In cases where there are certain conditions the transaction value of
identical goods sold in India or transaction value of similar goods could be taken
for assessment. The code has set out alternate methods to be followed in case
the transaction value cannot be straightway determined. This code recognises
the fact that a prudent buyer gets a favourable value for goods contracted for by
him. This transaction value of imported goods is the price actually paid or payable
for the goods when sold for exports to the country of importation plus the cost
of services variously provided for in the code itself to the extent these are
incurred by the buyer but are not actually reflected or shown in the price paid or
payable.
However transaction value is not acceptable in cases where certain limitations
exist in the form of restrictions, conditions, proceeds and relationships. And under
rule 10 of the Customs Valuation Rules, the Importer is required to furnish
full and accurate particulars of the goods to be imported and in the case of misdeclaration made, the goods are liable to confiscation and the Importer liable to
penalty and even prosecution. In addition to the normal commercial documents
like Invoice, Bill of Lading etc., the
Importer is required to fill in a prescribed declaration form.

8
Once description is accurately given and the assessable value is determined, what
remains to be done is the computation of the actual amount of duty leviable. For
this we have to classify the goods or in other words place the goods in the
appropriate slot in the tariff schedule.
Till 1975 our import tariff was based on the League of Nations nomenclature of
goods. It had 87 headings with a large number of subheadings. The last item 87
was a residuary item to cover all goods not specified else- where.
On account of the vast scientific and technological advances made later, the existing
tariff structure was found wanting. And during this time the international system
of classifying goods known as the Brussels Tariff of Nomen- clature has been
rapidly gaining ground and we decided to adopt it but with certain modifications to
meet some of our specific needs. This was done by enacting the Customs Tariff
Act 1975.
Already by the late sixties itself the trading nations had felt the need for evolving
a harmonised or rationalized system of classification of goods to meet the needs of
all commercial transactions for it had been found that a commodity could be classified
up to 17 times in the course of a single international transaction. The development of
automatic data transmission technique was also hampered by such phenomena.
The result was the evolution of "Harmonised Commodity Description and
coding System" popularly known as Harmonised System or H.S.
What is HS Code?
The Harmonized Commodity Description and Coding System (or Harmonised System), is a product
classification system used in International Trade by customs worldwide. Developed by World
Customs Organization (WCO). Brussels.
In India, the HS code is of 8 digit level. The first two digits stands for chapter code. The next two digits
stands for main product code and the rest four digits denotes the sub category of products.
The purpose of such structuring is to enable the various digit levels to be utilised
for different purposes. The H.S. is of immense help to producers, dealers, importers,
exporters, shippers, customs officials, dealers in external trade, transport operators
and statisticians. It is so versatile that apart from the chapters dealing with goods
at international levels, we in India have two chapters added for our own specific
needs, one dealing with some specific groupings of machinery and their parts,
personal luggage, ship stores etc. and the other for some specified medicinal
drugs, equipments, works of art, gifts and the like. The interpretative rules
are clearly framed so that classification disputes are kept at a very low level. The
nomenclature is of immense use as a
base for domestic tariff, as a base
for statistical coding, as a base for harmonisation of economic classification and
lastly as an
international economic language, which everybody will understand. The benefits that
accrue are generation of more reliable and detailed national and international trade
statistics. Transactions between various institutions and documentation such as
invoice, Customs declarations and returns to the Government get standardised.
The FT Policy 04 - 09 is contained in Hand book of Procedures Vol. I and II. The
FT Policy is aligned with Customs Tariff 04 - 05; this is a facilitation.
There is publication for sale, Alphabetical IITC (HS) classification and terms aligned with
Customs Tariff 04 - 05
Example
Exim Code
:
Item description
:
Policy
:
Conditions relating
to the Policy
Unit
:
Duty
Basic
:
PRF
:
ADD
:
Total
:
Total with EC
:
Effective
EC = Education Cess
4204 0040
Leather belting for machinery
Free
Kg
20 percent
16.32
39.584
40.376
The Finance Bill 2011 stipulates self-assessment of Customs duty in respect of goods
imported or exported by the importer or exporter as the case may be. This means that the
responsibility for assessment would be shifted to the importer/exporter while the Customs officers
would have the power to verify such assessments and make re-assessment where necessary.
10
CHAPTER 4
Foreign Trade Policy 2015 - 20

TRADE FACILITATION AND EASE OF DOING BUSINESS
Online filing of documents / applications, paperless transactions and 24x7 clearance
The DGFT provides the facility of online filing of various applications under the FTP by exporters /
importers, such as IEC. However, certain documents such as certificates issued by Chartered
Accountants/ Company Secretary / Cost Accountant etc. are required to be filed in physical form only. It
has now been decided to develop an online procedure to upload digitally signed documents by
Chartered Accountant / Company Secretary / Cost Accountant. To start with, applications under MEIS/
SEIS and Advance Authorisation and DFIA are being covered, and applications for EPCG will be taken up
in the next phase. Online facility for filing of Excise Duty refund (under Chapter 7) is also being made
available.
Further, facility has been created to upload documents in Exporter / Importer Profile. There will be no
need to submit copies of permanent records/ documents (e.g. IEC, Manufacturing licence, RCMC, PAN
etc.) repeatedly with each application, once uploaded.
On the export side, landing documents of export consignment as proofs for notified market can be
digitally uploaded; viz. an exporter may upload the scanned copy of Bill of Entry under his digital
signature.
On the import side, the facility of 24x7 Customs clearance for specified imports has been made
available at 18 sea ports across the country besides certain airports.
Online complaint registration and monitoring system

An Electronic Data Filing Help Desk is available to assist the exporters in filing online applications on the
DGFT portal and resolving other Electronic Data Filing related issues. An Online Complaint registration
and monitoring system allows users to register complaint and receive status / reply online, details of
which are available on the DGFT website.
Online inter-ministerial consultations
Online inter-ministerial consultations for approval of export of SCOMET items, Norms fixation, Import
Authorisations, Export Authorisation, will start in a phased manner, with the objective to reduce time
for approval. As a result, there would not be any need to submit hard copies of documents for these
purposes by the exporters.
Proposed measures for inter-Departmental coordination
1)Online message exchange with CBDT for PAN data and with Ministry of Corporate Affairs for CIN and
DIN.
11
2)Online issuance of Export Obligation Discharge Certificate.
Other measures for trade facilitation

Consignments of items meant for exports shall not be withheld / delayed for any reason by any State /
Central Government.
Certain information, like mobile number, e-mail address etc. has been added as mandatory fields, in
IEC data base. This information would help in better communication with exporters. SMS / email would
be sent to exporters to inform them about issuance of authorisations or status of their applications.
For faster and paperless communication with various committees of DGFT, dedicated email addresses
have been provided for Norms Committee, Import Committee and Pre-Shipment Inspection Agency for
faster communication.
GENERAL PROVISIONS REGARDING- Trade Policy 2015
Ease of doing business
Electronic form for e-IEC has now been operationalised; however, an assessee
continues to have the option to file an application for obtaining IEC manually. DIN
/DPIN would be required in case of Company/LLP.
Only one IEC would be given against one PAN. If any PAN holder has more than one
IEC, extra IEC will be disabled.
The limited list of three mandatory documents for import / export would now be
required. Exports Document would include invoice cum packing list, shipping bill and
Bill of Lading/Airway Bill. Imports documents would include include invoice cum
packing list, bill of entry and Bill of Lading/ Airway Bill.
Approved Exporter Scheme introduced for Self Certification of Certificate of Origin in
respect of manufactured goods originating from India with a view to qualify for
preferential treatment under PTA, FTAs, CECA and CEPA, has been introduced:
Status Holders will be recognized by DGFT as Approved Exporters for self-certification
based on availability of required infrastructure, capacity and trained manpower as per
the prescribed parameters:
The said scheme will come into effect only when India incorporates the scheme into a
specific agreement with its partner/s and the same is appropriately notified by DGFT.
Exporters not covered by the Approved Exporter Scheme shall continue to apply for
certificates of origin from EIC or the other bodies designated for the purpose.
Penal action and Denied Entity List
Penal action may be taken in accordance with the FTDR Act, the FTR Rules and any
Orders made thereunder, FTP or any other law, inter alia on the following grounds:
12
Failure to deposit requisite amount within the period specified in demand notice
issued by DoR and / or DGFT;
Failure to fill true / correct information / particulars in the self-certification system
under various schemes.
Provisions in relation to the Denied Entity List (DEL) have been placed in the FTP, in
terms of which defaulters may be placed under the DEL by issuance of an order. Such
defaulters may be refused grant or renewal of a license, certificate, scrip or any
instrument bestowing financial or fiscal benefits. The name may be removed from the
DEL if the defaulter completes the Export Obligation / pays penalty / rectifies the
non-compliance which is highlighted by the RA.
Procedural compliances in relation to FTP Schemes
For any benefit to accrue to a supporting manufacturer, the names of both supporting
manufacturer as well as the merchant exporter must figure in the concerned export
documents, especially in ARE-1 / ARE-3 / Shipping Bill / Bill of Export/ Airway Bill.
This will be a problematic and onerous condition to be complied with. However, it will
be important to ensure that the names of both supporting manufacturer and
merchant exporter are reflected in all the prescribed documents, which may not
currently be the practice.
Similarly, third party exports will be allowed under FTP provided export documents
such as shipping bills indicate name of both manufacturing exporter/manufacturer
and third party exporter(s). Further, BRC, export order and invoice should be in the
name of third party exporter.
Any communication by the exporter / importer with the DGFTs office, including the
RAs, must have the name, signature, email ID of the person duly authorised by the
firm / company to send such communications.
The definition of an Actual User (both Industrial and Non-Industrial) has been
amended to include a condition that the premises at which the goods are used by the
person (natural or legal) must have a definitive postal address
Deemed Exports
The categories of supplies entitled to deemed export benefit have been bifurcated
between manufacturer and main/sub-contractor.
The following supplies are entitled for deemed export benefit by manufacturer:
Supply of goods against Advance Authorisation / Advance Authorisation for
annual requirement / DFIA;
Supply of goods to EOU / STP / EHTP / BTP;
Supply of capital goods against EPCG Authorisation;
Supply of marine freight containers by 100% EOU (Domestic freight containersmanufacturers) provided said containers are exported out of India within 6
months or such further period as permitted by customs;
The rest of the supplies are entitled for deemed export benefit by main/subcontractors.
13
Changes in categories of supplies

Earlier the benefit in respect of supply of goods to nuclear power projects awarded
through ICB was not available. Such supplies will now be entitled for the benefit.
The benefit of deemed export earlier available to projects funded by UN agencies
has been extended to supplies made to UN or International Organization for their
official use and projects financed by them.
List of notified agencies in respect of supply of goods to projects financed by
multilateral or bilateral agencies/funds is curtailed. The following agencies have
been removed
- International Fund for Agricultural Development (IFAD)
- Organisation of Petroleum Exporting Countries (OPEC) Fund;
- Yen Credit channelised through Japan International Cooperation Agency (JICA)
(development component only)
- Swedish International Development Agency (SIDA)
Changes in benefits to supplier/recipient
Exemption from Terminal Excise Duty has been granted for supplies to United
Nation or International organization for their official use and projects financed by
them.
Exemption/refund against supply to DFIA is not available since CVD is not
exempted.
Interest on delayed in refund of terminal excise duty and duty drawback
Simple interest @ 6% per annum will be payable on delay in refund of duty
drawback and terminal excise duty under the scheme, provided the claim is not
settled within 30 days from the date of issue of final Approval letter by RA.
Introduction of risk management and internal audit mechanism
Cases on random basis to be selected and scrutinized by internal audit team,
headed by Joint DGFT.
RA may re-assess any case where any erroneous / in-eligible payment has been
made / claimed, and amount can be recovered along with interest @ 15% per
annum on recoverable amount.
QUALITY COMPLAINTS A ND TRADE DISPUTES

In an endeavour to resolve quality complaints and trade disputes between
exporters and importers, a new chapter on Quality Complaints and Trade
Disputes has been incorporated in the FTP. While these provisions were present
in some form in the erstwhile policy, these have now been consolidated into a
separate chapter.
14
Committee on Quality Complaints and Trade Disputes

For resolving such disputes at a faster pace, a Committee on Quality Complaints
and Trade Disputes (CQCTD) is being constituted in 22 offices and would have
members from Export Promotion Council/FIEO/APEDA/EICs. The CQCTD will be
responsible for enquiring and investigating into all quality related complaints and
other trade related complaints falling under the jurisdiction of the respective RAs.
It will take prompt and effective steps to redress and resolve the grievances of the
importers / exporters / overseas buyers, preferably within three months of receipt
of the complaint.
CQCTD proceedings are only reconciliatory in nature and the aggrieved party is
free to pursue any legal recourse.
Complaints of the following nature will be considered:
1.Complaints received from foreign buyers in respect of poor quality of the
products supplied by exporters from India;
2.Complaints of importers against foreign suppliers in respect of quality of the
products supplied; and
Complaints of unethical commercial dealings categorized mainly as non-supply /
partial supply of goods after confirmation of order; supplying goods other than the
ones as agreed upon; non-payment; non adherence to delivery schedules etc.
Obligation on the part of importer/ exporter
Importers / Exporters are required to comply with the provisions of Rule 11

of the FTR Rules in terms of which every importer / exporter is required to
submit complete details of the goods in question to the best of his
knowledge and belief.
Exporters of specified commodities are required to conform to the

prescribed standards on quality control and pre-shipment inspection.
Action against erring exporters may be taken in terms of Sections 8, 9(2), 9(4) and
11(2) of FTDR Act and FTR Rules, including suspension / cancellation of IEC or
scrip / licence issued, or fiscal penalty.
15
CHAPTER
Foreign Trade Policy 2015 - 20
EXPORT PROMOTION MEASURES

Foreign Trade Policy
Merchandise Exports from India Scheme (MEIS)
Schemes such as FPS, MLFPS, FMS, AIIS, IEIS and VKGUY [offering separate duty
credit scrips with varying conditions] have been merged into a single Scheme viz.,
MEIS with no conditions attached thereto. The objective of MEIS is to provide
rewards to exporters for offsetting infrastructural inefficiencies and associated costs
involved in export of goods/products, which are produced/manufactured in India,
especially those having high export intensity, employment potential and thereby
enhancing Indias export competitiveness. Under MEIS, exports of notified goods to
notified markets will be eligible for rewards in the form of duty credit scrips. The key
features of the MEIS are as follows:
MEIS Entitlement : 2% / 3% / 5% of FOB value of notified goods exported to notified
markets [based on three distinct categories framed and covered in Appendix 3B].
Country Groups:
Category A: Traditional Markets (30) - European Union (28), USA, Canada. A QUICK
ANALYSIS OF FOREIGN TRADE POLICY 2015-20 Category B: Emerging & Focus
Markets (139), Africa (55), Latin America and Mexico (45), CIS countries (12), Turkey
and West Asian countries (13), ASEAN countries (10), Japan, South Korea, China,
Taiwan,
Category C: Other Markets (70).
Features :
FOB value of exports in free foreign exchange or FOB value of exports as given in
the Shipping Bills in free foreign exchange, whichever is less, shall be considered.
FOB value of export of goods through Courier or Foreign Post Offices using eCommerce (as notified in Appendix-3C) only upto Rs. 25,000/- per consignment shall
be considered [i.e. FOB value of a single consignment exceeding Rs. 25,000/- shall
not be entitled].
Different Scrips offered to different sectors as well as for different markets have
been realigned into a single comprehensive list of specified goods/products to be
exported to specified markets.
Eligibility
Can be claimed by the Company/Firm who has realized foreign exchange.
16
Supporting manufacturer [subject to disclaimer from the Company/Firm who has

realized foreign exchange].
Duty credit scrip and goods imported/domestically procured against them shall be
freely transferable.
Utilization Duty credit scrip can be utilized for a wide range of duty/tax/fee
payments. The same has been elaborated in the common provisions section
[applicable for MEIS and SEIS].
Ineligible Categories
The following exports categories/sectors shall be ineligible:
EOUs / EHTPs / BTPs/ STPs who are availing direct tax benefits/exemption.
Supplies made from DTA units to SEZ units.
Export of imported goods covered under paragraph 2.46 of FTP.
Exports through trans-shipment, meaning thereby exports that are originating in
third country but trans-shipped through India.
Deemed Exports.
SEZ/EOU/EHTP/BPT/FTWZ products exported through DTA units.
Items, which are restricted or prohibited for export under Schedule-2 of Export
Policy in ITC (HS), unless specifically notified in Appendix 3B.
Service Export.
Red sanders and beach sand.
Export products which are subject to Minimum export price or export duty.
Diamond Gold, Silver, Platinum, other precious metal in any form including plain
and studded jewellery and other precious and semi-precious stones.
Ores and concentrates of all types and in all formations.
Cereals of all types.
Sugar of all types and all forms.
Crude/petroleum oil and crude/primary and base products of all types and all
formulations.
Export of milk and milk products.
Export of Meat and Meat Products.
17
Products wherein precious metal/diamond are used or Articles which are studded
with
Exports made by units in FTWZ.
Supplies made from DTA units to SEZ units which were eligible for FPS benefit
hitherto [in the range of 2% to 5%], have now been specifically included in the
ineligible categories.
The ineligible categories of exports/sectors have been significantly expanded to
include red sanders and beach sand, products wherein precious metal/diamond are
used or articles which are studded with precious stones, and exports made by units
in FTWZ.
Service Exports from India Scheme (SEIS)
In FTP 2015-20, the Served from India Scheme (SFIS) has now been recast into the
Service Exports from India Scheme(SEIS). The objective of SEIS is to encourage
export of notified Services from India. Under SEIS, Service providers of notified
services will be eligible for rewards in the form of duty credit scrips. The rates of
reward under SEIS are 3% and 5% on the net foreign exchange earned from notified
services.
The key features of the SEIS are as follows:
Entitlement Service Providers of notified services will be entitled to Duty Credit Scrip
at notified rates (3% and 5%) on the net foreign exchange earned. The entitlement
rates under SEIS (3% / 5%) are substantially lower as compared to the entitlement of
10% under SFIS scheme (5% for Hotels). This is a substantial reduction in the benefit,
atleast for those exporters who were fully utilizing their SFIS scrips; The list of
notified services and rates of rewards are specified under APPENDIX- 3D of the
Handbook of Procedures, which is the largely the same as in case of the erstwhile
SFIS scheme.
The list includes: Services with 5% reward Professional services (about 10 services),
specified research and development services, specified rental/leasing services,
specified communication services (about 5 services), specified construction and
related engineering services, A QUICK ANALYSIS OF FOREIGN TRADE POLICY
2015-20 educational services (excluding capitation fee), specified environmental
services, specified health related and social services, specified tourism and travelrelated services, specified recreational, cultural and sporting services (other than
audiovisual services), specified transport services including airport operations and
ground handling Services with 3% reward Other business services (about 19 services),
specified tourism and travel-related Services The list of notified services is largely the
same as in case of the SFIS scheme. However, the list of notified services and the
rates of rewards will be reviewed after 30.9.2015. Therefore, the services which have
not been included in SEIS should make a Representation so that their services
exports are also covered by SEIS benefit. Eligible Service providers SEIS is applicable
to all service providers located in India. However, only services provided in the
manner / mode specified at Para 9.51 (i) & (ii) are eligible, viz.
18
Supply of a service from India to any other country (Mode 1-Cross border trade)
Supply of a service from India to service consumers of any other country (Mode
2- Consumption abroad)
Supply of a service through a commercial presence in any other country, or through
presence of natural persons in any other country are not eligible for SEIS benefit.
Under SFIS, the benefit was available to Indian Service Providers. FTP 2015-20
provides that SEIS shall apply to Service Providers located in India instead of Indian
Service Providers.
Ineligible Services
List of ineligible services is given at Para 3.19 of the FTP and inter-alia covers Services
related to the Financial Sector, Services where foreign exchange is earned through
contract/regular employment abroad, Service providers in Telecom Sector, Foreign
exchange earnings for services provided by Airlines and Shipping Lines plying from
one foreign country to another, where the routes are not touching India, Payments
received from services received from EEFC Account, etc.
Threshold
Minimum net free foreign exchange earnings in the preceding year to be eligible for
Duty Credit Scrip
For Individual Service Providers and Sole Proprietorship - $ 10,000/Other Service Providers-$ 15,000/Calculation of Net Foreign Exchange earned
Net Foreign Exchange = (Gross Earnings of Foreign Exchange relating to service
sector in the Financial year) minus (Total expenses / payment / remittances of
Foreign Exchange by the IEC holder, relating to service sector in the Financial year)
If the IEC holder is a manufacturer of goods as well as service provider, then the
foreign exchange earnings and Total expenses / payment / remittances shall be taken
into account for service sector only
This clears the existing ambiguity as regards Calculation of Net Foreign Exchange
earned.
Utilization of SFIS scrips and transferability
As in the case of MEIS, the reward scrips under SEIS will not carry any actual user
condition and will be freely transferable and usable for all types of goods and services.
CENVAT Credit / Drawback
As in case of MEIS, creditable levies (Additional Customs duty/excise duty/Service
Tax) debited to SEIS scrips would be eligible for CENVAT credit or drawback. Basic
Custom duty paid in cash or through debit under Duty Credit scrip shall be adjusted
for Duty Drawback benefits .
MEIS: PROCEDURE
An application for claiming benefits on exports (other than export of goods through
courier or foreign post offices using e-Commerce) shall be filed online, using digital
signature on DGFT website with RA concerned in ANF 3A.
The hard copy of the documents such as application, EDI shipping bills, Electronic
bank realisation certificate (e-BRC) and RCMC need not be submitted to RA if
application is filed for exports made through EDI ports. The applicant shall submit
the proof of landing in the manner prescribed under Paragraph 3.03 of HoP.
The applicant needs to submit export promotion copy of non-EDI Shipping Bills in
case application is filed for exports made through non-EDI ports. Further, the
19
applicant shall upload scanned copies of any other prescribed documents for claiming
scrip unless specified otherwise.
No manual feeding of Shipping Bill details shall be allowed for EDI shipments in the
online system.
The applicant shall retain documents which are not required to be submitted in
original, for period of 3 years from the date of issuance of scrip.
Claiming benefits shall be determined from Let Export Date.
When MEIS is available to all countries, proof of landing shall not be required to be
submitted for claiming the reward.
Proof of landing of export consignment can be digitally uploaded for notified market.
Any of the following documents can be considered as a proof of landing of export
consignment in notified market:
A self attested copy of import bill of entry filed by importer in specified market, or
Delivery order issued by port authorities, or
Arrival notice issued by goods carrier, or
Tracking report from the goods carrier duly certified by them evidencing arrival of
export cargo to destination market, or
Rail/Lorry receipts of transportation for land locked notified.
Any other document that may satisfactorily prove to RA that goods have landed
in/reached the notified market.
The applicant shall have option to choose Jurisdictional RA on the basis of Corporate
Office/ Registered Office/Head Office/Branch Office address endorsed on IEC for
claiming MEIS benefit. This option need to be exercised at the beginning of FY and
once an option is exercised, no change would be allowed for claims relating to that
year. In other words, if an exporter has chosen Chennai RA for claiming benefits for
exports made in FY 2015-16, then all claims for exports made in FY 2015-16,
irrespective of the date of application shall be made to RA Chennai only.
In the existing policy provisions no facility for changing the Jurisdictional RA was
available. This may benefit the applicant to choose the Jurisdictional RA in order to
expedite the process of obtaining credit scrip.
MEIS scrip shall be issued with single port of registration which shall be the port of
export.
Export shipments filed under all categories of the shipping bills would need the
following declaration on the shipping bill to claim MEIS benefit:
We intend to claim rewards under Merchandise Exports From India Scheme (MEIS)
Such declaration of intent shall be mandatory with effect from July 1, 2015 in all
Shipping Bills (other than free Shipping Bills).
Application for obtaining duty credit scrip shall be filed within a period of:
20
Twelve months from the Let Export date; or

Three months from date of:
- Uploading of EDI shipping bills onto the DGFT server by Customs
- Printing/ release of shipping bills for Non EDI shipping bills whichever is later
STATUS HOLDER
Status holders are business leaders who have excelled in international trade and have
successfully contributed to countrys foreign trade.
Status category
The export performance will be counted on the basis of FOB value of export
proceeds realized during current and previous two FY
Category : Export Performance FOB / FOR Value (in US$ in Millions)
One Star Export House US$ 3 Million
Two Star Export House US$ 25 Million
Three Star Export House US$ 100 Million
Four Star Export house US$ 500 Million
Five Star Export House US$ 2000 Million
For granting status, export performance is necessary in at least two out of three
years.
For deemed exports, FOR value of exports in Indian Rupees shall be converted
into US$ at the exchange rate notified by the CBEC, as applicable on 1st April of each
FY.
Grant of double weightage
(a) The exports by IEC holders under the following categories shall be granted double
weightage for calculation of export performance for grant of status. (i) Micro, Small &
Medium Enterprises (MSME) as defined in Micro, Small & Medium Enterprises
Development (MSMED) Act 2006. (ii) Manufacturing units having ISO/BIS. (iii) Units
located in North Eastern States including Sikkim and Jammu & Kashmir. (iv) Units
located in Agri Export Zones.
(b) Double Weightage shall be available for grant of One Star Export House Status
category only. Such benefit of double weightage shall not be admissible for grant of
status recognition of other categories namely Two Star Export House, Three Star
Export House, Four Star export House and Five Star Export House.
(c) A shipment can get double weightage only once in any one of the above category.
Privileges of Status Holders:
A Status Holder shall be eligible for privileges as under:
(a) Authorisation and Customs Clearances for both imports and exports may be
granted on selfdeclaration basis; A QUICK ANALYSIS OF FOREIGN TRADE POLICY
2015-20
(b) Input-Output norms may be fixed on priority within 60 days by the Norms
Committee;
(c) Exemption from furnishing of Bank Guarantee for Schemes under FTP, unless
specified otherwise anywhere in FTP or HBP;
(d) Exemption from compulsory negotiation of documents through banks. Remittance
/ receipts, however, would be received through banking channels;
(e) Two star and above Export houses shall be permitted to establish Export
Warehouses as per Department of Revenue guidelines.
21
(f) Three Star and above Export House shall be entitled to get benefit of Accredited
Clients Programme (ACP) as per the guidelines of CBEC (website: http://cbec.gov.in).
(g) The status holders would be entitled to preferential treatment and priority in
handling of their consignments by the concerned agencies.
(h) Manufacturers who are also status holders (Three Star/Four Star/Five Star) will
be enabled to self-certify their manufactured goods (as per their IEM/IL/LOI) as
originating from India with a view to qualify for preferential treatment under different
preferential trading agreements (PTA), Free Trade Agreements (FTAs), Comprehensive
Economic Cooperation Agreements (CECA) and Comprehensive Economic Partnership
Agreements (CEPA). Subsequently, the scheme may be extended to remaining Status
Holders.
(i) Manufacturer exporters who are also Status Holders shall be eligible to self-certify
their goods as originating from India as per para 2.108 (d) of Hand Book of Procedures.
(j) Status holders shall be entitled to export freely exportable items on free of cost basis for export
promotion subject to an annual limit of Rs 10 lakh or 2% of average annual export realization during
preceding three licencing years whichever is higher
DUTY EXEMPTION & REMISSION SCHEMES

Amendments in Advance Authorization Scheme
Imports under Advance Authorisation would now also be exempted from Transition
Product Specific Safeguard Duty. Earlier, the exemption was restricted to Basic
Custom Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty and
Safeguard Duty.
Advance Authorization for annual requirements would only be issued for items
notified in SION and it shall not be available in cases of adhoc norms.
Validity period for import under Advance Authorisation has been prescribed as twelve
months from the date of issue of Authorisation. In respect of Deemed Export, validity
period would be co-terminus with the contracted duration of project execution or
twelve months from the date of issue of Authorisation, whichever is more.
In case of supplies to the turnkey projects in India under Deemed Export category or
turnkey projects abroad, the Export Obligation Period (EOP) has been prescribed to
be 18 months or contracted duration of the project execution, whichever is more.
Similarly, in case of defence, military store, aerospace and nuclear energy the EOP
has been prescribed to be 24 months of date of issue of authorisation or co-terminus
with contracted duration of the export order, whichever is more.
In respect of BIFR/Rehabilitation units, it has been clarified that if time period up-to
which Export Obligation extension is to be granted is not specifically mentioned in the
BIFR order, then the Export Obligation extension of two years from the date of expiry
of EOP or the date of BIFR order, whichever is later shall be granted without payment
of composition fee.
A detailed list of items (including vegetables/edible oils, Cereals, Spices etc.) has been
issued which are in-eligible for importation on self declaration basis.
Pre-import condition has been prescribed on importation of drugs from
un-registered sources. The new provision empowers DGFT to notify such pre-import
condition in suitable cases.
Amendments in DFIA Scheme
22
Detailed procedure has been prescribed for the transfer of the DFIA licence. The same
has been mentioned hereunder:Applicant shall file online application to Regional Authority concerned before starting
export under DFIA.
Export shall be completed within 12 months from the date of online filing of
application and generation of file number.
While doing export/supply, Applicant shall indicate file number on the export
documents viz. Shipping Bill / Airway Bill/ Bill of Export / ARE-1 / ARE-3, Central
Excise certified Invoice.
After completion of exports and realization of proceeds, request for issuance of
transferable Duty Free Import Authorisation may be made to concerned Regional
Authority within a period of twelve months from the date of export or six months (or
additional time allowed by RBI for realization) from the date of realization of export
proceeds, whichever is later.
Applicant shall be allowed to file application beyond 24 months from the date of
generation of file number as per paragraph 9.03 of HBP.
Separate DFIA shall be issued for each SION and each port.
Exports under DFIA shall be made from a single port as mentioned in paragraph 4.37
of HBP.
No Duty Free Import Authorisation shall be issued for an export product where SION
prescribes Actual User condition for any input.
Regional Authority shall issue transferable DFIA with a validity of 12 months from the
date of issue. No further revalidation shall be granted by Regional Authority.
A QUICK ANALYSIS OF FOREIGN TRADE POLICY 2015-20
In respect of the resultant products requiring specified inputs, exporters shall be
required to provide declaration with regard to technical characteristic, quality and
specification in Shipping Bill.
It has been clarified that Duty Free Import Authorization Scheme shall not be
available for Gems and Jewellery sector.
23
CHAPTER
EXPORTS - FORMALITIES FOR COMMENCING

INTRODUCTION :
The Ministry of Commerce, Government of India has, outlined the principal objectives of
our Foreign Trade Policy, keeping in view the need for boosting our export efforts.
The policy has been reoriented and many new schemes introduced to achieve the above
objective by facilitating better and smooth administration and eliminating ambiguity and
procedural constraints. The principal objectives of the Government policy in this
regard are :
a)
To establish the framework for globalisation of India's Foreign

Trade :
b)
To promote the productivity, modernisation and competitiveness of

Indian industry, agriculture and services with a view to enhance
the export capabilities;
c)
To encourage the attainment of high and internationally

accepted standards of quality for India's products abroad;
d)
To augment India's exports by facilitating access to raw

materials, intermediaries, components, consumables and Capital goods
from international market;
e)
To minimise
Trade;and
f)
controls
in
the
framework
of
India's
Foreign
To streamline the procedures connected with export and import.

Unless our exports pick up in a big way, the gap in the balance of
trade cannot be bridged in order to bring our economy on a sound
footing.
Definition of IEC Code

IEC Code is unique 10 digit code issued by DGFT Director General of Foreign
Trade , Ministry of Commerce, Government of India to Indian Companies.
Full form of IEC Code

Full From of IEC Code is : Importer Exporter Code . To import or export in India,
IEC Code is mandatory. No person or entity shall make any Import or Export without IEC Code
Number.
IEC Applications/ Authority

For obtaining IEC No., there are two options i.e.
1. Physical application
2. On-line application
24
Exporters exempted from filing documents in physical form

With an aim to simplify procedures for exporters, the Government today exempted them from
mandatory filing of documents in physical form to obtain registration certificates for shipment of a few
commodities. For commodities like cotton and cotton yarn, an exporter has to obtain registration
certificates(RCs) for their shipment.It said that the requirement of submission of hard copies of the
documents such as printout of online application, Letter of Credit or foreign inward remittance
certificate or proof of advance payment and export contract is dispensed with. There shall be no
other change in either the policy or condition for export of cotton, cotton yarn, non-basmati rice,
wheat and sugar notified earlier through respective notifications, public notices, policy circulars
etc.The step would help in reducing transaction cost for exporters.
There are certain commodities for which online registration procedure has been prescribed for export.It
was made mandatory in July2013 that after filing online applications, exporters are required to furnish
printout of the application submitted online besides other certificates and paper.The countrys exports
were suffering from the cost disadvantage. The average cost to an exporter on account of transaction
cost has been monetised at a level of $945 per container as compared to $460 in China, $ 450 in
Malaysia and &625 in Vietnam.
Physical Application
Apply in the Aayaat Niryaat Form (one copy) along with the documents listed below to the
Regional Authority. In respect of SEZ and EOUs, applications for IEC No. are to be sent to the
concerned Development Commissioner of the Zone having jurisdiction over the SEZ/ EOU. For
STP/EHTP/BTP, the RAs are the authorities for IEC issue. Each individual page of the
application is to be signed by the applicant. Fill in A, B and D of the application form.
The Registered Office or Head Office may apply for allotment of an IEC number. Read the
Guidelines for Applicants in the AN Form carefully before filling in the application form.
Only one IEC would be issued/ allowed against a single PAN number.
The Branch Office of a Foreign Company shall also apply to the jurisdictional Regional
Authority, along with necessary documents.
In case of STPI/EHTP/BTP units, the Regional Offices of the DGFT i.e. RAs having
jurisdiction over the district in which the Registered/ Head Office of the STPI unit is located, shall
issue or amend the IECs.
All pages of the application should be signed.
Change of Name - Whenever there is a change in the name, address or constitution of the
holder of an IEC Number, such change should be intimidated within 30 days to the Authority
concerned.
Documents
The following documents are to be sent along with the application for allotment of IEC No.
1. DD for Rs.250 for payment fees, in favour of concerned Regional Office of the
DGFT. The fee can also be paid through Electronic Fund Transfer (EFT).
2. Certificate from the applicants banker
25 in the format. There should not be any
qualifying remarks by the banker, like e.g. conforms with the specimen sign on our
records.
3. A copy of Permanent Account Number, duly attested by the applicant (self certified copy).
4. Passport size photograph (two nos.) of the applicant. Photograph on the bankers
certificate is to be attested by the applicants banker.
Self-addressed Envelope
Enclose a self-addressed envelope, affixing a postage stamp of Rs.30/- therein.
File Cover
All the documents and envelope may be kept secured in a file cover.
Submission
The application file may be sent by post or hand delivered at the concerned regional authority
(RA) office of the DGFT.
On-line Application
Exporters and importers will now be able to apply online for their new Importer Exporter Codes (IEC)
instead of physically submitting papers and making payments at various offices. IEC is a unique 10-digit
code given to exporters and importers by the DGFT without which they are not allowed to carry out
international trade unless given special exemption. The Directorate General of Foreign Trade (DGFT)
has started the process of online filing and processing of applications and issuing of codes in a digital
format, an official release said. The required documents for getting the IEC can be uploaded by the
applicants online and the required fee can be paid through net banking. Processing of such applications
by regional authority of DGFT would also be done online and the digitally signed e-IEC would be
issued/e-mailed to the applicants within two working days, the release added. In case the application is
incomplete or otherwise ineligible, the same shall be rejected and an auto generated rejection letter/email (with reasons for rejection) would be sent to the applicant within two working days. The DGFT is
also working on enabling payment of fee through debit/credit cards, which would further facilitate this
process. Once implemented the Online system would be made mandatory. Till that happens, the existing
offline/manual system has also been allowed side by side, in order to facilitate those applicants who do
not have net banking facility, the release added. Efforts are also on for message exchange/integration of
the DGFTs system with Income Tax department and Ministry of Corporate Affairs for verification of
PAN and other details. Once implemented, this would further reduce the processing time of e-IEC
applications to possibly one day, the release said.
IEC to Proprietor/ PAN Holder

Only one IEC would be issued against a single PAN number. Any proprietor can have only one IEC
number and in case there are more than one IEC allotted to a proprietor, the same may be
surrendered to the issuing office for cancellation.
Endorsement to Banker
A copy of IEC No. shall be endorsed to the concerned banker.
Validity
The IEC No. allotted to a firm/company will be valid for all its branches/ divisions/ units/
factories as indicated in the IEC Certificate, to import/export of any commodity by that firm/
company.
There being no date of expiry, the IEC once allotted is valid till it is revoked.
26
Duplicate Copy
Where an IEC Number is lost or misplaced, the Regional Authority who issued the original
certificate may consider requests for grant of a duplicate copy of IEC Number, if
accompanied by an affidavit.
Surrender of IEC
If an IEC holder does not wish to operate the allotted IEC number, he may surrender the same
by informing the issuing authority. On receipt of such intimation, the issuing authority shall
immediately cancel the same and electronically transmit it to DGFT and the Customs.
Reactivation of IEC
The inoperative IEC may be reactivated upon furnishing a fee to the Regional Authority.
Profile of Importer-Exporter
Each importer/ exporter shall file importer/ exporter profile once with RA in ANF 1. RA
shall enter such information in database so as to dispense with need for asking information again.
In case of any change in information given in ANF 1, importer/ exporter shall intimate same to the
RA.
Modification of existing IEC
An IEC holder must get the change in name/ address/ constitution incorporated within 90 days of
such change, provided, however, RA issuing IE Code may, condone delay on payment of
penalty of Rs.1000/-.
An application for the modification of existing IEC number, apply in the NAF 2A (filling its part A,
C and D) as follows:
(i) Only one application is to be submitted (ii)
Sign each page of the application (iii) enclose
the documents listed below,
(iv) Original (existing) IEC.
The application for issue or modification of IEC shall indicate the name and designation of the
person whose photograph has been affixed on the Bank Certificate. A photograph of the person
along with his/ her name and designation shall also be affixed on the IEC No. to be issued.
A. Documentary Proof Enclose as follows:
i)
Proprietory firm a) date of birth of individual
b) number of IECs held with their details
ii)
Companies date of incorporation
iii)
Others date of formation
B. Demand Draft No fee is payable for modification/ amendment, if such application is filed
in 60 days from the date of issue. Otherwise a fee of Rs.200 is payable in the form of
DD.
But no fees is payable for inclusion of PAN number in the old IEC. IEC
No: Exempted Categories
The following categories of importers or exporters are exempted from obtaining
Importer - Exporter Code (IEC) number:
1.
Importers covered by clause 3 (1) [except sub-clauses (e) and (l)] and
exporters covered by clause 3(2) [except sub-clauses (i) and (k)] of the Foreign
Trade (Exemption from application of Rules in certain cases) Order,
1993.
27
2. Ministries/Departments of the Central or State Government.

3. Persons importing or exporting goods for personal use not connected with trade
or manufacture or agriculture.
4.
Persons importing/exporting goods from/to Nepal provided the CIF value of a

single consignment does not exceed Indian Rs.25,000.
5. Persons importing/exporting goods from/to Myanmar through Indo-Myanmar order

areas provided the CIF value of a single consignment does not exceed Indian
Rs.25,000. However, the exemption from obtaining Importer- Exporter Code (IEC)
number shall not be applicable for the export of Special Chemicals, Organisms,
Materials, Equipments and Technologies (SCOMET) as listed in Appendix- 3,
Schedule 2 of the ITC(HS) except in the case of exports by category(ii) above.
6)
The following permanent IEC numbers shall be used by the categories of

importers/ exporters mentioned against them for import/ export purposes..
Guidelines for Application of IEC Code Number. Mandatory

Requirements to apply for IEC Code Number
PAN Number
Current Bank Account
Bankers Certificate
IEC Code Number
ApplicationFee Rs 250.00
(Expert TIP : Pay via EFT (Electronic Fund Transfer ), and submit IEC Online
Application form, If you wish to receive IEC Number instantly)
The physical application containing required documents should reach DGFT RLA
concerned within 15 days of its online submission.
E-mail is not mandatory. If it is provided it will facilitate faster communication.
Check List of Documents to apply for IEC Code
Covering Letter on your companys letter head for issue of new IEC Code
Number.
Two copies of the application in prescribed form at (AayaatNiryaatFormANF

2A) must be submitted to your regional Jt.DGFT Office.
Each individual page of the application has to be signed by the applicant.
Part 1 & Part 4 has to be filled in by all applicants. In case of applications

submitted electronically.
No hard copies of Part 1 may be submitted. However in cases where applications

are submitted otherwise, hard copy of Part 1has to be submitted.
Only relevant portions of Part 2 need to be filled in.
Rs 250.00 Bank Receipt (in duplicate)/Demand Draft/EFT details evidencing

payment of application fee in terms of Appendix21B.
Certificate from the Banker of the applicant firm in the format given in Appendix
18A.
Self certified copy of PAN issuing letter or PAN (Permanent Account Number) Card
issued by Income Tax Authority.
Two copies of passport size photographs of the applicant duly attested by the
Banker of the applicant.
Self addresses envelope with Rs.25/- postal stamp for delivery of IEC certificate by
registered post or challan/DD of Rs.100/- for speed post.
28
IEC Code Number Related links

DGFT Online IEC Code Number Application
Form-ANF-2A
View Your IEC Status : http://dgft.delhi.nic.in:8100/dgft/IecPrint
IEC Status at Custom(BIN) : http://164.100.9.176/iecstatus.html
Registration with EP Councils, etc.
Registration with Export Promotion Councils and other authorities helps in obtaining facilities/
services provided by these organizations. Any person applying for (i) an authorisation to
import/ export (except items listed as restricted items in ITC(HS) classification of export and
import) or (ii) any other benefit or concession under the Foreign Trade Policy shall be required to
furnish a RCMS (Registration cum Membership Certificate) number granted to him by competent
authorities issuing RCMC. Such authorities include all the Export Promotion Councils,
Commodity Boards, FIEO, APEDA, MPEDA, Administrative Authorities of EHTP/STP/units,
DCs of SEZ/ EOUs etc.
Certificate of Registration as Exporter of Spices issued by Spices Board shall be treated as
Registration-Cum-Membership Certificate (RCMC) for the purposes under this policy.
Sales Tax/ VAT Registration
For procuring export goods from manufacturers or exporters/traders, or exporting goods free of
sales tax, or for refund of VAT, get yourselves registered with the Sales Tax Deptt./ VAT of the
state/ union territory where you are located. The procedure for such registration is simple except
that you have to arrange for a surety/ security from another Registered Sales Tax/ VAT Dealer
and must possess some experience in local/ inter-state sales of the commodity concerned.
Central Excise Registration/ Declaration
Rule 9 of the Central Excise Rules, 2002 lays down that every person, who produces,
manufactures, carries on trade, holds private store-room or warehouse or otherwise uses
excisable goods shall get registered with the jurisdictional range officer, unless exempted
otherwise.
However, units manufacturing goods which are chargeable to nil rate of duty or remain exempt
from whole of duty are exempt from registration and such units shall file a declaration. But where
exemption from duty is based on clearances made in a financial year and the said clearance for
home consumption remains less than the specified limit no declaration needs to be filed.
SSI units having turnover below Rs.150 lakhs are not required to be registered with the Excise
Deptt. But units having turnover between Rs.90 to 150 lakhs in the previous year are to file a
simple declaration.
EOUs/ SEZ/ EHTP/ STP units are deemed to be registered for the purpose of CE Rule 9. Hence,
such units need not be registered separately under CE Rules.
29
CHAPTER
CUSTOMS - FORMALITIES FOR EXPORT

For a developing country like ours, the need for maximising exports cannot be
over
emphasized.
Besides,
over
a
period,
the
strain
on
our
foreign exchange reserves had been very heavy. In the past, the reserves had
depleted so low that the Govt. had to enforce very hard measures to maintain and
improve the level. The slogan has therefore been "Export or PERISH" Working with
this aim we have been steadily striving to increase our exports which is growing
day by day.
The Policy regarding exports is given in Ch 2 of the 09 - 14 Policy. Sched- ule 2,
Appendix 1 of the ITC (HS) specifies the list of items which may be exported
without a licence / permission/ certificate subject to conditions.
An application for export of restricted item (very very few) has to be made to jurisdictional
DGFT Office
For export of goods from India to places outside India, there is a set
procedure of documentation with Customs and other authorities, such as Import
Export Control Department, Reserve Bank of India, Export Inspection Agency, etc. To
facilitate speedy action in respect of all these, at some major ports like Kochi,
EXPORT DOCUMENTATION CENTRES (E.D.Cs) were started in the late 70's.
All Govt. Authorities concerned with exports are centralised there and it facilitates in
giving single window clearance for exports.
First of all every Exporter has to obtain an Import Export Code Number from
the Import Trade Control Authorities. The procedure for these has been
explained in earlier Chapter.
EXPORT DOCUMENTATION & PROCESSING
The important steps in processing of an export order at the pre-shipment stage
are the following :
1.
Entering into a contract.
2.
Order Scrutiny.
3.
Procuring Goods as per specifications.
4.
Booking Shipping Space
5.
Central Excise Clearance.
6.
Arranging Pre-shipment Inspection.
7.
Shipping Instructions to Freight Forwarder.
8.
Despatching Goods to Port of Shipment.
30
9.
Port and Customs Clearance (by Freight Forwarder including

Consular Formalities).
10.
Obtaining
Forwarder.
11.
Obtaining Certificate of Origin from Chamber of Commerce.
12.
Advising Importer of Shipment
13.
Submitting the required Export Documents to Bank for Negotia- tion

and Collection.
necessary
Shipping
Documents
from
Freight
The present system of documentation is known as Aligned Documentation system. It

was first introduced in Sweden in 1956, and later accepted in
1960 by the United Nations Economic Commission for Europe. At present most of
the European countries, U.S.A., Australia, Hong Kong etc. have adopted the
same.
Under this existing system, known as Aligned Documentation system, the required
information is created on a set of standardised forms on same size paper in such
a way that items of identical information occupy the same position in each form.
The different documents are aligned to one another in such a way that common
items of information are in the same relative slots in each document. This enables
preparation of a "Master Document" containing all the information common to all
the documents from this master document. The required aligned documents can
be easily prepared by using suitable masking and reproduction technique. This method
avoids repetitive typing of same information in the aligned documents which is time
consuming and error-prone. By the above revised method, speed and
accuracy are better ensured. Further, any information data, specific to a particular
document can either be pre-printed or added as and when required.
Masking helps to blank out such information as is not required in a particular
document.
The pre-shipment documents are broadly of two types viz.
a)
Commercial documents required for transferring the goods to the

Importer (Foreign Buyer) and
b)
Regulatory documents prescribed by the Government departments

bodies under various rules and regulations and relevant laws
governing Export Trade for processing the goods for export and
eventual shipment of the same. These include Export
Infomation, Export Trade Control, Customs Formalities, FEMA
Regulations etc. As regards Commercial Documents, there are
16 documents in use, out of which 8 are sent to the Importers
(Foreign Buyers) abroad and these are known as Principal
Export Documents.
31
These are :
i)
Commercial Invoice (plus invoice prescribed by the

importing country)
ii)
Packing List
iii)
Bill of Lading / Combined Transport Document iv)

Certificate of Inspection / Quality Control
v)
Certificate of Insurance / Policy (in case of C.I.F contracts)
vi)
Certificate of Origin
vii)
Bill of Exchange
viii)
Shipment Advice
The remaining 8 documents are called "Auxiliary Documents" which have only a
supportive role as these are required for preparation and procurement of the
Principal Export Documents.
These are :
i)
Proforma Invoice
ii)
Shipping instructions
iii)
Intimation for Inspection
iv)
Insurance Declaration
v)
Shipping Order
vi)
Mates Receipt
vii)
Application for Certificate of Origin
viii)
Letter of Bank of Collection / Negotiation of Documents
Out of the above 16 Commercial Documents, 14 (all except "Shipping Order"

and "Bill of Exchange") have been standardised and aligned to one another, through
Master Document-1. The two remaining could not be aligned mainly due to
different date elements and little common data among others.
REGULATORY DOCUMENTS :
Generally there are 9 regulatory documents in use for the pre-shipment stage of
an export transaction.
Prescribed by
i)
Central Excise Invoice
Central Excise Authorities ii)
AR4
Central Excise Authorities
32
iii)
Shipping Bill/Bill of Export
Customs Authorities
iv)
Export Application
Trust
v)
Receipt for payment of

Ports Charges
Port Trust
vi)
Vehicle Ticket
Port Trust
vii)
Exchange Control
Declaration / GR Form/
PP Form
RBI
viii)
Freight Payment Certificate
From Steamer Agents
ix)
Insurance Premium
payment Certificate
From Insurance Co.
Out of the above, 3 documents viz. Shipping Bill/Bill of Export, Exchange Control
Declaration (GR Form) and Export Application have been aligned and
standardised. Besides, "Receipt for Payment of Port Charges" has been incorporated in
the Export Application / Dock challan / Port Trust copy of S/ Bill.
DOCUMENT PREPARATION :
For Commercial Documents the standard A4 size paper is used. It should measure
297mm x 210 mm with standard margins 10mm top, 20mm left,
6mm right and 7mm bottom leaving inside of size 280mm length and
184mm width. A master document containing all the common information for the
14 documents aligned is typed out in light blue ink, compared and verified for
correction. The measurement for individual boxes as indicated in the Master Document
should be strictly adhered to. Thereafter the individual aligned document is
prepared by using suitable masks made of polyester transparent film and reproduced by
photocopying method. The masks being transparent enables in having only the
required information for that particular aligned document being copied on to
that. Additional information specifically required for a particular document can be
inserted in the appropriate slot as and when required.
For Regulatory Documents, the foolscap size paper is used. The would
measure 345mm x 215mm and with margins 15mm on top and bottom,
18mm left and 5mm right. Inside measurement would be 315mm length and
192mm width. A Master Document (Master Document-II) is prepared containing all the information, in the three aligned regulatory documents viz.
Shipping Bill, GR Form and Export Application. It is so aligned that all the
common data is accommodated on the front side so that all the three
documents can be reproduced without using any mask but with only blank- ing
the heading "Master Document - II". However, necessary provision is made to
have the specific requirements for the 3 aligned documents, provided for on
the reverse side. This facilitates preparation of the regulatory documents from the
Master Document. The following aspects should however be kept in view :
33
i)
The complete data should be typed (not handwritten) in the

respective column of the Master Document.
ii)
Each copy of the three documents should be signed in ink by the

Exporter/Forwarding Agent so that it becomes a legally valid document.
There are 6 versions of the Master Document - II depending on the type of

export :
Master Document - II (A)
For Shipping Bill for Export of

Dutiable Goods and Shipping Bills for
Export of Goods under claim for
Duty Drawback.
Master Document - II (B)
For Shipping Bill for Export of Duty

Free Goods.
Master Document - II (C)
For Shipping Bills for Export of

Goods Ex-Bond.
Master Document - II (D)
For Bills of Export for Dutiable

Goods and Bills of Export for
Goods
under
claim
for
Duty
Drawback.
Master Document - II (E)
For Bills of Export for Duty Free

Goods.
Master Document - II (F)
For Bills
Ex-Bond.
of
Export
for
goods
As can be seen from the above, the Exporters and other concerned agencies
get the benefits of "Systems Approach" by adopting the "Aligned Docu- mentation
System" (A.D.S).
To effect exports a shipping bill has to be filed with the Customs. This is
normally to be filed in triplicate. For different types of exports different
colours of S/Bill are prescribed as under.
1.
Duty-free goods
- White colour
2.
Dutiable goods
- White colour
3.
Goods exported under

claim for Duty Drawback
- Pink colour
4.
Goods exported ex-Bond - Green colour
With the Shipping Bill the following documents also have to be filed :
1.
Invoice
34
2.
Packing List/Weight Specifications
3.
Order & Confirmation, Copy of L.C. if any
4.
Export Licence/Permit where necessary
5.
Quality Control Certificate
6.
GR Form in duplicate duly filled
7.
Drawback Claim Application Form duly filled
8.
AR4/Form
The S/Bill with the above documents are filed in the E.D. C. This can be filed
prior to the arrival of the vessel which would help in completing the formalities earlier
and keeping the cargo ready for loading. But to facilitate this, the steamer agents
have to file an entry request with Customs Depart- ment at the E.D.C. They
have to indicate the details of the vessel, expected date of arrival, ports for
which loading will be done etc.
The Shipping Bill filed with documents are verified for the required particulars,
assigned a serial number and then passed on to the Appraising Officer for scrutiny
and assessment. The Appraising Officer scrutinies S/Bill with the documents, verify
correctness of the price, confirm full details of the value of the goods shown in
the GR form., validity of the quality certificate etc.He also ensures that Export
Licence/ Permits required are produced and verified. After thus confirming that all
aspects are in order, the Shipping Bill is assessed giving examination order on the
duplicate copy. If the goods are dutiable, the rate of duty is indicated. If not dutiable it is
shown as FREE. Thereafter the original of the GR form is retained in EDC for
onward transmission to RBI. In the case of dutiable goods all copies of the
S/Bill are passed on to the Exporter for payment of duty. On payment of duty in
the cash section of EDC, the original S/Bill is retained and the rest returned to
Exporters. In case of Free Shipping Bills, the original copy is retained giving
an Export Duty Free Number and the rest returned to the Exporter, for arranging
transport of the goods to the docks and examination.
Export Duties are liable to be levied under sec 12 of Customs Act, at such rates
as prescribed in the II Schedule to the Customs Tariff Act 1975. But all items
specified under the export tariff are at present exempt from such duties. But,
Export cess prescribed under the various Acts is also collected. Some of these
are Coffee Cess Act 1942 (Coffee), Coir Industries Act 1953 (Coir & Coir Products),
Produce Cess Act 1966 (Cashew Kernels), Marine Products Export Development Act
1972 (Marine Products), Tobacco Board Act 1972 (Tobacco), Spices Cess Act
1986 (Spices) etc.
Depending on the arrival of the vessel and grant of entry outward, the Exporter
carts in the goods to the docks, and stacks them separately in the allotted place.
The duplicate copy of the S/Bill containing the examination order is then
presented to Docks Appraiser alongwith the Invoice, Packing
35
List, Weight Specification, Quality Certificate, AR4 Form etc. The Appraiser gets
the goods examined and verified to conform to the declaration in the S/Bill and
documents. Thereafter he gives the "Let Export Order". The S/Bill is then passed
on to the S/Agents who after the permission loads the goods under Customs
Supervision. After loading, the ship's officer issues the mate's receipt on the
basis of which the Bill of Lading is issued. The B/L is a negotiable document and
is presented to the Bank with the Commercial Invoice and other connected
documents and payment received.
Electronic Processing of export documents
New system may cut customs clearance for exports to few hours
The time taken for customs clearance of export consignments will come down
to a few hours following the implementation of a risk management system. To
begin with the system will be available at 11 customs stations, including
Bangalore, Chennai, Delhi, Hyderabad, Mumbai, Pune and Tuticorin. But by the
end of the year, it will be extended to all Electronic EDI Customs Stations.
A similar system exists for imports. The system exists for imports. The system was introduced in
December 2005.
RESOURCE MANAGEMENT
The primary objective of this system is to strike an optimal balance between
facilitation and enforcement and to promote a culture of compliance. It is
intended to improve the management of the resources of the department to
enhance the efficiency and effectiveness in meeting stake holder expectations
and to bring the Customs process at par with the best international practices.
36
BILL OF LADING :
For further detail on various types of Bill of Lading please refer relevant Chap- ter on
Bill of Lading in Shipping book.
The above outlines the procedure to
required, this is normally endorsed
any
clarification/clearance
Reserve Bank of India, Export
representatives of the respective
Centre.
be followed for effecting exports. If Export Licence is

on the S/Bill by the I.T.C Authori- ties.
Similarly
required
from
other authorities such as
Inspection Agency etc. are all given by the
agencies stationed at the Export Documentation
Customs clearance
Round the clock electronic filing of round the clock customs documents for
clearance of goods has been extended to 23 customs formations from the earlier
9 places.
License fee payments
From 1st May 06, all exporters would have to compulsorily remit all license fee payments
only through the electronic fund transfer (EFT) mode.
The DGFT has also decided that all applications for advance licenses, export promotion
capital goods license, duty entitlement passbook licenses and the newly introduced
duty free import authorisation scheme would have to be submitted with digital
signatures.
You and your customer will assess many factors as you negotiate the payment term that
will be used for your international transaction. They include, but are not limited to:
Value of transaction
Your relationship with your customer, new or long-standing
37
The country where the goods are destined

The buyer's country's rules about how money will be released to you, the seller and
Whether the product being shipped is customised, built to specification,or off the shelf
Drawback payment procedure

In keeping with its ongoing efforts to reduce transaction costs for exporters, effective from 1st
July 08, all drawback payments by customs would be available to any core banking enabled
account in any branch/bank anywhere in the country, until now it was to the authorised bank in
the port of export.
FLOW - CHART OF SHIPPING BILL
PRE-SHIPMENT EXPORT
|
DOCUMENTATION
|
|
|
Commercial Documents
Regulatory
Documents
| Used by custom of trade in
| Prescribed by different govt.
| international commerce by
| departments/bodies for
| exporters/importers in discharge
| compliance of formalities
| of their respective legal and other
| under relevant laws.
| incidental responsibilities under
|
| sales contracts.
|_ Exchange control
|
| declaration-GR
|
|
Forms
|
|_ Freight Payment
Certificate
|
|
|
Principal
Auxiliary
|_ Insurance Premium Pay|
|
| ment Certificate
| Required for effecting physical | Required for prepar|
| transfer of goods and their title from | tion/procurement of |_ ARE 1/ARE II forms
| exporter to importer, realization of
| principal
|
| export sale proceeds.
| export documents
|_
|
|
|
|
|
|_ Shipping Bill/Bill of Export
|_ Commercial Invoice (plus
|_ Proforma Invoice
|
| invoice prescribed by
|_ Shipping
|_ Port Trust Copy of
|importing
country)
|_
Insurance
| bill/ export application/
Instructions
shipping
Declaration
|_ Packing List
|_
Intimation for
|dock
challan
|_ Certificate of Inspection
| inspection
|_ Receipt for payment of
port
|_ Certificate of Insurance/
|_ Shipping Order
| Charges
| insurance policy
|_ Mates Receipt
|_ Vehicle Ticket
|_ Bill of Lading/Combined
|_ Application for
|Transport document/Air Way Bill
| certificate of origin
|_ Certificate of Origin
|_ Letter to Bank for
|_ Bill of Exchange
negotiation/collectio
n documents
|_ Shipment Advice
of
38
24x7 Customs Clearance Facility for Export Cargo

With an aim to boost export, the customs clearance of all export goods will take place on 24X7 basis
from four major air cargo complexes at Bangalore,
Chennai, Delhi and Mumbai. All exports including those made under export incentives scheme as
well as duty drawback scheme will now be able to be move out of the country on 24X7 basis,
Government expect this initiative to greatly facilitate the exporting community and boost the
countrys exports.
39
CHAPTER
CUSTOMS FORMALITIES FOR IMPORT AND EXPORT CONTAINERISATION - I.C.Ds

We have already seen that the main function of the Customs Department is collection of
revenue and proper control over the Imports and Exports of the country. Most of the
duties collected are on imports, which are made subject to the provisions of
Customs Act, Foreign Trade (Development and Regulation) Act 1992 and many other
Central and State Laws. In the case of exports, the items are duty free, and the
controls are minimal. Exports are important from the point of view of foreign
exchange earned.
The procedures followed in Customs for clearance of imports and exports are broadly as
under :
IMPORTS
In terms of section 30 of the Customs Act, the person in charge of the conveyance (vessel/aircraft) carrying imported goods has to hand over to the Cus- toms
a document known as Import General Manifest. This document is actually a complete
list of all items carried on board including those to be transshipped or carried to the
subsequent port of call (same bottom cargo) and also the ship's stores.
When the Importers receive the information about the arrival of their goods by a
particular vessel or aircraft, they or their authorised agents have to file a statutory
document known as Bill of Entry in the Import Department of the Cus- toms House.
The Bill of Entry is a statutory prescribed form of the document to be filed for
clearance of any imported goods (other than unaccompanied baggage).
It provides for declaration of exhaustive details about the goods and the vessel
bringing the same, such as name of the vessel, nationality thereof, steamer agents of the
vessel, number of packages, marks and Nos., quantity - gross weight and net
weight, number of units, full description of goods, tariff heading under which classified,
assessable value, rate of duty - basic, auxiliary and additional
duty
separately,
value
of
the
goods
in foreign exchange, freight and insurance,
currency, exchange rate, landing charges, assessable value in rupees, licence
particulars etc. Besides these, there are important declarations to be signed by
the clearing agents as well as by the Importers confirming the correctness of the
data declared in the B/ E, correctness of the value in the invoice produced, special
relationship with foreign suppliers if any, commission received if any etc. It
is very important that these declarations, are signed by the Clearing Agents
/ Importers as the case may be, when the B/E is submitted for processing in the
Customs House. The date of presentation of the bill of entry is important in that
the rate of duty applicable would be the rate that is in force on such date irrespective of when the goods are assessed to duty or cleared.
40
Thereafter, the Bill of Entry is presented to appraising Section where the goods
are assessed for duty. The assessment involves three aspects viz. valuation,
classification under the Customs Tariff and Import Control. This is the most
important stage in the clearance of goods and the Bill of Entry should be accompanied by
all necessary documents like Invoice, Packing List, Bill of Lading, Import Licence,
where required, Catalogue / Literature, Copies of In- dent,
Acceptance,
Letter
of
Credit,
Bank
draft
etc.,
If
the Assessing Officer (Appraiser) is able
to verify and accept the value, classification etc. on the basis of the documents
produced, the assessment is done straight away and the Importers are asked to pay
the duty assessed and the goods allowed to be cleared after examination. In cases
where the Assessing Officer has doubts on any aspect declared, he may either ask for
additional information or document or have the goods physically examined before the assessment is completed, and duty allowed to be paid and the goods cleared.
The Bill of Entry which is a document statutorily prescribed has in it
columns for all details of the goods and carriers. The name of the vessel, its nationality,
name of the local agents are to be furnished in addition to the number, marks,
description weight and value of the goods. In addition there are declarations to be
signed both by the Importers and their agents.
The facility for warehousing imported goods up to a period of one year, pending
clearance on payment of duty as and when required is available and the relative
provisions are in Sec. 57 - 73 of the customs Act.
EXPORTS :
The statutorily prescribed form for effecting exports is known as Shipping Bill. As we
have already seen, an Exporter has first to obtain an I.E. code number from the
Import Export Control Authorities, before he can file a Shipping Bill.
The following documents are to accompany the Shipping bill, when it is filed in the
Export Department of the Customs House in triplicate.
1.
Invoice
2.
Packing List/Weight Specification
3.
Order Confirmation
4.
Export Licence (where required)
5.
GR Form in duplicate
6.
Quality Control Certificate (where necessary)
7.
Drawback Claim
8.
AR4 Form
41
The following are the salient customs formalities in export:

Processing of Shipping Bill -EDI
Appraising by customs
Sample testing, if necessary.
After 'Let Export' order, stuffing of goods in container.
Receipt of Bill of Lading/covering export of goods from Shipping Lines (AWB
in case of air shipment).
Standard Post shipment documents Customs
attested invoice and packing list Copy of
export order/LC
Commercial or consular invoice (if specified) B/L
or AWB
Certificate of Origin
Certificate of Inspection (if specified) Bill
of Exchange/Draft
GR form SDF.
Any other document specified in Export Order
CONTAINERISATION AND INLAND CONTAINER DEPOTS :
The containerisation of cargo for transport by sea is a comparatively new concept,
but it caught up the imagination of trade and developed so fast that today more
than 90% of the general cargo moves in containers. Containerisation has it obvious
advantages such as security against pilferage and contamina- tion, speeding up of
transport, quick clearance in the docks, shorter stay of vessels at the ports with
the resultant savings and so on.
Initially the containers used were of different sizes, but the sizes have now been
standardised according to International Standard Organisation (ISO) i.e.
8ft x 8.5ft. x 20ft. or 40ft. size. There are different types of containers such as open
top container, refrigerated container, insulated container etc.
INLAND CONTAINER DEPOTS (I.C.D) :
Following the examples of developed countries, the Government of India have appointed a
few Inland Container Depots, for unloading of imported goods and the loading of
export goods. The purpose of opening I.C.D., is to make available the
Import/Export facilities as near to Industrial establishments as possible with a view to
cut down the cost of transport from the Gateway Ports and also enable quick
movement of the goods. Such depots are already in existence at Coimbatore, Bangalore,
Ludhiana, New Delhi and Gauhati.
The Import General Manifest filed by the Steamer Agents will indicate
separately the details of containers, meant for I.C.Ds. On this basis tranship- ment
application is made by the agents and on obtaining the permission they are sent to
I.C.D where a separate manifest is to be filed. At the I.C.D the
42
Steamer Agent files the copy of the sub-manifest against which Bill of Entry for the
import goods is filed by individual Importers and the goods cleared.
As on Sep 06, we have 55 ICDs in operation in the country by CONCOR.
EXPORTS :
As for exports, the Exporters file the Shipping Bill at the I.C.Ds with an extra copy
for the use at the Major Sea Port. The goods are examined against the Shipping Bills,
passed and stuffed in containers. The original copy of the Ship- ping Bill is retained
in the I.C.D and the duplicate with the transference copy are forwarded to the sea
port. These documents are returned to the I.C.Ds after shipment and with
endorsement of the export.
APL Logistics brings double-stack container train service to India
APL Logistics, a unit of the Singapore-based Neptune Orient Lines, has extended its famous
double-stack container train service that help customers load double the volume of cargo in a
single voyage, to India.
APL (American Presidential Lines) IndiaLinx, the rail operations arm of APL Logistics in India
recently stacked 90 forty-foot boxes two-high on a train from Mundra port for an inland
container rail terminal at Kishangarh, near Delhi, according to a company official from
Singapore.
The double-stacked train operation followed the Indian Railways' recentl decision to allow
stacked train access along this rail corridor.
When a customer has a huge volume of freight to move between two points, using trains
offre traffic and environmental benefits over trucks. With double-stack trains, these
benefits are even greater.
With the container boxes stacked two-high, a double-stack train can potentially double the
capacity in a train run. This effectively allows the company to move boxes out of the prot
area at a faster velocity in each train run, thereby easing congestion.
In fact, it also frees up the highways for trucks to move cargoes into other locations not served
by rail or that do not have sufficient capacity or distance to justify rail movement. The use of
double stack trains also allows to make fewer train trips. This means reduciton in fuel
and emission.
43
CHAPTER
Government policy & initiatives on e-commerce

E-Commerce
There are two segments of e-Commerce - B2B (Business to Business) and B2C (Business to
Consumers). These components have to be chosen by individual needs in the Internet. In
general, e-commerce sites are a combination of some of the following business
functionalities:
An eCatalog so that buyers can browse through the products you have to offer
Product specification that gives detailed technical and delivery information
A feature that allows sending request for quote online (RFQ)
A product order placing system normally a shopping cart
Ability to view order status
Sending a notification if a new product added to the catalogue which was requested by a
prospective buyer
At least one payment method. For small orders you should have a merchant account.
Purchase order sending ability. Buyers should be able to send PO for the products readily
available or the contracts already negotiated with you.
Billing system should generate invoices automatically

Once you implemented these features there is virtually no geographic restriction on where you can
sell your products. If you are an export company you may consider translating your eCommerce site
to the language of your targeted market. This gives you an extra ability to leverage your sales
endeavour.
Benefits of e-marketing
Increase revenue;
Expand Client case;
Reach niche market segments;
Lower operating costs;
Better customer service;
Enhancing Company image.

Priority should be on establishing web presence and developing credible ways of
communication such as business e-mails. After this preliminary expense - one should explore
ways of attracting customers to web-site and finding useful trade leads. Search engine
submission and on-line advertisement are some of the ways of attracting customers to your website. Subscribing to trade portals, trade information services etc are some of the ways of finding
useful trade leads. It is not enough that a company has a quality product for export at a competitive
price. This fact should be known to potential buyers (importers).
Trade policy boost for e-commerce biz
In a boost for e-commerce businesses, the Centre has agreed to provide fiscal incentives for
exports shipped through e-commerce platforms.
To begin with, this facility will be available for shipments effected from Delhi and Mumbai, the
Commerce and Industry Minister, Mr. Anand Sharma, announced in New Delhi on 5th
44
June 2012, as part of the annual supplement to the trade policy.

The latest initiative could boost exports of handicrafts, gems & jewellery, carpets, music
CDs and electronic items from the country.
New Initiative to cut transaction cost for exporters
Availing oneself of export benefits from the Government could soon be a breeze with the
Directorate General of Foreign Trade (DGFT) launching a new initiative, e-BRC on 5th June.
The e-BRC initiative would lead to electronic transmission of foreign exchange realization
certificate from the banks to the DGFTs server on a daily basis. With the launch of this facility,
there will be minimum human interface between the commerce ministry and the exporting
community for grant of benefits.
This initiative will help exporters, who will not be required to make any request to bank for
issuance of bank export and realization certificate (BRC).
Already, shipping bills are flowing electronically from customs EDI to DGFT. Now DGFT has tied
up with some banks to get the BRC electronically. Both would be matched before export
incentives are provided to exporters.
At present, almost 90% of Indias merchandise exports in value terms go through EDI ports.
In 2011-12, Indias merchandise exports stood at $302 billion, registering a 21% increase over
exports of $251 billion in the previous year.
45
CHAPTER
10
WAREHOUSING UNDER
CUSTOMS ACT
Warehousing is a statutory facility for depositing imported goods in a
warehouse pending payment of duty. The advantage of the scheme is that the
imported goods can be cleared on payment of duty in installments, as and when
required during the warehoused period, up to one year.
A warehouse may be public under Sec. 57 or private under Sec. 58 of the Customs Act.
A public warehouse is appointed and private warehouse licensed, under the
above provisions by the Asst. Commissioner of Customs. The place where a
warehouse, public or private is allowed, should however be one that has been
declared as a warehousing station by the Central Board of Excise and Customs,
under Section 9 of the Customs Act.
There are broadly speaking four kinds of warehouses:
Private warehouses which are usually maintained by joint-stock companies, firms and
individuals.
Duty paid public warehouses which are maintained by dock authorities or port trust
authorities at port
Bonded warehouses which are maintained either by dock authorities or by the

government.
Licensed warehouses which are private warehouses run by cooperative societies or by

private agencies, after obtaining license from the government.
Features of warehousing:
They tend to cushion the price fluctuation and stabilize prices as it equates supply to
demand.
They facilitate future trading
They play a very important role in implementing the agricultural price policy of the
government
They obviate the need for unnecessary cross-transport.
They render various subsidiary services, such as sorting and packing commodities for
shipment, cleaning and drying goods and preparing them for the market, acting as
forwarding agents for exporters of goods, purchasing goods on behalf of clients, and
collecting and disseminating marketing intelligence.
They are also considered as a facility for depositing imported good pending payment of duty.
The imported goods can be cleared on payment of duty in installments up to one year. But
the location of the warehouse should be within a Warehouse Station which is declared by the
Central Board of Excise and Customs, under Section 9 of the Customs Act.
Public warehouses are managed by public bodies such as the Port Trusts, Central
Warehousing Corporation etc. Private warehouses are managed by individual Importers.
46
While licensing private warehouses under Section 58, the Asst. Commissioner takes
care to see that there is no risk to Customs Revenue. He ensures that the
applicant for licence is solvent, that the place is a secure one for storing non duty
paid imported goods and that there is no danger of theft, loss or deterioration due to
natural causes like weather conditions etc. He also takes into consideration the
volume of imported goods likely to be deposited in the warehouse, the total amount of
Customs duty on such goods etc., before issuing the licence. Licensing of private
bonded warehouses is done normally only when public bonded warehouses
have not been appointed at a warehousing station. The licence is issued by the
Asst. Commissioner normally for a calendar year and may be cancelled by him
after giving one month's notice to the licensee. It can also be cancelled if the licensee
commits any contravention of the Customs Act, Rules and Regulations, after giving him
an opportunity to represent. Section 58 (1) provides specifically that ordinarily only goods
belonging to the licensee shall be warehoused. However, other imported goods may also
be deposited in a private warehouse where facilities for deposit in a public
warehouse are not available. In all cases permission of the proper officer under Section
60 is necessary. It must be noted that the consent of the private warehouse
licensee is also required before any Importer can deposit his goods in the private
warehouse.
Section 46 of the Customs Act requires an Importer (or his Customs House
Agent) to file a Bill of Entry for home consumption or for warehousing. If an
Importer intends to deposit his consignment in a private or public
warehouse he files a Bill of Entry for warehousing in quadruplicate (yellow in
colour) in the Import Department of the Custom House. The Importer of the goods
which have been entered for warehousing and assessed to duty under Section 17
or 18 shall execute a bond as required in Sec. 59 of the Customs Act for twice
the amount of duty leviable on the goods (Instead of executing separate bonds for
each consignment imported by him, an Importer may also furnish a general bond for
a lump-sum covering twice the amount of duty leviable on goods to be imported by
him during a specified period, say
6 months/one year etc.).
The period during which imported goods may remain in the warehouse
without payment of duty has been specified in Section 61 of the Customs Act. It
is one year in the case of nonconsumable stores and five years in case of
Capital goods intended for use in any 100% Export Oriented unit. These limits
may be extended by the Collector of Customs by 6 months and by the Chief
Commissioner for any further period. For all such extended periods the
Importer has to pay an interest fixed by relevant notification calculated with reference
to the amount of duty.
Warehoused goods are subject to the control of the Customs Department. The
proper officer shall have access to every part of the warehouse and the power to
examine the goods therein.
47
The owner of the goods may with the permission of the Bond Officer, inspect the
goods, separate damaged or deteriorated goods, change the packing, show the
goods for sale to prospective buyers and take samples.
MANUFACTURE-IN-BOND:
Section 65 of the Customs Act also provides for manufacture and other operations in
bond subject to such conditions as may be prescribed. Such manufacture and operation
should take place in conformity with 'Manufacture and other Operation Regulations,
1966'. Section 65 itself provides for the manner in which duties should be
collected on the waste or refuse arising out of such manufacturing operations
in bond. If the entire products resulting out of manufacture in bond are
exported out of India and the waste is destroyed in the presence of a customs
officer, then no import duty is leviable on the imported goods contained in the
waste. If the waste is cleared out of the warehouse for home consumption them
import duty is leviable on the waste as if such waste only has been imported
(instead of goods which were actually imported and warehoused). If the products
manufactured in bond are not exported, but cleared for home consumption, import
duty is leviable on the quantity of imported goods contained in the waste. If the
manufactured products are partly exported and partly cleared for home
consumption, the quantity of waste resulting from manufacturing operations will be
proportionately apportioned for levy of (or exemption from) duty in the manner
mentioned above.
Section 67 permits transfer of warehoused goods from one warehouse to another. For
this purpose the owner applies in a prescribed form for the permission of the Asst.
Commissioner. If both the warehouses are situated in the same town, the
goods are required to be transferred under the supervision of the Customs
Officer (Escort Officer). If they are situated in different towns, owner is required to
furnish a bond for the amount of duty involved and undertaking to produce a
certificate from the proper officer at destination about the due arrival and
warehousing of goods there, in order to get it discharged.
The Importer (or owner) may clear the warehoused goods for home
consumption on payment of duty, warehouse rent, interest etc. (if any). For this
purpose he is required to file an ex-Bond (green) Bill of Entry under Section 68.
After assigning admission number and date it is transferred to the Bonds
Department where the Bond Clerk verifies the declared particulars with the
particulars already entered in the Warehouse Register from the 'Into-Bond Bill
of entry'. Thereafter the green Bill of Entry is
48
assessed by the Appraising Group. The Importer pays the duty and obtains out of
charge order on the reverse of the duplicate Bill of Entry from the Office Superintendent
of the Cash & Accounts Department.
He then produces this duplicate Bill of Entry to the Bond Officer or Warehouse Keeper and
clears the consignment from the warehouse. Under Sec. 15(1) (b) the rate of duty
applicable to such goods is the rate prevailing on the date of actual removal of the
goods from the warehouse.
Hence the Warehouse Keeper or Bond Officer endorses the date (or dates) on which
the goods are physically removed from the warehouse. If any further duty has become
due on account of a change in the rates of duty before such removal, the Bond
Clerk will have to initiate the necessary action. More than one clearance of a
single warehoused consignment can also be effected by filing different green Bills
of Entry under Section 68. As far as the rate of exchange is concerned the same
rate that prevailed on the date of filing of the into bond Bill of Entry by the Importer
is applicable to all clearances ex-bond.
The warehoused goods may also be exported out of India by presenting a Shipping Bill
and after payment of export duty, rent, interest etc., if any, but no import duty is
chargeable on the imported warehoused goods so exported (Section 69
Customs Act).
Under Section 70, the duty on specified volatile goods like aviation fuel, motor
spirit, mineral turpentine, acetone, menthol, raw naptha, vaporising oil, kerosene, high
speed diesel oil, batching oil and furnace oil kept in tanks and, wine, spirit and
beer kept in casks may be remitted by the Asst. Commissioner on the quantity found
deficient due to natural loss at the time of delivery from the warehouse. This
provision however is slightly different from the provision of Section 22 and 23
applied to warehoused goods. When any warehoused goods are damaged at any
time before clearance for home consumption on account of an accident not due to any
wilful act, negligence or default of the owner, proportionate abatement of duty
is available to the Importer (Section 23). Similarly when any warehoused goods
have been lost or destroyed at any time before clearance for home
consumption, remission of duty shall be allowed by the Asst. Commissioner (Section
23). Section 23 also provides that the owner of any imported goods may
relinquish his title to the goods before home consumption or allowed to be
warehoused and thereupon he shall not be liable to pay the duty thereon.
62
When all the imported goods warehoused have been cleared for home consumption on
payment of duty or exported or otherwise duly accounted for, the bond furnished
by the Importer under Section 59 is cancelled and
CHAPTER
11
EXPORTS VIS - A - VIS CENTRAL EXCISE
Some salient points for export without payment of duty are given. For all other
details, please refer to current Central Excise Manual.
Some important changes have been introduced under the present procedure, which are
mentioned below
1)
The concept of furnishing of a Letter of Undertaking by a manufac- turerexporter has been introduced. The clearances for export by a manufacturer-exporter
will be effected similar to clearances for home consumption after he furnishes
Letter of Undertaking.
2)
The merchant-exporters are required to file bond in specified format. A
manufacturer-exporter may also file bond and follow the bond-procedure specified in
the notification.
3)
Under bond procedure, the concept of self-debit by the exporter has been
introduced. The exporter need not go to the bond-accepting authority for a debitcertificate before each removal.
4)
The procedure of acceptance of proof of export has been simplified. The
concept of Self-credit based on the copy of A.R.E.1 duly certified by Customs
authorities at the place of export is being introduced.
5)
In each Commissionerate of Central Excise, there will be an officer designated as
Deputy / Assistant Commissioner of Central Excise (Exports) whose functions will be
similar to the Maritime Commissioners.
6)
Number of copies of application for Removal (A.R.E1) has been reduced
compared to AR-4. This will be further reduced after completion of compute
networking in the Department enabling on-line verification of exports.
Categories of exports
There are two categories of export without payment of duty
(i)
Export of finished goods without payment of duty under bond or

undertaking.
(ii)
Export of manufactured / processed goods after procuring raw

material without payment of duty under bond.
63
EXPORT TO ALL COUNTRIES EXCEPT NEPAL AND BHUTAN

Conditions
An exporter shall furnish bond in Form B-1 and obtain certificate in Form CT-1. A
manufacturer-exporter may furnish annual Letter of Undertaking (no CT-1 is
required in this case). The export shall be subject to the following conditions.
(i)
The goods shall be exported within six months from the date on which
these were cleared for export from the factory of the production or the
manufacture or the manufacture or warehouse or other approved premises
within such extended period as the Deputy/Assistant Commissioner of Central
Excise or Maritime Commissioner may in any particular case allow;
(ii)
When the export is from a place other than registered factory or
warehouse, the excisable goods must be in original packed condition and identifiable
as to their origin;
Forms to be used
ARE.1 is the export document for export clearance, which shall be prepared in
quintuplicate (5 copies). This is similar to the erstwhile AR.4. This document
shall bear running serial number beginning from the first day of the financial year.
Original
White
Duplicate
Buff
Triplicate
Pink
Quadruplicate
Green
Quintuplicate
Blue
An invoice shall be prepared in terms of rule 11 of the said Rules. It

should be prominently mentioned on top FOR EXPORT WITHOUT PAYMENT OF
DUTY
The obligation of the manufacturer flows from statutory requirement of
exporting the goods within six months or such extended period as the Deputy/Assistant
Commissioner of Central Excise may allow.
Procedure for clearance from the factory or warehouse
A Manufacturer-exporter who has furnished a Letter of Undertaking will
prepare the export documents (A.R.E.1 and invoice under rule 11) for
clearance from his factory or production.
64
A Merchant-exporter who has furnished a bond shall be provided sufficient number of

certificates (CT-1), duly signed/certified, in multiples of 25 copies, normally
covering a period of one to three months, depending upon the track record of
compliance by the exporter. The bond accepting authority shall be responsible
for verifying and accepting the proof of export and in case of any defaults by the
exporter, to recover the sum and enforcing the bond. The certificate should be
provided according to the volume of exports projected by the exporter (which
should also reflect in the amount of bond). The compliance of the exporter in
submitting the requisite documents towards proof of export shall be another
criterion.
The second part of CT-1 is very important. The exporter shall determine the description
of goods for procurement from a particular factory or warehouse or an approved
place of storage, quantum, value of procurement (provisional figures) and duty involved
therein (provisional figures - but based on correct rate of duty and contracted
transaction value). This duty element will be debited provisionally. The exporter
shall ensure that at the time of debit, sufficient credit is available at that point of
time to cover the said debit. The provisional debit shall be converted into final
debit within a period of seven days from the date of removal of goods on
A.R.E.1, based on the
duty payable in goods cleared for export reflected in the said A.R.E.1 and invoice.
The manufacturer shall record the clearance in his Daily Stock Account indicating, inter
alia, the invoice number/date, A.R.E1 number/date and duty payable but foregone
under rule 19.
The exporter has two optional procedures regarding the manner in which he may
clear the export consignments from the factory or warehouse or any other
approved premises, namely :(1)
Examination and sealing of goods at the place of despatch by a

Central Excise Officer.
(2)
Under self-sealing and self-certification.
65
CHAPTER
12
EXPORT PROCESSING ZONES, EXPORT ORIENTED UNITS, ELECTRON- ICS

HARDWARE/ SOFTWARE TECHNOLOGY PARK AND BIO-TECHNOL- OGY PARK
UNITS
(EPZs/EOUs/ EHTP/ STP/ BTP)
Introduction
In order to bridge the increasing deficit in balance of trade there is an imperative need to step up
the growth of our countrys exports as also to give incentives to exporters, the Central
Government has set up Export Processing Zones and has permitted setting up of 100% Export
Oriented Units in the country. Export Processing Zones are enclaves separated from the
Domestic Tariff Area by physical and barriers providing a duty free environment for export
production at low costs and at internationally competitive rates and quality. There are 10 such
Export Processing Zones in different parts of the country, each under a Developmental
Commissioner. Such zones provide basis infrastructural facilities like developed land, standard
designed buildings, roads, drainage, water supply, etc. Within the zone, customs facilities for
clearance are offered at no extra cost. These facilities can be availed by any person, Indian or
foreigner who wants to start a unit for manufacturing products solely for export purpose. Those
who do not wish to avail these facilities but still want to start units for manufacturing products
solely for export can apply for starting a 100% EOU at the places of his choice enjoying similar
facilities as in the case of EPZ. The Development Commissioner of the zone who has jurisdiction
over the area where the facilities of 100% EOU are situated, would be the Nodal Officer for
these units, once the Government approval for the establishment of the unit is granted. Units in
the EPZ as well as 100% EOU have facility of procuring indigenous capital goods, intermediates,
components and raw materials from other parts of the country without payment of central
excise duty for use in their factories in the zones. Similar such goods are also permitted to be
imported free of customs duties for use in these units for production of goods for export.
Legal formalities for setting up an export unit in an EPZ/EOUs
For setting up units in EPZs/EOUs, certain legal formalities have been prescribed by the
government. The various formalities for setting up such units and for their functioning are as
follows:
(a) Approval by the secretariat of Industrial Approvals, New Delhi Intending Entrepreneurs
desirous of setting up industries in the EPZ should make applications to the secretariat
of Industrial Approvals, ministry for industry, department of industrial development, Udyog
Bhavan, New Delhi in the prescribed form. These applications are to be submitted in 10
copies to S.I.A. and will have to be accompanied by a crossed Demand Draft for Rs.2500/
- (subject to revision) in favour of Pay and Accounts Officer, Dept. of Industrial
Development, Ministry of Industry, payable at State Bank of India, Nirman Bhavan Branch,
New Delhi. These applications will be considered by the Board headed by the commerce
secretary. Letters of intent and letters of approvals will be issued by S.I.A once the
Board accords sanction for the starting of these units.
(b) Execution of Legal Undertaking/Bond with the Development Commissioner of Export
processing zone: Once the approvals for setting up the unit has been received from the
secretariat of Industrial Approval, New Delhi, the unit is required to execute a bond/legal
undertaking before the jurisdictional Development Commissioner of the EPZ, undertaking
to earn foreign exchange by exporting 100% of its production for a period of 10 years.
The details of the plant and machinery installed in the unit as reflected in the application
for approval submitted to S.I.A will be an annexure to the bond. The bond has to be
executed before the Development Commissioner on a Rs.60 stamp paper (subject to
revision) and signed before the Development Commissioner. There is a prescribed
66
format for the bond. After executing the bond, the unit if it is a 100% EOU may also
apply for a Green card in a prescribed format. 100% EOUs are given priority treatment
in the disposal of their problems connected with government departments. For facilitating
such units to be eligible for such priority treatment in matters relating to the setting up
and implementation of their project, the Development Commissioner issues a green
card. These green cards are issued only to those units which have taken effective
steps for the implementation of their projects after obtaining approval from S.I.A., New
Delhi.
(c) While those Units manufacturing export products situated in the Free Trade Zones are
exempted from Licensing Control and registration formalities by Rule 174 of Central
Excise Rules 1944- vide Notification No. 24/83 dt. 11.02.83, 100% EOUs are required to
submit an application to the jurisdictional Superintendent of Central Excise (The Range
Officer) to get the unit registered by the Central Excise Authorities. There is a prescribed
format for such an application. This format has to be filled in and submitted to the
Supdt. Of Central Excise along with 3 copies of the Ground Plan of the unit, duly signed.
Normally the licenses are issued without any delay after an inspection of the unit by the
Central Excise Officer.
(d) EPZs are to work under Customs Bond. EPZs which are already declared as
Warehousing Stations under section 9 of the Customs Act, the units can straight away
start functioning.
(e) For EPZs, there is no need for applying to the customs authorities for granting a license
for private bonded warehouse to enable the functioning of the unit in bond, as entire
zone itself is a bonded area.
(f) When all the above requirements, are complied with, the unit is free to import capital
goods, raw materials, components and intermediates from abroad free of customs
duty and install them and use them in the premises. To enable the units to clear the
goods imported from abroad without payment of customs duty and to move them from
the port of importation to the premises of EPZ, a bond has to be executed before the
jurisdictional customs authority to cover the duty amount involved in the goods imported
and undertaking to fulfill export obligation. Along with this bond, complete details of
goods imported with their value and duty involved have also to be furnished.
(g) To procure indigenous capital goods, components, raw materials, and intermediates
without payment of central excise duty, another bond is required to be executed before
the Asstt. Commissioner of Central Excise having jurisdiction over the units. Details of
such goods, their value and duty involvement have to be furnished along with the bond.
(h) There are separate prescribed formats for these bonds. Once these bonds are executed
and accepted by the concerned authority, the stage is set for the receipt of imported and
indigenous goods into the premises of these units, without payment of duty.
(i) On arrival of imported goods from abroad, into Bond Bill of Entry have to be filled in the
customs house where the imported goods ordered for, arrive. After the assessment
and producing of proof of execution of bond with the jurisdictional Asstt. Collector of the
unit, the goods can be transferred to export units as provided for in section 67 of the
Customs Act. As soon as the goods reach the unit, intimation thereof should be sent to
the Customs House concerned.
(j) As far as procurement of indigenous goods are concerned, they can be ordered for and
obtained free of central excise duty under cover of CT3 certificates issued by the Central
Excise jurisdictional authorities. The goods can move out of the manufacturing unit of
the suppliers only after CT3 certificates are received by them. Some simplification has
been brought in the matter of issue of CT3 certificates. Instant of applying for and
obtaining CT3 certificates from Central Excise Authorities for every purchase, the board
decided that pre-unauthenticated CT3 booklets may be made use of by the units for
their local purchases.
67
(k) Once the goods are received in the factory unit, production can be commenced and of
course there are records to be maintained by the unit regarding capital goods, raw
materials, etc brought into the unit for production and details of production and exports
made.
(i) Although export units are to work under 100% physical supervision of Customs Officer,
Government has prescribed certain norms by which 100% physical supervision can be
dispensed with, enabling the units for work under Self Removal Procedure.
Flowchart showing Legal Formalities for setting an export unit in EPZs
Preparation of a detailed project report & Locational clearances
?
Making application for Letter of Intent/Letter of Permission to Development
Commissioner Of Export Processing Zone
?
Acceptance of Letter of Permission or Letter of Intent w hen granted
?
Execution of Legal Undertaking and attestation of capital goods/inputs and Green
Card
?
Making application for declaration of a place (Unit) as War ehousing station under
Section 9 of Customs Act, 1962 (if required), in case the location is not covered
under various Notifications issued by customs for warehousing purpose
?
Application for setting up of private bonded warehouse for EOU purpose with
Customs/ Excise authorities as the case maybe. (warehousing license under
Section 58 (for issue of Warehouse license) and Section 65 (for manufacture in
bond) of Customs Act, 1962.
?
Execution of Bond-17 supported by security or Bank Guarantee
?
Registration with the customs authorities at the port of import
An EHTP/ STP/ BTP Unit is that which is set up on Special Economic Zone or Electronic
Hardware/ Software Technology Parks/ Bio Technology Parks. Other conditions are same as for
EOUs.
Services Exports - Units engaged in professional service activities are covered by the
EOU Scheme.
Trading Units Trading units are not covered under the EOU scheme.
68
Items/ Industries Permissible

There is no longer any list of items/ industries for which an EOU can be set up, although
the Resolution No. 8(15)78-EP dated 31.12.80 of the then Ministry of Commerce did
contain an illustrative list of items.
Nevertheless, it has been decided to approve under the scheme only such projects which
offer a reasonable turnover depending on the value of venture or the guidelines decided
by the government.
In terms of para 6.1 of the FTP 2009-14, EOU may be engaged in manufacture,
including repair, remaking, reconditioning, re-engineering and rendering of services.
Import Authorisation/ Permission Any permission/authorization required for
import under any other law shall be applicable.
IEC
Number
The Importer-Exporter Code Number shall be required by EOUs, etc. It will be allotted
by the Development Commissioner concerned.
RC
MC
EOU/EHTP/STP/BTP units shall also be required to obtain a RCMC (Register-cumMembership Certificate) which shall be issued by the DC concerned.
EH/TH Status Certificate
The DC shall grant/renew the Export House/Trading House Status certificate in respect of
EOUs, provided it does not involve clubbing of FOB value of exports of its parent
company.
Simplified clearance at ports
For the simplified procedure, the EOU/EHTP/STP units after setting up of
EOU/EHTP/STP unit, may get themselves registered at the port of Import (ICD)/Airport/
CFS, etc) where from the unit expects to import goods duty free.
Once an EOU/EHTP/STP unit is registered at one port of import, it would not be required
to get itself registered subsequently in any other port of import for clearance of goods duty
free. The import consignments would be allowed clearance on the basis of registration
issued at any port of import. However, the authenticity of the registration certificate shall
be verified by the concerned Custom House from port of registration. For all
concessions, the concerned DC can be contacted.
69
CHAPTER 13
Special Economic Zones (SEZs)
International Trading Hubs
The Government announced the Special Economic Zones policy in April 2000 and enacted the
Special Economic Zones Act in 2005 to regulate their operations. The policies and rules were
similar to Chinas SEZ model.
Under this policy, special areas or zones are created, within which the normal economic and tax
regulations are suspended.
In simpler terms, the industries operating in these pockets would be operating as if they were in
a separate economic territory altogether with separate regulations and tax structures, as
governed by the Special Economic Zones Act, 2005. Broadly the benefits are:
Exemption from Customs/Excise duties for business in SEZs for authorized operations
approved by SEZ Board of Approval.
Income-tax exemption on income derived from the business in an SEZ for any 10 years
out of the first 15 years from the date of commencement (Section 80-IAB of the Income
Tax Act).
Exemption from Minimum Alternate Tax (MAT).
Exemption from Dividend Distribution Tax (DDT).
Exemption from Central Sales Tax (CST).
Exemption from Service Tax (Section 7,26 and second Schedule of the SEZ Act).
SEZs as they exist today are new on the Indian business landscape but in fact, the first SEZ
was set up in Kandla Port, Gujarat, in 1965. Their feasibility thus far was hampered by issues
such as minimal infrastructure and unstable fiscal regimes.
The SEZ Act & Rules
The scheme of Special Economic Zones and establishment of a unit therein is governed/
regulated under:1. The Special Economic Zones Act, 2005 (Act No.28 of 2005)
2. The Special Economic Zones Rules, 2006.
A Special Economic Zone (SEZ) is defined as a specially delineated duty free enclave for
trade operations. This area is reckoned as a foreign territory for the purpose of duties and
tariffs. Movement of goods/services between SEZ and Domestic Tariff Area (DTA) is
treated as exports and imports. SEZ units can be set up for export of goods and services
including trading. Rationale for setting up EPZs / SEZs emanates from natural endowments
and other resources of different countries. The developing countries have plenty of cheap
labour but they lack in export related infrastructure, technologhy and even access to their
products in overseas markets.
Exemptions from Taxes, Duties or Cess
Any goods or services exported out of or imported into or procured from the DTA by:
70
SEZ land norms eased, but industry unhappy

The Government has given greater operational flexibility to Special Economic
Zones by reducing the minimum area required for setting up such zones and
easing exit norms.
After Minimum Alternate Tax (effective at 22.5 per cent) and Dividend
Distribution Tax (at 15 per cent) were levied on SEZs, new applications have
reduced significantly and 216 notified SEZs have not started operations.Today,
there are 173 operational SEZs in the country.
The amended SEZ rules, aiming to put some sheen back into the policy, have
reduced by half the minimum land required for setting up multi-product and
sector-specific SEZs to 500 hectares and 50 hectares, respectively. Sectorspecific SEZs have been given the freedom to add an additional sector for every
50 hectares of contiguous area added. The rules also allow sectoral SEZs to
bring in similarly or related sectors under the same zone.
IT SEZs are now subject to only a minimum built up criteria norm which is
50,000 square metres for category B cities such as Jaipur, Ahmedabad,
Chandigarh and Lucknow and 25,000 sq.mt for every smaller cities and rural
areas.
A unit in SEZ; or A developer,shall be exempt from payment of taxes, duties or cess under all
enactments specified in the First Schedule.
As per SEZ Act and Rules, SEZs are deemed to be territories outside the customs territory of
India. These are deemed to be Ports, Inland Container Depots and Land Customs Stations
under the Customs Act.
Significant Additions and Changes till Oct 13
SEZ units can now outsource for up to 3 years
The government has allowed manufacturing units in special economic zones
(SEZs) to outsource production to units located outside these exports enclaves
for up to three years against a year allowed currently. The relaxation will give
SEZ units longer time to subcontract a part of their production or the entire
production processes to units in the domestic tariff are (DTA), a measure the
government thinks will boost manufacturing and augment exports.
1. The specified taxable services are exempted from whole of service tax.
2. SEZ units are permitted to undertake job work abroad and export goods from that
country itself.
The Special Economic Zones may have areas, demarcated as;
(a) Processing areas for setting up of units for production of goods and rendering of
71
services; and
(b) Non-processing areas, if any.
Goods and services going into the SEZ area from DTA shall be treated as exports and goods
coming from the SEZ area into DTA shall be treated as if the goods are being imported.
Administrative and IEC Authority

The administration or governance of the SEZ Scheme lies with a
Development Commissioner, appointed for one or more SEZ.
Sl.No.1 of App. 5 of the Handbook relates to units under DGFT situated in multi product SEZs
other than those mentioned at Sl.No.34-41 of App.1 on DCs of SEZs, shall come within
the jurisdiction of respective Development Commissioners of the SEZs. In case of units
in single product SEZs including IT/ITES SEZ, the work relating to issuance of IEC shall
come under the jurisdiction of respective Regional Authorities of DGFT.
Legal undertaking
The unit shall execute a legal undertaking (LUT) in prescribed form, with the Development
Commissioner concerned and in the event of failure to achieve positive foreign exchange
earnings, it shall be liable to penalty in terms of the legal undertaking or under any other law
for the time being in force.
A total of 576 SEZs have been approved so far by the Centre,of which
392 SEZs have been notified and 173 SEZs are in operation.
Major Sectors
The six major sectors of IT/ITES, Hardware, etc., Textiles and Apparel (including wool),
Pharma and Chemicals, Biotech, Engineering and Multi- products account for bulk (82%) of
the SEZ formal approvals granted so far. IT/ITES/ Electronics Hardware/Semiconductor is
the single most important segment accounting for about 61% of the total formal approvals
followed by Biotech and Engineering SEZs. More than half (about 51%) of the 568 formal
approvals issued so far have reached the stage of notified SEZs. This ratio is the highest in
Pharma/Chemicals sector (68%) followed very closely by engineering sector (67%).
Detailed procedures can be had from the Export Promotion Councils website
www.epces.org
These contain details of :Minimum Investment, Items/Industries Permissible, Raw material tie-ups, Foreign Technology
Forex Outgo, Sensitive Sector Items, Approval/ renewal procedure, conditions, etc, etc.
A SEZ unit may export goods and services, including agro-products, partly processed goods,
sub-assemblies, components, by-products, rejects, waste or scrap except prohibited items
of exports indicated in the ITC (HS) Classification of Export Import Items.
Export of Special Chemicals, Organisms, Material, Equipment and Technologies shall be
subject to fulfillment of the conditions indicated in the ITC (HS) Classification of Export Import
Items.
Job work Abroad and Export thereof
Units in SEZs are permitted to undertake job work abroad and export goods from that country
itself subject to certain conditions.
72
RBI Master Circular No. 09/2009-10 dated 1-7-09, details Job Work Abroad and exports
thereof.
A unit may import or procure from the Domestic Tariff Area (DTA) without payment of duty,
taxes or cess or procure from DTA after availing export entitlements or procure from other
units in the same or other special economic zones or from export oriented unit or software
technology park unit or electronic hardware technology park unit or bio-technology park unit,
all type of goods, including capital goods (new or second hand), raw materials, semifinished goods, (including semi-finished jewellery) components, consumables, spares
goods, and materials for making capital goods required for authorized operations except
prohibited items in the ITC (HS).
A Unit may import or procure from DTA, all types of goods and services, without payment of
duty, taxes or cess for creating a central facility for use by Units in Special Economic Zone and
where such facility is created for software development, the same may also be accessed by
software exporters of DTA.
IT, Service Tax, State Levies, etc. Reliefs and Refunds
Exporters are requested to access these from the websites of IT, CBEC, State governments,
etc.
The Central Excise procedure for procurement from Domestic Tariff Area can be accessed
from CBEC website.
Services Export in non-physical form If services are exported in non- physical form, the
export value is to be furnished by the Unit on self certification basis as specified.
Examination of goods
The goods may be examined at the port, airport, Inland Container Depot or Container Freight
Station or Land Customs Station only in case of specific intelligence or information after obtaining
the written permission of Deputy or Assistant Commissioner of Customs having jurisdiction
over the said port, airport, inland container depot or container freight station or land customs
station, as the case may be, in writing.
The unit may export through Inland Container Depot located in the Special
Economic Zone, or through any port or airport or Inland Container Depot.
73
Export by Post
The Unit may export goods by post subject to the procedure applicable to export through
Foreign Post Office.
Export through courier
Export through couriers shall be allowed only if the courier is an authorized courier, being
registered with the Commissioner of Customs having jurisdiction over the gateway airport
and the procedure specified in the Courier Export and Import (Clearance) Regulations, 1998.
The goods shall be allowed to be handed over to the courier by the custodian as per the
procedure specified by the Specified Officer.
Export through Foreign Bound Passenger
A Unit may export goods to be carried by foreign bound passengers authorized by the Unit
in this behalf as personal baggage, subject to the following conditions namely:(i)
the unit shall submit the shipping bill, invoice and currency declaration form
(GR) with the authorized officer;
(ii)
the shipping bill shall be assessed by the authorized officer in the same
manner as is done in the case of exports under free shipping bill;
(iii)
the goods shall be transferred from the SEZ to the airport under the cover of
assessed shipping bill by the authorized agency approved by the Specified
Officer or under escort of Authorised Officer;
(iv)
the goods shall be deposited with the warehouse at the airport against a
detention receipt issued by the Customs authorities at the airport;
(v) the consignment shall be handed over to the authorized passenger at the time
of departure on submission of original detention receipt;
(vi)
the Unit shall submit to the specified officer, the proof of export issued by the
Customs authority at the airport within a period of fifteen days from the date of
removal of the goods from the Special Economic Zone;
(vii)
where the facility of custodian is available in the Special Economic
Zone and the airport, goods shall be transferred and delivered to the
authorized passenger at the airport by the custodian.
(viii) personal carriage of spare parts by foreign bound passenger
74
(ix)
(x)
shall be allowed in case the spare parts are required for repairs of exported goods at
customer site and following documents shall be submitted as proof of export,
namely:(a) permission letter from the authorized officer for exports; and
(b) invoice with value.
personal carriage of any goods for exports by authorized passenger on
Document Against Acceptance or Cash On Delivery basis may be allowed
provided the Unit submits following documents, namely:(a) copy of Shipping Bill; and
(b) the bank certificate for realization of proceeds shall be submitted within
thirty days of delivery of the goods.
personal carriage of gems and Jewellery items of the value not exceeding US$
two million or other goods not exceeding rupees five lakhs in value, for holding
or participating in overseas exhibitions shall be permitted with
the approval of the Development Commissioner and subject to the following
conditions, namely:(i)
Unit shall declare personal carriage of such goods to the Customs
authorities at the airport while leaving the country and obtain necessary
endorsement; and
(ii)
Unit shall bring back goods or repatriate the sale proceeds within forty
five days from the date of closure of exhibition through normal banking
channels or within such days as may be noticed by the Central Government;
(iii)
for personal carriage of goods by foreign bound passenger, the
following documents shall be submitted by a Unit as proof of export, namely:(a) Copy of shipping bill filled by the unit;
(b) Copy of the currency Declaration Form filed by the Foreign buyer with
the Customs at the time of his arrival;
(c) Foreign exchange realization or encashment certificate from the Bank.
Export through Another Unit

A unit may export goods and services, through another unit or merchant exporter or status
holder or Export Oriented Unit or Electronic Hardware Technology park unit or Software
Technology Park Unit or Bio- technology park unit subject to following conditions, namely:(i)
goods or services shall be manufactured or developed in the

Unit concerned;
(ii)
requirements of positive net Foreign exchange Earning or any other conditions

relating to authorized operations shall continue to be discharged by the Unit:
(iii)
export orders so procured shall be executed within the provisions of these

rules and the goods shall be directly transferred from the Unit to the
airport or port of shipment;
(iv)
fulfillment of positive Net Foreign Earning by the Unit shall be reckoned on the
basis of the price at the which the goods or services were supplied by the Unit or
Electronic Hardware Technology Park unit or Software Technology Park unit or
75
Bio- technology Park Unit provided that such export shall be counted towards
fulfillment of obligations of the unit only.
Removal of Goods by SEZ units to DTA
DTA is the area outside the SEZs, but within the country where all taxes and duties apply.
SEZs are tax-free enclaves. A unit may sell goods and services including rejects or wastes
or scraps or broken diamonds or by
products arising during the manufacturing process or in connection therewith, in the
DTA on payment of Customs duties.
Detailed procedure for procurement from DTA can be seen in the website of DC, SEZ.
Procedure
DTA buyer shall file Bill of Entry for home consumption giving therein completed description
of the goods and/ or services namely, make and model number and serial number and
specification along with invoice and packing list with the Authorised Officers.
Temporary removal to DTA
The Unit may temporarily remove following goods to DTA without payment of duty,
namely: (a) capital goods and parts hereof for repairs and return thereof; (b)goods for
display, export promotion, exhibition and return
thereof;
(c) goods for job work, test, repair, refining and calibration and return thereof;
(d)laptop or notebook computers or video projection systems for use by
authorized employees of a Unit;
(e)any other goods with the prior approval of the Authorized
Officer.
Exit from the Scheme
The Unit may op out of Special Economic Zone with the approval of the Development
Commissioner and such exit shall be subject to payment of applicable duties on the
imported or indigenous capital goods, raw materials, components, consumables, spares
finished goods in stock.
SEZ approval process is to be on line process from October, 2010.
Free Trade and International Trading Hub and Warehousing Zone
(FTWZ)
The FTP 04-09, introduced a new scheme to establish Free Trade and Warehousing Zones
(FTWZs) to act as international trading hubs providing a trade-related infrastructure to facilitate
import and export of goods and services with freedom to carry out trade in free currency. The
FTWZs mean a Special Economic Zone wherein
mainly trading and warehousing and other
76
related activities are carried on.

The units in a FTWZ shall enjoy all benefits of a SEZ (Special Economic
Zone). In fact it is now a part of the SEZ.
The objective is to create trade-related infrastructure to facilitate the import and export of
goods and services with freedom to carry out trade transactions in free currency. The
scheme envisages creation of world-class infrastructure for warehousing of various products,
state-of-the art equipment, transportation and handling facilities, commercial office-space,
water, power, communications and connectivity, with one-stop clearance of import and export
formality, to support the integrate zones as international trading hubs. These Zones would be
established in areas proximate to seaports, airports or dry ports so as to offer easy access by
rail and road.
Net Foreign Exchange Earning
Units in FTWZs shall be net foreign exchange earners. Net foreign exchange earning shall
be calculated cumulatively for every block of five years from the commencement of
warehousing and/ or trading operations as per formula applicable for SEZ units.
As on Mar 10, the government has allowed units in special economic zones (SEZs) to export
prohibited or restricted items, provided they import all the raw-materials used for making
such products and add value before re- exporting. However, this permission comes with
riders.
Each such case will have to be placed before the Board of Approval (BoA) for SEZs, headed
by the commerce secretary, for its nod so that the views of the Directorate General of
Foreign Trade, the Revenue Department and others can be considered before taking a
decision.
But significantly SEZ units canot export any restricted or prohibited item if the raw material
used in those is sourced domestically.
Tax benefits in SEZ: manpower transfer limit raised for IT firms
The Central Board of Direct taxes (CBDT) has raised the limit for transferring technical manpower from
exiting units to a new unit in a special Economic zone (SEZ) a move that will benefit the software
industry.
Further if the company is able to prove that that the net addition of the new technical manpower in all
units of the said firm is at least equal to the number that represents 50 per cent of the total technical
manpower of the new SEZ unit during such previous year, deduction would not be denied said the
circular. The board revised the limit after receiving representations from the industry, which said that
the 20 per cent limit was inadequate and restrictive since it impacts the competitiveness of India
software industry in global market in terms of quality of product and delivery timelines. Global
competitiveness can be ensured only when highly skilled and experienced manpower is deployed for
software development,. The industry requested to enhance the limit in line with the recommendations
of Rang chary committee, which was set up to review the taxation of the IT sector and development
Centres.
77
Exports from SEZs rise 17% in 2011

Exports from special economic zones grew 17% to Rs.2,60,973 crore during AprilDecember 2011 from Rs.2,23,132 crore during the corresponding period in the
previous year, according to a statement by the Export Promotion Council for Export Oriented
Units and SEZs (EPCES).
New incentives for SEZs

The government
is looking at ways to incentivize SEZs as investments into the zone have reduced to a trickle because of
impositions of minimum alternate tax on developers distribution tax on developers units and the
generally dampened economic climate. The commerce ministry would have to get the Finance
ministry`s nod before allowing any tax concessions to the SEZs.At present, units in SEZs have to pay full
customs duty to sell in the domestic area outside the zones known as the domestic tariff area (DTA).
India has FTAs and economic partnership agreement with a host of countries such as Singapore.
Malaysia, Japan, South koura, Sri Lanka and the Asean trade bloc. A large number of items including
textiles, machinery, iron & steel, electronic goods, transport equipment and project goods are allowed
into India at lower duties from these countries.
The commerce ministry is persuading the finance ministry to lower the minimum alternate tax (MAT)
imposed on SEZ units and developers at 18.5 per cent.
SEZs have also demanded that they too be made eligible for benefits given to exporters outside the
zones for exporting targeted products and to specific markets under the focus products and focus
market schemes
78
CHAPTER
14
FULL CONVERTIBILITY OF THE RUPEE

INTRODUCTORY:
The Foreign Exchange Regulation Act 1947 was promulgated in 1947 with object
of regulating certain dealings in foreign exchange and the import and export of
currency and bullion. The b a s i c control was directed towards dealings in
Foreign exchange and payments which directly affect foreign exchange resources.
The exchange control consisted of restricting purchase and sale of foreign
exchange by general public and payments involving nonresidents. Restrictions were
also imposed on the import and export of Indian currency, Foreign currency and
bullion.
An official exchange rate was fixed by the Reserve Bank of India for the conversion of
Indian currency into foreign exchange. All transactions in foreign exchange
were governed by this official rate of exchange.
By virtue of these controls exercised by the Reserve Bank of India, all foreign exchange
earned and received by any person in India were required to be sold to
authorised dealers so that all foreign exchange earned or received can be
converted and utilised only according to the priorities fixed by the Government.
These controls were necessary at a time when India was still an undeveloped country
exporting only agricultural products and raw materials like Iron ore, manganese ore,
mica etc., and importing almost all the required consumer goods. However, with four
decades of such controlled and regimented system, India has been able to reverse the
pattern of trade to a considerable extent. Instead of exporting merely agricultural
products etc., and importing consumables, we are now in a position to export
sophisticated electronic gadgets and import mainly capital equipments and
intermediate products for our Industrial development. To move economy further in this
direction some relaxation in the controls exercised on foreign exchange was found
imperative and this has been brought about by what is termed as
"Liberalised Exchange Rate Management System", (LERMS for short), introduced
with effect from 1.3.1992.
LERMS :
Under the LERMS, Exporters of goods and services and those who are recipients of
remittances from abroad could sell the bulk of their foreign exchange receipts at market
determined rates. Similarly, those who need to import goods and services or undertake
travel abroad could buy foreign exchange to meet such needs, at market
determined rates from the authorised dealers, subject to their transactions being
eligible under the liberalised exchange control system. However, in respect of certain
specified priority imports and transactions, provisions were made in the scheme
for
79
making available foreign exchange at the official rate by the Reserve Bank of
India.
By this scheme, partial convertibility of the rupee was introduced. 40% of the foreign
exchange received on current account receipts, whether through export of
goods or services alone needed to be converted at the official rate, while take
remaining 60% was convertible at market determined rates. The imports of materials
other than petroleum, oil products, fertilizers, defence and life saving drugs and
equipment always had to be effected against market determined rates.
All receipts of foreign exchange were required to be surrendered to
authorised dealers as was the practice hitherto. The rate of exchange for the
transactions was to be the free market rate quoted by authorised dealers except
for 40% of the proceeds which would be based on the official rate fixed by the
Reserve Bank of India. The authorised dealers were required to surrender 40% of
their purchases of foreign exchange to the RBI at official rate. The remaining 60%
could be retained by them for sale in free market for all permissible transactions.
The Exporters were also given a choice to retain a maximum of 15% of the
export earnings in foreign exchange itself, which could be utilised by them for
their own personal needs.
FULL CONVERTIBILITY:
There is, however, a subtle difference in the full convertibility of the rupee introduced
in India and the concept of full convertibility prevailing in developed
countries like the U.K., U.S.A. etc. In developed countries, full convertibility means that
their currency is freely convertible anywhere in the world. Their home currency
can be converted into foreign currency without any restriction. One does not have to
disclose even the purpose of such conversion. For instance, U.S. Dollars can be
changed into Sterling Pounds in New York, Japanese Yen could be exchanged
to Deutsche Marks in Frankfurt, Australian Dollars can be converted into
Candian Dollars in Adelaide etc., The exchange rate is controlled by the position of
supply and demand in the market.
The full convertibility announced in the Union Budget of 1993-94, however, allows
convertibility only in the current account, which means the amount received by way
of sale proceeds of exports, paid for imports and the remittance by NRIs etc.,
alone are convertible at market determined rates.
In the last year's Budget, a dual exchange rate was announced i.e., 60% at
market rates and 40% at the official rate. In the current Budget, the dual exchange
rate has become a unified exchange rate which is a 100% conversion of foreign
exchange at market rate. This is described as Full Convertibility. This does not mean
that one can get any amount of foreign exchange at market rate for meeting any of
one's needs. The Reserve Bank of India will permit sale of foreign exchange currency to
anyone only for those purposes which are stipulated by the Govt. of India. It does not
permit conversion of one's savings in the country for investment in foreign
countries, as could be done by the citizens of developed countries like the U.K. or
U.S.A. For instance, if a citizen resident in India wishes to undertake a foreign travel,
the exchange for such travel can be had only as per the norms prescribed by the
Govt. under the Foreign Travel Scheme. Full convertibility of the Rupee we have
adopted for our country is tied up with exchange controls and restriction envisaged by
the provisions of the F.E.R. Act 1973 as amended.
80
Full convertibility has been introduced only as a measure of reforms to revitalise

the economy of our country and to bring it on to the path of liberalisation. The New
Economic Policy ushered in by out Govt. is with a view to take India forward from
a control-ridden-inward-looking economy into a market - friendly, forward looking
progressive and dynamic economy. Full convertibility of the rupee, lower Customs
and Central Excise duties, relaxation of Import / Export restrictions, streamlining of
procedural rules governing taxations, streamlining of procedural rules governing
taxation laws etc.,. have opened out our economy with a view to expansion
and globalisation of our trading activities. These are measures taken to move
India forward in her march towards economic freedom.
ADVANTAGES :
a)
Full convertibility will enable Exporters to get a higher price for the
goods exported. This is certainly a big incentive for
increasing export.
b)
Since the Importers have to pay more than the goods imported, there
will be a natural tendency to import less, confining the imports to
absolutely necessary items although the Export/Import Policy has been
liberalised.
c)
Malpractices like under-invoicing of exports may not arise as the rupee

is fully convertible and full value of exports is realised.
d)
Indian rupee would become stable and the gap in the balance of
trade reduced considerably. A self balancing mechanism of import
export trade will eventually get established.
CONCLUSION :
The Govt. had however stated that if the value of the rupee depreciates to an
unreasonable level in the free market operations, the R.B.I. will intervene and control it.
This assurances certainly gives credence to the earnestness and sincerity with which
the full convertibility has been announced.
What is important is that changes in the global markets will automatically get reflected in
the Indian markets on account of the full convertibility. This is certainly a move in
the right direction. Instead of remaining as an insulated economy, India will surge
forward as a free economy, unfettered and opened out for the world markets.
81
CHAPTER
15
GOODS IMPORTED OR EXPORTED BY POST

INTRODUCTION :
Sales or Purchases (i.e., exports or imports) of products involving foreign exchange are
allowed by post. Section 82,83 and 84 of the Customs Act deal with imports and
exports through post. Section 82 specifies that the label or declaration accompanying
the goods, imported or exported by post shall be deemed to be an entry for the
purpose of import or export. In terms of Section 83, the rate of duty and tariff
valuation in respect of goods imported or exported by post shall be the rate and
valuation in force on the date on which the Postal Authorities present to the
Customs Officer a list containing particulars of such goods known as a Way Bill.
Section 84 empowers the C.B.E.C. to make regulations for the form and manner in
which entry has to be made, the examination, assessment and clearance and for the
transit or transshipment of goods by post.
POSTAL IMPORTS
When foreign parcels are received in India through post, the foreign post office
attached to the Postal Department prepares a list of such items known as Way Bill
and submits the same to the Customs officers posted in Foreign Post Office in a
section styled "Postal Appraising Department". The Way Bill is checked by the
Postal Appraising Department and in cases where the description is clear and the
value is small and the goods are other than trade goods in commercial quantities,
the same are assessed straightaway on the Way Bill itself and the parcels released to
the respective post offices after indicating the Customs duty amount leviable, if any,
there on the Way Bill and on the parcel. The duty indicated on the parcel is
recovered by the Postal Department from the addressee and passed on to the
Customs Department.
In cases where the Department feels that documents such as Invoice, Catalogue,
Literature, I.T.C. Licence etc., are required to assess the parcel, a letter known as
Call Notice is issued to the Importer / Addressee and on production of the same the
goods are assessed to duty and the duty indicated in the Way Bill and on the
parcel and the parcel released as above. When the parcel is received by the
Importer and if the Importer feels that the duty charged is too high or incorrect, he
has an option to send the parcel back to the foreign Post Office concerned and
have the goods reassessed. If the Importer wants to claim refund of duty the
wrapper and label have to be retained and produced to the Customs as proof of
payment. No Bill of Entry is required for the clearance of post parcels. Similarly no
S/Bills is also necessary for sending out parcels.
82
POSTAL EXPORTS
Goods exported by post are divided into three basic categories.
1.
Jewellery items.
2.
Goods other than jewellery, not entitled to duty drawback.
3.
Goods entitled to customs duty drawback.
Jewellery Exports :
In case of export by post of jewellery all packages containing jewels/
jewellery is required to be sealed in the presence of customs authorities after necessary
valuation by them. This is binding to both trade goods as well as trade samples.
The relevant declaration form i.e., PP form must be countersigned by the customs. If
the exporter is from a place where there is no Customs House, a certificate from an
authorised dealer in foreign exchange as to the value of contents of the article
will be provisionally accepted by post offices in lieu of customs valuation.
Goods other than jewellery, not entitled to duty drawback :
In this case, the exporter has to make a declaration about the description and
value on the Customs Declaration Form and also submit a P.P. form
(in lieu of GR form) declaring the full export value of goods.
The procedure for filling PP form is just the same as that of GR form excepting
that, before filling the PP forms at the Postal Customs, the exporter has to submit
both copies of the PP forms to an Authorised Dealer for counter signature along
with the overseas bank or correspondent bank.
If the parcel is addressed directly to the importer, the AD will countersign the
parcel only if
a)
b)
c)
The irrevocable LC stipulate that the consignment should be made

direct to the buyer
or
100% advance payment has already been received or
Prior permission from RBI is received
Goods entitled for Duty Drawback :

Goods proposed to be exported under duty drawback scheme or excise rebate
may be required to be examined by Central Excise authorities before clearance from
factory or warehouse. In case of bulk or heavy articles, an officer may be
deputed on request to supervise the packing and sending of export goods. Form
AR4 (please refer annexure in Vol:2) is to be filled in case of excise rebate in
four copies. The duplicate copy of these duly processed forms should be affixed
with sufficient postage stamps before presentation to the post office.
83
In case of drawback articles 'From D' is used. The exporter has to fill in part I of
Form D. The customs after examination of the parcels will fill in part II of Form D and
return the form and parcels to the exporter for presentation at the booking
counter of the post office. A specimen copy of Form D is put as annexure in
Vol:2.
Booking at Post Office :
Export goods routed through post can be booked through any post office in India.
They are routed through the Foreign post offices at Mumbai, Kolkotta, Delhi, Jaipur
and Chennai or through the sub offices of exchange at Ahmedabad,
Bangalore and Cochin.
While booking the goods they should be accompanied by the documents listed
below:
1.
PP Form: To be submitted in two copies duly countersigned by the

exporter bank.
2.
Export License: If applicable
3.
Form D: In four copies for goods entitled to customs duty

drawback.
4.
AR4 Form: In 2 copies for goods entitled to excise rebate.
5.
Insurance Note: For goods like jewellery where insurance is

obligatory.
6.
Commercial Invoice: In two copies.
7.
Packing List: In two copies
8.
Self addressed envelope duly affixed with sufficient postage

stamps for registration.
Limitations of Weight, Dimension and Packing

There are certain limitations (both maximum and minimum) on specifications of
weight, dimension and packing imposed both by the post offices in India as well
as by the post offices in the country to which the export goods are intended.
Information on these limitations should be obtained from the concerned post offices
before packaging of export goods are undertaken.
Shipment Advice
Similar to the case of despatch by sea, air etc. the exporter should send an intimation to
the importer giving despatch details. A copy of the commercial invoice and packing list
along with the date of despatch, bank's name etc., should be sent to the importer.
84
Chennai customs allows courier items as in-flight baggage

The Commissioner of Customs, Chennai (airport and air cargo) has, in perhaps a first, allowed
the import or export of courier items as personal carriage on board a flight by authorized
courier agents through the Chennai airport.
This means a person will fly to a country carrying a confidential document or say an export item (up
to a value of Rs.50,000) of a client to be delivered abroad. This will be a personalized
service for a specific client. Similarly, a person can bring such courier from abroad, according to
sources. The Facilitation Notice (5/2011) issued recently by the department says that under
the scheme, the agent will be permitted to carry items as personal carriage on behalf of an
exporter who is otherwise permitted to import such goods only according to the Courier Imports
and Exports (Clearance) Regulations of 1998.
Infrastructure for e-export
The union ministry of finance would soon set up special customs infrastructure in Delhi and
Mumbai as pilot projects for e-exports and exports through courier and Indian Posts.
The Supplementary Foreign Trade Policy 2012-13 extended the credit and tax benefits to exports
through e-commerce, courier and postal systems.
According to an e-commerce portal, top online export revenue churners are gemstone
studded silver necklaces, followed by diamonds, homoeopathic remedies, silk sarees and
gemstones.
Annual Supplement 2012
Annual supplement to the FTP 09-14 stated that exports through posts and couriers would be
eligible for export incentives for shipments effected from Delhi and Mumbai.
85
CHAPTER 16
CUSTOMS HOUSE AGENTS,FREIGHT
FORWARDER AND THEIR RESPONSIBILITIES
The clearance of goods on Import or Export, including unaccompanied baggage, involves

quite a lot of procedural formalities under Section 46, 47, 50, 51 etc., These formalities have
to be observed by Importer / Exporter / Passenger, as the case may be. But in most cases
the Customs station would be far away and it may not be possible for the Importer /
Exporter / Passenger to attend to such work promptly. Unlike the work related to Central
Excise or Income Tax, the Customs formalities cannot be attended to leisurely, as
clearance is allowed only after the completion of formalities and payment of duty, where
due. To meet this situation, a provision for licensing Custom House Agents, to represent the
Importer / Exporter for the clearance work, has been made in the Customs Act 1962. Even
prior to 1962, such as Muccadams, Dalals, Baggage Agents, Clearance Agents etc.
In terms of Section 146, the Board (Central Board of Excise and Customs) has issued
certain Regulations known as Custom House Agents Licensing Regulation
1984 laying down the conditions and procedures to be followed. The extent of liability of the
agents is indicated in Section 147.
A person, who desires to become a Custom House Agent, has to make an application, in the
prescribed form. When such applications are invited by the Commissioner of Customs
under Rule 5. Initially only a temporary licence, valid for two years is issued (Rule 8). To be
eligible to make this application, the person should have experience in the line for at least
one year and should have assets to the extent of Rs.1 lakh (Rule 6). He has also to
execute a bond with security for Rs.25,000/-. The temporary licence can be made a regular
licence on his passing a qualifying examination (Rule
9) within a period of two years. The regular licence (Under Rule 10) is issued for five
years, and can be renewed thereafter on payment of a fee of Rs.3,000/- for further period
of three years.
The most important part of the Customs House Agents Regulations is Rule 14, which lays
down the obligations of Customs House Agents, as under.
(a)
obtain an authorisation from each of the companies, firms or individuals by

whom he is, for the time being, employed as Customs House Agent and
produce such authorisation whenever required by an Assistant
Commissioner of Customs;
(b)
transact business in the Customs Station either personally or through an

employee duly approved by the Assistant Commissioner of Customs,
designated by the Commissioner;
(c)
does not represent a client before an officer of Customs in any matter
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to which he, as an officer of the Department of Customs gave personal

consideration, or as to the facts of which he gained knowledge, while in
Government service;
(d)
advise his client to comply with the provisions of the Act and in case of non
compliance, shall bring the matter to the notice of the Assistant
Commissioner of Customs;
(e)
exercise due diligence to ascertain the correctness of any information which

he imparts to a client with reference to any work related to clearance of
cargo or baggage;
(f)
not withhold information relating to clearance of cargo or baggage

issued by the Commissioner of Customs from a client who is entitled to such
information;
(g)
promptly pay over to the Government, when due, sums received for
payment of any duty, tax or other debt or obligations owed to the
Government and promptly account to his client for funds received for him
from the Government or received from him in excess of Government or other
charges payable in respect of the clearance of cargo or baggage;
(h)
does not procure or attempt to procure directly or indirectly ,information from

the Government records or other Government sources of any kind to which
access is not granted by proper officer;
(i)
not attempt to influence the conduct of any official of the Customs

Station in any matter pending before such an official or his subordinates by the
use of threat, false accusation, duress or the offer of any special inducement
or promise of advantage or by the bestowing of any gift or favour or other
thing of value;
(j)
not refuse access to, conceal, remove or destroy the whole or any part of any
book, paper or other record, relating to his transactions as a Customs
House Agent which is sought or may be sought by the Commissioner;
(k)
maintain records and accounts in such a form and manner as may be

directed from time to time by an Asst. Commissioner of Customs and submit
them for inspection to the said Asst. Commissioner of Customs or an officer
authorised by him whenever required;
(l)
ensure that all documents prepared or presented by him or on his

behalf are strictly in accordance with orders relating thereto;
(m)
ensure that all documents, such as Bills of Entry and Shipping Bills
delivered in the Customs Station by him show the name of the Importer
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or Exporter, as the case may be, and the name of the Customs House
Agent, prominently, at the top of such documents;
(n)
in the event of the licence granted to him being lost, immediately report the
fact to the Commissioner;
(o)
ensure that he discharges his duties as Customs Hose Agent with

utmost speed and efficiency and without avoidable delay; and
(p)
not charge for his services as Customs House Agent in excess of the rates
approved by the Commissioner from time to time under Regulation
25.
It should be noticed that the above 'obligations' cover not only certain procedural aspects,
but also a Customs House Agents' conduct and character. Any lapse on the part of
Custom House / Agent or violation of any rule can invite action which might result in
suspension or revocation of licence under Rule 21.
A Custom House Agent has to be not only well informed of the Customs laws and
procedures and documentation, but has to be alert all the time, closely following the
instructions or change in the public notices, issued from time to time. His is a very peculiar
position in that, though he is employed by the Importers/Exporters, he is licensed by the
department and hence he can satisfy them only to the extent the law permits and within
the procedures laid down by the Customs House. He has, accordingly, to function under
two masters, the tax payer and tax collector, both simultaneously satisfactorily.
A Customs House Agent can attend to the Custom work himself or employ persons to
assist him, but after obtaining necessary permission from the Asst. Commissioner of
Customs. Such assistants appointed by Custom House Agents will have to pass an
examination conducted by the Asst. Commissioner of Customs within six months from the
date of such appointment.
The charges levied by Custom House Agents from the Client should be at such rates as
notified by the Commissioner from time to time which is done under Rule
25(b). The same rule, sub section (2) requires that Customs House Agents should enrol as
members of the registered Custom House Agents Association of the Port.
Govt., on 24 Feb 04, announced changes in regulations relating to CHAs, including
abolition of temporary licences for CHAs. For details refer to the nearest Customs House
or their website.
TIPS FOR SELECTING A CHA
*
Make sure that the CHA knows the regulatory changes that affect the
goods you import/export.
See to it that he knows his responsibilities and minimises his exposure to

administrative monetary penalties.
* Make sure the CHA can communicate with you electronically and how best can
he help you with data to prepare and improve your exporting comply skills.
* Make sure that his charges are reasonable. A periodical check and review
will help you.
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* What help can the CHA provide you in promotion of export of your product/s
which you can beneficially communicate with your buyers.
* If your CHA is affiliated with foreign CHAs/Carriers/freight forwarders, it will be
beneficial.
*
Make sure that your CHA's association has a regular e-mail service, and he
passes on the benefits to you concerning your export activities comprehensively.
* If he can supplement you the knowledge about the goods you import/ export
for your activities, in a global basis, you have made a better choice.
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Flow Chart
C&F Agent received documents from exporter
C&F Agent takes delivery of cargo
C&F agent stores cargo in his warehouse till shipment
C&F agent prepares shipping bill and submits along with other
documents to customs house
Documentary check by customs appraiser/examiner who also instructs 'Dock
Appraiser' about extent of physical examination of cargo
Cargo brought to the port shed for loading
Physical examination by Dock Appraiser who endorses 'Let

Exports' on duplicate copy of shipping bill
Preventive Officer endorses 'Let Ship' on duplicate copy of

shipping bill
Cargo loading 'On Board' the vessel
Master of Vessel issues 'Mate's Receipt' to Shed

Superintendent of Port
C&F agents collects mate's receipt after paying port dues
C&F agent presents mate's receipt to shipping company
Shipping company issues bill of lading in exchange for mate's receipt
C&F agent despatches bill of lading along with other documents to the exporter
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Freight forwarder
Freight forwarder functions are similar.
Freight Forwarder : Essentially secures the business of various exporters and importers and has the
ability/facility to
store the cargo belonging to the clients at their warehouse (usually all big forwarders have
their own warehouses)
arrange the distribution or forwarding of the cargo as per the instructions of their client..
This could be a regular routing or various routings
negotiate freight rates with the shipping line to cover the interest of their clients
book the cargo with the shipping line as per the requirement of the client
prepare bills of lading and associated shipping/negotiating documentation (F178, Certificate

of Origin, etc)
issue their approved house bill of lading as applicable
MAY or MAY NOT also do Customs Clearance
may or may not be accredited to customs, port etc and cannot do customs clearance if not
accredited
almost viewed by clients as an alternative shipping line

Clearing Agent : Essentially takes care of the customs clearance aspect of the business..
is a company accredited with the local customs authorities, border agencies, port etc
arranges to pass the relevant documents at customs
arrange for customs inspections as required
check and process Duty and VAT payments as applicable
apply for refunds etc where applicable
cannot issue own bills of lading if not registered or acting as a freight forwarder
These are the major differences between a Freight Forwarder and Clearing Agent..
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CHAPTER 17
QUALITY CONTROL AND PRE-SHIPMENT INSPECTION
Compulsory Preshipment Inspection
Under the Export Quality Control Inspection Act 1963, there are as many as 1057
commodities under major groups of foods & agriculture, fisheries etc. By amendment
act of 1984, Directorate of Inspection and Quality Control has been given wide powers of
seizure and search of goods etc. Provision of confiscation of goods have been
strengthened more to keep Exporters in discipline and improve the Indian Export Trade.
To ease Pre-shipment inspection system for Exports the Government reviewed the
procedure in July 1991. According to the revision the trading houses, including the star
trading houses, and export houses that are recognised by the Central Government
would be exempted from the purview of compulsory pre-shipment inspection for all
products covered under Export (Quality and Inspection) Act of 1963.In Process Quality Control
(I P Q C) units for all such notified, products would be authorised to issue statutory
certificates of inspection on their own.
Buyers Agency :
At times the foreign buyers, lay down their own standards/specifications which may or may
not be in consonance with the Indian standards including the stipulation under the
quality control regulation. Similarly the overseas buyers may nominate their own
agencies/persons for inspection before shipment.
Compulsory Inspection of Textile Goods :
For Textile goods and also for ready made goods inspection, has to be conducted by the
textile committee inspectors.
1.
For Hand Woven Cotton/Mixed Yarn goods voluntary inspection has to be done
especially for export to EEC countries and U.S.A. The certificate meant for EEC
countries should be in five languages.
2.
Handloom certificate and certificate of origin for handloom goods for export to
EEC countries.
3.
ESP certificates for items entitled to tariff concession under the Generalised system
of preference operated by almost all the developed countries.
4.
Endorsement of U.S. Special customs invoice otherwise known as visa certificate.
5.
Certification of Indian items.
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Leg up for exports: government plans green channel clearance for traders
A new green channel customs facility that will allow hassle-free and expeditious clearance of
Indias $600-billion trade will be in place soon, helping bring down transaction costs for traders.
Consignments will be cleared by customs official based on self declaration by traders after
payment of duties, a system followed in many countries, including China.
In the current system an inspector verifies the cargo, decides the duty and finally clears it, making
the process cumbersome and prone to abuse.
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CHAPTER 17
INCO TERMS AND TERMINOLOGY OF INTERNATIONAL TRADE
In international trading the two parties, i.e. the buyer and the seller are at a distance,
unknown to each other. Transactions are done through correspondence and the deals
are finalized. These transactions generate a set of documents confirming the sale, price,
quantity, time and mode of supply etc.Thus, the contract covers:
a) The contract of sale and b) The
contract of Carriage
Being at a distance and finalizing the contract by documents, it is the terms used for delivery,
which are dependent upon interpretations that vary because of commercial laws such as
Sale of Goods Act or the Contract Act that give different understanding to each party in
relation to their local applications of these laws.
To avoid misunderstandings and misinterpretations of these terms of contract which could
result in delays, losses and legal proceedings, the International Chamber of Commerce,
Paris came to an agreed understanding,accepted by the international trading community,
which spelt out the meaning of the terms of carriage, the liabilities, risks and costs involved of
the seller and the buyer. These terms are known as INCO Terms.
Understanding these risks and cost factors reduced the misunderstandings, losses and even
legal proceeding, it is true that these terms of carriage have no legal sanctions but they have
international acceptance and even the Courts have accepted their definitions and scope.
Some scope and limitations of INCO terms:
Inco terms facilitate export credit etc.

Inco terms helps to determine liability
It is not a contract of sale
It does not determine the price of goods
Inco terms do not override laws of the land of contracting parties
Inco terms do not establish a relationship among parties involved in export/import
trade.
INDIAN CUSTOMS WATERS :

This means the Waters extending into the sea upto the limit of continuous zone of India under
Section 5 of the territorial waters, continental shelf, Exclusive Economic Zone and other
Maritime Zones Act 1976 (8 of 1976) and includes any bay, gulf, harbour, creek or tidal
river.
In the provisions of law made for the prevention or detection of illegal export of goods i.e.
in Chapter IV B & C of the Customs act 1962 the term 'Specified Area' includes this
Customs waters. This is the widened area, transactions within which can be detrimental to
national interest. This definition within which can be detrimental to national interest. This
definition has been linked up with the definition of India, and import of any goods which
entered Indian Customs water are held to be imported goods and are liable for import duty
from the point when any steamer enters the Indian Customs waters.
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I.G.M. AND E.G.M. :

IGM meaning import General manifest, is the document to be filed by the Master of Vessel
within 24 hours of arrival at a port. It will contain a list of goods loaded on board destination
wise and also the list of crew members with the details of their personal belonging, list of
ship's the port clearance from the last port of call etc.
EGM meaning Export General Manifest, is a document to be filed by the steamer agents
on behalf of the master of the vessel within 7 days of the sailing of the vessel. This would
contain complete details of all cargo loaded on board as well as carried as bottom cargo,
destination wise, list of crew members with details of their personal property, ship's stores.
The EGM is filed with the Export Documentation Centre alongwith the duplicate copies of
all Shipping Bills concerned.
BILL OF LADING DATE :
This is the date on which the goods have been actually loaded on the vessel. This date is
shown on the Bill of Lading and is normally accepted as such. At times, in case of dispute
Customs Officer may verify the information such as ship's log book entry etc. to find out the
correct date of loading. This date is very important as the validity of the import licence is by
reference to this date. Any import licence issued subsequent to this date is not valid for the
goods. Similarly loading of goods after the expiry of the licence is not covered by the
licence.
FOB VALUE :
Free on Board (on the vessel). This is the value of the goods which includes the cost/ price of
the goods and all other expenses included upto the stage of loading of the goods on the
vessel. This value is the value of the goods for export under Section 14 of the Customs Act
1962.
C.I.F .VALUE :
This means the value which is the sum-total of cost, insurance and freight. The cost means
cost of goods which may be either inclusive of commission/discount or otherwise. In case
the commission is not admissible under the law, the same is required to be included. Insurance
charges are marine insurance charges for the passage of the goods from the port of loading
to the port of discharge. If Inland insurance is shown separately from the port of discharge to
place of destination, the same has to bededucted from the insurance charges for
assessment purposes.
Freight is the charge for the transport of the cargo from the port of loading to the port of
discharge. The C. I. F price is, generally the value of the goods under Section 14 of the
Customs Act for purposes of import duty. In order to arrive at the assessable value of the
goods, landing charges are required to be added (1%) to the C. I. F. Value.
PORT TRUST CHARGES :
These are in the nature of Wharfage and demurrage charges. The Wharfage charges are
applicable for fixed working days from the landing date generally to 4 days). Thereafter the
demurrage charges are made applicable. These charges are made leviable on
import/export cargo which are lying within 95
the port premises. The scale of these charges
are prescribed by the Port Trust and are shown in their schedules for the different
categories of goods. These charges do not form part assessable value for the purpose of
Customs duty.
LANDING CHARGES :
This represents the charges for unloading the handling. Under the Customs valuation Rule
1988, the landing charges have been fixed at one percent of the CIF value. In addition to
the freight and insurance charges, the landing charges are added to the C.I.F. to assure at
the assessable value.
C.C.P.
This is a short form for the "Customs Clearance Permit" and is issued by the Import
Licensing Authorities for the clearance of specific goods to be imported wherein no foreign
exchange is involved or required to be remitted. The CCP is issued with the specific
description, quantity and value for the goods concerned.
STATE TRADING ENTERPRISES
Any goods, the import or export of which is governed through exclusive or special
privileges granted to State Trading Enterprise(s), may be imported or exported by the
state Trading Enterprise(s) as specified in the ITC(HS) Book subject to the conditions
specified therein. The Director General of Foreign Trade may, however, grant a
licence/certificate/permission to any other person to import or export any of these
goods.
In respect of goods the import or export of which is governed through exclusive or
special privileges granted to State Trading Enterprise(s), the State Trading Enterprise(s)
shall make any such purchases or sales involving imports or exports solely in
accordance with commercial considerations, including price, quality, availability,
marketability, transportation and other conditions of purchase or sale. These
enterprises shall act in a non discriminatory manner and shall afford the enterprises
of other countries adequate opportunity, in accordance with customary business
practices, to compete for participation in such purchases or sales.
END USE-BOND :
The Government often issues notifications giving exemption from duty subject to specific
end use of the goods imported. In such cases at the time of release of goods, a bond is
taken for production of proof of specific end use. The B/F is provisionally assessed in such
cases. On production of proof of end use, the B/E is finally assessed and Bond is
cancelled. If the proof is not produced as per the conditions of the Bond, the assessment
is finalised without the benefit of the exemption and difference in duty charged and
collected. Bond may be taken with / without surety / bank guarantee at the discretion of
the proper officer (Asst. Commissioner).
SHOW CAUSE NOTICE :

It is an important principle in common law that no person shall be punished without being
96
heard. One should know what offence or violation of law he has committed and that he
shall get an opportunity of explaining his stand vis-a-vis the allegation against him. This
precisely what the show cause notice stands for. In terms of section
124 of the custom act the charges and the allegations thereto, and the exact sections
of Act or the particular Rules that re prima facia violated are given out in the notice to show
cause and the offender is asked to offer his explanation regarding those violations. Only
after considering the explanation, a decision could be taken by the authority. Sometimes
the formal issuance of the Show Cause Notice is waived on request and with the consent
of the party. If the Show Cause Notice is not issued within six months from the date of
seizure of the goods, or within such extended time as the Collector may decide-in any case
within one year - the goods seized should be released to the person from whom they have
been seized.
FREE TRADE ZONE / EXPORT PROCESSING ZONES :
The Govt. had, for purposes of developing the export trade of the country, started a
number of Export Processing Zones in the country. The first such zone - then called the
Free Trade Zone - was started in 1965 / 66 in Gandhidam (Kutch - Gujarat State).
Subsequently similar zones were started in Bombay (exclusively for electronic items), Delhi,
Kolkata, Chennai and Cochin.Capital goods, components, raw materials, spares and packing
materials are allowed to be imported without payment of duty for use in the zone for
manufacture of goods exclusively for export. Similarly indigenous goods are allowed to be
sold for use inside the zone without payment of Central Excise duty. As no duty is to be paid
on the input and considering the comparatively cheap labour available in the country,
goods manufactured in the zone are capable of being sold in the international market at
competitive prices. This enables the country to earn the much needed foreign exchange.
Besides, considering the nature of the goods, 25% of the goods manufactured in the zone
are allowed to be sold to the Domestic Tariff area (i.e., within the country excluding the zone) on
payment of duty leviable on the finished goods as it imported. Other incentives such as Tax
Holiday from Income Tax, exemption / reimbursement of sales tax, priority in power allocation
etc., are also offered to attract manufacturing units to the zone.
FULL EXPORT VALUE :
The full export value has not been defined under the Customs Act. However, Section
18 of the Foreign Exchange Regulation Act 1973 speaks of full export value of the goods.
The full export value of the goods is not equal to the FOB value declared in the Shipping
Bill. The same is the value which the Exporter receives in full on the sale of the exported
goods in the overseas market; naturally the same will be including FOB value, freight and
insurance provided the export contract is on CIF basis. Further, discounts, commission
and over price if any, are required to be disclosed if the said amounts are payable to the
Exporter. In other words, these also fall as part of Full Export Value. In case of goods,
shipped on consignment account, the full export value will be the value which the
Exporter is likely to get in the overseas market on the sale of such goods on his own
account. The payment of full export value of the goods has to be recovered in the
prescribed manner i.e., through the Bank approved by the Reserve Bank of India as
per the provisions of F.E.R.A.
1978.
PROFORMA INVOICE :
This is a provisional document drawn by the Exporters giving details of description,
quantity and price and terms of supply of the goods to enable him go through the
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exchange control formalities for opening Letter of Credit etc., The proforma invoice,
accepted by the foreign buyer is submitted to the Customs Authorities along with the
Shipping Bill and other related documents for assessment and passing of the goods for
shipment.
LETTER OF CREDIT :
This is the most important mode of receipt of payment for exported goods. For
details, please refer to Export Import Finance.
BILL OF EXCHANGE :
It is defined as an unconditional written order, in which the person drawing the draft
(drawer) instructs another person (drawee) to pay a certain sum of money on a definite date on
demand or at a fixed future time to third person (payee) or to his order or to bearer. Three
parties are concerned in this viz. (1) the drawer who executes the draft or orders the
payment; (2) payee to whom the negotiable instrument is made payable and (3) the drawee
to whom the draft is addressed and who is ordered to pay the instrument.
G.R. FORM:
This is a declaration form prescribed by the Reserve Bank of India to be submitted in
duplicate along with the Shipping Bills to the Customs for processing the shipping Bills to
the Customs for processing the shipping Documents. This should contain the details of
Shipper (name and address), consignee (name and address), description of goods, the
full export value in foreign currency (and in Indian Rupees). The original copy after
verification of the declaration including the full export value is retained by the Customs
Authorities and passed on to the Reserve Bank. The duplicate, submitted by the Shipper to his
Bank along with other shipping documents is sent by the Bank to the Reserve Bank after
duly endorsing it regarding realisation of the sale proceeds. The Reserve Bank of India will
match the original and duplicate and thus confirm timely realisation of the foreign exchange.
AR4 FORM :
An application AR4 has to be filed by every manufacturer for the clearance of excisable
goods from his factory for export. The clearances can be "under claim for rebate of duty: or
"under bond". The goods can be examined and sealed at the factory by a Central Excise
Officer having jurisdiction over the factory. If the clearances are without examination by
the Central Excise Officer, the examination is carried out at the port by the customs officers.
The AR4 should contain the following particulars besides the entries to be made in the
particular columns of the forms :
a)
Particular s of export licence obtained from the foreig n trade

development authorities in respect of commodities for which export licence
is required.
b)
The full address of the Exporter.
c)
Marks and numbers and special markings on the package / cases.
d)
In case of rebate of duty, a declaration to the effect that the amount of rebate
should be paid direct to the Exporter if the Exporter is other than the
manufacturer.
98
After shipment of the goods the AR4 form is duly endorsed by the Customs Officer to that
effect. This is taken as evidence of shipment by the Central Excise Authorities for
considering rebate / cancellation of Bond.
CONSULAR INVOICE :
This is a document prepared in the language of the foreign country to which the goods are
destined, containing all the usual details on the Commercial Invoice. The special forms used
for this would be available from the Consulates concerned or authorised printers. The
Consular Invoice should be prepared and executed in observance of the Customs Law of the
country concerned. Usually four or more copies are required.
SHIPPING BILL :
This is the statutory document prescribed for processing in the Customs Department for
shipment of goods to places outside the country. The format, size, colour of different
copies etc., are all prescribed and should be strictly observed. It is submitted in
quadruplicate (including export promotion copy). The assessment and collection of duty is
done on the original copy and shipment of the goods on the duplicate copy.
BILL OF ENTRY :
This is the statutory document prescribed for processing in the Customs Department for
clearance of goods imported from a foreign country. The format, size, colour of different
copies etc., are all prescribed and should be strictly observed. The Bill of Entry is to be
filed in quadruplicate along with other documents such as Invoice, Packing list, Certificate
of Origin, Indent Acceptance, Import Licence if required etc., The clearance of the goods is
allowed on the strength of the duplicate copy duly endorsed to that effect by the Customs
after all formalities of assessment and collection of duty are completed.
MATE's RECEIPTS :
This is the receipt issued by the officer on duty on board the ship immediately on
completion of loading a consignment. On the strength of the mate's receipt the steamer
agents issue the Bill of Lading which along with other documents is negotiated through
the bank for realisation of the sale proceeds.
BILL OF LADING :
This is the principal Shipping document between the Shipper and Ocean Carrier, Shipper
and consignee and carrier and consignee. It serves three distinct purposes
a)
It is a negotiable instrument and a document of ownership which covers the
goods thereon and, if and when made out " to order ", endorsed and passed
on to another person, passes the title to the goods to that person.
b)
c)
It is the receipt from the Ocean Carrier for the goods shipped.
It defines the terms and conditions of carriage of the goods and is an

evidence of contract between the Shipper and the carrier for
conveyance o f the goods f rom one port to another, f or freight c harges as
billed.
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Generally the steamer agents issue three negotiable copies. Further non-negotiable copies
are issued on the request of the Shipper.
DUTY AND CESS :
The Customs duty is levied and collected under the provisions of Section 12 of the
Customs Act 62 read with the provisions of Indian Customs Tariff Act 1975, on the
imported / exported goods. The rates of duties are shown in the tariff Schedule I for
imported goods and Schedule II for revenue and is appropriated accordingly as
Government revenue in general. The cess is levied and collected under the specific Acts of
the Central Government, which have been enacted for the development of specific
industry or agriculture produce. Thus, on import of textiles, cess is collected for the
development of textile industry. The cess is collected by the Customs Department on behalf of
other departments. Similarly on goods exported out of India, such as agricultural produce
like oil, spices etc., the cess is collected by the Customs on behalf of other departments of the
Government of India. The amount so collected as cess, is generally used for the development
/ protection of the particular commodity or industry.
SHIP'S STORES :
Bonafide import made for the maintenance of vessels, such as spare parts etc., and
also other items like provisions required for the crew and the passengers of the vessels
(Air crafts) are known as ship's stores. The provisions may vary depending upon the
needs of passengers and crew.
These imports are processed only against the warehousing (Bond) Bill of Entry and the Bill
of Entry also declares that the goods covered by the same are ship's provisions or spare
parts for maintenance of the steamer. These goods are deposited in the public bonded
warehouses or private warehouses of the steamer agents, or those of their suppliers. The
exbonding for the purposes of the supplies to the vessels are made against (green) exbond
shipping bills with the caption - "ship stores". The goods are loaded or delivered against
the Shipping Bill only to the Captain of the Vessel and under the preventive control and
supervision.
The import of the stores are exempted from the Import Trade Control regulations vide a
clause in the Import Trade Control order. For shortages, duty is payable on these goods
by preparing home consumption Bill of Entry.
EXPORT OF ANTIQUES :
The export of antique is prohibited under the Antiques and Art Treasures Act 1972. The
antiques as per the said Act covers Coins, Sculpture, Painting, Objects or things
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detached from building or cave, object / thing of historical importance etc.,

DANGEROUS DRUGS :
The Dangerous Drugs are specified under the Dangerous Drugs Act 1930 and rules framed
thereunder.
The dangerous drugs are opium, poppy capsules, charess, morphine and its
preparations, mixtures & extracts of these drugs.
The import and export of dangerous drugs require a certificate from the Narcotics
Commissioner.
TRIPTYQUE PROCEDURE :
This is a facility for temporary importation of cars by tourists without payment of duty. This
procedure is also known as clearance on "Garnett de passage". The system allows temporary
importation of motor vehicles in India, subject to the condition that the vehicles are reexported or are surrendered to the Customs within a period of 6 months, extendable to 12
months by the collector, or earlier if the holder leaves India before this 6 months or 12
months.
The payment of duty in case of misuse etc., is guaranteed by the Switzerland based
International Automobile Association represented here by their agents, the
Automobile Association of South India. The persons who bring cars to India under the
above procedure are not expected to be gainfully employed in India.
SMALL SCALE INDUSTRIES :
In a developing country like ours the need was felt for according some protection and
giving some incentives to small industries so that they can compete with multinational or
other giant units.
For this purpose a Small Scale Industry has been defined as an Industry whose plant and
machinery cost less than Rs.65 lakhs, as decided by the State Industries Department.
This limit periodically undergoes change commensurate with the economic health of the
country.
Once a unit is registered as a SSI Unit, several duty concessions are available on the
Central Excise side and also State Sales Tax, besides subsidies from the State Financial
Corporation etc.,
MODVAT IN CENTRAL EXCISE :
VAT, that is, Value Added Tax, is prevalent in computing the Excise Revenue in almost
all developed countries. In India, in the 1986 Budget a Modified Form of Value Added Tax
was introduced and it is called "Modvat".
101
The Modvat in India is that the manufacturer of specified commodities is allowed to take
credit of the duty paid on the inputs for payment of duty on his manufactured product. To
illustrate, take the case of Soda Ash, which is an input in the manufacture of Sodium Silicate
which, in turn, is one of the main inputs in the manufacture of soap. If Soda Ash of value
Rs.100/- attracts an excise duty of Rs.10/- the manufacturer of Sodium Silicate is allowed
to take a credit of that Rs.10/- for payment of duty on his product Sodium Silicate. If the
duty paid on Sodium Silicate manufactured out of the above Soda Ash is Rs.25/-, the
manufacturer of Sodium Silicate actually suffers only a duty amount of Rs.15/-. And again
when the soap manufacturer utilises the Sodium Silicate on which Rs.25/- for payment of
duty on the soap he manufactures. So if the duty on the soap manufactured out of the
Sodium Silicate (on which has been paid a duty of Rs.25/-) comes to Rs.50/-, the soap
manufacturer actually incurs only Rs.25/-. This facility is to prevent the cascading effect of
duty on inputs, on duty on final product.
COFEPOSA ACT :
Cofeposa Act is the abbreviated term for conservation of Foreign Exchange And
Prevention of Smuggling Activities Act. This is a specific statute under which preventive
detention of persons engaged or persons who are likely to be engaged in Customs and
Foreign Exchange violations is resorted to. The intention behind this legislation is mainly to
prevent the drain of foreign exchange which is very precious to the country. The main
causes of drain of foreign exchange are by smuggling and by compnsatory payments. By
keeping the persons indulging in smuggling confired to the jail, their smuggling activities
are curbed for the time being. Preventive detention is ordered by the State Government or by
the Central Government and not by the order of a Magistrate. A smuggler or a foreign exchange
violator is sent to jail by the Magistrate after the charge against him is proved. COFEPOSA
detention is preventive in nature and it is not ordered after the offence is proved in a Court
Trial.
Imports from Singapore
Vide notification no. 75/2005 customs of 22/07/05
Customs duty concession on imports of goods from Singapore has been announced. The
concession will be as follows:
Duty as in excess of 95% of the applied rate of duty
-2413 tariff lines
Duty as in excess of 90% of the applied rate of duty

- 2202 tariff lines
Whole of duty exemption

- 308 tariff lines
Hence, there will be 100% exemption for 308 items, the other two exemptions are for the
amounts in excess of 95% and 90% of the peak duty of 15%. Hence, the three exemptions
which apply are (1) Zero (2) 14.25% and 13.5% of the duty on imports from Singapore.
102
As part of simplifying the procedures, it has been decided to make the GR Forms available
online on the Reserve Bank's website www.rbi.org.in. Accordingly, the exporters have
now the option to use GR Forms available online as well. While downloading the GRForms, the exporter may ensure to use 'Legal' size paper i.e. 8.5 x 14 inches. Further, both
the printer (printing preference) and the paper size in the page setup option have to be set
to legal size before printing. The GR number will be automatically allotted when the
document goes to the print queue.
The exporters will continue to have the facility of purchasing the GR Forms from the
Regional Offices of the Reserve Bank, as hitherto. However, this facility would be phased
out within a period of one year.
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DOCUMENTATION &

INDIAS FOREIGN TRADE: NOVEMBER, 2013

INTRODUCTION TO CUSTOMS AND

VALUATION AND CLASSIFICATION IN

FOREIGN TRADE POLICY 2015 20-TRADE FACILITATION AND

Exports - Formalities for Commencing

Customs - Formalities for Export

Customs Formalities for Import & Export Containerisation - ICDs

Government policy & initiatives on e-commerce

Warehousing Under Customs Act

Exports Vis - A - Vis Central Excise

Export Oriented Units, Electronic hardware/

Special Economic Zones (SEZs)

Full Convertibility of the Rupee

Goods Imported or Exported by Post

Customs House Agents, F r e i g h t F o r w a r d e r

Quality Control and Pre-Shipment Inspection

INCO TERMS & Terminology of International Trade

EXPORTS & IMPORTS : (US $ Million)

EXPORTS & IMPORTS : (Rs. Crore)

INTRODUCTION TO CUSTOMS AND CENTRAL EXCISE

each in charge of an Asst. Commissioner of Central Excise and it is again

VALUATION AND CLASSIFICATION IN CUSTOMS

Dental scrapers fall under

Floor scraper fall under

Skin scrapers fall under

Scraper for smoking pipes

All FT products are divided into the following product groups.

Chemicals and Allied

Fish and Marine Products

Importer is required to fill in a prescribed declaration form.

Foreign Trade Policy 2015 - 20

Online complaint registration and monitoring system

2)Online issuance of Export Obligation Discharge Certificate.

Other measures for trade facilitation

Changes in categories of supplies

QUALITY COMPLAINTS A ND TRADE DISPUTES

Committee on Quality Complaints and Trade Disputes

Importers / Exporters are required to comply with the provisions of Rule 11

Exporters of specified commodities are required to conform to the

Foreign Trade Policy 2015 - 20

EXPORT PROMOTION MEASURES

Supporting manufacturer [subject to disclaimer from the Company/Firm who has

Twelve months from the Let Export date; or

DUTY EXEMPTION & REMISSION SCHEMES

EXPORTS - FORMALITIES FOR COMMENCING

To establish the framework for globalisation of India's Foreign

To promote the productivity, modernisation and competitiveness of

To encourage the attainment of high and internationally

To augment India's exports by facilitating access to raw

To streamline the procedures connected with export and import.

Definition of IEC Code

Full form of IEC Code

IEC Applications/ Authority

Exporters exempted from filing documents in physical form

IEC to Proprietor/ PAN Holder

2. Ministries/Departments of the Central or State Government.

Persons importing/exporting goods from/to Nepal provided the CIF value of a

5. Persons importing/exporting goods from/to Myanmar through Indo-Myanmar order

The following permanent IEC numbers shall be used by the categories of

Guidelines for Application of IEC Code Number. Mandatory

Check List of Documents to apply for IEC Code

Two copies of the application in prescribed form at (AayaatNiryaatFormANF

Each individual page of the application has to be signed by the applicant.