CUSTOMS PROCEDURES. Chapter 12 Import Export Management

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1 Learning objectives: This chapter will help you to understand the full scope of the method and procedures of the Indian Customs Department applicable to the Import and Export consignments.

2 1.1 THE CUSTOMS ACT: With the rapid industrialization of the country and diversification of Trade, Procedures relating to levy of Customs Duty and Customs Administration had undergone vast changes. These changes necessitated the enactment of THE CUSTOMS ACT,1962, which consolidated the Law relating to Customs. THE CUSTOMS ACT,1962 is an Act of Parliament. It has XVII Chapters and 161 sections.

3 The Constitutional Provisions have given Powers to The Union of India the Right to Legislate and Collect Duties on Imports and Exports as per Entry at Serial No.83 of List 1 to Schedule VII of our Constitution. The Customs Administration is not confined to the ENFORCEMENT of the Provisions relating to THE CUSTOMS ACT only. The Administration has been entrusted with other related Functions such as, Enforcement of Law relating to Import and Export Control as well as other Allied Acts.

4 The Central Board of Excise and Customs in the Ministry of Finance, is the apex body for administering the levy and collection of indirect taxes of the Union of India viz. Central Excise duty, Customs duty and Service Tax, and for facilitating cross border movement of goods and services.

5 CUSTOMS KEY FUNCTIONS: Levy and collection of Customs and Central Excise duties and Service Tax. Registration and monitoring of units manufacturing excisable goods and service products. Receipt and scrutiny of declarations and return filed with the department. Prevention and smuggling and combating evasion of duties and service tax. Enforcement of border control on goods and conveyances. Assessment, examination and clearance of imported goods and export goods. Implementation of export promotion measures.

6 CUSTOMS KEY FUNCTIONS: contd. Clearance of international passengers and their baggage Resolution of disputes through administrative and legal measures Sanction of refund, rebate and drawback Realization of arrears of revenue Audit of assessment for ensuring tax compliance

7 SERVICE FUNCTIONS: Dissemination of information on law and procedures through electronic and print media. Enabling filing of declarations, returns and claims through online services. Providing information on the status of processing of declarations, returns and claims. Assisting the right holders in protecting their intellectual property rights. Responding to public enquiries relating to Customs, Central Excise and Service Tax matters. Providing Customs services such as examination of goods and factory stuffing of export goods at client s sites, as per policy.

8 1.2 CUSTOMS TARIFFS & DUTIES: TARIFF CLASSIFICATION : Customs duties are chargeable on the act of importation of Goods. On some goods, customs duties are also charged on the act of exportation.

9 The World Customs Organization, at the HS Convention, adopted the Harmonized Coding System of Commodity Classification. Based on this, Government of India has now accepted that the I.T.C.(H.S.) Classifications, Revised Indian Trade Classification (R.I.T.C.), Customs Tariff and Central Excise tariff should all have the same nomenclature and with 8 digit codes.

10 The I.T.C.(H.S.) Classifications are divided into Chapters. The chapters cover general description of Commodities. Each of these general headings has been given a 2 digit code for ease of application and understanding, in the International Trade. The Group Headings has a 4 digit code i.e. 2 digits of the Chapter and the next 2 digits of the Group. The sub-headings has a 4 digit code after the group heading 4 digit code. The classification code has also an inbuilt compulsory requirement of the Unit Price of the goods to be declared in the UNITS mentioned against them.

11 Example 1 Chapter 28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of isotopes 2805 ALKALI OR ALKALINE-EARTH METALS; RAR EARTH METALS, SCANDIUM AND YTTRIUM, WHETHER OR NOT INTERMIXED OR INTERALOYED; MERCURY Exim Code Unit Code Item Description kg Mercury

12 Example 2 Chapter 85 CUSTOMS PROCEDURES Electrical machinery; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Mercury or sodium vapour lamps; metal halide lamps: Exim Code Unit Code Item Description u Mercury vapour lamps

13 CUSTOMS DUTY TYPES OF DUTIES The prescribed Levy of Duties on all Imported/Exported Goods are as follows: 1. Basic Duty on Imports 2.Basic Duty on Exports 3. Additional Duty (CVD)(Central Excise Duty) 4. Additional Duty ( Excise Duty on MRP Basis) 5. Special Additional Duty 6. Preferential Rate of Duties 7. Protective Duties 8.Increase/Imposition of Duty on Exports 9. Safeguard Duty

14 CUSTOMS DUTY TYPES OF DUTIES contd. 10. Safeguard Duty ( on Imports from China) 11. Countervailing Duty on subsidized goods 12. Anti Dumping Duty

15 The Basic duties on Imports and Exports are prescribed in The Customs Tariff Act, The Authority to levy these duties is by virtue of Section 12 of The Customs Act, The Finance Bill declares/changes the applicable rates of duties every year. All goods as per the ITC(HS) Classification are chargeable to duty. The Rate of Duty to be charged would be as per the Date determined by virtue of Section 15 of The Customs Act,1962.

16 The Additional Duties (CVD-MRP Based) on subsidized goods are prescribed in The Central Excise Tariff Act, These duties are a part of the Customs Duties to be levied and hence all details mentioned in the above paragraph for Basic Duty would be applicable.

17 Special Additional Duty or Countervailing Duty is applicable on all Imports to compensate the State Level Sales Tax. The present Rate is 4% chargeable on valuation of Value plus Basic Customs Duty plus all additional duties but excluding the Education Cess. This 4% SAD (CVD) is refunded on account of Exemption granted to Consumer goods in packaged form. For other products CENVAT Credit is available on payment of Excise Duty.

18 Preferential Rate of Duty are based on the Global System of Trade Preference (GSTP/GSP/GP) between countries. Countries enter into Preferential Treatment Agreements amongst themselves. India also has entered into these kinds of agreements with various countries and the products of these countries are charged to preferential rates of duties as determined and declared by the Government. These rates are always less than the Basic Customs Duty Rates and are applicable as long as the agreement between India and respective Countries of Preferential Areas are in existence. Imports / Exports between such Countries require a Certificate of Origin of the Goods issued by the Chamber of Commerce/Other Trade Bodies of the Exporting country. The details on the Certificate of Origins should comply with the Rules of Origin under the Customs Act,1962.

19 Protective Duties Tariff Commission has been established under Tariff Commission Act, If the Tariff Commission recommends and Central Government is satisfied that immediate action is necessary to protect interests of Indian industry, protective customs duty at the rate recommended may be imposed under section 6 of Customs Tariff Act. The protective duty will be valid till the date prescribed in the notification.

20 Safeguard Duty Central Government is empowered to impose 'safeguard duty' on specified imported goods if Central Government is satisfied that the goods are being imported in large quantities and under such conditions that they are causing or threatening to cause serious injury to domestic industry. These duties are applied only after determination of serious injuries or threat of serious injury to the domestic product aftera thorough investigation by a competent authority of the Government.

21 Anti Dumping Duty Often, large manufacturer from abroad may export goods at very low prices compared to prices in his domestic market. Such dumping may be with intention to cripple domestic industry or to dispose of their excess stock. In order to avoid such dumping, anti-dumping duty is determined by the Designated Authority in the DGAD of the Department of Commerce after conducting proper investigation.

22 National Calamity Duty of Customs as a Surcharge of Customs Duty is imposed on pan masala, chewing tobacco, cigarettes, mobile phones, motor cars etc. The surcharge is calculated as per the calculations of valuation for additional duty.

23 CESS CUSTOMS PROCEDURES CESS is levied in India on certain products as Market Cess or Commodity Cess for various purposes. Cesses are also applicable to the Imported Goods/Export Goods.

24 Education cess is a part of Customs Duty added as a percentage of the Duty calculated. This is used for the purposes of Education purposes. For the purpose of Basic Education 2% of the Duty amount is applicable as Education cess and for the purpose of Secondary and Higher Education 1% of the Duty Amount is applicable as Education cess. The cess is applicable on all import commodities except for certain Exemption granted as per the notification in this regard.

25 Clean Energy Cess is a part of Excise Duty. It is applicable on Coal lignite and peat produced in India. The cess is applicable on imports as well. Thus it is applied on imports as well as exports. The rate applicable at present is Rs.100/- per Metric Ton.

26 Cess on Exports is levied and collected on Scheduled Agricultural and Processed Food Products; Spices; Shellac and Lac based products; Tobacco, Mica etc. The rate of levy and collection are as per the enactments of the various Allied Acts in force at the time of Export. Normally the rates are declared on ad-valorem basis. However the Government has also fixed certain Tariff Values on which the Cess would be charged.

27 Cess as a part of Excise and Customs Duty is levied on certain produce of India viz Jute Manufactures, Sugar, manganese Ore, Chrome Ore, Iron Ore etc. The rate of levy and collection are as per the enactments of the various Allied Acts in force for all imported goods and exported goods.

28 RATES OF DUTY The rates of duties for Imported/Exported Goods are as prescribed in the schedule of: 1. The Customs Tariff Act, 1975 and 2. The Central Excise Tariff Act, 1975 The rates declared may be on the basis of Ad- Valorem (percentage of assessable value); Or Quantity Or Tariff Value declared for the purpose. The rates of duties have to be read with the Exemption Notifications declared under Section 25.

29 Ad-hoc Exemption In case of certain special and temporary requirement, an Ad-hoc exemption is granted to certain categories of Imported Goods. This is based on an individual application where it is decided to grant exemption in deserving cases only after consideration of all the factors and which makes it a necessity on humanitarian grounds. This exemption is also granted by the Finance Ministry by virtue of Section 25 of the Act.

30 The Method of Calculation of Duty is as follows: 1.CIF Value 2.Assessable Value 3. Basic Custom Duty 4. Additional Duty 5. Special Additional Duty 6. Education Cess 7. Total Duty payable

31 1.3 TRADE FACILITATION MEASURES: The Accredited Client Programme(ACP) ACP is a major element of risk management strategy of the customs department to create a climate of voluntary compliance. Under this programme, Importers/Exporters who are assessed as highly complaint would be given assured facilitation by the Risk Management System. The clients who are approved under ACP will get assured facilitation.

32 RISK MANAGEMENT SYSTEM (RMS) The Central Board of Excise and Customs has introduced a risk management based solution for the cargo clearance process. The objective of this program is to strike an optimal balance between the concerns of facilitation on one hand and enforcement on the other. The RMS enables the Customs department to focus on high risk areas, while delivering a higher level of facilitation to clients who are assessed as complaint and therefore of low risk.

33 1.4 SELF ASSESSMENT SCHEME Customs Clearance for Import and Export of consignments involves certain basic functions for assessment. All these functions were performed by the Customs Appraising Officers at the Customs House and Docks/CFC etc. These functions will now be performed by the Importers/Exporters under the Self Assessment Scheme.

34 1.5 INDIAN CUSTOMS EDI SYSTEM(ICES) Indian Customs EDI System initiated a new era of Paperless Trade & Trade facilitation rather than control in India. Indian trading community can exchange documents electronically with the Customs department and other Government Agencies.

35 1.6 POST CLEARANCE COMPLIANCE VERIFICATION (AUDIT) Post Compliance Audit(PCA) Standard 6.6 of the Kyoto Convention of World Customs Organization states that the customs control shall include audit based control. The Convention defines Audit-based control as Measures by which Customs satisfy themselves as to the accuracy and authencity of declarations through the examination of the relevant books, records, business systems and commercial data held by person concerned. The verification is done by the Proper Officer of Customs with help of a Risk Management System. Further RMS identifies some documents for detailed scrutiny after clearance of goods. This scrutiny is called Post-Clearance Compliance Verification or is loosely referred to as Post Clearance Audit.

36 1.7 OFFENCES BY THE IMPORTERS/EXPORTERS Delinquent and habitually non-compliant importers/exporters could face penal action on account of wrong Self-Assessment made with the intent to evade duty or avoid compliance of conditions of notifications, Foreign Trade Policy or any other provision under the Customs Act, 1962 or the allied Acts. Penal provisions would not be invoked in cases of bonafide errors in Self-Assessment where mensrea and willful intention to evade duty or non-compliance of a condition cannot be proved.

37 1.8 REMEDIAL MEASURES FOR IMPORTERS/EXPORTERS Right to Appeal : The principles of natural justice are required to be followed by the Customs Department in all such matters leading to disputed. When the customs authority do not accept the declarations, details or documents and initiates an action, the importer/exporter or his representative is required to be given a written notice called a Show Cause Notice detailing all the causes of action with documentary evidence. Even a personal hearing can also be granted. The importer/exporter can file his written submissions with documents in support of his claims and contentions as also give Oral submissions during the Personal Hearing. An Adjudication Order giving details of determination of the basis of rejection can be obtained if the importer is aggrieved with such action.

38 An aggrieved importer can appeal against a decision of the Customs officer to the Commissioner(Appeal) in the first instance. A second appeal lies to the Customs, Excise and Service Tax Appellate Tribunal consisting of Technical and Judicial Members. A third appeal lies to the High Court/Supreme Court of India.

39 The Customs Act has also provided certain measures to the Trade for their facilitation. The Trade can take the following remedial measures: 1.Advance Rulings 2. Settlement Commission 3. Appeals and revisions 4. Compounding of Offences

40 1.9 SUMMARY AND CONCLUSION The present set of Customs Clearance Procedures are all directed towards Trade facilitation. The Indian Customs EDI System has been made so simple and user friendly that the entire clearance procedure can be completed by sitting before our computers, through the ICEGATE. This is the result of the enormous facilities with its inbuilt simplified and easy to follow procedures by the Government.

41 We have completed Chapter 12 Next we move to Chapter 13 CARRIAGE OF GOODS BY SEA