Custom Clearance

It is a documented permission by national customs authority so that the imported goods can enter within the nation and the exported goods can leave the nation. The customs clearance is given to a shipping agent as proof that customs duties have been paid and the shipment is approved by the legal authority. Custom clearance is a composite and time taking procedure that every exporter has to face in the import export business. Custom clearance is based upon physical control basis where each consignment has to be examined manually in order to apply various types of export duties. So you must attain proper knowledge of the customs rules and regulations for a successful export process. For clearance of commodities, one must hire custom clearance agent or freight forwarder who can perform the entire task within custom clearance in place of the exporter. Export - Connect2india Blog Posts

Types of custom clearance

  • Import Custom clearance: All commodities imported within India have to pass through customs clearance procedure which involves an examination, estimation, and evaluation of products being imported. This helps the custom authorities to charge relevant tax and check if there exists any illegal import. Moreover, no import is allowed if the importer doesn’t have the IEC issued by the DGFT.
  • Export Custom clearance: Similarly all products exported from India have to pass through customs clearance procedure which involves proper documentation, inspection of goods being exported, insurance of commodities etc. It helps the national customs authority to examine that all the customs duty related to shipment has been paid and the goods are ready for export.
Moreover, the introduction of a software system to file export-related documents electronically made the task of custom clearance a little simpler to handle. Here, let us go through the export customs clearance procedure and formalities. Shipping bill is the crucial legal document that has to be filed mandatorily for movement of commodities outside India by an exporter. Along with the customs clearance procedure for export let’s go through the documents required for export customs clearance and registration by the exporter for the exports of goods.

Registration

  • In the beginning, the exporter has to register his business as Solo firm, Partnership firm, Private limited company or LLP depending upon the needs and type.
  • Further, the exporter is supposed to get the Import Export Code (IEC). It acts as an export license. On the basis of IEC exporter is allowed to export products. After the introduction to PAN, PAN has been made necessary as the PAN number of the exporter is used as the IEC code. So now exporter needs to obtain PAN-based Business Identification Number (BIN) from DGFT which is prior in the filing of shipping bill for custom clearance of goods being exported.
  • The exporters also have to register themselves to authorised foreign exchange dealer code and are supposed to open a current account.

Shipping Bill

Shipping bill or bill of export is the main document which is required for customs clearance by the customs authority. It is issued by the shipping agent and it includes documents related to seller, buyer and other parties which are involved. The commodities can only be taken on board if the commodities have been accompanied by certain documents. For seaport/airport shipping bill must be filed and at land customs stations bill of export is crucial. Shipping bill consists of various forms denoted by specific colours. These forms are for Dutiable goods(yellow), duty-free goods(white), goods with drawback claims(green), goods allowed to be exported as duty-free ex-bond(pink) and export goods under DEPB scheme(blue).

Procedure for the generation of Shipping Bill

  • Once you are done with registration and have got your IEC you are ready to move forward.
  • As soon the data entry is done at their side, a checklist will be generated which will be handed to the exporter.
  • Then the exporter is supposed to verify the data and tell if some correction has to be done.
  • Once the verification and correction are done, it automatically gets processed.
  • After this, it will be assessed by the Assistant Commissioner (Export). It is done as per some criteria such as if the value of goods in more than Rs.10 lakhs; have free samples having worth more than 20,000 etc.
  • The exporter can check the bill status at service centre once the processing is done.
  • After this at the docks, original documents have to be submitted such as invoice, packing list, insurance certificate etc along with the checklist provided by the service centre.
  • If everything is relevant and is as per legal procedure then ‘Let Export Order’ is issued by the officer.
  • With the issuing of ‘Let Export Order’, print out of the shipping bill is generated.
In the above mentioned steps, we read about the processing of shipping bill which can be done in two modes i.e. Non-EDI and EDI. It depends upon the exporter with which

Processing of Shipping Bill

It is further classified within two categories, these are:
  • Processing of shipping bill-Non EDI
  • Processing of shipping bill- EDI

Processing of shipping bill-Non EDI:

In this bill of exports is needed to be filed by the exporter in the prescribed format. These have to be filed with the original documents such as invoices, AR-4, packing list etc. After this, the assessing officer of the Export Department checks certain things such as the value of the goods, classification under Shipping Bills, rate of duty where applicable and other laws in force. It the officer has some doubts he may ask for samples from the docks, and other information too in case needed. Once the shipping bill is passed by the export department then the exporter is asked to present his products at the docks for further inspection. If any kind of uncertainty is found by the inspecting officer, then he may mark the shipping bill back to the export department for reconsideration. Then a further assessment is made and the case is reconsidered.

Processing of shipping bill-EDI:

Under EDI System declarations are filed through the Service Centre of Customs. After this data entry is done as per the documents provided and details given by the exporter. Then a checklist is generated for verification purpose. After verification, the data is loaded within the System by the Service Centre operator and a system generated Shipping Bill Number is generated, which is endorsed on the printed checklist and is provided to the exporter. Shipping bill form should be accompanied by the following documents:
  • Invoice
  • Packing list
  • Export license
  • Indent
  • Acceptance of contract
  • Letter of credit
  • QC certificate
  • Port trust document

Let Export Order

Once Shipping Bill is generated when above mentioned other documents are submitted and by using this bill the exportability of goods will be verified by assessing officer. Let export Order (LEO) is issued by assessing officer and after these goods are loaded. It can be seen as the final procedure within the export customs clearance. A proper officer is designated for the inspection of goods. Once he is done with the thorough inspection he permits the goods to be exported out from the nation and adds Let Export Order with the shipping bill. After getting LEO, exporter or the custom house agents delivers the goods to the shipping carrier for final shipment of goods towards the destination. Since shipping bill is generated only after the export order is generated, so exporters use other documents such as an export invoice for Quota Allocation.

Quota Allocation

It is a type of label that has to be pasted with the export invoice. The number allocated by AEPC (Apparel Export Promotion Council) is entered in the system while making the shipping bill entry. The quota certification of the export invoice is submitted to the customs officer at the time of examination of export cargo along with the original documents. These are used for the purpose of the exemption.

The arrival of Goods at Docks:

The goods are bought at the docks for the purpose of examination by the customs officer allotted for this. As per the checklist and other documents filed by the exporter at the service centre the products to be examined are allowed to enter within the dock. Moreover, port authorities check the number of goods as per the various available documents.

Custom examinations of Export Cargo

As the goods arrive in the dock, the exporter has to contact the custom officer to examine the goods, verify the number of goods received to enter within the system and to mark electronic shipping bill. The custom officer examines and evaluates the goods alone or along with the dock appraiser. If the customs officer is fully satisfied with the product examination and related entries made within the system, he may proceed to allow “let export order” for the shipment of commodities.

Loading of goods in containers

Officer Handover the shipping bill duly signed by the Appraiser who permits “Let Export” to the exporter. Followed by this exporter or the customs agent reaches the proper officer for allowing the shipment. "Shipped on Board" approval is given on the exporter’s copy of the shipping bill by Customs Preventive Officer who supervises the loading of the container. Loading of containers is done under some preventive supervision.

Drawal of samples

Appraiser Dock orders for samples that are to be drawn and tested. Followed by the order, the customs officer draws two samples from the consignment and make the relevant entries in the ICES/E system along with the name of the testing agency. No separate records are maintained for this purpose. Three copies are prepared by the customs office of the test memo which is signed by the customs officer and appraising officer. These copies are to be used as follows:
  • Original – is sent to the testing agency along with the sample
  • Duplicate- is customs copy that is retained with the second sample
  • Triplicate- is given to the exporter
As a whole custom clearance procedure is a little clumsy and inconvenient process. So you must contact to some customs broker for customs clearance. Ensure that you are choosing a customs broker who has a customs broker license. You can even hire freight forwarder for custom clearance processing. Depending upon the mode of shipment via air or sea contact to freight companies i.e. air freight or sea freight. Freight forwarding companies and freight brokers allow you to stay away from the hassle of customs clearance and they perform tasks on behalf of you. Moreover, customs clearance is an important part of your export process so you must have knowledge about it. Do it on your own or hire an agent. In international shipping import customs broker and export custom broker both play a crucial role on behalf of importer and exporter. For this, you can contact companies that provide customs clearance services.
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