Chapter 6
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. Schedule 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.
  9. Port and Customs Clearance (by Freight Forwarder including Consular Formalities).
  10. Obtaining necessary Shipping Documents from Freight 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.

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.

  1. Commercial documents required for transferring the goods to the Importer (Foreign Buyer) and
  2. Regulatory documents prescribed by the Government depart- ments 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.

These are :

  1. Commercial Invoice (plus invoice prescribed by the importing country)
  2. Packing List
  3. Bill of Lading / Combined Transport Document
  4. Certificate of Inspection / Quality Control
  5. Certificate of Insurance / Policy (in case of C.I.F contracts)
  6. Certificate of Origin
  7. Bill of Exchange
  8. 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 :

  1. Proforma Invoice
  2. Shipping instructions
  3. Intimation for Inspection
  4. Insurance Declaration
  5. Shipping Order
  6. Mates Receipt
  7. Application for Certificate of Origin
  8. 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

  1. Central Excise Invoice -      Central Excise Authorities
  2. AR4 -       Central Excise Authorities
  3. Shipping Bill/Bill of Export -       Customs Authorities
  4. Export Application -       Trust
  5. Receipt for payment of Ports Charges -       Port Trust
  6. Vehicle Ticket -       Port Trust
  7. Exchange Control Declaration / GR Form/ PP Form -       RBI
  8. Freight Payment Certificate -       From Steamer Agents
  9. 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 blanking 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 :

  1. The complete data should be typed (not handwritten) in the respective column of the Master Document.
  2. 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 of Export for goods Ex-Bond.

As can be seen from the above, the Exporters and other concerned agencies get the benefits of "Systems Approach" by adopting the "Aligned Documentation 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
  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 Department 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 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

The induction of information technology by way of electronic processing of export documents is a useful step to the exporter.

For the preparation of documents, a number of software packages are available in Indian market which carry out a number of functions such as application of

Advance License, DEPB, ECGC, etc. By such an usage, there is saving of effort, time and cost.

BILL OF LADING :

For further detail on various types of Bill of Lading please refer relevant Chapter on Bill of Lading in Shipping book.

The above outlines the procedure to be followed for effecting exports. If Export Licence is required, this is normally endorsed on the S/Bill by the I.T.C Authorities. Similarly any clarification/clearance required from other

authorities such as Reserve Bank of India, Export Inspection Agency etc. are all given by the representatives of the respective agencies stationed at the Export Documentation Centre.

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
  • 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.