CUSTOMS MANUAL 2012

For Departmental use only

CUSTOMS MANUAL
2012

For Departmental use only

CUSTOMS MANUAL

2012

Central Board of Excise & Customs Ministry of Finance Department of Revenue New Delhi

PREFACE

This Customs Manual - 2012 has special significance since this year the Department celebrates 50 years of the Customs Act, 1962.

This Manual is being issued to empower the Departmental officials by providing updated information on recent legal changes and trade facilitation measures. One such legal change is that of self assessment which was introduced vide Finance Act, 2011 as a paradigm shift in the mode of assessment of Customs duty by reposing trust on the importer / exporter to correctly declare the value, classification, description of goods, exemption notification etc. and self assess the duty, if any.

Self assessment is supported by On Site Post Clearance Audit (OSPCA), again newly introduced in last year’s Budget. OSPCA is aimed at creating an environment of enhanced compliance on the part of importers and exporters by providing for verification of the correctness of self assessment at their premises. Both self assessment and OSPCA would pave the way for greater trade facilitation and faster Customs clearance of import / export goods.

Other trade facilitation measures include the Authorised Economic Operator (AEO) Programme whereby legally compliant and security cleared economic operators involved in the global supply chain are given preferential treatment in terms of physical examination of goods and faster clearance.

All efforts have been made and due care has been taken to incorporate every important area of Customs functioning in this Manual. Of course, suggestions for further improvement would be appreciated. I hope that this Customs Manual – 2012 would be helpful in guiding Departmental officials in the correct application of legal provisions and procedures.

(M.C. Thakur)

Member (Customs), CBEC

2nd February, 2012

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CUSTOMS MANUAL – 2012

Chapter No.	Topic No.(s)	Page
Chapter 1	Overview of Customs Functions	1-8
1	Introduction	1
2	Statutory provision for levy of Customs duty	1
3	Control and regulatory provisions	2
4	Role of Custodians	3
5	Obligation of carriers	4
6	Customs preventive control	5
7	Customs clearance of cargo	5
8	Smuggling and other violations and penal provisions	6
9	Appellate remedies	7
10	Passenger processing	7
11	Import /Export by post/courier	8
12	Citizen’s Charter	8
Chapter 2	Arrival of Conveyances and Related Procedures	9-16
1	Introduction	9
2	Conveyance to call only at notified Customs ports /airports	9
3	Power to board conveyance, to question and to demand documents	9
4	Delivery of Import Manifest	9
5	Person filling the manifest t be registered	9
6	Amendments of IGM	12
7	Penal liability	13
8	Exclusion form IGMs of items originally manifested	13
9	Enclosures to Import General Manifest	14
10	Procedure for filing IGM at EDI Custom Houses	14
11	Filing of Stores List	15
12	Entry Inwards and unloading and loading of goods	15
13	Other liabilities of carriers	15
Chapter 3	Procedure for Clearance of Imported and Export Goods	17-37
1	Introduction	17
2	Import procedure – Bill of Entry	17
3	Self-Assessment of imported and export goods	19

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4	Examination of goods	21
5	Execution of bonds	22
6	Payment of duty	23
7	Amendment of Bill of Entry	23
8	Prior Entry Bill of Entry	23
9	Bill of Entry for bond/ warehousing	24
10	Risk Management System	24
11	Risk Management Division	25
12	National Risk Management (NRM)Committee	26
13	Local Risk Management (LRM) Committee	27
14	Accredited Clients Proqramme	27
15	Export procedure - Shipping Bill	29
16	Octroi certification for export goods	29
17	Waiver of GR form	30
18	Arrival of export goods at docks	30
19	Customs examination of export goods	30
20	Examination norms	30
21	Factory stuffing permission	33
22	Variation between Declaration and physical examination	34
23	Drawl of samples	34
24	Stuffing / loading of goods in containers	35
25	Amendments	35
26	Drawback claim	36
27	Generation of Shipping Bills	36
28	Export General Manifest	37
29	Electronic Declarations for Bills of Entry and Shipping Bills	37
Chapter 4	Classification of Goods	38-40
1	Introduction	38
2	Methodology of classification	38
Chapter 5	Classification /Assessment of Projects Import, Baggage and Postal imports	41-44
1	Introduction	41
2	Project imports	41
3	Registration of contracts	42
4	Clearance of goods after registration	43
5	Finalization of contract	43

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6	Baggage	44
7	Postal imports for personal use	44
Chapter 6	Customs Valuation	45-51
1	Introduction	45
2	Tariff value	45
3	Valuation of imported/export goods where no fixed	45
4	Methods of valuation of imported goods	46
5	Transaction value	47
6	Valuation factors	47
7	Cases where transaction value may be rejected	49
8	Provisional clearance of imported goods	50
9	Valuation of imported goods in case of transaction	50
10	Methods of valuation of export goods	50
11	Rights of appeal	51
Chapter 7	Provisional Assessment	52-53
1	Introduction	52
2	Bond for provisional assessment	52
3	Finalization of provisional assessment	53
Chapter 8	Import/Export Restrictions and Prohibitions	54-67
1	Introduction	54
2	Legal provisions governing restrictions/prohibitions	54
3	Prohibitions/restrictions under Foreign Trade Policy and other Allied Acts	55
4	The Prevention of Food Adulteration Act, 1954 and Food Safety and standards Authority Act, 2006	55
5	Labeling of the goods imported into India	58
6	The Livestock Importation Act, 1898	59
7	Destructive Insects & Pests Act, 1914, PFS Order,1989 and Plant Quarantine (Regulation of Import into India ) Order, 2003	59
8	Standards of Weights and Measures (Packaged Commodities) Rule, 1977	61
9	Drugs and Cosmetics Act, 1940 and Drugs and Cosmetics Rules, 1945	61
10	Import of hazardous substances	62
11	Clearance of imported metal scrap	64
12	International Standards for Phytosanitary Measures (ISPM-15	67

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Chapter 9	Warehousing	68-84
1	Introduction	68
2	Legal provisions	68
3	Warehousing Stations	68
4	Appointment of Public Warehouses	69
5	Licensing of Private Warehouses	70
6	Licences for storage of sensitive and non-sensitive goods	71
7	Cancellation / suspension of licences for Private Bonded Warehouses	71
8	Warehousing Bond	72
9	Permission for deposit of goods in a warehouse	72
10	Period for which goods may remain warehoused	73
11	Extension of warehousing period	74
12	Interest for storage beyond permissible period	75
13	Waiver of interest	76
14	Control over warehoused goods	77
15	Payment of rent and warehouse charges	77
16	Owner’s right to deal with warehoused goods	77
17	Manufacture and other operations in a warehouse	80
18	Transfer of goods from one warehouse to another	81
19	Clearance of warehoused goods for home consumption	81
20	Clearance of warehoused goods for exportation	83
21	Allowance in case of volatile warehoused goods	83
22	Audit of Bonded Warehouses	83
23	Recovery of duty from bonded warehouses	84
24	Cancellation and return of warehousing bond	84
Chapter 10	Transshipment of Cargo	85-103
1	Introduction	85
2	Transshipment of imported containerized cargo from gateway port to another port/ICD/CFS in India	85
3	Duty free import of containers	88
4	Transshipment of imported containerized cargo from gateway port to a foreign port	89
5	Transshipment form gateway port to SEZ	91
6	Timely issuance of transshipment permit	92
7	Automated movement of containerized cargo from gateway ports to hinterland – SMTP	92

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8	Movement of export cargo from port/ICD/CFS to gateway port	93
9	Movement of export cargo from one port to another by rail	94
10	Export of container cargo from ICDs/CFSs to Bangladesh and Nepal through LCSs	94
11	Transshipment of cargo by air	96
12	Bonded trucking facility	99
13	Carriage of domestic cargo on international flights	101
14	Movement of domestic courier bags on domestic segments of international flights	102
Chapter 11	Consolidation of Cargo	104-109
1	Introduction	104
2	Procedure for consolidation of import cargo	104
3	Procedure for consolidation of export cargo	105
4	International transshipment of LCL containers at Indian ports	106
Chapter 12	Merchant Overtime Fee	110-111
1	Introduction	110
2	Levy of overtime fee	110
3	Procedure for posting of officers on overtime basis	111
Chapter 13	Procedure for Less Charge Demand	112-115
1	Introduction	112
2	Legal provisions	112
3	‘Proper officer’ for the purposes of Sections 17 and 28 of the Customs Act, 1962	112
4	Adjudication proceedings	113
Chapter 14	Customs Refunds	116
1	Introduction	116-121
2	Legal provisions	116
3	Relevant dates for submission of a refund application	116
4	Processing of refund claim	117
5	Unjust enrichment	118
6	Interest on delayed refund	118
7	Expeditious disposal of refund applications	118
Chapter 15	Detention and Release/Storage of Imported/Export Goods	122-124
1	Introduction	122
2	Guidelines for expeditious Customs clearance/provisional release	122

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Chapter 16	Import and Export through Courier	125-134
1	Introduction	125
2	Categories of goods allowed import through courier	125
3	Categories of goods allowed export through courier	126
4	Import and export of gems and jewellery	126
5	Procedure for clearance of import goods	126
6	Procedure for clearance of export goods	128
7	Examination norms for goods imported or exported by courier	128
8	CENVAT credit	129
9	Transshipment of goods	129
10	Disposal of uncleared goods	129
11	Registration of Authorized Courier	130
12	Obligation of Authorized Courier	130
13	Outsourcing/Sub-letting	131
14	De -registration and forfeiture of security	132
15	Courier electronic clearance procedure	132
Chapter 17	Import and Export through Post	135-142
1	Introduction	135
2	Legal provisions	135
3	Clearance of Letter Mail Articles	136
4	Importability of dutiable items through post	136
5	Import of gifts through post	136
6	Import of samples through post	137
7	Import of Indian and Foreign Currencies by post	137
8	Procedure in case of postal imports	138
9	Legal provisions and exemptions in case of postal exports	140
10	Procedure in case of postal exports	141
11	Procedure for claiming Drawback on exports through post	141
12	Drawback in respect of goods re-exported through post	142
13	Re-export of partial consignment not allowed	142
Chapter 18	Import of Samples	143-145
1	Introduction	143
2	Legal provisions	143
3	Machinery import	144
4	Failure to re-export	144

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5	Import of samples under other scheme	144
Chapter 19	Re-importation and Re-exportation of Goods	146-148
1	Introduction	146
2	Re-importation of indigenously manufactured/imported goods	146
3	Re-exportation of imported goods	147
Chapter 20	Disposal of unclaimed/uncleared cargo	149-151
1	Introduction	149
2	Legal provisions	149
3	Procedure for sale of unclaimed/uncleared goods	149
4	Disposal of hazardous cargo	151
5	Compliance with restrictions/prohibitions under various laws	151
6	Mechanism for interaction between custodians and Customs	151
Chapter 21	Intellectual Property Rights	152-154
1	Introduction	152
2	Legal provisions	152
3	Conditions for registration	153
4	Automation in monitoring imports involving IPR	154
Chapter 22	Duty Drawback Scheme	155-158
1	Introduction	155
2	All Industry Rate (AIR) of Duty Drawback	155
3	Brand Rate of Duty Drawback	156
4	Section 74 Drawback	157
5	Supplementary claims of Duty Drawback	157
6	Procedure for claiming Duty Drawback	157
7	Limitations on admissibility of Duty Drawback	158
Chapter 23	Export Promotion Schemes	159-170
1	Introduction	159
2	Advance Authorisation scheme	159
3	Duty Free Import Authorisation (DFIA)	161
4	Reward scheme - Served From India Scheme	161
5	Reward scheme - Vishesh Krishi and Gram Uduog Yojana (VKGUY) or Special Agriculture and Village Industry Scheme	162
6	Reward scheme - Focus Market Scheme (FMS)	163
7	Reward scheme - Focus Product Scheme (FPS)	164
8	Reward scheme-Market Linked Focus Products Scrip (MLFPS)	164

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9	Reward scheme-Status Holders Incentive Scrip (SHIS)	164
10	Expired/abolished Export Promotion scheme	165
11	Special provision	166
12	Export Promotion Capital Goods (EPCG)	167
13	General provisions of Export Promotion schemes	169
Chapter 24	Special Economic Zones	171-178
1	Introduction	171
2	Board of Approvals	172
3	Unit Approval Committee	172
4	Establishment of SEZs	173
5	Setting up of SEZ unit	173
6	Monitoring of activities of SEZ units	174
7	Net Foreign Exchange Earnings	174
8	Import and Procurement	174
9	Export	174
10	Sub-contracting	175
11	Sub-contracting for Domestic Tariff Area unit for export	175
12	DTA Sale	175
13	Valuation of goods cleared into DTA	175
14	Temporary removal of goods into the DTA	176
15	Duty remission on destruction of goods	176
16	Exit of Units	176
17	Drawback on supplies made to SEZs	177
18	Other administrative guidelines	177
Chapter 25	Export Oriented Units	179-201
1	Introduction	179
2	Customs and Central Excise exemptions	180
3	Setting up of an EOU	180
4	Import/procurement and warehousing	181
5	Monitoring and administrative control	182
6	Customs bonding	183
7	Items allowed duty free imports/procurement	183
8	Time limit for utilization of imported capital goods and inputs	184
9	Manufactured in bond	184
10	B-17 bond	185

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11	Monitoring of export performance/foreign exchange realization	186
12	Import and export procedures	186
13	Goods imported/exported and found defective	187
14	Procurement of indigenous goods under CT-3 procedure	187
15	DTA sale	188
16	Valuation of goods sold in DTA	189
17	Duty liability on DTA clearance/sales	189
18	Goods manufactured from indigenous materials in EOUs	189
19	Clearance of by-products, rejects, waste, scrap, remnants, non-excisable goods etc.	190
20	Special concessions for certain waste products and other goods	191
21	Reimbursement of Central Sales Tax (CST) /Drawback	192
22	Manner of calculation of duty on goods/services/waste/scrap/by- products cleared in DTA under Paragraph 6.8 of the FTP	192
23	Clearance of samples	193
24	Clearance of Fax/laptop computers outside approved premises	193
25	Sale of surplus/unutilized goods	194
26	Destruction of flowers/horticulture products	194
27	Sub-contracting	195
28	Temporary removal of goods	195
29	Inter-unit transfer	196
30	Repair, reconditioning and re-engineering	196
31	Replacement/repair of imported/indigenous goods	196
32	Special provisions relating to Gems and Jewellery EOUs	197
33	Cost Recovery Charges	197
34	Supervision by the departmental officers	198
35	Monitoring of EOUs	198
36	Recovery of duty forgone and penal action for abuse/diversion etc.	198
37	De-bonding of goods/exit from EOU scheme	199
Chapter 26	International Passenger Facilitation	202-207
1	Introduction	202
2	Clearance of arriving passengers	202
3	Duty free allowances and entitlements for Indian Residents and Foreigners Residing in India	203
4	Import of jewellery/gold/silver	204

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5	Duty free allowances and entitlements for tourists	204
6	Allowances and entitlements on Transfer of Residence (TR)	205
7	Import of baggage of deceased person	205
8	Import of unaccompanied baggage	205
9	Import of foreign exchange/currency	206
10	Import of Indian currency	206
11	Import of fire arms as baggage	206
12	Import of pet animals as baggage	206
13	Detained baggage	206
14	Mishandled baggage	207
15	Clearance of departing passengers	207
16	Export of gold jewellery as baggage	207
17	Export of currency	207
Chapter 27	Setting up of ICDs/CFSs	208-211
1	Introduction	208
2	Distinction between ICD & CFS	208
3	Procedure for approval of ICD/CFS	210
4	Posting of Customs officers on cost recovery basis	210
Chapter 28	Customs Cargo Service Providers	212-217
1	Introduction	212
2	Salient features of the HCCR, 2009	212
Chapter 29	Custom House Agents	218-225
1	Introduction	218
2	Application for CHA licence and eligibility	218
3	Qualifying examinations	219
4	Obligation of CHA	220
5	Revocation and suspension of CHA licence	223
Chapter 30	Offences and Penal Provisions	226-235
1	Introduction	226
2	Seizure of offending goods	226
3	Confiscation of seize3d goods	227
4	Confiscation of conveyances /packages etc.	227
5	Penalties in respect of improper importation of goods	227
6	Penalties in respect of improper exportation goods	228
7	Mandatory penalty in certain cases	229

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8	Other penalties	229
9	Adjudication of confiscations and penalties	230
10	Arrest	230
11	Offences and prosecution- non-boilable or cognizable offences	232
12	Offences and prosecution – billable or non-cognizable offences	233
13	Offences by Customs officers	234
14	Presumption of culpable mental state	234
15	Prosecution	235
Chapter 31	Appeal, Review and Settlement of Cases	236-243
1	Introduction	236
2	Appeal to Commissioner (Appeals)	236
3	Appeal to CESTAT	237
4	Review of orders passed by Commissioner and Commissioner (Appeals)	239
5	Revision Application	239
6	Pre-deposit of duty demanded or penalty levied	240
7	Appeal to high Court	240
8	Appeal to Supreme Court	241
9	Disputes with PSUs/other Government Departments	241
10	Monetary Limits for filing appeals to CESTAT/High Court and Supreme Court	242
11	Settlement Commission	242
Chapter 32	Grievance Redressal	244-245
I	Introduction	244
2	Grievance Redressal related to cargo clearance	244
3	Grievance redressal and facilitation measures for passengers	245
Chapter 33	On-site Post Clearance Audit	246-248
1	Introduction	246
2	On-site Post Clearance Audit at the Premises of Importers and Exporters Regulations, 2011	247
Chapter 34	Authorized Economic Operator (AEO) programme	249-262
1	Introduction	249
2	Benefits of an AEO Programme	250
3	Criteria for grant of AEO status	251
4	Application for Grant of AEO Status	256

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5	Processing of application for grant of AEO status	257
6	Pre-certification verification	258
7	Certification	260
8	Maintaining AEO Status	260
9	Review of AEO Status	261
10	Suspension of AEO Status	261
11	Revocation of AEO Status	262
12	Right to Appeal	262

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Chapter 1

Overview of Customs Functions

1. Introduction:

1.1 Central Board of Excise and Customs (CBEC or the Board) is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of Customs and Central Excise duties, prevention of smuggling and administration of matters relating to Customs, Central Excise and Narcotics to the extent under CBEC’s purview. The Board is the administrative authority for its subordinate organizations, including Custom Houses, Central Excise & Customs Commissionerates and the Central Revenues Control Laboratory.
1.2 The important Customs related functions include the following:
(a) Collection of Customs duties on imports and exports as per the Customs Act,
1962 and the Customs Tariff Act, 1975;
(b) Enforcement of various provisions of the Customs Act, 1962 governing imports and exports of cargo, baggage, postal articles and arrival and departure of vessels, aircrafts etc.;
(c) Discharge of agency functions and enforcing prohibitions and restrictions on imports and exports under various legal enactments;
(d) Prevention of smuggling including interdiction of narcotics drug trafficking; and
(e) International passenger clearance.
1.3 The Customs functions cover substantial areas of activities involving international passengers, general public, importers, exporters, traders, manufacturers, carriers, port and airport authorities, postal authorities and various other Government/semi- Government agencies, Banks etc. However, at any Customs station there are various other agencies/parties that are involved. On its part, the Customs is continuously rationalizing and modernizing its Customs procedures through adoption of EDI and global best practices. Also, as a member of the World Customs Organization, Indian Customs has adopted various international Customs Conventions and procedures including the Revised Kyoto Convention, Harmonized Classification System, GATT based valuation etc.

2. Statutory provisions for levy of Customs duty:

2.1 Entry No. 83 of List 1 to Schedule VII of the Constitution empowers the Union Government to legislate and collect duties on imports and exports. Accordingly, the Customs Act, 1962, effective from 1-2-1963 provides vide its Section 12 for the levy

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of duties on goods imported into or exported from India. The items and the rates of duties leviable thereon are specified in two Schedules to the Customs Tariff Act, 1975. The First Schedule specifies the various import items in systematic and well considered categories, in accordance with an international scheme of classification of internationally traded goods known as ‘Harmonized System of Commodity Classification’ and specifies the rates of import duties thereon, as prescribed by the legislature. The duties on imported items are usually levied either on specific or ad- valorem basis, but in few cases specific-cum-ad valorem duties are also levied. The Second Schedule incorporates items that are subject to exports duties and the rates of duties thereof.
2.2 Levy of duties on ad-valorem (i.e., with reference to value) basis is the predominant mode of levy. For this purpose the value of the imported goods is required to be determined as per provisions of Section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Prices of Imported Goods) Rules, 2007. These provisions are essentially the adoption of GATT based valuation system (now termed WTO Valuation Agreement) that is followed internationally. Likewise, in respect of export goods the value is to be determined as per provisions of Section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.

3. Control and regulatory provisions:

3.1 In tune with international practice the entry/exit of carriers/passengers etc. into and out of the country is regulated by law. The Customs Act, 1962 is the basic statute which governs/regulates entry/exit of different categories of vessels/crafts/goods/passengers etc., into or outside the country. Various allied laws and regulations also apply. It is the responsibility of the Customs to handle international traffic speedily and effectively while ensuring that all the goods/passengers etc., imported/coming into the country or exported/going out of the country by sea, air, land or rail routes are in conformity with the laws of the land.
3.2 In terms of the Customs Act, 1962 the Board is given the powers to appoint Customs ports, airports and Inland Container Depots (ICD) where alone the imported goods can be brought in for unloading or export goods loaded. Similar powers have been given to the Board to notify places as Land Customs Stations (LCS) for clearance of goods imported or exported by land or by inland water. Thus, various airports, ports, ICDs and LCSs have been notified across the country and also routes have been specified for carrying out trade with neighboring countries like Nepal.
3.3 Once a particular Customs port or airport is notified, the Customs Act, 1962 empowers the jurisdictional Commissioner of Customs to approve specific places therein where only loading and unloading can take place and also to specify the limits of the Customs area where the imported goods or the export goods are ordinarily to be kept before clearance by the Customs authorities.

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3.4 Essentially all goods brought into the country or meant for export must pass through authorized points, be reported to Customs, and the importers/exporters must fulfill the prescribed legal and procedural requirements laid down under Customs Act, 1962 and allied laws including payment of the duties leviable, if any. The legal provisions allow the Customs to regulate the outflow of the goods (and persons) out of the country and subject them to proper checks before allowing final exit out of the country by sea/ air/land/rail routes. They also help detect any attempts of smuggling or commercial frauds by unscrupulous parties.

4. Role of custodians:

4.1 In regard to all imported goods unloaded in a Customs area, the Commissioner of Customs is required to appoint a custodian under whose custody the imported goods shall remain till these are cleared for home consumption, or are warehoused or transshipped as provided in the law. With the growth of containerized traffic the facility of Customs clearances in the interiors of the country has also been provided by opening various ICDs, which are actually dry ports and here too the goods remain with the appointed custodian till these are cleared by the Customs. In addition to custodians appointed by the Commissioner of Customs, the Customs Act, 1962 recognizes other custodians as provided under any other law. For instance, the Mumbai Port Trust is a legal custodian under the Major Ports Trust Act, 1963. The custodian is essentially required to take charge of the imported goods from the carrier, arrange its proper storage and safety and allow clearance to the importers only after they fulfill all the Customs formalities, pay requisite duties and other charges/fees and discharge various other obligations. No goods can be cleared from a Customs area without the express permission of the Customs. Moreover, since the Customs Act, 1962 obliges the custodians to ensure safe custody of the goods till delivery in case any imported goods are pilfered while in custody, the custodian is required to pay duty on such goods.
4.2 Various port trusts and other authorities in the public and private sectors handle the import and export cargo when kept in their custody at various ports, international airports/ ICDs. The cargo handling and custody at the international airports is generally entrusted to International Airport Authority of India (IAAI), but there is an increasing trend of the IAAI leasing such facility to private sector or even direct entry of private sector. Also, new ICDs are being opened at various industrial centres as a facilitation measure with the result that Customs clearances of both imported and export cargo, from these places has expanded substantially in recent years.
4.3 Maximum import and export cargo is handled at different sea ports and there is a trend towards containerized cargo movement; increasing part of import cargo landed at some ports like Nhava Sheva is also transshipped to interior ICDs for final clearance by importers at their door steps. Security arrangements ensure there is no pilferage/ theft of the cargo and arrangements of loading and unloading of cargo at different berths in various docks, their movement to different places including container yards/ storage godowns etc., are arranged by the port authorities.

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4.4 The Customs authorities are given appropriate office place and requisite facilities in the dock area as well as in international cargo complexes/ICDs etc., to discharge their functions in relation to imports and exports such as supervision of loading/unloading of goods from vessels/crafts etc., supervision of stuffing or de-stuffing of containers, inspection and examination of goods which are imported/presented for exportation before Customs clearance formalities etc. For this purpose and in order to provide comprehensive guidelines for custodians / Cargo Service Providers (CCSP) for handling, receipt, storage and transportation of cargo in a Customs area, the Board has framed the Handling of Cargo in Customs Areas Regulations, 2009

5. Obligations of carriers:

5.1 To regulate and have effective control on imports and exports the Customs Act, 1962 enjoins certain liabilities on the carriers. Thus, they have to bring in the cargo imported into the country for unloading only at notified ports/airports/Land Customs Stations; furnish detailed information to Customs about goods brought in for unloading at that particular port/international airport as also those which would be carried further to other ports/airports. Declaration of such cargo has to be made in terms of an ‘Import General Manifest’ (IGM) prior to arrival of the vessel/aircraft at the Customs station. In the case of imports through Land Custom Stations the person in charge of the vehicle has to give similar import report within 12 hours of its arrival. Since the cargo clearance formalities are linked generally with the availability of information about cargo being brought by a vessel for unloading at any port, provisions is also made for prior filing of an IGM if all details of relevant cargo for any port are available even before the vessel arrives. The final IGM can be filed after arrival of the vessel.
5.2 Unless, the IGM is furnished in the prescribed form, no unloading of cargo can be undertaken from any vessels/aircrafts/vehicles in normal circumstances. After the IGM is duly delivered the unloading takes place under the supervision of the Preventive Officers of Customs. The law prohibits unloading of any goods at a Customs station, which are not mentioned in the IGM/import report. Similarly, there are restrictions on loading for export such that no vessel/aircraft can begin loading goods for export unless intimation is given to Customs and its permission for loading obtained – what is also called ‘Entry Outward’ of the vessel. Loading of cargo on vessels, aircrafts etc. is checked and supervised by Preventive Customs Officers who ensure that cargo loaded has discharged the prescribed Customs formalities such as payment of duties or cess, where leviable, any other formalities enjoined by the law, and authorization for exports is duly given by the proper officer as a part of Customs clearance formalities.
5.3 The person in charge of the vessel/aircraft is required to furnish details of all the goods loaded on a vessel/aircraft in a prescribed form, which is termed ‘Export General Manifest’ (EGM). The person in charge of a vehicle must furnish a similar report called
‘Export Report’. The EGM/Export Report is to be furnished before the vessel/aircraft/
vehicle departs and is essentially taken as the proof of shipment/export.

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6. Customs preventive control:

6.1 No vessel/aircraft can leave a Customs station unless a written order for port clearance is given by the proper officer of Customs. This permission for departure is given subject to the satisfaction of the proper officer that all the prescribed formalities have been fulfilled, duties/penalties etc., have been paid or secured.
6.2 The Preventive Officers of Customs are authorized to board the vessels/aircrafts to take suitable declarations, Crew property list etc., and to check whether there are any goods which are not declared for unloading at a particular Customs station in the IGM with intention to smuggle them without following the prescribed formalities and payment of duties. A thorough examination and checking of the vessels/aircrafts - known as rummaging - is also undertaken on selective basis taking due note of the past history of the vessels, the area/country from which these are arriving, the intelligence report etc.
6.3 The Preventive Officers of Customs also keep a very careful vigil for checking any illegal activities and develop intelligence to guard against any possible attempts of unauthorized removals from the docks, unloading of unmanifested cargo etc.

7. Customs clearance of cargo:

7.1 Before any goods imported can be cleared for home consumption in the country or for warehousing for subsequent Customs clearances as and when needed etc., the importers have to comply with prescribed Customs clearance formalities. Essentially, these involve presentation of certain documents along with a prescribed application normally termed ‘Bill of Entry’, which gives essential particulars in relation to imported goods, country of origin, particulars of vessel/aircraft etc. seeking clearance of goods for home consumption/warehousing etc. The importer either himself handles the import clearance documents or appoints Custom House Agents (CHAs) who are trained and experienced in Customs clearance work and are licensed by Customs for such work in terms of the CHA Licensing Regulations, 2004.
7.2 The import clearance documentation, presentation, and processing is handled in the Custom Houses by Appraising staff trained in assessment matters. After a tally has been made with related IGM to ensure the goods sought for clearance have arrived and declared in the particular IGM of the vessel/aircraft mentioned in the Bill of Entry (or even where the prior manifest is filed) the scrutiny of documents – manually or through EDI system is taken up. The main function of the Appraising staff in the Custom Houses is the careful scrutiny of the Bill of Entry and related particulars / information with a view to checking the import permissibility in terms of the Foreign Trade Policy and any other laws regulating import and to determine value, classification and duties leviable on the goods on import – (Basic, Additional, Anti-dumping, Safeguards etc.). Permissibility of various benefits of duty free clearances under different schemes or applicability of any exemption notification benefits is also checked and decided.

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7.3 Normally, the import declarations made are scrutinized without prior examination of the goods with reference to documents made available and other information about the values/classification available with Customs and duties chargeable on the goods are assessed and paid up by the importer or his authorized representative. It is only at the time of clearance of the goods from the custody of the port trusts/international airport authority or other custodians that these are examined on percentage basis by separate staff posted in the premises where the goods are stored pending Customs clearance. These officers undertake checking of nature of goods, valuation and other part of declaration, or draw samples as may be ordered by the Appraising officers of the Custom House/Cargo Complexes/ICDs. If no discrepancies in relation to the nature of goods, quantity, value etc., are observed at the time of examination of the cargo,
‘Out of Customs Charge’ orders are issued, and thereafter goods can be cleared after discharging any other fees/charges etc., of the custodians.
7.4 At times, for determining the duty liability and permissibility of import it may become necessary to examine the goods in advance. Such goods are got examined after filing of Bill of Entry and other documents and based upon the report of the examining staff, duties etc. are assessed and if there is no prohibition etc., the goods are taken clearance from the custodian without the need for further examination.
7.5 Where disputes arise in the matter of classification/valuation or any violations of any provisions of law are observed, where the goods cannot be allowed clearance finally without further investigations and following adjudication proceedings, the law provide for provisional clearances subject to suitable bond/security. Only where the goods are of prohibited nature or in certain other exceptional cases, where provisional release is not considered advisable, the final decision may be taken after results of enquiries etc. are known and adjudication proceedings completed, where necessary.
7.6 Customs clearance formalities for goods meant for export have to be fulfilled by presenting a ‘Shipping Bill’ and other related documents to the Export Section of the Custom Houses or EDI Service Centres. The Appraising staff checks the declarations to assess the duties/cess, if leviable, propriety of export incentives, where claimed under different schemes like Duty Drawback or duty free exemption schemes etc. Appropriate orders for examination before shipments are allowed export are given on the Shipping Bill. The staff in the docks/cargo complexes/ICDs examines the goods meant for export on percentage basis, and allows shipment if there are no discrepancies/ mis-declarations etc., and no prohibitions/violations come to light. Appropriate penal action as per law is initiated where any fraudulent practices get detected during initial stage of scrutiny or at the time of examination etc.

8. Smuggling and other violations and penal provisions:

8.1 Unscrupulous elements do attempt to evade the duties leviable and bypass various prohibitions/restrictions in relation to imports by attempting to bring the goods into the country from places other than the notified ports/airports/Land Custom Stations without reporting or presenting the goods to customs. Similar attempts are made to take

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goods out of the country unauthorizedly. This is essentially termed as ‘smuggling’ and Customs officers have very important role in ensuring that they detect any such attempts of smuggling into or out of the country and take appropriate action both against the goods as well as against the persons involved.
8.2 The Customs Act, 1962 provides for strict penalties in relation to the goods/persons involved in smuggling and other violations of the legal provisions. These include seizure/ confiscation (including absolute confiscation) of the offending goods and fines and penalties on the persons involved in the offence as well as those abetting the offence. The law also empowers Customs officers to carry out searches, arrests and prosecution of persons involved in smuggling and serious commercial frauds and evasion of duties or misuse of export incentives by fraudulent practices (mis-declaration of nature, and value of the goods or suppression of quantities etc.).
8.3 Whereas the Customs Act, 1962 provides for deterrent penal provisions for violations, due process of law has to be followed before action is taken against offending goods or persons/conveyance etc. involved. The Customs officers act as quasi-judicial authorities and the liabilities for duty evaded or sought to be evaded, fines, penalties etc., are adjudged by giving the persons concerned due notice (or Show Cause Notice) of contemplated action against including the gist of the charges and their basis, and providing opportunity for representation as well as personal hearing.
8.4 In grave offence cases the Customs Act, 1962 provides for prosecution with imprisonment upto maximum of 7 years. This action is taken following the usual criminal proceedings in a Court of law, after prosecution sanction is given by the competent Customs officer.

9. Appellate remedies:

9.1 Any concerned person aggrieved with the departmental adjudication is given the right to appeal against the said order. The first level of appeal is to Commissioner (Appeal) and thereafter to an independent Tribunal (CESTAT) unless the adjudication order is originally passed by the Commissioner of Customs in which case the first level of appeal is to the CESTAT. On questions of law, the orders of CESTAT could also be considered for reference to the High Court and certain categories of decisions involving classification or valuation can be appealed even before the Supreme Court.

10. Passenger processing:

10.1 All incoming international passengers after immigration clearance have to pass through the Customs who have the duty to ensure their maximum facilitation and speedy clearance. At the same time unscrupulous passengers may try to smuggle goods into the country which are sensitive and otherwise prohibited/restricted or evade duties by non-declaration/mis-declaration to Customs. Similarly, the Customs have to ensure that these passengers do not smuggle out foreign currency, antiques or other wildlife and prohibited items or narcotics drugs or psychotropic substances. The Customs have also to ensure enforcement of various other allied laws before any goods carried

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by the passengers on person, in hand bag or accompanied baggage enter into the country or get out of the country.

11. Import/Export by post/courier:

11.1 Customs is charged with coordination with Postal authorities for giving Customs clearances after appropriate checks on selective basis of various goods coming as post parcels, etc. Customs also ensure that these postal mail/packets/parcels enter into the country in accordance with the provisions of the Customs Act, 1962. Unless the goods brought by post are within the value limits prescribed for free gift or free samples these have to be assessed to duties by Customs and the same indicated to Postal authorities. The duties are collected before the Postal authorities deliver the goods to addressees.
11.2 Imports/exports through couriers are governed by the Courier Imports and Exports (Clearance) Regulations, 1998 and the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010. These Regulations facilitate such goods in terms of quick Customs clearance, after discharge of duties, if any, for delivery to the consignees. At few places dedicated Courier terminals manned by Customs officers (akin to Air Cargo Complexes) are established to handle courier cargo.
12. Citizen Charter:
12.1 Customs has committed in its Citizen Charter to provide to trade and industry time bound and speedy cargo clearance facility, quick redressal of grievances, and inculcating in its officers’ a sense of service with courtesy, understanding, integrity, objectivity and transparency. Customs is committed to render professional, efficient and prompt service to all stakeholders.

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Chapter 2

Arrival of Conveyances and Related Procedures

1. Introduction:

1.1 Customs control over conveyances that bring imported goods and take out export goods is necessitated by the fact that all imports and exports are required to be subjected to appropriate Customs clearance procedures. Hence, legal provisions are in place to monitor such conveyances and the goods carried thereon. Furthermore, in terms of Section 2 of the Customs Act, 1962 conveyances include a vessel, an aircraft and a vehicle thereby covering all possible modes of transport and carriage of cargo.

2. Conveyances to call only at notified Customs ports/airports:

2.1 Section 7 of the Customs Act, 1962 envisages that the unloading/clearance of imported goods and loading/clearance of export goods shall be allowed only at places notified by the Board as Customs ports or Customs airports or Land Customs Stations or Inland Container Depots. At each such Customs ports or airport, the Commissioner of Customs is empowered to approve proper places for the unloading and loading of goods, and specify the limits of such Customs area. It is further provided vide Section
29 ibid that the person in charge of the vessel or an aircraft shall not call or land at any place other than a Customs port/airport, except in cases of emergencies.

3. Power to board conveyance, to question and to demand documents:

3.1 Section 37 of the Customs Act, 1962 empowers the proper officer of Customs to board any conveyance carrying imported goods or export goods and Section 38 ibid provides that the proper officer may question the person in charge of the vessel or aircraft or demand production of any documents. The person in charge of the conveyance is bound to comply with these requirements.

4. Delivery of Import Manifest:

4.1 In accordance with Section 30 of the Customs Act, 1962 the person in charge (Master
/ Agent) of the vessel or an aircraft has to deliver an import manifest (an import report in case of a vehicle), prior to arrival in the case of a vessel and an aircraft or within 12 hours of arrival in case of a vehicle in the prescribed form. The time limit for filing the manifest is extendable on showing sufficient cause, but otherwise a penalty not exceeding Rs.50,000/- can be imposed on account of any delay. A person filing the manifest/report declarations under this section has to declare the truthfulness of contents, which has legal consequences.

5. Person filing the manifest to be registered:

5.1 In terms of the Import Manifest (Vessels) Regulations, 1971 and Import Manifest

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(Aircrafts) Regulations, 1976 any person, who delivers the import manifest for a vessel or an aircraft to the proper officer under Section 30 of the Customs Act, 1962 is required to be registered with Customs.
5.2 In order to ensure that the Import Manifest for vessel or aircraft is filed prior to arrival of vessel or aircraft, in terms of the said Regulations, the following procedure has been formulated:
(i) The person responsible for filing of the Import Manifest, both at Master as well as House-level details, shall register with the Customs in advance. The application for registration shall be made to the Jurisdictional Commissioner of Customs in Form V or Form VI, as the case may be, of the said Regulations. The application should be accompanied by an undertaking to file the manifest details as required.
(ii) Airlines/Steamer Agents/Shipping Lines/Consol Agents (including ‘any other person’ notified as per Section 30 of the Customs Act, 1962) are assigned business category codes as AL, SA, SL and CN, respectively. For the purpose of registration of Airlines/Steamer Agents/Shipping Lines, the existing Airline Code or Steamer Agents Code or Shipping Lines Code already allotted to them shall be used for filing manifest and same shall be their registration number. As regards consol agents, their registration number shall be of 12 digits (10-digit Income Tax PAN, followed by business category code, i.e. CN). A sample of registration number of a consol agent will look like AAACK8719PCN.
(iii) Airlines/Steamer Agents/Shipping Lines/Consol Agents are required to submit the information as per the prescribed Annexure “A”, which is a system compliant form that contains information prescribed as per the Form V and Form VI of the Import Manifest (Aircraft) Regulations, 1976 and Import Manifest (Vessels) Regulations, 1971 respectively, to the respective Commissioners, where they are operating, for capturing the details in the EDI System.
(iv) In the case of chartered flights where the consol agents themselves are entrusted with the responsibility of filing both Master as well as House-level details, the consol agents will have to be registered with the Customs as airline agent and will be allotted an ad-hoc/temporary code (accepted by system), as per existing format for each such flight.
(v) Access to the system for filing IGM details will be allowed after the receipt of the applications, in the Annexure “A” along with a self-declaration of the correctness of the particulars, by the jurisdictional Commissioner. The verification of details will be done subsequently and for this the applicant will mention in Annexure “A” the name of the Commissionerate i.e. “Port/Airport/ICD of verification” where their details would be verified. In the case of any discrepancies observed at the time of verification the registered party would be debarred from filing IGM. The concerned Commissionerate after the verification will send the registration number along with the name of the registered entity to webmaster of www.cbec.gov.in who in turn will post the details on the website for the information of all stakeholders.

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Verification of the declaration will be done only by the “Port/Airport/ICD of verification” mentioned in Annexure “A” and no other port etc. will be required to do further verification. In case of doubt, they may refer to the Commissioner of “Port/Airport/ICD of verification”.
(vi) The responsibility for filing the import manifest with Master level details shall rest with the person in-charge of the vessel or aircraft or their agent while the House level details shall be filed by “any other person” specified under Section 30 of the Customs Act, 1962. In case the “any other person” is not registered under the said Regulations, then, the responsibility to file House level details shall also rest with the person in-charge of the vessel or aircraft or their agent. The shipping lines or airlines should, therefore, ensure that the person authorized to issue delivery orders in respect of goods carried by them, are duly registered with Customs. Failure to file the IGM in advance will invite action as per Section 30(1) of the Customs Act, 1962.
(vii) At Customs stations where Indian Customs EDI (ICES) system is in operation, the IGM shall be filed through electronic mode. At other i.e. non-EDI places, the hard copies of IGM shall be required to be filed manually, in advance as per the Section 30 of Customs Act, 1962. Where ICES is operational but some Bills of Entry are filed manually, hard copy of IGM will have to be filed but late filing of hard copy will not be considered as non-filing or late filing of IGM, provided that the soft copy is filed in time.
(viii) In the case of vessels, where the voyage from the last port of call exceeds 4 (four) days, the IGM shall be filed at least 48 (forty eight) hours before the entry inward of such vessels. In the case of short haul voyages, i.e., where the voyage from the last port of call is less than 4 (four) days, the IGM is required to be filed 10 hours before entry inward of the vessel.
(ix) In the case of long haul flights i.e. flight time of at least 3 hours from the last airport, the IGM shall be filed within 2 (two) hours before the arrival of the aircraft and for short haul flights, before the arrival of the aircraft. Further, flights in domestic sector, which carry transshipped imported goods from one Indian airport to another airport in India, would be treated as short haul flight for the purpose of filing IGM under Section 30 of the Customs Act, 1962.
(x) The vessel’s stores list and list of private property in possession of the Master, officer and crew etc. should contain the quantity of store on board at the time of departure from the last port of call and estimated quantity likely to be consumed till the grant of entry inward.
(xi) At the time of registration, the requirement stipulated in the para 5 of Form V and Form VI of the Import Manifest (Aircraft) Regulations, 1976 and Import Manifest (Vessels) Regulations, 1971 respectively.

[Refer Circulars No.110/2003-Cus., dated 22-12-2003, No. 15/2004-Cus., dated 16-2-2004 and No. 30/2004-Cus., dated 16-4-2004]

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6. Amendments of IGM:

6.1 Section 30(3) of the Customs Act, 1962 read with Levy of Fee (Customs Documents) Regulations, 1970 allows the proper officer to permit an IGM to be amended or supplemented, on payment of prescribed fees, if he is satisfied that there is no fraudulent intention. Further, Board has provided for two broad categories of amendments - Major and Minor:
(a) Major Amendments:
(i) Addition of extra entries (Line numbers in the IGM).
(ii) Amendment in the quantity of goods already declared.
(iii) Changing the date of the Bill of Lading mentioned in the IGM. (iv) Changing the Importer’s/consignee name.
(v) Commodity description.
(vi) Conversion of general description of goods from cargo to un-accompanied baggage and vice-versa.
(b) Minor Amendments:
(i) Changing the Importers address only. (ii) Correcting any spelling mistakes.
(iii) Conversion from one unit of measurement to another.
(iv) Change in the container number (only alphabetic prefix and the last 10th test numerical).
(v) Change/addition of marks and numbers.
(vi) Conversion from local to T.P./SMTP and vice-versa. (vii) Port of Loading.
(viii) Size of containers (provided there is no change in weight of the consignment).
(ix) Port of discharge; (x) Type of packages.
(xi) Number of packages (provided there is no change in the weight).
(xii) Seal number.

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6.2 The need for adjudication will arise only in cases where there are major amendments involving fraudulent intention or substantial revenue implication. Further it is possible that in certain special situations such as mother/daughter vessel operation for lighterage on account of shortage of draft, congestion of port, natural calamity, the final quantity of goods covered by the IGM would be known only after completion of such lighterage operation, requiring amendment in quantity originally declared at the time of filing IGM. These exceptional situations need to be taken care so that penal action is not initiated mechanically.
6.3 Amendment of IGM after the arrival of vessel or aircraft would not be treated as late filing. However, the veracity of the amendment would be examined by the Assistant/ Deputy Commissioner of Customs for the purpose of invoking penal provisions under Section 116 of the Customs Act, 1962.

[Refer Circulars No. 13/2005-Cus., dated 11-3-2005 and

No. 44/2005-Cus., dated 24-11-2005]

7. Penal liability:

7.1 Any mis-declaration in the IGM will attract the penal provisions of Section 111(f) and Section 112 of the Customs Act, 1962. Thus, the goods concerned would be liable to confiscation and the person concerned liable to penalty.

8. Exclusion from IGMs of items originally manifested:

8.1 Exclusion from IGMs of items originally manifested is permitted only on the basis of an application from the person filing the IGM and on production of the documentary evidence of short shipment of goods. Further, prescribed fee will have to be paid for the amendment, if permitted.
8.2 Exclusions or amendments of items in the IGM involving reduction in number of packages or weight thereof is allowed on an application from the person filing the IGM and on the basis of connected documentary evidence. Such excisions or amendments will only be allowed if investigation proves that the excess quantity was originally shown in error. In the absence of such proof, the application will be dealt with by the Manifest Clearance Section at the time of closure of the manifest file.
8.3 Applications for the excision or amendments of items for which Bills of Entry have been noted will be dealt with by the Manifest Clearance Section if made two months after the arrival of the vessel.
8.4 Matters such as the number of copies of IGMs to be filed, nature of forms, manner of declaring cargo etc. are governed by the Regulations listed below. Generally, these Regulations stipulate declaring separately cargo to be landed, unaccompanied Baggage, goods to be transhipped and same bottom or retention cargo. Separate declarations are also to be filed in respect of dangerous/prohibited/ sensitive goods such as Arms and Ammunitions, Narcotics, Gold etc. These Regulations require that

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the IGM shall cover all the goods carried in the conveyance. I. Import Manifest (Vessels) Regulation, 1971;
II. Import Report (Form) Regulation, 1976; and
III. Import Manifest (Aircraft) Regulation, 1976.
8.5 In respect of a vessel, an IGM shall, in addition, consist of an application for grant of
Entry Inwards.

9. Enclosures to Import General Manifest:

9.1 The various IGM forms are designed according to IMO-FAL Convention. The forms have to be filed in prescribed sizes alongwith the following declarations:
(i) Deck Cargo declaration/certificate. (ii) Last port clearance copy.
(iii) Amendment application (when relevant).
(iv) Income Tax Certificate in case of export cargo. (v) Nil export cargo certificate.
(vi) Port Trust “No Demand” certificate. (vii) Immigration certificate.
(viii) Application for sign on/sign off of crew (when relevant).
(ix) Application for crew baggage checking when they sign on (when relevant).

[Refer Circular No.36/95-Cus., dated 10-4-1995]

10. Procedure for filing IGM at EDI Custom Houses:

10.1 In case of sea cargo the shipping lines are required to submit the electronic version of the IGM through the EDI Service Centre or through internet at ICEGATE, containing all the details and particulars. It is to be ensured that all the particulars and details of the IGM are correct and that details of House Bill of Lading are also incorporated in case of consol cargo.
10.2 In case of air cargo the airlines are required to file IGM in prescribed format through electronic mode. The IGMs should contain all details and particulars, including the details of the Master Airway Bills and the House Airway Bills in the case of consol cargo. The airlines are also required to furnish the additional information, namely, the ULD numbers for use by the custodians.

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11. Filing of Stores List:

11.1 When entering any port/airport, all vessels are required to furnish to the proper officer, a list (or ‘nil’ return) of ships stores intended for landing (excluding consumable stores issued from any Duty Free Shops in India). Retention on board of imported stores is governed by Import Store (Retention on board) Regulations, 1963. The consumable stores can remain on board the vessel without payment of duties during the period the vessel/aircraft remains as ‘foreign going’. Otherwise, such consumable stores are to be kept under Customs seal. Even in respect of foreign going vessels, only stores for immediate use may be left unsealed while excessive stores such as liquor, tobacco, cigarettes, etc are kept under Customs seal.

12. Entry Inwards and unloading and loading of goods:

12.1 On arrival of the vessel, the shipping line needs to approach the Preventive Officer for granting Entry Inwards. Before making the application, the shipping line has to make payment of the Light House dues, as may be applicable.
12.2 Section 31 of the Customs Act, 1962 requires that the Master of the vessel shall not permit unloading of any imported goods until an order is given by the proper officer granting Entry Inwards to such vessel. Normally, Entry Inwards is granted only after the IGM is delivered. The date of Entry Inwards is crucial for determining the rate of duty in case of filing of prior Bill of Entry, as provided in Section 15 of the Customs Act, 1962. However, unloading of items like accompanied baggage, mail bags, animals, perishables and hazardous goods are exempt from this stipulation.
12.3 No imported goods are to be unloaded unless specified in the IGM/Import Report for being unloaded at that Customs station and such unloading shall only be at places provided therefor. Further, imported goods shall not be unloaded except under the supervision of the proper officer. Similarly, for unloading imported goods on a Sunday or on any holiday, prior notice shall be given and prescribed fees paid.
12.4 Board has clarified that unloading of liquid bulk cargo from the ship to the bonded storage tanks through pipe lines is allowed under the provisions of Section 33 of Customs Act, 1962 subject to the conditions that the premises where the goods are received through pipe lines is a bonded warehouse under Section 58 or 59 of Customs Act, 1962; permission of the proper officer is obtained for unloading prior to discharge of such cargo; and other requirements under the Customs Act, 1962 are fulfilled. If the bonded tanks are located outside the jurisdiction of the Commissioner i/c port, permission may be granted subject to concurrence of Commissioner in whose jurisdiction the bonded tanks are located, and other safeguards as necessary.

[Refer Instruction F.No.473/19/2009-LC, dated 9-5-2011]

13. Other liabilities of carriers:

13.1 The person in charge of vessel/aircraft has other legal liabilities under the Customs

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Act, 1962, the non-fulfillment of which may result in suitable penal action, as reflected in Sections 115 and 116 of the Customs Act, 1962. For instance, Section 115 provides for confiscation of vessel/ conveyance in the following circumstances:
(a) A conveyance within Indian waters or port or Customs area, which is constructed, adopted, altered or altered for concealing goods.
(b) A conveyance from which goods are thrown overboard, staved or destroyed so as to prevent seizure by Customs officers.
(c) A conveyance, which disobeys an order under Section 106 to stop or land, without sufficient cause.
(d) A conveyance from which goods under drawback claim are unloaded without the proper officer’s permission.
(e) A conveyance, which has entered India with goods, from which substantial portion of goods are missing and failure of the master to account therefor.
(f) Any conveyance, when used as means of transport for smuggling of any goods or in the carriage of any smuggled goods, unless the owner establishes that it was used without the knowledge or connivance of the owner, his agent and the person in-charge of the vessel.
13.2 Under Section 116 of the Customs Act, 1962, penalty may be imposed on the person in-charge of vessel if there is failure to account for all goods loaded in the vessel for importation into India or transshipped under the provisions of Customs Act and these are not unloaded at the place of destination in India or if the quantity unloaded is short of the quantity to be unloaded at particular destination. Penalty may be waived if failure to unload or deficiency in unloading is accounted for to the satisfaction of competent officer. Thus, if there is any shortage, which is not satisfactorily accounted for, the person in-charge of the vessel will be liable to penalty, which may be twice the duty payable on the import goods not accounted for.

[Refer Circulars No.36/95-Cus., dated 10-04-1995; No.110/2003-Cus., dated 22-12-2003;

No.15/2004-Cus., dated 16-2-2004; No.30/2004-Cus., dated 16-4-2004; No.34/2004-Cus., 13-5-2004; No.13/2005-Cus, dated 11-3-2005; and No.44/2005-Cus., dated 24-11-2005]

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Chapter 3

Procedure for Clearance of Imported and Export Goods

1. Introduction:

1.1 The imported goods before clearance for home consumption or for warehousing are required to comply with prescribed Customs clearance formalities. This includes presentation of a Bill of Entry containing details such as description of goods, value, quantity, exemption notification etc., Customs Tariff Heading. This Bill of Entry is subject to verification by the proper officer of Customs (under self assessment scheme) and may be reassessed if declarations are found to be incorrect. Normally import declarations made are scrutinised without prior examination of goods with reference to documents made available and other information about the value/ classification etc. It is at the time of clearance of goods that these are examined by the Customs to confirm the nature of goods, valuation and other aspects of the declarations. In case no discrepancies are observed at the time of examination of goods ‘Out of Charge’ order is issued and thereafter the goods can be cleared. Similarly Customs clearance formalities for goods meant for export have to be fulfilled by presenting a Shipping Bill and other related documents. These documents are verified for correctness of assessment and after examination of the goods, if warranted, ‘Let Export Order’ is given on the Shipping Bill.

2. Import procedure - Bill of Entry:

2.1 Goods imported into the country attract Customs duty and are also required to confirm to relevant legal requirements. Thus, unless the imported goods are not meant for Customs clearance at the port/airport of arrival such as those intended for transit by the same vessel/aircraft or transshipment to another Customs station or to any place outside India, detailed Customs clearance formalities have to be followed by the importers. In contrast, in terms of Section 52 to 56 of the Customs Act, 1962 the goods mentioned in the IGM/Import Report for transit to any place outside India or meant for transhipment to another Customs station in India are allowed transit without payment of duty. In case of goods meant for transhipment to another Customs station, simple transshipment procedure has to be followed by the carrier and the concerned agencies at the first port/airport of landing and the Customs clearance formalities have to be complied with by the importer after arrival of the goods at the other Customs station. There could also be cases of transshipment of the goods after unloading to a port outside India. Here also simple procedure for transshipment is prescribed, and no duty is required to be paid.
2.2 For goods which are offloaded at a port/airport for clearance the importers have the option to clear the goods for home consumption after payment of duties leviable or to clear them for warehousing without immediate discharge of the duties leviable in terms of the warehousing provisions of the Customs Act, 1962. For this purpose every

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importer is required to file in terms of the Section 46 ibid a Bill of Entry for home consumption or warehousing, as the case may be, in the form prescribed by regulations. The Bill of Entry is to be submitted in sets, different copies meant for different purposes and also bearing different colours, and on the body of the Bill of Entry the purpose for which it will be used is mentioned.
2.3 The importers have to obtain an Importer-Export Code (IEC) number from the Directorate General of Foreign Trade prior to filing of Bill of Entry for clearance of imported goods. The Customs EDI System receives the IEC number online from the DGFT.
2.4 If the goods are cleared through the EDI system, no formal Bill of Entry is filed as it is generated in the computer system, but the importer is required to file a cargo declaration having prescribed particulars required for processing of the Bill of Entry for Customs clearance.
2.5 The importer clearing the goods for domestic consumption through non-EDI ports/ airports has to file Bill of Entry in four copies; original and duplicate are meant for Customs, third copy for the importer and the fourth copy is meant for the bank for making remittances. Along with the Bill of Entry the following documents are also generally required:
(a) Signed invoice
(b) Packing list
(c) Bill of Lading or Delivery Order/Airway Bill (d) GATT valuation declaration form duly filled in (e) Importers/CHA’s declaration
(f) Import license, wherever necessary (g) Letter of Credit, wherever necessary (h) Insurance document
(i) Import license, where necessary
(j) Industrial License, if required
(k) Test report in case of items like chemicals
(l) DEEC Book/DEPB in original, where relevant
(m) Catalogue, technical write up, literature in case of machineries, spares or chemicals, as applicable

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(n) Separately split up value of spares, components, machineries
(o) Certificate of Origin, if preferential rate of duty is claimed
2.6 While filing the Bill of Entry, the correctness of the information given therein has also to be certified by the importer in the form a declaration at the foot of the Bill of Entry and any mis-declaration/incorrect declaration has legal consequences.
2.7 Under the EDI system, the importer does not submit documents as such but submits declarations in electronic format containing all the relevant information to the Service Centre. A signed paper copy of the declaration is taken by the service centre operator for non-reputability of the declaration. A checklist is generated for verification of data by the importer/CHA. After verification, the data is filed by the Service Centre Operator and EDI system generates a Bill of Entry Number, which is endorsed on the printed checklist and returned to the importer/CHA. No original documents are taken at this stage. Original documents are taken at the time of examination. The importer/CHA also needs to sign on the final document before Customs clearance.
2.8 The first stage for processing a Bill of Entry is termed as the noting/registration of the Bill of Entry vis-à-vis the IGM filed by the carrier. In the manual format, the importer has to get the Bill of Entry noted in the concerned Noting Section which checks the consignment sought to be cleared having been manifested in the particular vessel and a Bill of Entry number is generated and indicated on all copies. After noting, the Bill of Entry gets sent to the appraising section of the Custom House for assessment functions, payment of duty etc. In the EDI system, the noting aspect is checked by the system itself, which also generates Bill of Entry number.
2.9 After noting/registration the Bill of Entry is forwarded manually or electronically to the concerned Appraising Group in the Custom House dealing with the commodity sought to be cleared. Appraising Wing of the Custom House has a number of Groups dealing with commodities falling under different Chapter Headings of the Customs Tariff and they take up further scrutiny for assessment, import permissibility angle etc.

3. Self-assessment of imported and export goods:

3.1 Vide Finance Act, 2011, ‘Self-Assessment’ has been introduced under the Customs Act, 1962. Section 17 of the Customs Act, 1962 provides for self-assessment of duty on imported and export goods by the importer or exporter himself by filing a Bill of Entry or Shipping Bill, as the case may be, in the electronic form (new Section 46 or
50). Thus, under self-assessment, the importer or exporter who will ensure that he declares the correct classification, applicable rate of duty, value, benefit of exemption notifications claimed, if any, in respect of the imported / export goods while presenting Bill of Entry or Shipping Bill.
3.2 Section 46 of the Customs Act, 1962 makes it mandatory for the importer to make entry for the imported goods by presenting a Bill of Entry electronically to the proper officer except for the cases where it is not feasible to make such entry electronically.

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While this is not a new requirement, it provides a legal basis for electronic filing. Where it is not feasible to file these documents in the System, the concerned Commissioner can allow filing of Bill of Entry in manual mode by the importer. These Bills of Entry would continue to be regulated by Bill of Entry (Forms) Regulations, 1976. However, this facility should not be allowed in routine and Commissioner of Customs should ensure that manual filing of Bill of Entry is allowed only in genuine and deserving cases. Similarly, on export side also, Section 50 of the Customs Act, 1962 makes it obligatory for exporters to make entry of export goods by presenting a Shipping Bill electronically to the proper officer except for the cases where it is not found feasible to make such entry electronically. The Commissioner concerned in these cases may allow manual filing of Shipping Bill. Again, this authority should be exercised cautiously and only in genuine cases.
3.3 The declaration filed by the importer or exporter may be verified by the proper officer when so interdicted by the Risk Management Systems (RMS). In rare cases, such interdiction may also be made with the approval of the Commissioner of Customs or an officer duly authorized by him, not below the rank of Additional Commissioner of Customs, and this will necessarily be done after making a record in the EDI system. On account of interdictions, Bills of Entry may either be taken up for action of review of assessment or for examination of the imported goods or both. If the self-assessment is found incorrect, the duty may be reassessed. In cases where there is no interdiction, there will be no cause for the declaration filed by the importer to be taken up for verification, and such Bills of Entry will be straightaway facilitated for clearance without assessment and examination, on payment of duty, if any.
3.4 The verification of a self-assessed Bill of Entry or Shipping Bill shall be with regard to correctness of classification, value, rate of duty, exemption notification or any other relevant particular having bearing on correct assessment of duty on imported or export goods. Such verification will be done selectively on the basis of the Risk Management System (RMS), which not only provides assured facilitation to those importers having a good track record of compliance but ensures that on the basis of certain rules, intervention, etc. high risk consignments are interdicted for detailed verification before clearance. For the purpose of verification, the proper officer may order for examination or testing of the imported or export goods. The proper officer may also require the production of any relevant document or ask the importer or exporter to furnish any relevant information. Thereafter, if the self-assessment of duty is not found to have been done correctly, the proper officer may re-assess the duty. This is without prejudice to any other action that may be warranted under the Customs Act, 1962. On re- assessment of duty, the proper officer shall pass a speaking order, if so desired by the importer, within 15 days of re-assessment. This requirement is expected to arise when the importer or exporter does not agree with re-assessment, which is different from the original self-assessment. There may be situations when the proper officer of Customs finds that verification of self-assessment in terms of Section 17 requires testing / further documents / information, and the goods cannot be re-assessed quickly but are required to be cleared by the importer or exporter on urgent basis. In such cases, provisional assessment may be done in terms of Section 18 of the Customs

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Act, 1962, once the importer or exporter furnishes security as deemed fit by the proper officer of Customs for differential duty equal to duty provisionally assessed by him and the duty payable after re-assessment.
3.5 One of the salient features of self-assessment is that verification of declarations and assessment done by the importer or exporter, except for cases wherein a speaking order has been passed by the proper officer while re-assessing the duty, can also be done at the premises of the importer or exporter. This provision is being implemented as ‘On Site Post Clearance Audit’ (OSPCA) programme. OSPCA has been applied to importers under the Accredited Client Programme (ACP) with effect from 1.10.2011. The current Post Clearance Audit at Custom Houses shall continue for other importers.
3.6 In cases, where the importer or exporter is not able to determine the duty liability / make self-assessment for any reason, except in cases where examination is requested by the importer under proviso to Section 46(1), a request shall be made to the proper officer for assessment of the same under Section 18(a) of the Customs Act, 1962. In this situation an option is available to the proper officer to resort to provisional assessment of duty by asking the importer / exporter to furnish security as deemed fit for differential duty equal to duty provisionally assessed and duty finally payable after assessment. This provision is to be applied in deserving cases only where importer or exporter is not able to assess the goods for duty for want of certain information / documents etc. and not in a routine manner. As far as possible, steps should be taken to provide guidance to importers/ exporters so that they are able to self-assess the duty. It should, however, be made clear that such guidance is not legally binding.
3.7 In both cases where no self-assessment is done and when self-assessment is done but reassessment is required under Section 17, the importer or exporter can opt for provisional assessment of duty by the proper officer of Customs. The difference is that when no self-assessment is done, the provisional assessment shall get converted into final assessment and when self-assessment is done, the provisional assessment shall get converted into re-assessment.
3.8 Subsequent to introduction of self-assessment, it was felt that the existing facilitation levels under RMS could be increased as responsibility of filing correct declarations has been shifted to importers and exporters; the idea being to move towards a trust based Customs control while at the same time fine tuning the risk parameters based interdictions through RMS to check against non-compliance. Therefore, consequent to introduction of self-assessment, Board has decided that the facilitation target to be achieved for Bills of Entries would be 80% at Air Cargo Complexes, 70% at Seaports and 60% at ICDs.

[Refer Circulars No. 17 /2011-Cus., dated 8-4-2011; and No.39/2011-Cus.,dated 2-9-2011]

4. Examination of goods:

4.1 All imported goods are required to be examined for verification of correctness of description given in the Bill of Entry. However, ordinarily only a part of the consignment

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is selected on random selection basis and examined. Also, the goods may be examined prior to assessment in case the importer does not have complete information with him at the time of import and requests for examination of the goods before assessing the duty liability or, if the Customs Appraiser/Assistant Commissioner feels the goods are required to be examined before assessment. This is called First Check Appraisement. The importer has to request for First Check Appraisement at the time of filing the Bill of Entry or at data entry stage giving the reason for the same. The Customs Appraiser records on original copy of the Bill of Entry the examination order and returns the Bill of Entry to the importer/CHA for being taken to the import shed for examination of the goods. Thereafter, Shed Appraiser/Dock Examiner examines the goods as per examination order and records his findings. In case appraising group has called for samples, he forwards sealed samples accordingly. The importer is required to bring back the said Bill of Entry to the assessing officer for assessing the Bill of Entry, which is countersigned by Assistant/Deputy Commissioner if the value is more than Rs.1 lakh.
4.2 The imported goods can also be examined subsequent to assessment and payment of duty. This is called Second Check Appraisement. Most of the consignments are cleared on Second Check Appraisement basis. In this case whole of the consignment is not examined and only those packages which are selected on random basis are examined.
4.3 Under the EDI system, the Bill of Entry, after assessment by the appraising group or first appraisement, as the case may be, needs to be presented at the counter for registration for examination in the import shed. A declaration for correctness of entries and genuineness of the original documents needs to be made at this stage. After registration, the Bill of Entry is passed on to the shed Appraiser for examination of the goods. Alongwith the Bill of Entry, the CHA is required to present all the necessary supporting documents. After examination of the goods, the Shed Appraiser enters the report in EDI system and transfers first appraisement Bill of Entry to the appraising group and gives ‘out of charge’ in case of already assessed Bills of Entry. Thereupon, the system prints Bill of Entry and order of clearance (in triplicate). All these copies carry the examination report, order of clearance number and name of Shed Appraiser. Two copies each of Bill of Entry and the order are to be returned to the CHA/importer, after the Appraiser signs them. One copy of the order is attached to the Customs copy of Bill of Entry and retained by the Shed Appraiser.

5 Execution of bonds:

5.1 Wherever necessary, for availing duty free assessment or concessional assessment under different schemes and notifications, execution of end use bonds with Bank Guarantee or other surety is required to be furnished. These have to be executed in prescribed forms before the assessing Appraiser. For instance, when the import of goods are made under Export Promotion schemes, the importer is required to execute bonds with the Customs authorities for fulfillment of conditions of respective notifications. If the importer fails to fulfill the conditions, he has to pay the duty leviable on those

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goods. The amount of bond of bond and bank guarantee is in terms of the instructions issued by the Board from time to time as well the conditions of the relevant Notification etc.

6. Payment of duty:

6.1 The duty can be paid in the designated banks through TR-6 challans. It is necessary to check the name of the bank and the branch before depositing the duty. Bank endorses the payment particulars in challan which is submitted to the Customs. Facility of e- payment of duty through more than one authorized bank is also available since 2007 at all major Customs locations.
6.2 In order to reduce the transaction costs and expedite Customs clearance the Board has decided to make e-payment of duty mandatory from a date to be notified for the importers paying an amount of Rs. 1 lakh or more per transaction. Likewise, e-payment of duty regardless of amount shall be made mandatory for ACP importers from a date to be notified.

[Refer Circular No.33/2011-Cus., dated 29-7-2011]

7. Amendment of Bill of Entry:

7.1 Whenever mistakes are noticed after submission of documents, amendments to the Bill of Entry is carried out with the approval of Deputy/Assistant Commissioner. The request for amendment may be submitted with the supporting documents. For example, if the amendment of container number is required, a letter from shipping agent is required. On sufficient proof being shown to the Deputy/Assistant Commissioner amendment in Bill of Entry may be permitted after the goods have been given out of charge i.e. goods have been cleared.

8. Prior Entry for Bill of Entry:

8.1 For faster clearance of the goods, Section 46 of the Customs Act, 1962 allows filing of Bill of Entry prior to arrival of goods. This Bill of Entry is valid if vessel/aircraft carrying the goods arrives within 30 days from the date of presentation of Bill of Entry. This Bill of Entry has 5 copies, the fifth copy being called Advance Noting copy. The importer must declare that the vessel/aircraft is due within 30 days and present the Bill of Entry for final noting as soon as the IGM is filed. Advance noting is not available for Into- Bond Bill of Entry and also during certain special periods.
8.2 Often goods coming by container ships are transferred at intermediate ports (like Colombo) from mother vessel to smaller vessels called feeder vessels. At the time of filing of advance Bill of Entry, the importer does not know which vessel will finally bring the goods to Indian port. In such cases, the name of mother vessel may be filled in on the basis of the Bill of Lading. On arrival of the feeder vessel, the Bill of Entry may be amended to mention names of both mother vessel and feeder vessel.

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9 Bill of Entry for bond/warehousing:

9.1 A separate form of Bill of Entry is used for clearance of goods for warehousing. All documents, as are required to be attached with a Bill of Entry for home consumption are also required with the Bill of Entry for warehousing which is assessed in the same manner and duty payable is determined. However, since duty is not required to be paid at the time of warehousing, the purpose of assessing the duty at this stage is only to secure the duty in case the goods do not reach the warehouse. The duty is paid at the time of ex-bond clearance of goods for which an Ex-Bond Bill of Entry is filed. The rate of duty applicable to imported goods cleared from a warehouse is the rate in- force on the date of filing of Ex-Bond Bill of Entry.

10. Risk Management System:

10.1 ‘Risk Management System’ (RMS) has been introduced in Customs locations where the EDI System (ICES) is operational. This is one of the most significant steps in the ongoing Business Process Re-engineering of the Customs Department. RMS is based on the realization that ever increasing volumes and complexity of international trade and the deteriorating global security scenario present formidable challenges to Customs and the traditional approach of scrutinizing every document and examining every consignment will simply not work. Also, there is a need to reduce the dwell-time of cargo at ports/airports and also transaction costs in order to enhance the competitiveness of Indian businesses, by expediting release of cargo where compliance is high. Thus, an effective RMS would strike an optimal balance between facilitation and enforcement and promote a culture of compliance. RMS is also expected to improve the management of the Department’s resources by enhancing efficiency and effectiveness in meeting stakeholder expectations and bringing the Customs processes at par with best international practices.

[Refer Circular No. 43/2005-Cus., dated 24-11-2005]

10.2 With the introduction of the RMS, the practice of routine assessment, concurrent audit and examination is discontinued and the focus is on quality assessment, examination and Post Clearance Audit of selected Bills of Entry.
10.3 Bills of Entry and IGMs filed electronically in ICES through the Service Centre or the ICEGATE are transmitted by ICES to the RMS. The RMS processes the data through a series of steps and produces an electronic output for the ICES. This output determines whether a particular Bill of Entry will be taken-up for action (appraisement or examination or both) or be cleared after payment of duty and Out of Charge directly, without any assessment and examination. Also where necessary, RMS provides instructions for Appraising Officer, Examining Officer or the Out-of-Charge Officer. It needs to be noted that the appraising and examination instructions communicated by the RMS have be necessarily followed by the proper officer. It is, however, possible that in a few cases the proper officer might decide to apply a particular treatment to the Bill of Entry which is at variance with the instruction received from the RMS. This may happen due to risks which are not factored in the RMS. Such a course of action

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shall however be taken only with the prior approval of the jurisdictional Commissioner of Customs or an officer authorized by him for this purpose, who shall not be below the rank of Addl./Joint Commissioner of Customs, and after recording the reasons for the same. A brief remark on the reasons and the particulars of Commissioner’s authorization should be made by the officer examining the goods in the departmental comments section in the EDI system.
10.4 The system of concurrent audit has been abolished and replaced by a Post-Clearance Compliance Verification (Audit) function. The objective of the Post Clearance Verification Programme is to monitor, maintain and enhance compliance levels, while reducing the dwell time of cargo. The RMS will select the Bills of Entry for audit, after clearance of the goods, and these selected Bills of Entry will be directed to the audit officers for scrutiny by the EDI system. In case any possible short levies are noticed, the officers will issue a Consultative Letter mentioning the grounds for their view to the importers/CHAs. This is intended to give the importers an opportunity to voluntarily comply and pay the duty difference if they agree with the department’s point of view. In case there is no agreement, the formal processes of demand notices, adjudication etc. would follow. It may also be noted that the auditors are specifically instructed to scrutinize declarations with reference to data quality and advise the importers/CHAs suitably where the quality of their declarations is found deficient. Such advice is expected to be followed by the trade and monitored by the local risk managers.
10.5 The facilitation schemes viz., Self-assessment scheme, Fast Track / Green Channel, Accelerated Customs Clearance etc., are phased out with the implementation of the RMS and the Accredited Clients Programme.

11 Risk Management Division:

11.1 With a view to streamline the operations of the RMS, a Risk Management Division (RMD) has been created under the Directorate General of Systems with the following charter of functions:
(i) The RMD has the overall responsibility for designing, implementing and managing RMS using various risk parameters and risk management tools to address risks facing Customs, i.e., the potential for non-compliance with Customs and allied laws and security regulations, including risks associated with the potential failure to facilitate international trade.
(ii) The RMD will suggest assessment and examination in respect of consignments perceived to be risky and facilitate the remaining ones.
(iii) The RMD is responsible for collecting and collating information and developing an intelligence database to effectively implement the RMS and also carry out effective risk assessment, risk evaluation and risk mitigation techniques. It will update and maintain risk parameters in relation to the trade, commodities and all stakeholders associated or involved with the supply chain logistics.

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(iv) The RMD is the nodal agency for Accredited Client’s Programme (ACP). It will maintain a list of accredited clients in the RMS and closely monitor their compliance standards.
(v) The RMD will closely interact with all Custom Houses, Directorate of Revenue Intelligence (DRI) and Directorate of Valuation (DOV) to enable it to effectively address national risks. The RMD shall also work in close coordination with Directorate General of Audit (DG Audit). The local risks will be largely addressed by RMD in co-operation with the Custom Houses. Further, the RMD will also closely interact with DOV on all matters pertaining to the Valuation Risk Assessment Module (VRAM) of RMS. DOV will also supply the list of Most Sensitive Commodities with value bands, the list of valid valuation alerts and the list of Unusual Quantity Code (UQC) at agreed intervals.
(vi) The RMD will review the performance of the RMS in terms of reviewing the various targets/interventions inserted by the Local Risk Management (LRM) Committee, make objective assessment of the effectiveness of such insertions, and ensure that the performance is consistent with the objective laid down. For this purpose, the RMD shall provide necessary advice and guidance to Custom Houses as and when required, which shall be followed. The RMD will also review the extent of facilitation being provided to the trade and offer necessary guidance to the officers in the Custom Houses with a view to providing appropriate facilitation and also ensuring compliance.
(vii) The RMD will coordinate and liaise with other Government Departments (OGDs), in order to deal with risks relating to the compliance requirements under relevant Allied Acts.
(viii) The RMD will work in close coordination with NACEN in developing training manuals and other documentation necessary for implementing RMS and also work out regular training schedules for officers responsible for the RMS in major Customs locations.

12. National Risk Management Committee:

12.1 A National Risk Management (NRM) Committee headed by DG (Systems) reviews the functioning of the RMS, supervise implementation and provide feedback for improving its effectiveness. The NRM Committee includes representatives of Directorate General of Revenue Intelligence (DGRI), Directorate General of Valuation (DGOV), Directorate General of Audit (DG Audit), Directorate General of Safeguards (DGS) and Tax Research Unit (TRU), and Joint Secretary (Customs), CBEC. The NRM Committee meeting is to be convened by RMD at least once every quarter. The following are some of the functions of the NRM Committee:
(i) Review performance of the RMS including implementation of ACP and PCA. (ii) Review risk parameters and behavior of important risk indicators.

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(iii) Review economic trends, policies, duty rates, exemptions, market data etc. that adversely impact Customs functions and processes and suggest remedial action thereof.

[Refer Circular No 23/2007-Cus., dated 28-06-2007, Circular No 39/2011- Cus., dated 2-09-2011]

13. Local Risk Management (LRM) Committee:

13.1 A Local Risk Management (LRM) Committee headed by Commissioner of Customs has been constituted in each Custom House / Air Cargo Complex / ICD, where RMS is operationalised. The LRM Committee comprises the Additional / Joint Commissioner in charge of Special Investigation and Intelligence Branch (SIIB), who is designated as the Local Risk Manager and includes the Additional / Joint Commissioner in charge of Audit and a nominee, not below the rank of a Deputy Director from the regional / zonal unit of the DRI, and a nominee, not below the rank of Deputy Director from the Directorate of Valuation, if any. The LRM Committee meets once every month and some of its functions are as follows:
(i) Review trends in imports of major commodities and valuation with a view to identifying risk indicators
(ii) Decide the interventions at the local level, both for assessment and examination of goods prior to clearance and for PCA.
(iii) Review results of interventions already in place and decide on their continuation/
modification or discontinuance etc.
(iv) Review performance of the RMS and evaluate the results of the action taken on the basis of the RMS output.
(v) Send periodic reports to the RMD, as may be prescribed by the RMD, with the approval of the Commissioner of Customs.

14. Accredited Clients Programme:

14.1 The Accredited Clients Programme (ACP) has been introduced with the objective of granting assured facilitation to importers who have demonstrated capacity and willingness to comply with the laws administered by the Customs. This programme replaces all existing schemes for facilitation in the Customs stations where EDI and RMS is implemented. Importers registered as “Accredited Clients” form a separate category to which assured facilitation is provided. Except for a small percentage of consignments selected on random by the RMS, or cases where specific intelligence is available or where a specifically observed pattern of non-compliance is required to be addressed, Accredited Clients are allowed clearance on the basis of self assessment without examination of goods as a matter of course.

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14.2 Considering the likely volume of cargo imported by the Accredited Clients, Custom Houses may create separately earmarked facility/counters for providing Customs clearance service to them. Commissioners of Customs are also required to work with the Custodians for earmarking separate storage space, handling facility and expeditious clearance procedures for these clients.
14.3 The RMD administers the ACP and maintains the list of Accredited Clients centrally in the RMS. The importers who have been granted the status of Accredited Clients are required to maintain high levels of compliance, which is closely monitored by the RMD in co-ordination with the Commissioners of Customs. Where compliance levels fall, the importer is at first informed for improvement and in case of persistent non- compliance, the importer may be deregistered under the ACP.
14.4 In order to ensure that there is no misuse of the program by imposters (persons who assume the Accredited Client’s name and identity), the Accredited Clients should file Bills of Entry using digital signatures. Additionally, all Bills of Entry must be filed through the ICEGATE and duty in respect of these consignments paid though such the Accredited Clients’ bank account at the designated bank.
14.5 The eligibility criteria for importers to get ACP status are as follows:
(i) They should have imported goods valued at Rs. Ten Crores [assessable value] in the previous financial year; or paid more than Rs. One Crore Customs duty in the previous financial year; or, in the case of importers who are also Central Excise assesses, paid Central Excise duties over Rs. One Crore from the Personal Ledger Account in the previous financial year, or they should be recognized as
‘status holders’ under the Foreign Trade Policy.
(ii) They should have filed at least 25 Bills of Entry in the previous financial year in one or more Indian Customs stations.
(iii) They should have no cases of Customs, Central Excise or Service Tax, as detailed below, booked against them in the previous three financial years:
(a) Cases of duty evasion involving mis-declaration/ mis-statement/collusion / willful suppression / fraudulent intent whether or not extended period for issue of SCN has been invoked.
(b) Cases of mis-declaration and/or clandestine/unauthorized removal of excisable / import / export goods warranting confiscation of said goods.
(c) Cases of mis-declaration/mis-statement/collusion/willful suppression/ fraudulent intent aimed at availing CENVAT credit, rebate, refund, drawback, benefits under export promotion/reward schemes.
(d) Cases wherein Customs/Excise duties and Service Tax has been collected but not deposited with the exchequer.

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(e) Cases of non-registration with the Department with intent to evade payment of duty/tax.
(iv) They should not have any cases booked under any of the Allied Acts being implemented by Customs.
(v) The quality of the submissions made by the applicants to Customs should be good as measured by the number of amendments made in the Bills of Entry in relation to classification of goods, valuation and claim for exemption benefits. The number of such amendments should not have exceeded 20% of the Bills of Entry during the previous financial year.
(vi) They should have no duty demands pending on account of non-fulfillment of export obligation.
(vii) They should have reliable systems of record keeping and internal controls and their accounting systems should conform to recognized standards of accounting. They are required to provide the necessary certificate from their Chartered Accountants in this regard.
14.6 The ACP accreditation is initially valid for a period of one year and would be renewable thereafter upon a review of the compliance record of the Accredited Client.

[Refer Circulars No. 22/97-Cus., dated 4-7-1997; No.63/97-Cus., dated 21-11-1997; No.42/2005-Cus., dated 24-11-2005; and No.43/2005-Cus dated 24-11-2005]

15. Export procedure – Shipping Bill:

15.1 For clearance of export goods, the exporter or his agent has to obtain an Importer- Export Code (IEC) number from the Directorate General of Foreign Trade prior to filing of Shipping Bill. Under the EDI System, IEC number is received by the Customs System from the DGFT online. The exporter is also required to register authorised foreign exchange dealer code (through which export proceeds are expected to be realised) and open a current account in the designated bank for credit of any Drawback incentive.
15.2 All the exporters intending to export under the export promotion scheme need to get their licences/DEEC book etc. registered at the Customs Station. For such registration, original documents are required.

16. Octroi exemption for export goods:

16.1 Since the Shipping Bill is generated only after the ‘Let Export’ order is given by Customs, the exporter may make use of export invoice or such other document as required by the Octroi authorities for the purpose of Octroi exemption.

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17. Waiver of GR form:

17.1 Generally the processing of Shipping Bills requires the production of a GR form that is used to monitor the foreign exchange remittance in respect of the export goods. However, there are few exceptions when the GR form is not required. An example is export of goods valued not more than US $25,000/- and another is export of gifts valued upto Rs.5,00,000/-.

[Refer RBI Notifications No.FEMA.23/2000-RB, dated 3-5-2000; and

No.FEMA.116/2004-RB, dated 25-3-2004]

18. Arrival of export goods at docks:

18.1. The goods brought for the purpose of export are allowed entry to the Dock on the strength of the check list and other declarations filed by the exporter in the Service Center. The custodian has to endorse the quantity of goods actually received on the reverse of the check list.

19. Customs examination of export goods:

19.1 After the receipt of the goods in the Docks, the exporter/CHA may contact the Customs Officer designated for the purpose, and present the check list with the endorsement of custodian and other declarations along with all original documents such as, Invoice and Packing list, AR-4, etc. The Customs Officer may verify the quantity of the goods actually received and enter into the system and thereafter mark the Electronic Shipping Bill and also hand over all original documents to the Dock Appraiser who assigns a Customs Officer for examination and indicate the officers’ name and the packages to be examined, if any, on the check list and return it to the exporter/CHA.

20. Examination norms:

20.1 The Board has fixed norms for examination of export consignments keeping in view the quantum of incentive, value of export goods, the country of destination etc. The scale of physical examination of various categories of exports at the port of export is as follows:
A. Factory stuffed export cargo:

Category of Exports	Scale of Examination
Export goods stuffed and sealed in the presence of the Customs/Central Excise officers at the factories of manufacture, ICD/CFS, notified warehouses and other places where the Commissioner has, by a special order, permitted examination of goods for export.	No examination except: (a) where the seals are found tampered with; or (b) there is specific intelligence in which case, permission of Deputy/Assistant Commissioner would be required before checking.

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B. Export under Free Shipping Bills:

Category of Exports	Scale of Examination
Exports under Free Shipping Bills i.e. where there is no export incentive.	No examination except where there is a specific intelligence.

C. Export under Drawback Scheme:

S.No.	Category of Exports	Scale of Examination
S.No.	Category of Exports	Export consignments shipped to sensitive places viz. Dubai, Sharjah, Singapore, Hong Kong and Colombo	Others
(i)	Consignments where the amount of drawback involved is Rs.1 lakh or less.	25%	2%
(ii)	Consignments where the amount of drawback involved is more than Rs.1 lakh.	50%	10%

D. Export under EPCG/DEEC schemes:

S.No.	Category of Exports	Scale of Examination
S.No.	Category of Exports	Export consignments shipped to sensitive places viz. Dubai, Sharjah, Singapore, Hong Kong and Colombo	Others
(i)	Consignments where the FOB value is Rs.5 lakh or less.	25%	2%
(ii)	Consignments where the FOB value is more than Rs.5 lakhs.	50%	10%

E. Export under Shipping Bills claiming benefits under Reward Schemes:

S.No.	Category of Exports	Scale of Examination
S.No.	Category of Exports	Export consignments shipped to sensitive places viz. Dubai, Sharjah, Singapore, Hong Kong and Colombo	Others
(i)	Exports under Free Shipping Bills where benefits under Chapter 3 of the FTP have been claimed by the Exporter and where the FOB value is Rs.20 lakhs or less.	25%	2%
(ii)	Exports under Free Shipping Bills where benefits under Chapter 3 of the FTP have been claimed by the Exporter and where the FOB value is more than Rs.20 lakhs.	50%	10%

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20.2 In all cases referred to above, in respect of consignments selected for examination, a minimum of two packages with a maximum of 5% of packages (subject to a maximum of 20 packages from a consignment) shall be opened for examination. The package number to be opened for examination is selected by the EDI system.
20.3 It is to be ensured that exporters do not split up consignments so as to fall within the lower examination norms. Therefore, wherever on the same day the same exporter attempts to export a second consignment (other than under Free Shipping Bills) involving export incentive of Rs.1 lakh or less (Drawback/DEPB) or in other cases having the FOB value upto Rs.5 lakhs to the same country, the EDI system would alert the Examining Officer. The Examining Officer can then decide whether to subject the second consignment for examination or not. In case the buyer in both or more consignments happens to be the same person, subsequent consignments should be examined.
20.4 After the goods have been presented for registration to Customs and determination has been made whether or not to examine the goods, no amendments in the normal course are expected. However, in case an exporter wishes to change any of the critical parameters resulting in change of value, Drawback, DEPB credit, port etc. such consignment should be subjected to examination.
20.5 Notwithstanding the examination norms, any export consignment can be examined by the Customs (even upto 100%), if there is any specific intelligence in respect of the said consignment. Further, to test the compliance by trade, once in three months a higher percentage of consignments (say for example, all the first 50 consignments or a batch of consecutive 100 consignments presented for examination in a particular day) would be taken up for examination. Out of the consignments selected for examination a minimum of two packages with a maximum of 5% of packages (subject to a maximum of 20 packages from a consignment) would be taken up for checking/ examination.
20.6 In case export goods are stuffed and sealed in the presence of Customs/Central Excise officers at the factory of manufacture/ICD/CFS/warehouse and any other place where the Commissioner has, by a special order, permitted, the containers should be bottle sealed or lead sealed. Also, in such case the consignments shall be accompanied by an examination report in the prescribed form. In case of export through bonded trucks, the truck should be similarly bottle sealed or lead sealed. In case of export by ordinary truck/other means, all the packages are required to be lead sealed.

[Refer Circulars No.6/2002-Cus., dated 23-1-2002; and

No.1/2009-Cus., dated 13-1-2009]

20.7 If the export is made claiming benefits of Drawback / DEPB or any other export promotion scheme in addition to claiming benefits under any Schemes of Chapter 3 of FTP, then the examination norms as prescribed by the Board for the respective export promotion schemes would apply. In order to claim benefits under the Reward

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Schemes, the exporter is required to declare the intention to claim such benefits on the Shipping Bill itself.
20.8 Exports by EOUs and units in SEZs are governed by examination norms, as applicable for EPCG/DEEC schemes. However, if the export consignment of EOUs or SEZs units has been sealed by Customs/Central Excise Officer, the norms for factory stuffed cargo will apply.
20.9 Routine examination of perishable export cargo is not to be conducted. Customs should resort to examination of such cargo only on the basis of credible intelligence or information and with prior permission of the concerned Assistant Commissioner/ Deputy Commissioner. Further, the perishable cargo which is taken up for examination should be given Customs clearance on the day itself, unless there is contravention of Customs laws.

[Refer Circular No.8/2007-Cus., dated 22-1-2007]

20.10 In cases of cargo transported for exports through containers or bonded closed trucks to Gateway Port after following the Central Excise/ Customs officer supervised sealing or self-sealing by manufacturer exporters, EOUs; and containers aggregated with LCL cargo in CFSs/ ICDs sent to the port after sealing in the presence of officers the tamper proof one-time bottle seal alone should be adopted as it ensures safety and security of sealing process and avoid any resealing at the point of export. In respect of one-time bottle seals provided by the department, its cost may be recovered from exporters/ manufacturers or their agents. However, exporters/manufacturers need not be compelled to procure such bottle seals only from the department as this would defeat the very purpose of self-sealing facility and avoid delay. When trucks/ other means used for export cargo cannot be bottle sealed, same would be subject to normal examination norms at gateway port.

[Refer Circular No.1/2006-Cus., dated 2-1-2006]

20.11 The exporters can avail of the facility of removal of export goods from the factories on the basis of self-certification and self-sealing; but these shall be examined at the port of export on the basis of prescribed examination norms.

[Refer Circulars No.6/2002-Cus., dated 23-1-2002; and

No.31/2002-Cus., dated 7-6-2002]

21. Factory stuffing permission:

21.1 The grant of a single factory stuffing permission valid for all the Customs stations instead of Customs station-wise permission is permitted. This facility is subject to the following safeguards:
(i) The exporter is required to furnish to Customs a list of Customs stations from where he intends to export his goods.

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(ii) The Custom House granting the factory stuffing permission should maintain a proper register to keep a track-record of such permissions, and also create a unique serial number for each of such permissions.
(iii) The Custom House should circulate the factory stuffing permission to all Custom Houses concerned clearly indicating the name and contact details of the Preventive Officer/Inspector and Superintendent concerned of the Custom House granting the permission as well as those of the Central Excise Range concerned to facilitate real time verifications, if required.
(iv) In case something adverse is noticed against the exporter, the Customs station concerned shall promptly intimate the Custom House granting the permission, which will, in turn, withdraw the permission, and inform all Custom Houses concerned.

[Refer Circular No.20/2010-Cus., dated 22-7-2010]

22. Variation between declaration and physical examination:

22.1 The check list and the declaration along with all original documents submitted with the Shipping Bill are retained by the Appraiser concerned. In case of any variation between the declaration in the Shipping Bill and physical documents/examination report, the Appraiser may mark the Electronic Shipping Bill to the Assistant Commissioner/Deputy Commissioner of Customs (Exports) alongwith sending the physical documents and instruct the exporter or his agent to meet the Assistant Commissioner/Deputy Commissioner of Customs (Exports) for settlement of dispute. In case the exporter agrees with the views of the Department, the Shipping Bill needs to be processed accordingly. Where, however, the exporter disputes the view of the Department the issue will be finalized in accordance with the principles of natural justice.

23. Drawl of samples:

23.1 Where the Appraiser Dock (Export) orders for samples to be drawn and tested, the Customs Officer may proceed to draw two samples from the consignment and enter the particulars thereof along with details of the testing agency in the ICES/EDI system. There is no separate register for recording dates of samples drawn. Three copies of the test memo shall be prepared by the Customs Officer and signed by the Customs Officer and Appraising Officer on behalf of Customs and the exporter or his agent. The disposal of the three copies of the test memo are as follows:
(i) Original – to be sent along with the sample to the test agency. (ii) Duplicate – Customs copy to be retained with the 2nd sample. (iii) Triplicate – Exporter’s copy.

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23.2 If he considers it necessary, the Assistant Commissioner/Deputy Commissioner, may also order sample to be drawn for purposes other than testing such as for visual inspection and verification of description, market value inquiry, etc.

24. Stuffing / loading of goods in containers:

24.1 The exporter or his agent should hand over the Exporter’s copy of the Shipping Bill duly signed by the Appraiser permitting “Let Export” to the steamer agent who would then approach the proper officer (Preventive Officer) for allowing the shipment. In case of container cargo the stuffing of container at Dock is done under Preventive Supervision. Further, loading of both containerized and bulk cargo is to be done under Preventive Supervision. The Customs Preventive Superintendent (Docks) may enter the particulars of packages actually stuffed into the container, the bottle seal number, details of loading of cargo container on board into the EDI system and endorse these details on the Exporter’s copy of the Shipping Bill. If there is a difference in the quantity/ number of packages stuffed in the containers/goods loaded on vessel the Superintendent (Docks) may put a remark on the Shipping Bill in the EDI system and that it requires amendment or change in quantity. Such Shipping Bill may not be taken up for the purpose of sanction of Drawback/DEEC logging, till it is suitably amended. The Customs Preventive Officer supervising the loading of container and general cargo into the vessel may give “Shipped on Board” endorsement on the Exporters copy of the Shipping Bill.
24.2 Palletisation of cargo is done after grant of Let Export Order (LEO). Thus, there is no need for a separate permission for palletisation from Customs. However, the permission for loading in the aircraft/vessel would continue to be obtained.

[Refer Circular No.18/2005-Cus., dated 11-3-2005]

25. Amendments:

25.1 Any correction/amendments in the check list generated after filing of declaration can be made at the Service Center provided the documents have not yet been submitted in the EDI system and the Shipping Bill number has not been generated. Where corrections are required to be made after the generation of the Shipping Bill number or after the goods have been brought into the Export Dock, the amendments will be carried out in the following manner:
(i) If the goods have not yet been allowed “Let Export” the amendments may be permitted by the Assistant Commissioner (Exports).
(ii) Where the “Let Export” order has already been given, amendments may be permitted only by the Additional/Joint Commissioner in charge of Export.
25.2 In both the cases, after the permission for amendments has been granted, the Assistant Commissioner/Deputy Commissioner (Export) may approve the amendments on the EDI system on behalf of the Additional/Joint Commissioner. Where the print out of the

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Shipping Bill has already been generated, the exporter may first surrender all copies of the Shipping Bill to the Dock Appraiser for cancellation before amendment is approved on the system.
25.3 In respect of amendment in AEPC Certificate on receipt of request from the exporter, the Assistant Commissioner /Deputy Commissioner (Exports) should allow the change of port in EDI Shipping Bills / invoice to help exporters in getting the goods cleared without waiting for an amendment of documents by AEPC. The ratification of the port of change would be done subsequently by AEPC.

[Refer Circular No.46/2003-Cus., dated 5-6-2003]

26. Drawback claim:

26.1 After actual export of the goods, the Drawback claim is automatically processed through EDI system by the officers of Drawback Branch on first-come-first-served basis. The status of the Shipping Bills and sanction of Drawback claim can be ascertained from the query counter set up at the Service Center. If any query is raised or deficiency noticed, the same is also shown on the terminal and a print out thereof may be obtained by the authorized person of the exporter from the Service Center. The exporters are required to reply to such queries through the Service Center. The claim will come in queue of the EDI system only after reply to queries/deficiencies is entered in the Service Center.
26.2 All the claims sanctioned on a particular day are enumerated in a scroll and transferred to the Bank through the system. The bank credits the drawback amount in the respective accounts of the exporters. The bank may send a fortnightly statement to the exporters of such credits made in their accounts.
26.3 The Steamer Agent/Shipping Line may transfer electronically the EGM to the Customs EDI system so that the physical export of the goods is confirmed, to enable the Customs to sanction the Drawback claims.

27. Generation of Shipping Bills:

27.1 After the “Let Export” order is given on the EDI system by the Appraiser, the Shipping Bill is generated in two copies i.e., one Customs copy, one exporter’s copy (EP copy is generated after submission of EGM). After obtaining the print out the Appraiser obtains the signatures of the Customs Officer and the representative of the CHA on both copies of the Shipping Bill and examination report. The Appraiser thereafter signs and stamps both the copies of the Shipping Bill.
27.2 The Appraiser also signs and stamps the original and duplicate copy of SDF and thereafter forward the Customs copy of Shipping Bill and original copy of the SDF along with the original declarations to Export Department. The exporter copy and the second copy of the SDF are returned to the exporter or his agent.

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28. Export General Manifest:

28.1 All the shipping lines/agents need to furnish the Export General Manifests, Shipping
Bill-wise, to the Customs electronically before departure of the conveyance.
28.2 Apart from lodging the EGM electronically the shipping lines need to continue to file manual EGMs along with the exporter copy of the Shipping Bills in the Export Department where they would be entered in a register. The shipping lines may obtain acknowledgement indicating the date and time at which the EGMs were received by the Export Department. .

[Refer Circulars No.33/96-Cus., dated 17-6-1996; No.6/2002-Cus., dated 23-1-2002; No.31/2002-Cus., dated 7-6-2002; No.3/2003-Cus., dated 3-3-2003; No.53/2004-Cus., dated 13-10-2004; No.18/2005-Cus., dated 11-3-2005; No.42/2005-Cus., dated 24-11-2005; No.43/2005-Cus., dated 24-11-2005; No.1/2006-Cus., dated 2-1-2006; No.8/2007-Cus., dated 22-1-2007; No.23/2007-Cus., dated 28-6-2007; and No.1/2009-Cus., dated 13-1-2009]

29. Electronic Declarations for Bills of Entry and shipping Bills:

29.1 Bill of Entry (Electronic Declaration) Regulations, 2011 has been framed in supersession of the Bill of Entry (Electronic Declaration) Regulations, 1995 to incorporate changes made vide Finance Act, 2011 and mandate self-assessment by the importer or exporter, as the case may be. Likewise, Shipping Bill (Electronic Declaration) Regulations, 2011 are framed in tune with statutory provisions of Sections
17, 18 and 50 of the Customs Act, 1962.

[Refer Notifications No.79/2011-Customs (N.T.) dated 25-11-2011; and

No.80/2011-Customs (N.T.) dated 25-11-2011]

***

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Chapter 4

Classification of Goods

1. Introduction:

1.1 Import and export of goods are required to be assessed to duty which may include an assessment of nil duty. For this purpose, it is necessary to determine the classification of the goods, which basically means the categorization of the goods in a specific heading of the Schedules to the Customs Tariff Act, 1975.
1.2 Classification of imported/export goods is governed by the Customs Tariff Act, 1975 which contains two Schedules. The First Schedule specifies the nomenclature that is based on the Harmonized Commodity Description and Coding System generally referred to as “Harmonized System” or simply “HS”, developed by the World Customs Organization (WCO) which is applied uniformly by more than 137 countries the world over. The Second Schedule contains description of goods chargeable to export duty. As the nomenclature also specifies the Customs duty rates (Tariff), it is called the
‘Indian Customs Tariff’ or ‘Tariff Schedule’.

2. Methodology of classification:

2.1 In the Tariff Schedule, commodities/products are arranged in a fixed pattern with the duty rates specified against each of them. The pattern of arrangement of goods in the Tariff is in increasing degree of manufacture of commodities/products in the sequence of natural products, raw materials; semi finished goods and fully finished goods / article
/ machinery, etc. The Indian Customs Tariff has 21 Sections and 98 Chapters. A Section is a group consisting of a number of Chapters which codify a particular class of goods. The Section notes explain the scope of chapters / headings, etc. The Chapters consist of chapter notes, brief description of commodities arranged at four digit, six digit and eight digit levels. Every four-digit code is called a ‘heading’ and every six digit code is called a ‘subheading’ and 8-digit code is called a ‘Tariff Item’.
2.2 The Harmonized System (HS) provides commodity/product codes and description up to 4-digit (Heading) and 6-digit (Sub-heading) levels only and member countries of WCO are allowed to extend the codes up to any level subject to the condition that nothing changes at the 4-digit or 6-digit levels. India has developed 8-digit level classification to indicate specific statistical codes for indigenous products and also to monitor the trade volumes.
2.3 The HS is amended periodically in a review cycle of 4/6 years, taking note of the trade flow, technological progress, etc. After the HS came into effect on 1.1.1988, it was amended in 1992, 1996, 2002 and 2007.The amendments for 2012 have already been approved by the WCO in 2009 and will come into force w.e.f. 1.1.2012. Member countries including India are under obligation in terms of International Convention on Harmonized System to amend their Tariff Schedules in alignment with HS. Therefore,

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the classification of some commodities/products may change over a period of time. Those involved in the negotiation of international commercial arrangements, multilateral tariff agreements etc. should refer to correlation tables showing the transposition of sub-headings from older version to the newer and the newer to the older version of the HS.
2.4 For purposes of uniform interpretation of the HS, the WCO has published detailed Explanatory Notes to various headings/subheadings. This forms the basis for interpreting the HS. The WCO, in its various committees discusses the classification of individual products and gives classification opinion on them. Such information, though not binding in nature provides a useful guideline for classifying goods.
2.5 The process of arriving at a particular heading/subheading code, either at four digit, six digit or eight digit level for a commodity in the Tariff Schedule is called ‘classification’. The titles of Sections, Chapters and Sub-chapters are provided for ease of reference only. For legal purposes the texts of the Section Notes, Chapter Notes, Subheading Notes, Supplementary Notes, Headings, Subheadings, and the General Rules for Interpretation of Import Tariff (GIR) should be relied upon to determine the classification of an item. Classification helps in determining the rate of duty leviable as prescribed by the legislature. The Indian Customs Tariff provides specific headings for goods imported under Project Import Scheme, goods imported by post and goods imported as baggage in Chapter 98 under which they will be classified straightaway even though they may be covered elsewhere.
2.6 The GIR is a set of 6 rules for classification of goods in the Tariff Schedule. These rules have to be applied sequentially. Rule 1 gives precedence to the Section notes/Chapter notes while classifying a product. Rule 2(a) applies to goods imported in incomplete / finished condition and assembled / unassembled condition. Rule 2(b) is applicable to
‘mixtures’ and ‘composite goods’. Goods which cannot be classified by application of Rule 2(b), will be classified by application of Rule 3 i.e. by application of ‘most specific description’ as per Rule 3 (a) or by ascertaining the ‘essential character’ of the article as per Rule 3 (b) or by taking into consideration the heading that occurs last in the numerical order as per Rule 3 (c). Rule 4 states that goods which cannot be classified by application of the preceding rules may be classified under the heading appropriate to the goods to which they are most akin. Rule 5 applies to packing materials / articles in which the goods are carried. Rule 6 is applied to arrive at the appropriate subheading within a heading and for that purpose the provisions of Rules 1 to 5 apply mutatis mutandis on the understanding that ubheadings at the same level are comparable. For the purpose of Rule 6 the relative Section and Chapter Notes also apply unless the context otherwise requires.
2.7 While classifying goods, the foremost consideration is the ‘statutory definition’ and any guideline provided by HS Explanatory Notes. In their absence, the cardinal principle would be the way goods are known in ‘common parlance’. Many times statutes contain definitions and meanings of only a restricted number of words, expressions or phrases. Therefore, while interpreting the common words used in the statute, giving more than

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due importance to common dictionary meanings may be misleading, as therein all shades of meaning of a particular word are given. Similarly, meanings assigned in technical dictionaries will have limited application.
2.8 For purposes of classification the ‘trade meaning’ should be given due importance unless the Tariff itself requires the terms are to be interpreted in a strict technical sense in which case technical dictionaries should be used. If any scientific test is to be performed, the same must be carried out as prescribed to arrive at the classification of goods. The common dictionary meaning of technical words should not be accepted in such cases since normally, the common parlance understanding is indicative of the functional character of the goods. Further, in matters of classification the quality of goods, whether prime or defective is not material. There is no prohibition on Customs in revising the classification once decided. However revision should be only done for good and sufficient reasons. In case of difficulty in understanding the scope of the headings / subheadings, reference should invariably be made to supplementary texts like the Explanatory Notes to the HS.
2.9 The rate of duty specified in the Tariff Schedule is called ‘Tariff rate of duty’. Goods which are not identified for concessional rate of duty / exemption from duty by issue of an exemption notification issued in terms of provisions of the Customs Act, 1962 are levied the Tariff rate of duty. The Export Tariff Schedule mentions only the commodities on which export tariff is levied. Likewise the Central Excise Tariff prescribed Excise duties against each subheading, which is relevant for the purpose of computing the Additional Duty of Customs. Goods which are prescribed ‘nil’ rates of duty in the Tariff are those goods which are levied to ‘free’ rates of duty.
2.10 Board issues Tariff Advices in the form of circulars to ensure uniformity in classification of goods at an All India level. Such issues also get discussed and resolved in the periodic Conferences of Chief Commissioners/Commissioners of Customs on Tariffs and Allied Matters. An Advance Ruling Authority has also been set up for giving binding tariff information to Joint Ventures set up by non-residents.
2.11 Permissibility of import and export of goods is governed by the ITC (HS) Classification of Import and Export Goods, published by the DGFT. In this omenclature, goods are arranged as in the HS but are codified by ten digit numerical code for more precision for purposes of import / export control.

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Chapter 5

Classification/Assessment of Projects Imports, Baggage and Postal imports

1. Introduction:

1.1 For the sake of convenience, a special classification has been introduced in the Customs Tariff for project imports, baggage and postal imports. By virtue of this classification, the diverse goods that are imported for the purpose of execution of projects or as baggage and postal imports are classified under one heading and subjected to a uniform rate of duty. This facilitates assessment and ensures faster clearances since the alternative would be to classify each item distinctly and subject the same to the applicable duty.

2. Project imports:

2.1 ‘Project Imports’ is an Indian innovation to facilitate setting up of and expansion of industrial projects. Normally, imported goods are classified separately under different tariff headings and assessed to applicable Customs duty, but as a variety of goods are imported for setting up an industrial project their separate classification and valuation for assessment to duty becomes cumbersome. Further, the suppliers of a contracted project, do not value each and every item or parts of machinery which are supplied in stages. Hence, ascertaining values for different items delays assessment leading to demurrage and time and cost overruns for the project. Therefore, to facilitate smooth and quick assessment by a simplified process of classification and valuation, the goods imported under Project Import Scheme are placed under a single Tariff Heading 9801 in the Customs Tariff Act, 1975. The Central Government has formulated the Project Import Regulations, 1986 prescribing the procedure for effecting imports under this scheme.
2.2 The Project Import Scheme seeks to achieve the objective of simplifying the assessment in respect of import of capital goods and related items required for setting up of a project by classifying all goods under heading 9801 of the Customs Tariff Act,
1975 and prescribing a uniform Customs duty rate for them even though other headings may cover these goods more specifically.
2.3 The different projects to which heading 9801 applies are; irrigation project, power project, mining project, oil/mineral exploration projects, etc. Such an assessment is also available for an industrial plants used in the process of manufacture of a commodity. The Central Government can also notify projects in public interest keeping in view the economic development of the country to which this facility will apply. Thus, a number of notifications have been issued notifying a large number of projects for assessment under Tariff Heading 9801. However, this benefit is not available to hotels, hospitals, photographic studios, photographic film processing laboratories,

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photocopying studios, laundries, garages and workshops. This benefit is also not available to a single or composite machine.
2.4 Goods that can be imported under Project Import Scheme are machinery, prime movers, instruments, apparatus, appliances, control gear, transmission equipment, auxiliary equipment, equipment required for research and development purposes, equipment for testing and quality control, components, raw materials for the manufacture of these items, etc. In addition, raw material, spare parts, semi-finished material, consumables up to 10% of the assessable value of goods can also be imported.
2.5 The purposes for which such goods can be imported under the Project Import Scheme are for ‘initial setting up’ or for ‘substantial expansion’ of a unit of the project. The ‘unit’ is any self contained portion of the project having an independent function in the project. A project would fall under the category of ‘substantial expansion’ if the installed capacity of the unit is increased by not less than 25%, as per the Project Import Regulations.

3. Registration of contracts:

3.1 In terms of Regulation 4 of the Project Import Regulations, 1986 (PIR) the basic requirement for availing the benefit of assessment under Tariff Heading No.98.01 is that the importer should have entered into one or more contracts with the suppliers of the goods for setting up a project. Such contracts should be registered prior to clearance in the Custom House through which the goods are expected to be imported. The importer shall apply for such registration in writing to the proper officer of Customs.
3.2 Regulation 5 provides in the manner of registering contracts, as follows:
(i) Before any order is made by the proper officer of Customs permitting the clearance of the goods for home consumption;
(ii) In the case of goods cleared for home consumption without payment of duty subject to re-export in respect of fairs, exhibitions, demonstrations, seminars, congresses and conferences, duly sponsored or approved by the Government of India or Trade Fair Authority of India, as the case may be, before the date of payment of duty.
3.3 To expedite registration, the importers are advised to submit the following documents alongwith the application for registration:
(i) Original deed of contract together with true copy thereof.
(ii) Industrial Licence and letter of intent, SSI Certificate granted by the appropriate authority with a copy thereof.
(iii) Original Import licence, if any, with a list of items showing the dimensions, specifications, quantity, quality, value of each item duly attested by the Licensing Authority and a copy thereof.

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(iv) Recommendatory letter for duty concession from the concerned Sponsoring Authority, showing the description, quantity, specification, quality, dimension of each item and indicating whether the recommendatory letter is for initial set-up or substantial expansion, giving the installed capacity and proposed addition thereto.
(v) Continuity Bond with Cash Security Deposit equivalent to the 2% of CIF value of contract sought to be registered subject to the maximum of Rs.50,00,000/- and the balance amount by Bank Guarantee backed by an undertaking to renew the same till the finalisation of the contract. The said continuity bond should be made out for an amount equal to the CIF value of the contract sought to be registered.
(vi) Process flow chart, plant layout, drawings showing the arrangement of imported machines along with an attested copy of the Project Report submitted to the Sponsoring authorities, Financial Institution, etc.
(vii) Write up, drawings, catalogues and literature of the items under import.
(viii) Two attested copies of foreign collaboration agreement, technical agreement, know-how, basic/detailed engineering agreement, equipment supply agreement, service agreement, or any other agreement with foreign collaborators/suppliers/ persons including the details of payment actually made or to be made.
(ix) Such other particulars, as may be considered necessary by proper officer for the purpose of assessment under Heading No. 9801.
3.4 After satisfying that goods are eligible for project imports benefit and importer has submitted all the required documents, the contract is registered by the Custom House and as a token of registration the provisional duty bond is accepted by the Assistant/ Deputy Commissioner of Customs, Project Import Group. The details of the contracts are entered in the register kept for the purpose and a Project Contract Registration Number is assigned and communicated to the importer. The importer is required to refer to this number in all subsequent correspondence.

4. Clearance of goods after registration:

4.1 On every Bill of Entry filed for clearance of goods under the Project Import Scheme, the importer/CHA is required to indicate the Project Contract Registration Number allotted to it. After noting, the Bill of Entry is sent to the Project import Group, which is required to check the description, value and quantity of the goods imported vis-à-vis the description, value and quantity registered. In case these particulars are found in order, the Bill of Entry is assessed provisionally and handed over to the importer or his agent for payment of duty. The Project Import Group keeps a note of the description of the goods and their value in the Project Contract Register and in the file maintained in the Group for each project.

5. Finalisation of contract:

5.1 Under Regulation 7 of the PIR, 1986 the importer is required to submit, within three months from the date of clearance of the last consignment or within such extended

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time as the proper officer may allow, the following documents for the purpose of finalization of the assessment:
(i) A reconciliation statement i.e. a statement showing the description, quantity and value of goods imported along with a certificate from a registered Chartered Engineer certifying the installation of each of the imported items of machinery;
(ii) Copies of the Bills of Entry, invoices, and final payment certificate. The final payment certificate is insisted upon only in cases where the contract provides that the amount of the transaction will be finally settled after completion of the supplies.
5.2 To ensure that the imported goods have actually been used for the projects for which these were imported, plant site verification may be done in cases where value of the project contract exceeds Rs.1 crore. In other cases plant site verification is normally done selectively.
5.3 In the normal course, after submission of the reconciliation statement and other documents by the importers, the provisional assessments are finalized within a period of three months where plant site verification is not required and within six months where plant site verification is required. In cases where a demand has been issued and confirmed on such finalization and importer has not paid the duty demanded, steps are taken as per law to realise the amount.

6. Baggage:

6.1 All goods imported by a passenger or a member of crew in his baggage are classifiable under Tariff Heading 9803 and levied to a single rate of duty. Such goods need not be classified separately in the Tariff. However, Tariff Heading 9803 does not apply to motor vehicles, alcoholic drinks, and goods imported through courier service. Such assessment will also not apply to goods imported by a passenger or a member of the crew under an import license or a customs clearance permit.

7. Postal imports for personal use:

7.1 All goods imported by Post or Air for personal use are classifiable under a single Tariff Heading 9804 and levied to duty accordingly. This heading has been sub divided into two subheadings, one applicable to drugs and medicines and the other, to the balance items so imported. Such goods will however be governed by the FTP as far their importability is concerned. Motor vehicles, alcoholic drinks and goods imported through courier service can however not be classified under this heading. Goods imported under an import license or a customs clearance permit will however not be classified under this tariff heading.

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Chapter 6

Customs Valuation

1. Introduction:

1.1 The rates of Customs duties leviable on imported goods and export goods are either specific or on ad valorem basis or at times on specific cum ad valorem basis. When Customs duties are levied at ad valorem rates, i.e., based on the value of the goods, it becomes essential to lay down in the law itself the broad guidelines for such valuation to avoid arbitrariness and to ensure that there is uniformity in approach at different Customs formations. Accordingly, Section 14 of the Customs Act, 1962 lays down the basis for valuation of import and export goods. The present version of the said Section
14 is applicable with effect from October 2007.

2. Tariff value:

2.1 The Board is empowered to fix values, under Section 14(2) of the Customs Act, 1962 for any item, which are called “Tariff Values”. If tariff values are fixed for any goods, ad valorem duties thereon are to be calculated with reference to such tariff values. The tariff values may be fixed for any class of imported or export goods having regard to the trend of value of such or like goods and the same have to be notified in the official gazette. Tariff values have presently been fixed in respect of import of Crude Palm Oil, RBD Palm Oil, Other Palm Oils, Crude Palmolein, RBD Palmolein, Other Palmoleins, Crude Soyabean Oil, Brass Scrap (all grades) and Poppy Seeds.

[Refer Notification No.36/2001-Cus. (N.T.), dated 3-8-2001]

3. Valuation of imported/export goods where no Tariff Value is fixed:

3.1 Section 2(41) of the Customs Act, 1962 defines ‘Value’ in relation to any goods to mean the value thereof determined in accordance with the provisions of Section 14(1) ibid. In turn, Section 14(1) states that the value of the imported goods and export goods shall be “the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf”. It is also provided that in the case of imported goods such transaction value shall include “in addition…any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf”
3.2 In accordance with the provisions of Section 14(1) of the Customs Act, 1962 the rules specified for the purpose of valuation may provide for:

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(i) the circumstances in which the buyer and the seller shall be deemed to be related;
(ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case;
(iii) The manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purpose of this section.
3.3 The price paid or payable shall be calculated with reference to the rate of exchange as in force on the date on which a Bill of Entry is presented under Section 46, or a Shipping Bill of export, as the case may be, is presented under Section 50 of the Customs Act,
1962.
3.4 When compared to the earlier provisions of Section 14(1), the present provisions have discarded the concept of ‘deemed value’ and adopted the concept of ‘transaction value’. Also, the present Section 14 contains therein provisions for specific rules to be made for determination of value and also for specific additions to value on account of cost and services. Some provisions deleted from the earlier Section 14 include:
(i) Reference to such or like goods. Thus, the value (transaction value) shall be the price actually paid or payable for the goods under consideration.
(ii) The reference to price of the goods ordinarily sold or offered for sale.
(iii) The price of the goods when sold for export to India is to be considered and not the price in the course of international trade.
3.5 As provided in Section 14(1), the Custom Valuation (Determination of Value of Imported Goods) Rules, 2007 and the Custom Valuation (Determination of Value of Export Goods) Rules, 2007 have been framed for valuation of imported goods and export goods, respectively.
3.6 The provisions of Section 14(1) and the Custom Valuation (Determination of Value of Imported Goods) Rules, 2007 are based on the provisions of Article VII of GATT and the Agreement on implementation of Article VII of GATT. The methods of valuation prescribed therein are of a hierarchical (sequential) order.
3.7 The importer is required to truthfully declare the value in the import declaration and also provide a copy of the invoice and file a valuation declaration in the prescribed form to facilitate correct and expeditious determination of value for assessment purposes.

4. Methods of Valuation of imported goods:

4.1 According to the Customs Valuation (Determination of Value of Imported Goods) Rules,
2007, the Customs Value should be the “Transaction Value”, i.e., the price actually

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paid or payable after adjustment by Valuation Factors and subject to (a) compliance with the Valuation Conditions and (b) satisfaction of the Customs authorities with the truth and accuracy of the Declared Value.

5. Transaction value:

5.1 Rule 3(i) of the Customs Valuation (Determination of Value of Imported Goods) Rules,
2007 states that the value of imported goods shall be the transaction value adjusted in accordance with the provisions of its Rule 10.
5.2 The price actually paid or payable is the total payment made or to be made by the buyer to the seller or for the benefit of the seller for the imported goods. It includes all payments made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller.
5.3 If objective and quantifiable data do not exist with regard to the Valuation Factors, if the Valuation Conditions are not fulfilled, or if Customs authorities have doubts concerning the truth or accuracy of the declared value in terms of Rule 12 of the said Valuation Rules, 2007 the valuation has to be carried out by other methods in the following hierarchical order;
(i) Comparative Value Method - Comparison with transaction value of identical goods
(Rule 4);
(ii) Comparative Value Method — Comparison with transaction value of similar goods
(Rule 5);
(iii) Deductive Value Method — Based on sale price in importing country (Rule 7); (iv) Computed Value Method — Based on cost of materials, fabrication and profit in
country of production (Rule 8); and
(v) Fallback Method — Based on earlier methods with greater flexibility (Rule 9).

6. Valuation factors:

6.1 Valuation Factors are the various elements which must be taken into account by addition (factors by addition) to the extent these are not already included in the price actually paid or payable or by deduction (factors by deduction) from the total price incurred in determining the Customs Value, for assessment purposes.
6.2 Factors by addition deduction are the following charges:
(i) Commissions and brokerage, except buying commissions;
(ii) The cost of containers, which are treated as being one for Customs purposes with the goods in question;

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(iii) The cost of packing whether for labour or materials;
(iv) The value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production sale for export of the imported goods, to the extent that such value has not been included in the price actually paid or payable:
(a) Material, components, parts and similar items incorporated in the imported goods;
(b) Tools, dies, moulds and similar items used in the production of the imported goods;
(c) Materials consumed in the imported goods; and
(d) Engineering, developing, artwork, design work, and plans and sketches undertaken elsewhere than in the importing country and necessary for the production of imported goods;
(v) Royalties and license fees related to goods being valued that the buyer must pay either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable;
(vi) The value of any part of the proceeds of any subsequent resale, disposal or use of the goods that accrues directly or indirectly to the seller;
(vii) Advance payments;
(viii) Cost of transportation up to the place of importation. The cost of transport of the imported goods includes the ship demurrage charges on charted vessels, lighterage or barge charges;
(ix) Loading, unloading and handling charges associated with transporting the goods;
and
(x) Insurance.
6.3 As regards (v) and (vi) above, an Explanation to Rule 10 (1) clarifies that the royalty, licence fee or any other payment for using a process, whether patented or otherwise, when they are otherwise includible referred in terms of clause (c) or (e) of Rule 10(1), shall be added to the price actually paid or payable for the imported goods, notwithstanding the fact that such goods may be subjected to the said process after importation of such goods.

[Refer Circular No. 38/2007-Cus., dated 9-10-2007]

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6.4 Factors by deduction are the following charges provided they are separately declared in the commercial invoices:
(i) Interest charges for deferred payment;
(ii) Post-importation charges (e.g. inland transportation charges, installation or erection charges, etc.); and
(iii) Duties and taxes payable in the importing country.

7. Cases where transaction value may be rejected:

7.1 The transaction value may not be accepted in the following categories of cases as provided in Rule 3(2) of the said Valuation Rules, 2007:
(i) If there are restrictions on use or disposition of the goods by the buyer. However, the transaction value not to be rejected on this ground if restrictions:
(a) Are imposed by law or public authorities in India; (b) Limit geographical area of resale; and
(c) Do not affect the value of the goods substantially.
(ii) If the sale or price is subject to a condition or consideration for which a value cannot be determined. However, conditions or considerations relating to production or marketing of the goods shall not result in rejection.
(iii) If part of the proceeds of the subsequent resale, disposal or use of the goods accrues to the seller, unless an adjustment can be made as per valuation factors.
(iv) Buyer and seller are related; unless it is established by the importer that: (a) The relationship has not influenced the price; and
(b) The importer demonstrates that the price closely approximates one of the test values.
7.2 The transaction price declared can be rejected in terms of Rule 12 of the said Valuation Rules, 2007, when the proper officer of Customs has reason to doubt the truth or accuracy of the value declared and if even after the importer furnishes further information/documents or other evidence, the proper officer is not satisfied and has reasonable doubts about the value declared. An Explanation to Rule 12 clarifies that this rule does not, as such, provide a method for determination of value, and that it merely provides a mechanism and procedure for rejection of declared value in certain cases. It also clarifies that where the proper officer is satisfied after consultation with the importer, the declared value shall be accepted. This Explanation also gives certain illustrative reasons that could form the basis for doubting the truth of accuracy of the declared value.

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7.3 The interpretative notes are specified in the schedule to the rules for the interpretation of the rules.

8. Provisional clearance of imported goods:

8.1 Section 18 of the Customs Act, 1962 and Customs (Provisional Duty Assessment) Regulations, 1963 allow an importer to provisionally clear the imported goods from Customs pending final determination of value by giving a guarantee in the form of surety, security deposit or bank guarantee. Rules 4(1)(a) and 5(1) of the Customs Valuation Rules, 2007 concerning identical goods and similar goods, respectively provide that the value of the goods provisionally assessed under Section 18 of the Customs Act, 1962, shall not be the basis for determining the value of any other goods.

9. Valuation of imported goods in case of related party transaction:

9.1 Rule 2(2) of the said Customs Valuation Rules, 2007 enumerates the persons who shall be deemed to be “related”. It has been made clear by Explanation II thereto that the sole agent, sole distributor or sole concessionaire can be termed as related only if they fall within the criteria of this sub-rule. Further, Rule 3(3) provides that where buyer and seller are related, the transaction value can be accepted if the examination of circumstances of the sale of the imported goods indicate that the relationship did not influence the price or if the importer demonstrates that the declared value of the goods being valued, closely approximately to one of the test values namely transaction value of identical/similar goods, in sales to unrelated buyers in India, deductive value for identical/similar goods or computed value for identical/similar goods ascertained at or about the same time can be used.
9.2 Related party transactions are examined by Special Valuation Branches (SVB) located presently in the major Custom Houses at Mumbai, Calcutta, Chennai and Delhi. In such cases the goods are first assessed provisionally and the importer is required to fill a questionnaire and furnish a list of documents so that finalisation of provisional assessments is expedited.

[Refer Circular No.11/2001-Cus., dated 23-2-2001]

10. Methods of valuation of export goods:

10.1 The provisions of Section 14(1) of the Customs Act, 1962 specifically cover the valuation of export goods. Also, the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 have been framed to provide a sound legal basis for the valuation of export goods and check deliberate overvaluation of export goods and mis-utilization of value based export incentive schemes.
10.2 Rule 3 of the Customs Valuation (Determination of Value of Export Goods) Rules
2007 that are framed in a format similar to the said Valuation Rules, 2007 for the imported goods emphasizes for acceptance of the transaction value, which is the primary basis for valuation of export goods. In cases where the transaction value is not

50

accepted, the valuation shall be done by application of Rules 4 to 6 sequentially. As per Rule 7, exporter has to file Export Value Declaration relating to the value. Also, the value of the export goods declared by the exporter can be rejected under Rule 8.
10.3 Wherever there are doubts about the declared value of export goods and an investigation/enquiry is being undertaken to determine whether or not the Declared Value should be accepted, the export consignments should not be ordinarily detained. Due process envisaged under Rule 8, for rejection of declared value and consequent re-determination of value may be undertaken by applying valuation Rules sequentially.

11. Rights of appeal:

11.1 The principles of natural justice are required to be followed in valuation matters also.
When the Customs authorities do not accept the declared value and re-determine the Customs value, the importer or his representative is normally required to be given a written notice followed by a personal hearing. An adjudication order giving in detail the basis of determination of the value can be obtained, if the importer is aggrieved with the re-determination of value. Under the Customs Act, 1962, an importer can appeal against a decision on valuation to the Commissioner of Customs (Appeal) in the first instance. A second appeal lies to the Tribunal (CESTAT) consisting of administrative and judicial members. A third appeal lies to the Supreme Court of India. The importer is informed regarding his rights of appeal by each of the adjudicating and appellate authorities.

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Chapter 7

Provisional Assessment

1. Introduction:

1.1 The Finance Act, 2011 introduced self-assessment under which importers and exporters are mandatorily required to self-assess the duty in terms of Section 17 of the Customs Act, 1962. This self-assessment is subject to verification by the proper officer of the Customs and may lead to reassessment by the proper officer of Customs if it is found to be incorrect. However, in terms of Section 17(1) of the Customs Act, 1962 in case an importer or exporter is not able to make self-assessment he may, request in writing to the proper officer for assessment. Also, in terms of Section 18 of the Customs Act,
1962 in case the proper officer is not able to verify the self-assessment or make re- assessment of duty or he deems it necessary to subject any imported or export goods to any chemical or other tests or where necessary documents have not been furnished or information has not been furnished and the proper officer deems it necessary to make further enquiry, he may direct that the duty leviable on such goods be assessed provisionally. In this direction the Board has notified the Customs (Provisional Duty Assessment) Regulations, 2011 to prescribe conditions for allowing provisional assessment, terms of bond, penal provisions etc. A penalty of upto Rs.50,000 may be imposed on account of contravention of these Regulations.

2. Bond for provisional assessment:

2.1 For making provisional assessment the proper officer is required to estimate the duty to be levied i.e. the provisional duty. Thereafter, the importer or the exporter has to execute a bond in an amount equal to the difference between the duty that may be finally assessed or re-assessed and the provisional duty. He shall also and deposits with the proper officer such sum not exceeding twenty per cent of the provisional duty, as the proper officer may direct, the proper officer may assess the duty on the goods provisionally at an amount equal to the provisional duty. The proper officer may require that the bond to be executed may be with such surety or security, or both. The terms of the bond include the following:
(a) The importer or exporter shall pay the deficiency, if any, between the duty finally assessed or re-assessed, as the case may be, and the duty provisionally assessed.
(b) Where provisional assessment is allowed pending the production of any document or furnishing of any information, the importer or the exporter shall produce such document or information within one month or within such extended period as the proper officer may allow.

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3. Finalisation of provisional assessment:

3.1 The provisional assessments are expected to be finalized expeditiously, well within 6 months. However, in respect of cases involving machinery contracts or large project imports, where imports take place over long period, such finalisation may take more time since action to can be taken only after all the imports have been made. Here too, effort should be made to finalise the cases within 6 months of the date of import of the last consignment covered by the contract.

[Refer Instructions F.No.512/5/72-Cus.VI, dated 23-4-1973; and F.No.511/7/77-Cus.VI, dated 9-I-1978 and Circular No. 17 /2011-Cus., dated 8-4-2011]

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Chapter 8

Import/Export Restrictions and Prohibitions

1. Introduction:

1.1 Deliberate evasion of duty or violation of prohibition/restriction imposed upon import of export of specified goods invites penal action under the Customs Act, 1962 or any of the allied legislations that are enforced by the Customs in terms of the said Act. Thus, importers and exporters and other connected with international trade require to be well conversant with the provisions of Customs Act, 1962, the Foreign Trade Policy, as well as other relevant allied Acts and make sure that before any imports are effected or export planned, they are aware of any prohibition/restrictions and requirements subject to which alone goods can be imported/exported.

2. Legal provisions governing restrictions/prohibitions:

2.1 Some of the relevant penal legal that come into play when there is violation of the
Customs Act, 1962 or any allied Acts are as follows:
(a) The terms “Prohibited Goods” are defined in Section 2(33) of the Customs Act,
1962 as meaning “any goods the import or export of which is subject to any prohibition under the Customs Act or any other law for the time being in force”. Thus, a prohibition under any other law can be enforced under the Customs Act,
1962. For instance, under Sections 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992, the Central Government can make provisions for prohibiting, restricting or otherwise regulating the import of export of the goods, which finds reflected in the Foreign Trade Policy, laid down by the DGFT, Department of Commerce. Some of the goods are absolutely prohibited for import and export whereas some goods can be imported or exported against a licence and/or subject to certain restrictions. One example is provided by Notification No.44(RE-2000)1997-2002, dated 24.11.2000 in terms of which all packaged products which are subject to provisions of the Standards of Weights and Measures (Packaged Commodities) Rules, 1997, when produced/packed/sold in domestic market, shall be subject to compliance of all the provisions of the said Rules, when imported into India. Thus, all such packaged commodities imported into India shall carry the name and address of the importer, net quantity in terms of standard unit of weights measures, month and year of packing and maximum retail sale price including other taxes, local or otherwise. In case any of the conditions is not fulfilled, the import of packaged products shall be held as prohibited, rendering such goods liable to confiscation. Another example is that certain products are required to comply with the mandatory Indian Quality Standards (IQS) and for this purpose exporters of these products to India are required to register themselves with Bureau of Indian Standards (BIS). Non-

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fulfillment of the above requirement shall render such goods prohibited for import. Action on such goods and persons involved can be taken under the Customs Act,
1962.
(b) Under Section 11 of the Customs Act, 1962 the Central Government has the power to issue notification under which export or import of any goods can be declared as prohibited. The prohibition can either be absolute or conditional. The specified purposes for which a notification under Section 11 can be issued are maintenance of the security of India, prevention and shortage of goods in the country, conservation of foreign exchange, safeguarding balance of payments etc.
(c) Section 111(d) and Section 113(d) of the Customs Act, 1962 provide that any goods which are imported or attempted to be imported and exported or attempted to be exported, contrary to any prohibition imposed by or under the said Act or any other law for the time being in force shall be liable to confiscation.
(d) Section 112 of the Customs Act, 1962 provides for penalty for improper importation and Section 114 of the said Act provides for penalty for attempt to export goods improperly. In respect of prohibited goods the adjudicating Officer may impose penalty upto five times the value of the goods. It is, therefore, absolutely necessary for the trade to know what are the prohibitions or restrictions in force before they contemplate to import or export any goods.

3. Prohibitions/restrictions under Foreign Trade Policy / other Allied Acts:

3.1 Apart for collection of duty, Customs has also been entrusted with the responsibility to ensure compliance with prohibitions or restrictions imposed on the import and export of goods under the Foreign Trade Policy (FTP) and other Allied Acts. The Customs has a pivotal role to play because, it is the agency stationed at the border to enforce the rules, regulations and orders issued by various administrative Ministries. For instance, import and export of specified goods may be restricted/prohibited under other laws such as Environment Protection Act, Wild Life Act, Indian Trade and Merchandise Marks Act, Arms Act, etc. and these will apply to the penal provisions of the Customs Act, 1962 rendering such goods liable to confiscation under Sections
111(d) – for import - and 113(d) – for export - of the said Act. Thus, for the purpose of the penal provisions of the Customs Act, 1962 it is relevant to appreciate the provisions of these allied legislations.

4. The Prevention of Food Adulteration Act, 1954 and Food Safety and Standards

Authority Act, 2006

4.1 As per the Prevention of Food Adulteration Act, 1954 (PFA), any product not fulfilling the statutory provisions is not allowed to be imported into the country. Likewise, there are several rules, regulations, orders, notifications, etc. issued by the Government, laying down procedures as to how the imports of above products are to be dealt with. Further, the Food Safety and Standards Authority Act, 2006 (FSSA) seeks to replace many of the existing legislations including the PFA Act relating to import of edible

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items. The FSSAI has been established to lay down standards and regulate/monitor the manufacturing, import, processing, distribution and sale of food. The FSSAI has taken over PHO functions at select ports such as Nava Sheva and Mumbai with effect from 13-9-2010 with the stipulation that the existing rule and procedures will continue to be followed without any change till FSSAI regulations are notified. Thus, FSSAI has replaced PHO with its authorized officers at abovementioned ports in terms of Section
47 (5) of the FSSA Act, 2006.
4.2 PFA/FSSAA lay down detailed guidelines for examination and testing of food items prior to Customs clearance. It is, thus, provided that the Customs shall undertake the following general checks and if the product does not satisfy these requirements, clearance shall not be allowed:
(i) All consignments of high risk food items, as listed in DGFT Policy Circular No.
37(RE-2003)/2002-2007 dated 14.06.2004 (as may be modified from time to time), shall be referred to Authorised Representative of FSSAI or PHOs, as the case may be, for testing and clearance shall be allowed only after receipt of the test report as per the instructions contained in the Customs Circular No. 58/
2001–Cus,, dated 25-10-2001.
(ii) All consignments of perishable items like fruits, vegetables, meat, fish, cheese, etc., will continue to be handled in terms of the guidelines contained in Para 2.3 of the Board’s Circular No.58/2001-Customs dated 25-10-2001.
(iii) In respect of food items not covered under (a) and (b) above, the following procedure would be adopted in addition to the general checks prescribed under Para 2.1 of the Circular No. 58/2001–Cus,, dated 25-10-2001:
(a) Samples would be drawn from the first five consecutive consignments of each food item, imported by a particular importer and referred to Authorised Representative of FSSAI or PHOs, as the case may be, for testing to ascertain the quality and health safety standards of the consignments.
(b) In the event of the samples conforming to the prescribed standards, the Customs would switch to a system of checking 5% - 20% of the consignments of these food items on a random basis, for checking conformity to the prescribed standards. The selection of food items for random checking and testing would be done by the Customs taking into consideration factors like the nature of the food products, its source of origin as well as track record of the importers as well as information received from FSSAI from time to time.
(c) In case, a sample drawn from a food item in a particular consignment fails to meet the prescribed standards, the Customs would place the import of the said consignment on alert, discontinue random checking for import of such food items and revert to the procedure of compulsory checking. The system of random sampling for import of such food items would be restored only if the test results of the samples drawn from the 5 consecutive consignments

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re-establish that the food items are in conformity with the prescribed standards.
4.3 The ‘general checks’ include checking the condition of the hold in which the products were transported to see whether they meet the requirements of storage, as per the nature of the product, and does not in any way cause deterioration or contamination of the products. Also, physical/ visual appearance in terms of possible damage - whether it is swollen or bulged in appearance; and also for rodent/insect contamination or presence of filth, dirt etc. - should be checked. Finally, it should ebb checked that the product meets the labelling requirements under the Prevention of Food Adulteration Rules and the Packaged Commodities Rules. This includes ensuring that the label is written not only in any foreign language, but also in English. The details of ingredients in descending order, date of manufacture, batch no., best before date etc. are mandatory requirements. All products will also have to indicate details of best before on all food packages.
4.4 Authorised Officers of FSSAI will ascertain that for the imported pre-packaged good items, the language and other major requirements of the label like mention of best before date, nutrition information etc. should comply the labeling provisions under PFA Rules, failing which sample may not be drawn from such consignment for testing.
4.5 Risk Management System (RMS) module for import consignments of edible / food items, presently does not provide for random sampling as it is one of its CCR (Compulsory Customs Requirements) targets. Accordingly, Risk Management System (RMS) shall take necessary steps to modify the RMS module to conform to the new requirements. Till such time, this modification is carried out, Customs shall take appropriate decision to waive the CCR requirements in respect of food items not covered under clause (a) and (b) above and to the extent mentioned under clause (c) above. Such a course of action shall, however, be taken only with the prior approval of the jurisdictional Commissioner of Customs or an officer authorized by him for this purpose, who shall not be below the rank of Addl./Joint Commissioner of Customs, and after recording the reasons for the same. A brief remark on the reasons and the particulars of Commissioner/ADC/JC authorization should be made by the officer examining the goods in the departmental comments in the EDI system.
4.6 As per Para 13 of Chapter IA (General Notes Regarding Import Policy) of the ITC (HS) Classification of Export and Import items, import of all such edible/ food products, domestic sale and manufacture which are governed by PFA Act, 1954 shall also be subject to the condition that at the time of importation, the products are having a valid shelf life of not less than 60% of the original shelf life. Shelf life of the product is to be calculated based on the declaration given on the label of the product, regarding its date of manufacture and the due date for expiry. Therefore, Customs shall ensure that this condition is complied with before allowing clearance of such consignments.
4.7 At certain ports / airports / ICDs / CFSs where Port Health Officers (PHO) under PFA,
1954 or Authorised officers under FSS Act, 2006 are not available, the samples will

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be drawn by Customs and these may be got tested from the nearest Central Food
Laboratory or a laboratory authorized for such testing by DGHS or FSSAI.
4.8 RMD shall develop an application software that incorporates the stipulation of testing of imported foodstuff and alerts the Customs officer to the effect the number of past shipments already tested and found fit warrants future shipments need not ordinarily be tested. This should apply regardless of port of import so long as the importer, supplier and item of import do not change. In other words, if such a shipment is imported say, at Mumbai and the previous 5 shipments imported at, say, Delhi have passed the test, then the next shipment at Mumbai need not be tested. A suitable data base would also be prepared at each Custom House to indicate the compliance history of importers.

[Refer Circular No.58/2001-Cus., dated 15-6-2001; No.43/2005-Cus., dated 24-11-2005; and Circular No.3/2011-Cus., dated 6-1-2011]

5. Labeling of the goods imported into India:

5.1 DGFT Notification No.44 (RE-2000)/1997-2002 dated 24-11-2000 provides for labeling of the goods imported into India which are covered by the provisions of Standards of Weights & Measures (Packaged Commodities) Rules, 1977. This Notification mandates that compliance of labeling conditions have to be ensured before the import consignment of such commodities are cleared by Customs for home consumption.
5.2 In order to redress the issue and to remove the difficulties faced by importers on account of space constraints at CFSs/ Port / ICDs and the nature of goods, etc., the Board has allowed the labeling on imported goods in Bonded warehouses subject to certain procedural conditions. It is clarified that the importers should first ascertain that for such marking / labeling facility, space, is available in warehouse prior to exercising this option. In such cases, importers may file Warehousing Bill of Entry and the Assessing Group will give suitable directions to Dock staff to allow bonding of the goods without labeling and with endorsement on the Warehousing Bill of Entry that verification of compliance of DGFT Notification No.44 (RE-2000)/1997-2002 is to be done prior to de-bonding by Bond Superintendent. The goods will then be labeled in the bonded premises and compliance of said DGFT Notification will be ensured at the time of ex-bonding of the goods, by the Bond Officer, by examining the goods again and endorsing the Examination Report on the Ex-bond Bill of Entry. 100% examination at the time of Ex-bond clearance of goods should be done to ensure compliance of the said DGFT Notification. The Examination Report can be endorsed on hard copy of Ex-bond Bill of Entry where EDI facility is not extended, and on hard copy as well as EDI system where EDI facility is extended to Bonded Warehouses. It is also clarified that this facility is applicable only to goods that cannot be easily labeled in ports / CFS, having regard to their size and other factors such as sensitivity to temperature and dust.

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5.3 Further, as the activity of labeling and re-labeling including declaration of Retail Sale Price (RSP) on goods amounts to manufacture in terms of section 2(f) of the Central Excise Act, 1944, if the same is carried out on goods warehoused, it would be considered as manufacturing operations having been undertaken in bond/warehouse and accordingly, the provisions of ‘Manufacture and Other Operations in Warehouse Regulations, 1966’ would apply on those goods. Importers can, therefore, avail the facility of carrying out labeling in warehouse after following above procedure and the provisions of ‘Manufacture and Other Operations in Warehouse Regulations, 1966’.

[Refer Circular No.19/2011-Cus., dated 15-4-2011]

6. The Livestock Importation Act, 1898:

6.1 The import of livestock and livestock products is regulated by the Livestock Importation Act, 1898. The objective of this Act and the notifications/orders issued therein is to regulate the import of livestock products in such a manner that these imports do not adversely affect the country’s human and animal health population.
6.2 The livestock products are allowed to be imported into India only through the sea ports or airports located at Delhi, Mumbai, Kolkata and Chennai, where the Animal Quarantine and Certification Services Stations are located. In addition, import of perishable fish items, exclusively meant for human consumption but excluding seed material for breeding or rearing purposes, is allowed at Petrapole, District North 24
Parganas, West Bengal, through land route. On arrival at the port/seaport, the livestock product is required to be inspected by the officer in-charge of the Animal Quarantine and Certification Services Station or any other veterinary officer duly authorized by the Department of Animal Husbandry and Dairying. After inspection and testing, wherever required, quarantine clearance is accorded by the concerned quarantine or veterinary authority for the entry of the livestock product into India. If required in public interest, the quarantine or veterinary authority may also order the destruction of the livestock product or its return to the country of origin. The Customs will have to ensure that the livestock products are granted clearance for home consumption only after necessary permission is granted by the quarantine or veterinary authorities.
6.3 Wherever any disinfection or any other treatment is considered necessary in respect of any livestock product, it is the importer who has to arrange the same at his cost under the supervision of a duly authorized quarantine or veterinary officer.

[Refer Circulars No.43/2001-Cus., dated 6-8-2001, No.48/2005-Cus., dated 28-11-2005 and No. 13/2007-Cus., dated 2-3-2007 and Instructions F.No.450/132/2004-Cus.IV, dated 4-1-2005 and F.No.450/122/2005-Cus.IV, dated 13-10-2005]

7. Destructive Insects & Pests Act, 1914, PFS Order, 1989 and Plant Quarantine

(Regulation of Import into India) Order, 2003:

7.1 Import of plants and plant materials into the country is regulated under the Destructive
Insects & Pests (DIP) Act, 1914 and PFS Order, 1989 and Plant Quarantine (Regulation

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of Import into India) Order, 2003. As per the requirements of these enactments, subject to exemptions, as may be applicable, no consignment shall be imported even for consumption unless it is accompanied by an Import Permit and an Official Phytosanitary Certificate. However, cut flowers, garlands, bouquets, fruits and vegetables weighing less than 2 kgs. Imported for personal consumption is allowed without a Phytosanitary Certificate or an Import Permit. Likewise, the requirement of Import Permit is relaxed for import of (a) mushroom spawn culture by EOUs and (b) tissue culture materials of any plant origin and flower seeds.
7.2 The Department of Agriculture and Co-operation has issued detailed guidelines for inspection and clearance of plant/plant materials, the basis features of which are as follows:
(i) Registration of application: The importer or his authorized representative is required to file an application at the Plant Quarantine Station in respect of each consignment immediately upon arrival at the port. In case of perishable consignments, such application can be filed in advance to enable the Plant Quarantine authorities to organize inspection/testing on priority. Alongwith application for registration, copies of documents namely, import permit, phyto- sanitary certificate issued at the country of origin, copy of bill of entry, invoice, packing list and fumigation certificate, etc. are required to be submitted. The Plant Quarantine Officer shall register the application and the assessed inspection fee is required to be paid by the importer or his agent. No such application is required to be filed in the case of import of plant and plant materials through passenger baggage and post parcels.
(ii) Sampling/inspection/fumigation of consignments: The importer or his agent is required to arrange for inspection/sampling of the consignment. In the event of live insect infestation having been noticed, the importer or his agent shall arrange for fumigation of consignment by an approved pest control operator at his own cost under the supervision of the Plant Quarantine officer.
(iii) Release/detention of consignments: A release order is issued to Customs, if a consignment on inspection is found to be free from pests. However, in case it is found infested with live pests, the same is permitted clearance only after fumigation and re-inspection. The detention order is issued, if the consignment is imported in contravention of the PQ Regulations, for arranging deportation failing which the same shall be destroyed at the cost of importer under the supervision of the Plant Quarantine Officer, in presence of Customs Officers after giving due notice in advance i.e. for perishable plant material 24-48 hours and 7 days for other plant material. The Customs will ensure that plant/plant material (primary agricultural products) are granted clearance for home consumption only after necessary permission is granted by the concerned Plant and Quarantine Officer.
7.3 In terms of Plant Quarantine (Regulation of Import into India) Order, 2003, no article, packed with raw or solid wood packaging material shall be released by the Customs

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unless the wood packaging material has been appropriately treated and marked as per International Standards for Phytosanitary Measures (ISPM) No. 15 or accompanied by a phytosanitary certificate with the treatment endorsed. The proper officer of Customs shall grant release of such articles packed with untreated wood packaging material only after ensuring that the wood packaging material has been appropriately treated at the point of entry under the supervision of Plant Quarantine Officer. The Customs Officers are required to report the non-compliant cases to the concerned Plant Quarantine Station / authorities for necessary action.

8. Standards of Weights and Measures (Packaged Commodities) Rules, 1977:

8.1 As per Chapter 1A of General Notes regarding Import Policy (ITC (HS) Classification of Export and Import Items, Schedule I, all such packaged products, which are subject to provisions of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 when produced/ packed/ sold in domestic market, shall be subject to compliance of all the provisions of the said rules, when imported into India. The compliance shall be ensured before the import consignment of such commodities is cleared by Customs for home consumption. All prepackaged commodities, imported into India, shall in particular carry the following declarations:
(a) Name and address of the importer;
(b) Generic or common name of the commodity packed;
(c) Net quantity in terms of standard unit of weights and measures. If the net quantity in the imported package is given in any other unit, its equivalent in terms of standard units shall be declared by the importer;
(d) Month and year of packing in which the commodity is manufactured or packed or imported; and
(e) Maximum retail sale price at which the commodity in packaged form may be sold to the ultimate consumer. This price shall include all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertising, delivery, packing, forwarding and the like, as the case may be.

9. Drugs and Cosmetics Act, 1940 and Drugs and Cosmetics Rules, 1945:

9.1 In terms of Rule 133 of the Drugs and Cosmetics Rules, 1945, no cosmetics shall be imported into India except through the points of entry specified in Rule 43A of the said Rules. Further, under Schedule “D” to the said Rules read with Rule 43, an exemption is provided to certain categories of substances from the restrictions under Chapter III of the Drugs and Cosmetics Act, 1940 relating to import of drugs and cosmetics. Further, the Drugs Controller General of India (DCGI) has clarified that under Schedule “D” to the said Rules, an exemption has been provided for substances not intended for medical use from the provisions of Chapter III of the Drugs and Cosmetics Act and Rules made thereunder. The Act provides for separate definition for ‘cosmetic’ and

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‘drug’ under Sub-Section 3(aaa) and 3(b), respectively. Hence, the phrase ‘substances not intended for medical use’ would only relate to substances which would otherwise fall under the definition of the term ‘drug’ under Section 3(b) of the Act, but are being imported not for medicinal use or for some other purposes or are of commercial quality and are being abeled indicating that they are not for medicinal use. Accordingly, DCGI had clarified that this exemption does not extend to other categories of products defined under the Act including cosmetics. For the purpose of import of cosmetics, provision of Rule 133 therefore remains applicable.
9.2 Import of cosmetics at points of entry/places other than those specified under Rule
43A may not be permitted as per the provisions of the Drugs and Cosmetics Rules,
1945. The points of entry specifically mentioned in Rule 43A are Chennai, Kolkata, Mumbai, Nhava Sheva, Cochin, Kandla, Delhi, Ahmedabad, Hyderabad and Ferozepur Cantonment, Amritsar, Ranaghat, Bongaon and Mohiassan Railways Stations. If the imports are noticed through Customs stations, then necessary action may be taken for non-compliance of the Drugs and Cosmetics Rules.
9.3 As per rule 43A of the Drugs and Cosmetics Rules, 1945, drugs can be only imported into India through specified places. Accordingly, import of drugs at any other place may not be permitted. Further, whenever in doubt, field formations may seek necessary clarification about the generic name versus chemical name of medicines before clearance. The specified places are:
(i) Ferozepore Cantonment and Amritsar Railway Stations (for drugs imported by rail across the frontier with Pakistan)
(ii) Bongaon, Mohiassan and Ranaghat Railways Stations (for drugs imported by rail across the frontier with Bangladesh)
(iii) Raxaul (for drugs imported by road and railway lines connecting Raxaul in India and Birganj in Nepal)
(iv) Chennai, Cochin, Kandla, Kolkata, Mumbai and Nhava Sheva (for drugs imported by sea)
(v) Ahmedabad, Chennai, Delhi, Hyderabad, Kolkata and Mumbai (for drugs imported by airports)

10. Import of Hazardous Substances:

10.1 As per Chapter 1A of General Notes regarding Import Policy (ITC (HS) Classification of Export and Import Items, Schedule I, imports of Hazardous Waste into India shall be subject to the provisions of Hazardous Wastes (Management and Handling) Amendment Rules, 1989. Further, notwithstanding anything contained in ITC (HS) Classifications of Export and Import Items, import of hazardous waste or substances containing or contaminated with such hazardous wastes as specified in Schedule 8 of Hazardous Wastes (Management and Handling) Amendment Rules, 1989 shall be prohibited.

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10.2 Clearance of waste oil/sludge derived from the normal course of a ship’s operation and covered by the MARPOL Protocol will be allowed without a license only to persons registered with the Ministry of Environment and Forests or the Central Pollution Control Board, as the case may be, for re-processing waste. Such waste oil/sludge will conform to the definition in Schedule 3 of the Hazardous Waste (Management and Handling) Amendment Rules, 1989.
10.3 Import of Hazardous Chemicals permitted is permitted in accordance with the provisions of the Manufacture, Storage and Import of Hazardous Chemicals Rules
1989 (made under the Environment (Protection) Act, 1986). Besides other conditions mentioned in the Rules, the importer shall, before 30 days but not later than the date of import, furnish the details specified in Rule 18 to the Authority specified in Schedule 5 of the said Rules.
10.4 Import of products, equipments containing Ozone Depleting Substances (ODS) will be subject to Rule 10 of the Ozone Depleting Substances Rules, 2000. In terms of these Rules no person shall import or cause to import any product specified in Column (2) of Schedule VII, which was made with or contains Ozone Depleting Substances specified in Column (3), unless a license is obtained from the Directorate General of Foreign Trade.
10.5 Import of Genetically Modified Food, Feed, Genetically Modified Organism (GMOs)
and Living Modified Organisms (LMOs) will be subject to the following conditions :
(i) The import of GMOs / LMOs for the purpose of (i) R & D; (ii) food; (iii) feed; (iv) processing in bulk; and (v) for environment release will be governed by the provisions of the Environment Protection Act, 1986 and Rules 1989.
(ii) The import of any food, feed, raw or processed or any ingredient of food, food additives or any food product that contains GM material and is being used either for industrial production, environmental release, or field application will be allowed only with the approval of the Genetic Engineering Approval Committee (GEAC).
(iii) Institutes / Companies who wish to import Genetically Modified material for R&D purposes will submit their proposal to the Review Committee for Genetic Modification (RCGM) under the Department of Bio-Technology. In case the Companies / Institutes use this Genetically Modified material for commercial purposes approval of GEAC is also required.
(iv) At the time of import all consignments containing products which have been subjected to Genetic Modification will carry a declaration stating that the product is Genetically Modified. In case a consignment does not carry such a declaration and is later found to contain Genetically Modified material, the importer is liable to penal action under the Foreign Trade (Development and Regulation) Act, 1992.

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10.6 As per Chapter 1A of General Notes regarding Import Policy (ITC (HS) Classification of Export and Import Items, Schedule I, import of textile and textile articles is permitted subject to the condition that they shall not contain any of the hazardous dyes whose handling, production, carriage or use is prohibited by the Government of India under the provisions of Section 6(d)(2) of the Environment (Protection) Act, 1986 read with the relevant rule(s) framed thereunder. For this purpose, the import consignments shall be accompanied by a pre-shipment certificate from a textile testing laboratory accredited to the National Accredition Agency of the Country of Origin. In cases where such certificates are not available, the consignment will be cleared after getting a sample of the imported consignment tested and certified from any of the agencies indicated in Public Notice No. 12 (RE-2001)/1997-2002, dated 3-5-2001. The sampling will be based on the following parameters:
(i) At least 25% of samples are drawn for testing.
(ii) While drawing the samples, Customs will ensure that majority samples are drawn from consignments originating from countries where there is no legal prohibition on the use of harmful hazardous dyes.
(iii) The test report will be valid for a period of 6 months in cases where the textile/ textile articles of the same specification/quality are imported and the importer, supplier and the country of origin are the same.

11. Clearance of imported metal scrap:

11.1 In terms of the relevant provisions of the Foreign Trade Policy, the following procedure is prescribed for clearance of imported metal scrap.
(i) Import of any form of metallic waste, scrap will be subject to the condition that it will not contain hazardous, toxic waste, radioactive contaminated waste / scrap containing radioactive material, any type of arms, ammunition, mines, shells, live or used cartridge or any other explosive material in any form either used or otherwise.
(ii) Import of metallic waste and scrap of certain categories, listed in para 2.32.2 of Handbook of Procedures (Vol. I), in shredded form shall be permitted through all ports of India subject to the conditions that importer shall furnish the following documents to the Customs at the time of clearance of goods:
(a) Pre-shipment inspection certificate as per the format in Annexure I to Appendix
5 from any of the Inspection & Certification agencies given in Appendix-5 to the effect that the consignment does not contain radioactive contaminated material in any form; and II) Copy of the contract between the importer and the exporter stipulating that the consignment does not contain any radioactive contaminated material in any form.
(b) Copy of the contract between the importer and the exporter stipulating that

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the consignment does not contain any radioactive contaminated material in any form.
(iii) Import of metallic waste, scrap, listed in para 2.32.2 of Handbook of Procedures (Vol. I), in unshredded compressed and loose form shall be subject to the conditions that the importer shall furnish the following documents to the Customs at the time of clearance of goods:
(I) Pre-shipment inspection certificate as per the format in Annexure-I to Appendix 5 from any Inspection & Certification agencies given in Appendix-5 to the effect that:
(a) The consignment does not contain any type of arms, ammunition, mines, shells, cartridges, radioactive contaminated or any other explosive material in any form either used or otherwise.
(b) The imported item(s) is actually a metallic waste/ scrap/ seconds/ defective as per the internationally accepted parameters for such a classification.
(II) Copy of the contract between the importer and the exporter stipulating that the consignment does not contain any type of arms, ammunition, mines, shells, cartridges, radioactive contaminated, or any other explosive material in any form either used or otherwise.
(III) Import of scrap would take place only through following designated ports and no exceptions would be allowed even in case of EOUs, SEZs:

S.No.	Ports	S.No.	Port/ICDs
1.	Chennai	14.	Vishakaptnam
2.	Cochin	15.	Ahmedabad ICD
3.	Ennore	16.	Dadri (Greater Noida) ICD
4.	JNPT	17.	Jaipur ICD
5.	Kandla	18.	Jodhpur ICD
6.	Kolkata	19.	Kanpur ICD
7.	Mormogua	20.	Loni. Ghaziabad
8.	New Mangalore	21.	Ludhiana ICD
9.	Mumbai	22.	Malanpur ICD
10.	Mundra	23.	Mulund ICD
11.	Paradip	24.	Nagpur ICD
12.	Pipava	25.	Pitampur ICD
13.	Tuticoron	26.	Udaipur ICD

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(iv) Import of other kinds of metallic waste and scrap will be allowed in terms of conditions of ITC (HS). Further, import from Hodaideh, Yemen and Bandar Abbas, Iran will be in shredded form only.
(viii) In respect of metal scrap in unshredded, compressed or loose form accompanied by a pre-shipment inspection certificate, examination will be
25% of the containers in respect of manufacturer-importers and 50% in respect of traders, for each import consignment, subject to examination of a minimum of one container. The container selected will be examined 100%. Where EDI is operational with Risk Management Module (RMM), the percentage of examination will be determined by the RMM.
(vi) Imported metal scrap in unshredded, compressed or loose form not accompanied by the prescribed pre-shipment inspection certificate will be subject to 100% examination apart from stringent penal action for violation of provisions of the FTP. The examination may be done in the presence of police authorities, if considered necessary by the Commissioner, at the risk and cost of the importer.
(ix) For scrap imported in shredded form examination may be limited to 10% of the consignment subject to examination of minimum one container. The container so identified should be examined 100%.
(x) In respect of metal scrap consignments meant for EOUs and SEZ units the existing procedure is relevant subject to 100% examination at the premises of the EOU or the SEZ unit, in the presence of police authorities, if considered necessary by the proper officer.
(ix) It will also be the responsibility of the shipping line to ensure that every consignment of metal scrap in unshredded, compressed or loose form is accompanied by such a pre-shipment inspection certificate before it is loaded on the ship. Failure to observe this precaution would invite penal action for abetment regarding irregular import of metal scrap.

[Refer Circulars No. 43/2001-Cus., dated 6-8-2001; No.58/2001-Cus., dated 25-10-2001; No.21/2003-Cus., dated 28-3-2003;

No.23/2004-Cus., 15-3-2004; No.39/2004-Cus., dated 3-6-2004; No.60/2004-Cus., dated 26-10-2004; No.2/2005-Cus., dated 12-1-2005; No.10/2005-Cus., dated 22-2-2005; No.24/2005-Cus., dated 24-5-2005; No.32/2005-Cus., dated 28-7-2005; No.40/2005-Cus., dated 3-10-2005; No.48/2005-Cus., dated 28-11-2005; No.28/2006-Cus., dated 6-11-2006; No.13/2007-Cus., dated 2-3-2007; No.2/2010-Cus., dated 9-2-2010;

and No.8/2010-Cus., dated 26-3-2010; and Instructions F.No.450/80/2000-Cus.IV, dated 24-7-2000; F.No.450/132/2004-Cus.IV, dated 4-1-2005; F.No.450/122/2005-Cus-IV, dated 13-10-2005; F.No.450/08/2007-Cus.IV, dated 22-1-2007; and F.No.450/19/2005-Cus.IV, dated 2-4-2009]

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12. International Standards for Phytosanitary Measures (ISPM-15):

12.1 International Standards for Phytosanitary Measures (ISPM) are prescribed as per IPPC convention of FAO to reduce the risk of introduction / or spread of quarantine pest associated with wood packaging material (including dunnage) made of coniferous and non coniferous raw wood, in use in international trade.
12.2 DGFT, vide Notification No 54/2009-2014 dated 3-8-2010 has made it mandatory that export of goods including plant and plant products using wood packaging materials such as pallet, dunnage, crating, packing blocks, drums, cases load boards, pellet collars shall be allowed subject to compliance of ISPM-15.
12.3 On export side, a large number of consignments are intercepted abroad for non- compliance of ISPM-15 Standards relating to wood packaging materials used for export of materials, as informed by Department of Agriculture and Cooperation. Thus, the Board has decided that export / imported consignment with wood packaging material are to be inspected by Customs and if any export / imported consignment is found without ISPM-15 mark or with doubtful marking, it should be reported to Plant Quarantine Officer / authorities for taking necessary action. It is also clarified that exporters should specifically indicate in the Shipping Bill, the description of packaging material so as to ensure whether any consignment with wooden packaging material warrants mandatory compliance with ISPM-15 standards or not.
12.4 Department of Agriculture and Cooperation has informed that all the agencies authorized to provide ISPM Certification on wood packaging material have been duly accredited by Directorate of Plant Protection, Quarantine & Storage. These agencies issue ISPM-15 certification after providing treatment with Methyl Bromide or Forced Hot Air as per prescribed norms. The list of these accredited agencies is available at www.plantquarantineindia.org.

[Refer Circular No.13/2011-Cus., dated 28-2-2011]

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Chapter 9

Warehousing

1. Introduction:

1.1 There are instances when the importer does not want clearance of the imported goods immediately due to factors such as market price, salability, requirement in the factory of production, paucity of funds etc. Some imported goods are also warehoused for supplies to EOU/EHTP/STP/SEZ units. Goods imported for sale in Duty Free Shops at International Airports are also warehoused before being sold to international travellers. Thus, the Customs Act, 1962 contains specific provisions that facilitate the warehousing of imported goods. The imported goods after landing may be allowed to be removed to a warehouse without payment of duty and duty is paid at the time of clearance from the warehouse. Provisions lay down the time period up to which the goods may remain in a warehouse, without incurring any interest liability and thereafter, with interest liability.

2. Legal provisions:

2.1 The facility of warehousing of the imported goods in Custom Bonded Warehouses, without payment of Customs duty is permitted in terms of Chapter IX of the Customs Act, 1962. Further, where necessary the Manufacture and Other Operations in Warehouse Regulations, 1966 provide the procedure to be followed for manufacture under bond. On their part, Warehoused Goods (Removal) Regulations, 1963 provide the procedure for movement of the goods from one warehouse to another.

3. Warehousing Stations:

3.1 Public or Private bonded warehouses can be operated only at places which are declared as warehousing stations under Section 9 of the Customs Act, 1962. This also applies to the operations in Customs bonded warehouses like EOU/EHTP/STP units.
3.2 As per provisions of Section 9 of the Customs Act, 1962, Board may declare places as warehousing stations at which alone public warehouses may be appointed and private warehouses may be licensed. Board has vide Notification No. 34/94 (NT)– Cus., dated 1-7-1994 delegated these powers to the Chief Commissioners of Customs or Chief Commissioners of Customs and Central Excise, as the case may be. Also, in respect of setting up of EOUs, the powers for declaring places as warehousing stations have been delegated to the jurisdictional Commissioner of Customs or Commissioner of Customs and Central Excise, as the case may be.
3.3 The following guidelines shall be followed for ensuring uniformity in practice in the declaration of places as warehousing stations:

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(i) The industrial development of the proposed area and the need for warehousing of the imported goods shall be assessed.
(ii) Only those places shall be declared as warehousing stations where adequate facilities are available for appointing public bonded warehouses. However, this condition shall be relaxed only in case of EOUs.
(iii) Adequate Customs/Central Excise staff is available in the vicinity of the proposed warehousing stations and arrangements for training of the staff from NACEN or by attachment in the nearest Custom House should be made.
(iv) Requests not fulfilling aforesaid criteria but if it is considered that there is a strong justification for declaring a place as a warehousing station shall be referred to the Board for decision.

[Refer Circular No. 473/232/88–Cus VIII, dated 28-11-1988 and

F.No.473/25/91-Cus IV, dated 30-5-1991]

4. Appointment of Public Warehouses:

4.1 Section 57 of the Customs Act, 1962 provides that at any warehousing station, the Assistant Commissioner of Customs or Deputy Commissioner of Customs, may appoint public warehouses wherein dutiable goods may be deposited. Other than CWC and SWCs, private operators can also be appointed as custodians of the Public Warehouses. In case of Private owned Public Warehouses there is a requirement of Cash deposit or Bank guarantee equal to 25% of the duty in respect of sensitive goods.
4.2 All the applications for custodianship of Public Warehouses shall be carefully scrutinized and due consideration shall be given to the following criterion for their appointment:
(i) Feasibility and financial viability of the warehouse operator, his financial status and his expertise in warehousing field;
(ii) Past record of the applicant in complying with the provisions of the Customs and
Central Excise Laws:
(iii) The operational requirements such as suitability and security of the premises, availability of customs expertise, proximity to the users etc. shall be taken into account;
(iv) The applicant should agree to take the services of the Customs Officer on Cost– Recovery basis, if services of the Customs Officers are required on a continuous basis or on payment of Merchant Overtime/Supervision Charges, as the case may be.

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5. Licensing of Private Warehouses:

5.1 As per Section 58 of the Customs Act, 1962, at any warehousing station, the Assistant Commissioner of Customs or Deputy Commissioner of Customs may license private warehouses for depositing without payment of duty following types of goods:
(i) Dutiable goods imported by the licencee; or
(ii) Dutiable goods imported on behalf of the licensee; or
(iii) Any other goods imported by other importers in respect of which specialised storing /handling facilities are required and such specialised storing /handling facilities for deposit are not available in a public warehouse. The specialized facilities are like liquids in bulk, hazardous goods, explosive goods, goods requiring controlled temperature conditions etc.
5.2 The main conditions for granting Private Bonded Warehouse licences are:
(i) The applicant is financially sound and credible and the proprietor or partner or any of the Directors have not been involved in any Customs or Central Excise duty evasion cases or smuggling offences and have not been subject to penalty or other action under the Customs Law and similarly under the Central Excise Law. Where the applicant is involved in such cases (other than technical offences), licences shall be denied even if such offences were committed before five years;
(ii) The premises are suitable and adequately secured against theft, pilferage and other risks; fire fighting equipments shall be installed in the warehouse;
(iii) The premises shall be accessible to the Customs officers for verification; (iv) The warehouse shall not be located in residential area;
(v) The goods deposited in the warehouse shall be fully insured against theft, pilferage, fire accident, other natural calamities, risk against rioting etc. by a comprehensive insurance policy drawn in favour of Commissioner of Customs or Central Excise, as the case may be.

[Refer Circular No. 28/96-Cus., dated 14-5-1996]

6. Licences for storage of sensitive and non-sensitive goods:

6.1 It is for the concerned Commissioner to decide as to whether a product is sensitive or not depending upon rates of duty, licencing aspects and nature of the commodity. Thereafter the following conditions shall apply for issue of licences for Private Bonded Warehouses in respect of sensitive and non-sensitive goods.
(a) For sensitive goods the applicants should produce a solvency certificate (not a reference or confidential letter) from a Scheduled bank of repute (i.e. other than a

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co-operative bank or a bank which has operation limited to a city) for a value not less than Rs. 50 lakhs. Further, in case of individual consignments to be warehoused, a bond as per Section 59 of the Customs Act, 1962 for a sum equal to twice the duty leviable on the goods should be given backed by bank guarantee/ cash deposit of 25% of the duty liability for each consignment. Also, if the licencee desires to give bond for a number of consignments, a revolving bond may be taken subject to cash deposit/bank guarantee of 25% of the duty involved on the goods brought for storage in the warehouse. This requirement would be applicable not only to Private Bonded Warehouses but to private owned Public Bonded Warehouses as well.
(b) For non-sensitive goods the applicants for Private Bonded Warehouses are exempt from requirement of furnishing solvency certificate. However, they shall be solvent for an amount of Rs.10 lakhs and should possess a good record. The double duty bond as per Section 59 of the Customs Act, 1962 shall be sufficient for bonding of non-sensitive goods without a cash deposit/bank guarantee. However, if concerned Assistant/Deputy Commissioner of Customs is not satisfied about the transactions of a particular licencee, a suitable bank guarantee may be obtained.

[Refer Circulars No. 99/95–Cus., dated 20-9-1995; No.20/96-Cus., dated 4-4-1996;

and No.18/2007-Cus., dated 24-4-2007]

7. Cancellation/suspension of licences for Private Bonded Warehouses:

7.1 Section 58(2) of the Customs Act, 1962 provides that the Assistant/Deputy Commissioner of Customs may cancel a license, if the licensee has contravened any of the provisions of the said Act or the rules or regulations or committed breach of any of the conditions of the license after giving a reasonable opportunity of being heard.
7.2 Pending an enquiry regarding cancellation of a license, the Assistant/Deputy
Commissioner of Customs may suspend the license.

8. Warehousing Bond:

8.1 The importer of any goods who wants to store the goods in a warehouse is required to file an into-bond Bill of Entry at the place of import and get it assessed to duty. For warehousing the goods in a Public Bonded Warehouse or a Private Bonded Warehouses, the importer as per Section 59 of the Customs Act, 1962 is required to execute a bond for a sum equal to twice the amount of the duty assessed on such goods. The terms of the bond are as under:
(i) To observe all the provisions of the Customs Act, 1962 and the rules and regulations in respect of such goods;
(ii) To pay on or before a date specified in a notice of demand:

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(a) All duties, and interest, if any, payable under Section 61(2) of the Customs
Act, 1962; and
(b) Rent and charges claimable on account of such goods under the Customs
Act, together with interest on the same;
(iii) To discharge all penalties incurred for violation of the provisions of the Customs
Act and the rules and regulations in respect of such goods.
8.2 Importer may enter into a general bond in such amount as the Assistant/Deputy Commissioner of Customs may approve in respect of the warehousing of goods to be imported by him within a specified period.
8.3 A bond executed by an importer in respect of any goods shall continue in force even if the goods are transferred to any other person or removed to another warehouse. However, if the whole of the goods or any part thereof are transferred to another person, the proper officer may accept a fresh bond from the transferee in a sum equal to twice the amount of duty assessed on the goods transferred and thereupon the bond executed by the transferor shall be enforceable only for a sum mentioned therein less the amount for which a fresh bond is accepted from the transferee.

9. Permission for deposit of goods in a warehouse:

9.1 After assessment of the into-bond Bill of Entry and execution of the bond by the importer, the proper officer may make an order permitting the deposit of the goods in a warehouse.
9.2 The goods should be stored in a Bonded Warehouse only after due examination.
Reverse of the Bill of Entry must conform the veracity of the declared description with distinctive identification marks of the subject goods.

10. Period for which goods may remain warehoused:

10.1 As per section 61 of the Customs Act, 1962, the warehousing period of goods deposited in a warehouse or in any other warehouse to which they may be removed, is as under:
(i) Capital goods intended for use in any EOU, may be kept for five years;
(ii) Goods other than the capital goods intended for use in any EOU, may be kept for three years;
(iii) Any other goods may be kept for one year. However, if the goods are likely to deteriorate, the period of one year may be reduced by the Commissioner of Customs to such shorter period as he may deem fit:

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11. Extension of warehousing period:

11.1 In the case of any goods which are not likely to deteriorate, the warehousing period, on sufficient cause being shown, be extended-
(i) In the case of such goods intended for use in any EOU, by the Commissioner of
Customs, for such period as he may deem fit;
(ii) In any other case, by the Commissioner of customs, for a period not exceeding six months and by the Chief Commissioner of Customs for such further period as he may deem fit.
11.2 The extension of warehousing period is not granted as a matter of routine and there should be valid grounds for granting extensions. The prescribed guidelines in this regard are as follows:
(i) Extension shall be granted only if the authority granting the extension is satisfied that the goods are not likely to deteriorate during extended period. Wherever necessary, goods should be got tested to ensure quality and fitness for further extension of warehousing period.
(ii) Lack of finance to pay the duty is not necessarily a good ground for granting extension of warehousing period.
(iii) Depending on the circumstances of the case, requests made to the Chief Commissioners for extension in warehousing period, beyond the extension granted by the Commissioners of Customs, may be considered for the shortest period, not exceeding three months at a time. Such extensions are to be granted after due circumspection only in deserving cases.
(iv) The requests for extension for a period beyond six months at the Chief Commissioner’s level may be considered only in respect of those cases where it is really warranted that the goods have to be kept in the warehouse under circumstances beyond the control of the importer viz. closure of the factory due to strike, lock-out, natural calamities, etc. Financial constraints of the importers are not to be consid customs-manual-2012.htmlOpen T Tonsing (gelhthoh@gmail.com)Displaying customs-manual-2012.html.