How to Import -Introduction

How to Start Import

[As governed by the Foreign Trade (Development & Regulation) Act, 1992]

With the globalisation of Indian economy and consequent upon comfortable balance of payment
position Government of India has liberalised the Import Policy and practically all Controls on
imports have been lifted. Imports may be made freely except to the extent they are regulated by the
provisions of Import Policy or by any other law for the time being in force.

Principal Law & Import Export Policy

Principal Law

Imports in to India are governed by Foreign Trade (Development & Regulation) Act 1992. Under
this Act, imports of all goods are Free except for the items regulated by the policy or any other law
for the time being in force. In exercise of the powers conferred by the Foreign Trade (Development
& Regulation) Act 1992 the Government has issued the following Rules & Order:

Foreign Trade(Regulation)Rules, 1993, which inter alia, provide for grant of special licence,
application for grant of licence, fee, conditions for licences, refusal of licence, amendment of
licence, suspension of a licence, cancellation of licence, declaration as to the value and quality of
imported goods, declaration as to the Importer- Exporter Code number, utilisation of imported
goods, provisions regarding making, signing of any declaration/statement or documents, power to
enter the premises and inspect, search and seizure of goods, documents, things and conveyance,
settlement, confiscation and redemption and confiscation of conveyance.

Foreign Trade (Exemption from Application of Rules in Certain Cases) Order 1993

Notifications under Foreign Trade (Development & Regulation) Act 1992.

Import Export Policy

The present import policy and procedures in respect of various commodities/category of importers,
are, inter alia, contained in the following publications issued by the Ministry of Commerce and
revised from time to time:

Import - Export Policy, 1997-2002 as modified upto 31.03.1999

Handbook of Import - Export Procedures (Volume 1), 1997-2002 as modified upto 31.03.2000.

Handbook of Import - Export Procedures: (Volume 2) Duty Exemption Scheme:

Input - Output and Value Addition Norms, 1997-2002.
ITC(HS) Classification of Import and Export Items.

Notifications and Circulars

The Import - Export Policy and Procedure books issued by the Government are amended/clarified/
explained by the Ministry of Commerce from time to time. The types of
Notifications/Clarifications/Instructions issued by the Ministry for this purpose are:

Public Notices.
Notifications
Policy Circulars
Select the commodity/Product you wish to import:

Be aware of the import potential and the commercial viability of the commodity/product.

Check whether the items of your interest fall in the restricted list of ITC (HS) Classifications of
Exports & Imports items.

Prohibited items are not permitted to be imported at all. List of Prohibited items of import are
detailed below:

Tallow, Fat or Oils rendered, untendered or otherwise of any animal origin, animal rennet and wild
animals including their parts and products and ivory any part and products, including ivory.

For import of items appearing in restricted list you need secure import licence. Third category of
items comes under the Canalised list of items. Import of items included in Canalised list is
permitted to be imported through Canalising Agencies.

Thus items not appearing in Prohibited list, restricted list and or in Canalised list can be imported
Freely without any import licence. A large number of Consumer goods are freely importable
without licence.

Registration with Regional Licensing Authority and obtaining IEC Code

Registration with Regional Licensing Authority:

Registration with Regional Licensing Authority is a pre-requisite for import of goods. The Customs
will not allow clearance of goods unless:

The importer has obtained IE Code Number from Regional Licensing Authority. However, no such
registration is necessary for persons importing goods from/ to Nepal provided Value of a single
Consignment does not exceed Rs. 25000/=

Obtaining IEC Code Number

An application for grant of IEC Code Number should be made in the prescribed perform a given at
Appendix 3.I. The application duly signed by the applicant should be supported by the following
documents:

Bank Receipt (in duplicate)/demand draft for payment of the fee of Rs.1000/- Certificate from the
Banker of the applicant firm as per Annexure1 to the form. Two copies of passport size photographs
of the applicant duly attested by the banker of the applicant.

A copy of Permanent Account Number issued by Income Tax Authorities, if PAN has not been
allotted, a copy of the letter of legal authority may be furnished. If there is any non-resident interest
in the firm and NRI investment is to be made with repatriable benefits, full particulars thereof along
with a photocopy of RBI's approval. If there is NRI investment without repatriation benefit, a
simple declaration indicating whether it is held with the general/specific permission of the RBI on
the letter head of the firm should be furnished. In case of specific approval, a copy may also be
furnished.

Declaration by the applicant that the proprietors/partners/directors of the applicant firm/company, as

the case may be, are not associated as proprietor/partners/directors with any other firm/company the
IEC No. is allotted with a condition that be can export only with the prior approval of the RBI.
Profile of the exporter/importer in a given format at Appendix 3.II.

The Registered Office or HO or Branch Office (duly authorized by the HO in this behalf) should
apply for allotment of IEC No. However, only one IEC no. is allotted to a company and the same is
valid for all its branches/offices/units. The application for grant of IEC No. should be made to the
Regional Licensing Authority concerned as specified in Appendix 3.III.

The application fee shall be deposited by way of deposit in an authorized branch of Central Bank of
India indicating the head of Account 1453 Foreign Trade and Export Promotion Minor Head 102.
Import Licence Application Fee.

The IEC No. is likely to be granted within 3 days of the receipt of the complete application and
requisite documents.

How to fill up IEC application:

• Application form should be made in the prescribed form in duplicate along with the above
enclosures, mentioned against serial 1 to 8 of above paragraph, also in duplicate.
• The form should be neatly typed/handwritten in bold capital letters only.
• Each copy of the application form should be signed in ink by the authorised person.
• Items of information relevant to applicant should only be filled and remaining items may be
marked not applicable.
• Modification of particulars of the applicant should also be furnished on this form by filling
the relevant items.

However, in case an IE Code holder no longer wishes to operate under the allotted code number, the
matter should be brought under the notice of the Regional Licensing Authority to make the Code
number inoperative.

Import Policy:

For items not mentioned as Prohibited, Restricted or Canalised List for import in ITC(HS)
Classification of Export and Import items; import of such items are freely permitted. There is no
need to obtain any license or permission for importing such goods. The ITC(HS) Classification of
Export and Import items contains 99 chapters and in each chapter there are column heading
covering Exim Code, items description, policy and nature or restriction. The information related to
import policy for any item can be obtained from our site under Customs Duty Calculator Schedule.

Procedure to be followed for grant of import license:

An application for grant of an import licence or CCP for import of the items mentioned as restricted
for import in ITC(HS) Classification of Export and Import items may be made to the regional
licensing authority concerned.

Licence Application Fees

Fees for Licence Application:

Every application for import licence or CCP should be accompanied by 2 copies of a bank receipt
from the Central Bank of India or a Bank Draft from any Bank indicating the deposit in accordance
with the prescribed scale of fees.
Rs. 200 where the value of goods specified does not exceed Rs. 50,000.
Rs. 2 per thousand or part thereof subject to a minimum of Rs. 200 and a maximum of Rs.1 lakh 50
thousand, where the value of goods exceeds Rs. 50,000.
Rs. 200 where Application is filed be SSI units where the CIF value of goods specified in the
application does exceed Rs. 2 lakh.
Rs. 200 where application is fro grant of duplicate licence.

The application fee shall be deposited either:

By way of deposit in an authorized branch of Central Bank of India indicating the Head of
Accounts 1453 Foreign Trade and Export Promotion - Minor Head 102, Import Licence
Application Fee. The Bank receipt must show the name of the department viz. "Director General of
Foreign Trade". The bank receipt should be drawn in favour of Pay & Accounts Officer concerned.
Such fees can also be deposited with Indian Missions abroad.

Or, Crossed DD on a scheduled bank for the requisite amount should be made in favour of the
concerned licensing authority.

Validity of Licence
Besides import licence for import of restricted items there are other variety of licences and such
licences have different period of validity.

Export Promotion Capital Goods Licence validity 24 months

Customs Clearance Permit " 12 months

DEPB " 12 months

Advance License/Special Imprest Licence

For Project/Turnkey Project "18 months or co-terminus with the contracted duration of the Project

For the cases where the license expires before the last day of the month, the license shall be deemed
to be valid until the last day of that month.

Revalidation of License: License revalidation can be done on merits but not beyond 12 months by
the concerned licensing authority for a period of six months at a time reckoned from the date of
expiry of the validity period.

Last date for filling applications: the last date for receipt of applications for grant of licenses is
28th February of the licensing year unless otherwise specified.

Conditions of Licence
Licensing conditionality’s: The license for import is taken into consideration provided:

• the goods covered by the license shall not be disposed of except in accordance with the
provisions of the EXIM Policy, 1997-2002 or in the manner specified by the licensing
authority in the license;
• the applicant for a license shall execute a bond for complying with the terms and conditions
of the license.

It shall be deemed to be a condition of every license for import that -

no person shall transfer or acquire by transfer any license issued by the licensing authority except in
accordance with the provisions of the Policy;

the goods for the import of which a license is granted shall be the property of the licensee at the
time of import of which a license is granted shall be the property of the licensee at the time of
import and up to the time of clearance through the Customs;

the goods for the import of which a licensee is granted shall be new goods, unless otherwise stated
in the license;

the goods covered by the license for import shall not be exported without the written permission of
the DGFT;

Disposal period for import application: Provided the application is complete in all respects along
with prescribed documents, the applicant-importer can expect the disposal in:

IEC No. - 3 working days

Duty free license where input-output norms are notified - 5 working days
Duty free license where input-output norms are notified but cases are to be placed before ALC -15
working days
Duty free license where input-output norms are not notified, EPCG licenses/export

Licenses/specific import licenses - 15 working days

Revalidation of license and extension of export obligation period by RLA - 5 working days
Acceptance of Bank Guarantee/Legal undertaking - 3 working days
Redemption of Bank Guarantee/Legal undertaking/Endorsement of Transferability - 10 working
days

Issuance/renewal of Export House/Trading House/Star Trading House/Super Star Trading House -

15 working days

Amendment of any category of license - 5 working days SIL - 7 working days

Fixation of Standard input-output norms - 45 working days

DEPB - 5 working days

All licenses falling under Chapter 8 - 5 working days
Miscellaneous - 15 working days
Fixation of deemed exports drawback rate - 45 working days
N.B. This apart, a " Counter Assistance" service is provided in all the offices of the DGFT for
speedy disposal of applications. A foreign trade development officer (FTDO), in charge of the
counter in each office. On submission of the application at the counter the applicant will be handed
over a token and advised to return the same day when he will be informed whether his application
has been found complete and admitted for further processing by the office or if there are any
deficiency or lacunae. If deficiency is noticed the same is sent back to the applicant.

Counter Assistance may also be availed of, for amendments of minor nature/enquiries. Applications
in such cases will be received in the licensing offices at the counter.

Importer's own Identity Card: An application for issuance of an Identity Card may be made in
the prescribed form. In case of loss of an Identity Card, a duplicate card is issued.
Imports under Special Scheme for Exporters
The Govt. of India has framed the certain schemes to promote exports.

Export Promotion Capital Goods Schemes:

Capital goods including jigs, fixtures, dies and moulds may be imported at a concessional rate of
customs duty as per table given below. Subject to an export obligation to be fulfilled over a period
of time. In addition spares up to 20 per cent of the cost insurance and freight (CIF) value of the
capital goods may also be imported under the scheme.

Under this scheme Customs duty is 5% if the export obligation is 5 times the CIF value of the
capital goods or 4 times the CIF value of capital goods on NEF basis. The period of fulfilment of
the export obligation is 8 years reckoned from the date of issuance of licence.

Period from the date of issue of licence Proportion of total export obligation

Block of 1st and 2nd year nil

Block of 3rd and 4th year 15%

Block of 5th and 6th year 35%

Block of 7th and 8th year 50%

The licence holder under EPCG scheme shall fulfil the export obligation over the specified period
in the following proportions:

An application for grant of license under this scheme should be made to the licensing authority
concerned in the form given in Appendix 10 A of the Handbook of Procedures, 1997-2002 along
with documents prescribed therein. Before clearance of goods through customs, the importer has to
execute a bond supported by a bank guarantee with the Customs Authority in the prescribed
manner. The license holder will also have to submit progress report of the export/supplies made and
services provided, duly certified by a Charted Accountant/Cost and Works Accountant to the
Licensing Authority. The report should be submitted in the prescribed form 10C of the Handbook
of Procedures, 1997-2002. For Customs duty exemption in respect of imports under EPCG scheme,
the Ministry of Finance has issued Notification No. 28/97-Cus. & 29/97-Cus., both dated 1st April,
1997.

Duty Exemption Scheme:

According to the EXIM Policy 1997-2000, duty free import of inputs is permitted under the
following schemes:

Advance License - granted to merchant exporter or manufacturer exporter for the import of inputs
required for the manufacture of goods without payment of basic customs duty. However, such
inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time
of import. Reference: Notification No. 30/97-Customs both dated 1.4.97.

Annual Advance License - Manufacturer exporter with export performance of Rs. 1 crore in the
preceding year and registered with excise authorities, except for products which are not excisable
for which no such registration is required, shall be entitled for Annual Advance License. Export
House, Trading House, Star Trading Houses and Super Star Trading Houses Holding the certificate
as merchant exporter where they agree to the endorsement of the name(s) of the supporting
manufacturer on the relevant annual advance license shall also be entitled for the annual advance
license.

This license and/or material imported there under shall not be transferable even after completion of
export obligation. Such annual advance license shall be issued with positive value addition without
stipulation of minimum value addition. The entitlement under this scheme shall be up to 125% of
the average FOB value of export in the preceding licensing year. Imports against this are exempted
from payment of Additional customs duty, Special Additional Duty, Anti Dumping Duty, Safeguard
duty, if any, in addition to Basic customs duty and surcharge thereon.

Advance Intermediate License: This license is granted to a manufacturer exporter for the import of
inputs required in the manufacture of goods to be supplied to the ultimate exporter holding an
Advance License/Special Imprest License.

Special Imprest License: This license is granted for the duty free import of inputs required in the
manufacture of goods to be supplied to the ultimate exporter holding an Advance License/Special
Imprest License. Such Special Imprest License is granted for the Duty Free import of inputs
required in the manufacture of goods to be supplied to the EoUs/units in EPZs/STP/EHTP, holders
of license under the EPCG scheme, projects financed by multilateral/bilateral agencies/funds as
notified by the Dept. of Economic Affairs, MoF, Fertilizer Plants if the supply is made under the
procedure of International Competitive Bidding, supply of goods to refineries and proejcts/purposes
for which MpF permits import of such goods on zero customs duty.

Advance Release Order:

A duty free license holder except Advance Intermediate License Holder intending to source the
inputs from indigenous sources/canalising agencies/EOUs/EPZ/EHTP/STP units in lieu of direct
imports has the option to source them against Advance Release Order denominated in foreign
exchange/Indian rupees. In such cases, the license is invalidated for direct import and permission in
the form of ARO is issued which will entitle the supplier to the benefits of deemed exports.

Back to back inland letter of credit: This is an alternative to ARO. For this the duty free license
holder intending to avail such facility may approach a bank for opening an inland L/C in favour of
an indigenous supplier. Before this the bank will ensure that necessary bank guarantee or Letter of
Undertaking has been executed by the license holder and endorsement to this effect has been made
on the License. The indigenous supplier may supply the goods on the strength of L.C. opened in his
favour . For the purpose of claiming Deemed Export benefits, an indigenous supplier shall produce
the copy of the L/C together with a photocopy of the Duty Free License, duly endorsed by the bank
concerned and the said documents shall for all purposes be deemed to be an ARO.

Duty Entitlement Pass Book scheme: It aims at neutralising the incidence of customs duty and
surcharge thereon on the import content of the export product. This neutralisation is provided by
way of grant of duty credit on the deemed import content in the export product as per Standard
input output norms and considering the value addition achieved. This scheme is allowed to be
operated on pre and post export basis by a manufacturer exporter and merchant exporter. The
scheme allows exporter to claim credit of customs duty at a specified percentage of the f.o.b. value
of the exports made in freely convertible currency. DGFT issues public notice featuring eligible
products along with the credit rates under this scheme. Although items outside the restricted list can
be exported without Customs duty, DEPB holder may pay additional customs duty in cash, if any.
(vide MoF Customs Notification No. 34/97 - Cus. Dated 7.4.1997 and Circular No. 10/97-Cus.
Dt.17.4.1997). Third party exports are also permissible for grant of credit under this scheme and
DEPB is valid for 12 months from the date of issue.

Special Import License(SIL): issued to Export/Trading/Star Trading/Super Star Trading houses;

Manufacturers/processors with the quality certification from ISO,HACCP,WHO-GMP or SSI
CMM level 2 and above certification; EOUs/EPZs ; Deemed exporters; exporters of telecom and
electronic equipments; small scale exporters(certified); service providers and other exporters. This
provision has been withdrawn from 31.03.2000. No SIL licenses will be issued for exports made
after 31.03.2000.

Diamond, Gem & Jewellery Export Promotion Scheme: Exporters of gem and jewellery are eligible
to import their inputs by obtaining Rep. License and diamond imprest license from the licensing
authority. Exporters of gold/silver/platinum jewellery and articles thereof may import their essential
inputs e.g. precious metals and stones in accordance with the procedure specified in this regard.

100% EOU/EPZ/FTZ Scheme -This means an industrial unit offering its entire production,
excluding rejects and items otherwise specifically permitted to be supplied to the domestic tariff
area(DTA), for exports. Such units may be set up under the EOU/EPZ scheme. While EOUs can be
set up anywhere in India subject to certain locational conditions, units in EPZ/FTZ can be set up in
specific areas separated from the DTA by physical barriers.

Hints/Suggestion for finalisation of import order/contract:

Proper selection of the Commodity will depend up on Various Commercial and legal
Considerations including the regulations Contained in the Current Import Export Policy, Procedure,
while selecting the product, particularly for Commercial purposes one should know the export
regulations in the exporting Countries.

Selecting the Overseas Supplier

Imports can be made from any country of the world except Fiji and Iraq. The information regarding
overseas supplier can generally be obtained from the following sources:

Trade Directories and Yellow Pages, like Singapore yellow pages, Japan yellow pages, USA yellow
pages etc. available from leading booksellers in India including. Consulate Generals and Trade
Representatives of various countries in India and abroad.

Friends and relatives in foreign countries. International Trade Fairs and Exhibitions for which you
may contact:

International Trade Promotion Organisation(ITPO),

Pragati Maidan, New Delhi.
Chamber of Commerce.
Directorate of Industries, etc.
Indenting Agents of Foreign Suppliers.

The advertisement in foreign papers may also be useful.

Similar informations are also available in our Import-Export database.

Capability and Creditworthiness of Overseas Supplier

Successful completion of an import transaction will mainly depend upon the capability of the
overseas supplier to fulfil his contract.The credit worthiness of the overseas supplier, his capacity to
fulfil that contract, etc. should, therefore, be properly verified beforeentering into a contract with
him. Confidential reports about the supplier may be obtained through the banks and Indian
embassies abroad. Reputed overseas suppliers normally have their Indenting Agents with offices in
India and contract can also be finalised through them for smoother operations. The importer can
also take the assistance of Credit Information Agencies for specific commercial information on
overseas suppliers. They may also contact Trade Information Centres of the country concerned.

Correct address of these agencies can be obtained from the overseas countries trade representatives
posted in India.

Role of Overseas Suppliers' Agents in India

Some overseas suppliers have appointed their agents in India. These agents procure orders from the
Indian parties and arrange for the supply of goods from their principal abroad. It is advisable to
import through such agents as they can be readily contacted in case of any difficulty with regard to
quality of goods, payment and documentation, etc.

Finalising the Terms of Import

This is an important subject and should be handled with extreme care and caution. It is advisable
that before finalising the terms of Import Order, you should call for the samples or catalogue and
other relevant literatures and the specification of the items to be imported. Import of samples of
goods is exempt from import duties under 'Geneva' Convention of 7th November, 1952. Samples
are subject to re-export and other conditions as specified in the Geneva Convention. Besides, vide
Customs Notification No. 154/94 dated 13.07.1994, commercial samples brought into India as
personal baggage by bona fide commercial travellers and businessmen or imported into Into India
by post or by air are exempt from the customs duty. Similarly, vide Notification No. 154/94 dated
13.07.1994, prototype of engineering goods when imported into India as samples for executing or
for use in connection with-export orders are exempt from customs duty. Likewise, the Central
Government has exempted bona fide commercial samples and prototype of engineering goods when
imported into India by post or by air or by courier service by manufacturers of export goods.

Once you are satisfied with the samples and the creditworthiness of the overseas supplier, you can
proceed to finalise the term of the contract to be entered into. For this purpose, the Import Contract
should be carefully and comprehensively drafted incorporating therein precise terms, all relevant
conditions of the trade deal. There should not be any ambiguity regarding the exact specifications of
the goods and terms of the purchase including import price, mode of payment, type of packaging,
port of shipment, delivery schedule, etc. The different aspects of an import contract are enumerated
as under some of which may be relevant and other may not be:

Product, Standards and specifications.

Quantity.
Inspection.
Total value of the Contract.
Terms of Delivery.
Taxes, Duties and Charges payable at Exporting Country and payable in India on importation.
Period of Delivery/Shipment.
Packing, Labelling and Marking.
Terms of Payment-Amount, Mode & Currency.
Discounts and Commissions.
Licenses and Permits.
Insurance.
Documentary Requirements.
Guarantee.
Force Majeure or Excuse for Non-performance of Contract.
Remedies.
Arbitration.

Mode of Pricing and INCO TERMS

While finalising the terms of import contract, the Importer, should, inter alia, be fully conversant
with the mode of pricing and the manner of payment for the imports. As regards mode of pricing,
the overseas supplier normally quote the terms prevailing in international trade.

The importer for his benefits should know the meaning of the technical terminology. To avoid
ambiguity in interpretation of such terms, International Chamber of Commerce, Paris, Has give
detailed definition of a few standard terms popularly known as 'INCO TERMS'. These terms have
almost universal acceptance and are explained below:

Ex-work

'Ex-work' means that the seller's responsibility is to make the goods available to the buyer at works
or factory. The full cost and risk involved in bringing the goods from this place to the desired
destination will be borne by the buyer. This terms thus represents the minimum obligation for the
seller. It is mostly used for sale of plantation commodities such as tea, coffee and cocoa.

Free on Rail (FOR)/Free on Truck (FOT)

These terms are used when the goods are to be carried by rail, but they are also used for road
transport. The seller's obligations are fulfilled when the goods are delivered to the carrier.

Free Alongside Ship (FAS)

Once the goods have been placed alongside the ship, the seller's obligations are fulfilled and the
buyer notified. The buyer has to contract with the sea carrier for the carriage of the goods to the
destination and pay the freight. The buyer has to bear all costs and risks of loss or damage to the
goods hereafter.

Free on Board(FOB)

The sellers's responsibility ends the moment the contracted goods are placed on board the ship, free
of cost to the buyer at a port of shipment named in the sales contract. 'On board' means that a
Received for Shipment' Bill of Lading is not sufficient. Such B/L if issued must be converted into
'Shipped on Board B/L' by using the stamp 'Shiped on Board' and must bear signature of the carrier
or his authorised representative together with date on which the goods were 'boarded'.

Cost and Freight (C & F)

The seller must on his own risk and not as an agent of the buyer, contract for the carriage of the
goods to the port of destination named in the sale contract and pay the freight. This being a
shipment contract, the point of delivery is fixed to the ship's rail and the risk of loss or of damage to
the goods is transferred from the seller to the buyer at that very point. As will be seen though the
seller bears the cost of carriage to the named destination, the risk is already transferred to the buyer
at the port of shipment itself.

Cost Insurance Freight (CIF)

The term is basically the same as C & F but with the addition that the seller has to obtain insurance
at his cost against the risks of loss or damage to the goods during the carriage.

Payment against imports

Payment under better of Credit is a universally accepted mode of payment. A Letter of Credit is a
Signed instrument and an undertaking by the banker of the buyer to pay the seller a certain sum of
money on presentation of documents evidencing Shipment of Specified goods subject to
Compliance with the stipulated terms and Conditions.

Letter of Credit vs Bank Gaurantee

A letter of credit differs from a bank guarantee. An issuing or confirming bank's obligation is
independent of, and unqualified by, the contract of sale under the transaction. A commercial
credit is neither a performance bond, nor it is a guarantee of the quantity or quality of the
goods shipped.

Letters of Credit are Separate Transactions

A contract for sale of goods between the seller and the buyer incorporates mode of settlement.
Letters of credit by their nature are separate from the sale contract, and banks are not concerned or
bound by such sale contracts even if the credits bear reference to them.

The credits stipulate documents which have to be tendered for payment and it, therefore, follows
that in credits parties deal with documents and not with goods, services or performances to which
the documents relate.

It is, therefore, in the interest of all the parties concerned that the conditions and terms of credit are
complete and precise and barefit of excessive details.

Payment under a letter of credit does not depend on the performance obligation on the part of the
exporter except those which the credit imposes. Banks accept documents under letters of credit for
what those document purport to be on their face. Contract between the buyer and the seller is
obligatory between themselves. The seller(beneficiary) cannot take advantage of any contractual
terms in between the buyer and the opening bank and between the opening bank and the
advising/confirming bank.

Uniform Customs and Practice for Documentary Credit

In the course of time, a number of practices, expressions and terms have evolved between banks
dealing with documentary credits. To ensure uniformity of interpretation in international trade, the
International Chambers of Commerce in Paris has worked out the "Uniform Customs and Practice
for Documentary Credit". These have been revised and brought up to date several times in the past.
The latest in the line of revisions is the UCP 500 (w.e.f. January 1, 1994) which updates and
consolidates the previous UCP 400. They are now applied by the banks in nearly all countries
including India.

Parties to a Letter of Credit:

Following persons are generally parties, to a letter of Credit:

Benificiary : The exporter of goods in whose favour the L/C has been established.
Customer/importer : The person we intends to import the goods and instructs bank to established
Letter of Credit.

Issuing Bank: The Banker in the importers Country who opened the L/C. Correspondent Bank or
Advising Bank: The banker in the exporters country, who is authorised by the issuing bank to
advise the beneficiary of the Credit and to effect such payment or to accept and pay such bills of
exchange or to negotiate against Stipulated documents and on Compliance of Stipulated terms and
condition specified by the importer on the exporter.

Confirming Bank: The banker in the exporters(beneficiary) country, who at the desire of the
beneficiary adds confirmation to the letter of Credit so that beneficiary can get payment without
recourse from the Confirming bank. The Confirming bank may be correspondent bank itself or
some other bank.

Generally following types of Letter of Credit are in operation.

Revocable or Irrevocable Letters of Credit

Confirmed Credit
Transferable Credit
With or without Recourse Credit
Revolving Letter of Credit
Transit Credit
Back to Back Credit
The Sight Credit
The Credit available against Time Draft (Usance Credit)
The Deferred payment Credit.

Precautions to be taken at the time of establishing Letter of Credit

Letter of credit offers almost complete protection to the seller but the buyer is put to many
disadvantages and has to make payments against documents only. Before agreeing to open a letter
of credit in favour of the seller, the opener must be satisfied with the creditworthiness and general
reputation of the seller. Entire success of an L/C transaction depends on proper conduct of the
seller.

Confidential report on the seller must be obtained at the time of first transaction with him.

Letter of credit also does not offer any protection for the quality/quantity of goods supplied under
the L/C. It would, therefore be necessary to know the nature of goods and specify submission of
quality reports/inspection reports from an independent agency to ensure receipt of goods of proper
quality. This is particularly important in case of import of chemicals and such other goods. The
opener has to submit an L/C application to the opening bank. The instructions contained in the L/C
application is the mandate for the issuing bank and letter of credit will be issued in accordance with
this application. It is, therefore, necessary that complete and precise information must be given in
the L/C application form specifying therein the description, unit rate and quantity of the goods
covered under L/C and details of documents required in absolute clear and unambiguous terms. The
reference to underlying sale contract must be avoided as far as possible. The L/C application must
nevertheless contain all the required/information based on which L/C could be opened by the bank.
After the L/C has been issued by the bank, a copy thereof must be obtained immediately. The L/C
must be scrutinized to ensure that it has been properly issued and is in conformity with L/C
application. Discrepancy, if any, must be brought to the notice of opening bank immediately.

Import contact may be concluded either in terms of INR or in foreign currency. Where the contracts
are in INR, the related documents are also prepared in INR and no conversion is involved.
However, where the bill is drawn in foreign currency, the payment is made in Indian rupees
equivalent to the foreign currency. The equivalent rupee value is arrived at by applying suitable
exchange rate. These rates are applied by banks to standardise the foreign exchange-rupee
conversion process.

When the price of foreign currency is quoted in terms of home or local currency it is called direct
quotation basis. This has been in application since 02.08.1993. However, there is a difference
between inter-bank exchange rates and merchant rates.

Merchant rates are the exchange rates applied by the bankers for transaction with their customers
for various purposes, including imports and exports. These rates are calculated by the banks as per
the guidelines issued by the Foreign Exchange Dealers Association of India (FEDAI). Inter-bank
rates are the rate for transactions amongst the authorised dealers in foreign exchange and depend on
the market conditions.

Since exchange rates are volatile, documents delivered by the bank at the time of a favourable
exchange rate will enable the Indian purchaser to pay less of Indian rupees. Forex rates are always
quoted as two way price i.e. at a rate at which the bank is willing to sell foreign currency(buying
rate) and at a rate at which the bank is willing to buy foreign currency(selling rate). There is always
some difference in buying and selling rates. However, the maximum spread available to bank is
restricted in terms of celling imposed by RBI. All exchange rates by authorised dealers are quoted
in terms of their capacity as buyer or seller.

TT Selling Rate

This rate is applied for all clean remittances outside India. For selling foreign currency to its
customer by the bank such as for issuance of bank drafts, mail/telegraphic transfer etc.

TT Buying Rate

This rate is applied for purchase of foreign currency by banks when the banks in India have already
obtained the cover in India. Thus all foreign inward remittances which are made payable in India
are converted by applying this rate. A mail transfer issued by a bank in Dubai for US $ 10,000
drawn on any commercial bank having branch at the overseas destination will be converted into
rupees at TT buying rate.

Reading Rates-The rates announced by the banks every day morning are card rates.

Reputed importers can always bargain with the bank for improvement in the card rates for reducing
their rupee liability on conversion of foreign currency into Indian rupees. Also a distinction is made
between spot rates and forward rates. Spot rates are applicable on the day of transaction, whereas
forward rates are fixed in advance for a transaction that will mature at a specified date or during a
specified period in future imports.

Hedging against Forex risk:

Exchange risk arising on account of adverse movement of the exchange rates, can be avoided by the
following methods:

• By requesting the supplier to invoice the goods in Indian rupees (possible only when the
seller agrees to it)
• By entering into a forward exchange contract.

This involves booking of forward exchange contract with the bank of the importer.

For booking forward contract the importer should approach his bank with which an L/C has been
opened. The bank will book a forward contract only against genuine trade transaction. The bank
will verify suitable documents to ensure the authenticity and the amount of permitted currency of
the underlying transaction. The amount, date and number of the forward contract will be marked on
such documents under the stamp and signature of the bank to ensure that more than one forward
contract is not booked in respect of the same underlying transaction. A transaction may be covered
either in parts or in whole. The period and extent to which an exposure is to be covered is left to the
choice of the customer. Ordinarily, the maturity of the forward contract matches with that of the
underlying transaction. If the documents of import are not received within the agreed period of the
contract, the contract needs to be cancelled (a fresh contract booked if desired) for which the bank
will levy cancellation charges as per FEDAI rules. In case the documents are received before the
stipulated date and the importer wants early delivery, the bank will again levy charges for early
delivery, as per FEDAI rules.

The importers should be careful in choosing the period of forward contract. Otherwise early
delivery or cancellation of forward contract would lead to unnecessary charges. The RBI allows
substitution of an import order on specific request, provided the bank is satisfied with the
circumstance leading to the non-performance of the contract.

Where the documents are under a contract(Non-L/C case), the seller will submit the complete set of
documents to his bankers with the request to either purchase/discount the documents to his banker
with the request to either purchase/discount the documents or same on collection basis to the
importer. In the former case the seller's bank finances the sellers whereas in the latter case, no
financial facility is extended to the overseas seller. The seller's banker may advance some money
against documents sent on collection basis while, treating the documents as collateral security.

When the documents are under L/C, the documents are prepared strictly in conformity with the
letter of credit.

After preparing the documents the overseas seller will tender the documents to his banker for
negotiation. The bank, after receiving the documents, will examine them to ensure that they are
strictly drawn as per the terms of the credit. Following this the overseas banker will send the
documents to the importer's banker in India. The importer’s bank will advise the importer to collect
the shipping documents either against payment or acceptance as per the terms of the contract.

In case the documents are drawn under L/C, the issuing banker(of the overseas supplier) will
examine the documents and if found in order it will hand over the same to the importer after
debiting his account with amount involved or against acceptance as per the terms of the credit.

If the documents are not in line with the terms of the credit, the overseas banker can either refuse to
negotiate further and ask the seller to send them on collection basis only; or it can contact the
importer's bank(in the buyer's country) for authorisation; or it can also make payment under the
reserve against seller's indemnity.
Import Policy:

For items not mentioned as Prohibited, Restricted or Canalised List for import in ITC(HS)
Classification of Export and Import items; import of such items are freely permitted. There is no
need to obtain any license or permission for importing such goods. The ITC(HS) Classification of
Export and Import items contains 99 chapters and in each chapter there are column heading
covering Exim Code, items description, policy and nature or restriction. The information related to
import policy for any item can be obtained from our site under Customs Duty Calculator Schedule.

Procedure to be followed for grant of import license:

An application for grant of an import licence or CCP for import of the items mentioned as restricted
for import in ITC(HS) Classification of Export and Import items may be made to the regional
licencing authority concerned.

Scrutiny of documents
This is a very important function and this should be done with great care. After receiving the
document from the overseas supplier's bank the importer's bank will scrutinise them to verify
the extent of correctness as per the terms of the L/C. For discrepancies in the documents
following principles are adopted:

If discrepancies are such which violates any of exchange control or import control regulations, the
documents should straightaway be rejected.

If the discrepancies are of trivial nature not affecting the character of the transactions the documents
may be accepted on merits.

If the documents are rejected, immediate notice to that effect should be given to the bank to
safeguard the importer's interests.The documents prescribed by the beneficiary are carefully
scrutinised by the issuing banker. The importer should also scrutinise the documents to ensure that:

They were presented when the credit was in force and had not expired.
The amendments and special instructions have been taken care of
The amount of bill does not exceed the value of L/C
All documents required in the L/C have been made available
Documents carry required endorsements

The documents do not contain discrepancies which violate any exchange control/import control
regulations

The invoice is duly signed, tallies with amount of draft, Exact quantities are shown and is drawn in
appropriate currency of the origin of goods

Bill of leading is presented in full set of negotiable copies and is on board bill of lading and duly
signed In case the goods are imported on cash against documents(CAD), documents against
payment(D/P) or documents against acceptance(D/A) basis, the importer needs to take delivery of
documents from the banker before completion of the customs formalities. This process, known as
retirement of documents, needs the importer to apply to authorised dealer/banker who is in
possession of documents. This can be done by tendering the funds equivalent to the value of
documents and the bank charges exchange control copy of import license, where applicable, Form
A-1 duly completed for remittance of foreign exchange.
The documents are released to the importers against payment in case of DP bills and against
acceptance in case of DA bills. The payment in either case is accepted only from the bank account
of importer. If the bank is out of funds the interest is charged to the importer's account. For any
overdue period a penal interest will be charged.

Checklist for Document (received under L/C) scrutiny:

General-check whether all documents in full sets as per L/C terms have been received
Documents had been presented before the expiry date
All the documents are dated subsequent to the date of issue of the L/C
Cancellation/overwriting in all documents are authenticated
Bills of Exchange-check whether
Drawn on the person indicated in the L/C and duly signed up by the beneficiary of the credit
Drawing is within L/C amount and in the same currency as per the L/C
The amounts in words and figures are the same and identical with the amount stated in the invoice

Superscription, regarding drawing under L/C has been made and the Bill must have been issued
stamped.

Invoice- check whether invoice:

Is made out in the name of the person who had opened the L/C
Quantity, unit price and value are quoted as per L/C
Whether unit price and value are quoted as per L/C
The description of the merchandise corresponds to the description in the L/C
The arithmetical calculations are correct
Import license/OGL/Contract No./Order No./Indent No. mentioned as per L/C
No charge other than stipulated in L/C in included
Additional copy for Exchange Control purposes is submitted
The date and no. of the License/OGL indicated

Bill of lading is submitted within 21days from the date of shipment, if no specific time is between
the date of issue and expiry of L/C

The date of shipment is between the date of issue and expiry of L/C
Full quantity of goods is shipped, if part shipment is not allowed
Full set is submitted
Freight is shown as prepaid/payable at destination, as per L/C
Bill of lading shows 'on board shipment'
Parties are notified as per L/C terms
Carrying vessel's name has been mentioned in Bill of Lading
The beneficiary's name is shown as consignor, unless L/C terms permits third party bill of lading
The consignee's name is as per L/C
The B/L is manually signed

The description of goods is consistent with L/C

The ports of loading/destination are mentioned as per L/C
Marks, numbers, quantity and weight agree with the invoice
The carrying vessel belongs to any particular line as per L/C
Adequately stamped
Properly endorsed
If AWB, whether flight number and date of departure mentioned
If freight has been added separately in invoice and no separate freight certificate of shipping
company is submitted. B/L shows freight amount.

Scrutiny for Insurance documents-check whether the policy is taken out in the name of the shipper

Certificate/policy is according to Letter of Credit terms

Risk commences w.e.f. date of B/L
Amount of insurance as per L/C terms
Whether drawn in the same currency as the L/C
Description of goods agree with B/L
Risks as per L/C are covered
The place where claims are payable is as per L/C terms
Adequately stamped
Details such as name of carrying vessel, ports of loading/destination, marks, agree with the B/L
Certificate of analysis, weighment,etc.
The certificates are issued by the authority stipulated in L/C
Name of the shipper is properly shown
The samples drawn relate to the goods actually shipped
Date of sample verification is within the date of shipment

Certificate of origin
It is issued by the authority stipulated in the L/C
The description of goods agrees with that in the invoice

Checking other documents

All other documents stipulated in the L/C are verified

They are issued by the authorities specified in the L/C

They contain the details as required by the L/C

For matter relating to Documentary Collections and Commercial terms, the importers are likely to
be conversant with the brochures issued by the International Chamber of Commerce(ICC), Paris.

Following are the brochures:

Uniform Customs and Practice for Documentary Collection and Commercial Terms
Uniform Rules of Collections (ICC522)
Uniform Rules for a Combined Transport Document (ICC298)
INCO Terms 1990
RBI regulations for Making Payments by importers

Import Policy:
For items not mentioned as Prohibited, Restricted or Canalised List for import in ITC(HS)
Classification of Export and Import items; import of such items are freely permitted. There is no
need to obtain any license or permission for importing such goods. The ITC(HS) Classification of
Export and Import items contains 99 chapters and in each chapter there are column heading
covering Exim Code, items description, policy and nature or restriction. The information related to
import policy for any item can be obtained from our site under Customs Duty Calculator Schedule.

Procedure to be followed for grant of import license:

An application for grant of an import licence or CCP for import of the items mentioned as restricted
for import in ITC(HS) Classification of Export and Import items may be made to the regional
licensing authority concerned.

Mode of payment
Payments in retirement of bills drawn under L/C as well as bills received from abroad for collection
against imports into India must be received by authorised dealers, irrespective of amount, by debit
to the account of the importer with themselves or by means of a crossed cheque drawn by him on
his other bankers. Payment against bills should not be accepted in cash. This rule also applies to
private imports where the amount involved is Rs. 20,000 or more.

Payment for import bills-Where the import bills are drawn in Indian Rupees (INR), an equivalent
amount(plus bank charges) is debited to the account of the importer by the authorised dealer and the
amount remitted to the foreign seller. In case the bills are drawn in foreign currencies, the INR
equivalent is arrived at by applying the appropriate foreign exchange rate.

Fixing of Re. Equivalent-In order to bring uniformity in the handling of import bills under L/C
authorised dealers have been directed by the RBI of follow the following procedure:

Sight import bills received under L/C and conforming to credit terms, may be held in foreign
currency for a maximum period of 10days from the date of receipt of documents by the Bank.

In case of non-payment by the drawee within 10days, the importer's liability on the foreign currency
bill shall be crystallised by converting the foreign currency amount in to rupee at the

B.C. Selling rate prevailing on the 10day or the forward exchange contract rate where applicable.
Authorised dealers shall keep a proper record of the date of receipt of documents.

In case the 10th day is holiday or a Saturday, the importer's liability in rupees shall crystallise in the
next following working day.

Authorised dealer shall carry swap costs from the customer.

Authorised dealer shall charge interest at the rate as prescribed by RBI for advances to non-priority
sectors from time to time on rupees advances made against the import bills pending retirement by
the customer. Such interest shall be recovered from the date of negotiation or the date of
crystallisation of the rupee liability and thereafter penal interest shall be recovered.

When the rupee liability on an import bill is crystallised at the Forward Exchange Contract Rate and
it results in early/late delivery, the charges as per FEDAI rule 9 shall be levied.

Authorised dealers shall charge commission/handling charges at the rate of 0.15% on the bill
amount at the time of converting foreign currency into INR irrespective of the fact whether the bill
is retired within 10 days or later.

Time limit for import remittance:

The remittance against imports should be completed not later than 6 months from the date of
shipment. Accordingly, deferred payment arrangements involving payments beyond 6months are
not permissible without approval of RBI/Gol.

However, no objection to importers withholding a small part of the cost of the goods not exceeding
15 percent towards guarantee of performance etc. Authorised dealers may make remittances of
amounts so withheld provided the earlier remittance had been made through them. No interest
payment should be allowed to be remitted on these withheld amounts.

Sometimes, settlement of import dues may be delayed due to disputes, financial difficulties,
Authorised dealers are permitted by the RBI to make remittances in such cases even if the period of
6 months expires, provided-

Authorised dealer is satisfied about the bona fides of the circumstances leading to the delay in
payment.

No payment of interest is involved for the additional period.

In case, where the overseas supplier insists on payment of interest, it may be allowed in accordance
with the provisions contained in para 7A.12 up to a maximum period of 60 days beyond 180days
from the date of shipment provided the import bill is paid within that period. Remittances against
import of books may be allowed without restrictions as to time-limit, provided no interest payment
is involved nor has the importer forgone any part of the discount/rebate normally allowed to
importers towards compensation for delay in settlement of dues.

Interest remittance on import bills-interest accrued on usance bills under 'normal interest clause' or
of overdue interest paid on sight bills for a period. Not exceeding 6 months from the date of
shipment in respect of imports without prior approval of RBI. In case of pre-payment of usance
import bills, remittances may be made only after reducing the proportionate interest for the
unexpired portion of usance at the rate at which the interest has been claimed or the 'prime' rate (or
its equivalent) of the country in the currency of which the goods are invoiced, whichever is higher.
Where interest is not separately claimed remittances may be allowed after deducting the
proportionate interest for the unexpired portion of usance at the prevailing 'prime'.

However, interest under normal interest clause would mean interest at the prime rate (or its
equivalent) of the country in the currency of which the goods are invoiced.

Impoter's documents-The importer should comply with certain obligations: submission of Exchange
Control Copy of Bill of Entry for Home Consumption/Postal Wrappers to the authorised dealer.
This will act as evidence that the goods for which the payment was made, have actually been
imported into India.

Authorised dealers should ensure that in all cases, including cases of advance remittances permitted
(Vide para 7A, 10, these are submitted by their importer customers and are verified. In respect of
imports made on D/A basis, since goods would normally be cleared before the due date of payment,
authorised dealers should insist on production of documentary evidence of import i.e. Exchange
Control Copy of Bill of Entry for Home Consumption/ postal wrappers at the time of effecting
remittance of import bill. Authorised dealers should also advise this requirement to their importer
customers in writing while delivering the documents against acceptance.

Postal Imports

Remittances against bills received for collection in respect of imports by post parcel may be made
by authorised dealers, provided the goods imported are such as are normally despatched by post-
parcel. In these cases the relative parcel receipts must be produced as evidence of dispatch through
the post and on undertaking to submit importers should furnish post parcel wrappers within three
months from the date of remittance.
If the parcel has already been received in India, the parcel wrapper should be produced in support of
the remittance application. Where goods to be imported are not of a kind normally imported by post
parcel or where authorised dealer is not satisfied about the bona fides of the applications the case
should be referred to RBI for prior approval with full particulars together with relative parcel
receipts/or wrappers.

Customs Clearance of imported goods

Customs Authorities and the Clearing agents play the key role in the import of goods. All goods
imported into India have to pass through the procedure of Customs clearance as they cross Indian
border. The goods are examined, appraised, assessed, evaluated and then allowed to be taken out of
charge of the Customs for use by the importer. The entire process of customs clearance is complex
and to carry out this procedure smoothly, the help of accredited customs clearing agents has to be
taken.

The importers need to present a Bill of Entry on receipt of the advice of the arrival of the vessel.
The B/E is noted in Import Department, with corresponding endorsement made against the
consignment entry in the IGM along with the date. The B/E will then be presented in the Appraising
Department with all the relevant documents like invoice, Bill of Lading, and Import license and
catalogue literature. The appraising procedure may be of two types.

The First Check Procedure-Applicable only when appraisers/assessing group find it difficult to
complete the assessment on the basis of the documents made available.

The Scrutinising Appraiser in the group gives the examination order. The goods are then examined
in the docks and the B/E returned to the Scrutinising Appraiser for completion and license debit. In
this case the Customs 'out of charge' is given by the Accounts Department soon after the recovery of
duty.

The Second Check Procedure-Under this 80 to 90 percent of the consignments are cleared.

If the documents are adequate for determining the classification, value, ITC license, the form is
completed by the Appraiser and then countersigned by The Assistant Collector. It is then forwarded
to the License Department for licensing debit and audit. Then it is returned to the importers for
payment of duty in the Accounts/Cash department. After recovery of duty the original B/E is
retained in the Accounts Department and the duplicate and other copies are returned to the importer
for getting the goods examined in the docks.

In the docks, the Shed Appraiser/Examiner shall examine the goods and if in order, shall give the
out of charge for taking delivery from the custodian of the goods viz. Port Trust, after payment of
Port Trust charges.

Irrespective of the procedure, examination of cargo for assessment purpose is chiefly the function of
the Appraising Department having special staff of examiners in the docks/Air cargo shed. The
records of the examination and weighment should be declared, attested and dated at the time of the
examination. If the examination spreads over more than one day, the result on each day's progress
should be disclosed.

These apart some of the Customs house in India have introduced the simplified computer procedure
for speedy clearance of consignment through B/E.

Custom Authorities
The customs administration vests in CBEC for implementing the provisions of the Customs
Act.1962. There are two main wings of Customs House. In the 'Appraisement' wing the job of
collection of revenue is assigned, while the 'Preventive' one aims at prevention of smuggling.

The Customs authority functions under the Ministry of Finance (MoF) with the Central Board of
Excise & Customs at the apex. The board is headed by a Chairman and assisted by Members. The
Member (Customs) looks after the following matters:

Customs Law and its interpretation and application, policy and broad procedures(Other than those
concerning anti-smuggling)
Enforcement of Import Export prohibitions
Foreign Travel and Cases on imports and exports
Baggage concessions and rules;
Customs Valuations;
Tariff Classification and Tariff advices; Customs procedures, Customs House
Agents Regulations;
Warehousing, inland Bonded Warehouses;
FTZs, EPZs, 100% EOUs etc.
Matters relating to Drawback;
Customs Co-operations Council, GATT and ESCAP and international talks and agreements,
organisations concerning customs;
All other works on Customs not specified elsewhere;
Supervision and control over Customs Commissione rate of Mumbai, Calcutta, Chennai, Kandla,
Bangalore, Cochin, Delhi , Visakhapatnam, Goa and Tuticorin and Customs Divisions of other
Central Excise Commissioners, Assistant Commissione rates regarding Customs work handled by
them.
Chemical laboratories and
Directorate of Drawback

The Ministry of Finance (MoF) issues Customs Notifications to levy duty on the imported goods.
The Changes are made each year on the Day of the Fiscal Budget. Customs clearance of the
imported goods is done by the customs Authorities functioning under the overall charge of MoF.
The hierarchy of the Authorities:

Central Board of Excise & Customs (CBEC) in the MoF

Under which operates: Customs Commission rates of Mumbai, Calcutta, Chennai, Kandla,
Bangalore, Cochin, Delhi, Vizag, Goa and Tuticorin.

Directorate of Drawback
Field Level: Principal Commissioners Customs ,Commissioners, Addl. Commissioners ,Dy.
Commissioners, Asst. Commissioners, Port of clearance.

Classification of Customs tariff

The basic legislation is the Indian Customs Act, 1962 read with Customs Tariff Act, 1975.
Section 12 of the Customs Act,'62 empowers levy of duties on goods imported into or exported
from India.

However, the rates at which the different import export duties shall be liveable have been
respectively specified in the First and Second Schedule to the Customs Tariff Act, 1975-called the
import Tariff and Export Tariff respectively.
With effect from Feb. 28, 1986, the new tariff import schedule based on international convention of
Harmonised Commodity and Coding system, commonly known as Harmonised Coding System
came into being. The basic features of the Import Tariff

Nomenclature are outlined below:

The headings, the Section and Chapter Notes and the interpretive Rules, Customs duties are levied
in three ways-Specific rate-at the rate prescribed per unit of item i.e. weight or number of length;
Ad-valorem duty-levied on the value of the item; Specific and advalorem-levied in both ways.

Types & Levy of Customs duties:-

Basic duty: all goods imported into India are chargeable to duty as prescribed in the 1st Schedule of
Customs Tariff Act. This Schedule is amended from time to time of Customs Tariff Act. This duty
can be levied either as a percentage of value of goods or at a specified rate.

Surcharge: It is levied at the rate of 10% of the basic rate on all commodities except crude oil and
petroleum products, GATT-bound items, gold and silver. Additional Duty: Also known as
countervailing duty is levied on the cost of imported goods and is equal to excise duty levied on like
goods when manufactured in India. The objective is to ensure that the protection provided by the
import duty to domestic industry is not eroded.

Special Additional Duty: It is levied at the rate of 4%. Anti-dumping Duty: This is levied on
specified goods imported from specified countries to protect indigenous industry from injury
resulting from USA, Korea and so on.

Customs Duty Assessment: The assessment of goods to duty is done on the basis Whether the
goods covered by the B/E are such as are regularly imported, or are required to be tested by the
customs house laboratory for fulfilment of license conditions, or The appraiser desires to see the
representative sample before completing the bill of entry for the purpose of verification of the
value/description, etc. or The required document is not forthcoming.

Customs Duty Rates: When the import invoice is in any currency other than Indian rupees, customs
fix the exchange rate for conversion into the Indian rupees at a predetermined rate which is
published in customs houses on a daily basis.

Imports from specified countries enjoy preferential duty. This is generally the result of special
status accepted under bilateral trade agreements or otherwise. However, the incidence of customs
duties on various goods imported is obtained as follows:

Total duty payable=(Landed cost including CIF of the item concerned + Basic customs duty under
the Customs Tariff Act + Surcharge thereon + Additional duty + Special Additional duty as per
Finance Act).

Getting Import License checked-The appraising official checks the license for their description,
value, validity period, importers name, etc. It is for the importer to establish that the goods satisfied
the description in the license unless he is able to establish the fact he would not be entitled to lawful
import thereof. If the appraising official is satisfied that the license is in order, he will send the
license with B/E to license section for registration and audit. The department maintains a register
for every license accepted and debited showing the last balance on the license.

The importer is likely to know the term of license, the type of goods and whether they can be
lawfully imported as per the terms of the license. In case there is any error on the part of the
appraising authority then possession of even a valid license will not confer any right upon the
importers to import such goods again on the basis of similar licenses.

Bill of Entry-This is a document on the strength of which clearance of imported goods can be
affected. Its form has been standardised by the Central Board of Excise and Customs. All goods
discharged from a vessel, from foreign or coastal Ports, are cleared on this prescribed forms
presented under the B/E Regulations, 1971.

It should be presented for 'noting' in the import dept. of the customs house after the import General
Manifest which gives a detailed description item wise of the goods brought by the concerned vessel
is filed by the steamer Agent.

Import Policy:

For items not mentioned as Prohibited, Restricted or Canalised List for import in ITC(HS)
Classification of Export and Import items; import of such items are freely permitted. There is no
need to obtain any license or permission for importing such goods. The ITC(HS) Classification of
Export and Import items contains 99 chapters and in each chapter there are column heading
covering Exim Code, items description, policy and nature or restriction. The information related to
import policy for any item can be obtained from our site under Customs Duty Calculator Schedule.

Procedure to be followed for grant of import license:

An application for grant of an import licence or CCP for import of the items mentioned as restricted
for import in ITC(HS) Classification of Export and Import items may be made to the regional
licensing authority concerned.

Warehousing of Imported goods

An importer may not like to clear or may have certain problems in clearing the imported goods
immediately on payment of duty for home consumption. In that case the importer can deposit the
goods in a Public or Private Bonded Warehouse, provided he is satisfied with the arrangement.
Thus, the importer can avail the facility of deferring payment of duty on imported goods pending
their actual clearance. Towards this the importer should file a set of yellow coloured B/E known as
warehousing B/E.

Self-Assessment Scheme: Applicable to goods without any ITC license/CCP or any restrictions
thereof. The objective is to enable importers effecting repetitive imports of some commodities to
assess their own B/E and determine their duty liability and pay the duty accordingly. Any importer,
including Govt. bodies and PSUs, with proven identity and track record can avail of this.

This process does away with the procedure of processing, and the time consumed by the appraising
and licensing sections.

When the duty is paid, the goods would be cleared in the docks, provided the goods are partly
examined and payment of duty verified.

Green Channel: This fast-track facility has been introduced to simplify and expedite the process of
cargo clearance. Instead of going in for a hundred per cent examination only a part of the cargo is
checked. Bulk importers, Govt. Depts. & PSUs, consignment of a single product of well known
brand name and importers with identified and unblemished track record are allowed to avail this
facility.
Export of services
A new Chapter has been added in the revised EXIM Policy 1997-2002, March 1999 Ed.,
recognising the importance of export of services and the potential in the sector. Apart from
extending all possible facilities applicable to merchandise exports, the threshold limit for
recognition as Service Export House etc. has been pegged at 1/3rd of the level prescribed for
merchandise exports.

The salient provisions of EXIM Policy relating to services exports are given below:

"Services" include all the 161 tradable services covered under the General Agreement on Trade in
Services where payments for such services are received in free foreign exchange.

Facilities for service providers:

The service providers shall be eligible for the facility of EPCG Scheme as described in Chapter 6 of
EXIM Policy. The provisions of paragraph 6.5(vii) shall also extend to the service providers
availing licences under this scheme.

The service providers shall also be eligible for the facility of EOU/EPZ/ EHTP/STP scheme.

Service providers are also permitted to import drawings, designs, integrated circuits and layout
designs, software in diskettes and CDs related to their line of services as a part of passenger
baggage without a licence.

Facility of import of restricted items by service providers:

Service providers shall be entitled to import restricted items up to 10% of the foreign exchange
earned by them during the preceding licensing year for import of essential goods related to their line
of business, including office and other equipment required for their own professional use.

Import through Courier

As laid down by the current Exim Policy, import of goods through courier is permitted in
accordance with the Courier Imports & Exports (Clearance) Regulations, 1998.

If the CIF value of the consignment imported does not exceed Rs.100000, the relative Bill of Entry
is required to be filed by the registered courier service.

If the CIF value is Rs.100000 or more, importers are to file separate B/E as in the case of other
imports.

In case of remittances for imports through courier services, authorised dealers should ensure
submission of Exchange Control Copy of Bill of Entry for home consumption in the case of imports
valued at Rs. 100000 or more.

This is not regarded as baggage for the purpose of assessment of duty and clearance thereof. The
practice of charging a uniform duty on articles imported through courier has been discontinued.
Imports by courier are now classified on merits in the respective customs Tariff headings. The new
system of assessment and clearance of goods imported by courier is now governed under the
Courier Imports & Exports (Clearance) Regulations 1998.

Imports without Forex remittances:

Imports not involving foreign exchange remittance is allowed as given below (vide Para 5.41 of the
Handbook of Procedures):

Import of items by United Nations Organisation and Specialised Agencies and its officials without
payment of Customs duty.

Import of Medical Equipment by Indian Doctors and Professionals is allowed under the Baggage
Rules, 1994.

Goods as Baggage by Foreign Mountaineering Expedition Teams and Painting and other Display
Articles, except consumables, are allowed. Foodstuffs and Medicines by Charitable organisations
are also allowed.

Import of food parcels, except alcohol and tobacco, subject to a limit of Rs. 100 000 per annum is
allowed for personal consumption of foreign citizens.

Import of free gifts and relief supplies by certain organisations/institutions e.g. Indian Red Cross
Society, National Defence Fund is allowed.

Also import of equipments, raw-films etc. by foreign publicists like Radio, Press, Films, Television
teams are allowed.

Import of exhibits including construction and decorative materials required for the temporary stands
of the foreign exhibitors at the exhibitions, fair or similar show or display for a period of 6 months
on re-export basis is allowed provided these fairs are sponsored/approved by the Govt. of India in
the Ministry of Commerce/India Trade Promotion Organisation and is being held in public interest.

Import for personal use

Importers under this category do not need any IEC number. Import of goods by any person as
passenger baggage is permitted to the extent admissible under the Baggage Rules 1994. However,
quinine of more than 500 tablets or = pounds powder or 100 ampoules is not permissible.

Also, for any tourist, articles of high value whose re-export is obligatory under the Baggage Rules
shall be re-exported on his leaving India. Otherwise, those goods shall be deemed to be regarded as
prohibited goods under the Customs Act, 1962.

Any type of goods for which the c.i.f. value shall not exceed Rs. 2000 can also be imported through
Post or otherwise for personal use, provided they are not:

Vegetable seeds exceeding 1 pound in weight, bees, tea, books and periodicals, alcoholic beverages,
consumer electronic items (save hearing aids and life saving equipments and items for which import
is canalised under EXIM Policy.

Nevertheless, the customs duty, as applicable, shall have to be paid. As regards the procedure for
personal imports is concerned the same may involve sending of advance remittance if required by
the overseas supplier, opening of letter of credit, retirement of documents and remittance of foreign
exchange, customs clearance of the goods and payment of customs duty.

Import of Samples
Bona fide technical and trade samples of items, even those in the restricted in
ITC(HS)Classifications of Export and Import items is allowed without a license for a value notmore
than Rs. 1 lakh(CIF) in one consignment save vegetable seeds, bees and new drugs by any importer.
Tea samples not above Rs.2000 (CIF) in one consignment is allowed without a license by any
person connected with Tea industry.

Prototype import
This may be allowed on payment of duty without a license to an actual user, industrial engaged in
the production of or having industrial license/LoI or research, as the case may be, provided the
number of items imported does not exceed 10 in number in a year.

Import of Computer/Computer Software

Computers including personal computers, Keyboards or monitor valued upto Rs. 1.50 lac and Rs.
7000/- respectively can be imported freely without any licence. Computer Software can also be
imported freely without licence despite the fact computer software is regarded as Consumer Goods.

Passenger Baggage
Under the Rules various kinds of articles can be imported upto certain value limit depending upon
the duration of stay of the passenger abroad and on the basis of Resident and Non-Resident Status
of the passenger.

Passenger Baggage Rules and import duty structure for baggage as applicable for such imports
under the Baggage Rules has been given separately