Customs Training.ppt

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Basics of Indian Customs





Operations Program Group - Training

Slide 2

When you have completed this section, youwill be able to

Learn Basic`s of Indian Customs

Export Promotion Schemes

DHL`s Process of Clearance and Calculate

customs duty levied on a shipment.

Objective





Slide 3

By the end of this session we be able tolist the

– Basics of Indian Customs

– Different Agencies involved at Airport. – Customs law`s Scope and Coverage.

– Different Governing Acts & Regulations

– Organization structure of CBEC & Customs

Module I





Slide 4

Custom Clearance: Introduction

Indian Customs is a department under Ministry of Finance which deals with the tasks of implementation

of policy concerning imports & exports of shipments,

through Indian Customs.

The Customs Clearance Department of DHL IN is

involved in the following activities:

• Clearances of Import & Export of shipments

arriving into and departing out of IN.• On COB (Courier on Board – Informal) mode.

• On Cargo (Freight – Formal) mode.





Slide 5

Agencies Involved

• Customs Department

• CMC (Electronic Data Interchange)

• Octroi Department

• Airport Authority of India• Airlines

• Ground Handling Agents at ACC

• EICI

• Handling Agents (Labour/Carpenter)

• Co-Loaders & Consol Agents





Slide 6

Customs Act is used to

Regulate Imports and Exports

Protect the interests of the Indian Industry

Collect Revenues for the government

Customs Law: Scope and Coverage





Slide 7

Governing Acts & Regulations

Import-export policy 2002-2007. Any commodity entering or leaving IN is governed by

the EXIM policy.The policy is broadly classified as.

• Prohibited items –cannot be imported/exported.

• Restricted items – import/export governed by

restrictions. Import/export is possible only on

compliance of the conditions.

• Free – items can be freely imported/exported. Also

known as items not appearing in negative list (OGL).




Operations Program Group - TrainingSlide 8


Customs Act 1962.Shipments post-entry or pre-exit aregoverned by the customs act.

The act broadly fixes the following :-.

a) Rules & regulations.b) Total 161 sections consisting of ‘definitions’ to

‘removal of difficulties’ of complete customsdepartment of INDIA.

c) Customs act also ensures that provisions of alliedacts are also adhered to. Viz. Arms & ammunitionsact, cosmetics & drugs regulations, CITES etc.






Central Excise Act 1944. Activities of manufacture and services are governed

by the central excise act1944.

The act broadly fixes the following :-.a) Rules & regulations.

b) Total 40 sections consisting of ‘definitions’ to

‘protection of action taken under the act’ of

complete central excise department of India.






Customs Tariff Act 1975.Schedule of duties payable for commodity post-entryor pre-exit are listed by the customs tariff act 1975.This act is governed by customs act 1962.

Central Excise Tariff act 1985.Schedule of duties payable for the activity of

manufacture and providing of services in

India. This act is governed by central excise

act 1944.






• Courier Imports & Exports (Clearance)Regulation 1998.

– Regulation governing the traffic of imports& exports by courier mode.

• Customs House Agents LicensingRegulation 2004.

– Regulation governing the rules &regulations of CHA engaged in clearancesof import & export of goods at anycustoms station in INDIA.

f C





CENTRAL BOARD OF EXCISE & CUSTOMS

B i f I di C t

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http://www.cbec.gov.in/

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Appraising Off icers

Superintendents of Cust

Deputy Commissioner of Customs

Joint Commissioner of Customs

Addit ional Commissioner of Custo

Commissioner of CustomsImport /Export

General/Preven t ive

Appeals/Adjudication

Chief Commissioner of Customs

Mumbai

I / II / III

Customs – Organizational Structure

B i f I di C t





– Basics of Indian Customs

– Different Agencies involved at Airport.

– Customs law`s Scope and Coverage.

– Different Governing Acts & Regulations

– Organization structure of CBEC & Customs

Review Module I

Basics of Indian C stoms





Module II

By the end of this session you will be able to• Define Courier on Board and Freight Mode

• Rules that determine whether a shipment can

go on COB or Freight• Name the governing bodies which decides

the mode by which a commodity must travel

• List the various departments/ ministries

responsible for licenses and duties






COB mode (Courier on Board Mode)

Shipments that travel as excessbaggage accompanied by the courier

travelling on a particular flight






Freight Mode

Shipments which require formalclearance and are uplifted through

airline cargo (at the point of exit from

the country- local governmentrequirement)






COB or Freight ?

A shipment will be sent on COBmode depending upon

• Value

• Size

• Weight

• Commodity

• Commercial/ Non-commercial






Exercise 1

Can the following items be sent as COB or Cargo.1. 10 gm of Sodium bi-carbonate

2. Unaccompanied passenger baggage

3. 10 Ready made shirts, 15 trousers as tradesamples to US

4. Individual sending fabric or ready made

garments to a shop.

5. Pace setters for cardio vascular therapy






Who decides whether an itemgoes as COB or Freight ?

Government of India






Who in GOI?

Courier Import and ExportRegulations, 1998

Who is the delegating authority for Courier Import Regulations?

Central Board of Excise and Customs






Who decides?List of licensed

commodities

Special /

Specific Importlicense

Restricted

Open General list

Ministry of Commerce

ITC (Import Trade

Control)/ ETC (ExportTrade Control)

DGFT

Respective ministry

CBEC





Who decides? (contd.)

Duty Structure Ministry of Finance





Exercise 2





Module III

By the end of the session you will be ableto

• Export Promotion Schemes

• List the differences between EOU/EPZ

• Understand Transhipment process.






Input Duty relief Schemes

1. Schemes where export production unit has

to be isolated from domestic production units• EOU- Export Oriented Unit

• EPZ- Export Processing Zones

• STP- Software Technology park

• SEZ- Special Economic Zones• EHTP- Electronic Hardware Technology Park





Difference between an EPZ and EOU?

• Geographical

• Examination done by

• Rules regarding sale in local market





Similarities between EPZ and EOU

• Manufacturing done in bond

• Exempt from sales tax and central

excise





Slide 30


2. Schemes where domestic production unit

can get inputs free from taxes.

• Advanced License Scheme

• Duty Exemption Pass Book (DEPB) & Duty

Entitlement Exemption Certificate (DEEC)

• Duty Free Replenishment Certificate Scheme

(DFRC)





Slide 31

Advanced License Scheme

Advance Licenses are issued for 1. Physical exports: - Advance License may be issued for

physical exports to a manufacturer exporter or merchantexporter tied to supporting manufacturer(s) for import of inputs required for the export product.

2. Intermediate supplies: - Advance License may be issuedfor intermediate supply to a manufacturer-exporter for theimport of inputs required in the manufacture of goods to besupplied to the ultimate exporter/ deemed exporter holdinganother Advance License.

3. Deemed exports: - Advance License holder for deemedexport is permitted import of materials, which are requiredin the manufacture of resultant product free of Customsduty.





Slide 32


1. DEPB - Duty Exemption passbook scheme – Can export commodity without importing raw material

(can procure raw material locally)

– Can obtain SIL (without any legal bindings/ pre-

conditions)2. DEEC - Duty Exemption Entitlement certificate

– Export can be done only after importing raw materialcomponent/consumable

– Manufacturer needs to give a LUT (Letter of understanding) that he will import raw material andexport the finished product within 1 year of the date of issue of the license or else he will pay duty penaltyfixed by the government





Slide 33

3. Duty Free Replenishment Certificate (DFRC) – DFRC is issued to a merchant-exporter or

manufacturer-exporter for the import of inputs used in

the manufacture of goods without payment of basic

customs duty, and special additional duty. (This is

issued after goods are actually exported).

– DFRC Licenses are issued for import of inputs, as per

SION(Standard Input & Output Norms), having same

quality, technical characteristics and specifications as

those used in the export product and as indicated inthe shipping bills.






Slide 34


4. Export Promotion of Capital Goods – Under EPCG Scheme import of capital goods which are required for the

manufacture of resultant export product specified in the EPCG Licenseis permitted at concessional rate of Customs duty.

– This Scheme also enables upgradation of technology of the indigenousindustry.

– EPCG licenses are issued to manufacturer exporters and merchantexporter with or without supporting manufacturer, and service providers.

– In the case of manufacturer/merchant exporters, Export Obligation (EO)is required to be fulfilled by exporting resultant products manufacturedwith the help of imported capital goods. In the case of service providersthe export obligation is required to be fulfilled by earning foreignexchange through rendering service.

– The license holder is required to file bond with or without bankguarantee with the Customs Authority prior to commencement of importof capital goods





Slide 35

CENVAT (MODVAT)

• MODVAT- Modified Value Added tax

also known as CENVAT.

• Duty Drawback





Slide 36

TRANSHIPMENT

Transhipment is a facility provided under Customs Act to avoid payment of duty at the port of landingfor goods which are to be carried to another port /airport.

For Transhipment DHL needs to have standinginstruction from customer in form of ICD update or shipment details (Viz. AWB no,Final Port of

Clearance,Reason for Transhipment etc) prior tolanding.





Slide 37

Group Exercise

1. First group notes the similarities and differences between

EPZ and EOU.Second group lists the features of DEPB &

DEEC scheme.

2. First group notes the features of EPCG scheme.Second group

lists the features of DFRC scheme.

3. First group notes”What is CENVAT?”.Second group lists

”What is Duty Drawback?”.





Slide 38

Module III

By the end of this module you will be able tounderstand

– DHL`s Process of Clearance – Different types of Bill of Entries

– How to Calculate Customs Duty





Slide 39

Clearance Process – Inbound Courier

• Pre-Alerts from Last Transit Hub

• Downloading Images

• Classification on Easy Clear

• Preparation of Pre-Clearance Bill of Entry along withcopies of Images

• Presentation of Bill of Entry in Customs

• Assessment

• Payment of Duty & Octroi for Assessed shipments(pre-arrival)

• Retrieval of shipments on arrival of flight

• Segregation & Customs Examination

• Post Clearance, dispatch to GTW for distributionContd…..





Slide 40

Clearance Process – Inbound Courier

• Held Shipments move to Examination Zone

• Preparation of Post Arrival Bill of Entry

• Assessment on the basis of Examination

• Detention of Shipment on specific reasons• Payment of Duty & Octroi on Assessed Shipments

• Dispatch of cleared Shipments to GTW for

distribution





Slide 41

Clearance Process – Inbound Cargo (Freight)

• Pre-Alerts from Last Transit Hub

• Downloading Images

• Break Bulk Operation

• Preparation of Cargo Arrival Notice (CAN)

• Contacting Customers & Dispatch of CAN

• Handing over of documents & DO for Broker Clearances

• Receipt of documents required for Clearance fromCustomers

• Filing of Bill of Entry through our Customs Broker (CHA)

• Payment of Duty, Warehouse & Octroi

• Post Clearance, dispatch to GTW for distribution





Slide 42

Clearance Process – Reasons for Detention

• Missing Images

• DHL Duty Policy

• ICD (Import Customer Database)

• Incorrect declaration of shipments/Under

Value/Related parties• Specific Request by CS/Sales

• Clarification requirement of Customs

• Customs Regulations

• Formal Clearance Requirement (FRT)• Operational Challenges





Slide 43

Clearance Process – Outbound Courier

• Consolidation of shipments from Service Centers

• Preparation of SCL Manifest on flight basis

• Dispatch of Shipments to Airport

• Reporting at Airport’s Security & Customs 3 hrs.before departure of Flight

• Screening/Physical Checking of Shipments while

handover

• Handing over of Cleared Bags to Airlines





Slide 44

Clearance Process – Outbound Cargo (FRT)

• Receipt of Documents & Shipments from Service Center

• Checking & Preparation of Documents

• Filing of Documents in Customs

• Assessment

• Segregation of Assessed Shipments at GTW

• Booking of Space & Airlines AWB Execution

• Reporting at Customs with Consolidated Load on flightbasis

• Examination of Shipments & Let Export Order (LEO)

• Handing over of Shipments to Airline for Upliftment• Release & Dispatch of Post-Shipment Documents to

Service Centers





Slide 45

Bill Of Entry

Bill Of Entry: All Clearance in India happens on the basis of Bill of

Entries. These are legal documents that are filed with customs

officials to legalize the import of shipments into the country.

For Informal Clearance there are 5 forms that need to be filed with

customs to legalize the courier import

Form I :The OBC who flies on Board the aircraft as the passenger

files this form at customs.

Form II: The Express company receiving the bags from the OBC

files this form.

Form III: This is the Bill Of Entry that is filed by the Express

company to regularize the import of Documents.





Slide 46

Form IV :All non-documents with value less than INR 10,000 have todeclared on form IV to regularize their import.

Form V: This is also filed by the Express Company and is used to

regularize the import of all non- document shipments valued above INR

10,000

Shipments are assessed by the Appraising customs Officer based on thefollowing criteria

The customs officers interpretation of the Harmonized code of the

commodity (A discretionary Power)

The duty % break-up that is listed in the Customs Tariff Notification

Register (CTNR) on the basis of the harmonized code of the commodity.

The Value and the Commodity declaration made on the invoice by the

shipper.

Bill Of Entry - Informal





Slide 47

2. Formal Clearance :

The Shipments that need Formal Clearance fall into the followingcategories

All Commercial Shipments

All High Value (> INR 100,000) Shipments

All shipments weighing > 70 kg

Animals and Animal Products (Unprocessed) Plants and Plant products (Unprocessed)

Perishables

Precious and Semi-precious Stones

Gold and Silver in any form

Chemicals – Organic ,Inorganic and chemical Products Goods for 100% Export oriented Units (EOU)

Goods for Free Trade Zones (SEEPZ,NEPZ etc)

Goods imported under Duty Exemption schemes

Personal Effects and Baggage

Bill Of Entry - Formal





Slide 48

• Bill of Entry for home consumption This form also called as the

white bill of entry, is used when the imported goods are to be clearedon payment of full duty. Home consumption means use in India. It iswhite in color.

• Bill of Entry for warehousing If the imported goods are not required

immediately, importer may like to store the goods in a warehousewithout payment of duty under a bond and then cleared from thewarehouse when required on payment of duty. This enables him todefer the payment until required. The bill of entry is on a yellow paper and often called ‘Yellow Bill of Entry’ . It is also called ‘Into Bond Bill of Entry’ as bond is executed for transfer of goods in warehouse without

payment of duty• Bill of Entry for Ex-bond Clearance This is used for the clearance

form the warehouse on payment of duty and is printed on green paper (also called the Green Bill of Entry’).

Bill Of Entry - Formal


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Slide 49

• Basic Customs Duty –

(BCD) This is the duty levied as a percentage of the value as determined under Section 14(1). The rates vary for different commodities, but the maximumrate at present is 15%. To protect some industries like agriculture,automobiles the rate of basic duty is far higher.

• Countervailing Duty - (CVD)

Countervailing duty is the duty imposed when the excisable goods areimported.This duty is the excise duty charged on alike productmanufactured in India and is calculated on the Assessable Value plus theBCD

• Educational CESSEducational CESS is calculated as 2% of the CVD value. In respect of excise, the CESS will be 2% of the aggregate duties of excise leviable on

the goods.

Types Of Customs Duty





Slide 50

Classification of duty is done on the basis of commodity description onthe invoice and Customs Tariff. The rate of duty is specified in theCustoms Tariff.

Valuation for Custom DutyCustoms duty is payable as a percentage of ‘Value’ often called‘Assessable Value’ or ‘Customs Value’. The value may be either

• Value as defined in section 14 (1) of the Customs Act

• Tariff value prescribed under the section 14(2) of the Customs Act

Classification for Customs Duty





Slide 51

Section 14(1) provides the following criteria for deciding ‘Value’ for

purpose of Customs Duty• Price at which such or like goods are ordinarily sold or offered for sale.

• Price for delivery at the time and place of importation or exportation.

• Price should be in course of International trade.

• Seller and buyer have no interest in the business of each other or one of them

has no interest in the other .

• Price should be the sole consideration for sale or offer for sale .

• Rate of exchange as on date of presentation of Bill of Entry as fixed by CBE&C

Board by notification should be considered .

Tariff Value

Tariff Value can be fixed by CBE&C for any class of imported goods while fixing

Government considers the trend value of such or like goods while fixing the tariff value.Once fixed, duty is payable as percentage of this value.

Customs Value as per Section 14(1)


C t V l S ti 14(1)




Slide 52

CIF (Cost of Insurance and Freight) value is the basis of

evaluation for imported goods.

• If the cost of airfreight is higher than 20% of FOB value of

goods then only 20% of the FOB price will be added for custom

valuation purposes .

• The cost of unloading and handling associated with delivery of

imported goods in port, also called Landing Charges shall be

added. These will be calculated @1% of CIF value.

• Insurance charges on goods have to be included. (In case not

mentioned, it will be calculated @1.125% of FOB value of

goods)

Customs Value as per Section 14(1)


O C C O (S )




Slide 53

1. ASSESSABLE VALUE = (INVOICE VALUE )x (EXCHANGE RATE)2. Basic Duty (BD) = (Assessable Value ) x BD %

3. C V D = ( Assessable value + BD) x CVD %

4. Educational Cess. on CVD (EuCVD) = ( CVD )x 2 %

5. Educational Cess on Customs Duty (EuTD) = ( BD+CVD +EuCVD) x2 %

6. Duty = BD + CVD + EuCVD+EuTD

7. Octroi(For Mumbai shpts only) = ( Assessable Value + Duty ) x 5.5%

8. DHL Service Charge = 2 % of Duty ( Step 6) OR INR 300whichever is Higher

9. Service Tax = (DHL Service Charge ) x 10.2%

10. Total Amount Chargeable = Duty + Octroi + DHL Service Charge +Service tax

11. I.e. Total Amount Chargeable = (Step 6+ Step 7+ Step 8 + Step 9 )

FORM – IV DUTY CALCULATION (Shipments < INR 10000)





Slide 54

Q. A consignment is imported by air for delivery in

Bangalore. CIF price is USD 100. Exchange rate is INR.46.55 per dollar. Find duty charged to the customer if duty

rate is 15+16+2+2.

1. ASSESSABLE VALUE = (100)x (46.55) = 4655

2. Basic Duty (BD) = (4655) x 15% = 698.25

3. C V D = (4655+ 698.25) x 16% = 856.52

4. EuCVD= ( 856.52 ) x 2% = 17

5. EuTD = ( 698.25+ 856.52+ 17) x 2% = 31.44

6. Duty = 698.25 + 856.52 + 17 + 31.44 = 1603.21

7. Octroi = 0 (Not for Mumbai)

8. DHL Service Charge = 300

9. Service Tax = (300) x 12.24%) = 37

10. Total Chargeable Amount = (1603 + 0 + 300 + 37) = 1940

Example


FORM - V DUTY CALCULATION (Shipments > INR




Slide 55

1. Invoice Value x Exchange Rate = FOB (inr)

2. 2.1 - A = Freight Component = FOB x 20%2.2 - B = Insurance Component = FOB x 1.125%

2.3 - C = Others = Freight Component (A) + Insurance Component (B)

2.4 - D = Landing Charges = (FOB + Others ) x 1%

3. Assessable Value = FOB + C + D

4. Basic Duty (BD) = (Assessable Value ) x BD %

5. C V D = ( Assessable value + BD) x CVD %6. Educational Cess on CVD (EuCVD) = ( CVD ) x 2 %

7. Educational Cess on Customs (EuTD) = ( BD+CVD +EuCVD) x 2 %

8. Duty = BD + CVD + ECVD+EuTD

9. Octroi (For Mumbai shpts only) = ( Assessable Value + Duty ) x 5.5 %

10. DHL Service Charge = 2 % of Duty ( Step 8) OR Inr 300 whichever is Higher

11. Service Tax = (DHL Service Charge ) x 10.2%12. Total Amount Chargeable = Duty + Octroi + DHL Service Charge + Service tax

13. I.e.Total Amount Chargeable = (Step 8 + Step 9 + Step 10 + Step 11)

NOTE : For CIF Invoice steps 2.1 , 2.2 & 2.3 should not be calculated (as freight& insurance is included in the cost) . Move straight to from Step 1 to Step 2.4

FORM - V DUTY CALCULATION (Shipments > INR

10000)





Slide 56

FORM - V DUTY CALCULATION (Shipments > INR 10000)

Q. FOB cost of a consignment is 3000 UK pounds. Insurance andtransport costs are not available. What is the customs duty if duty

rate is 15+16+2+2?Also calculate the octroi amount.

(On the date of filing of Bill of Entry, RBI reference rate of US$ was 43.37 and

inter bank closing rates were INR. 43.38 per US$ and INR. 69.38 per UK pound.

Exchange rate announced by CBE&C was INR. 69.78 per UK pound)

1. FOB = (3000 x 69.78) = 209340

• 2.1 A - Freight component = 209340 x 20% = 41868

• 2.2 B - Insurance component = 20934 x 1.125% = 2355

• 2.3 C - Others = 41868 + 2355 = 44223

• 2.4 D - Landing Charge = (209340 + 44223) x 1% = 25363. Assessable Value = (209340 + 41868 + 2355+ 2536) = 256099

4. Basic Duty (BD) = (256099) x 15% = 38415

5. C V D = (256099+ 38415) x 16% = 47122

Example





Slide 57

6. EuCVD = (47122) x 2 % = 942

7. EuTD = ( 38415+47122+942) x 2% = 1730

8. Duty = 38415 + 47122 + 942 + 1730 = 88209

9. Octroi = (256099 + 88209) x 5.5 % = 18937

10. DHL Service Charge = (88209 x 2% = 1764) OR Inr 300 whichever is

Higher = 1764

11. Service Tax = (1764) x 12.24% = 216

12. Total Amount Charged = (88209 + 18937 + 1764 + 216) = 109126




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