High seas sales

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 January 2014 we had sale our consignment on high seas to our customer.As per rule the sale invoice value will be cif +2 % eg cif value $ 1000 +20 Sales value $ 1020. Converted in INR as per exchange rate.
Is compulsory sale invoice should be CIF + 2% or we can raised invoice only CIF value our customer will pay custom duty at customs as per rule CIF +2 %

Jyotindra Thakar

Jyotindra Thakar (Expert)
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13 February 2014 For custom duty assessment purpose customs will consider CIF value + 2% even if you raise your highseas sale invoice at lower rate. You can raise invoice at CIF value and at the time of custom clearance / assessment, your customer will have to agree to pay duty on CIF + 2%. In reverse senario, if highseas sale invoice is raised by amount more that CIF +2 %, customs will consider that amount for duty assesssment purpose which please note.

Querist : Anonymous

Querist : Anonymous (Querist)

17 February 2014 if we prepared invoice on CIF Value and our customer agree to pay custom duty CIF + 2 % as per rule. after this sale we will get commission for our supplier against the same transaction.These transaction create any issues as we indirectly paid less custom duty

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 ### High Seas Sale and Invoice Value Clarification

**High Seas Sale (HSS)** involves selling goods while they are still in transit, before they arrive in the destination country. It is crucial to understand how the invoice value should be handled and the implications for customs duties and compliance.

### Key Points:

#### **1. Invoice Value in High Seas Sales**

- **CIF Value and Sale Invoice**:
- **CIF Value**: This is the cost, insurance, and freight value of the goods. It represents the value of goods at the point of origin.
- **Sale Invoice**: Typically, the sale invoice for high seas sales should include an additional markup. In many cases, this markup is around 2% over the CIF value, which represents a standard practice for high seas sales.

**Example**:
- **CIF Value**: $1000
- **Invoice Value**: CIF + 2% = $1020

#### **2. Custom Duty and Compliance**

- **Customs Duty**:
- The customs duty is generally calculated on the value of the goods at the point of entry into the destination country, which is the CIF + 2% invoice value for high seas sales.

- **If the Invoice is CIF Only**:
- **Customs Duty**: If you raise an invoice only at CIF value and the customer agrees to pay the customs duty based on CIF + 2%, this might be acceptable if it aligns with the regulatory framework of both countries involved. However, this is less common and could lead to complications or disputes.

- **Commission and Transaction Handling**:
- **Commission**: The commission received from the supplier or for the transaction should be accounted for separately and appropriately.

#### **3. Potential Issues**

- **Compliance Risk**:
- **Underpayment of Customs Duty**: If the invoice does not reflect the CIF + 2% value and only the CIF value is invoiced, it could potentially result in the customs authority calculating duties based on the CIF value only. This can lead to non-compliance issues if not handled correctly.
- **Audit and Verification**: Customs authorities may audit and verify transactions, so discrepancies between invoiced values and customs duty paid could result in penalties or additional scrutiny.

- **Regulatory Alignment**:
- Ensure that all aspects of the high seas sale comply with the regulations of the exporting and importing countries. Different countries might have different rules, and it's important to follow them to avoid any legal issues.

### **Recommendations**

1. **Invoice Value**: To avoid complications, it is generally advisable to issue the sale invoice at CIF + 2%, as this is the standard practice for high seas sales and aligns with how customs duties are calculated.

2. **Consult a Customs Expert**: Consult with a customs expert or a trade advisor to ensure that your transactions are in compliance with the relevant regulations and to handle any specific nuances in your trade practices.

3. **Documentation**: Maintain detailed records of all transactions, including invoices, commission agreements, and customs documentation, to ensure transparency and compliance.

4. **Review Regulations**: Regularly review the regulations of both the exporting and importing countries to stay updated on any changes that might affect high seas sales.

By adhering to these guidelines, you can ensure that your high seas sales transactions are conducted smoothly and in compliance with all relevant regulations.