Import procedure

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28 January 2015 What is the basic import procedure in India?

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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29 January 2015 In India, the import and export of goods is governed by the Foreign Trade (Development & Regulation) Act, 1992 and India’s Export Import (EXIM) Policy. India’s Directorate General of Foreign Trade (DGFT) is the principal governing body responsible for all matters related to EXIM Policy, and new guidelines on Foreign Trade Policy (FTP) are expected to be released soon to replace previous FTP guidelines that expired in March 2014.

Importers are required to register with the DGFT to obtain an Importer Exporter Code Number (IEC) issued against their Permanent Account Number (PAN), before engaging in EXIM activities. After an IEC has been obtained, the source of items for import must be identified and declared. The Indian Trade Classification – Harmonized System (ITC-HS) allows for the free import of most goods without a special import license. Certain goods that fall under the following categories require special permission or licensing, however:

Licensed (Restricted) Items: Licensed items can only be imported after obtaining an import license from the DGFT. These include some consumer goods such as precious and semi-precious stones, products related to safety and security, seeds, plants, animals, insecticides, pharmaceuticals and chemicals, and some electronic items.
Canalized Items: Canalized items can only be imported via specified transportation channels and methods, or through government agencies such as the State Trading Corporation (STC). These include petroleum products, bulk agricultural products such as grains and vegetable oils, and some pharmaceutical products.
Prohibited Items: These goods are strictly prohibited from import and include tallow fat, animal rennet, wild animals, and unprocessed ivory.

Import Procedures
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Bill of Entry

Every importer is required to begin by submitting a Bill of Entry under Section 46. This document certifies the description and value of goods entering the country. The Bill of Entry should be submitted as follows:

1) The original and duplicate for customs

2) A copy for the importer

3) A copy for the bank

4) A copy for making remittances

Under the Electronic Data Interchange (EDI), no formal Bill of Entry is required (as it is recorded electronically) but the importer is required to file a cargo declaration after prescribing particulars required for processing of the entry for customs clearance. Bills of Entry can be one of three types:

Bill of Entry for Home Consumption- This form is used when the imported goods are to be cleared on payment of full duty. Home consumption means use within India. It is white colored and hence often called the ‘white bill of entry’.
Bill of Entry for Housing- If the imported goods are not required immediately, importers may store the goods in a warehouse without the payment of duty under a bond and then clear them from the warehouse when required on payment of duty. This will enable the deferment of payment of the customs duty until goods are actually required. This Bill of Entry is printed on yellow paper and is thus often called the ‘yellow bill of entry’. It is also called the ‘into bond bill of entry’ as the bond is executed for the transfer of goods in a warehouse without paying duty.
Bill of Entry for Ex-Bond Clearance – The third type is for ex-bond clearance. This is used for clearance from the warehouse on payment of duty and is printed on green paper.

It is important to note that the rate of duty applicable is as it exists on the date a good is removed from a warehouse. Therefore, if the rate changes after goods have been cleared from a customs port, the customs duty as assessed on a yellow bill of entry (Bill of Entry for Housing) and paid on the value listed on the green bill of entry (Bill of Entry for Ex-Bond Clearance) will not be the same.

Other non-EDI Documents

If a Bill of Entry is filed without using the Electronic Data Interchange system, the following documents are also generally required:

Signed invoice
Packing list
Bill of lading or delivery order/air waybill
GATT declaration form
Importer/CHA declaration
Import license wherever necessary
Letter of credit/bank draft
Insurance document
Industrial license, if required
Test report in case of chemicals
Adhoc exemption order
DEEC Book/DEPB in original, where applicable
Catalogue, technical write up, literature in case of machineries, spares or chemicals as may be applicable
Separately split up value of spares, components, and machinery
Certificate of Origin, if preferential rate of duty is claimed

Import Duties

The Indian government levies several types of import duties on goods. These include:

Basic Customs Duty

Basic Customs Duty (BCD) is the standard tax rate applied to goods, or the standard preferential rate in the case of goods imported from specified countries. The rates of customs duties are outlined in the First and Second Schedules of the Customs Tariff Act, 1975. The First Schedule specifies rates of import duty and the Second specifies rates of export duty. BCD is divided into standard and preferential rates, with goods imported from countries holding trade agreements with the Indian central government eligible for lower preferential rates.

Additional Customs Duty (Countervailing Duty)

Countervailing duty (CVD) is equal to central excise duty and is levied on imported articles produced in India. With CVD, the process of production amounts to ‘manufacture’ as it is defined in the Central Excise Act, 1944. CVD is based on the aggregate value of goods including landing charges and BCD. An additional CVD may be levied equivalent to sales tax or VAT, not exceeding four percent. This duty can be refunded if the importer pays all customs duties, the sales invoice indicates the credit is not allowed, and the importer pays VAT/sales tax on the sale of the good.

Other CVDs may be imposed on specific imported goods to neutralize the effect of a subsidy in the country of origin. A notification issued by the central government on these specified goods is valid for five years and potentially subject to further extension not exceeding ten years. Subsidies related to research activities, assistance to disadvantaged regions in the destination country, and assistance in adapting existing facilities to new environmental requirements are exempt.

Anti-Dumping Duty

The central government may impose an anti-dumping duty if it determines a good is being imported at below fair market price, and an importer will be notified if this is the case. The duty cannot exceed the difference between the export and normal price (margin of dumping). This does not apply to goods imported by 100 percent Export Oriented Units (EOU) and units in Free Trade Zones (FTZs) and Special Economic Zones (SEZs). If an importer is notified by the central government then an Anti-Dumping duty is to be imposed, the notification will remain valid for five years with the possibility of being extended to 10 years.

Safeguard Duty

Unlike Anti-Dumping Duty, the imposition of Safeguard Duty does not require the central government to determine a good is being imported at below fair market price. Safeguard Duty is imposed if the government decides that a sudden increase in exports is causing, or threatens to cause, serious damage to a domestic industry. A notification regarding the imposition of Safeguard Duty is valid for four years with the possibility of being extended to 10 years.

Protective Duty

A protective duty is sometimes imposed to protect domestic industry from imports. If the Tariff Commission issues a recommendation for the imposition of a Protective Duty, the central government may choose to impose this at a rate that does not exceed that recommended by the Tariff Commission. The central government can specify the period up to which the protective duty will remain in force, reduce or extend the period, and adjust the effective rate.

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