Before your international shipment can be delivered to the customer, it has to clear customs. But what really happens in a customs office? Customs clearance is simply the process of getting goods through customs so they can enter the country. Every country has import duties and taxes on goods crossing their borders. This generates income and helps protect the economy, environment, and citizens.
For many merchants, this is a big mystery that complicates cross-border shipping. Luckily, for 99% of merchants, clearing customs is a straightforward 4-step process.
You just need a few documents, and you’re good to go, but it’s always good to know what you’re dealing with. In this blog, we will discuss exactly that, from defining customs clearance to mentioning the necessary documents for every step, we’ve covered it all!
Let’s get right into it then!
What is Customs Clearance?
Before shipping different goods, a shipper might ponder the significance of customs clearance and how it impacts their shipping choices. Every international ocean freight shipment must fulfill its requirement of it in every country it passes through.
Clearing orders is an essential step in allowing goods to enter a country, facilitated by the authorized customs broker. This process also entails handling information about shipments involving imports and exports, with various parties participating in the procedure.
Who is a Customs Broker?
It is someone who serves as a representative for importers, aiding them in managing their trade affairs.
These agents are authorized under tariff laws. Such brokers, whether individuals or firms, hold licenses issued by the Indian Customs authorities to handle customs entries, duty payments, and navigate the release of goods from customs custody.
Customs Clearance Process
The entire procedure of getting your products cleared at customs might be confusing, therefore we’ve broken down all the processes below, have a look!
Vessel Arrival Notification
Upon arrival of goods-carrying vessels in the country, the vessel operator is responsible for ensuring they are officially called at the customs port. For example, if goods are imported by aircraft, the pilot takes care of this process at the customs airport. Importers typically don’t need to get involved as airlines or shipping lines handle it.
Import General Manifest (IGM) Filing
The person in charge of the vehicle must electronically file an Import General Manifest before the goods arrive. This document contains details of all goods imported by the vessel.
Customs Entry and Verification
After reviewing the Import General Manifest and verifying documents, customs authorities grant entry inward to the vessel. They assign an IGM number to the manifest and allow the vessel’s master to land and unload the cargo.
Custodial Arrangements
Upon vessel arrival, the goods remain in the custody of an approved Custodian until customs clearance is completed. Custodians are individuals authorized by the Principal Commissioner or Commissioner of Customs.
Imported goods can only be unloaded under specific conditions, such as noting it on the manifest, unloading at approved locations within the customs port, under authorized supervision, and during working hours.
Bill of Entry Filing
The importer is also obliged to submit a Bill of Entry-in customs copy before or at the time of importation of the goods. Like all Honour Roll procedures, the Bill of Entry is completed where the importer assesses the duties and taxes himself, a situation referred to as self-assessment.
Once the Bill of Entry contains the importer’s declaration, the GST, and duties contained are paid and uploaded into the ICEDIS. Numerical identification of the form is then provided, in the form of a Bill of Entry number.
The importer submits the customs copy of the Bill of Entry, duty-paid challan, and other supporting documents to port authorities for clearance permission. After clearance permission is granted, the port officer generates duplicate and triplicate copies of the Bill of Entry for the importer.
Goods Delivery
Upon presenting customs clearance to port authorities, the importer can take delivery of their goods. For goods deposited in a warehouse, the importer needs another Bill of Entry called the ex-bond Bill of Entry to clear all or part of the warehoused cargo.
Import Export Code (IEC)
The Import Export Code (IEC) is a primary document required for commencing import-export activities. Obtaining an IEC is mandatory for importing or exporting goods or services. Applying for an IEC through IndiaFilings typically results in approval within 6 to 7 days, providing numerous benefits for business growth.
Custom Clearance Charges
All imports into India are primarily subject to four duties and taxes: Basic Customs Duty (BCD), Customs Handling Fee, Integrated Goods and Services Tax (IGST), and Social Welfare Surcharge.
Here’s how each duty is calculated:
Basic Customs Duty (BCD)
To get BCD, therefore, we need to calculate total value of goods, multiplying it with the customs duty rate. For instance, if you wish to import 2000 umbrellas in India for a total cost of INR 200 per piece then the BCD will be calculated on the basis of Total value.
Countervailing Duty (CVD)
Countervailing Duty (CVD) is applied when goods that have received tax incentives or subsidies in a foreign country affect the competitiveness of locally produced goods. This duty may apply to goods such as steel, chemicals, and agricultural producer goods both imported into the EEA and exported from the EEA. Based on the CVD on various goods, the Indian government periodically examines several products to analyse the need.
Anti-dumping Duty
Dumping is the practice of selling goods for less than they would have sold for on the domestic market, which could be problematic for domestic businesses. To this effect, the Indian government carries out investigations of activities and also imposes anti-dumping duties.
Special Additional Duty (SAD)
Certain imported commodities are subject to Special Administrative Duty (SAD) in order to shield domestic producers from unfair competition from importers from other countries. The computation for SAD is compounded on the taxable value of the things/service and other taxes inclusive of BCD as well as CVD.
Safeguard Duty
This is a parachuted duty applied to goods which experience an increased importation rate to prevent the domestic industry from being negatively affected. For example, the Indian government levies a 25% Safeguard Duty on Solar Panels imported from some nations.
Customs Handling Fee
India has made regulations with the customs handling fee of 1% on the total actual cost of the imported goods including freight and insurance.
India and Malaysia have a longstanding trade relationship, with bilateral trade surpassing $17 billion in 2022. Despite the significant opportunities for Malaysian businesses, India’s import duties can be complex and challenging to navigate due to the various duties and taxes imposed.
FAQs: Customs Clearance: The Ultimate Guide – Meaning, Process, Documents Covered!
What are the customs clearance documents?
The primary documents required for customs clearance are the commercial invoice and the air waybill.
Depending on the shipment’s origin, destination, and type of goods, you may also need additional documents such as:
- Certificate of origin
- Export/Import license or permit
How long does customs clearance take?
Customs clearance duration varies, typically taking a few hours to several days, depending on factors like shipment complexity and customs workload.
How to check the status of customs clearance?
To check customs clearance status, use the tracking number provided by the shipping carrier or contact the customs authority directly.
What does the first cheque mean in customs clearance?
“First check” in customs clearance refers to the initial inspection of documents and goods by customs officials to assess compliance with import regulations.
Conclusion
Customs clearance may seem dull, but it’s the thrilling climax of your product’s international journey! It’s the last obstacle before your product reaches eager customers.
With proper preparation, you can breeze through this final challenge. For expert advice on supply chain navigation, check out Qodenext! They’re supply chain pros and cover everything shipping-related!
