Understanding the Customs Clearance Process: A Guide for Importers and Exporters

Customs clearance is a very important step in international trade, as it ensures that goods coming into or transiting out of a country comply with its laws and regulations. To an enterprise dealing with imports and exports, proper knowledge of customs clearance procedures helps the company avoid delays, extra costs, and other legal issues arising. The main aim of this blog is to provide insight into customs clearance procedures by discussing some of the important steps and procedures in India while giving methods applicable globally.

The Role of Customs in International Trade

The customs authorities are jointly responsible for regulating and controlling imports and exports. Some of the most important functions of the customs authorities are to collect tariffs and taxes. This is to ensure that trade is in conformance with national legislation. This helps to protect the country from various illegal activities such as smuggling. Customs procedures, as a rule, are standardized in order to promote international trade, but they vary slightly from country to country. In India, the customs clearance process is followed by going through a series of steps for both importers and exporters

Steps involved in the customs clearance procedure:

Calling of Vessels

When a vessel carrying goods arrives at a customs port or airport, the person in-charge of the vessel-that is, either a ship’s captain or any airline pilot-is under obligation to notify the customs authorities. This is called the “calling of vessels.” It does not involve the importer since the shipping line or airline concerned does it.

Filing the Import General Manifest (IGM)

In turn, the person in charge of the vehicle transporting such goods shall, prior to the unloading of such goods, electronically submit an Import General Manifest in response. It’s, in essence, a document which includes cargo details, such as goods type, quantity, and the details of an importer. On proper assessment by the customs authorities, the information as submitted in the IGM is verified. After verifying the manifest, customs issue “entry inwards” of the vessel, assign an IGM number to thus allow cargo to be taken out.

THE CUSTODY OF GOODS

Once the goods arrive and are unloaded, they are taken into the custody of a recognised custodian. He will take care that no goods are tampered with or taken away without proper clearance. Goods remain in custody until completion of the customs clearance process.

Filing of Bill of Entry

The importer must file an electronic Bill of Entry before or on arrival to initiate the customs clearance process. A Bill of Entry is a document which portrays the details of the goods to be imported, its value, quantity, and classification for customs purposes. Bill of Entry, in India, is filed through ICEDIS, and the importer is said to assess his own taxes and duties payable. Once the Bill of Entry is acquitted, the importer pays due duties, along with Goods and Services Tax, recorded on ICEDIS.

Assessment and Payment of Duties

Assessment of duty is one of the important steps in customs clearance. Importers themselves estimate under self-assessment the dues payable in accordance with the customs tariff and the exchange rate applicable at the time of importation. Customs verification takes place to check the assessment and any errors detected may attract additional duty/penalty. The Bill of Entry after payment of the dues is taken up for further processing.

Inspection and Verification of Goods

Customs officials may check the goods to ascertain if they are the same as described in the Bill of Entry after making the payment of duties due. Goods are normally inspected on a random selection basis, although high-risk shipments may be subjected to a more detailed check. After finding that the goods match what is declared, customs give permission for clearance.

Delivery of Merchandise

Once the Bill of Entry is approved by the customs authorities after the goods are inspected, delivery of the cargo may be taken by the importer. If the goods have been deposited in a warehouse, then the importer must file an Ex-Bond Bill of Entry to clear the warehoused goods. The importer can thus avoid duties on the goods that are deposited in the warehouse on payment of duties when such goods are taken out of the warehouse.

Import Export Code (IEC)

In other words, IEC is a necessary document to be available with anyone doing international business in India. Without this code, none can import or export the goods in India. The issuance of an IEC is quite easy, and one may get it by contacting DGFT. The code is normally issued within a few days and has lifetime validity.

Customs Clearance of Export Goods

Like in the case of imports, exports are also subjected to export customs clearance formalities. The exporters in India have to file a Shipping Bill, which is somewhat similar to the Bill of Entry in the case of imports. The Shipping Bill contains detailed information on the exported goods in terms of its value, quantity, and destination. The exporters also have to submit other supporting documents like the invoice, packing list, and certificate of origin. In most cases, the customs examine the export goods before allowing their clearance.

The Role of the Electronic Data Interchange System

Imports and exports in India are cleared through the EDI system. This EDI/EGC helps in simplifying the procedure because the importers and exporters can submit the documents electronically. The status of the shipment to be delivered is tracked. This helps in reducing delays and thereby brings transparency in customs clearance.

With this in mind, any business operation that relies on international trade should understand how customs clearance works to guarantee smooth cargo movement across borders. Customs delays may translate into colossal financial losses, especially where the goods are perishable or the end delivery has to be time-sensitive.

Common challenges in customs clearance

However, despite these streamlined procedures, customs clearance is still a headache for some, particularly those that may be inexperienced in the process. Some of the common setbacks reported include:

Documentation Errors: The most frequent reason for customs clearance delay is wrong documentation. All the documents involved in the process, which are an invoice, packing lists, and certificates of origin, should be accurately and timely completed.
Valuation Disputes: The value declared on goods against the assessed value by the customs authority may create dispute and delays in customs clearance. Import decisions should format a characterization of products against market pricing.
Import/Export Control Compliance: Many countries have regulations on the import and export of certain goods. Businesses must ensure that they put up with regulations to avoid penalties or confiscation.

In a Nutshell:

Customs clearance is quite a confusing and huge procedure for an Indian entrepreneurship firm intending to set up business internationally, though comprehensive support is provided through platforms like Amazon Global Selling. Businesses can sell their products on more than 18 international marketplaces with the help of Amazon’s vast logistics network-Amazon FBA and Amazon SEND. Amazon Global Selling provides access for both small businesses and experienced exporters alike to the platform and resources necessary to manage such complexity.