Summer Report On Import Export Procedure

Functional Procedure of Custom Clearance
“FUNCTIONAL PROCEDURE OF CUSTOM

CLEARANCE”
A PROJECT REPORT SUBMITTED BY
SULABH MAHETA (08084)

AMIN PATTANI (08100)
BATCH – 2008-2010
TO
DIRECTOR (PGDM)
In partial fulfillment of the requirements of
Tolani Institute of Management Studies, Adipur
For the award of the degree of
Post Graduate Diploma in Management
TOLANI INSTITUTE OF MANAGEMENT STUDIES

ADIPUR – 370205
JULY - 2009

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ACKNOWLEDGEMENT
We are very thankful to Tolani Institute of Management Studies who give us such
opportunity to work out for project on foreign trade. We also express our gratitude to
Mr. Apurva Maheta for his precious help during the entire course.
We are very thankful to all employees of Shakti Forwarders Pvt. Ltd., Gandhidham
for supporting and providing us the necessary knowledge that would help in our
future quests. During our training period, we have not only learnt the standard Custom
Clearance procedure but also learned about other aspects of for running the shipping
departments smoothly.
The various department of the organization work in close co-ordination with each
other in order to achieve a common end.
We would also like to thanks Mr. Suresh Maheta, Mr. Rajesh Naiyer, Mr. Paresh
chaturvedi, Mr.Dharmesh, Mr. Manoj for their guidance which help us to complete
our project. Once again we heartly thankful to Shakti Forwarders Pvt. Ltd who help us
in making a project of procedure of custom clearance for import and export and gives
us an opportunity to learn under kind guidance and learning environment.

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PREFACE
We know that training is for the development and enhancement of the knowledge in
particular fields. It can never be possible to make a mark in today’s competitive era
only with theoretical knowledge when industries are developing at global level,
practical knowledge of administration and management of business is very important.
Hence, practical study is of great importance to PGDM student.
With a view to expand the boundaries of thinking, we have undergone 2 rd SEM

TRAINING at Shakti Forwarders Pvt. Ltd. we have made a deliberate to collect the
required information and fulfill training objective.

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EXECUTIVE SUMMRY
As a partial fulfillment of PGDM all students are required to undergo training for 2
months. With respect to that this we have prepared this project report on “Functional
Procedure of Custom Clearance” undertaken at Shakti Forwarders Pvt. Ltd.,
Gandhidham.
We have selected this topic to know about the custom process. This report also tells
about present scenario of Indian shipping and also tells about development in shipping
in Gujarat. Another objective is to know Documentation process done by CHA
(Clearing House Agent) to clear the goods from CUSTOM.
Our secondary objective is to know the relation between CHA and importer as well as
exporter. The report also describes that why shipping line invest their amount to
purchase ship and type of ship for transportation of goods.
This report also tells that as that how to calculate the DUTY on import-export goods.
We also describe that which Documents are useful for CHA, IMPORTER and
EXPORTER.

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OBJECTIVE OF THE STUDY
 To know the present scenario in Indian shipping line.
 To know the relation between the CHA and exporter as well as importer.
 To know the documentation process done by the CHA.
 To know the future of Indian shipping.

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CONTENTS
Description Page No.

Acknowledgement 2
Preface 3
Executive Summary 4
Objective of the Study 5
List of tables 7
List of figures 8
Abstract
1. Introduction 9
1.1 Project 9
1.2 Industry 10
1.3. Company 27
2. Methodology 29
3. Data Collection and Explanation 30
3.1 Export 30
3.2 Import 46
4. Recommendations 54
5. Conclusion 55
Appendices 56
Bibliography 56

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LIST OF TABLES
Sr No. Table Title Page No.

1 Performance of Major Ports 13
2 Growth of state GDP 13
3 Largest Port by State 13

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LIST OF FIGURES
Sr No. Table Title Page No.

1 Ports of Gujarat 11
2 Break Up of Commodities Handled at Major Ports 23
3 Forecast for Container Port Capacity 24

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1. INTRODUCTION
1.1 Project:
In view of the rapidly and constantly changing business environment globally and fast
evolving trade and commerce scenario in India vis-à-vis global market, there is
increasing requirement of reliable and dependable integrated logistics solutions
providers who can provide comprehensive, professional and dependable logistics
support to the industry, keeping the same in mind and with the vision to provide
quality and professional comprehensive logistics solutions to the international &
domestic trade.
In the development of any country’s economy, exports play a crucial role. Export is
the most important aspect of earning foreign exchange. A country should have to be
equipped with natural resources, so that it can sell these resources into the
international market.
With the opening up of the Indian economy, the international trade has been increased
significantly as there are less restriction on exports and imports.
More and more multinationals are registering their entry into the Indian market. The
imported products are now in well reach of Indian customers. The living standard has
been improved. This results in substantial amount of growth in both exports and
imports.
The procedure of both the exports and imports are time consuming and complicated.
In this regard there are several logistic companies and custom house agents providing
their services on the behalf of the exporters and importers to facilitate the trade
between them. These custom house agents and logistics companies take over the
responsibility of sending the goods from the exporter’s premises to the importer
premises, which also includes the most important aspect of custom clearance.
Shakti Forwarders Pvt. Ltd. is a leading name for custom clearance. Over the years
they have operated smoothly with their wide spectrum of personalized services.

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1.2 Industry:
Indian shipping scenario:
India has 12 major ports and 185 minor/intermediate ports. Over 90 percent by
volume and 70 percent by value of India’s overseas trade, aggregate of exports and
imports, is carried out through maritime transport along its 7617 km long coast line.
India has the largest merchant shipping fleet among the developing countries and its
merchant shipping fleet ranks 18th in the world, in terms of fleet size. Another silver
lining is the average age of the India’s merchant shipping fleet is only 12.7 years as
compared to the international average of 17 years .but, India’s share, sadly, constitutes
only 1.45% of the world’s cargo carrying capacity.
As on April 1, 2005, India has a total of 686 ships comprising 8.01 Million Gross
Tonnage (GT) and 13.28 Million Dead Weight Tonnage (DWT). The shipping
corporation of India (SCI), the country’s largest carrier, owns and manages 82 ships
with 2.54 million GT and accounts for 40 percent of national tonnage. India is also
among the few countries that offer fair and free competition to all shipping companies
for obtaining cargo. There is no cargo reservation policy in India.
Indian shipping has remained a deferred subject till independence. Only after
independence, the development of shipping has attracted the state policy. The subject
of shipping, in the beginning, has been dealt with by the ministry of commerce, till
1949 and subsequently, in 1951, it has been shifted to the ministry of transport and
shipping. In 1947, the government of India has announced the national policy on
shipping, aiming at the total development of the industry. In order to accelerate the
developmental efforts, the necessity for a centralized administrative organization has
been felt. Accordingly in September necessity for a centralized administrative
organization has been felt. Accordingly in September 1949, the directorate general of
shipping with its headquarters at Bombay has been established with the objectives of
promotion and development of Indian shipping industry.

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Introduction to Gujarat port:
Ports of Gujarat
Along the 1600 kms. of coastline of Gujarat, there are 41 ports, of which Kandla is a
major port. Out of remaining 40 ports, 11 are intermediate ports and 29 are minor
ports under the control of Gujarat maritime board.
Gujarat, situated on the western coast of India, is a principal maritime state endowed
with favorable strategic port locations. The prominence of Gujarat is by virtue of
having nearly 1600 kms long coastline, which accounts for 1/3rd of the coastline of
India and being the nearest maritime outlet to Middle East, Africa and Europe.
In 1991, government of India initiated various economic, trade and industrial reforms,
through the policy of liberalization to enhance industrial and trading activities. The
rationalization of import duties and stress on export promotion has seen imports
increasing by 24% and exports by 25%. Gujarat state is one of those frontline states
that can take up the policy of liberalization and privatization announced by the
government of India through the process of globalization.

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Gujarat itself is experiencing a phenomenal interest in investments both from mega-

industrial sectors within the country and also from top multi-national abroad.
Investments to the tune of $30 billion are already in the pipeline. From an analysis of
the present investments and those that are flowing in, one can perceive a particular
trend which is manifesting itself - investments are converging in and around potential
port sites. Investments of over Rs.16,000 crores are taking place at Hazira, Rs.15,000
crores are planned at Varga, Rs.20,000 crores are planned in areas near Pipavav and
near Jamnagar port locations. The logic of locating these industries is rather clear, viz.
The large business houses want to import industrial raw-materials and want access to
the international market through sea routes, which is definitely more viable and
feasible as against the surface transport or air transport.
Export of salt and import of coal are other major potential cargo apart from the
existing items of import and export. As indicated earlier, the massive spurt in
industrialization also opens up scope for import of industrial raw materials and export
of finished goods to the global market through ports. The vast coastline of Gujarat,
also offers tremendous potential for marine fisheries and subsequent processing and
exports. Over and above this, any development in the hinterland state has a direct
impact on Gujarat ports.
In all over India, Gujarat ports are handling more cargo then other states and by the
year by year cargo handling is increasing. From the below data we can find that
Kandla port is handling more cargo than all over India.

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In Gujarat, ports are playing major role for growth of state GDP (Gross Domestic
Product) below are the figure for the year 2006-2007
Shipping Company:
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“Shipping Company is companies which invest his capital in purchase of ships and
provide transport service through the sea to its customers is known as shipping
company.”
Basically the shipping companies provide services in two ways
1. TRAMP SHIPS
2. LINER SHIPS
Tramp Ships:-
Tramp ship or general trader, does not operate on a fixed sailing schedule, but merely
trades in all parts of the world in search of cargo, primarily bulk shipments. It is a
chartered ship prepared to carry anything anywhere. Its cargoes include coal, grain,
timber, sugar, ores, fertilizers, etc like which are carried in complete shiploads.
Tramp tankers are specialized vessels. They may be under charter or be operated by
an industrial company, that is oil company, motor manufacturer, etc to suit their own
individual/market needs.
Liner Ships:-
Liner ship operates on a fixed route between two ports or two series of ports. They
operate on a regular scheduled service. They sail on scheduled dates/times whether
they are full or not. The cost of using the service (freight) can be quoted from a fixed
tariff.
Container ships in deep sea trades and roe ship in the short sea trades feature
prominently in this field.
Different Types of Ships:-

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1. Container ships
2. Roll-on/roll-off ships
3. Break-bulk ships
4. Crude carries
5. Dry-bulk carriers
6. Gas carriers
Container Ship:-
 Container ship is also known as a ‘BOX SHIP’
 Container ships cater to only containerized cargo and generally have cranes on
board. They can store up to 4 tiers of containers below the main deck and up to 3
tiers above deck.

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Roll – on / Roll - off Ships:-
 Roll-on/roll-of ships were created to accommodate cargo that was self

propelled, such as automobiles or trucks, or cargo that could be wheeled into a
ship, such as railroad cars. They are essentially floating garages. It takes long time
to load such vehicles over the rail it is preferable to load them by rolling them onto
the ship.
 Roll-on/Roll-of ships therefore have a portion of their hull that opens up and
acts as a ramp on which the vehicles are driven before being parked on the many
decks of the ship and secured with chains. The hull opening is either on the side of
the ship or on its stern (rear).This ship have an advantage in that specialized lifting
equipment is not required, even for the heaviest of loads, since the cargo rolls
under its own power or pulled by a tractor.

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Break-Bulk Ships:
 Break-bulk cargo ships are multipurpose ships that can transport shipments of
unusual sizes, unitized on pallets, in bags, or in crates.
 Due to increasing role of RORO (Roll-on/Roll-off) ships, container ships,

break-bulk ships share of international trade is decreasing.
 The advantage of break-bulk ships is that they can call at just about any port to
pick up different kinds of cargo loads, giving them a flexibility that container ships
do not yet have.
 The main problem with a break-bulk ship stems from its labor-intensive
loading and unloading because each unit of cargo handles separately.

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Crude Carriers:-
 Crude carriers are the bulk ships dedicated to the transport of petroleum products,
whether unrefined or refined, such as gasoline or diesel fuel.
 The crude carriers are also known as VLCC (Very Large Crude Carriers) and
ULCC (Ultra Large Crude Carriers).
 VLCCs and ULCCs are such large ships that they can call on only a few ports in
the world; since their draft, when loaded, can reach 35 meters(115 feet) they need
very deep ports for berthing.

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Dry-Bulk Carriers:
 Dry-bulk carriers operate on the same basis as oil tankers in that they are chartered
for a whole voyage.
 Dry-bulk ships have several holds in their hull, in which non-unitized cargo is
placed.
 Dry bulk ships carry agricultural products, such as cereals, as well as coal, ores,
scrap iron, dry chemicals, and other bulk commodities.
 Dry-bulk ships are generally small enough to fit through the PANAMA CANAL.

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Gas Carriers:
 Another important bulk trade is the transportation of Liquefied Natural Gas

(LNG) and of Liquefied Petroleum Gas (LPG). These types of carriers have a very
distinctive shape. These ships hold several spheres of compressed gasses, only
part of which are visible above their main deck.
 The LNG and LPG trades tend to be slightly different than the average bulk
transport, as they are used in a particular trade for long periods of time, on long-
term contracts-called time charter parties and therefore nearly have a sailing
schedule, not unlike liner ships.

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Containerization:
‘Containerization’, the term very familiar to present day shipping industry is a

completely unknown concept, a few decades back. Malcolm McLean, owner of a
huge trucking company in USA, who has first conceived the idea of containerization
by transporting containers though ‘ideal-x’ in 1956 and initiated a revolution in the
history of shipping industry.
Before containerization, cargo has to be loaded first into the truck and later truck is to
driven to the port, unload the goods at the port and them into the ship at the port. This
has been a cumbersome process and, in consequence, consumed a lot of time. For
completing the exercise, ships are detained in the port for about ten days for the entire
process of unloading and loading. With the arrival of containerization, shippers have
started stuffing into containers, at their own place, and containers are brought to the
container yard (inland container depot) for shipment. This process has greatly
facilitated in two, after unloading the containers and loading them again into the ship.
The process of containerization has decongested the ports that are heavily crowded.
Shipping is truly the lynchpin of global economy and international trade. More than
90% of world merchandise trade is carried by sea and over 50% of that volume is
containerized. In today’s era of globalization, international trade has evolved to the
level where almost no nation can be self-sufficient and global trade has fostered an
interdependency and inter-connectivity between countries. Shipping has always
provided the most cost-effective means of transportation over long distances and
containerization has played a crucial role in world maritime transport.

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What is meant by containerization?
Containerization is the practice of carrying goods in containers of uniform shape and

size for shipping. Almost anything can be stored in a container, but they are
particularly useful for the transport of manufactured goods. It is a method of
distribution of goods using containers. The use of containers has, indeed, facilitated
carriage of goods using containers. The use of containers has, indeed, facilitated
carriage of goods. Exporters need to go to the seaport for export of goods. Instead the
goods sent to inland container depot/ container freight station for sending to the
destination.
Since 1950s, containers have revolutionized sea-borne trade, and now carry around
90% of all manufactured goods by sea. The transporters in developed countries have
started making use of containerization, early now; developing countries have started
making use of containerization, early. Now, developing countries too are taking a
greater advantage in using containers for transportation of goods. Different countries
are giving logistic support, giving the necessary boost to improve the required
infrastructure to containerization, for encouraging export industry.
Containerization is to contribute about 22.66% to total cargo by 2010-11.
The robust growth of India’s manufacturing industry has pushed up India’s

containerization. India’s containerization has over 70% of total exported cargo, and
around 40% imported cargo. The Government of India has pursued a policy of
developing a number of Inland Container Depots and Container Freight Stations to
facilitate modal interchange and distribution of cargo and most importantly to avoid
awkward customs procedures from the waterfront. Containerization at major ports of
India contributed about 11% of total cargo handled at those ports in 2000-01; it
increased to 16% in 2005-06 and is estimated to further increase to 22.7% by 2010-
11.

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Challenges Container port demand and capacity imbalance:
In view of the buoyant global merchandise trade scenario, container port demand has
been growing rapidly. Globalization has spurted merchandise trade, which is ready for
big stride. During the last four years, world container traffic has been growing at over
9.2% per annum, while container port capacity is growing at an average 4.5% per
annum. There will be requirement for additional port capacity to be built if the current
trend and port utilization level is maintained by 2010. The projected global container
demand and container port capacity illustrates that there will be a huge difference
between container port demand and capacity in the next four to five years. This is one
of the major challenges for global container trade. Extra capacity should be built to
meet the growing demand.

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Types of containers-:
There are different types of containers. The popular types are:
1. General purpose containers-:
There are the most common type of containers and are the ones with which most
people are familiar. Each general-purpose container is fully closed and has width
doors at one end for access. Both liquid and solid substances can be loaded in these
containers. Based on length of the container, the container is generally known as a 20
ft container or 40 ft container, in practice. Hazardous or dangerous cargo can not be
loaded into general-purpose containers.

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2. Reefer containers (refrigerated) -:
These play an important role in South - Africa’s exports of perishable products, and
are designed to carry cargoes at temperatures reading down to deep frozen. For
refrigeration, they are fitted with electrical equipment for supply of necessary
electricity.
3. Dry bulk containers-:
These are built especially for the carriage of dry powders and granular substances in
bulk.
4. Open top/open sided containers-:
These are built for heavy and awkward pieces of cargo. These containers are ideal
where height of the cargo is in excess of height of the standard general purpose
containers.
5. Liquid cargo containers-:
These are ideal for bulk liquids, such as wine, fruit concentrates, vegetable oils,
detergents and various other non-hazardous chemicals. Bulk liquid bags, designed to
carry specific commodities, can fit into these containers.
6. Hanger containers-:
They are used for the shipment of garments on hangers.

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Custom House Agent:
“Custom House Agent” means a person licensed, temporarily or otherwise, under the
regulations made under sub-section (2) of section 146 of the Customs Act, 1962.
A person is permitted to operate as a customs house agent, temporarily under

regulation 8(1) and permanently under regulation 10, of the Customs House Agents
Licensing Regulations, 1984.
The services rendered by the custom house agent are not merely limited to the
clearing of the import and export consignment. The CHA also renders the service of
loading/unloading of import or export goods from/at the premises of the
exporter/importer, the packing, weighment, measurement of the export goods, the
transportation of the export goods to the customs station or the import goods from the
custom station to the importers premises, carrying out of various statutory and other
formalities such as payment of expenses on account of de-stuffing/ pelletisation
terminal handling, fumigation, drawback/ DEEC processing, survey /amendment fees,
dock fees, repairing and examination charges, landing and container charges, statutory
labour etc this expenses paid on behalf of importer and exporter. The CHA is
ordinarily reimbursed by the importer/ exporter for whom the above services are
rendered.

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COMPANY PROFILE:-
Shakti forwarders Pvt. Ltd. formerly known as Shakti Enterprise was established in
1992. A leading custom house agent, for import and export, Shakti Forwarders has
established its basis at four different places across india. We have offices located at
mumbai, kandla, delhi and vapi.
Major items handled by Shakti Forwarders are as follows:
Exports: sanitary ware, stainless steel utensils, readymade garments, soya,

engineering goods, sesame seeds, groundnuts, rice, textiles etc.
Imports: non ferrous and ferrous metal scrap, consumer goods, soap raw material,
chemicals, fabrics, capital goods, rubber products, dates, dry fruits, auto parts etc.
At Gandhidham Branch the estimate of 400 containers per month in 2009.

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Management Team:
Sr. No. Director's Name Designation

1 MR. KISHORE B. BHAGAT DIRECTOR
2 MR. PRANAV BHAGAT DIRECTOR
3 MR. MAULIK K. BHAGAT DIRECTOR
4 MRS. TEJAL MAULIK BHAGAT DIRECTOR
5 MR. SHAILESH B BHAGAT DIRECTOR
Head office of Shakti Forwarders Pvt. Ltd.:
Gandhidham
“Om Guru Shakti”
Sector no- 1, Plot no -48/8,
Gujarat (kutchh) - 370201
Branches:
Mumbai
Plot no-47/A, Little Malabar hill,
Opp. Sindhi Gymkhana, Near Police Chowki, Chembur, Mumbai - 400071
VAPI OFFICE:
SHAKTI FORWARDERS PVT. LTD.
A/218, GUNJAN GARDENS, G.I.D.C. VAPI – 396195
DELHI OFFICE (NOIDA):
SHAKTI FORWARDERS PVT. LTD.
12, 1ST FLOOR, DHARAM MARKET,
ATTA, SECTOR 27, NOIDA – 201301
2. RESEARCH METHODOLOGY:

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Research as a term stand for “systematic investigation towards increasing the sum of
knowledge”
Research Methodology is the methods involved in gathering meaningful data.
The data which has been collected from various sources can be categorized into two
fields mainly:-
Primary data:-
Primary data collected through personal interview with the employee of the Shakti
Forwarders pvt. Ltd and we have initiated our research going through the whole step
wise processes of its routine activities.
Secondary data:-
Secondary data is collected through some good articles of shipping times and some
sites from internet.

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3. DATA COLLECTION
AND
EXPLANATION

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3.1 EXPORT
Export preliminaries:
In order to enter into export business, certain preliminary steps have to be taken by
every business organization. The setting up of an export firm is completed in two
stages. They are:
A) Establishing a business firm-:
There are various formalities and registrations to be made with different authorities
before an exporter can enter into export business and accept an export order.
1) Selection of name of the firm-: An entrepreneur can choose any name for the
firm he wants to start. It is desirable that the name of the firms indicates that the
business relates to export/import.
2) Approval to name of firm-: There is no need to obtain prior approval of

regional licensing authority of DGFT (Directorate General of Foreign Trade) for
the proposed name of business firm. However, if the firm is planning to export
readymade garments to any country; approval from Apparel Export Promotion
Council (AEPC) is required. The entrepreneur has to apply to AEPC in the
prescribed application form for the clearance of the name. Once the name is
approved, registration of firm in that name with AEPC is to be made within a
period of three months. After the registration is done, the firm would become
registered exporter.
3) Registration of Organization-: The form of organization can be sole

partnership, partnership firm under Indian partnership act, 1932 or join stock
company registered under the companies act, 1956.
4) Opening of Bank Account-: The firm or company has to open a bank account
with branch of a commercial bank, authorized by reserve bank of India to deal in
foreign exchange. The firm may require pre and post shipment finance for its
business.

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5) Obtaining Permanent Account Number-: export income is subject to a number

of exemptions and deductions under the income tax act. For claiming those
exemptions and deductions, it is necessary for every exporter to obtain permanent
account number from the income tax authority.
6) Registration with Sales Tax Authorities-: exporter need not pay sales tax while
making purchases meant for export. But for availing the benefit, firm has to
register with sales tax authorities and secure sales tax number.
B) Obtaining the importer-exporter code number -:
This is required for completing other registrations.
1. Importer - Exporter Code Number (IEC)-: No export or

import transaction can be made without obtaining an importer-exporter code
number. IEC number is a pre-condition for exports from and imports into India.
IEC number entitles to import or export any item of non-prohibited goods. This
code number is made compulsory now. The registered /head office of the applicant
shall make an application for grant of IEC number to the regional office of DGFT
(known as Regional Licensing Authority), having territorial jurisdiction over the
firm, along with the following documents: profile of the exporter/importer,
demand draft from a bank for rs.1000 as fees, certificate from the banker of the
applicant, two copies of passport size of the applicant, declaration on applicant’s
letterhead that there is no association of the applicant’s firm with caution listed
firms. The licensing authority shall allot the IEC number in prescribed format.
There is no expiry date for iec number. This number is invariably used in all
documents particularly in bill of entry in case of imports and shipping bill in case
of exports.
2. Registration Cum Membership Certificate (RCMC) -: it

is obligatory for every exporter to register with appropriate Export Promotion
Council (EPC) and obtain registration cum membership certificate. Any person
applying for import or export license or any other benefit under the current exim
policy is required to obtain registration cum membership certificate (RCMC). The
benefits provided in the current EXIM policy are available only to those having

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valid RCMC with the receipt of the certificate the exporter will be known as
“Registered Exporter”
3. Registration with Export Credit and Guarantee

Corporation (ECGC)-: the exporter should also register with export credit and
guarantee corporation of India (ECGC) in order to secure export payments against
political and commercial risks. It also helps to get financial assistance from
commercial banks and other financial organization.
4. Registration with other authorities -: it is desirable for

the exporters to become members of local chamber of commerce, productivity
council or any other trade promotion organization recognized by the ministry of
commerce or industry. Local membership helps the exporters in different ways,
including in obtaining certificate of origin, which is vital for exporter to certain
countries.
5. Registration for business identification number (BIN)-:

the exporters have to obtain pan based Business Identification Number (BIN) from
DGFT (Director General Foreign Trade) prior to filling for custom clearance of
export goods. Purpose of bin is to bring a common identification number to all
persons dealing with various regulatory agencies such as custom department,
central excise etc.
6. Export Licensing -: many items of goods are free for

exports without obtaining any license, if they do not fall in the negative list. The
negative list consist of goods the import or export of which is prohibited, restricted
or canalized.
Prohibited items-: these items can not be exported or imported. These items
include wild life, exotic birds, wood and wood products in the form of logs,
timber, pulp and charcoal.
Restricted items -: these are the items, export or import of which is restricted
through license. They can be imported or exported only in accordance with the
regulations governing in this behalf.

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Canalized items -: goods which are canalized can be imported or exported through
the canalizing agency, specified in the negative list.
So it is necessary for the exporter to check the nature of the item before he enters into
the contract or even makes efforts to secure the export order. Needless to add, the
items of export agreed upon should not be fall in the negative/ banned list.
Exporter’s incentives & drawback:
Incentives & facilities:
Advance license -: inputs required for manufacturing export products can be imported
without payment of custom duty under advance license. Since the raw materials can
be imported before exports of final product, the license issued for this purpose is
called “advance licenses”. An advance license is issued under duty exemption scheme
to allow import of inputs, which are physically incorporated in the export product.
Duty free replenishment certificate (DFRC):- DFRC is issued to a merchant exporter

or manufacturer exporter for the duty free import of inputs such as raw materials,
components, intermediates, consumables, spare parts, including packing materials to
be used for export production. Such license is given subject of the fulfillment of time
bound export obligation.
Duty entitlement passbook scheme (DEPB) :- under the DEPB scheme, an

exporter may apply for credit as a specified percentage of fob value of exports, made
in freely convertible currency. The credit shall be available against such export
products and at such rates as may be specified by the director general of foreign trade
(DGFT) by way of public notice issued in this behalf, for import of raw materials,
intermediates, components, parts, packaging materials, etc.
Export promotion capital goods scheme (EPCG) :- EPCG scheme was introduced by
the EXIM policy of 1992-97 in order to enable manufacturer exporter to import
machinery and other capital goods for export production at confessional or no
customs duties at all. This facility is subject to export obligation, i.e., the exporter is
required to guarantee exports of certain minimum value, which is in multiple of tit1e

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value of capital goods imported.
EXPORT PROCEDURE

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The different steps involved in export department are as follows:
Step 1:
Exporter sends the following document to Shakti Forwarder:
 Letter of credit: Assures exporter his payment promise to pay a seller

(beneficiary) upon receipt of goods by a buyer if certain conditions outlined in the
letter have been met.
It is a method of payment for goods in the buyer establishes which his credit with
a local bank, clearly describing the goods to be purchased, the price, the
documentation required, and a time limit for completion of the transaction. Upon
receipt of documentation, the bank is either paid by the buyer or takes title to the
goods themselves and proceeds to transfer funds to the seller.
Types of letter of credit
Clean letter of credit: negotiated against a clean draft without any documents
Documentary letter of credit: documents specified in the letter of credit must

accompany the draft
Revocable letter of credit: can be cancelled or revoked any time without the consent
or notice to the beneficiary
Irrevocable letter of credit: cannot be amended, revoked or modified by the issuing

bank without the express consent of all parties concerned

36
Thus the issuing bank has definite undertaking to honor drafts drawn under that credit,
provided that the conditions in letter of credit are met.
Confirmed letter of credit: Issuing bank sends letter of credit to the bank located in
beneficiary’s country with a request to add confirmation to the credit
Confirmation involves legal undertaking on the part of the confirming bank that it will
duly honor payment or acceptance on presentation of documents
Back to back letter of credit:
 SECONDARY CREDIT: In favour of a domestic supplier. The original credit

backs the secondary credit and facilitates the purchase of goods from a local
supplier by the original beneficiary of L/C
 Red clause letter of credit: Allows exporter to withdraw a predetermined

amount so that he is able to pay his suppliers and purchase relevant letter of credit
Packing list: A list which shows number and kinds of packages being shipped, totals
of gross, legal, and net weights of the packages, and marks and numbers on the
packages. The list may be requested by an importer or may be required by an
importing country to facilitate the clearance of goods through customs.
Invoice: One of the common to both international and domestic transactions is the bill
(invoice) that the exporter sends to the importer. However, the content of an
international invoice is more complex and should be prepared slightly differently for a
foreign customer than for a domestic one.
Step 2:
On the basis of invoice, Shakti Forwarder preparing Annexure – A, Annexure – C,

Annexure – D and SDF ( Statutory Declaration Form ) along with the invoice.
Step 3:
Send these annexure to the custom house. The custom prepares the shipping bill in
four copies on the basis of these annexure.

37
Step 4:
Custom calculate the duty (CESS) on the value of the goods.
Using the Treasury Challan the duty can be paid. Cargo can enter the port premises.
Step5:
Custom examined the cargo by using the sample. (Customs examined the cargo only
after the duty is paid) in case of more than one container in one B/L than A.C give
some container no. randomly for examination and that container must be de-stuff by
CHA.
Step 6:
The duplicate shipping bill and wharf age duly paid is given to the container agent.
The container agent hand over the duplicate shipping bill to the vessel agent who is
here uses it for the purpose of filling EGM (Export General Manifest).
The container agent gives the wharf age form paid is given to the container agent
grants the loading permission. (But in case of the break bulk cargo, the CHA itself
submits the wharf age paid form to the port authority, so that loading can be allowed
in the vessel).
Step 7:
In the case of break bulk, after loading the cargo the chief officer issues the mate
receipt, on the basis of which captain of the vessel issues the bill of lading.
Step 8:
Besides all the CHA sends the phytosanitary certificates/pre inspection certificate to
the exporter so that with all documents he can submit this to the bank.

38
In case of charter, after processing and shipment of the goods following documents
are sent back by the CHA to exporter.
 Full set of bill of lading:
For pre carriage is through ship the bill prepared for export is called bill of lading
& if the shipment is by air then the bill prepared is called airway bill.
A bill of lading is a very important document. It is issued by the logistics service

providers. It can be well explained as a document issued by a common carrier to a
shipper that serves as:
A receipt for the goods delivered to the carrier for shipment.
A definition of the contract of carriage of the goods.
A Document of Title to the goods described therein.
This document is generally not negotiable unless consigned "to order." If we ask to
the logistics companies than a Bill Of Lading is a product for them. They do the
whole business on the Bill of Lading. Increase in Bill of Lading shows increase in
company’s turnover.
Bill of Lading, On Board:
A bill of lading acknowledging that the relative goods have been received on board a
specified vessel.

39
Bill of Lading, Order:
It is a negotiable bill of lading. There are two types:
A bill drawn to the order of a foreign consignee, enabling him to endorse the bill to a
third party.
A bill of lading drawn to the order of the shipper and endorsed by him either "in
blank" or to a named consignee. The purpose of the latter bill is to protect the shipper
against the buyer's obtaining the merchandise before he has paid or accepted the
relative draft.
To get B/L, software (Visual Samudra) is used. Various details are entered in the
software such as Vessel Name & Number, Consignee, Shipper, Notify Address,
Quantity, No. of Packages, Packing List (Details of Material), Container No. etc.
The invoice is given to the company by the shipper. And a shipping bill is generated
in the customs clearance on the basis of the invoice and packing list.
The container is stuffed and the required information is received from the port office,
such as the container number, and the Vessel name and No. The details are entered in
the Software (Visual Samudra) also each B/L is given a manual entry if not
computerized. Than the details are entered in the software and the final print of the
B/L is taken. In B/L there are two types.
Receipt for shipment: If the shipper wants a receipt the shipper can get the receipt
when the container is ready to load on a vessel.
HBL – House Bill of Lading
HBL – House Bill of lading is made when the information is received for the port
office. If the shipper wants a bill before the loading of vessel on board, than HBL is
provided. HBL is also sent to shipper for approval.
MBL – Master Bill of Lading

40
MBL- Master Bill of lading is the final copy of Bill. It is given to the shipper it
contains all the details of everything. The Bill is used to charge the fees from the
shipper. It is only given after the container is loaded on to the vessel for sail.
Now if the freight charges are paid by the exporter then bill of lading is stamped as
freight prepaid & if the freight charges are to be paid by importer then bill of lading
is stamped as freight to pay.
 Copy of Mate Receipt:
Issued by commanding officer of the ship that cargo has been loaded to the ship name
of the vessel, date of shipment, condition of cargo at the time of receipt, berth, and
description of packages.
Mate receipt is handed over to the port authorities so that port dues are cleared by the
exporter. Bill of lading is issued by the shipping company only after the mate’s
receipt is submitted by the exporter
 Self Declaration Form or G R Form:
Under customs act, every exporter is required to declare export value of shipment ad
give an undertaking that export proceeds would be realized within a period of six
months from the date of shipment or due date, which ever is earlier. If customs
clearance for the shipment is made manually, declaration is made in GR form, in
duplicate. If the clearance is computerized, SDF form, in duplicate, is used in place of
GR form.
 Copy of shipping bill (triplicate and quadruplicate).

41
Bill is generated in the customs clearance on the basis of The invoice is given to the
company by the shipper. And a shipping the invoice and packing list. When cargo is
stuffed, inside the container, in our port office or at factory. The details are given to
the corporate office documentation department via fax. The details as such received
are feed in to software called Visual Impex. Than, the details are sent via Ice gate link
to the customs database. In return, the customs allocate a shipping bill number and
print a shipping bill in the port office which is to be collected from the port office.
Further, the procedure goes for carting and loading the cargo into the vessel.
Following three types of shipping bill with custom authorities
Dutiable shipping bill: it is used in case of goods, which attract export duty may or
may not be entitled to duty drawback. It is printed on yellow paper.
Free shipping bill: it is used in case of goods which neither attract any export duty nor
entitled for duty drawback. It is printed on simple white paper.
Drawback shipping bill: it is used in case when refund of duties is allowed on the
goods exported generally it is printed on green paper, but when the drawback claim is
paid to a bank, then it is printed on yellow paper.
 Certificate of origin.
A document provided by the exporter’s chamber of commerce that attests that the
goods originated from the country in which exporter is located.
Documents submitted by CHA to the customs:

42
 Invoice.
 Packing list.
 Self Declaration Form Or Gr Form
 Acceptance of contract.
 Letter of credit.
 Quality Control Certificate.
Lists of documents required to be submitted by the exporter to

various authorities, organizations, and agencies.
1) To the custom authority:-
 Commercial invoice
 GR Form ( Original and Duplicate )
 Shippers Declaration Form
 Copy of the Export Contract /L/c/Export Order
 Inspection certificate
 AR-4 Form Export License
 Export license
 Weighment Certificate
 Shipping bill
2) To the port authorities:-

43
 Port Trust Copy of the Shipping Bill

 Wharf age application.
3) To the bank
 Letter of credit
 Commercial invoice
 Bill of lading
 Insurance Policy/Certificate
 Bill of exchange
 GR Form (duplicate copy)
 Bank certificate
 Export Inspection Certificate
 Certificate of Origin
 Shipment advice
4) To the RBI:-
 Copy of the invoice
 Sales Contract
 Bill of lading
 Inspection / Analysis Report
5) To the EXIM Bank:

44
 Export contract
 Letter of Contract
 Balance sheet of the exporter
 Statement of profit and loss in the transaction covered by the export contract
 Statement regarding the projections of the credit requirement.
Short shipment:
In case of short shipment customs sends the short shipment notice Annexure ‘C’ to
the RBI (Reserve Bank of India) along with G R form.
Short shipment notice is in five copies:-
 Original – Customs
 Second copy – Agent
 Third copy – Exporter
 One copy – Wharf age refund
 One copy is for CESS

45
Treasure Challan:-
This is document is used at the time of payment of the duty to the customs. It shows
the amount to be paid to the customs authority.
It is in four copies:-
 Original
 Duplicate
 Triplicate
 Quadruplicate
Customs keeps the original and duplicate copies. Triplicate and Quadruplicate copies
are sent to the CHA.

46
3.2IMPORT
Import Procedure

47
The import procedure is quite different the export procedure. It starts with
 The importer asks for the three original bills of lading from the bank. The
bank issues the bill of lading only when the importer cleared all the payments due
to the bank.
 The importer then sends the following documents CHA :-
a) Bill of lading
b) Invoice
c) Packing list
d) Certificate of origin
e) Pre shipment inspection certificate
f)Insurance certificate
g) Sales contract
h) Bond copy (if H.S.S)
 The CHA shows the bill of lading to the shipping agent in order to get the
NOC (Non Objection Certificate in Kandla Port only).
 No objection certificate has been issued by the shipping line to make sure that
they have no objection to open the containers for the examination of goods.
 CHA then presents the bill of entry to the customs for noting and then customs
gives the import department the serial no. that comes on all copies of bill of entry.

48
 CHA pays wharf age to the port authority and the original copy of wharf age
goes to the treasury of port trust.
 Customs give the examination order on the back of original bill of entry in
case of first check procedure.
 Cargo is inspected in front of the customs. Customs give the examination

report at the back of the bill of entry.
 Customs assessed the duty to ensure that the duty evaluated by the CHA is
correct.
Prior to this, the CHA on the basis of invoice, packing list prepares the bill of entry.
The bill of entry is a proof that the goods have been imported.
For custom clearance purpose, the importer has to submit to the customs authority a
form, which is known as bill of entry.
Bill of entry is in three copies:-
Original copy:-
This is called the customs copy. In first check procedure it contains the examination
report on the back of it.
Duplicate copy:-
It is submitted in port either in container section or in break bulk section along with
wharf age, NOC, Delivery order. It shows charges have been paid to customs and
contain on the back, passed out of custom charges.
Triplicate copy:-
This copy is for central excise for availing certain benefits.

49
Quadruplicate copy:-
This copy is submitted to the bank.
Port trust copies:-
Out of 5th, 6th, and 7th copies, one copy is given to the port authority. The other two
copies are kept by the CHA for his record.
Types of bill of Entry:-
I. Bill of entry for home consumption
II. Bill of entry for warehousing
III. Bill of entry for Ex-bond clearance for home consumption
Bill of entry for home consumption:-
This type of bill of entry is used when importer wants to take the delivery of goods on
payment of custom duty.
Bill of entry for warehousing:-
This type of bill of entry is used when importer wants to warehousing the goods in
custom bonded warehouse.
Bill of for ex-bond clearance for home consumption:-
This type of bill of entry is used for clearing the goods from custom bonded
warehouse against warehouse bill of entry on the payment of custom duties.
Another important document that is used in import is bill of lading. It plays an

important role both for the exporter and importer.

50
Calculation of duty in import:
The duty has been calculated on the basis of assessable value.
Assessable value in rupees = CIF (Cost Insurance Freight) value + landing charges
(1% of CIF value and H.S.S. (High Seas Sale) CIF+2%+1)
If the case is of FOB (Free on Board) then freight and insurance is to be added. If
insurance is not there then 1.125% of the C & F (Cost and Freight) value is taken as
insurance charges.
Duty calculation is done by CHA as per the given rate of duty for a particular product.
There are six kinds of duties, which have to be paid at the time of custom clearance in
case of imports those are:
1. Basic Custom Duty
2. CVD
3. Additional cess on CVD
4. Secondary and higher cess on CVD
5. CESS
6. Custom sec & higher education cess
7. Additional Custom Duty
Let us consider that basic custom duty on the ALL ALUMINIUM SCARP is 0%,
CVD 8%, and additional duty is 4%. Say basic custom duty in rupees be X,
Additional custom duty be Y and CVD be Z (12.826688%)
X = 0% of assessable value
Z = Assessable value *8%(CVD)

51
Y = Assessable value + 4% of ASS. VAL.+Z+ CESS on CVD 2%+ SEC.&HIGHER

EDU.CESS ON CVD 1%+ CUS. EDU.CESS 2+1%
CESS on CVD = 2% of Z
SEC.& HIGHER EDU.CESS ON CVD = 1% OF Z
Total duty amount (in rupees) = X+Y+Z
CUS. EDU.CESS on Total duty =
2% of Z +EDU.CESS ON CVD+S&H EDU.CESS ON CVD
1% of Z +EDU.CESS ON CVD+S&H EDU.CESS ON CVD
Documents to be used in import:
I. Bill of lading
II. Invoice
III. Certificate of origin
IV. 59- Bond warehousing bond
V. Wharf age
VI. Bill of entry
VII. Packing list
VIII. NOC (No Objection Certificate)
IX. Delivery order
X. Treasury challan
XI. Gate pass

52
DOCUMENTS WHICH ARE TO BE USED IN IMPORT AND EXPORT

CUSTOM CLEARANCE.
 Letter of Credit
A Letter of credit is a document containing guarantee of a bank to honor drafts

drawn on it by an exporter, under certain conditions and up to certain amounts,
provided that the beneficiary fulfills the stipulated conditions.
 Packing list
Its is a detailed document provided by the exporter that spells out how many
containers there are in the shipment and which merchandise is contained in each
container.
 Invoice
It is a document which shows the total amount of the goods and the description of
goods.
 Bill of lading
A generic term used to describe a document issued by the carrier to the shipper.
 Mate receipt
Mate receipt is issued by the mate (assistant to the captain of the ship) after the
cargo is loaded into the ship. It is an acknowledgement that the goods have been
received on board the ship
 Shipping bill

53
It is issued by the custom authority. Shipping is the main document of the basic of
which the custom permission is given. After the shipping bill is stamped by
custom, then only the goods are allowed to be enter to the deck. It is prepared by
EDI system or manually system.
 Certificate of Origin
A document provided by the exporter’s chamber of commerce that attests that the
goods originated from the country in which exporter is located.
 Phyto-sanitary certificate
A document provided by an independent inspection company, or the Agriculture

Department of the exporting country’s government, that attests that the goods
confirm to the agriculture standard of the importing country.
 Manifest
A document internal to the shipping company (the carrier) that lists all cargo
onboard the transportation vehicle.
 Forms AR-4/AR-4A
These forms are meant for applying for the removal of excisable goods for export
by sea/post. Form AR-4 is used for applying for excise inspection at the factory
and form AR-4A is used when goods are to be exported under a claim for rebate of
excise duty or under bond.
 Certificate of Measurement
Freight can be charged either on the basis of weight or measurement. When it is

charged on weight basis, the weight declared by the overseas supplier is accepted.
The certificate contains the name of the vessel, the port of destination description
of goods, quantity, length, breadth, depth etc of the packages.
 Shipping advice

54
A shipping advice is used to inform the overseas customer about the shipment of
goods. There is no particular form of shipping advice. The exporter only advises
his importer about the invoice number, Bill of lading / Airway bill number and
date, name of the vessel with date of sailing of the vessel.
 Bill of entry
The bill entry is a document, prepared by the importer or his clearing agent in the
prescribed form under bill of entry regulation, 1971, on which clearance of
imported goods can be made.
 Certificate of insurance
A document providing by the insurance company of the exporter that the goods
are insured during their international voyage.

55
4. SUGGESTIONS
The custom clearance for import and export cargo is such a long procedure so it takes
time to clear, so the employee must be try to make their work on time and quick.
Some of the complicated procedure in custom clearance so if we get the support of all
employees it must be easy.
If custom clearance done through online then it should be more simple.

56
5. CONCLUSION
The Indian business environment is changing with the rapid growth in infrastructure
and technology. With the increasing inflows of multinationals, trade has been
increased, which result in stiff competition between the organizations.
Despite of the stiff competition Shakti Forwarfers pvt. Ltd known as the leading
custom clearance agent, because of their effective implementation of quality
management system and customer centric approach.

57
APPENDIX

58
BIBLIOGRAPHY
Websites:
www.cbec.gov.in
www.kandlaport.com
http://www.cygnusindia.com/pdfs/CONTAINERISATION%20-%20India%20and
%20Global%20Scenario.pdf
http://www.gmbports.org/port_pog.htm
http://www.projectsmonitor.com/NewsImages/photo%207/Transport%20Table.jpg
Articles:
Daily Shipping News
EXIM

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Functional Procedure of Custom Clearance

“FUNCTIONAL PROCEDURE OF CUSTOM

A PROJECT REPORT SUBMITTED BY

SULABH MAHETA (08084)

TOLANI INSTITUTE OF MANAGEMENT STUDIES

TOLANI INSTITUTE OF MANAGEMENT STUDIES

TOLANI INSTITUTE OF MANAGEMENT STUDIES

With a view to expand the boundaries of thinking, we have undergone 2 rd SEM

TOLANI INSTITUTE OF MANAGEMENT STUDIES

TOLANI INSTITUTE OF MANAGEMENT STUDIES

OBJECTIVE OF THE STUDY

 To know the present scenario in Indian shipping line.

 To know the documentation process done by the CHA.

 To know the future of Indian shipping.

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Description Page No.

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Sr No. Table Title Page No.

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Sr No. Table Title Page No.

TOLANI INSTITUTE OF MANAGEMENT STUDIES

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Indian shipping scenario:

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Introduction to Gujarat port:

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Gujarat itself is experiencing a phenomenal interest in investments both from mega-

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Basically the shipping companies provide services in two ways

Different Types of Ships:-

TOLANI INSTITUTE OF MANAGEMENT STUDIES

 Container ship is also known as a ‘BOX SHIP’

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Roll – on / Roll - off Ships:-

 Roll-on/roll-of ships were created to accommodate cargo that was self

TOLANI INSTITUTE OF MANAGEMENT STUDIES

 Due to increasing role of RORO (Roll-on/Roll-off) ships, container ships,

TOLANI INSTITUTE OF MANAGEMENT STUDIES

TOLANI INSTITUTE OF MANAGEMENT STUDIES

TOLANI INSTITUTE OF MANAGEMENT STUDIES

 Another important bulk trade is the transportation of Liquefied Natural Gas

TOLANI INSTITUTE OF MANAGEMENT STUDIES

‘Containerization’, the term very familiar to present day shipping industry is a

TOLANI INSTITUTE OF MANAGEMENT STUDIES

What is meant by containerization?

Containerization is the practice of carrying goods in containers of uniform shape and

Containerization is to contribute about 22.66% to total cargo by 2010-11.

The robust growth of India’s manufacturing industry has pushed up India’s

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Challenges Container port demand and capacity imbalance:

TOLANI INSTITUTE OF MANAGEMENT STUDIES

There are different types of containers. The popular types are:

1. General purpose containers-:

TOLANI INSTITUTE OF MANAGEMENT STUDIES

2. Reefer containers (refrigerated) -:

3. Dry bulk containers-:

4. Open top/open sided containers-:

5. Liquid cargo containers-:

They are used for the shipment of garments on hangers.

TOLANI INSTITUTE OF MANAGEMENT STUDIES

Custom House Agent:

A person is permitted to operate as a customs house agent, temporarily under

TOLANI INSTITUTE OF MANAGEMENT STUDIES