I

I) Filing o f documents with tlie customs authorities for checking genuineness ot the

UNIT 13 SHIPMENT OF EXPORT CARGO

transactio~iand for obtaining examination order;

2)

Pay~iie~it
o f port charges;

Structure

3) Obtaining permission o f the shipping company to bring cargo into the shipment shed;

13.0

4)

Obtaining permission from the shed superintendent for bringing the cargo into the
shipment shed;

5)

Arranging for transport o f cargo to move into the shipment shed through Port Gate;

6)

Permission o f the Gate Inspector to move cargo into the port area;

13.1
13.2
13.3

13.4

1 3.5

13.6
13.7
13.8

13.9

Ol?jectives
Introduction
Stages o f Shipment
Central Excise Formalities
13.3.1
Excise Rebate Policy
1 3.3.2 Procedural For~nalities
Customs Clearance Formalities
13.4. I
Legal Framework
13.4.2 CUS~OIS Clearance Stages
13.4.3 Docu~nentaryRcquire~nents
13.4.4 Procedural Formalities
Port Procedures
Let Us Sum Up
Key Words
Answers to Check Your Progress
Terminal Questions

'

After studying this unit, you should be able to:

e explain stages involved in shipment of goods

e discuss the policy for central excise rebate on exports

i1

,
I

describe procedural formalities in claiming the central excise rebate

explain policy, procedures and documentation requirements in customs clearance o f

export cargo, and

describe port procedures involved in tlie shipment of export cargo.

131 INTRODUCTION
You have learnt in unit 1 I the process, procedures and documentation formalities in prepar.
ing goods for export as well as movement o f goods from the inland production centres to
the port o f loading. At the port of loading, two main formalities are involved: i) Getting
permission from the customs authorities to ship the goods; and ii) Getting permission fro111
the port authorities to bring the cargo into the shipment shed where the goods will have to
be brought for loading into the carrier. After the goods have been loaded, the exporter,
through [he clearing and forwarding agent, will proceed to obtain "fact o f shipment" certification on different documents. This will help the exporter in claiming sollie of the major
export incentives. In this unit, you will learn various stages involved in the shipment of
goods and policy and procedure of central excise formalities, You will also be acquainted
with tlie for~nalitieso f custo~nsclearance.

13.2 STAGES OF SHIPMENT

For effecting shipment from ports in India, the exporter, generally through his clearing and
forwarding agent, has to comply with procedural formalities o f the customs and port authorities separately. In addition, he has also to obtain permission frotn the shipping colnpanies
(or their agents) for bringing the cargo into the shipment shed according to the "loading
plan" o f the ship. SpeciticaIIy, the stages o f tlie shipment process are:

8) E x a ~ i ~ i ~ i aot ifocargo
~ i by the Customs Authorities and obtaining "Let Export" Order;
9) Obtainittg "Let Ship" Order from the customs preventive officer prior to loading;

13.0 OBJECTIVES

7) Unloading o f cargo in the shiprrrent shed;

/
,

10) Issuance of Mate's Receipt b y the Master o f the vessel.

I I ) Obtaining "fact o f shipment" certificate from the Customs Preventive Officer.

13.3 CENTRAL EXCISE FORMALITIES

It is common practice all over the world that the exports are not to bear the burden of
indirect taxes. Export goods are either exempted from such taxes or these taxes are
refunded, if exemption is not possible. In India, indirect taxes are levied at the central,
state and local levels on the inputs as well as on the tinal products. import and excise
duties levied on production and packing inputs are refunded under the Drawback Rules.
Central Excise duties on the inputs used in manufacturing export products as well as on
final export products is either exempted through production under bond or is refunded
atter export. The Government of India has laid down procedure for either getting the duty
'refilnded or exemption from payment o f duty.

13.3.1 Excise Rebate Palicy

The scheme under which the Central Excise exemption or refund i s provided i s popularly
known as Rebate o f Central Excise. This scheme operates under section 37 o f the Central
Excise and Salt Act, 1944;as amended from time to time as well as the relevant Excise
Rules. According to the recent amendment in lieu o f the Ryles 12, 12A and 191A of the
Central Excise Rules, only one Rule 12 operates for exports undei claim for rebate o f duty.
The rebate is granted on the duty levied at finished product and on inputs for this finished
product. Rule 13, 191-BB o f Central Excise Rules has been integrated into Rule 13.

13.3.2 Prockdural Formatities

Let us now discuss various procedural formalities o f excise rebate.

Refund Procedure under Ruk 12: The authorities involved in the Rule are: i)Jurisdictionsl Central Excise Authority known as Central Excise Range Superintendent under whose
jurisdiction the manufacturing unit i s located; ii)Maritime Central'Excise Authority located
at the port. Rebate may be either claimed from Jurisdictional Assistant Collector o f Central
Excise or Maritime collector.
The documents required under Rule 12 are:

i)

lnvoices to be filled i n four copies.

ii) AR 41AR 5 Form to be filled in six copies.

The procedure followed is as under:

i)

The exporters prepare four copies of Invoices giving all detail o f the consignment.

33

e,

';'rli'rt

'"'p(ln

lrrlluOln.~tilrl~

The excisable goods. which are to be enported under claim Sor rebate, are
~narkedas export cargo in individual packages.

ii)

be

iii)

These marks and numbers are to be specified on AR4IAR5 Forms. all the 6 copies.

iv)

Personal Ledger Account (PLA) is to be filled in specifyi~lgthe amount of duty

applicable to the export consignment as debit. In PLA the credil balance of thc
deposit account spent by the individual manulhcturer with the centr-al excise
authority is shown Each time when goods are cleared, the amount of duty
applicable to the goods to be cleared is debited and the balance is sliown i n the
balance column.

:xcept that instead of petting refund amount, the exporter gets release tiom the bond after
zxporter. Yo11will lcarn detail procedure for
- Excise clearance in Unit-16, Block 4.

Check Your Progress A

I)

vi)

List four documents required ~lnderRule 12 for excise refund.

............................................................................................................

,411 6 copies of AR41 AR5 For~usare to,be presented to the Range Superintendent
before clearance of the cargo. Under tlie Self-Renloval Procedure (SRP) Presence
of the central excise officer at the factory at the time of clearance is not necessary.
But in those cases where physical examination by thle central excise officer is
solicited before tlie cleararice of the cargo, 6 copies o f AR41AR5 Forms should be
presented to the Range Superintendent at least 24 hours before the goods are to be
removed from the factory.

v)

2)

After verifying the details given in tlie afore-~nentioneridoculnents, tile Range

supelsintendentallows clearance of the cargo from tile factory for onward
transmission to the Port of shipment. Followins- end0rst:ment are to be given in al[
the 6 copies of AR4/ AR5 Forms.

State whether the following statements are True or False.

i)

Export goods are either kxernpted from'bdirect taxes o r these taxes are
refunded.

ii)

AR 4/AR5 Forms are submitted in 8 copies-

iii)

~ ~ ~ ~ oneed
i c enot
s be submitted under Rule123

iv)

Maintenance of public Ledger Account is allowed under Rule

"Allowed to export under claim for Central Excise Rebajtr:".

vii) The original and duplicate copies of AR4/ ARS Forrns are handed over to the
exporter; the triplicate copy is sent to the Maritime Cerit'1.n.1Excise CollectorateRefund section, havingiul.isdictio~~
over the iotz whel.efr.om the goods are to be
the fourth COPY is sent to the Chief Accounts offricer (CAO) of the Maritilne
Central Excise Collectorate concerned; the 5"' copy is retained by Range
Superintendent for his record and future reference. The sixth copy is also to be
given to exporter or his authorised agent.
viii) The original, duplicate and sixtuplicate copies of AR4/AR5 For~nsare to be
submitted to the Export Department of Custonis House alongwith other shipping
docurnents to prove that formal central excise clearance has been obtained from the
jurisdictional Central Excise Authority.
ix)

x)

xi)

Rebate claim may be filed either from Maritime Collector or Jurisdictional Assistant
Collector of Central Excise.

1
1

13.4.1 Legal Framework

Section 50 of the Indian Custo~nsAct requires the exporter to file a declaration in a
prescribed form and submit supporting docilments to enable the customs authorities to
check declarations made by the exporter. Tlle objectives of the custo~nscontrol are:

i)

to ensure that nothing goes out of the country against the laws of the land and that

prol~ibitionsand restrictions regarding outward cargo are duly enforced by the

I
i

ii)

custonls authorities;
to ensure authenticity of the value of outward cargo according to the customs
valuation I-ulesto check over and under invoicing;

I i i ) to assess and realise export duty/cess/cbarge according to the customs Tariff Act and

1
j

c) Duplicate copy of AR4 in sealed cover received fro111customs officer, if

required
d) Duly attested copy of Bill'of lading
e) Duly attested copy of shipping Bill (Export promot'ion copy)
f)

Under section 40 oftlie llldian Customs A C ~an, overseas carrier cannot permit loading of
witllout perlnission from the customs authorities. The permission is to be obtained
b tile exporter, generally through his clearing and forwarding agent- Let us now discuss
various aspects of custonls forlnalifies.

Following docurnents should be filed for claiming rebate:

b) Original copy of AR4/ARS Form.

Disclaimer certificate in case where clai~nantis otkter t h i n exporter,

Under this Rule there is no PLA (Public Ledger Account) as no duty is pnid. TIle Innin
documents are Invoice and AR41 AR5 Fonns. Same procedure is followed as undeerRule 12,

34
--

I
i

Exemption under Bond under Rule 13: The procedure under this Rule is silnilar to tite
one under Rule 12, except that under this Rule appropriate borrd is tb be executecj.

lfcusto~nofficer is satisfied, he would make endorsements in the ol.riginal, duplicate

and sixtuplicate copies of AP4IARS Forms. The officer retturns ori,ginal and
sixtuplicate copies to the exporter and sends duplicate coply to the Rebate
sanctioning Authority.

a) Application in prescribed form.

I
1

iv)

any other fiscal legislation;

to check that all the relevant regulatory provisions enforced by various authorities in
the country have been duly colllplied with in respect of export; and

to provide export data through the customs returlls.

13.4.2 Customs Clearance Stages

There are b u r stages of customs involvement, These are:

i)

Processing of doculnents at the Customs House i.e. the main office. This stage
involves: i) clleckillg up of documents to ensure that all relevant documents have
been submitted; ii) verification of quantity and value of goods; iii) verification and
detemination of rate of duty and collection of the duty amount; (iv) direction for the
custo~~is
officer in the docks for physical examination o f goods;

Sllipmcnt of Export Cargo

l:xnelat lli1110rt. I ' ~ : I ~OCP W ~ ~ ~ J I N

ii)

Physical examination of goods in the docks in accordance with the examination

order given at the Customs House;

iii)

Supervision of loading by the Customs Preventive Officer; and

iv)

Post-sliiplnent endorsements by the Customs Preventive Officer.

13.4.3 Documentary Requirements

For movement of goods by air or by sea, the customs permission for shipment is given on a
prescribed document, known as Shipping Bill. In other cases (i.e. by roadlrail) the document
is known as Bill of Export. There are four types of Shipping BillIBill of export.
These are:
i)

Dutiable Shipping BilllBill of Export for those goods which attract export dutyl
cess;

ii)

Drawback Shipping BilllBill of Export for those goods which are covered by the
Duty Drawback scheme;

iii)

Free Shipping BilllBill of Export for those goods which neither attract export dutyl
cess nor are covered by the Duty Drawback scheme;

iv)

EX-bond Shipping BilVBill of Export for those goods, which are shipped from,the
customs, bonded warehouse.

Exporter or his agent submits the following documents to the customs department.

'

i)

Shipping Bill (in duplicate, triplicate or quadruplicate) duly filled in and signed.

ii)

Declaration regarding truth of statement made in the Shipping Bill

i i i)

Invoice copy

iv)

GR Form

v)

Export Licence (wherever required)

vi)

Quality Control Inspection Certificate (wherever required)

vii) Original Contract wherever available or correspondence leading to contract

viii) Contract registration certificate (wherever applicable)
ix)

Letter of credit (wherever applicable)

x)

Packing List

xi)

AR4lAR5 Forlns (original and Duplicate)

xii) Any other documents

13.4.4 Procedural Formalities

'

The Shipping Bill and the other documents are submitted to the Custom House as soon as
the Rotation No. has been given to the carrier. As soon as the documents are filed in the ,'
Custom House, the Receiving clerk will stamp the Shipping Bills with date and time and
number them according to their category. Tlie Shipping Bills involving foreign exchange
will be sent to the Appraisement Section where they are allotted to Appraisers and Examiners for scrutiny and giving examination order. While the Appraisers will examine the
Dutiable and Drawback Shipping Bills, Free Shipping Bill will be examined by the Examiners.
Tlie verification ofthe shipping bills will be carried out with reference to value and quantity
of goAds, export liccnce/quota/permit, compliance with other statutory requirements, rate
and amount of export duty, etc.

After verification of shipping bill, the customs AppraiserIExaminer will give an "examination order" on the Duplicate shipping bill. This "order" will enable the customs officer to
carry out physical examination of goods in the docks. The "examination order" will also be
counter-endorsed by the principal Appraiser.
After completion of formalities at the Appraisement section,She documents are given to the
GR Form Clerk who puts the shipping bill no. On the GR form and detaches the original to
be sent to the RBI. Further, where export duty is to be paid, the documents are given to the
exporterlagent to pay it at the cash and accounts Department. After payment of duty,
Shipping Bill (original) is detached and other documents are given to the exporterlagent. In
other cases. shipping bill (original) is retained at customs house and other documents are
given to the exporterlagent for bringing the goods to the shipment shed and make shipment
arrangement.
The second stage of customs formalities is to carry out physical examination of goods in the
shed. Tlie ~ o o d can
s be brought into the shed only after completing port formalities. Once
the goods have been brought in, the exporterlagent will present the shipping bill to the
custo~nshed AppraiserlExaminer along with the following documents.
i)
ii)

Invoice,

.Packing list,

iii)

A RWAR5 forms,

iv)

Apmark certificate (wherever applicable).

The shed AppraiserlExaminer would carry out physical examination according to the
"examination order" given on shipping bill (duplicate). Once this activity is over, the
Examiner will give. "Let Export7' order on the shipping bill (duplicate) which constitutes the
physical examination report.
After the physical examination report, the customs preventive officer at the docks gives
permission for shipment on the shipping bill (Duplicate) in the form of "Let Ship" order.
This copy is then presented to the master of the carrier, who then in consultation with the
concerned customs preventive officer, commences loading operation.
The master of the carrier, after receiving consignments on board issues "Mate's Receipt",
which is obtained by the exporter or his agent through the shed superintendent after paying
port dues. The Mate's Receipt provides the basis for certification of the "fact of shipment"
on those documents where it is needed for claim of export incentives. These documents are
AR4lAR5 Form, Export promotion copy of shipping bill, GR (duplicate) and Commercial
Invoice.

13.5 PORT PROCEDURES

Export cargos can be brought into the port only after the ship has been allotted a berth and
declared for loading. Some port authorities in India require the shippers to pay port charges
and have their shipping bills passed by the Customs House before bringing goods to the
docks. At the Bombay port, however, shippers have the facility of paying charges after
shipment.
Before bringing the cargo to the shipment shed, the shipper has to obtain "carting permission, from the shed superintendent and also the ship's agent on the prescribed document.
This document is known differently at different ports, e.g., Dock challan at Calcutta, Port
Trust Copy of the shipping bill at Bombay and Export Application at other ports in India.
When goods are brought at the dock gate, the shipper has to present the port document and
the Vehicle Ticket (in duplicate) to the Gate Inspector. At the gate, the documents are
compared and checked to ensure that such goods as have been permitted are brought to the
docks for shipment. The packages; bundles, cases in each vehicle are counted to see that
their number tallies with the number mentioned in the respective vehicle tickets. Vehicles

Shlpmcnt of Export Cnrgo

LCsport Import 'l'r:~dcOperations

are then allowed to move to the concerned shipment shed and particulars o f cargo passed
through the gate recorded in a register maintained at this point.
Coinciding with the arrival of the vehicles in the shipment shed, the shipper submits the
Vehicle Ticket duly endorsed by the Gate Inspector, Export ApplicationIDock ChallanIPol?
Trust copy of shipping bill, shipping bill (duly passed by customs) and a receipt in lieu of
payment of port charges, where necessary, to the shed superintendent. As cargo is unloaded
in the shipment shed, details of the cargo received are entered in the 'Shed Export Cargo
Register' which is maintained shipper-wise and shipwise.

iii)

'Let Export; orderon shipping bill shows the physical examination report
of the goods.

iv)

Carting permission is obtained from the shed superintendent.

Fill in tlae blanks:

3.

Tlie relevant excise Rule under which central excise duty paid on final
products is refunded in full is ..................

i)
ii)

The shipper then approaches the customs Appraiser and the customs preventive officer for
physical Examination of Goods and obtains 'Let ExportlLet Ship' endorsements in the
Port Trust's documents also. The cargo is then allowed to be shipped. On completion o l
shipment, details of cargo actually shipped are recorded in the 'Shed Export Cargo Register;
from the 'Shipping Tally Sheets' which are maintained by the port Trust and also tlie
shipping lines.

............... Requires the exporter to file a declaration in a prescribed form

and submit supporting documents to enable the customs authorities to check
declarations made by the exporter.

iii)

For movements of goods by air or sea, the customs permission for shipment
is given on.. .................

iv)

The master of the carrier, after receiving consignments on board,

issues.. ................

On
Receipt'

of cargo on board, the Master of the vessel issues a document called the 'Mate's
respect of every shipment taken on board. At some ports, the issuance of Mate's
is preceded by another document, which has to be exchanged for the Mate's
The Mate's Receipt is subject to the terms and conditions stated in the shipping
c o n l ~ a n ~regular
's
Bill of Lading. At most ports in India, the port authorities collect the
Mate's Receipts from the Master or the chief officer otthe vessel and pass them on to the
respective
only after ensuring receipt of all port dues. The port authorities accept
no claused Mate's Receipts, unless authorised by the shipper (-1.
After collecting the Mate's Receipt, the shipper (exporter or his agent) prepares the Bill of
Lading on blank forms supplied to him by the shipping company. He presents 213 originals
and some non-negotiable copies of the document at the shipping company's office for
signature of the authorised officer alongwith the Mate's Receipt. The Mate's Receipt is an
important document because it is required to be exchanged for the bill of lading. The
shipper must, therefore, collect this document from the shed superintendent im~nediately
after it has been received by the latter to avoid delays and problems. which might follow if
this is not collected in time.
Bills of Lading may be marked ' Freight paid' or Freight to pay'. If the freight is pre-paid,
i.e., paid by the exporter, the Bill of Lading is marked or stamped to that effect and where
freight is not pre-paid, the Bill of Lading is marked ' Freight to pay' or 'Freight collect'.
g the bills
The shipping company retains the Mate's Receipt. Before signing and p a n i ~ ~with
of lading, the shipping company ensures that all the clauses appearing on the Mate's
Receipt are reproduced on the Bills of Lading also.

Check Your Progress B

I.

Write two main objectives of the customs control.

13.6 LET US SUM UP

procedural formalities ofthe custolns and port authorities
sliipment
ofthe goods. Export goods are either exemptedfrom indirect taxes Or
befpre
thesi
taxes are iefunded. rile schetne under wllich the central excise exemption Or lefund
is known as rebate on central excise. The rule under which central excise duty
is
.
paid on fjllal products is refunded in full.is Rule
to

t
of
Under Section 40 of the Indian Custo~nsAct, an oversras carrier cannot ~ e r r n i loading
goods witilout pelraisrion from the custonis authorities. Custom control ensures that
nothing goes out of the country against the laws of the land. Various stages of customs
cleara~icei~lvolve(I) processing of documents of customs house (ii) physical examination
of goods ill tlie dock (iii) supervision of loading by the customs preventive officer. After
the pliysical exa~ninationreport, the customs preventive officer at the docks gives permission for rhip!nent on the shipping bill in the form of "Let Ship" order. When consignlllents ore received on board tlie master of the carrier issues Mate's Receipt.

-13.7 KEY WORDS

Mate's Receipt: A receipt issued by tile master of the carrier after receiving consign~nents
on board.
Rebate of Central Excise: The scheme under which the central excise exe~nptionsor
refund is provided.

13.8

ANSWERS

A 2 i) True

ii) False

TO CHECK YOUR PROGRESS

iii) False

iv) False

B 2 i) True ii) False iii) True iv) True

2,

ii) Section 50 of Indian Customs Act iii) Shipping Bill

iv) Mate's Receipt

3 i) Rule 12

State whether the following statements are True or False.

i)

Under section 40 of the Indian customs Act, an overseas carrier cannot

permit loading of goods without permission from the customs authority.

ii)

The goods can be brought into the shed without completing port
formalities.

13.9 TERMINAL QUESTIONS

. !
I

I)

,
uescribe various stages involvkd in the shipment of export cargo.

2)

Describe the procedures of obtaining excise rebate under excise rebate policy.

S l ~ i p ~ nuf
c ~Export
~t
Cnrgo

Ekport I ~ t ~ p o'l'rndc
rt
op~

3,

Can YOU exPOn the goods without permission from the cushm;
are the objectives of customs control?

4)

Describe various stages involved in customs cleamnncc.

suthoritiesl

What

UNIT 14 CUSTOM C L E A ~ N OF
C~
IMPORT CARGO
Structure
14.0
14.1
14.2
14.3
14.4

Objectives
Introduction
0b.jectives of Custom Clearance
Legal Framework
Bnsic l~lformation.Documents and Duties .
14.4.1 Basic lnformntion
14.4.2
14.4.3

14.5
14.6
14.7
14.8
14.9
14.10
14. l l

Documents
Duties

Stages of Custom Clearance

Procedure of Custom Clearance
Electronic Data Interchange (EDI)
Let Us Sum UP
Key Words
Answers to Check Your Progress
Ter~ni~ial
Questions

After sti~dyi~ig
this unit, you should be able to:
e describe the ob.jectives o f custom clearance
a explain the legal framework

o discuss the basic infanatim;docurnents and rilated duties

@

describe the stages of custom clearance

explain the procedure of custom clearance

discuss the Electronic Data Interchange System.

14.1 INTRODUCTION
The concept of customs operation is as old as tho trade itself. I n the olden days, there was a
tradition followed by traders of offering gifts, etc. to kings to be able to sell their merchandise in different territories. The same practice has been formalized in the modem economic
and political systems. Goods are subjected to levy of duties, whenever they cross the
national frontierslboundariesof a country. Despite all efforts in favour o f free trade, collection of revenue is still on priority of the Commissioner in charge of a Custqmhouse. In this
unit, you will learn the objectives, legal framework, basic information, documents and duties
related to custom clearance of import cargo. You will further shfdy the stages and procedure
of custon~clearance and the operation o f Electronic Data Inter6hange System.

14.2 OBJECTIVES OF CUSTOM CLEARANCE

Apart from being a source of revenue, the major objectives of customs clearance ate as
follows:

Check smuggling: Those transactions which do not take place in accardancd with pmvisions of different laws in force in lndiaamountsto smuggling. It is the duty of customs
administration.to check such transactions.