Compliances under Customs Laws – Import and Export.

Here’s a comprehensive analysis of “Compliance under Customs Laws – Import and Export (India)”, covering the legal framework, procedural steps, documentation, recent reforms, penalties, and practical insights.

1. Introduction

The Customs law in India governs the levy, collection, and regulation of duties on imports and exports, ensuring that goods entering or leaving the country comply with fiscal, safety, and regulatory norms.

Customs compliance has two key dimensions:

1. Fiscal compliance – payment of duties, valuation, classification, exemptions, etc.

2. Regulatory compliance – documentation, licensing, restrictions, and adherence to allied laws (DGFT, BIS, FSSAI, etc.).

The legislative foundation lies in:

• Customs Act, 1962

• Customs Tariff Act, 1975

• Foreign Trade (Development & Regulation) Act, 1992

• Import-Export Policy (FTP) and allied notifications.

The law’s purpose is not only revenue collection but also trade facilitation, national security, and consumer protection.

2. Objectives of Customs Compliance

1. Revenue Generation – collection of import and export duties.

2. Trade Regulation – monitoring movement of restricted or prohibited goods.

3. Protection of Domestic Industry – through anti-dumping, safeguard, and countervailing duties.

4. Prevention of Smuggling & Fraud – via licensing, inspection, and risk management.

5. Facilitation of Legitimate Trade – simplified procedures, automation, AEO certification.

3. Legal Framework

A. Customs Act, 1962

Provides the legal foundation for:

• Levy and collection of customs duties.
• Import/export procedures, warehousing, transit and trans-shipment.
• Adjudication, confiscation, appeals, and penalties.

B. Customs Tariff Act, 1975

• Prescribes rates of duty and classification of goods under HSN (Harmonised System of Nomenclature).
• Basis for anti-dumping, countervailing, and safeguard duties.

C. Related Laws

• Foreign Trade Policy (FTP) – licensing, import/export restrictions.
• GST (IGST on imports) – integrated tax on imported goods.
• Special Acts – FSSAI (food), BIS (standards), Drugs & Cosmetics Act, Wildlife Act, etc.

4. Import Compliance under Customs Law

Import compliance begins from the time goods enter Indian territory till they are cleared for home consumption or warehoused.

A. Stages of Import Compliance

1. Arrival of Goods & Manifest Filing

• Section 30 (Import Manifest) – carrier (vessel, aircraft) must file Import General Manifest (IGM) electronically before arrival.
• Objective: Declare all cargo intended for unloading.
• Compliance failure ? penalty under Section 30(3).

2. Entry and Declaration (Bill of Entry)

• Importer (or customs broker) must file a Bill of Entry (Section 46) before arrival or within permitted time.

• Types:

  • Home Consumption – immediate clearance.

  • Warehousing – goods stored without duty payment for later clearance.

• Filed electronically via ICEGATE portal.

3. Self-Assessment and Examination

• Importer self-assesses classification, value, and duty (Section 17).
• Customs verifies using Risk Management System (RMS); may examine goods physically if required.

4. Duty Payment

• Importer pays:

  • Basic Customs Duty (BCD) – as per Customs Tariff Act.

  • Social Welfare Surcharge (SWS) – 10% on BCD.

  • Integrated GST (IGST) – under GST Act, on CIF + duty value.

  • Anti-dumping / Safeguard Duties, if applicable.

5. Out-of-Charge Order (OOC)

• After duty payment and verification, customs issues “Out of Charge” order — allowing goods to enter domestic circulation.

6. Post-Clearance Compliance

• Maintain import records for 5 years.
• Subject to post-clearance audit (PCA) by Customs authorities.

B. Key Import Documents

C. Allied Compliance Areas

1. Valuation (Section 14, Customs Valuation Rules 2007)

   • Transaction value = price actually paid + adjustments (freight, insurance, royalties).

   • Customs may reject declared value if inaccurate.

2. Classification (Tariff Heading / HSN)

   • Determines duty rate; must follow Customs Tariff Act & HSN Explanatory Notes.

3. Prohibited and Restricted Goods (Section 11)

   • Certain imports restricted under FTP, DGFT notifications, or environmental/safety laws.

4. Warehousing (Chapter IX)

   • Goods may be stored without duty payment (Section 59) under license.

   • Periodic compliance with warehousing rules essential.

5. Export Compliance under Customs Law

Exports are governed by similar legal principles but with different procedural objectives — promotion of trade and foreign exchange earnings.

A. Stages of Export Compliance

1. Export Declaration

• Exporter (or CHA) files a Shipping Bill under Section 50 through ICEGATE.

• It serves as both declaration and application for duty drawback / export benefits.

2. Assessment and Examination

• Customs verifies export goods and documentation; may inspect consignment physically based on RMS risk parameters.

3. Duty and Drawback

• Exports are generally zero-rated (no customs duty or IGST payable).

• Exporter may claim:

  • Drawback of Duties under Section 74 / 75 (refund of duties paid on inputs).

  • IGST Refunds under GST for zero-rated exports.

4. Let Export Order (LEO)

• Once all checks are completed, Customs issues LEO, permitting loading of goods onto the vessel/aircraft.

5. Export General Manifest (EGM)

• Filed by carrier (Section 41) post-shipment, confirming goods actually left the country.

• EGM is necessary for claiming export incentives/refunds.

B. Key Export Documents

C. Allied Export Compliance

1. Export Promotion Schemes

   • Advance Authorization, EPCG, DFIA under FTP — governed by DGFT.

   • Customs ensures compliance before allowing benefits.

2. Prohibited / Restricted Exports

   • Prohibited: e.g., wildlife, antiques, narcotics.

   • Restricted: e.g., certain food grains, chemicals — require DGFT license.

3. Refund & Rebate Claims

   • Must be filed within prescribed time under Section 74/75 or Rule 96 of CGST Rules for IGST refund.

4. Post-export Audit

   • Customs may audit records to verify genuineness of export, valuation, and drawback claims.

6. Modernisation and Compliance Facilitation

India’s customs system is rapidly digitising for trade facilitation and transparency.

A. Major Reforms

1. ICEGATE / e-Sanchit – digital document filing and clearance.

2. Risk Management System (RMS) – selective inspection based on risk profiling.

3. Faceless Assessment (2020) – location-independent clearance to reduce human interface.

4. Authorised Economic Operator (AEO) Scheme – trusted trader status with simplified compliance.

5. Single Window Interface for Facilitating Trade (SWIFT) – unified clearance for multiple regulatory agencies.

6. Turant Customs Initiative – faster and paperless customs processing.

B. International Compliance Alignment

• WTO Valuation Agreement, WCO SAFE Framework, and Trade Facilitation Agreement (TFA) integrated into Indian customs practice.

7. Offences, Penalties, and Adjudication

Adjudication by Assistant / Deputy / Joint / Additional Commissioner based on monetary limits, with appeals under:

• Commissioner (Appeals) – Section 128

• CESTAT – Section 129A

• High Court / Supreme Court – on substantial questions of law.

8. Interaction with GST Regime

• IGST on Imports: Collected along with customs duties (Section 3(7) of Customs Tariff Act).

• Export as Zero-Rated Supply: Exporters can export under LUT (without tax) or pay IGST and claim refund.

• Drawback & Refund Coordination: Dual compliance with Customs and GST authorities required.

9. Best Practices for Customs Compliance

1. Maintain Accurate Documentation – misclassification or valuation errors invite penalties.

2. Ensure Correct HSN Classification – reference WCO Explanatory Notes.

3. Adopt Digital Filing Systems (ICEGATE, e-Sanchit) for traceability.

4. Use AEO Programme – gain reduced inspections and faster clearances.

5. Stay Updated with Notifications / FTP Amendments.

6. Conduct Regular Internal Audits.

7. Engage Qualified Customs Brokers (Regulation 2018).

10. Conclusion

Customs compliance in India is no longer a mere fiscal formality — it is a strategic necessity integrating trade facilitation, transparency, and risk management.

For importers and exporters:

• Every stage — from manifest filing to post-clearance audit — is governed by statutory provisions that must be meticulously followed.

• With digital transformation and international alignment, compliance today demands both legal understanding and technological competence.

Ultimately, customs compliance ensures:

“Lawful trade, secure borders, and a competitive economy.”

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