October 10, 2018

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Custom Clearance Meaning and Importance

Custom Clearance

Audio Script on Custom Clearance

Introduction to Custom Clearance

All goods imported into a country and exported from a country have to pass through numerous procedures of customs for proper examination, appraisal, assessment and evaluation. It’s a documented permission to pass that a national customs authority grants to imported goods so that they can enter the country or to exported goods so that they can leave the country.

Importance of custom clearance

Goods are exported and imported from one country to another in order to maintain a seamless supply chain. Transportation and shipping of the commodities happen through various routes like road, air, and water to reach their destinations. But in order to ensure a complete legal and ethical freight shipment, custom clearance is indispensable. Custom clearance can help a countries economy from illegal tax invasion.

Parties involved in Custom Clearance process

Who all are involved in this process? Importers and exporters are the main parties involved in the EXIM process. Here are some examples of importers and exporters. Honda, Walmart, Spensors etc. are some of the companies involved in this process.

Custom Broker

Custom broker is a person who is licensed to carry out the customs formalities. He or she acts as a professional-agent. An importer or exporter prepares and submits all documents or clearing goods through customs. The remuneration so received for his service is called customs-brokerage.

Functions of a custom officer/Services

A custom broker can act as an intermediary in between the importer and exporter and deals with the procedural formalities involved. His major duties and services involve; collection of duty, endorsement of various provisions, and discharge of agency functions, prevention of smuggling, international goods processing and so on.

Custom Duty

Custom duty is the tax levied upon the international movement of goods. It is a type of indirect tax levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export from India.

Types of Custom Duty

Custom duties can be broadly be classified as basic duty, Auxiliary duty of customs, additional customs duty, Export duty, Educational Cess, Protective Duty, Anti dumping duty, national calamity contingent duty etc.

Custom Clearance Process

Custom clearance process involves preparations and documentations required to facilitate exports or imports in to the country. This process involves, representing client during customs examinations, assessment, payment of duty and co taking delivery of cargo from customers after clearance along with documents.  Custom clearance is typically given to a shipping agent to prove that all applicable customs duties have been paid and the shipment has been approved.

Documents involved in custom clearance are:

Documents involved in custom clearance are classified into export documents and import documents.

Exports Documents:

The various types of export documents involve Purchase order from buyers, Sales invoice, packing list, shipping bill, Bill of lading or air-way bill Certificate of origin and any other specific documentation as specified by the buyer or as required by financial institutions as per importing country regulations.

Import documentations

Import documentations involves purchase order from buyer, sales invoice of supplier, Bill of entry, Bill of lading/air-way bill, packing list  and any other specific documentation required by the buyer or financial  institution or the importing country regulations.

Bill of Entry

Bill of entry is a legal document to be filed by CHA or importer duly signed. It must be filed within 30 days of arrival of goods at a custom location. Also it one of major document which indicates the ‘total outward remittance of country’ regulated by Reserve Bank and Customs Department.

Types of bill of entries

Bill of entries are of three types

  1. Home consumption bill of entry (White Bill of entry)
  2. Warehousing bill of entry (Yellow Bill of entry)
  3. Ex-bond bill of entry (Green Bill of entry)

Home consumption Bill of entry

This bill is filed when the importer wants to clear of the goods by paying of duty for immediate remove the goods to his home premises.

Warehousing Bill of entry

This bill is filed when the importer prefers to keep his goods in a warehouse and pay the duty subsequently clear/moves the goods into his home premises.

Ex-bond Bill of entry

This bill is filed when importer wants to clear the goods from warehouses owned by customs to home premises on payment of duty.


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