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 1
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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 STUDIESADIPUR – 370205
JULY - 2009
TOLANI INSTITUTE OF MANAGEMENT STUDIES 1
Functional Procedure of Custom Clearance
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.
TOLANI INSTITUTE OF MANAGEMENT STUDIES 2
Functional Procedure of Custom Clearance
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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Functional Procedure of Custom Clearance
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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Functional Procedure of Custom Clearance
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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Functional Procedure of Custom Clearance
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:
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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Ports of Gujarat
Functional Procedure of Custom Clearance
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
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Functional Procedure of Custom Clearance
Shipping Company:
“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.
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Different Types of Ships:-
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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Functional Procedure of Custom Clearance
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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Functional Procedure of Custom Clearance
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.
Containerization:
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Functional Procedure of Custom Clearance
‘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.
What is meant by containerization?
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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.
2. Reefer containers (refrigerated) -:
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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.
Custom House Agent:
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Functional Procedure of Custom Clearance
“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