Brief about the Customs Clearance Process and Duties Involved
Customs clearance is an essential step in international trade, ensuring that goods
comply with the laws and regulations of the exporting and importing countries. In
India, customs clearance involves multiple steps and is governed by various laws
and agencies. The objective is to prevent illegal trade, ensure payment of duties
and taxes, and facilitate smooth trade practices. For exporters, understanding the
customs clearance process is crucial to avoid delays, penalties, and to ensure
timely delivery of goods.
Steps Involved in Customs Clearance for an Export Consignment from India
The customs clearance process for an export consignment involves several stages:
1. Registration with the Authorities
Before initiating the export process, the exporter must:
• Obtain an Import Export Code (IEC) from the Directorate General of
Foreign Trade (DGFT).
• Register with Goods and Services Tax (GST).
• Open a current account with an authorized bank for foreign
transactions.
2. Classification and Documentation
The exporter must determine the HS (Harmonized System) Code of the goods, which is
essential for calculating duties and fulfilling compliance requirements.
Key documents required include:
• Commercial Invoice
• Packing List
• Shipping Bill/Bill of Export
• Bill of Lading or Airway Bill
• Export License (if applicable)
• Certificate of Origin
• Insurance Certificate
• Letter of Credit (if under LC terms)
3. Filing the Shipping Bill
The Shipping Bill is the primary customs document for exports. Exporters or Customs
House Agents (CHA) file it electronically through the ICEGATE portal (Indian
Customs Electronic Gateway).
Types of shipping bills include:
• Free Shipping Bill (for duty-free goods)
• Dutiable Shipping Bill (for goods with export duty)
• Drawback Shipping Bill (for goods eligible for duty drawback)
• DEEC and DEPB Shipping Bills (for goods under export incentive schemes)
4. Examination and Assessment by Customs
Customs officials assess the shipping bill and supporting documents. Based on the
Risk Management System (RMS), the consignment may be:
• Cleared without examination (green channel),
• Sent for routine inspection,
• Sent for detailed inspection (red channel).
If required, customs officers physically examine the cargo to ensure it matches the
documentation and complies with regulations.
5. Payment of Export Duties (if applicable)
Although most exports from India are duty-free to promote trade, certain products
like mineral ores, hides, skins, etc., may attract export duty. If duty is
applicable, it must be paid online via the ICEGATE portal before clearance.
6. Customs Out-of-Charge (OOC) and Let Export Order (LEO)
After satisfactory inspection and document verification, the customs officer issues
a Let Export Order (LEO) and Out-of-Charge (OOC) certificate, allowing the goods to
be loaded onto the vessel or aircraft.
7. Export General Manifest (EGM) Filing
Once the goods are shipped, the carrier files the Export General Manifest (EGM)
with customs, confirming the departure of goods.
8. Claiming Export Incentives
After successful export, exporters can claim incentives under various schemes like:
• RoDTEP (Remission of Duties and Taxes on Export Products)
• SEIS (Service Exports from India Scheme)
• MEIS (Merchandise Exports from India Scheme) [phased out and replaced
by RoDTEP]
The claims are filed through the DGFT portal.
Key Government Agencies Involved in the Export Customs Process
1. Central Board of Indirect Taxes and Customs (CBIC):
• The apex body governing customs procedures, duties, and tax laws in
India.
2. Directorate General of Foreign Trade (DGFT):
• Issues IEC, export licenses, and governs India’s foreign trade policy.
3. Customs Department (Ministry of Finance):
• Responsible for physical inspection and assessment of goods at ports
and airports.
4. GSTN (Goods and Services Tax Network):
• For verification of tax compliance and refund of IGST on exports.
5. Food Safety and Standards Authority of India (FSSAI):
• For food-related exports.
6. Plant Quarantine & Animal Quarantine Departments:
• For agricultural and animal-related products.
7. Directorate of Revenue Intelligence (DRI):
• For enforcement and intelligence against smuggling or customs
violations.
8. Port Authorities, Shipping Lines, Airlines:
• Involved in the logistics and cargo handling at ports.
⸻
Use of Online Platforms like ICEGATE
The ICEGATE (Indian Customs Electronic Gateway) is a government portal
([Link] launched by CBIC to facilitate electronic filing of
customs documents and communication between trade and customs authorities.
Key features of ICEGATE:
• Filing of Shipping Bills and Bills of Entry.
• E-payment of customs duties.
• Status tracking of consignments.
• Document verification and digital signatures.
• Integration with DGFT, GSTN, RBI, and other trade platforms.
The use of EDI (Electronic Data Interchange) has reduced paperwork, enhanced
transparency, and improved clearance speed, especially for Authorized Economic
Operators (AEOs).
Example Product: Export of Cotton Shirts (Textile Product)
Let us consider the export of cotton shirts (Men’s wear) as an example.
1. HS Code:
The HS Code for cotton men’s shirts is 62052000.
2. Export Duty:
There is no export duty on cotton shirts. In fact, the Indian government promotes
textile exports.
3. Import Duty in Destination Country:
Though India may not levy an export duty, import duty in the destination country
varies. For example:
• In the EU, cotton garments attract an average of 12% customs duty.
• In the USA, around 15.9% duty may apply unless exported under a Free
Trade Agreement (FTA).
4. Export Incentives:
Cotton shirts are eligible for incentives under:
• RoDTEP (rate approx. 1% to 2% of FOB value).
• Advance Authorization Scheme (exemption from import duties on raw
materials like fabric and dyes used in making shirts).
• Production Linked Incentive (PLI) for textiles (for selected
companies).
5. Compliance Requirements:
• Certificate of Origin (COO) – Mandatory for availing trade preference
under FTAs.
• Textile labeling as per destination country standards (e.g., fiber
content, country of origin, care instructions).
• BIS certification or quality standards, if exporting under a government
tender or to countries with strict compliance policies.
• AZO-free dyes certification (for eco-friendly markets like Europe).
⸻
Conclusion
The customs clearance process in India is a well-structured system aimed at
regulating the movement of goods and ensuring compliance with national and
international trade laws. Exporters need to be well-versed with the procedural
steps, government regulations, and technology platforms like ICEGATE for smooth
operations.
With the digitalization of customs processes, the turnaround time for clearance has
significantly improved. However, exporters must pay attention to product
classification, documentation, and compliance with international norms to avoid
delays and financial losses.
Understanding duty structures, incentive schemes, and using online platforms
effectively not only reduces export costs but also boosts India’s image as a
reliable global trading partner. Whether dealing with textiles, machinery, or
electronics, every product requires precise compliance to tap into the vast
potential of international markets.
Would you like a summarized version for easier presentation in your viva?
