INTERNATIONAL TRADE ADMINISTRATION
Federal News Service
OPERATOR: Good morning, and thank you for standing by. (Gives queuing instructions.) I would now like to turn the call over to your host for today, Ms. Barbara Lapini. Ma’am, you may begin.
BARBARA LAPINI: Good morning to our participants in the United States and good evening to our speakers in India. Thank you for joining us for our webinar on getting your products into India and understanding Indian customs. I’m pleased to note that we have more than 80 people registered for the webinar today. My name is Barbara Lapini. I’m an international trade specialist with the India Business Center of the Trade Information Center.
The Trade Information Center is part of the U.S. commercial service of the Department of Commerce. I’d like to welcome all the U.S. commercial service clients and other webinar participants in the exporting community who are joining us from across the United States to learn about Indian customs.
Our speakers include: Dr. Abdul Shaikh, senior economist with the India Business Center of the Trade Information Center; Ms. Aileen Nandi, principal commercial officer with the U.S. Commercial Service in Chennai, India; Mr. Vijay Anand, customs manager for India with Expediters International; Mr. Vimal Rawat, manager of planning, engineering and operation support with FedEx in India.
All the speakers will be available at the end of the presentations to answer your questions. Contact information will also be provided at the end of the webinar if you have any additional questions after the event. For those of you who just joined, you can still log on to the webinar by entering the URL, website and passcode provided as per the instructions that were sent to you by e-mail.
We do have a few housekeeping details to make sure that everyone gets the most benefit from today’s webinar. As I mentioned, you will hear – be able to hear the presentation via your telephone and view it simultaneously on your computer. If you are not hooked up through both, please take a moment to do this. If you’re experiencing any technical difficulties during the webinar, please press star, 0 anytime during the presentation.
We are planning the question-and-answer session at the end of all the presentations, so please hold your questions until the end. This will be operator-assisted. The operation will put you in queue to have your line taken off mute to ask a question.
Now, without further ado, I’d like to introduce our first speaker, Dr. Abdul Shaikh, senior economist at the India Business Center. Abdul?
ABDUL SHAIKH: Thank you, Barbara. And good morning and good evening to our speakers in India and all the folks who joined us from the United States. As Barbara said, that – we have a India Business Center, which is opened recently because of the significance of doing business in India, and more and more American companies and clients are looking for information.
So today’s focus is more how to get your products across the borders in India. But before that – we focus on it, I thought I would give you kind of a brief overview of opportunities and challenges of doing business in India.
The first thing is why we need to focus on India; you know, India is considered one of the megamarkets and one of the BRIC countries, where the United States is focusing on increasing exports, and India is one of them. And it is one of the fastest growing free market economies. For the last several years, it has been growing very rapidly. Even during the time of world recession, India continues to grow, and Indians are looking for U.S. products because the U.S. have competitive advantage in large number of products that you folks in America produce.
This is a map of India, and you can see India has 29 states and six union territories, and the southern part of India is more prosperous and industrialized, so obviously, the markets are more fertile. And then the western part of India is also more prosperous and industrialized as well. So we have several of these trade missions we undertake from time to time to take American companies to India.
The few facts I think many of you may be familiar with that India is very highly populated. It has more than three times of the U.S. population, close to 1.2 billion, and with one-third of the U.S. territory. So you can see the congestion when you go to India. It is the sixth-largest country in terms of purchasing power, and more strikingly, it has a large and growing middle class population, which is a very good market for U.S. products. And it is easier to do business in India because English is widely spoken, and English, I think – the British have left one good legacy, that is the language. So they really enjoy the fruits of that.
India’s GDP has been growing rapidly, as I said, and more than 100 Fortune companies have their R&D operations because India is now considered to be the intellectual capital of Asia.
As I said, that – we have a website, export.gov/india, and this is the India Business Center. Everything that you want to know about India and doing business with India and that information is available on this website, and we update that with the help of our colleagues in India and also other organizations in India as well as in the United States.
So if you want to start from the beginning, then you can understand what is the basic of exporting, how to start trading with India. And we have – last time I was looking at – there were more than 4,000 market research reports on various industries that are also posted on the website. And you can also find the duties and tariffs because that is one of the important components that you need to know, how much India taxes or levies tariffs because it is a very complex mechanism, and still India is one of the highest tariff countries.
We also post all the trade events – you know, any places that is taking place in the trade missions. We – I think importantly for you, if you are looking to sell products, we also have trade leads on that, and we post webinars as well.
India is growing market. Nevertheless, it is only the 17th largest export market. As you can see that, of course, our neighbors are the largest exporters followed by China, and India is 17th. But I think what is important is the rate at which India’s U.S. exports to India is growing is more important. And as I said, that its rapidly growing middle class, I think one of the important features of Indian economy is that it is driven by domestic consumption, unlike China. As you can see, 62 percent of the GDP in India is due to private consumption. So there are consumers and they are looking for various products and services that the Americans make. And 71 percent of the population is under 35, and they are very Internet-savvy, educated and they are looking for American products.
And it is a growing market. It also is very challenging, and the private sectors and entrepreneurship is also growing. So there is a greater opportunity for alliances, joint ventures for American companies if they are looking for it.
And we have a network to assist you both in the United States and overseas. We have trade specialists in 108 U.S. cities. I think many of you have joined from different cities in the United States. We have local district export centers of the U.S. Department of Commerce commercial service. We also have 150 posts in 80 countries, including in India. I think Aileen will talk about more of those offices in India, how they can help you.
Now these offices both in the U.S. and overseas can help you to locate international buyers, distributors and agents; provide expert help at every stage of that; and also help you to enter the market. So we are here to help you, and I think I also want to mention at this point that we have toll-free hotline that you can call in. A live person will answer your questions, and that number is 1-800-USATRADE. And this is the commercial service, I think I will let Aileen talk more about that.
Now, even though the opportunities are striking in India, but there are also a lot of challenges, and you have to be very careful in doing business in India. Today, you know, there is a lot of government interference at all levels. As I said, there is a high tariff in excess to indirect taxes, some restrictions on foreign investments, although they are liberalizing. And more and more American companies are opening up for business, including Wal-Mart has opened a wholesale outlet in Gurgaon.
There are also some problems in terms of the intellectual properties, so you have to be careful if you have an IPR or patent and trademark that you want to protect it. It is also a problem in India doing business because of lack of infrastructure, even though, you know, it is growing. The airports are multiplying, more passengers are traveling, but still, you’re getting from one place to the other, and if any of you have recently visited and traveling by car from one location in a city like Bangalore or Mumbai or New Delhi, you’ll find that the traffic congestions. And to add that, I think that Tata has added a new small car, so more and more millions of Indians are planning to buy that. And it costs only $2,400.
There’s still some corruptions and custom regulations, and my colleagues and the – who are experts from India will talk more about the customs regulations in a few minutes.
And to facilitate, I’ll list some of the tips for doing business in India because it is important to find a good partner so he can help you to do due diligence and screen out from – the good from the bad and so that you can deal with the companies or the parties where you want to do business. We can also help you to understand the market and competition because we have market research reports, we have folks in India commercial service can help you as well.
It is important to do good planning and aggressive due diligence, but it also needs patience and commitment on your part because things don’t happen as rapidly as we are familiar in the United States. We don’t get instant results in India. And you need to get export counseling, we are here to help you and you can call Trade Information Center, India Business Center at 1-800-USATRADE. And it is equally important to understand the rules and regulations and standards, and they can be very complex, and unless you know those regulations, it is very difficult to be successful in India.
And especially the documentation, I think, the customs require extensive, which has problems in free flow of trade across the borders. There are complex tariff structure, multiple exemptions and there is also various export promotion programs, and the enterprise zones where you locate your company, and all of that information is essential. These documentations I’m going to skip because I think our custom people will talk more about that.
Now, this is a kind – the last slide, that is the World Bank conducts surveys of all the countries in the world to determine how easy to do business in India. And India has made significant progress from 2007 to 2008, but still, it is a long way to go, particularly, you know, the – dealing with licenses and you’re taking the products across borders, which has – trading across borders, as you can see, was 142 (rangs ?) but it has gong to 79.
So there is a significant improvement, and India is trying to improve their customs – other regulations besides other problems that they encounter because they are now realizing that, unless they improve the regulatory environment, it is very difficult to attract foreign investment and foreign business.
So that is kind of a quick overview, and my colleague from Chennai will – will give you the view from the Indian side. Thank you very much, and –
MS. LAPINI: Thank you very much, Abdul. That was – for your – that very interesting presentation. And now, I’d like to introduce Aileen Nandi, the principal commercial officer with the U.S. Commercial Service in Chennai. Aileen?
AILEEN NANDI: Thank you, Barbara and Abdul. Good morning, everyone, and I’d like to thank you all for joining us. I’m going to just talk very briefly – since Abdul gave an overview of doing business in India – of how we can help you succeed in the market. I’m having trouble forwarding my slides –
MS. LAPINI: Hang on, Aileen. Let me see if I can – there you go.
MS. NANDI: Thank you.
Basically, we are part of the U.S. Department of Commerce. We work closely with our colleagues in the Indian Business Center. And we are here to help you make sales to the Indian market. Next slide.
We have offices in seven cities throughout India, and some of the major ports that we deal with – work with are here in Chennai – Bombay and, of course, the capital city, Delhi, where a lot of cargo sites arrive in. But there are minor ports all throughout the country and, of course, most of the major – all the major cities and many minor cities have international airport facilities. Next slide.
This shows you the Indo-U.S. trade. You know, before 2001, we – people used to joke that trade was as flat as the japappy (ph). And then you can really see how it’s taken off, where every year, the bilateral trade would increase by 20 (percent) to 30 percent and – so now it’s a very robust $44.5 billion. 2009 has shown a little bit of a weakening of about 2.9 percent, but what’s important to remember from the Indian perspective is that their – Indian exports to the United States have dropped substantially.
This afternoon – I happen to spend most of my afternoon actually at the customs office here and they said that Indian exports to the United States were down by as much as 40 percent, and this could actually explain why we’re seeing a little bit of a(n) uptick in terms of customs issues, although I have to say as I’ve been here in Chennai for one year, and I just had several issues pop up in the past week. So I’m not sure if it’s – they have more time to scrutinize the incoming or even outbound shipments or what that issue is, but we are seeing an uptake. Next slide.
And this is just showing investment – U.S. investment in India. And what’s interesting here is that the smaller portion, you can see Indian companies are increasingly more confident on the global stage and investing more in the United States. Next slide, please?
So we can help you basically by doing matchmaking; working at trade shows and missions; counseling, as Abdul mentioned. And if you have something stuck in customs and you can’t get it out, give us a call and we can help work with our partners here to find out what the problem is and get it – because, of course, nobody wants to pay even more charges and everybody wants to get their shipments released. So we can help you do that. Next slide.
Again, my contact information will be released at the end. I just wanted to make this short and sweet because the – I know you’re all here to listen to the – the service experts. So please contact us if you have issues or need any assistance in selling to the Indian market. We’d be very happy to help you. Thank you.
MS. LAPINI: Thank you, Aileen, for that interesting overview of what the U.S. commercial service can do in India to help U.S. exporters.
Our next speaker will be Mr. Vijay Anand, customs manager with – for India with Expeditors International. Mr. Anand?
VIJAY ANAND: Yes. Good morning, ladies and gentlemen, and thank you for giving us this opportunity.
Let me give you an overview about Indian customs brokerage setup. I think the slide is not moving, Barbara.
MS. LAPINI: There we go.
MR. ANAND: Okay. Just to give an idea about the agenda of this presentation, this first one will – or will be about the regulatory for customs and the next one is about understanding the Indian duty structure. The next one will be the requirements to do ex-im in India. What I mean by ex-im India is exports and imports in India. And then import customs clearance process and export customs clearance process and special themes available provided by the government of India and the special privileged areas. So let us see the regulatory first.
The Indian regulatory is called Central Board of Excise and Customs. They formulate the policy concerning the levy and collection of, you know, customs and excise duties and also to prevent the smuggling and administrational matters relating to customs and excise – (inaudible) – and narcotics. And they are the administrative authorities of customs – (inaudible) – and central revenues control laboratory.
They come under the Ministry of Finance, and under the Ministry of Finance, we have three departments. The first one is the Department of Economic Affairs, the next one is the Department of Revenue and the third one is the Department of Expenditure. CBEC, the Central Board of Excise and Customs comes under the Department of Revenue. The next one, please?
Just to give an idea of what – (background noise) – custom duty is kind of an imbedded tax, which is released on the goods of international trade. In economic terms, it is also called as the consumption tax. There’s a duty levied by the government in relation to the goods which is imported. It is also known as the import duty. In the same vein, duties released on export consignment is called export duty.
There are certain items that get exported out of India that attract a duty. Tariffs, which is actually a list of commodities along with a leviable rate of customs popularly understood as customs duties. And there’s also another one called the excise tax, which is basically for goods when it is getting exported out of India. And these are, you know, like levied on the manufacturer of goods when these goods leave the place of manufacture. It’s – earlier, it was known as, you know, as central excise duty and also known as the CENVAT.
Manufacturers are allowed to offset the duty paid on materials used in the manufacturing process. We’re using the duty as a credit against the excise tax through a process known as CENVAT credit. What it means is like if you import a good into India for the raw materials and if you have paid a duty for it, and when you export the finished good, you can adjust the – you know, a proportion or the – you know, the percentage of duty which you have already paid when you do the exports out of India. Next slide please?
Just to give you an idea about the Indian duty structure, I mean, any dutiable good will basically attract the first four duties in the black, which is basically the basic duty of customs; the next one is the countervailing duty; the third one is the additional customs duty; and the fourth one is education cess. So any dutiable good will attract, you know, any of – I mean, all these four. And there are also other duties, which is known as – you know, like the effect duty – I mean, if customs or the government decides to effect a particular percentage of duty on a particular commodity or tariff, they can issue a notice and effect a different duty for this particular product.
And there are preferential rate of duties which are basically, you know, with relevance to the free trade agreement we have with different countries, you know. And these countries have a discounted duty structure of, you know, whatever. So these are coming under the preferential rate of duty. And, of course, the third one we all know is anti-dumping duty. If any commodity which is imported into India – I mean, if the price of that particular commodity is lower than the world market level, then the customs will impose an anti-dumping duty.
And the fourth one is the safeguard duty. I mean, the Indian customs has, you know, a list of developed nations in terms of their import into India. If any one particular country’s (aggregating posts ?) goes over 3 percent, then a safeguard duty is imposed. And the other scenario is the aggregate of all the developed nations’ countries’ imports exceeds by 9 percent, then there is an application of safeguard duty as well. Next slide please.
Just to give you an idea of what the process in terms of the custom clearance. I mean, the way it is done – as you know, the original import document list – this slide is about the import custom clearance. Fortunately, four document are required to – (inaudible) – and the customs, if you know – I mean, you can find the bill of entry or the import entry through EDA. And after the arrival of the vessel at the seaport, the bill of entry will be assessed by the customs, and customs duty and taxes will be paid.
When you have the receipt or delivery order from the steamship line and the – you know, forward that and the customs examination will be completed at the CFS. Lead and container cargo shall be removed from CFS for delivery to (containment ?) – factory. Normally, the process takes between one to three days for a sealed container, however, but one to two working days for the custom clearance and delivery planning.
Now, most of the companies or the customers in India will prefer to clear the goods within three days because the (free time ?) – a load in the seaport or the customs is only three working days. So anything goes beyond three days, you will have to, you know, end up paying (damages ?). So more often it is all cleared under three days if there is no issues on the documentation. Next slide please?
Okay, this is on the add import clearance process. Similarly, like – I mean, on the add phrase part, customs will accept copies. On the sea freight part, you need the original documents to clear the goods, but on the add import parts, copies is enough. Similarly, the EB, the bill of entry or the import entry is filed with the customs. After arrival of the flight at the airport, the bill of entry will be assessed at customs, and you pay the duty and taxes, receive delivery order from the airline and forward it, and customs examination will be completed at the airport.
Cargo will be moved out of the airport for delivery to (containers ?) location. The lead time to do this activity normally takes between one to two working days, and even on the add import front, the free time available is only for three days. And in India, most of the international flights, I would say like 70 (percent) to 80 percent of the international flights land only in the midnight. So normally the process goes to the second day of the arrival, and by the same day’s evening, I mean, you’ll be in a position to clear customs and remove the freight out of airport. Next slide please?
This is for the process on export – I mean, just wanted to share it with you, but I know most of the customers are planning to do imports into India, but the export process is very, very simple in India, both on the air front as well as the sea front. It normally takes about one to two working days to do custom clearance, and the document required are the – (inaudible) – packing list, IEC number, AD code and bank (retail ?) – numbers.
The IEC, area code, description will come in the following slides, and the export entry is called shipping bill. It’s a name filed through the EDA in the area of sea customs and customs assessment will be carried out in the airport or seaport.
The (factories ?) of containers will be moved to the seaport for the cargo for air shipment will be moved to the airport. If you have an LCL shipment, it will moved to a CFS, and then the stuffing happens in the container freight station. On an LCL container, the seal is verified, cargo is examined for an LCL cargo and the airport for air shipments with a customs officer.
The export processes are very, very simple. If all the documentation are perfect, you can even clear customs on an export within three to four hours subject to the documentations, you know, remaining perfect.
And finally, once the customs officer assesses it, he gives the “let export,” you know, certificate, and the container will be handed over to the cargo – I mean, the carrier or the air freight shipment will be handed over to the carrier. Normally – I mean, 90 percent of the export shipments are cleared within one day, but some cases, this may go to the second day as well. Next slide, please?
Just to give you an idea of what it’s – imported – I mean, IEC port and the authorized dealer code and the business identification number, these are the basic requirements to do imports or exports in India. The import or exporter code is nothing but a code given by the director-general of foreign trade. Only when you have this code you are allowed to do export or import. And this can be – earlier, it used to be available at the central office in Delhi, but now they have regional licensing authorities in all the 29 states.
The next one is every exporter – authorized dealer code – every exporter who’s involved in a foreign transaction should have a bank account, and this account should be informed to Indian customs and through the Bank of India, which is a federal bank, allots a code to each bank. And this code is called an authorized dealer code.
Customs links your IEC number and the AD code together, and the exporter also requested – I mean, required to register authorized foreign exchange dealer and open a current account in the designated bank. And all the drawback incentives are credited in these bank accounts.
The third one is the business identification number. The exporters have to obtain and, based on identification number, from the director-general of foreign trade. Without a bin number, you cannot file a shipping bill for clearance of exporters. Under the EDA system (land-based ?) businesses receives online with a custom system from the DGFT. So these three are the mandatory requirements before even you start, you know, doing your imports or exports in India. Next slide, please?
There are 1,000 schemes forwarded by the Indian customs in order to reduce your duty or, you know, take a resumption of duty or, you know, to control your duty payout or whatever. As Mr. – Dr. Abdul said, like, the tariffs are very high in India, and the duties are still a little complex, and in order to, you know, help the exporters or importers, you know, there are certain schemes which allows them to reduce the duty or even go for a free, you know, duty structure.
First one is the advanced license scheme. This allows you to free import of imports which are specifically incorporated in the export product making, and you have a normal allowance for – (inaudible) – with a specific export obligation in terms of value and quantity. What it means is you can go for an advanced license, but you can go for a duty free aspect in this but you need to – you know, you have an obligation in terms of exporting an extra amount of, you know, value and by showing that – (background noise) – in an advanced license.
The next one is the export promotion of capital growth, allows the import of capital goods alone for pre-production, production, post-production, including, you know, CKD (ph) and SKD (ph) – (inaudible) – computer software systems at 3 percent customs duty subject to an export obligation equivalent to eight times. It means if you’re asking for a – for example, if your duty is, say, $100,000 in a year, you have to fulfill an export obligation of, you know, $800,000 on the export. So this has been monitored and recorded and registered as maintained, and this particular scheme, you know, is very popular in India. A lot of companies bring their capital goods under this scheme.
The next one is duty entitlement passbook scheme. This is to neutralize the incidence of customs duty on import content of export products, and the exporter is entitled for a duty credit as a specified percentage of freight onboard. Again, this has to be applied through the – you know, director-general of foreign trade. And the fourth one is the duty drawback scheme for those transactions in which goods are placed in specific categories of beneficiaries to leave the country, and the payment for such supplies is received in either in Indian rupees or foreign exchange.
Fourth one is the deemed export. This refers to the transaction in which goods supplied do not leave country. For example, we have a lot of special economic zones in India, and these special economic zones are as good as foreign countries, there is no duty or taxes involved. Now, if you have to supply to these special economic zones inside India, it is considered as deemed exports, and payment of such supplies is received in Indian rupees or foreign exchange. Next slide, please?
Just to give an idea about the (privileged ?) areas provided by the Indian government, Pashtwan (ph) is the most populous special economic zone in India. This is specifically dealing duty free and clear. It is as good as a foreign country and for the purpose of trade operations and duties and tariffs. These units can import procure from domestic tariff area all types of goods and services without payment of duty. That means there is zero duty for this – nothing applies to that. And apart from this, you have export-orient units, electronic hardware technology parts deemed, software technology parts deemed or biotechnology parts deemed. So these schemes are all operating under duty free regime for import procurement of all types of goods, including capital goods without payment of duty for manufacture of goods for exports.
Now, these schemes are provided only when you have an obligation for export, so this is something which you need to keep in mind. And the next one which is developing is a free trade warehousing zone, which is on the anvil – Indian government is planning to promote a free trade warehousing zone, and this infrastructure will also allow you to, you know, bring in goods from various neighboring countries and do a consolidation in India and then export it out. So this is likely to be starting in the middle of 2010, and most of the customers are, you know, looking eager for this particular scheme. Next one, please?
So that’s about it. If you have any questions, you can throw it back to us. Thank you.
MS. LAPINI: Thank you very much for that very substantial presentation, Mr. Anand.
Our next speaker will be Mr. Vimal Rawat of – who’s the manager of planning, engineering and operation support with Federal Express, FedEx, in India. Mr. Rawat?
VIMAL RAWAT: Yeah, good morning, everyone in the U.S. and good evening for participants from India. Barbara, can I control the movement of the slides?
MS. LAPINI: You can. Just let me know if you have any problems. Okay.
MR. RAWAT: (Off mic.) Okay.
Now, what I want to cover, a lot of, Mr. Anand has covered, so I’ll be really quick on those areas. The subject that I want to cover here is just trade regulators and CB fees (ph) and fee responsibilities of customs – (inaudible) – ratification and understanding principles of restrictions, import and export governments – (inaudible) – export and import clearances.
(Inaudible) – normally the credit (qualities ?) are governed by the Ministry of Commerce. They have Department of Commerce and the – most important for exporting – (inaudible) – of foreign trade. And they govern – the export-import policy is governed by the Ministry of Commerce. And the Department of Commerce is headed by a secretary, and they’re responsible for the country’s external trade, formulating the trade policies.
And DGFT, director-general of foreign trade, is under Department of Commerce, and they have active participation in foreign trade policies. And the IEC Code, the Import Export Code, it’s like – you have EIN number in the U.S.; that’s similar. Every company wants to import and export, they must have an IEC.
Import/export licenses and standard input/output norms, they are formulated for various (drawback scheme ?)s. So all these are the key responsibilities of the DGFT.
Now, the customs department is under Ministry of Finance, Department of Revenue. And then under Department of Revenue, there is Central Board of Excise and Customs, who govern the Customs Department. And customs – there is a chairman of CBEC, and under him for customs is member, customs. These are the – for customs policy at a ministry level. They formulate the customs and excise duty tariffs and rates, protection of domestic industry, prevention of smuggling, administrative matters, and they have the administrative authority for their subordinate organizations.
Those include the custom houses, who are actually – they also call them field commissions. They are the ones who are at the airports and seaports clearing the shipments.
The key responsibility of customs is collection of customs duties, safeguarding the financial interests and implementing the policies and procedures framed by the Ministry of Commerce. So the national economic commercial interests, economic and commercial (force ?), regulating international trade within foreign trade guidelines, and illicit trafficking, they have to keep track on that.
The classification of goods. Whether it’s import or export, classification is the first step that needs to go in there. And India is a participant in WTO and we adopted the WTO classification coding system way back in 1986. And our – the customs and excise tariffs have to be aligned with – (inaudible) – codes. And a nomenclature combining – (inaudible) – is called – we call it (tariffs ?). So the only differential between the customs tariffs in U.S. and India would be the rate of duty; otherwise, the classification, what you adopt, is the same that we adopt in India.
And this tariff part is governed by direct act, and that’s called tariffs – (inaudible). They’re for importing to India and even exports more regarding the imports because there are very few restrictions of exports. So mainly, you can classify them, all the goods, in three major categories. One is – (inaudible/background noise) – imports a week, or they also call it open (daily license ?) and you don’t need any license to import commodities. These can be imported and exported free, and it’s – (background noise) – on import and export of these commodities.
(Registered ?) commodities are where you require a license or a certificate or a permission. And then fines and penalties may apply for – (inaudible) – that you cannot import and export into India. Now, the principle of restriction are the – protecting the public morals and protecting the human and animal or plant life or health; protection of patents, trademarks and copyrights; prevention of use of prison labor. So these are the various principles by which the restrictions are governed.
Then import and exports. As far as the law is concerned, they are governed by a customs act, which was the 1962 Customs Tariff Act. Like I mentioned earlier, that’s the duty rates and all. Foreign trade policy, the (five-year ?) policy that is put down by the Ministry of Commerce – (inaudible) – like everywhere in the world now, the – (inaudible) – arms act, we have some cosmetics acts for cosmetics.
And then there are some state government rules and regulations that Dr. Abdul in his presentation, he was talking about some across borders – so India has 29 states. So if not 29, so then at least do that for – around 15 states where their – (inaudible) – entries are also governed by certain rules, regulations, permissions and the entry permits.
Just to give you a brief on the import and export clearance on the air transportation, there are two main categories in air transportation, the experts, or the (career mode ?) they call, and then we have the formal entry or the entries – (inaudible) – cargo mode. So there are three main governing areas of – (inaudible) – contents, gems and jewelry, and anything related to the export promotion schemes like Mr. Anand mentioned in detail, and repair and – (inaudible).
So these categories, they can clear in express mode if it requires a formal entry. And if the – on the export side, the samples valuing more than 50,000 (dollars), valuing more than 25,000 (dollars) or anything with a – (audio break) – transaction, again, a formal exit from the country, and – (inaudible) – these shipments weighing more than 32 kgs or dimensions. These are basically – the weight and size are, by the airline security they put. So these three categories, you need a formal exit from the country. I’m sorry – it should be formal exit, not entry.
And similarly on the import side. If the low-value document – low value and medium value, these three categories that are shown in this presentation, they are – they don’t require a formal entry, can be cleared on express or – (inaudible) – country. However, the high value requires a formal entry.
So documents, they just – (express ?), you just make one simple declaration for documents, and low value is gifts and samples up to 10,000 rupees or $200. And there doesn’t follow the de minimis entirely. We have a selective de minimis, I would say, for – it’s for samples and gifts up to $200. If it is not a sample, not a gift and the value is still within $200, it doesn’t fall under de minimis, there is a duty on it.
So that selective de minimis on low value will – that – it can become express mode. The medium value, that is more than 10,000 rupees or 200 (dollars) – between 200 (dollars) to $2,000, they are cleared on, again, express entry, with examination and duty rated as applicable. The higher end do require a formal entry. So the value that I’ve mentioned about here, $200, $2,000, this is the landed value of the goods. So it’s not a declared value, it’s declared value plus insurance plus freight plus 1 percent port status.
Now, here I’ve given a little bit of comparison on express and formal entry, the paperwork and the – procedure-wise. On express clearance, we have the provision of three clearance. So before arrival of the flight, the assessment and the release can be procured from customs.
So on arrival, they do examinations and final release. However, in formal entry, the clearance process is – it’s not as simple as in the express entry. And 90 percent of the shipments arriving in express mode are cleared within four to six hours of arrival. However, on formal entry, it may take one day, at least. Clearance up to 100,000, that is the restriction on express mode of clearance. However, on the formal side, there is no value limit.
Consignee participation is required on – (audio break) – only more than $2,000. However, every entry on formal entry you need consignee participation – documents from consignee, the authorization letters and the value – (inaudible). The express clearance in Delhi and Bombay are 24/7, and the clearances under the license if the consignee’s importer is (providing ?) any benefit, then that is not permissible on the (express side ?), it has to be on the formal entry. And duty – normally, the express companies, they advance the duty on behalf of the customer and take the reimbursement on daily rates. And as practiced normally, the – on the formal side it’s the consignee who advances the duty.
So the main import clearance paperwork, other – there are more, but those are more specific to the – (inaudible) – commodities. This is the general paperwork that you will need for all kinds of shipments, airbill, commercial invoice, packing list, IEC and (the authority ?) letter from consignee that is required on the express side only more than $2,000. However, on the formal clearance side, you need it for each and every shipment. And the same goes with the valuation declaration.
The main, (same ?) points that we have on import clearances, not everything is attributed to customs. There are other regulators, like airport regulators and all. There are also – there are procedures and also costs from delays. The IGM filing delays – or the import manifest needs to filed by the carrier at least four hours before arrival of the flight. So if that is delayed – that is the starting point for the import clearance. That needs to be filed first. And then if – because on the cargo side, the cargo arrival notice or the delivery order in case consignees are paying for his own broker to clear. If that is delayed the entire process gets delayed.
On the airport side, the segregation and location allocation – like Mr. Anand said, most of the flights arrive during the night, so that – that delays the process. And the shipment getting into the warehouse and getting the location. And without that, the examination cannot start.
On the clearance delay, the disputes are not only on valuation and classification, plus the other regulatory bodies like EDC – (inaudible) – or any licenses, those are the main areas where – (inaudible) – on import happens.
On export, I have not touched too much. We can – on the express side, it’s just about a three-hour activity, and on the enforcement side – (inaudible).
That’s all I have. And my contact details. If anybody has questions, can please contact me. Thank you.
MS. LAPINI: Okay. Thank you very much, Mr. Rawat for that very interesting presentation with lots of good information, I think, from all of our speakers.
At this point, we will have question-and-answer time. Operator? Christine, are you there?
OPERATOR: Yes, ma’am.
MS. LAPINI: Can you open up the lines for questions for us?
OPERATOR: Yes, thank you. At this time, we’d like to begin the question-and-answer session of the conference. (Gives queuing instructions.)
The first question comes from Patty Ellison (sp). You may ask your question.
Q: Are express bill (waitings/weightings ?) allowed to clear shipments in India on ocean?
MS. LAPINI: Can I ask one of our customs experts to answer that?
MR. ANAND: Yes, it is allowed.
Q: Okay. Thank you.
OPERATOR: The next question comes from John Balsom (sp). You may ask your question.
Q: Yes, thank you. This is a question dealing with getting a (RMA ?) – made unit back out of India to our office. We basically shipped a network appliance that has a standard computer server with proprietary software on it. So we originally sold and imported into India a number of the units at full value, and – although they asked us to break out the hardware portion with a software portion; we normally don’t do that, but we did in this case.
One of those units failed just recently. We shipped a replacement unit to them; in our cases, we ship at whatever the insured value is, which is really just the cost of the software – excuse me, the hardware in that case. Got the unit in successfully, and the value was, for example, $3,000, where the original cost was 20,000 (dollars) that was on the original commercial invoice.
But now we can’t get the unit back out because our customers say that they need to value that unit at, like, $20,000, and we’re concerned that we’ll end up paying some type of a tax or duty on that value versus the value of the unit that we actually replaced with it.
So my question is, what do we – what should we value that unit that we need to get returned back from India?
MR. RAWAT: How long back this original unit was brought into India?
Q: Well, it was imported last year, and we’ve imported probably 15 of those units, and this is just one unit that failed. And we already replaced it; we already sent them a new unit. We’re just trying to get the old unit back out. And there’s a difference – we have a conflict, I guess, in how much we should value that unit for.
And we don’t really care what they value it, as long as we’re not responsible for any type of duty or tariff on the way back out.
MR. RAWAT: But there are no export duties out of India.
MR. RAWAT: The valuation they’d need for the export documentation, and if it was – it’s an old unit, they can always use the depreciated value –
Q: Mm hmm.
MR. RAWAT: – and, accordingly, they can export it out. And – (inaudible) – they’re going to pay it on the – (inaudible) – that they should have a weighted – and could have sent the unit back out there. But they can export it, but there is no export duty in that.
Q: Okay. So – I mean, just to clarify. We valued the replacement unit at $3,000. We thought that that’s what they should value it – when they’re asking for a value, that they should value it at $3,000 to get it back out of the country. But they seem to think that they need to value it at whatever the original cost was.
MR. RAWAT: Three thousand dollars is the original cost?
Q: No, $20,000 was the original cost, and that was on the original commercial invoice when they first imported it last year. We got a replacement unit in to them at – with a $3,000 value because that’s just the cost of the hardware, and that’s what we said that should be the value that they place on the faulty unit to ship it back out. And they seem to think that they need to put the original value of $20,000 on that unit. That’s what we can’t understand.
MR. RAWAT: Yeah, I think that’s right. And they have to – all they can do is depreciate – the one-year depreciation on it, and –
MR. RAWAT: – the value around – whatever the depreciation (is ?), they must be placing – if it is five years, then 4,000 (dollars) less, then 15,000 (dollars) can be the depreciated value.
Q: Okay. All right. Thank you.
MR. RAWAT: Sure.
OPERATOR: The next question comes from Steve Schaud (sp). You may ask your question.
Q: Yes. I was just wondering what’s the price differential between express clearance and your normal clearance, that last item that they covered? How much more does it cost to do express clearance?
MR. RAWAT: The clearance cost, I would say, on the express side – normally, the clearance cost is included in your transportation.
MR. RAWAT: And the duties and the taxes are the same on both sides. (Inaudible) – that is followed on express as a – (inaudible). For express clearance, which is a $2,000 – there is no – no clearance cost there separately.
Q: Okay. All right. Thank you.
MR. RAWAT: Sure.
OPERATOR: The next question comes from Ken Ansell (sp). You may ask your question.
Q: On the documentation required to enter the country, I know there’s value declaration. Can you explain what constitutes value declaration and – in particular when shipping used equipment into the country as well as new.
And then a secondary question is does customs apply interest on the duties when the equipment is in bonded warehouses?
MR. ANAND: Yeah. When the cargo is imported into India and it is getting bonded in a warehouse, the customs give 90 days’ interest free. This – and after 90 days, it is 15 percent per annum on the duty mode, which is being levied by the customs at interest.
Q: Now, what about the value declaration? What constitutes value declarations? What is accepted?
MR. ANAND: Are you talking about the second-hand machinery or the new machineries?
MR. ANAND: I mean, the value declaration for a new one is your actual value which you declare in the commercial invoice, but customs also has, you know, the identical rates of those equipments in India. So if it matches with that, then it works fine.
But when it comes to a secondhand machinery, I mean, it depends on, you know, how you depreciate the value of used machinery. Normally, customs allows you to depreciate up to 70 percent of the – you know, the original value of the used machinery, not beyond that. But even then, whenever a secondhand machinery comes inside India, customs has authorized 35 chartered engineers.
So these chartered engineers will assess the used machinery, and they give the value of the – I mean they make an assessment and, you know, come at a – arrive at a value, and this value must be announced to customs and the importer. So irrespective of if the value depreciates 50 percent or 70 percent, the chartered engineer’s certification or the assessment of the value is final.
Q: On new equipment, what is acceptable for a declaration? The commercial invoice has not been acceptable in the past. We’ve had to provide additional value declarations, and that’s been a bit confusing.
MR. ANAND: For used machinery importation into India, the chartered engineers which have been listed by the customs, they will give these values. They will assess the car – I mean equipment, and they will recommend the value for the customs. So the invoice value, the chartered-engineer-given value and the customs transaction value, whichever is the highest, the customs will levy duty on the higher value. This is one area.
And the other area is, the customs always – (inaudible) – transaction value rules for all the new products, okay, even if you have – (inaudible) – a new machine or new equipment which is coming into India, and that the value declared in your invoice should match with the value that – the record placed on the customs. If that is the case, the customs will very well accept your invoice value and levy duty on that.
Q: But we’ve been asked for product catalogues and documentations of published pricing list and that type of thing. And not all of our manufacturers have published price lists, so it’s been a matter of how do we generate a price list when we don’t have a publicly published price list.
MR. ANAND: Okay. This will be a case where you bring in the machinery. And is it a new kind of sophisticated machinery?
Q: It’s new equipment. Sophisticated, I don’t know the answer to that question.
MR. ANAND: Because, I mean, if there is no transaction price available for a particular equipment when it arrives, in that case customs may request to provide the product catalogue and then, you know, the price list. But otherwise, predominantly most of the assessment happens with the commercial invoice of the customer, unless if the equipment is new into India and there is no transaction value for it in the customs.
OPERATOR: Your next question comes from Jose Whitman (sp). You may ask your question.
Q: Hi. Thank you. I have a couple questions, actually. Number one, I have a similar situation like the one just expressed. We just sent a couple samples to India from one of our customers. The value of the product, real value is $85, and customs had assessed the value of the product for $715. It seems to me like customs doesn’t have any kind of – (word inaudible) – from there and they’re just checking Google or I have no idea how they’re getting to this. However, my customer is refusing to pay the duties for $715, because that will set a precedent for the next importation.
Is there anything that can be done about that? We have a public price list. We can certify any price list with the chambers of commerce and so on. Is there anything that we can do about that?
MR. : Has the duty been paid and shipment released?
Q: No. No. The customer actually – we sent this by FedEx, and the customer actually refused the shipment because the customs duty was more than $250. And he was afraid of taking this and then setting the precedent in customs that the real value is $715, which is not the case on this product.
This is not the first time that this has happened.
MR. : (The $715 ?) – challenge first time value on that. Like you said, you have if you have some lists and some value evidence available. You can definitely challenge customs on the value if the documents you do provide to prove the value is $85. You can definitely do that.
It was sent through FedEx, you said?
MR. : Okay. And you have my e-mail ID, and if you can send me the details, I’ll personally look into it.
MR. : I think we can challenge it, yes.
Q: Okay. Wonderful.
And the last two questions is, first, about the free zone in India, it works like any other free zone all over the world? So the product basically is stationary in there and they pay duties only when it’s released into the country?
MR. : Yeah. The free trade zone, as you said, it’s like any other free trade zone in the world. But if you want to sell it for the domestic market or for the Indian consumption, then you have to pay the local duty.
Q: Okay. And on the event that there is no selling internally, could be re-exported?
MR. : I beg your pardon? Can you please come again?
Q: That in the event that the product is not consumed or sold into the domestic market in India, can I re-export that product to the region, to other countries?
MR. : You can. You can.
MR. : The free – the special economic zones or the free trade zones are basically foreign (countries ?) inside India.
MR. : So you can bring in, take it out. As long as you don’t sell it for domestic custom, you don’t have to pay any duties or taxes.
OPERATOR: The next question comes from Louis Rothberg (sp). You may ask your question.
Q: Yes. My question is just simple. I was not able to write fast enough to get some of the excellent information. Will we be given a set of these charts?
MS. LAPINI: Yes. I can answer that for you. Yes. I will be sending out the slides, and there will be a recorded version, also, of the webinar available afterwards.
Q: All right. When can we anticipate receiving the slides? That’s it.
MS. LAPINI: Within the next day.
Q: All right. Thank you very much.
OPERATOR: The next question comes from Abe Thomas (sp). You may ask your question.
Q: Yeah, hi. Thank you very much.
We are exporters of musical instruments for education to India. In our case, we have shipped some harmonicas into India and that was being used by a customer, and one of the customers needed one of the harmonicas repaired. So we sent it out from India via EMS post and have an outbound EMS number for it. It went to Japan, Suzuki Japan, who repaired the harmonica and then sent it back via EMS post. And on the export declaration, they have marked clearly that this is a repaired harmonica, no commercial value, and with the marking of $5 for customs purposes.
However, when it arrived in India, the customs officer assessed or asked our employee in Bangalore what the value of the product is, and he gave a rupee value of 6,000 rupees. And even though it was marked on there that it was a repaired harmonica brought back with no commercial value, they assessed a duty on it of approximately 1,900 rupees.
And of course, after having visited these folks three or four times and spending three or four days there, I just told them, look, just pay the clearance fee because it was about 40 U.S. dollars; time is worth more money than this.
So, you know, how do we avoid this for any type of future imports, where a product needs to be sent out for repair and needs to come back in, where we are not assessed duty twice on the same product?
MR. RAWAT: On the express or the cargo side – on EMS, I’m not very aware, but on the express and cargo side, when we export anything for repair and it comes back, we declare at the time of export that this is going for a repair – (inaudible) – and the first import documentation should – (inaudible).
The other thing which is very important in such cases is having a very visible – (inaudible) – number endorsed by customs, the serial numbers and all. At the time of import, the invoice that’s coming in should give the value of repair costs and transportation. That’s the only portion which is dutiable when it comes back in.
Q: I see. Well, you know, this is – in India they call these mouth organs, harmonicas. There is no serial number on it. In fact, that is one of the questions that the customs officer asked: How do we know that this is not a new product and it is a repaired product?
Well, there was one month’s worth of e-mail communications that took place on this thing from the customer to the factory, the factory requesting us to please send it back for repair. We presented all of those documents, and we told them there is no such thing as a serial number on this; however, here is the outbound EMS numbers.
But, you know, this is interesting. You say that you are with FedEx, sir? (Pause.) Are you with FedEx?
MR. RAWAT: Pardon me?
Q: Are you with FedEx?
MR. RAWAT: Yes, I am, sir.
Q: Okay, so that’s great, because in the future this is something that we can use, because this way there is – you know, you just mentioned that for an export of this, you have to have a declaration. Well, at the postal service or at the EMS, we did not have any way to document that this was going out. However, we presented them the EMS number –
MR. RAWAT: Yeah, that’s important, because – that’s very important to match. And recently our own equipment we sent out, and we paid a duty only on the repair cost. It was $1,800 that we imported from U.S. and for repairs, and the repair cost was just $25, and the transportation another $10, and on return it would be only on $35, not $1,800.
Q: Is there any way to now go back to the customs – you know, the customer was quite upset to know about this aspect, but we took care of, you know, customer care, that we paid for it ourselves. We, by the way, have an office in India. (Inaudible) – corporation has opened an office in India and we have a presence there. And we wanted to give the same level of service that we give to customers here in the U.S. Therefore, we handled it ourselves.
Now, if it was being sent to a customer directly, they do not have an import-export code number, do they? You know, a consumer.
MR. RAWAT (?): If it is (personal ?) shipping, then the customs officer on the shift, the assistant commissioner, we just have to make a request to him; he allows on a customs IC code number. They have one reserved for such shipments.
Q: I see. For direct to customers.
MR. RAWAT (?): Yeah, for direct one-time importer who’s not a regular importer and exporter, he won’t have an IC code. So then we make a form request to the assistant commissioners of customs, and he allows them to file that entry on that particular code.
Q: I see. Thank you very much for your -
MR. RAWAT (?): And as far as –
Q: Yeah, go ahead.
MR. RAWAT (?): You’re welcome.
As far as your question about could you go to customs back on your harmonica case, we can always challenge, but I don’t see too much for success coming on this, because there is no proof of export, the marks and numbers and – there’s no identification for that. So it can always be challenged, but the chances here of getting any reimbursement from customs in this particular case are, I think – (inaudible).
Q: Well, you know, most of the mouth organs or the harmonicas do not have a marking on them, as far as a serial number is concerned. You know, how do we address that? How do you address it if one was to be sent out that way? We do have one harmonica, one mouth organ, that costs $3,000. That has a serial number on it. But there are other items, such as this, where – you know, most musical instruments don’t have – well, electronic instruments do, but I’m talking about, you know, mouth organs do not have serial numbers put on them.
So how –
MS. LAPINI: You know what, maybe should we – I think there are maybe other questions in queue. Can we talk about that specific case off-line?
Q: Yes, surely can.
MS. LAPINI: Is that okay, Mr. Thomas?
Q: Yes. I appreciate your answers. You’ve given me some good tips on future shipments. We will contact you at FedEx. Thank you.
MS. LAPINI: Yeah. And you have the contact information and the direct e-mail, so you can follow up on that, certainly.
Q: Thank you very much.
MS. LAPINI: Thank you.
Q: And thank you very much, Barbara, and thank you very much, everyone.
MS. LAPINI: Okay. Operator, are there other questions?
OPERATOR: Yes, ma’am. The next question comes from Amy Zacker (sp). You may ask your question.
Q: Hi. My question is pretty simple. I just want to find out if original commercial invoices, original signed commercial invoices, are always required in India.
MR. : Yes, it is always required for the sea shipments, but for air shipments, copies are fine.
Q: Of the commercial invoice, not of the airway bill.
MR. : Commercial invoice.
OPERATOR: The next question comes from Deloria (sp) Williams. You may ask your question.
Q: Yes. We are actually re-exporters of a mosquito control product. And we’re buying goods exported from a factory in Karur and in full-container quantities, and what’s happening is our freight forwarder is shipping it from Karur to Chennai in trucks. And they said that they’re doing that because of the inspection that has to take place in Chennai. And what I suggested to them is to do it in containers, and they said that they could not do it.
So I guess my question is, you know, what’s the reason behind this? And is there any other way that we could have them to ship containers and (stuff ?) them at the factory?
MR. : What is the product, Madame?
Q: They’re mosquito nets.
MR. : Mosquito nets.
MR. : There are two types of inspection which can be effected. One type is the manufacturer in India can stuff the cargo in their barrels, in the containers, with the central excise or customs supervision, and that can be taken to Chennai port and can be exported. This is one way.
The other way is they can move the cargo to Chennai container freight stations, keep the cargo there, do the customs examination, stuff the cargo in the container, and they can move it to the Chennai port. These are the two ways that the manufacturer can export.
Q: Okay. So the second one, that’s basically what they’re doing now. They’re shipping trucks and then examining it and then stuffing it at the port.
MR. : But you can prefer the first one also, but the exporter in India has to be registered in the jurisdiction’s central excise authority or the customs authority to carry out the customs examination in their own barrels.
Q: Okay. What would be involved in doing that? What would be the cost to have that done, if any?
MR. : It is just a registration. It is just a registration of the manufacturer with the customs jurisdictional authorities of customs and central excise. And they also make a special application after the registration to carry out the customs examination or central excise examination inside their barrels. And they been given a special authority also by the customs and the central excise to do the self – (inaudible) – in their own barrels.
Q: Okay. So that official would just come and do the inspection.
MR. : Inspection there.
And actually I had another question. This is just a short one. Where can we obtain an Indian national holiday schedule?
MR. : Indian national – ?
Q: The national holiday schedule so that we’ll know the holidays, because we always are finding out kind of after the fact that there’s a holiday there.
MR. : There is not – the listed holidays as for the Indian government is only 12. But for customs, it varies. I mean, it varies from zone to zone. There is no uniform holiday for the whole of the Indian customs. It is different in Bombay, it is different in Chennai. So we can send it across to you. Not a problem.
Q: You could send that? Okay.
MR. : Tell me which is the location you’re looking for, so that that particular customs jurisdiction holiday list, I can send it across.
Q: Okay. That will be for Chennai and for Haldia port.
MR. : Okay. We can send it across.
MS. LAPINI: So go ahead and maybe follow up by e-mail with one of our customs experts and ask them for that. That’s probably the best way.
Q: Okay, I’ll do that. Thank you.
OPERATOR: The next question comes from Lynn Brannigan (sp). You may ask your question.
Q: Hi. Good morning. We are a manufacturer and exporter of automotive lubricants, chemicals. And we have not attempted to export to the Indian market yet, but it’s on my radar for this year. So my question goes back to the B-I-N number. We use a freight forwarder for all of our shipments and then we don’t get into any of the import on the other side. So is this B-I-N number essential for us before we start exporting?
MR. : No. If you are exporting it, it is not applicable to you. All those B-I-N numbers or I-E-C (ph) is applicable only to the importer in India.
Q: Excellent. Thank you.
OPERATOR: The next question comes from Margaret Bruneld (ph). You may ask your question.
Q: Yes. Thank you. I have two questions.
We are a manufacturer of telecommunications equipment. We would like to do a demonstration for a potential client in India. This would result in very, very substantial duties and taxes. We anticipate, based on the numbers that we’ve seen, it could be as much as a half a million dollars in duties and taxes.
Since India does not accept the ATA Carnet, what are the opportunities for a duty-free temporary import into India?
MR. : Yeah. As you referred, the ATA Carnet is the best way to import into India and that you will face no hassle with the Indian government to import it as an ATA Carnet, provided your consignee in India should have the supporting documents required by the notification, customs notification. If those documents are intact, it can be imported as an ATA Carnet without payment of any duties. This is one way.
The other way around this without payment of duty is you can import it as a temporary import, pay the duty during – (inaudible) – customs during importation in India, then after completing all the exhibitions and displays, it can be re-exported. After re-exportation, whatever the duties paid can be taken as a drawback from the customs by the consignee in India. But it cannot be a hundred-percent refund. It may be on a (slide rate ?) based on the period of usage.
The second question we have is, we’ve recently run into several requests for chartered engineering certificates for used equipment coming into the country. We have some development happening in country. And we haven’t had this come up before. Is this something that’s always been a requirement but not often requested, or has there been a regulatory change?
MR. ANAND: It is a mandated requirement for all the used equipment imported into India. There are two ways. One is the customs has listed the chartered engineers which have been nominated by the customs. These chartered engineers have branches all over the world. So during your exportation to India, you can use one of these chartered engineers who have been listed, so then to avoid one more examination in India. But the chartered engineer certification for a used equipment is a (mandate ?) for Indian import.
Q: And if I send you an e-mail under separate cover, could you direct me to the list of pre-approved chartered engineers for the U.S.?
MR. ANAND: Definitely. Definitely I can do that.
Q: Okay. And this is Mr. Anand?
MR. ANAND: Yes.
Q: Thank you.
MS. LAPINI: Did you want to follow? Okay.
OPERATOR: The next question comes from Paul Lynch (sp). You may ask your question.
Q: Yes. Thank you. My question is this. First of all, we are a manufacturer of medium-value capital goods on the order – typical order value $300,000 plus. Is there a way – on occasion we would be asked to handle an order all the way through FOB delivered to the job site. Is there a way to quickly and conveniently get a decent estimate of what our total duty, taxes, fees, et cetera would be for purposes of estimating what the cost would be to deliver to a job site in India?
MR. ANAND: You can do an approximate estimation of your duties into India. Just send me across your e-mail ID and the contact areas. We can give you the link. And in fact, Indian customs is coming up with a user-friendly website where you just have to go there and put the STS (ph) classification and it will list out all the possible duties into India.
Q: Okay. And who’s speaking, please?
MR. ANAND: Vijay Anand from Expediters.
Q: No, I’m sorry, your name, sir?
MR. ANAND (?): (Off mike) – Expediters.
Q: Oh, okay. Very good. I’ll send you an e-mail.
One more quick question, if I may. In the event that there’s a problem with a product once it’s installed and we have to dispatch an engineer and/or replacement parts, what is the impact of that type of thing on duties and customs on parts that are replacing something that has failed on a job site?
MR. : You’re talking about replacement parts or –
Q: Yes, sir, under warranty service, a part that was originally shipped in, has failed and a replacement part must be sent or installed. Do we have to pay duty and everything else on that replacement part?
MR. : It depends, actually. What happens now, whatever the replacement parts, warranty parts which is coming into India is being levied (a part ?) customs duty.
Q: So in other words, the answer is basically yes, a duty must be paid on any replacement parts.
MR. : Yeah. Yeah.
Q: Okay. Okay, thank you very much.
OPERATOR: The next question comes from Tina Savrinski (sp). You may ask your question.
Q: Yes. Thank you. We’re a manufacturer of vibration data collectors, hardware and software. And we are doing business with a partner in India. They’re basically a distributor for us. And we are exporting our data collectors to them to utilize in service work. They collect the data and then they send that to us for analysis. So the data collectors are not for sale. They’re for their use only to collect the data and then get it back to us via e-mail or over the Internet.
What kind of value should we assess on the data collectors? These are used pieces of equipment and they’re not reselling them. We’ve been using our COGS. Is that correct?
MR. : I’m sorry, I don’t follow you. Can you please repeat it?
Q: Sure. We basically have a distributor in India, a partner we’re working with. And what they are going to do is we send them our data collector to go out and collect data on machinery with various customers, and then they will, via the Internet, send that data to us for analysis.
The problem we are having is what value to put on the data collectors when we export them. They’re used pieces of equipment, and they are not selling them. They’re just utilizing them. We own them.
MR. : Now I understand. The valuation should always be your actual pricing. Actual pricing of the product has to be mentioned in your invoices for the export into India, because the customs have something called the transaction value rules, which is being required by the customs act, section (14/40 ?), transaction values. So customs always go by the actual price of the product.
MR. : Even if you don’t put a price for these particular data collectors, the customs will have a value for these data collectors and they will calculate the duty accordingly.
Q: Well, we’re putting a price, but we were putting our cost of goods sold, our COGS, because they’re not selling them and they’re used pieces of equipment.
MR. : So after the usage, are these data collectors sent back?
Q: We retain ownership, so they might have them for a year or even two years. They would only send them back to us for repair or if we terminated our relationship with them. But we retain ownership.
MR. : No, you retain ownership, but do you get it back out of India or it remains here?
Q: It would be remaining in India as long as we had a relationship with this company.
MR. : Yeah. So it’s simple. I mean you have to declare a value for these data collectors. Whatever is the price of these data collectors has to be, you know, specified in the invoice.
Q: Okay. And do we put anything in there – does it help the end user – because the company we’re working with is getting assessed high duties, evidently, and does it help to put that it’s not for resale?
MR. : It is immaterial if it is for a resale or for your own consumption or for the creating activity in India. It is immaterial for customs. The valuation is – the customs will go for evaluation based on the actual price of the product. For example, whatever the same product, if you are selling it to a third party, the (named ?) price has to be mentioned for your (either ?) transactions and even for your own use in India.
MS. LAPINI: I think that’s actually all the time we have. We’ve gone just two minutes over. And so if there are additional questions that we didn’t get a chance to answer, please feel free to contact any of the speakers that are listed on the screen.
I’d like to thank all of our participants for being with us today. And for further information on exporting, I hope you will consult www.export.gov or call 1-800-USA-TRADE. And I’d also like to thank our speakers for being a resource to our U.S. exporters. I think we got a lot of good information out there today, and so we’re very appreciative.
Thanks again to everyone for joining us. This is the end of the call.
Q: Barbara, just a second.
MS. LAPINI: Oh, sure. Okay, one more thing.
MS. : Yeah, this is Malla (ph) from Chennai. I think Mr. Vijay Anand’s e-mail address listed on the screen is incorrect.
MS. LAPINI: Okay. What is it?
MS. : (Inaudible) – his correct e-mail address, and could you please forward to all of the participants, please?
MS. LAPINI: Absolutely, Malla (ph). I’m sorry for that and I will do that immediately. Just send me the correct address and I’ll make sure that everybody gets that.
MS. : Okay. Thank you.
MS. LAPINI: Okay. Thank you. Thank you to everyone for participating.
MR. : Thank you.
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