Provisional Assessment of Import Export

Once the Bill of Entry or the Shipping Bill comprising all the relevant information/ details and all the appropriate documents are submitted, the duty leviable on the imported goods and exports will be assessed by the Customs Officer. There are times when it is not possible to conduct a proper evaluation due to the non-availability of relevant information or documents. A delay in the clearance of goods makes it difficult for importers and exporters to pay for the demurrage/ detention charges, disturbances in the production schedule, and other financial losses. Likewise, the delay in clearance leads to the cancellation of an export order, an increase in interest liability, and other economic damages to the exporters. To overcome all these turbulences, Section 18 of the Customs Act, 1962 facilitates assessing the duty provisionally, thereby allowing clearance of goods by taking a bond with appropriate security.

Conditions to Permit Provisional Assessment

Given below are the conditions for allowing provisional assessment.

When the concerned officer is satisfied that an importer or an exporter cannot furnish any document necessary for assessing duty on the imported or exported goods.
When the concerned officer considers it necessary to perform any chemical or order test on the imported or exported goods for assessment purposes.
When the importer or the exporter has produced all the necessary documents and furnished complete information for the assessment of duty, the concerned officer considers it appropriate to make a further inquiry for assessing the tax.

During the given circumstances, the pending production of such documents, furnishing such information, or completion of the inquiry, the concerned officer of the Customs orders that the duty leviable on goods has to be assessed provisionally. The importer or exporter has to execute the appropriate bond and furnish the requisite security to the satisfaction of the concerned officer to make the payment between the duty that is finally assessed and the duty that is provisionally determined. The amount paid provisionally will be adjusted against the final assessed responsibility for goods cleared for home consumption or exportation. If the paid amount falls short of the duty assessed, the importer or exporter has to pay the deficiency. On the other hand, if the paid amount is more than the duty finally set, the importer or exporter can claim a refund. For goods warehoused, if the task finally assessed is more than the responsibility that the concerned officer provisionally evaluates, it might require the importer to execute a bond for a sum equal to twice the amount of the excess duty.

Terms of Bond

Suppose the provisional assessment permits the pending production of documents or to furnish information by the importer or exporter. In that case, the terms of the bond will be the documents or information that is provided within a month or within the given period by the concerned officer can permit the person to execute the warrant and shall pay the deficiency between the duty that is finally assessed and the duty that is provisionally estimated.
Suppose a provisional assessment is permitted to complete any test or inquiry. In that case, the bond terms will be applied to the person executing the bond, paying the deficiency between the duty that is finally assessed and the duty that is provisionally considered.

Determination of the Amount of Bond and Security/ Surety

According to the Customs Regulation 1963, the importer or the exporter claiming the provisional assessment has to execute a bond for the difference between the duty that would be finally assessed and the temporary duty. When the calculation of the exact difference between the duty provisionally set and the duty finally considered is not possible, there are some chances to make some estimate of the same. Generally, the amount of surety and the security for provisional assessment is restricted to the difference between the duty provisionally assessed and the duty, which is finally evaluated. However, the bond for provisional assessment has to be submitted with surety, security, or both, as considered by the officer. Usually, government departments or undertakings assign the requirement of surety/ security.

Finalisation of Provisional Assessment

Provisional assessments are finalized within six months. The finalization occurs for machinery contracts or significant project import cases over some years. This is because the action to complete can be taken only after all the imports under the agreement have been made. Every effort to finalize the cases must be made within six months of the date of import of the last consignment covered by the contract.

Guidelines to be Followed

S.No	Class of Importer	Amount of Bank Guarantee or Cash Deposit must be Obtained as “Security of the Differential Duty.”	Remarks
1	The imports made by Authorized Economic Operators (AEO-T3)	0%	In terms of Circular No. 33/2016- Customs dated 22nd July 2016, as amended.
2	Imports by Authorized Economic Operators (AEO- T1 and AEO- T2)	(a) 0% (b) 50% for AEO-T1 or 25% of the applicable bank guarantee or cash deposit	In terms of Circular No. 33/2016- Customs dated 22nd July 2016.
3	Imports that are made by Public Sector Undertakings/ Government Central/ State/U.T. and their undertakings	0%
4	Cases referred to SVB	According to Circular No. 5/2016- Customs, dated 9.2.2016, issued from F. No. 465/12/2010 Cus. V
5(a)	Cases that are related to verification of origin under FTAs, which are based on the reasonable belief that the matter involves misdeclaration of the origin or the value addition	100%	Based upon “Operational Certification Procedures” as mentioned in the non-tariff notifications issued on Rules for determination of origin
5(b)	Cases selected on a random basis for verification of the origin	0%
5(c)	Cases that are related to verifying the seals and signatures under FTAs	100%	Provided that the Commissioner of Customs or the Principal Commissioner of Customs reduces the amount of security where there are goods and justifiable reasons to do it
6(a)	Cases where the importer is unable to make a self-assessment and has sought a provisional assessment	Not applicable	As the officer will provisionally assess these cases as deemed fit.
6(b)	Cases where the officer considers it necessary to order a provisional assessment, whether for a chemical test or requirement of information, or causing inquiries. (1) Where differential duty has been estimated. (2) Where, despite best efforts by the officer, the differential duty cannot be computed	100 % 0%	They provided that the Principal Commissioner of Customs or the Commissioner of Customs may reduce the amount of security where there are reasonable and justifiable reasons to do so. N.A.

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Frequently Asked Questions

Common questions about Provisional Assessment of Import Export Duty Compliance.

Provisional Assessment is a facility provided under Section 18 of the Customs Act, 1962, which allows the clearance of imported or exported goods by assessing the duty payable provisionally when certain documents or information are not available or further inquiry is required. The importer or exporter has to execute a bond and provide appropriate security for the differential duty amount.

Provisional Assessment can be allowed in the following situations: when the importer or exporter cannot furnish necessary documents for duty assessment, when chemical or other tests need to be conducted on the goods for assessment purposes, or when the Customs officer deems it necessary to make further inquiry despite the submission of required documents.

The terms of the bond depend on the reason for Provisional Assessment. If it is for pending production of documents or information, the bond requires the importer or exporter to provide the documents or information within a specified period and pay the deficiency between the final and provisional duty assessed. If it is for completing tests or inquiry, the bond requires the payment of the duty deficiency once the final assessment is made.

The bond amount is typically the difference between the duty provisionally assessed and the duty that would be finally assessed. However, if this difference cannot be estimated, the Customs officer can determine the surety or security amount as deemed appropriate. The bond is usually required to be accompanied by surety, security, or both.

Provisional Assessments are generally finalized within six months. However, in cases of machinery contracts or significant project imports spanning multiple years, the finalization can be done after the import of the last consignment covered under the contract.

The guidelines for the amount of security vary based on the class of importer. For instance, Authorized Economic Operators (AEOs) with higher tiers may be exempt or required to provide a lower percentage of the differential duty as security. Public Sector Undertakings and Government entities may also be exempted from providing security.

For cases referred to the SVB for verification of origin or value addition under Free Trade Agreements (FTAs), a 100% security deposit may be required. However, for random verification of origin or cases involving verification of seals and signatures, the Commissioner of Customs can reduce the security amount if there are justifiable reasons.

If the amount of duty paid provisionally falls short of the duty finally assessed, the importer or exporter has to pay the deficiency amount.

Yes, if the amount paid provisionally is more than the duty finally assessed, the importer or exporter can claim a refund for the excess amount paid.

The purpose of Provisional Assessment is to facilitate the clearance of imported or exported goods without delay due to unavailability of certain documents or information, pending tests or inquiries, thereby avoiding demurrage/detention charges, disruptions in production schedules, and other financial losses for importers and exporters.