Transhipment of Cargo

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Transhipment of Cargo

A number of ports, airports, Container Freight Stations (CFS), Inland Container Depots (ICD) having Customs clearance facilities have been established in the country in order to reduce overcrowding at the gateway airports/ ports and to allow importers and exporters to take Customs clearance of imported and export goods at their doorsteps. The objectives of implementing the Customs facility to the doorstep of importing community and decongesting the gateway ports/ airports require the movement of imported cargo or export cargo between a port/ airport and other port/ airports, ICDs/ CFSs in India or a port/ airport abroad.

Payment of Duty

According to the Customs Act 1962, duty becomes payable once the imported goods are landed at the port or airport. In order to avoid payment of duty at the port of landing in cases where goods are to be carried to another airport/ port or ICD/ CFS or to a port/ airport abroad. The Act also provides a facility for the transhipment of cargo without making payment of duty. The goods can be transhipped from one airport/ port to another airport/ port/ CFS/ ICD/ either by air, rail, vessel or road or by a combination of more than one such mode of transport.

Transhipment Permit

Transhipment Permit is a consent that is granted by the Customs, at the port/ airport while unloading the imported goods, to shipping agents for carriage of goods to another port/ airport/ ICD/ CFS in India. The shipping agents have to submit an application with the five transhipment forms, sub-manifest and a copy of IGM to the Customs. The Customs surveys the details that are furnished by the shipping agents in the application for transhipment. If the documents are in order and there is no alert notice made against the shipping agent, permission for transhipment will be granted.

Categories of Carriers

To make sure that the imported cargo on which the duty has not been paid are not pilfered during transporting to another port/ airport/ ICD/ CFS and reach safety, a bond with bank guarantee that is executed by the carrier engaged for the transhipment of goods. The quantum of bank guarantee for transhipment to be furnished by different categories of carriers is given below.

  • The carriers in the public sector like the Central/ State Government undertakings are exempted.
  • All carriers of the containerized cargo used for handling more than 1000 TEUs as import containers in a financial year are exempted irrespective of the fact if the movement is by road or coastal shipping or rail. Those carriers having an annual transhipment volume below the limit of 1000 TEUs but having a good track record would be considered for an exception from BG on merit by the jurisdictional Commissioner of Customs.
  • The custodians of ICDs/ CFSs that are operating as carriers of transhipment cargo between the ICDs, CFSs and gateways shall remain in their terms and conditions of their bank guarantees that is executed with Customs for custodianship of ICDs/ CFSs over safety and security of cargo being transhipped by them. The details of such bank guarantee will be informed to the Commissioner of Customs having jurisdiction over the gateway port. The custodians of ICDs/ CFSs will be permitted to tranship the cargo against the bank guarantee and they will not be required for executing a separate bank guarantee for the transhipment.
  • The remaining carriers have to furnish bank guarantee at 15% of the bond amount.

Terms of Bond

The terms of the bond are when a carrier produces a certificate from the Customs of the destination port/ airport/ ICD/ CFS for the safe arrival of goods, the bond stands discharged. If the said certificate is not furnished within a month or within such extended period by the concerned officer an amount equal to the value or the market price is the imported goods are forfeited.

Bond Value

The bond value has to be equal to the value of the goods. Taking into account the difficulties of the shipping agents in producing the documents for determining the value of the goods that are sought to be transhipped the bond value is determined depending on the notional value of the goods, which is an average value of the cargo per container transhipped in the past.

Running Mother Bond

In order to avoid multiplicity of bonds, the carriers will be permitted to execute a running mother bond instead of individual bonds. The value of the mother bond can arrive in the basis of the average number of containers that are carried per trip, the average time that is taken for submission of proof of sale landing of containers ar the destination ICDs/ CFSs, the frequency of such transhipment and the notional value of the container. A mother bond being a running bond, its amount may be high. If a running bank guarantees 15% of the total bond amount that is taken, it might blocks a huge sum of money. To avoid such blockage of money of carriers an option has been given to furnish a running bank guarantee or an individual bank guarantee for every transhipment, the latter can be released as soon as the lading certificates from the destination customs are produced. The bond or mother bond and the bank guarantee are debited during the transhipment of the import/ export containers at the port of origin and then credited on receipt of proof of sale lading of the containers at the port/ ICD/ CFS of the destination. Further, the EDI system has a bond module that will be completely utilized once the ‘message exchange facility’ is operationalised between two ports. In an online environment, the bond re-credit is automatically done in the EDI system on receipt of an electronic message between Gateway port and the destination port or between two Customs Stations.

Sealing of Containers

After issuing the transhipment permit and the execution of bonds, the containers are sealed with ‘one-time bottle seal’ by the Customs. If the containers are already sealed with ‘one-time bottle seal’ by the shipping agents, there is no requirement for sealing again by the Customs. Once the sealing and the checking of seals by the Customs is over, the containers are moved from the gateway port and then carried by the shipping agents to the destination port/ ICD/ CFS by vessels, rail or road. Transhipment formalities in all these modes are similar.

Coastal Containers

The Indian flag foreign going vessels that are operating in routes covering more than one Indian port to a port outside India have been allowed to carry coastal vessels with imported and exported cargo between two Indian ports. Moreover, the coastal vessels are also permitted to carry coastal containers along with imported/ exported cargo between two India ports. Safeguards have been prescribed to guard against the possibility of replacement of transhipment goods with domestic containerised cargo. Every transhipment containers and domestic containers have to be sealed by ‘one-time bottle seal’ at the port of loading. The domestic containers have to be painted in bold stating ‘For Coastal Carriage only’ for their identification. It is mandatory for the Carriers to file a manifest for domestic containers.

Destination Formalities

  • At the destination, the carrier has to present the sealed cover containing the copy of the transhipment permit to Customs. The Customs enquires the containers, seals, etc with reference to transhipment permit. The carrier has to obtain a certificate pertaining to the landing of the container from the Customs.
  • If the seals are broken during the examination of the containers, by the Customs, a survey of contents of the containers will be conducted in the presence of the Customs Officer carrier, importer or his representative and representative of the insurance company. The carriers have to pay the duty for pilferage in terms of the condition of bond that is executed by them with the Customs at the port of loading.
  • The carriers have to acquire the landing certificates of the containers from the Customs at the destination port/ ICD/ CFS and have to submit the same to the Customs at the originating port. The Customs reconciles the record and closes IGMs depending on the certificates.
  • After safe landing of containers at the respective destination port/ CFS/ ICD, authorised agents or the importers have to follow all the Customs formalities including the Bill of Entry, assessment, examination of goods etc. that are required for the clearance of goods.

Duty-Free Import of Containers

Customs duty exemption is provided in Notification No. 104/94-Cus., dated 16-031994, that facilitates the containers when taken out of the port without duty payment subject in the execution of the bond. The shipping agents have to file this bond with the container cell of the Custom House, binding themselves to re-export containers in six months of their import to India. The period of six months can be further extended by the Deputy/ Assistant Commissioner of Customs for a further period that is not more than six months at a time in terms of the said Notification.

Clearance Procedure

The procedure for clearance of containers that are imported temporarily are as follow:

  • The nature of the bond should be ‘continuity bond’.
  • No Bank Guarantee/ Security has to be furnished with the bond.
  • The bond should be executed by the shipping line, Non-Vessel Owning Common Carrier (NVOC), Steamer agents or their authorised authorities.
  • The bond amount has to cover only the duty element of the imported containers and not the cargo it is carrying.
  • The validity period of the bond has to be made in a year, extendable till the period ad requested by the person who is executing the bond.
  • Till module for automatic matching of the imported and export containers within the permissible time is rolled out at all Customs ports, the process of monitoring of period of temporary importation will be done manually.

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