Step-by-Step Guide to the Customs Clearance Procedure in India

For businesses, one of the most dreaded statuses is “Held at Customs”. It can make you quite anxious in such situations. Every day the shipment is held back, businesses suffer heavy losses due to lost sales, increasing storage charges, and damaged client relationships. As per the World Bank’s Logistics Performance Index 2023, India has ranked 38th globally, with efficient customs clearance being one of the key performance indicators which influences trade competitiveness.

It is therefore necessary for businesses to understand customs clearance procedures, irrespective of whether you are an importer, exporter, or a business dealing with imported or exported goods. 

In this article, we provide a step-by-step guide to the customs clearance process in India, as well as discuss other key aspects, including the role of customs clearance agents, customs clearance documents, charges, and best practices.

What is Customs Clearance?

Customs clearance is a process by which goods (imported or exported) are checked, documented, and cleared by government authorities. 

It ensures:

• Duties and taxes are correctly assessed and collected.
• The goods comply with trade, safety, environmental, and other regulations.
• Illegal, misdeclared, or restricted items are prevented from entering or leaving.

The customs clearance guidelines are governed by the Customs Act, 1962. Moreover, they are administered by the CBIC (Central Board of Indirect Taxes and Customs).

The customs clearance procedure involves a sequential set of steps, from the arrival of goods to their release. 

Which Are the Key Stakeholders in the Customs Clearance Process?

Several parties are involved in the customs clearance procedure. Before we begin to follow the steps, it is necessary to know the key stakeholders, such as:

• Importer / Exporter: The party owning or commissioning the goods.
• Carrier / Shipping Line / Airline: Responsible for filing the manifest (IGM/EGM) and bringing the goods to port.
• Customs House Agent (CHA) / Customs Clearance Agent: Licensed intermediary who handles paperwork, liaison, and formalities on behalf of the importer/exporter.
• Customs Authority: The government entity (under the Central Board of Indirect Taxes & Customs) that inspects, evaluates, and clears goods.
• Custodian / Warehouse / Port Authority: Handles physical custody until clearance is obtained.

Step-by-Step Guide to the Customs Clearance Procedure in India

Navigating customs clearance can be quite confusing; therefore, it is essential to understand the step-by-step customs clearance procedure. It can help save time, reduce costs, and mainly prevent delays. 

Below is a detailed stepwise path for import customs clearance. (Export clearance follows a parallel route with shipping bills and drawback mechanisms.)

Step 1: Prerequisite — IEC, Registration & Compliance

1. Obtain Import-Exporter Code (IEC)

Before initiating imports or exports, you must acquire an electronic IEC from the Directorate General of Foreign Trade (DGFT). It is mandatory for customs clearance.

2. Registration with ICEGATE / Customs EDI

You (or your CHA) need to register on India’s ICEGATE portal for e-filing Bills of Entry, Shipping Bills, and other declarations.

3. Check Regulatory Permits / Licences

Suppose the goods fall under a restricted or regulated category (such as drugs, hazardous chemicals, or defence goods). In such cases, it is important to gain permits from the governing authorities, such as the Drug Controller or the DGFT.

4. KYC / Importer Identity Documents

Mandatory documents include:

• Proof of identity
• Proof of address
• Company Registration
• PAN.

Step 2: Arrival & Manifest Filing (IGM / EGM)

1. Call of Vessel / Arrival Notification

The carrier (ship, airline, or freight forwarder) is responsible for notifying Customs about the arrival of the vessel or aircraft at the destination Customs station.

2. Filing of Import General Manifest (IGM)

The IGM is a declaration listing all the goods on board. It must be submitted electronically before or shortly after arrival. Filing an IGM is a legal requirement under Section 30 of the Customs Act. Without a correct IGM, goods cannot be legally unloaded for customs processing.

3. Goods Landed in Custody of Custodian

Upon verification of the manifest once the vessel has arrived, the goods are then offloaded and placed under the custody of an approved custodian or warehouse until further customs clearance steps are completed.

Step 3: Bill of Entry Filing & Declaration (Self-Assessment)

1. File Bill of Entry (BoE) / Cargo Declaration

The Bill of Entry has to be filed by the importer or the DHA for warehousing or home consumption in the prescribed form. Under the EDI system, the BoE is submitted electronically; no physical documents are required at the time of filing (but originals must later be produced at examination).

• The bill of entry contains all the necessary details, including the goods’ description, value, HSN classification, tariff details, and details of origin.
• The importer must certify the correctness of the information. Any misdeclaration can lead to penalties.

2. Noting / Registration of BoE

Once the BoE is registered or noted, it confirms that the goods are manifested as the IGM. In the EDI environment, much of this is automated. 

3. Self-Assessment & Duty Calculation

Next, the importer or the CHA calculates the applicable duties, such as:

• Basic Customs duty
• IGST
• Anti-dumping
• Safeguard
• Cess

The system then processes the calculation and assigns duties.

The customs assessing officer verifies the classification, valuation, and eligibility of exemptions or notifications. In case of doubts, the office may seek clarification or even order a customs inspection.

Step 4: Examination, Assessment & Out-of-Charge

1. Physical Examination / Sampling

Depending on the risk assessment, some consignments must be cleared via a “second check”. 

• If a first check (pre-assessment) is ordered, the goods are examined before final duty assessment.
• Examination involves verification of quantity, description, and valuation, along with checking compliance with necessary rules and regulations. Samples may be taken for further testing.

2. Final Assessment & Confirmation

Once the examination is complete, the assessing officer will then move on to finalise the classification, valuation, and duty. The BoE is confirmed, and duties are calculated while also including any applicable surcharges, IGST, or other charges. 

3. Payment of Duty and Other Charges

In the next step, the importer will deposit the due amount into the designated bank account or submit a treasury challan. Then the BoE is endorsed and cleared.

4. Clearance Certificate/Out-of-Charge Order

Once the duties are paid and all cheques are cleared, Customs will issue an “Out-of-Charge” or Let-Out” order. This will allow the goods to leave the customs premises. 

5. Cargo Release

As the final step, the CHA or the importer can take the delivery from the custody or the port warehouse. If goods are in a bonded warehouse, an ex-bond Bill of Entry is filed to remove the goods upon payment of duty at the time of removal.

Role & Responsibilities of a Customs Clearance Agent (CHA)

To complete the customs clearance process successfully, a customs clearance agent plays a crucial role. Here are the customs clearance agent’s responsibilities:

• Preparing and filing declarations (BoE, Shipping Bill) via EDI.
• Making sure that classification, valuation and documentation are accurate.
• Liaising with customs officers, responding to queries, and securing examination orders.
• Ensuring the physical inspection or sampling is done successfully.
• Obtaining clearance orders.
• Coordinating duty payments.
• Movement of cargo from customs custody after clearance.
• Advising on regulatory compliance, classification, and tariff benefits.
• Managing amendments, appeals, and rectifications.

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Conclusion

More often than not, customs clearance seems like a challenge considering the vast list of steps and documentation, but it does not necessarily have to be. If businesses understand the customs clearance procedure, they can make sure that the goods move seamlessly across borders. It is necessary to file in advance, follow regulatory updates and monitor duty requirements. Following the step-by-step guide can transform a complex bureaucratic process into a smooth, predictable, and cost-efficient part of your business.

FAQs About the Step-by-Step Guide For Customs Clearance Procedure

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