Si Unit 4

Shipping Insurance (Unit – 4) III Year
UNIT – 4
AIR TRANSPORT AND PROCEDURES INVOLVED IN THE
DETERMINATION OF FREIGHT AND BOOKING of CARGO SPACE
AIR TRANSPORT
Air transport is the most recent mode of transport. It is the gift of the 20th
century to the world. The two world wars gave a great impetus to the
development of air transport in almost all the countries of the world. The
peculiar characteristic of air transport is that is does not need a specific surface
track for its operations.
It is the fastest – mode of transport. But the cost of its operation is very high
and thus it is suitable for only passengers, mails and light and costly cargo.
However, in advanced counties like U.S.A., Germany, etc. it offers a tough
competition to the railways.
Air transport is the fastest mode of public transport which connects
international boundaries. Air transport allows people from different countries
to cross international boundaries and travel other countries for personal
business, medical, and tourism purposes. It has no physical barriers as in the
case of other mode of transport, Political boundaries are also immaterial
although it has to observe the requirements of the International Law. The
supreme advantage of air transport lies in its quickness.
Air transport enables highly perishable and valuable products to be moved fast
other long distances, but it lacks the environment control that is possible for
other modes. In-flight storage will be at hold temperature and it may be quite
low over most of the distance, the quality of product will be highly dependent
on prompt and speedy handling at the airports. Exposure of local weather
conditions waiting to be loaded onto a plane on being moved to and from the
airport can constitute a major part of the total travelling time. Cold rooms are
provided at same airports to store produce immediately before and after
transit, solid Carbon dioxide (dry ice) is used for short-term cooling of airline
passenger meals.
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Characteristics of Air Transport

Air transport has the following characteristics:
1. Unbroken Journey: Air transport provides unbroken journey over land and
sea. It is the fastest and quickest means of transport.
2. Rapidity: Air transport had the highest speed among all the modes of
transport.
3. Expensive: Air transport is the most expensive means of transport. There is
huge investment in purchasing aero planes and constructing of aerodromes.
4. Special Preparations: Air transport requires special preparations like
wheelers links, meteorological stations, flood lights, searchlights etc.
5. Fastest Mode of Transport: Air transport is the fastest mode of public
transport which connects international boundaries.
Advantages of Air Transport
1. High Speed: The supreme advantage of air transport is its high speed. It is
the fastest mode of transport and thus it is the most suitable mean where time
is an important factor.
2. Comfortable and Quick Services: It provides a regular, comfortable, efficient
and quick service.
3. No Investment in Construction of Track: It does not require huge capital
investment in the construction and maintenance of surface track.
4. No Physical Barriers: It follows the shortest and direct route as seas,
mountains or forests do not come in the way of air transport.
5. Easy Access: Air transport can be used to carry goods and people to the
areas which are not accessible by other means of transport.
6. Emergency Services: It can operate even when all other means of transport
cannot be operated due to the floods or other natural calamities. Thus, at that
time, it is the only mode of transport which can be employed to do the relief
work and provide the essential commodities of life.
7. Quick Clearance: In air transport, custom formalities can be very quickly
complied with and thus it avoids delay in obtaining clearance.
8. Most Suitable for Carrying Light Goods of High Value: It is most suitable for
carrying goods of perishable nature which require quick delivery and light
goods of high value such as diamonds, bullion etc. over long distances.
9. National Defence: Air transport plays a very important role in the defence of
a country. Modern wars have been fought mainly by aeroplanes. It has upper
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hand in destroying the enemy in a very short period of time. It also supports
over wings of defence of a country.
10. Space Exploration: Air transport has helped the world in the exploration of
space.
Disadvantages of Air Transport
In spite of many advantages, air transport has the following limitations:
1. Very Costly: It is the costliest means of transport. The fares of air transport
are so high that it is beyond the reach of the common man.
2. Small Carrying Capacity: Its carrying capacity is very small and hence it is not
suitable to carry cheap and bulky goods.
3. Uncertain and Unreliable: Air transport is uncertain and unreliable as it is
controlled to a great extent by weather conditions. Unfavourable weather such
as fog, snow or heavy rain etc. may cause cancellation of scheduled flights and
suspension of air service.
4. Breakdowns and Accidents: The chances of breakdowns and accidents are
high as compared to other modes of transport. Hence, it involves
comparatively greater risk.
5. Large Investment: It requires a large amount of capital investment in the
construction and maintenance of aeroplanes. Further, very trained and skilled
persons are required for operating air service.
6. Specialised Skill: Air transport requires a specialised skill and high degree of
training for its operation.
7. Unsuitable for Cheap and Bulky Goods: Air transport is unsuitable for
carrying cheap, bulky and heavy goods because of its limited capacity and high
cost.
8. Legal Restrictions: There are many legal restrictions imposed by various
countries in the interest of their own national unity and peace.
CUSTOMS CLEARANCE
CUSTOMS CLEARANCE
If you are into import and export business, you already understand how crucial
it is to get customs clearance for your cargo. That’s where custom brokers play
an important role.
Customs clearance is certainly an important aspect of cargo and shipping
industry. A custom house agent looks into all the nitty – gritties of process
involved, acting as a seamless facilitator of your shipment and delivery of
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goods across international borders. Typically, your customs broker will aid you
through concessions on tariff and costing, issues pertaining to valuation,
documentation, rules, taxes, duties etc. Here’s how customs clearance can
affect your shipment.
The rules and regulations pertaining to import and export of goods are
different for every nation. And these keep changing time and again. If you do
not keep yourself updated on these laws, it can create handful of mess for your
shipment.
Custom brokers keep themselves updated with evolving customs laws and
regulations and ensure that are being followed throughout. This leaves you all
hassle – free of having to know updated customs laws. A veteran custom
clearance agent is there to guide you so you can focus on your core areas.
Custom house agents make international trade a hassle-free experience for
you. Yes! They not only guide you through the process and documentation, but
they remain in the forefront and deal with the government official and other
agencies to facilitate the clearance process.
Customs clearance involves a lot of documentation followed through
meticulously so you have your cargo cleared on time. Unless that happens,
your business may get affected. Customs brokers work efficiently knowing all
the processes, and ensure you shipment sails through every step.
Another important aspect in customs clearance is the digital age. With
shipment processes being migrated online, it is all the more important to
identify a custom house agent who keeps himself abreast of technology and
continually develop the infrastructure to meet the needs and ensure that the
processes are followed properly.
Whether you are into shipping business or you ship your goods across global
peripheries, customs clearance is an inevitable and important aspect of your
business. Understanding and working with a veteran custom house agent will
certainly relieve you of all your clearance worries.
Customs clearance work involves preparation and submission of
documentations required to facilitate export or imports into the country,
representing client during customs examination, assessment, payment of duty
and co taking delivery of cargo from customs after clearance along with
documents.
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Freight forwarders who coordinate the international transportation also

provide customs clearance services to the clients. The activity is called
brokerage.
The documented permission to pass that a national customs authority grants
to Imported goods so that they can enter the country or to exported goods, so
that they can leave the country. The custom clearance is typically given to a
shipping agent to prove that all applicable customs duties have been paid and
the shipment has been approved.
PROCEDURE OF CUSTOMS CLEARANCE OF EXPORTS BY AIR
Air cargo complexes have come up at almost all the international airports in
India where from cargo is to be sent by air to foreign destinations. The air
cargo complexes have two wings, one wing undertakes the checking of the
relevant documents connected with the air cargo and the other wing
undertakes physical examination of the cargo in accordance with the physical
examination order specified on the duplicate copy of the Shipping Bill by the
Appraiser in the wing for checking the documents. The phases involved in the
customs clearance of export cargo by air are the same as those discussed
regarding the customs clearance of export cargo going by ship, i.e. -
(1) Checking of the relevant documents,
(2) Physical examination of Export Cargo,
(3) Supervision of loading operation, and
(4) Post-shipment certification
However, suitable adjustments have been made in these phases to suit the
requirements of expeditious movement of cargo by air. These are mentioned
below:
(i) Actual booking by the flight concerned is done in advance. Even
Airway Bill is obtained before arrival of the flight,
(ii) All the documents required for customs clearance, i.e., the Shipping
Bill, and all the supporting documents as required in connection with the
shipment by the vessel are to be brought along with the cargo for which
booking has already been done. The documents are first submitted to the
section meant for checking them at the Air Cargo complex. After the
documents have been checked and physical examination order has been given,
physical examination is conducted in quick succession.
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(iii) Physical examination is conducted on a much larger scale in respect

of export by air, as compared to export by vessel i.e. 50 to 25% of the total in
respect of air cargo, as against I to 2% of the total in respect of cargo moving
by vessel. Each packet is to be passed for shipment-whether examined and
passed for shipment or passed for shipment.
(iv) The export cargo examined and passed for shipment is kept under
the charge of customs in the control of GROUND HANDLING AUTHORITIES.
Usually some cooling period is observed, 24 to 48 hrs. before the cargo is to be
loaded on board the air craft.
(v) Before arrival of the Night Export General Manifest (EGM) whether
provisional or final, is to be prepared by the airline concerned and is to be
handed over to the Customs Authority.
(vi) With the help of EGM, goods are to be moved from the storage
under customs charge to the place where from they are to be moved alongside
the aircraft for being loaded on board.
(vii) In the case of air flights no entry inward permit is required for each
flight. There is standing facility granted to the airline concerned for landing and
taking off specified flights. Hence, non-rotation number is allotted in advance.
This number is allotted by the station-officer on duty when the flight has
landed.
(viii) The customs officer who has supervised the loading operation with
reference to the EGM has to write Rotation Number on the Shipping Bill - the
copies available at that stage and the EGM.
(ix) Unlike the practice followed in the case of ship, there is no
arrangement for associating a Preventive Officer right from me stage when
entry inward permit is granted. The Customs Officer in-charge of the duty
routine for the period when the flights are scheduled to land, assigns the task
of supervision of unloading and loading operation to customs official on duty.
(x) After the loading of the cargo on board the aircraft, the captain signs
the Duplicate, Triplicate copy of the Shipping Bill against contents received. He
may initial the copy of the Shipping Bill. This flexibility is provided in keeping
with requirement of air cargo's expeditious movement.
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Customs Clearance Process - All the Steps an Exporter Needs to

Follow
The process of customs clearance of goods starts with the filing of a shipping
bill and the ensuing activities around it. However, before you (as an exporter)
try to get customs clearance for your goods, you must satisfy a few
prerequisites. The primary prerequisites are the import export code,
authorised foreign exchange dealer code, current account for the credit of
duty drawback, and license for export under export promotion scheme.
Initial steps in customs clearance process:-
1. Self-assessment: As an exporter, you will have to self-assess the duty of
the export items. Under self-assessment, you will be expected to declare the
correct classification, rate of duty, the value of the goods, and claim the
exemption notification correctly while filing the shipping bill. Documents
generated at this stage include the commercial invoice and packing list,
consular invoice, certificate of origin, insurance certificate etc.
2. Shipping Bill: Shipping Bill is generated through the Indian Customs EDI
System (ICES) or the non-EDI mode in case of non-EDI ports. It is filed in the
prescribed format and in the defined manner, and with supporting documents.
We have separately explained the process of generating the shipping bill in
detail.
3. Risk Management System: Self-assessed shipping bills are processed by
the Risk Management System (RMS) of the customs department. Once done,
the verification of such shipping bills will be done to ensure the correctness of
classification, value, duty rate, exemption etc. by the proper officer who may
also examine and test the goods. Thus, shipping bills, once filed electronically
in the ICES through service centre or ICEGATE will be processed by the RMS,
based on which the next step will be decided. The shipping bills will either be
taken up for verification or examination, or both, or will be given the Let
Export Order (LEO). The additional assessment may be done by the concerned
officer even without the RMS red flag, by taking prior approval of the
jurisdictional Commissioner of Customs or an officer not below the rank of
Additional/Joint Commissioner of Customs.
4. Post Clearance Audit: Notably, a Post Clearance Audit (PCA) of the
shipping bill has been introduced after the implementation of the RMS. This
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aims to improve compliance levels and reduce the cargo dwell time of exports
in India.
Final steps in customs clearance process upon arrival of goods at the dock:-
1. Checklist: On arrival of the goods at the dock, the custodian must
endorse the quantity of the goods on the reverse of the checklist. This
endorsed checklist is presented by the exporter/CHA to the customs officer
upon receipt of the goods at the dock area, along with original copies of the
invoice, packing list, and other relevant documents.
2. Verification: The customs officer verifies the goods received and
updates the same to the system. They also mark an electronic copy of the
shipping bill and hand it over to the dock appraiser, along with the original
documents submitted earlier.
3. Examination: The dock appraiser assigns the task of examination to a
customs officer. As mentioned above, the examination norms and the RMS can
be bypassed by the customs to examine any export consignment even up to
100% based on credible intelligence or information. This goes for perishable
cargo as well.
4. Sampling: Based on the orders of the proper officer, a representative
sample from the shipment may be drawn and tested, or verified for visual
inspection, description, valuation etc.
5. Let Export Order: Let Export Order (LEO) is the green signal given by the
customs to the exporter once they are satisfied with the verification and
examination of the shipment. We have separately explained the process
around LEO in detail.
6. Loading: When it comes to the stuffing or loading of the container cargo,
the customs preventive officer ensures preventive supervision for the same
and gives a ‘Shipped on Board’ endorsement on the exporter’s copy of the
shipping bill.
7. Export General Manifest: The shipping lines/agents have to submit a
shipping bill-wise Export General Manifest (EGM) to customs before their
departure. EGM is lodged electronically as well as manually.
8. Duty Drawback: Duty drawback is now primarily limited to the incidence
of customs duties on inputs used. It is claimed by filing the prescribed format
of the shipping bill. The drawback claim must be accompanied by prescribed
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documents as defined in the Drawback Rules 2017. The claim may be returned
in case of any deficiency, but the shipment is not stopped for this reason.
Apart from the documents mentioned in the various subheads, others like
inspection certification, dock receipt and warehouse receipt, destination
control statement, bill of lading etc. are generated during the customs
clearance process.
Some of the documents involved in customs clearance are:
1. Exports Documentation: Purchase order from Buyer, Sales Invoice, Packing
List, Shipping bill, Bill of Lading or air way bill, Certificate of Origin and any
other specific documentation as specified by the buyer, or as required by
financial institutions or LC terms or as per importing country regulations.
2. Imports Documentation: Purchase Order from Buyer, Sales Invoice of
supplier, Bill of Entry, Bill of Lading or Air way bill, Packing List, Certificate of
Origin, and any other specific documentation required by the buyer, or
financial institution or the importing country regulation.
Here are 2 ways you can help make the customs clearance process smooth
for your shipment.
1. Properly load your shipping container
One of the biggest things you can do is make sure your shipping container is
properly loaded.
Ultimately, as the shipper, you are responsible for the loading of your shipping
containers. You can do so as you see fit; however, if shipping containers are
not properly loaded, you could cause red flags to go off at customs.
Improper loading may lead to extensive examinations and even searches of
your international shipments. You don’t need the delays and costs that are
associated with this.
Household and personal effects shippers should pay special attention to this as
such shippers tend to have less experience with international shipping and
container loading than business importers and exporters.
To help in this area, Universal Cargo Management has a Container Loading
Guidelines page on our site.
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2. Provide Complete and Accurate Information to Your Customs

Broker/Freight Forwarder
There is a great deal of paperwork involved in international shipping. The
complication of shipping cargo from one country to another is why freight
forwarders like UCM exist.
We have the experience and knowledge of smoothly shipping cargo from one
country to another so you, the shipper, don’t have to worry about all the
details, regulations, and hassles and can focus on your business.
Still, there is a certain amount of paperwork you will need to provide to your
freight forwarder.
Being accurate and thorough with your paperwork is important. This includes
business information, inventories or itemized lists of shipments, and value of
cargo.
This information affects the duties and custom fees at the ports, helps assess
the risk of your cargo shipment, and more.
The last thing you want is for customs to find your shipping manifest is
inaccurate and think you’re trying to sneak something past them.
What you do want is a low risk assessment of your cargo shipment at customs.
Most of the paperwork of your international shipping will be handled by us,
your freight forwarder and with over 25 years of experience, Universal Cargo
Management is prepared to handle your customs along with any problems that
may arise; but, accuracy on your part will help us keep your international
shipping smooth from beginning to end.
Always, we’ll be here to walk you through any questions you have when it
comes to international shipping, paperwork, and customs clearance.
CUSTOMS ON ARRIVAL
There are two channels of customs clearance for arriving passengers:
1. Green channel: For passengers not having any dutiable goods or other
items for which declaration is not required.
2. Red channel: For passengers having dutiable goods or any other items
for which declaration is required, however-
i. All passengers must file correct declaration of their baggage.
ii. Declaration of the foreign exchange/currency shall be made to the
customs authority in the following cases.
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a) Where the aggregate value of the foreign currency notes exceeds

US $ 5000 or equivalent, and/or
b) Where the aggregate value of the foreign exchange including
currency exceeds US $ 10,000 or equivalent.
c) Indian currency exceeding Rs. 25,000/-
Walking through the Green Channel with dutiable/prohibited/restricted goods
by passengers in an offence which may result in seizure, confiscation
prosecutions/arrests and penal action.
Simplified procedure for clearance and examination of export and import
cargo at Air Cargo Complexes
Pursuant to the decisions in Export Promotion Board the Board has ordered
the following:
(a) All airlines may be directed to submit their import General Manifest
immediately on arrival of the light and in any case within 12 hours of the
arrival of the flight, even though the Section 30 of Customs Act provides for
submission within 24 hours. Suitable Standing Order is issued by
Commissioners.
(b) On arrival of export cargo, the computer or the AC shall select the package
numbers which would be retained for examination. Those packages from the
consignment may be kept at the examination area and rest of the packages
may be directly taken to bonded area/palletisation area Retained packages
would be examined and later on transferred to bonded area.
(c) Henceforth export cargo will be received in all the Air Cargo Terminal up to
9.00 PM and the delivery of import cargo will also be allowed up to 8,00 PM.
(d) In terms of instructions contained in Circular No. 33/96-Cus., dated 17th
June, 1996, export consignments of perishable goods like fruits, vegetables and
flowers would not be subjected to routine customs examination at Airports
and Air Cargo Complexes.
(e) The Customs Department would make available an officer for supervision of
segregation of import cargo which mainly arrive in the night and has to wait for
12 to 36 hours for the segregation work to be taken up.
What is Custom Duty?
Custom duty is a type of indirect tax that is levied on all the goods that are
imported to the country as well as some goods exported from the country. The
duty levied on the former is referred to as import duty while that on the latter
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is referred to as the export duty. To simplify it, any tariff that is introduced on
goods across national borders is referred to as custom duty.
The duty levied depends on the value of the goods, its dimensions and weight
along with a lot of other criteria. While value-based duties are called valorem
duties, quantity-based duties are called specific duties. On the other hand,
duties on values plus other factors are called compound duties.
Custom Duty is a tariff or tax imposed on goods when transported across
international borders. The Purpose of Custom Duty is to protect each country’s
economy, residents, jobs, environment etc. by controlling the flow of goods
especially restrictive and prohibited goods, into and out of the country.
Custom Duty in India
Custom Duty in the country falls under the Customs Act, 1962. As per this act,
the government levies duties on both import and export of goods along with
their procedures, prohibitions, penalties etc. Matters pertaining to this duty
fall under the CBEC (Central Board of Excise and Customs), a division of the
Department of Revenue of the Ministry of Finance.
The CBEC helps in formulating policies w.r.t. the collection and imposition of
custom duties including custom duty evasions, prevention of smuggling etc. It
oversees the tax administration of inland and foreign travel. It has different
divisions to take care of field work such as the Commissioner ate of Customs,
Central Revenues Laboratory and Directorates etc.
Types of Custom Duty
Custom duties are levied on nearly all goods that are imported into the nation.
While export duties are levied on goods as specified by the Second Schedule,
import duties are not levied on certain items like fertilizers, food grains,
lifesaving drugs etc. Custom duty can be classified into the following types:
(1) Basic Customs Duty: This duty is imposed on the value of goods at a
specified rate as it is fixed on an ad-valorem basis. After being amended
time and again, it is currently regulated by the Customs Tariff Act, 1975.
The Central Government, however, holds the rights to exempt specific
goods from this tax.
(2) Countervailing Duty: CVD or Additional Customs Duty is levied on
imported goods that fall under Section 3 of the Customs Tariff Act of
1975. It is the same as the Central Excise Duty which is levied on similar
goods that are produced in India.
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(3) Education Cess: The cess used to be levied at 2% and an additional 1%

of the aggregate of customs duties.
(4) Protective Duty: This duty is imposed in order to shield the domestic
industry against the imports at rates that are recommended by the
Tariff Commissioner.
(5) Safeguard Duty: As the name suggests, this duty serves as a means of
safeguarding the rise in exports. Sometimes, if the government feels
that a rise in exports can damage the existing domestic industry, it may
levy this duty.
(6) Anti-Dumping Duty: This duty is based on the dumping margin, i.e. the
difference between the export price and the normal price. It is only
imposed when the goods that are imported are below the fair market
price.
Calculating Custom Duty
Custom duty can be calculated on either a specific or an ad valorem basis. The
value of goods, for the latter, is determined by Rule 3(i) of the Customs
Valuation Rules, 2007. If there is no quantifiable data w.r.t. valuation factor,
then the valuation of the items is done using other means based on a system
of hierarchy, as follows:
(1) Comparative Value Method: This method compares transaction values
of items similar in nature (Rule 4)
(2) Comparative Value Method: This method compares transaction values
of items similar in nature (Rule 5)
(3) Deductive Value Method: This method uses the sale price of items in
the importing country (Rule 7)
(4) Comparative Value Method: This method uses costs related the
fabrication, materials as well as profit in the production country (Rule 8)
(5) Fall-back Method: This method is based on the earlier methods that
offer higher flexibility (Rule 9)
Why is Customs Duty important?

1. Important source of revenue.
2. Protection to domestic industry.
3. Reduce deficit in the balance of trade and the balance of payment.
4. Controlling the smuggling.
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5. Reducing export.
6. Saving foreign exchange.
Demerits of Customs Duty

1. Causing inflation.
2. Increase black money.
3. Absence of better quality goods.
Features of Customs Duty in India

Fundamental features of Customs Duty Act, 1962-
a) It is an indirect tax levied on import and export.
b) This duty is imposed only on goods and not on services.
c) Sale or purchase is not the criterion for the levy of customs duty, the
duty is connected with movement of goods.
d) It is also subject to education cess. However, education cess is not
applicable on export duty.
Note:- If the agent in India gets goods from his overseas principal and even
in the case of baggage brought into India by the passenger duty is attracted.
Process of Customs Clearance
A customs officer verifies that the paperwork completed for shipments are
correct. International shipments must have commercial invoices. Once the
paperwork is verified, the document will list a shipper and contact info of the
receiver. The shipment will also include the export date and airway bill
number.
A customs officer will see what fees may be applied to a shipment. Depending
on the type of goods, their value, and laws that the importing country
enforces. If the value of goods surpasses a tax bracket, the officer will check to
see if taxes and duties have been paid.
If there are outstanding taxes and duties, customs will ask that they are paid.
There are two options for payment, with one being DDU (Deliver Duty Unpaid)
and the other being DDP (Deliver Duty Paid). As a result, if a shipment is
marked as DDP, then a payment of taxes and duties were paid for. These
services may be offered at a fixed price when you pay for a label. This process
can be expensive as brokers are independent with differing fee charges.
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Brokerage, storage, late payment, and various fees may apply which will affect
the total shipment fee.
Once taxes and duties are paid, shipments are released. From this point, if
paperwork, duties, and taxes are handled properly then the goods should be
shipped to their destination.
Advantages of Customs Brokerage
1. A customs broker will be able to take care of shipping for products. A
customs brokerage firm will verify if you’re complying with customs
regulations. If custom regulations are not met, it will result in a time
delay.
2. A company will be able to retain more money. A customs broker will
guide a company so that it is able to avoid shipment problems that will
also follow trade agreement opportunities. There are multiple trade
agreements that are dedicated to scaling down duties and taxes such as
ASEAN, JPEPA, and the EFTA free trade agreement.
3. A customs broker will tell you if they’re unable to handle products that
you want to ship. If this occurs, they will be able to defer your shipment
in the safest way possible.
4. It’s always great to have an outside source evaluating your goals and
reasons for merchandise. As a result, you will form a stronger
relationship with your customs broker and they will give you advice
regarding your business model.
5. Providing a customs broker with the proper paperwork. You are still
responsible for filing and paying taxes and duties, but a good custom
broker can correct errors and tell you if you’re missing important info.
WHAT IS THE PURPOSE OF CUSTOMS DUTY
1. Functions of Tariffs by Definition:

Tariffs are considered to have three primary functions: to serve as a source of
revenue, to protect domestic industries, and to remedy trade distortions
(punitive function for product dumping). The revenue function income from
tariffs provides governments with a source of funding. In the past this was the
main function and reason for applying tariffs, but economic development and
the creation of systematic domestic for instance it only accounts for about 2%
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of tax revenue. Nevertheless, revenue may still be an important tariff function

in underdeveloped countries. In our time tariffs are more of a trade policy tool
to protect domestic industries by altering the conditions under which goods
compete. A case in point are “tariff quotas” that are used to strike a balance
between market access and protecting domestic industry. Tariff quotas
normally work by applying low or no duties to imports up to a certain volume
and then higher rates to imports that exceed that the quota level.
2. The short answer from US Customs:
“Customs Duty is a tariff or tax imposed on goods when transported across
international borders. The purpose of Customs Duty is to protect each
country’s economy, residents, jobs, environment, etc., by controlling the flow
of goods, especially restrictive and prohibited goods, into and out of the
country.
3. The Anti-subsidy Duty
The anti-subsidy duty, also known as the countervailing duty, is a kind of
import surtax levied to countervail the bonus or subsidy received directly or
indirectly at the manufacture, production and output stage of the imported
commodities.
Tax-free imports might relate to other things as follows:
1. Imports of goods used in the manufacture of other goods for local
consumption,
2. Imports of goods used in the manufacture of other goods for export,
3. Imports of goods which are only temporarily in the country for
adjustments, repair, etc. which is then re-exported.
4. Imports of goods for local consumption
There are vast differences in the rules that apply to each of these refunds and
importers will not automatically receive the refunds. Instead importers have to
apply for these refunds, preferably before the goods were imported, in order
to receive these refunds.”
What effect do tariffs have on a given economy? It depends mainly on two
broad issues:
1. Its traded volume
2. Its trade-price
There are however many secondary issues that can effectively affect the
performance of a given economy.
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1. Its protective effect: import duty raises the price of imported goods.
This increase in the price of imports reduces imports and increases the
demand for domestic goods.
2. Its consumption effect: increase in price of the taxed commodity
reduces the consumption capacity of the country
3. Its distribution effect: an increase in the price of domestically produced
goods amounts to redistribution of income between the consumers and
producers in favour of the producers.
4. Its revenue effect: an import duty means increased revenue of the
government
5. Its income and substitution effects: the duty may cause a switch over
from spending on foreign goods to spending on domestic goods which
should result in higher domestic income and employment.
6. Its competitive effect: overprotecting the domestic industries from
foreign competition may enable the domestic producers to become a
monopoly in the domestic industry.
7. Its terms of trade effect: in order to maintain previous levels of sales to
the duty imposing country exporter will reduce prices making imports to
be purchased at a lower price.
8. Its balance of payment effect: reducing the volume of imports helps the
imposing country improve its balance of payment position.
In conclusion, tariffs can have multiple functions that have marked effect on
pricing for any economy which will also affect terms of trade, employment,
income, government revenue, balance of payments and so on.
Customs Broker
A customs broker is an agent for importers that assist importers with the
transaction of their customs business. These agents are authorized by tariff
laws. A customs broker is either a private individual or firm that are licensed by
the U.S. Customs and Border Protection (CBP) to organize custom entries,
payment of duties, and how this process may be affected by CBP discharges
goods from custody.
What services can customs brokers assist with?
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A customs broker can assist with HTS codes, which are based on product
classification codes between 8-10 digits. The first six digits are HS codes and
countries of import include proceeding digits that are provided for additional
classification. All codes are administered by the U.S. International Trade
Commission.
In addition, determining the country of origin can be difficult to determine for
Customs. Country of origin is important for marking. It is defined by the
country that goods were assembled or the most work was put into the
product.
CF-28 and CF-29 Forms
There are two essential forms for Customs and Border Protection. A good can
either be listed under CF-28 or CF-29.
The issuance of a CF-28 means that a CBP is analysing your entry info and may
notice greater issues with import practices that should not be overlooked. The
Harmonized Tariff Number (HTSUS) Code that’s given to a product will ask for a
Free Trade Agreement Certificate of Origin during the admittance process.
Based on the information provided may present a CF-29 Notice of Action.
A CF-29 is a Notice of Action. A CF-29 is a form for an importer to maintain a
stance on a certain issue. As a result, an importer must adhere to customs but
still has the option to open the case to Customs in case of additional changes.
An importer usually has 20-30 days to reply to a CF-29.
Valuation Analysis, RLF, EDI, and ACE
There is also something known as a valuation analysis. A Valuation Analysis is
used to appraise an asset. An analyst will use various methods to evaluate an
analysis of different assets. In addition, a valuation analysis is mostly reliant on
number crunching which analyses the value based on present value (PV) that is
projected for the product.
Remote Location Filing (RLF) allows customs brokers to have a national permit
to file entries for merchandise. There is no need for a district permit. RLF can
clear merchandise nationwide in a Customs and Border Protection (CBP) office
with ability to process electronic documents and regardless of the region.
Some of its benefits include a lack of restriction to the port of arrival or port of
filing for an examination, electronic management of Customs cargo data, and
consistent cargo processing.
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EDI transactions will make business documents easier to manage. EDI transfers
unique business documents between partners. The ANSI Commission
(American National Standards Institute) will format EDI standards. As a result,
automatic updates will occur for newer ANSI versions. EDI also coincides with
ACE capabilities.
ACE provides a single access point that allows the reporting of imports and
exports to the U.S. government. ACE helps to eliminate paper and assist with
compliance with U.S. regulations.
Consignees, surety bonds, reconciliation prototypes and more if a shipment is
an imported from the U.S., then a consignee is necessary. This shipment must
have a U.S. address and tax ID number. As a result, an EIN is used for a
business that’s not in the U.S. It’s also essential to list a U.S. business that acts
as a consignee of the shipment. A consignee will be a party receiving your
goods at a specific destination. If you’re importing into the U.S. as a Foreign
Importer of Record, then a U.S. business will have to be listed as a consignee.
The consignee will be the person that’s receiving the shipment.
Importing goods from outside of the country, will require a U.S. Customs
Surety Bond that will pay all U.S. Customs duties and penalties that may be
appraised for goods that are imported. There are two options when choosing
to apply for a bond renewal. The first option is to apply for a single bond which
is only efficient if you import rarely. The second option is to apply for an annual
bond renewal for businesses that ship frequently. Annual bond renewals may
seem like an expensive option, but a bond is only $280 dollars.
A Reconciliation Prototype is what allows importers use to file entry
summaries that use info on file and tag estimated components. As a result,
importers adjust information to reconciliation. Reconciliations are liquidated,
rejected, or change liquidated. A liquidation of reconciliation can be objected,
and the Bulletin Notice of Liquidation will inform you of the process of a
liquidation of the Reconciliation.
Documents for Transportation of goods by airways
What is an Air Way Bill (AWB)?
An air way bill (AWB) is a legally binding transport document issued by a
carrier or agent that provides details about the goods being shipped. It
provides detailed information on the contents of the shipment, the sender and
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recipient, terms and conditions, and other information. The AWB is a standard
form that is distributed by the International Air Transport Association (IATA).
Consider the document as a receipt for the sender or consignor. An air waybill
is also referred to as a consignment note or dispatch note. The AWB is non-
negotiable and acts as evidence of the contract of carriage from airport to
airport. There are three parties involved in an air waybill – the sender, the
airline, and the recipient.
Before goods are shipped, an air waybill must be filled out. Once the air waybill
is signed by the shipper and carrier involved, it becomes an enforceable
contract. Because it is a legally-binding document between parties, the details
must be filled out clearly and accurately.
An air waybill is a receipt issued by an airlines, which is a document stating that
an airline company is contracted to fly a specified number of goods from the
airport of the sender, to the airport of the recipient. It consists of an 11 digit
number which has detailed information about the contents of the package but
does not prove entitlement of the goods. An air waybill is non-negotiable in
nature.
There are three parties which are involved in fulfilling the contractual transfer
as noted in the air waybill. First, is the sender of the package called the
consignor. Second, is the airline company carrying the package, called the
carrier. And the third, is the recipient of the package, called the consignee. All
three parties have a copy of the bill, and it can be tracked by all of them. There
are 12 copies each of the Air Waybill for all the parties involved in the process.
Summary
An air waybill (AWB) is a legally binding transport document issued by a carrier
or agent that provides details about the goods being shipped.
It provides detailed information on the contents of the shipment, the sender
and recipient, terms and conditions, and much more.
The AWB used to be a one-page physical paper document, but the e-AWB is
considered the standard nowadays and is filled out and stored electronically.
Functions of the Air Way Bill
The air way bill serves many functions, including:
1. Contract of Carriage: Behind every original of the Airway bill are conditions of
contract of carriage documents.
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2. Evidence of receipt of goods by an airline: When the shipper delivers goods to

be forwarded, he will get a receipt. The receipt is proof that the shipment was
handed over in good order and condition and also that the shipping
instructions, as contained in the shipper’s Letter of instructions are acceptable.
After completion, an original copy of the air way bill is given to the shipper as
evidence of the acceptance of goods and as proof of contract of carriage.
3. Freight bill: The air way bill may be used as a bill or invoice together with
supporting documents since it may indicate charges to be paid by the
consignee, charges to be paid by the consignee, charges due to the agent or
the carrier. An original copy of the air way bill is used for the carriers
accounting.
4. Certificate of insurance: The air way bill may also serve as evidence if the
carrier is in a position to ensure the shipment and is requested to do so by the
shipper.
5. Custom Clearance: Although customs authorities require various documents
like a commercial invoice, packing list, etc. The air way bill too is proof of the
freight amount billed for the goods carried and may be needed to be
presented for customs clearance.
6. Customs declaration: A customs declaration is a document that shows the lists
and detailed description of goods bound for import or export. The customs
declaration is mostly submitted by travellers upon arrival or departure, at the
border of individual country.
Through customs declaration, the customs authorities control what types of
goods or items are imported or being exported.
7. Description of the goods: It states what your goods are, what they’re made of
and what they’re used for. You need to provide a goods description on all
shipping documents like the air waybill and commercial invoice. You should
also include it on any other additional documents required by the authorities.
A clear description gives customs authorities the information they need to
access taxes and duties. It’s also necessary to check if your goods are allowed
to enter the country.
8. Guide for handling and delivering goods: There are some steps of handling
and delivering goods:-
a) Deliver the goods
b) International trade regulations
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c) Export declarations
d) Export permits
e) Delivering products
f) Freight forwarders and brokers
g) Packing your goods
h) Labels and marks
i) Transportation insurance
j) Export documentation
k) Duty deferral and duty relief
l) Delivering services: How it's different
9. Tracking of shipment: All you need is your tracking or PRO number and a few
minutes. ... If your claim is lost, FedEx will perform a “trace” to try and locate
where it went missing. They will notify you when it has been resolved as lost or
found by email.
Features and Format of the AWB
An AWB is typically a one-page document that is packed with important
information. The bill is designed and distributed by the IATA and is used in
domestic and international shipping. The document itself is issued in eight sets
of different colours, with the first three copies being the original.
1. The first original (green) is the issuing carrier’s copy.
2. The second (pink) is the consignee’s copy.
3. The third (blue) is the shipper’s copy.
4. The fourth copy is brown and functions as the receipt and proof of
delivery. The other four copies are white.
5. The air waybill may come with an airline logo at the top right corner or it
may be a neutral AWB. The two are essentially identical outside of the
airline logo and prepopulated information for the airline.
6. Each air waybill must include the carrier’s name, office address, logo,
and AWB number, which is an 11-digit number that can be used to make
bookings and track the status and location of the shipment.
7. The top-left quadrant of an air waybill document will contain
information for the shipper, consignee, agent, airport of departure, and
airport of destination.
8. The top-right quadrant will contain the information for the airline –
either in the form of printed and prepopulated text and logos or
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manually-entered information. The top-right section will also contain

information about the declared value for carriage and declared value for
customs.
9. The middle of the page will contain information on the contents of the
shipment, including the number of pieces, gross weight, chargeable
weight, total charge, and the nature and quantity of goods.
The bottom portion of the air waybill will contain additional charges and taxes,
an area for the signature of the shipper or agent, and an area to enter the
date, time, and place of execution.
The significance of the numbers in an Air Waybill number:
There are 11 numbers in an Air Waybill number. These are described as below:
1st three numbers: They are the airline prefix. The International Air Transport
Association has assigned a 3 digit number for each individual airline. Through
the first three numbers we can identify the airline carrier from the IATA index.
Next 7 numbers: They are running numbers, with one number for each
consignment.
Last digit: The seven running numbers are divided by 7. Their remainder is the
last digit number. This is why the last digit of an Air Waybill number is always
between 0-6.
Functions of an Air Way Bill:
An air waybill serves a number of important functions which are listed below:
1. It is a contract of carriage and acts as an evidence for conditions of
carriage.
2. It acts as an evidence of receipt of goods and that the shipment was
handed over to the recipient in good condition.
3. It serves the purpose of a freight bill invoiced together with supporting
documents used to show charges to be paid to the consignee. The
original air waybill copy is used for the accounting purposes of the
carrier.
4. It can also be a certificate of insurance.
5. It facilitates customs declarations.
Information conveyed in an Air Waybill:
1. Name and address of the carrier
2. Name and address of the sender
3. Place and address of the shipper
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4. Nature and quantity of goods, including weight and sizes of package

5. Place and date of loading
6. Price of transport, the date and place of its payment
7. Any declared value of the goods.
The shipper receives the Air Waybill after handing the shipment over to the
airline career. It could also be sent through the bank in some cases. As you can
see, it is an extremely important document with a lot of information and
therefore must be preserved carefully.
Purposes of Airway Bill in Exports and Imports
Purposes of Airway Bill in Exports and Imports Purposes Airway Bill serves the
following:
1. A receipt, acknowledging consignment of goods from the shipper.
2. An evidence of the contract of carriage.
3. A contract between the shipper and the airline for moving the goods to
the destination.
4. A freight bill as it contains all the details.
5. A document of instructions to carrier's staff in handling, dispatching and
delivering shipments.
6. A customs declaration
7. Airway Bill is issued and signed by the airways company. They are made
out in the name of the buyers or bankers of the buyers. The issuance
date of the airway bill (AVM) is considered to be the date of shipment.
Air Cargo documents

Shipping goods by air requires you to fill out and provide several important
freight shipping forms. Depending on where the goods are being sent and what
classification of goods you’re exporting, you may need some or all of the
different forms discussed below.
Following are the documents require for the air cargo:-
1. Air freight shipments: It is handled by Air Waybills (AWB) which is a contract
between the shipper and airline that states the terms and conditions of air
transportation and can never be made in negotiable form.
2. Ocean Bill of Lading (B/L): It is a receipt for cargo in transit, and a contract
between the exporter and an ocean carrier for transportation and delivery of
goods to a specified party at a specified foreign destination. The Ocean Bill of
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Lading is issued after the vessel has sailed and the cargo has been entered in
the ship’s manifest.
The Bill of Lading identifies the shipper, consignee, and the types and quantity
of the goods. The Bill of Lading is essentially the contract between the owner
of the goods and the carrier. This is also the case with domestic shipments.
There are two types of Bills of Lading. A straight Bill of Lading is non-
negotiable. On the other hand, a negotiable or shipper’s order Bill of Lading
can be bought, sold, or traded while the goods are in transit. It’s often used for
letter-of-credit transactions. In order to prove ownership and take possession
of the goods, the customer usually needs the original Bill of Lading or a copy of
it.
3. Commercial Invoice: It is a bill for the goods from the seller to the buyer.
These invoices are often used by governments to determine the true value of
goods when assessing customs duties. Governments that use the commercial
invoice to control imports will often specify its form, content, and number of
copies, language to be used, and other characteristics.
Your shipping documentation should include a commercial invoice. This type of
invoice includes a detailed line-by-line description of every item in the
shipment. It also lists the value of each item as well as the total value of the
shipment. Some countries may require the use of their own specialized
invoices.
The commercial invoice also includes basic information about the transaction,
such as the name and address of the shipper and seller and the delivery and
payment terms. The buyer can use the commercial invoice to prove ownership,
and some governments use this document to assess custom duties.
4. Consular Invoice: It is a document that is required in some countries. It
describes the shipment of goods and shows information such as the consignor,
consignee, and value of the shipment.
Certain nations require a consular invoice to control and identify the imported
goods. The invoice must be purchased from the consulate of the country to
which the goods are being shipped and usually must be prepared in the
language of that country.
5. Certificate of Origin: This document is required in certain nations. It is a signed
statement as to the origin of the export item. Certificate of origin are usually
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signed through a semi-official organization, such as a local chamber of

commerce. A certificate may still be required even if the commercial invoice
contains the information.
The certificate of origin is used to declare which country the shipment
originated in. This is very important for customs clearance purposes because
every international location carries distinct rules and regulations based on
where the goods originated. The Certificate of Origin is usually certified by an
authorized semi-official organization. The Certificate of Origin may be required
even if the commercial invoice contains the same information.
6. NAFTA Certificate of Origin: It is required for products traded among the

NAFTA countries (Canada, the United States, and Mexico). The NAFTA
Certificate of Origin is used by Canada, Mexico, and the United States,
including Puerto Rico, to determine if goods imported into their countries
receive reduced or eliminated duty as specified by the North American Free
Trade Agreement (NAFTA). For those forms that are completed online, this
application is designed for goods whose origin is the U.S. or Puerto Rico only.
7. Inspection Certification: It is required by some purchasers and countries in
order to attest to the specifications of the goods shipped. This is usually
performed by a third party and often obtained from independent testing
organizations.
Some purchasers and countries require an Inspection Certificate. This
certificate attests to the specification of the goods shipped. The inspection is
usually performed by a third party. You will have to obtain an Inspection
Certificate from an independent testing organization.
8. Dock Receipt and Warehouse Receipt: This document is used to transfer
accountability when the export item is moved by the domestic carrier to the
port of embarkation or warehouse and left with the ship line or forwarding
agent for export. All Dock Receipts and Warehouse Receipts are issue by Ocean
Air Logistics traffic System and automatically sent to the client, shipper and/or
consignee.
9. Destination Control Statement: It appears on the commercial invoice, and
ocean or air waybill of lading to notify the carrier and all foreign parties that
the item can be exported only to certain destinations.
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The Destination Control Statement usually appears on the commercial

invoices, airway Bill of Lading, and Shipper’s Export Declaration (SED). This
statement notifies the carrier and all foreign parties that the item may be
exported only to certain destinations.
10.A Shipper’s Export Declaration (SED): It is used to control exports and act as a
source document for official U.S. export statistics. SEDs must be prepared for
shipments through the U.S. Postal Service when the shipment is valued over
$500. SEDs are required for shipments not using the U.S. Postal Service when
the value of the commodities, classified under any single Schedule B number, is
over $2,500. SEDs must be prepared, regardless of value, for all shipments
requiring an export license or destined for countries restricted by the Export
Administration Regulations. SEDs are prepared by the exporter or the
exporter’s agent and filed electronically with the U.S. Census Bureau, prior to
shipment departure.
If any single commodity has a value in excess of $2,500, then a Shipper’s Export
Declaration (SED) is required when exporting goods from the United States.
The US Census Bureau is collecting this information for statistical purposes.
The Census Bureau is currently undergoing a transition which will eventually
lead to mandated electronic filing for SEDs. This is all the more reason to use
electronic shipping document management within your company.
11.Shipper’s Letter of Instructions: It is the shipping instructions to the forwarder
or carrier from the shipper or exporter.
12.An Export License: It is a government document that authorizes the export of
specific goods in specific quantities to a particular destination. This document
may be required for most or all exports to some countries or for other
countries only under special circumstances.
13.A Packing List: It itemizes the material in each individual package and indicates
the type of package, such as a box, crate, drum, or carton. It also shows the
individual net, legal, tare, and gross weights and measurements for each
package (in both U.S. and metric systems). Package markings should be shown
along with the shipper’s and buyer’s references. The list is used by the shipper
or forwarding agent to determine the total shipment weight and volume and
whether the correct cargo is being shipped. In addition, U.S. and foreign
customs officials may use the list to check the cargo.
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An export packing list is usually more detailed than packing lists used for
domestic shipments.
Here are some examples of what an export packing list includes:
a) Freight cost in US dollars (exchange rate on the day of shipment)
b) Full name and address of shipper
c) ID number of the company
d) Full name and address of consignee
e) Detailed specification of the goods
f) Quantity of cargo
g) Weight of the load
h) Place of origin of goods
The shipper generally uses the packing list to verify the weight and
volume of the goods. Custom officials in the US and in foreign countries
may also use this list to check the cargo.
14.A Cargo Insurance Certificate: It is used to assure the consignee that insurance
will cover the loss of or damage to the cargo during transit.
Additional Documentation
Your shipment may require additional documentation depending on the type
of goods being shipped and the destination country.
Here are other documents you may need:
1. Dock receipt
2. Warehouse receipt
3. Insurance certificate
4. Export license
5. Certificate of Handling (Fumigation Certificate)
6. Dangerous Goods Declaration
7. NAFTA Certificate of Origin (for shipment between Canada, United States,
and Mexico)
The Importance of Proper Documentation
While it may be cumbersome to ensure the accuracy and completeness of your
freight documentation, it’s important to get it done right.
Even small errors and omissions can result in severe consequences, such as:
1. Delayed shipment of your goods
2. Non-shipment of your goods
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3. Cost of extended storage (until appropriate documentation is received)

4. Fines for missing or incorrect documentation
5. Non-payment from the recipient
Managing shipping forms is a critical aspect of exporting freight. Therefore,
you may want to revise your current documentation process. To make things
easier for your company, you can take advantage of e-File Cabinet’s document
solutions. With e-File Cabinet, you can view your documents from anywhere
and find what you’re looking for quickly. Let us make managing your shipping
documentation easier for you. Simply fill out the form on this page to start
your free demo right now.
Procedure of Customs Clearance by Post Parcel
1. The facility for import of goods by Post Parcels has been provided by the Postal
Department at its Foreign Post Offices and sub- Foreign Post Offices. Customs
facilities for examination, assessment, clearance etc. are available at these Post
Offices. Export of parcels can also be affected at the facilities provided at
Foreign Post Offices and sub-Foreign Post Offices. Limited facility for export
clearances are also available at Export Extension Counters opened by the
Postal Department where parcels for export are accepted and cleared by the
Customs.
2. Letter Mail Articles are generally cleared by the Customs at the time of their
arrival and sorting unless they appear to contain contraband or dutiable
articles. In such cases, the Letter Mail is subjected to further examination at
the Foreign Post Offices or sub- Foreign Post Offices, as the case may be.
3. Goods imported or exported by post are governed by sections 82, 83 & 84 of
the Customs Act, 1962. Furthermore, vide Notification No. 53/Cus dated
17.6.1950 (as amended by Notification No. 111/Cus dated 8.7.1955) Rules
Regarding Postal Parcels & Letter Packets from Foreign Ports In/Out of India
have also been framed.
Importability of items through Post:
Import of dutiable goods by letter, packet or parcel posts is prohibited under
Notification No. 78-Cus., dated 2.4.1938 (as amended), read with section 11 of
the Customs Act, 1962, except where such letter or packet bears a declaration
stating the nature, weight and value of the contents or if such a declaration is
attached alongside indicating that the letter/packet may be opened for
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Customs examination. Dutiable goods may also not be imported by Post in

case the Customs is not satisfied that the details as above are incorrectly
stated in the declaration.
Items intended for personal use, which are exempt from the prohibitions
under the Exim Policy, 1997-2002 or the Customs Act, 1962, can be imported
by postal channel on the payment of appropriate duties under Chapter
Heading No. 98.04 of the Customs Tariff. This, however, does not apply to
items viz. Motor Vehicles, Alcoholic Drinks and goods imported through
Courier Service which are to be assessed at merit rates of duty. In case the
customs duty payable is not more than Rs. 100/-, the same is exempt vide
Notification No. 17/2001-Cus. dtd. 1.3.2001, as amended.
Import of Gifts:
At the same time, bona fide gifts upto a value-limit of Rs. 5, 000/-, imported by
post, are exempt from basic and additional customs duties vide Notification
No. 171/93-Cus. dtd. 16.9.1993. Items imported as gift should not be restricted
for importation under Foreign Trade (Development and Regulation) Act, 1992.
The sender of the gift may not necessarily be residing in the country from
where the goods have been dispatched. Any person abroad can send the gifts
to relatives, business associates, friends, companies and acquaintances. The
gifts have to be for bonafide personal use. The purpose of this stipulation is
that the person receives the gift genuinely free and the payment is not made
for it through some other means. The quantity and frequency of the gifts
should not give rise to the belief that it is used as a route to transfer money.
The gifts can be received by individuals, societies, institutions, like schools and
colleges and even corporate bodies.
For the purposes of calculating the value-limit of Rs. 5, 000/- in case of imports
of gifts, postal charges or the airfreight is not taken into consideration. The
exemption under the above-referred Notification is subject to revision from
time to time. The value of Rs. 5, 000/- is taken as the value of the goods in the
country from where the goods have been dispatched.
If the value of the gifts received is more than Rs.5, 000/-, the receiver has to
pay customs duty on the whole consignment, even if the goods have been
received free, unsolicited. In addition, at the discretion of the Assistant/
Deputy Commissioner, if the goods are restricted or banned for import, the
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receiver has a liability for penalty for such import, even if the goods have been
sent unsolicited.
Customs duty is chargeable on gifts assessed over Rs. 5, 000/- by the Customs.
In case of post parcel, the customs department assesses the duty payable and
the postal department collects the assessed duty from the receiver of the gift
and subsequently deposits it with the customs. In case of imports of gifts by
the Courier mode, the courier company deposits the amount with customs and
collects the same from the receiver at the time of giving delivery. If the amount
is high, the courier company intimates the receiver to contact Customs or
make payment of duty for the said goods before release of the goods to the
receiver.
Import of Samples:
Bonafide commercial samples and prototypes imported by post are also
exempted from customs duty, subject to the value limit of Rs. 5, 000/-,
provided that the samples are supplied free of cost by the supplier. Subject to
conditions prescribed under Notification No. 154/94-Cus. dtd. 13.7.1994 (as
amended from time to time), samples and prototypes of higher value are also
permitted to be imported with a view to help exports.
Parcels containing medicines and lifesaving drugs:
Lifesaving drugs and items specified under Sl. No. 371 in the Notification No.
17/2001-Cus. dtd. 1.3.2001 (as amended), subject to the conditions prescribed
therein, may be imported by post free from customs duty for personal use.
In addition to the above, various general exemptions from customs duties on
merits would be available on imports made through postal channel.
Procedure in case of Postal Imports:
The Rules prescribed for landing and clearing at notified Ports/Airports/Land
Customs Stations of parcels and packets forwarded by the foreign mails or
passenger vessels or air liners are as follows: -
1. The boxes or bags containing the parcels labelled as "Postal Parcel", "Parcel
Post", "Parcel Mail", "Letter Mail" will be allowed to pass at the Foreign Parcel
Department of the Foreign Post Offices and Sub Foreign Post Offices.
2. On receipt of the parcel mail, the Postmaster hands over to the Customs the
following documents:
i. a memo showing the total number of parcels received from each country
of origin;
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ii. parcel bills in sheet form (in triplicate) and the senders’ declarations (if
available) and any other relevant documents that may be required for the
examination, assessment etc. by the Customs Department;
iii. the relative Customs Declarations and dispatch notes (if any); and
iv. any other information required in connection with the preparation of the
parcel bills which the Post Office is able to furnish.
3. On receipt of the documents, the Customs Appraiser shall scrutinize the
particulars given in the parcel bill and shall identify the parcels required to be
detained for examination either for want of necessary particulars or defective
description or suspected misdeclaration or under-valuation of contents. The
remaining parcels are to be assessed by showing the rates of duty on the
declarations or parcel bill, as the case may be. For this purpose, the Appraisers
are generally guided by the particulars given in the parcel bill or Customs
declarations and dispatch notes (if any). When any invoice, document or
information is required whereby the real value, quantity or description of the
contents of a parcel can be ascertained, the addressee may be called upon by
way of a notice to produce or furnish such invoice, document and information.
4. Whenever necessary, the values from the declarations are entered into the
parcel bill and after conversion into Indian Currency at the ruling rates of
exchange, the amount of duty is calculated and entered. The relevant copies of
parcel bills with the declarations so completed are then returned to the
Postmaster immediately. In case of postal imports, duty is calculated at the
rate and valuation in force on the date that the postal authorities present a list
of such goods to the Customs. In case the list is presented before the arrival of
the vessel carrying the goods, the list is deemed to have been presented on the
date of the arrival of the vessel.
5. All parcels marked for detention in the manner indicated above are to be
detained by the Postmaster. Rest of the parcels will go forward for delivery to
the addressee on payment of the duty marked on each parcel.
6. As soon as the detained parcels are ready for examination, they are submitted
together with the parcel bill to the Customs. After examining them and filling
in details of contents of value in the parcel bills, Customs note the rate and
amount of duty against each item. The remarks "Examined" is then to be
entered against the entry in the parcel bill relating to each parcel examined by
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the Customs Appraiser and the Postmaster’s copies will be returned by the
Customs.
7. In the case of receipt of letter mail bags, the Postmaster gets the bags opened
and scrutinized under the supervision of the Customs with a view to identify all
packets containing dutiable articles. Such packets are to be detained and are
presented in due course to the Customs Appraiser with letter mail bill and
assessment memos for assessment.
8. As soon as packets so detained are ready for examination and assessment,

they shall be submitted together with the relative letter mail bill and
assessment memos to the Customs. After examining them and filling the
details of contents of value in the bill, the Customs Appraiser will note the rate
and amount of duty against each item. He will likewise fill in these details on
the assessment memos to be forwarded along with each packet.
9. All parcels or packets required to be opened for Customs examination are
opened, and after examination, re-closed by the Post Office officials and are
then sealed by them with a distinctive seal. The parcels or packets remain
throughout in the custody of the Post Office officials.
10. If on examination the contents of any parcel or packet are found to be
misdeclared or the value understated or to consist of prohibited goods, such
parcels or packets must be detained and reported to the Customs and the
Postmaster does not allow such parcels or packets to go forward without the
Customs’ orders.
11.The duties as assessed by the Customs Appraiser and noted in the parcel bill or
letter mail bill shall be recovered by the Post Office from the addressees at the
time of delivery to them. The credits for the total amount of duty certified by
the Customs Appraiser at the end of each bill are given by the Post Office to
the Customs Department in accordance with the procedure settled between
the two Departments.
12.The parcel bills or letter mail bills and other documents on which assessment is
made remain in the custody of the Post Office, but the duplicates, where these
are prepared, are kept in the Customs Department for dealing with claims for
refunds, etc.
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Procedure in case of Postal Exports:

1. The rate of duty and tariff value, if any, applicable to any goods exported by
post shall be the rate and valuation in force on the date on which the exporter
delivers such goods to the Postal Authorities. Goods for exportation may be
delivered at Foreign Post Offices (including Export Extension Counters) and
Sub-Foreign Post Offices which have been notified by the Customs under
section 7 of the Customs Act, 1962.
2. The articles exported by post are required to be covered by a declaration in the
prescribed form.
3. All exports by post, where the value exceeds Rs. 50/- and payment has to be
received, must be declared on the exchange control form viz. P.P. form. When
the postal article is covered by a certificate issued by the RBI (with or without
limit) or by an authorised dealer in foreign exchange that the export does not
involve any transaction in foreign exchange upto Rs. 500/-, the declaration in a
P.P. form is not necessary.
4. Export by post of Indian and foreign currency, bank drafts, cheques, National
Saving Certificates and such other negotiable instruments is not allowed unless
accompanied by a valid permit issued by the R.B.I., except in cases where such
negotiable instruments are issued by an authorised dealer in foreign exchange
in India.
5. Export of all goods is allowed under OGL to all destinations except those that
are covered by the Negative List of exports. Goods upto the values of Rs. 15,
000/- are allowed for exports as gifts in a licensing year. Items covered under
Negative List are not allowed as gifts without a license except in the case of
edible items.
6. Prohibition/restrictions under the Exim Policy and the Customs Act, 1962 exist
on the export of various articles by Post. Some of these articles are viz. arms
and ammunitions, explosives, inflammable material, intoxicants, obscene
literature, certain crude and dangerous drugs, antiquities, etc.
7. Export of purchases made by the foreign tourists is allowed subject to proof
that the payment has been made in foreign exchange.
8. If the addressee take delivery of parcels on payment of duty and then wish to
have them returned to the senders they can do so only under claim for
drawback under the observance of the prescribed procedure. Permitting an
addressee to open a parcel and take the delivery of part contents on payment
34
of duty and repack the balance of the contents for re-export without payment
of duty thereon is not authorised and is irregular.
The Process of Air freight/transport
Airfreight involves the shipment of packages and goods via an air carrier. An air
carrier could be commercial or charter. Transportation via air carriers allows
shipments an easier gateway to anywhere that airlines fly and land.
The process of airfreight is used in conjunction with other shipping methods
such as rail, marine and has since become widely used as one of the most
efficient delivery options in exporting and importing in the 21st century. The
airfreight industry has grown steadily over the past decades and considered an
efficient and quicker way of transporting goods.
The process of air cargo requires many vital steps taken by the freight
forwarder and the air carrier. Here is a guideline on how the process of air
cargo is carried out on a daily basis.
1. Shipping
There are 3 vital steps that are followed under the process of shipping.
A. Assembling the Shipment
Collecting goods for consignee and preparing the packing materials and the
packing list is important. Once the shipment is assembled we move onto the
next step.
B. Making RFT (Read for Transport)
It is also important to ensure you pack your goods and label packages clearly.
Following the packaging, your freight forwarding agent will prepare any
required security documents and other relevant transportation documentation
and prepare for shipment. Transco Cargo can help you any step of the way.
C. Ordering Transport
Once the package has arrived, it will be sent to the freight forwarder
warehouse and left at storage ready for pick up.
2. Forwarding Out
When your goods are being exported, the below steps apply during
transportation.
a) Goods are picked up following the order received and given a POA (Proof
of Acceptance)
b) An incoming check is performed and sorted according to flight dates for
goods to be transported
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c) Recheck for labelling errors and re-label if required and make necessary
security declarations
d) Prepare all relevant customs documents and clear for customs
e) Consolidate all goods according to all regulations of necessity and prepare
a master AWB (Air Waybill).
f) Arrange transport to airline and inform receiving end of the incoming
package
3. Air Transport
During air transportation, there are many vital steps that are carried out during
the transference of the package.
1. Prepare and plan for handling and storage shipments based on confirmed
bookings.
2. Perform incoming and administration checks
3. Sort good and documents
4. Perform outgoing and administration checks
5. Prepare ULDs (Unit Load Devices) according to specific instructions
6. Prepare ramp transport and security checks
7. Load onto aircraft and prepare for flight
8. Once landed prepare for ramp transport of cargo
9. Receive ULDs and breakdown ULD according to instructions
10.Check incoming shipments against documents
11.Prepare for warehouse storage and clear flight manifest
12.Load goods onto truck and dispatch
4. Forwarding In
Importing goods via air transportation is considered a convenient method to
transfer packages. Here are the steps taken to ensure goods are delivered on
time;
1. Picking up documents once notified by the airline and arranging local
pickup of the documents
2. Preparing customs documents, aiding with clearance and printing the
customs release note
3. Arrange local pick up of the package from the airline
4. Arrange delivery to consignee with all relevant documentation and
receive POD (Proof of Delivery)
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5 .Consignment
1. Receiving shipment – once the shipment is received the check for all
number of goods and if any visible damage can be identified. Once
cleared, provide a POD.
2. Unpacking goods– unpack goods and thoroughly check for any damages
that have occurred during transportation.
3. Check goods with administration – count present goods with the packing
list or procurement order to verify any missing items. Arrange for any
warranty claims along with payments for transport supplier where
necessary. Make arrangements for customs declarations when required.
A. Categories of Goods Allowed Import through Courier

Except for certain categories, all goods can be imported using the courier
mode. The exclusion of certain types of goods is done based on the fact that
these require specific conditions that have to be fulfilled under any other Act
or rule or regulations like testing of samples etc. on reference to the relevant
authorities or experts before their clearance. In certain cases, due to additional
compliance requirements, the assessment and clearance process takes time.
These goods that is not eligible under this scheme, which envisages Customs
clearance on a fast track basis. Moreover, air terminals and LCS are not
equipped to handle certain goods. The following categories of goods are not
permitted to be imported through courier mode.
1. Precious and semi-precious cargo.
2. Animals and plants.
3. Perishables.
4. Publications that contain maps depicting incorrect boundaries of India.
5. Precious and semi-precious stones and gold or silver in any form.
6. Goods under the Export Promotion Schemes including EOU Scheme.
7. Goods the exceed the weight limit of 70 kgs. imported through courier
under manual mode.
However, under the electronic mode, no restriction regarding the weight has
been provided.
Clearance of goods under the EOU Scheme is permitted under electronic
mode.
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B. Categories of Goods Allowed Export through Courier

All gods are permitted to exporters through courier except for the following
excluded categories.
1. Goods attracting any duty on exports.
2. Goods that are exported under Export promotion schemes, such as
Drawback, DEPB, DEEC, EPCG, etc.
3. Goods where the consignment value is more than Rs. 25,000 and
transaction in foreign exchange are involved (the limit of Rs. 25,000
does not apply when G.R. waiver or specific permission has been
obtained from the RBI).
Import and Export of Gems and Jewellery
Import of gems and jewellery including samples provided by EOUs or SEZ units
is allowed through courier. Similarly, the export of cut and polished diamond,
gems and jewellery under any scheme of FTP from EOUs, SEZs or DTA is
permitted through courier subjected to the condition that the cost of each
export consignment under such export is not more than Rs. 20 Lakhs.
Procedure for Clearance of Import Goods
For facilitating Customs clearance, the goods that are imported through
courier are classified into the following categories.
1. Documents that mentions any message, information or data recorded on
paper, cards or photographs containing no commercial value that do not
attract duty or subject to any prohibition/ restriction on their import or
export.
2. Any bonafide commercial samples and prototypes of goods that are
supplied free of charge of a value not more than Rs. 50,000 for exports
and Rs. 10,000 for imports that are not subjected to any prohibition or
restriction on their import or export and which does not involve the
transfer of foreign exchange.
3. Any of the bonafide fit articles for personal use of a value not more than
Rs. 25,000 for a consignment in case of exports and Rs. 10,000 for imports
that are not subjected to any prohibition or restriction on their import or
export that does not involve the transfer of foreign exchange.
4. Goods containing a declared value of up to Rs. 1,00,000 and dutiable or
commercial goods having a declared value of more than Rs. 1,00,000.
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Various Customs declaration forms have been prescribed under the Courier
Regulations for manual mode, simplified Bill of Entry has been mentioned for
clearance of goods. These goods are assessed for duty on merits like other
imported goods, and exemption, wherever available, can be imported when it
is claimed.
Courier Bill of Entry-III for documents.
Courier Bill of Entry-IV for samples and free gifts.
Courier Bill of Entry -V for commercial shipments upto a declared value of Rs. 1
Lakh
The courier regulations for manual code stipulate for certain categories of
import, a regular Bill of Entry that is prescribed in the Bill of Entry Regulations,
1976 has to be filed. This includes
1. The goods that are imported under the EOU Scheme.
2. Goods that are imported under DEPB, DEEC and EPCG Schemes.
3. Goods that are imported against the license that is issued under the
Foreign Trade (Development and Regulation) Act, 1992.
4. Goods that are imported by a related person defined under the Customs
Valuation Rules, 1988.
5. Goods for which the concerned officer files a Bill of Entry.
6. Goods having a declared value of Rs. 1 Lakh and above.
As per the courier regulations for the electronic mode, the forms prescribed
for filing Customs declarations are as follows.
1. The Courier Bill of Entry-XI (CBE-XI) for documents in Form B.

2. The Courier Bill of Entry-XII (CBE-XII) for free gifts and samples in Form C.
3. The Courier Bill of Entry-XII (CBE-XIII) for low-value dutiable
consignments in Form D
4. The Courier Bill of Entry-XIV for other dutiable consignments in Form E
for import consignments.
Procedure for Clearance of Export Goods
For exporting goods, the Authorised Courier has to file Courier Shipping Bills
with the respective officer of Customs at the airport or LCS in prior to the
departure of flight or other modes of transport. Different forms have been
prescribed for the export of documents and other goods. The Authorised
Courier has to present the export goods to the concerned officer for
39
inspection, examination and assessment. For certain export goods, a regular

Shipping Bill as mentioned in the Shipping Bill and Bill of Export Regulations
1991 has to be filed. These Shipping Bills are processed at the Air Cargo
Complex or the STP or EOUs or EHTP and then with the permission of Customs,
the goods that are handed over to the courier agency for onward dispatch. The
goods for which this procedure applies are given below.
1. Transhipment of Goods
Transhipment of Goods between two Customs stations is applicable as per the
provisions of the Customs Act, 1962 and Goods Imported Regulation, 1995 and
other instructions. In many circumstances, the consignments that are imported
through the courier node may also be transferred to the cargo terminal of the
same airport for clearance purposes. Such transfer is similar to the local
movement of cargo from one customs area of the Customs station to the next
custom area of the same station. This is covered by the local procedure that is
evolved by the jurisdictional Commissioner of Customs.
2. Disposal of Uncleared Goods
The Courier regulation for both the manual and electronic mode depicts a
procedure for clearance of the uncleared goods. For imported goods, the same
is required to be detained by Customs and a notice is issued to the Authorized
courier and that the goods can be disposed of after the expiry of 30 days of the
mentioned goods. The charges that are payable for storage and holding of such
goods should be taken care of by the Authorised Courier. For export goods, a
procedure that is similar to the imported goods is prescribed. The only
dissimilarity is that, if the goods have not been exported within 7 days of
arrival into the Customs Area or within the extended period, it would be
permitted by the Customs.
3. Registration of Authorised Courier
A person in need of operating as an Authorised Courier is required to get
himself registered with the jurisdictional Commissioner of Customs. As per the
regulations for the manual code, the registration is valid for 10 years and is
renewable for another 10 years if the performance of the courier is
satisfactory. Similar provisions are contained in regulation for the electronic
mode other than the initial registration period is fixed as 2 years.
The person applying for registration has to be financially viable and has to
produce a certificate that is issued by a Scheduled Bank or other proofs as
40
evidence of possession of the assets of a value not below Rs. 25 Lakhs.

Moreover, the person has to execute a bond with the security of Rs. 10 Lakhs
for registration at Mumbai, Delhi, Calcutta and Chennai. In other airports and
LCS, the security deposit is Rs, 5 Lakh. The security deposit can be made in the
form of cash or in the form of postal security, Bank Guarantee or National
Savings Certificate. A condition for registration is that the applicant has to
agree to pay the duty, if any, not levied or short-levied with interest, if
applicable, on any goods taken clearance by the Authorised Courier.
An authorised Courier who has registered ay one customs station is permitted
to transact business at more than one airport or LCS subjected to giving of
intimation in the prescribed form. However, separate bind and security have to
be furnished at every airport and LCS.
Existing Authorised Couriers who have registered or transacting business in
terms of Regulation 12 of the Courier Imports and Exports Regulations, 1998 at
locations where the automated clearance facilities become operational will be
eligible to file declarations according to the electronic mode without any need
for fresh appointment or fresh intimation, that are subjected to the fulfilment
of other conditions or requirements according to the courier Regulations for
the electronic mode. Therefore, once a person is registered as an Authorized
Courier, he can file declarations under both modes that are subjected to
compliance with other requirements of the concerned Regulations.
Obligation of Authorised Courier
A number of obligations are levied on the Authorised Courier. Some of the
important obligations are given below.
1. File declarations for clearance of imported or exported goods through a
person who has passed the examination according to Regulation 8 or 19
of the Customs House Agents Licensing Regulations, 2004 and those who
are duly authorised under Section 146 of the Act.
2. Advises his clients to abide by the provisions of the Customs Act, 1962
and the rules and regulations that are made under the Act.
3. Verify the antecedent and the correctness of Importer Exporter Code
(IEC), the identity of the client and the functioning of the client in the
declared address by using reliable, independent, authentic documents,
data or information.
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4. Excise due diligence in furnishing the information to the Customs in

relation to the clearance of the import or the export goods.
5. Not withholding any information that is related to the assessment and
clearance of import and export of the goods from the Assessing Officer
and not trying to influence the conduct of any Customs officer in any
matter by using threats, false accusations, and duress or offer any
special inducement, etc.
6. Maintains records and accounts that are prescribed by the Customs and
abide by all the provisions of the Act and the notifications, rules,
regulations and orders that are issued under the Act.
7. The obligation on the Authorised Courier to verify the antecedents, to
identify the client and the functioning of the client in the declared
address by using reliable, independent, authentic documents, data or
information that is based upon the increasing number of offences that
are involved in several modus-operandi like fraud and duty evasion by
bogus IEC holders etc. Elaborative guidelines on the list of documents
that are to be verified and have to be obtained from the client or
customer. However, it is mandatory for the client or the customer to
furnish to the Authorised Courier any two of the listed documents. There
is no necessity for the client/ customer to furnish a photograph to the
Authorised Courier.
Outsourcing/ Sub-letting
According to the Handling of Cargo in Customs Areas Regulation 2009, a
provision has been made that mentions the necessity of prior approval of
Customs if the Authorised Courier needs to sub-let/ outsource any
components in the door-to-door supply chain. This is required since an
Authorised Courier is defined as a person who is engaged in international
transportation of goods for export and import on the door-to-door delivery
basis and is registered on behalf by the Jurisdictional Commissioner. The
fundamental reason for expeditious clearance facilities that are extended is
that the Authorised Couriers have appropriate verifiable and secure work
processes on a global basis supported by a detailed IT infrastructure for
knowledge and information management. Such companies have their own in-
house mechanisms to safeguard against the use of express supply chain by
unscrupulous elements. Hence, any un-authorized sub-letting or supply chain
42
may defeat the very purpose behind the facility of expeditious clearance. The
Commissioners of Customs has to review the facilities that are available wi the
Authorised Couriers appointed under their charge to ensure compliance.
During this, any sub-letting or outsourcing due care has to be taken to ensure
that it does not go against the purpose behind the facility of expeditious
clearance.
De-Registration and Forfeiture of the Security
The registration of an Authorised Courier could be cancelled by the
Commissioner and his security can be accused of his failure to abide by the
conditions of the bond, the provisions of regulations and misconduct.
Revocation of registration can be made only when a notice is issued to the
Authorised Courier and when he is given an opportunity to present his case in
writing and an opportunity of being heard in the matter. If there is a need to
conduct an inquiry to establish prima facie, the grounds against the Authorised
Courier, the Commissioner of Customs could suspend the registration. An
Authorised Courier by order of the Commissioner can represent to the Chief
Commissioner within 60 days of communication of the impugned order.
Introduction
There are only 3 modes of transportation: Land, Sea, and Air. Sea freight
consists of the bulk of global trade transportation, land transportation is
predominantly used for cross border and last-mile transportation. Airfreight is
a transportation service that can be complex, fast-paced and exciting.
Air Freight transportation is for cargoes that fall into these few categories:
1. Perishable Goods/Live animals that have a limited lifespan
2. Cargo with an ultra-high value that requires additional security
3. Cargo in small quantities or small volume metric weight
4. Cargo with utmost priority in delivery urgency
Those who chose to ship cargo by air instead of by sea will definitely fall into
one of those four categories.
The purpose of this article is to serve as a general guide to arranging for air
freight transportation and the underlying comprehension of how air freight
transportation works.
Advantages of Air Freight
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1. Frequency and Reach

According to Open Flights, there are 14,110 Airports listed and 754 Seaports
(according to export Virginia). With that being said, the connectivity of air
transportation, especially to land-locked areas, is definitely better than sea
transportation.
You can search from a plethora of nearest airports to the final destination, this
is not the case for seaports where you have only a few choices.
The cost of delivering the cargo from the seaport to the destination may also
be higher due to the distance at play.
In addition, Air Freight schedules are compact and frequent. For certain high
demand routes, there are more than 2 allocations per day. So rest assured, if
you missed the flight scheduled departure, you can reschedule for the closest
one. This benefit is not so pronounced for transportations via Sea.
Hong Kong airport (HKG), 2016 air freight movement in tonnage for Hong Kong
reaches over 5 million tonnes a year. HKIA connects to over 220 destinations
and 120 airlines patron that airport.
2. Security
Air Cargo Security is always the emphasis of airliners and the IATA
organization.
In the not too distant past, Oct 2010, remains of a plastic bomb were found in
a plane from Yemen to the United States of America, the Al-Qaeda terrorist
group plotted and took responsibility of the bomb. The bomb took down a UPS
cargo airplane
These are the incidents that outline the importance of advanced cargo security
system because many lives are at stake.
Air Freight shipments are also only shipped on Master Air Way Bill which is
non-negotiable, it also means that the consignee is known before the shipment
has been accepted by airliners. This is an added security mandated by IATA.
With the terrorist bomb incident from Yemen in 2010 as a class example, it is
no wonder that Air Cargo transporters and officials must know the actual
consignee beforehand.
3. Lower Insurance Cost
Because air cargo security is of such importance, the multiple layers of security
like x-ray screening and dog-sniffing add more security that the cargo is safe
and secure. With the added stringent packing requirements of air
44
transportation, the Insurance underwriters take a lesser risk in insuring air

cargo.
The short transit time and the air transportation track record are also a big
contributing factor to lower insurance cost as well. Shorter transit time means
a lower chance of cargo damaged in transit. In addition, the odds of a plane
crash is 1 in 11 million, insurance adjusters like those odds for sure.
4. Fast Transit Time
The typical cruising airspeed for an airliner is approximately 500 knots or 575
mph. Whereas the average speed of a slow streaming sea freight liner is at 20
knots or 23 mph.
Airplanes travel 25 times faster than a container ship. This is one of the many
reasons why air transportation is sometimes preferred over sea or land
transportation.
Disadvantages of Air Freight
1. Cost (to a certain extent)
When a freight cargo is measured by the pound or kilogram instead of tonne or
per container basis, you know in fact that the former is going to be more
expensive than the latter.
But this is not always the case in every shipment. If the cargo you wish to
deliver is well below the courier weight and size restriction, it is actually
CHEAPER to ship that cargo by air instead via sea transportation
The reason why is that in sea freight logistics, there is a lot of minimum fixed
cost attached to a particular shipment. The Terminal Handling Charges, Bill of
Lading, Electronic Data Interchange Fee, to name a few are fixed at price.
Amazon Fulfilment Centre, low air freight transportation cost due to its
economies of scale
Although these charges are not exclusive to sea freight transportation only, air
courier users do not need to pay for those charges as their cargo is
consolidated before shipping.
2. Size limitation
Without a doubt, the size of an airplane is always going to be dwarfed by a
freight ship’s size.
Take a Boeing 747-400F with a maximum gross payload of less than 130 metric
tonnes and juxtapose it with a standard Handymax and Supramax bulk carrier
vessels with a capacity of 50,000 DWT.
45
You need more than 380 trips to deliver the same amount of capacity a
Handymax or Supramax bulk carrier carries in one trip.
Moreover, the cargo packing is restricted to specifications of a Unit Load
Device (ULD) which will be discussed more in-depth below. This is definitely
not the case for sea carriers as they have many types of carriers to cater to
different commodity both wet or dry.
3. Documentation timeliness
Preferential Certificate of Origin, issued by the country of origin’s chamber of
commerce, is a document resulting from a bilateral or multilateral agreement
between country(s) that reduces or eliminates import duty to promote
international trade.
In most instances, this document has to be presented to customs in the
original copy.
Preferential and Legalized Certificate of Origin usually travels with the
shipment, in a document pouch, this mitigates the need to courier the original
document separately before the cargo shipment arrives.
The timeliness of the document’s availability is of paramount to smooth cargo
shipment. If cargo is air-bound but the documents are not yet ready, this poses
as a limitation to air freight transportation.
Import Permit or Licensing is also another document preparation required at
the destination airport, the application process may take some time and
requires ancillary documents to apply which may be delayed.
With sea transportation, there is a big buffer time for cargo owners to prepare
documents as the transit time is longer. But, with air transportation where
transit time is typically within 24 hours, there is a small disadvantage in this
aspect.
Air Cargo Flow at Origin/Export
Step 1 – Prepare Shipment for export and planning
Cargo owners will first have to prepare the cargo for shipment and
transportation.
There are two key areas that have to be referred to by cargo owners to
anticipate loading and storage requirement of air transporters.
 IATA Cargo Handling Manual
 Unit Load Device Dimensions
46
IATA Cargo Handling Manual, available in the IATA website will outline all the
packing requirements to make sure the cargo is safe and secure.
Unit Load Device dimensions, which will be touched on later, is important for
the shipper to decide if the cargo stowage is possible into the airplane
fuselage.
Step 2 – Calculate and Determine cargo chargeable weight
One should be clear about the difference between chargeable weight, net
weight, and gross weight.
Net weight is the weight of the actual cargo itself.
Gross weight is a view of the cargo shipment in totality, including the package,
pallets, and containers.
Chargeable weight is based on volumetric calculation, taking into account the
volumetric weight or the gross weight, whichever is the higher.
Step 3 – Arrange bookings with Air Freight Forwarder
Accompanying the booking arrangement planning are documents such as the
Commercial Invoice and Packing List.
The document can be named in many ways depending on the air carrier used,
the booking can be called the Shipper’s Letter of Instruction or Shipper’s
Booking Instruction. Whichever way, the purpose of the booking instruction is
the same.
Step 4 – Preparation of Airway Bill
A drafted airway bill complete with the cargo details, shipper and destination
details, and flight schedule details is prepared and confirmed by both the
Freight Forwarder and the Shipper.
There are many forms of airway bills, each with different arrangement
procedures which are also explained further below. Some of the example air
waybills are:-
a) House Airway Bill
b) Neutral Airway Bill
c) Master Airway Bill
d) E-Airway Bill
Step 5 – Transportation to Terminal Warehouse Operator
Once booking and details in the Airway Bill is confirmed, either by the
arrangement of the freight forwarder or the shipper’s own, the cargo is
transported to the Warehouse Terminal appointed by airlines or freight
47
forwarders. The Transport Service provider will then issue a warehouse receipt
or freight certificate.
If the cargo at hand is consolidated by the freight forwarder, the freight
forwarder is responsible to issue the receipt, it will then be called the
forwarder’s receipt
Step 6 – Custom Clearance
The air cargo is then inspected by customs officers and any other governing
agencies that regulate the export of the cargo. This is where custom officers
inspect whether there are any anomalies in the cargo description, cargo
weight, and measurements.
Step 7 – Loading and Stowing of cargo
Once all of the above has been arranged, the cargo is then loaded into the ULD
and stowed into the airplane fuselage. The Carrier will then issue a confirmed
Airway Bill as evidence of a contract of carriage.
Air cargo flow at Destination/Import
Step 1 – Unloading of Cargo ULDs
The cargo arrived is handled by ULD Operators, transferred to a high loader
and then lowered and latched to the dolly train, which is then moved to the
terminal warehouse for break bulking.
Step 2 – Break-bulk of Cargo
Here is where warehouse operators unload the cargo from the ULD and stores
it in the warehouse until further instructions.
Step 3 – Custom Clearance
Similar to export custom clearance, clearing the import customs is also
required, here once again the Invoice, Packing List, Airway Bill along with any
ancillary documents and permits are handed to customs to verify and inspect.
A form of import duty and tax will be imposed on certain products based on its
tariff code, or Harmonised System Code (HS Code), and collected from
appointed agents on behalf of the consignee.
Step 4 – Delivery
Once the customs clearance procedure is done, road transportation is then
arranged to deliver the cargo to the consignee’s doorstep.
Air Cargo Accompanying Documentation
A. Air Waybill
1. Evidence of Contract of Carriage
48
An Airway Bill is evidence of a contract of carriage, a contract has terms and

conditions detailed in the back of the airway bill that includes the limited
liabilities of the carrier, the scope of the contract, and the applicable liability
exemptions. Typically the contract of carriage is based on either one of these 3
protocols or conventions:-
 Warsaw Convention 1929
 Hague Protocol 1955
 Montreal Agreement
Each of these has a different scope of liabilities, exemptions, and liability
limitations. One has to study the contract closely.
2. Non-Transferrable/Non-Negotiable
The airway bill, much like the seaway bill is non-transferrable. This means that
the airliner only releases the cargo to the named consignee on the airway bill.
This does not facilitate the buying or selling of goods while in transit.
3. Document of Title
While as detailed in this article, an Airway Bill does not represent the
ownership of goods by the Airliner, but merely the possession of the goods in
question.
Possession of goods, similarly to having custody of the goods does not allow
the airliner to sell trade or modify the goods.
B. Types of Airway bill
1– Neutral AWB
A Neutral Airway Bill is essentially the same as any other Airway Bill. The key
difference is that it is a pre-printed form that bears the Warsaw Convention as
the term of the contract of carriage, and it can be used across multiple airlines
and freight forwarder.
This is devised to reduce the need for Agents to maintain multiple airline’s
formats of an airway bill and reduces paper waste.
2– House Airway bill
House Airway bill is used by Freight Forwarders and Agents that consolidates
the cargo for air transport. The contract of carriage will then be between the
freight forwarder/agent and the shipper itself.
Although the issuance of Airway Bill is closely regulated by the IATA
Organization, the terms of the contract of carriage may differ from the Master
Airway Bill’s terms.
49
3– Electronic Airway bill

The IATA Organization is championing the use of e-AWB to reduce reliance on
paper printing and also increase information security. In essence, it still
functions similarly to a standard Airway Bill, albeit in electronic form.
Freight Forwarders or agent need to update codes to signify it’s documents are
fully electronic (EAW) or has accompanying physical document (EAP)
Whilst Airliner is also required to update codes to signify the need for a paper
AWB (ECP) or that the paper AWB is not required. (ECC)
Accompanying document in this sense comes in the form of a Cargo Pouch that
contains ancillary documents.
A cargo pouch primarily contains the following information:
a) Airliner Name
b) Primary Bar Code
c) Airway Bill Number
d) Destination Address
e) Consignee Name
f) Flight Identification
g) Contact Information
C. Shipper’s Letter of Instruction
A Letter of Instruction or SLI is a necessary document prepared by the shipper
to prompt the logistics service provider of an incoming instruction.
An SLI is a working document for Airliners to acknowledge and accept the
cargo to be shipped, it is also used for the calculation of freight charges and
the issuance of Airway Bills.
An SLI typically comes in 3 Originals and 6 Copies:
i. Original 1 Green (For Issuing Carrier),
ii. Original 2 Pink (For Consignee),
iii. Original 3 Blue (For Shipper),
iv. Copy 4 Yellow (For Cargo Receipt),
v. Copy 5,6,7,8,9 White (For Logistic Service Providers i.e. Carriers and
Agents)
D. Consular Invoice
A document that is certified by a consular official of the importing country.
E. Commercial Invoice
50
A Document with the item description, cargo value and cargo amount. An
important document for all logistic party.
F. Certificate of Origin
A document certified by the local chamber of commerce that the exporting
goods are of local origin, whether it is wholly obtained, manufactured,
produced or processed.
Unit Load Devices
Unit Load Devices (ULD) is essentially the air transportation version of a
container. The key differences between a ULD and a container are that ULDs
comes in various shapes and sizes that contour the dome-shaped fuselage of
the airplane.
A ULD is made with a light material such as aluminium in order to reduce as
much weight as possible as the fuel consumption of aircraft carriers is very
high. Moreover, a ULD’s function other than the storage of cargo is to cargo
restraint, securing the cargo safely to the internal base of the airplane.
The advantages of using a ULD are:-
a) Speedy process of cargo loading
b) improved cargo capacity
c) improved cargo weight distribution
d) promote cargo intermodal transportation
The disadvantages of using a ULD are:-
a) Increased weight and therefore more fuel burn.
b) reduce total payload capability.
c) requires special handling and leasing.
d) requires additional planning if cargo in-transit requires connecting to
another aircraft.
e) ULD compatibility issue, some ULDs are only compatible with some
aircraft carriers.
Shippers who frequently rely on airplanes as a mode of transportation, and
have a steady production line of products may be heavily reliant on ULDs.
Shippers can lease either certified or uncertified ULDs and load them at the
site before transporting the ULDs from the manufacturer’s warehouse to the
airport terminal.
51
Air Freight Calculation

The key to calculating air freight is to accurately calculate the Chargeable
weight.
Chargeable weight essentially means the greater of the volumetric weight or
the actual gross weight of the cargo.
The volumetric weight and the actual gross weight are often different because
the density of every cargo is different.
If you take a tonne of sulphuric acid and juxtapose it with a tonne of steel, in
actual gross weight the cargo will be the same. However, the density of steel is
much higher, therefore does not occupy a lot of space as compared to
feathers.
Knowing the density of the cargo is very helpful as it gives us a picture of how
much storage space is used.
The density of sulphuric acid is at 1840 kilograms per metric cube, or 114.87
pounds per cubic foot.
The density of steel, on the other hand, is 8050 kilograms per metric cube, or
502.54 pounds per cubic foot.
Chargeable weight of one tonne of sulphuric acid
Volumetric tonne (density) = 1.84 Tonnes
Actual Gross Weight = 1.00 Tonnes
Chargeable weight = 1.84 Tonnes
The other method is more rudimentary but effective, which is to measure the
length, width, and height of the cargo and multiply it to get the volumetric
weight.
Chargeable weight by cargo dimension
Cargo Length = 1.2 meters
Cargo Width = 0.8 meters
Cargo Height = 1.15 meters
Cargo volumetric weight = 1.2m x 0.8m x 1.15m = 1.104m3
Cargo Gross Weight = 853kgs
Chargeable weight = 1104kgs
Types of Air Freight Rates
There are several types of rates applicable in the air transportation industry,
we have listed the key rates and briefly explain when the rate applies.
1. General Commodity Rate
52
The General Commodity Rate (GCR) is the rate applicable for a normal
commodity that does not require any special handling expertise or poses any
significant hazard to the air carrier by transporting them.
The air freight structure is similar to passenger fare structure in that there is a
normal or basic price applicable to all commodities in all markets.
The GCR is rated by the volumetric weight, the higher of its cubic meter weight
or its absolute weight. The Chargeable Weight
The heavy cargo is the rate per pound of cargo decreases. There is also a
general minimum charge in order for the service to be economically viable for
the aircraft carriers.
2. Specific Commodity Rate
The Specific Commodity Rate (SCR) is applied where the cargo requires certain
attention or handling. Once the SCR rate is applied, the cargo in question is no
longer entitled to the GCR rate.
Due to the added security and safety requirement of cargoes applying the SCR
rate, specific packaging and containerizing requirements are laid out by the air
carriers.
Some of the most common commodities that fall under the SCR rate charge is:-
a) Fresh Fish or Crustaceans
b) Fresh Agricultural Produce (Flowers, Plants, Soil)
c) Foodstuff, dairy, meat, poultry
d) Alcoholic Beverages
e) Printed Materials
f) Electronics
3. Exception Rate
Exception rates are higher than usual air freight rate and apply to a certain
type of cargo that requires special handling. It is similar to the SCR rate but
only at a higher rate due to the complexity of the transportation.
Some examples of cargoes requiring exception rate are:-
a) Live Animal
b) Human Remains
c) Disassembled Furniture
4. Joint Rate
For transportation requiring the coordination and planning among two or
more mode of transportation. Predominantly, the coordination is between
53
connecting aircraft carriers and the land transportation of the cargo. The rates
charged to shippers are usually in the form of a joint rate.
In circumstances where direct flights between two airports are far and
between, if not, non-existent, joint rate can be very handy in planning the
delivery of cargo to ports that were previously not able to reach. Moreover,
shippers has more flexibility in choosing the right transit time and delivery
schedules.
5. Priority Reserve Air Freight
As the name suggests, priority reserve air freight is designed to serve shippers
of heavy or bulky freight who need the advantage of reserved space on a
specific flight.
Often when a large cargo is transported, it is done with a priority reserve air
freight to ensure there is enough space allocated to the large cargo in
question.
6. Speed Package Service
A Speed Package service is a small package fast-delivery service. It is handled
like passenger baggage without any accompanying passenger.
When the cargo is time critical, for example, an exhibition is arranged by the
shipper, but the shipper by-mistake did not pack an important machinery part,
they can arrange for a speed package service.
7. Container Rate
When cargo is shipped using a Unit Load Device (ULD containers), the
container rate is applied.
Here are some of the benefits of using a ULD for air transportations.
1. lower transportation charges
2. packaging cost reduced
3. prevent pilferage
4. arrival as a complete unit
5. simplified inventory checking system
6. lower cost of transportation
Excess pound rate does apply if the weight exceeds the maximum gross
weight.
Concluding Remarks
We barely scratched the surface of air freight transportation, this serves as a
primer for any supply chain stakeholders to comprehend the vast
54
Air Freight Related Global Agencies

ACI – Airport Council International
CITES – Convention on International Trade in Endangered Species of Wild
Fauna and Flora
FIATA – International Federation of Freight Forwarders Associations
GACAG – Global Air Cargo Advisory Group
GLEC – Global Logistics Emission Council
GSF – Global Shippers Forum
IATA – International Air Transport Association
ICAO – International Civil Aviation Organization
IPC – International Post Corporation
OECD – Organization for Economic Co-operation and Development
OIE – World Organization for Animal Health
PUCA – Platform for Unmanned Cargo Aircraft
TIACA – The International Air Cargo Association
UPU – Universal Postal Union
WCO – World Customs Organization
WHO – World Health Organization
WTO – World Trade Organization
55

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Shipping Insurance (Unit – 4) III Year

Characteristics of Air Transport

Freight forwarders who coordinate the international transportation also

(iii) Physical examination is conducted on a much larger scale in respect

Customs Clearance Process - All the Steps an Exporter Needs to

2. Provide Complete and Accurate Information to Your Customs

a) Where the aggregate value of the foreign currency notes exceeds

(3) Education Cess: The cess used to be levied at 2% and an additional 1%

Why is Customs Duty important?

Demerits of Customs Duty

Features of Customs Duty in India

WHAT IS THE PURPOSE OF CUSTOMS DUTY

1. Functions of Tariffs by Definition:

of tax revenue. Nevertheless, revenue may still be an important tariff function

What services can customs brokers assist with?

2. Evidence of receipt of goods by an airline: When the shipper delivers goods to

manually-entered information. The top-right section will also contain

4. Nature and quantity of goods, including weight and sizes of package

Air Cargo documents

signed through a semi-official organization, such as a local chamber of

6. NAFTA Certificate of Origin: It is required for products traded among the

The Destination Control Statement usually appears on the commercial

3. Cost of extended storage (until appropriate documentation is received)

Customs examination. Dutiable goods may also not be imported by Post in

8. As soon as packets so detained are ready for examination and assessment,

Procedure in case of Postal Exports:

A. Categories of Goods Allowed Import through Courier

B. Categories of Goods Allowed Export through Courier

1. The Courier Bill of Entry-XI (CBE-XI) for documents in Form B.

inspection, examination and assessment. For certain export goods, a regular

evidence of possession of the assets of a value not below Rs. 25 Lakhs.

4. Excise due diligence in furnishing the information to the Customs in

1. Frequency and Reach

transportation, the Insurance underwriters take a lesser risk in insuring air

An Airway Bill is evidence of a contract of carriage, a contract has terms and

3– Electronic Airway bill

Air Freight Calculation

Air Freight Related Global Agencies

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