Introduction
Warehousing is a facility for depositing imported goods in a warehouse without payment of duty. In certain circumstances, the importer prefers not to clear the imported goods immediately upon their arrival due to various reasons. The reasons may due to fluctuation in market price, saleability, the requirement in the factory of production, paucity of funds, etc.
In such circumstances the option before the importer is to warehouse such goods till they are required. The payment of custom duty is permitted to pay under installments which is the main advantage of the scheme. An importer is entitled to utilize this facility as and when required during the warehoused period, up to one year. Thus, the Customs Act, 1962 contains provisions that facilitate the warehousing of imported goods.
The imported goods after arrival, are allowed to store in a warehouse without payment of import duty. The duty of such goods is paid at the time of clearance from the warehouse. This process is called Warehousing, Bonding, or ‘into bond’ of imported goods.
There are provisions provided for the period up to which the goods may remain in a warehouse. During this period interest liability is not applicable.
Legal provisions
The facility of warehousing of the imported goods in Custom Bonded Warehouses, without payment of Customs duty, is permitted in Chapter IX of the Customs Act, 1962. Chapter IX covers S. 57 to 73 of the said Act.
Other provisions concern the warehousing of goods are:
- Warehoused Goods (Removal) Regulations, 1963 and
- Manufacture and Other Operations in Warehoused Goods Regulations, 1966
Various Types of Warehouses
There are three types of warehouses namely; Public Warehouse, Private Warehouse, and Special Warehouse.
- Public Warehouses: S. 57 of the Act provides provisions for the licensing of Public Warehouses. Dutiable goods may be deposited in such warehouses, without payment of duty subject to prescribed conditions. Conditions for the appointment of Public warehouse:
- Applicant must be a citizen of India or is an entity incorporated or registered in India.
- Must submit an undertaking as prescribed by the Commissioner of Customs.
- Solvency certificate for two crores. (Furnishing of solvency is not mandated if the applicant is a Central or State or Union Territory)
Licensing of Public warehouses is governed by the Public Warehouse Licensing Regulations, 2016.
- Private Warehouse: S. 58 of the Act deals with the provisions of appointment of private warehouses. Conditions for the appointment of private warehouses are as follows:
- All risk insurance policy which covers natural calamity, riots, fire, theft, pilferage, and commercial crime,
- Undertaking binding himself to pay any duties, fine penalties payable under prescribed provisions,
- Indemnity undertaking any liability on account of loss due to accident, damage, deterioration, destruction, or any other natural cause during their receipt, delivery, storage, despatch or handling, and
- Appoint a person who has experience in warehousing operations and customs procedures.
The licensing of Private warehouses is governed by Private Warehouse Licensing Regulations, 2016.
- Special Warehouse: As per S. 58-A of the Customs Act, 1962 and under the conditions provided therein, Special Warehouses are appointed. The Board may specify the class of goods which may be deposited in such special warehouses.
Licensing of Special warehouses are governed by the Special Warehouse Licensing Regulations, 2016
Warehousing Bond and Security
Section 59 of the Customs Act, 1962 provides for the rules related to the warehousing bond. The bond shall be for a sum equal to thrice the amount of the duty assessed. Where a bill of entry for warehousing has been presented and assessed to duty, the importer shall execute the bond, binding himself:
- to comply with all statutory provisions in respect of such goods
- to pay all duties and interest payable under sub-section (2) of section 61of the Customs Act on or before the date specified in the notice of demand, and
- to pay all penalties and fines incurred for the contravention of the relevant statutory provisions in respect of such goods.
However, for the above purpose, the proper officer may permit an importer to execute a general bond in such amount as may approve.
The importer shall, in addition to the execution of a triple value bond or a general bond furnish such security as may be prescribed.
Subject to compliance with the provisions, the importer is entitled to transfer the warehoused goods to another warehouse. The bond executed by an importer shall remain in force notwithstanding the transfer of the goods to another warehouse.
The importer is also free to transfer the goods to another person by way of sale while the goods are in a warehouse. Where a transfer takes place, the transferee shall execute a bond in the manner specified for bonding of goods and furnish security as specified.
Permission for Removal of Goods from Customs Area for Deposit in a Warehouse.
The proper officer may make an order permitting the removal of the goods from a customs station for deposit in a warehouse subject to the compliance of provisions provided under S. 59 of the Act.
Where an order is made as stated above, the goods shall be deposited in a warehouse in such a manner as may be prescribed.
Duration of Period for which goods may remain in a warehouse
Any warehoused goods may remain in the warehouse in which they are deposited or in any warehouse to which they may be removed till the completion of the period as given below:
- Where the goods intended for use in any- hundred percent export-oriented undertaking; or
- Electronic hardware technology park unit; or
- Software technology park unit; or
- All warehouses where the manufacture or other operations have been permitted,
- for capital goods: till their clearance from the warehouse and
- for goods other than capital goods: till their consumption or clearance from the warehouse.
- In the case of any other goods, till the expiry of one year from the date on which the proper officer has made an order.
In the case of goods that are likely to deteriorate, the period allowed may be reduced by the proper officer to such shorter period as he may deem fit.
Provisions for Extension of warehousing period
In the case of any goods warehoused, where the importer has sufficient reason to show, the warehousing period will get extended for such goods to remain in the warehouse, by not more than one year at a time.
Owner’s Right to Deal with Warehoused Goods
The owner of any warehoused goods shall have the following rights with regard to his warehoused goods:
- to inspect the goods
- take measures in such manner as may be necessary to prevent loss or deterioration or damage to the goods
- to sort the goods, or
- to show the goods for sale.
Transfer of Warehoused Goods to another Warehouse
Transfer of warehoused goods to another warehouse is permitted by the bond officer. Where an owner of the warehoused goods produces the form for transfer of goods from a warehouse bearing the orders of the bond officer, he will be allowed to:
- the removal of the goods and their loading onto the means of transport
- affix a one-time-lock to the transport
- enter the number of the one-time-lock on the form for transfer of goods and retain a copy thereof
- endorse the number of the one-time-lock on the transport document and retain a copy thereof; take into record the removal of the goods, and
- deliver the copies of the retained documents to the bond officer.
Upon receipt of goods from another warehouse, a warehouse keeper shall:
- verify the one-time-lock on the transport carrying the goods to the warehouse
- if the one-time-lock is not found intact, inform the bond officer immediately, and refuse the unloading of the goods,
- If the one-time-lock is found intact, allow unloading, and verify the number of goods received,
- In the case of any discrepancy in the number of goods, report it to the bond officer within twenty-four hours,
- Endorse and retain a copy of the Form for transfer of goods from a warehouse with quantity received,
- acknowledge the receipt of the goods and retain a copy of the transportation document presented by the carrier of the goods;
- take into record the goods received, and
- deliver copies of the retained documents to the bond officer and to the warehouse keeper of the warehouse from where the goods have been received.
Clearance of Warehoused Goods for Home Consumption
An Ex-bond Bill of Entry under S. 68 of the Customs Act shall be presented for the clearance of goods from the warehouse for home consumption. The rate of duty and tariff value for clearance of the goods from a bonded warehouse shall be the rate of duty and tariff value of such date of presentation of Bill of Entry.
To know more about the various types of duties applicable, please read the article related to it here.
The detailed procedure for the ex-bonding of bonded goods:
- A bill of entry for home consumption for ex-bonding has been presented in the prescribed form,
- The import duty, interest, fines, and penalties payable in respect of such goods have been paid, and
- An order for clearance for home consumption of such goods has been made by the proper officer.
The owner of any warehoused goods can relinquish his title to the goods, at any time before an order for clearance of goods for home consumption has been made. Upon such relinquishment, the owner is liable for the payment of penalties that may be payable in respect of such goods. However, he shall not be liable to pay any duty thereon.
Provided where an offense appears to have been committed under this Act or any other law, the owner of any such goods shall not be permitted to relinquish his title to such goods.
When upon removal of the goods, the declared description of the goods recorded on the into-bond bill of entry should be tallied with that of the description declared on the ex-bond bill of entry.
The value of the goods for ex-bond is the same as assessed on the into-bond Bill of Entry.
Clearance of warehoused goods for Export
Warehoused goods are eligible to be exported to a place outside India without payment of import duty subject to the compliance of the following conditions:
- Presenting a shipping bill in respect of such goods,
- Payment of export duty, fines and penalties payable if any in respect of such goods have been made; and
- An order for clearance by the proper officer for the export of goods has been made.
Upon the bond officer permitting the removal of the goods from the warehouse, the owner of the goods may cause the goods to be loaded for transportation and affix a one-time-lock to the means of transport.
The re-export of the Warehoused goods shall be allowed subject to the following conditions:
- On re-export, the exporter realizes full consideration spent on import in freely convertible foreign currency, if the goods were imported on payment in freely convertible foreign currency; and
- The import was not un-authorized or in contravention of the FTP.
- There shall be no net loss of foreign exchange due to re-export from the bonded warehouses. The value of the goods at the time of re-export shall not be less than the foreign exchange paid at the time of their import.
- Where the goods imported by payment in freely convertible currency, the re-export shall not be allowed against Indian Rupees.
Recovery of Duty Upon Non-Removal of Goods from Bonded Warehouses
The proper officer may demand the full amount of duty chargeable together with interest, fines, and penalties payable on any warehoused goods in any of the following cases:
- Where any warehoused goods are removed from a warehouse in contravention of provisions;
- If such warehoused goods have not been removed from a warehouse at the expiration of the prescribed period during which such goods are permitted to remain in a warehouse;
- In the case of any goods in respect of which a bond has been executed and which have not been cleared for home consumption or export or not duly accounted for.
If any owner fails to pay any amount demanded as stated above, the proper officer shall have the power to cause the goods or sufficient portion of such goods to be sold, after notice to the owner as the said officer may deem fit.
Cancellation and return of warehousing bond
The owner of the goods may apply for the cancellation of warehouse bond when the goods have been:
- cleared for home consumption;
- exported;
- transferred; or
- otherwise duly accounted for.
Also, the owner shall have to pay all the amounts due on account of such goods. Upon such request, the proper officer shall cancel the bond as discharged in full, and shall on demand deliver it, to the person who has executed or is entitled to receive it.
Conclusion
Warehousing of imported goods is a trade facilitation measure. There are drastic changes brought in to the regulations of matters relating to the warehousing of imported goods through the amendment of the Finance Act, 2016.