Risk Management System

Risk Management System

Customs has recently introduced RMS for cargo clearance. The objective of the RMS is to strike an optimal balance between facilitation and enforcement and to enable low risk consignments, which are perceived to be law compliant, to be cleared with minimal intervention. This enables enhancement of the level of facilitation and speed up the process of cargo clearance. Once B/E is filed, it will go in the Risk Management System.

System will process the B/E against various risk parameters like:

• Whether importer is an individual, firm, company etc.
• Paid-up capital of the Company
• Reputation of the importer and persons
• Reputation of the CHA
• Past records of importer
• Sensitivity of the goods and exemption notification
• Recorded value data for the goods under import
• Country of Origin/ Country of Consignment etc
  
  These parameters have been assigned individual risk weight and the result will depend upon the overall risk perceived by the RMS. Further, RMS has a Central Risk Manager and Local Risk Manager for human intervention and depending upon the external inputs, he can modify/give suitable directions for specific importer/ commodity.

Flow of Bill of Entry

Depending upon the perceived risk, B/E will be dealt by the RMS in various ways:

Delivery of goods after Assessment and Examination

Delivery of goods after Examination

Direct delivery of goods

Post Clearance Audit

Accredited Client Programme

Under this programme, highly law compliant importers are given assured facilitation by the RMS and most of the consignments, based on the importers’ self-declaration, will be cleared without any assessment/examination. Assessment/examination will be on random basis and not as a rule.

There are prescribed eligibility criteria like import of goods over Rs 10 Crores, payment of customs duty or excise duty over Rs 1 Crore, more than 25 B/E, unblemished records, no demand due, good internal accounting system and control etc.

Assessment procedure

As the Assessment and Examination order will cover all point, let us see how the B/E is processed in the typical environment:

B/E is assessed by the Appraising Officers (AO) who are either Appraisers of Customs or Superintendents. They are divided in to various appraising groups 1 to 7. All of us know that the Customs Tariff Act is divided in to 99 chapters. The chapter wise allocation is as follows:

Appraising Group 1 Chapter 1 to 26
Appraising Group 2 Chapter 27 to 49
Appraising Group 3 Chapter 50 to 71
Appraising Group 4 Chapter 72 to 83
Appraising Group 5 Chapter 84
Appraising Group 5A Chapter 85 to 89
Appraising Group 6 Chapter 90 to 99
Appraising Group 7/7A….. Export promotion related schemes

Each group comprises of appraisers and headed by an Asst/Deputy Commissioner. If selected for assessment, System allocates B/E to various appraising groups depending upon the value of the goods and the Scheme opted. B/E will be put into Assessment queue and will be available to AO on first come first serve basis. At present, B/E pertaining to Group 7 are not assessed under RMS, therefore all B/E are marked for assessment and examination.

Assessment of B/E

Assessment means verification of classification, valuation, licensing and compliance with other enactments. The Assessment of B/E will be done on screen by the A.O. with no physical verification of documents. AO may raise a query in the system with the approval of the AC for any clarification required for the Assessment. The query may be replied online.

There are two types of appraisement

First Check - If the AO feels that it is not possible to assess the B/E based on the available information, he may order for examination of the goods before assessment and based on examination report, assessment is completed. Generally, the first check appraisement is ordered in exceptional cases.

Second Check - Assessment is made based on the declarations in the B/E and examination order is given as per requirement. Goods may be allowed delivery directly, or on inspection of package or inspection of goods or on examination of goods.

Verification of Valuation - Generally the transaction value is accepted as assessable value. However, to verify the correctness of declared value, the AO take help of NIDB data maintained by Directorate of Valuation, valuation guidelines and alerts of DoV, trade journals and bulletins like London Metal Bulletin, Commodity Ledgers, PLATT plastic bulletin etc. If the declared value is found on lower side, he may issue a notice under Rule 10A for the rejection of declared value. The AO also verify whether the seller and buyer are related and if so whether the declared value is affected or not. If prima facie, he is of the view that relationship has affected the transaction value then he refers the matter to Special Valuation Branch (SVB).

License and Compliance with other enactments

for the protection of country and public, a large number of enactments are implemented by the Customs. An illustrative list is given below:
* Foreign Trade (Development and Regulation) Act 1992 & Foreign Trade Policy
* Live Stock Importation Act, 1898
* Wild Life Protection Act, 1972
* C I T E S - (Convention of International Trade in Endangered Species of Wild Fauna and Flora) * Plant Quarantine Order 2003 issued under Sec.3 (1) of Destructive and Insects and Pest Act, 1914
* Plants, Fruits and seeds (Regulation of Import into India) Order, 1989
* Prevention of Food Adulteration Act, 1954 and Rules, 1955
* Breast Milk Substitutes (Advertisements and Labeling) Act.1982
* Drugs and Cosmetics Act, 1940 and Rules, 1945
* Standards of Weights and Measures Act, 1976
* Essential Commodities Act, 1958
* Insecticide Act, 1968
* Trade marks Act, 1999
* Copyright Act, 1957 and Rules, 1958
* Patents Act, 1970 and Rules, 1972
* The Bureau of Indian Standards Act, 1986 and Rules, 1987
* Environment (Protection) Act, 1986 and Rules, 1986
* Explosives Act, 1884 and Rules 1983
* Gas Cylinder Rules, 1981 and S&MPV (unfired) Rules, 1981
* Information Technology Act, 2000
* Motor Vehicles Act, 1988
* Atomic Energy Act, 1962
* Arms Act, 1959
* BIS applicable as per DGFT NOT.44 (RE) 2000 DT. 24.11.2000
* Indian Telegraph Act, 1882
* Wireless Communication Act, 1933

Undertakings, declarations: import of some goods requires end use undertaking, end use declarations, bonds etc to be executed. Importer has to execute the same beforehand and incorporate the same in the B/E for online processing.

Provisional assessment

B/E are assessed based on the available information. If the AO feels that the available information, in spite of first check/query is not sufficient to make a correct assessment, he may order for Provisional Assessment under Section 18 of the Act. If the case has been taken for investigation by SIIB or DRI, the Importer can seek release of goods under provisional assessment. In these cases, assessment is made against Bond with or without cash deposit/ bank guarantee/ surety pending production of some documents/information/clarification/investigation. Assessed duty is required to be paid.

Other feature

Provisional assessment even for one purpose is deemed as provisional for all purpose;
Goods will be allowed delivery as usual;

B/E will be finally assessed on production of required documents;

If there is short levy during provisional assessment, interest has to be paid;

Relevant date for Demand under Section 28 or refund under Section 27 is the date of finalization of the provisional assessment;

On refund arising out of finalization, principle of unjust enrichment will apply.

Once the AO process the B/E, he gives the appropriate open order in the case of second check and the B/E goes to AC/DC screen. After AC/DC approval, one copy of the B/E along with three copies of the Challan for payment of assessed duty is generated and the duty is required to be paid, if any. In the RMS, concurrent audit has been done away and B/E gets audited by the system.

Concurrent Audit

In the case of B/E not under RMS, same is audited by a concurrent auditor before the B/E moves to DC/AC screen. In case of any objection, he returns the B/E to the group for clarification and B/E again go in the queue of the AO.

Speaking Order

While filing the B/E, importer declares classification and value of the goods and the exemption notification he intents to avail. In case the Department does not agree with any of the above, a query is raised in the system. If the Importer agrees with the contention of the department, he may accept the same in writing and assessment will be made accordingly. However, if does not agree with the contention of the department, then department will issue a speaking order which can be appealed. In such case, it is advisable to pay duty under protest so that time limit under section 27 of the Act will not apply and the refund application will not be time barred.

Goods registration and Examination

The B/E in the first check and after payment of duty in the case of second check moves to Goods registration section in Examination Area where the Examiner will register the goods and examine the same as per examination order. The documents like invoice, packing list etc are submitted to the shed appraisers who verify the same and retains for records. The shed officer will comply with the requirement of open order.

There are different types of examination

Green channel- there will not be any examination and pass out charge will be given after verification of the marks and numbers of the consignment or verification of the seal and container number in case of full consignment load (FCL).

Open and inspect- selected 10% of the packages subject to minimum 2 and maximum 10 will be opened for inspection. The description will be matched by the officers. If required, samples may be drawn.

Open and examine- apart from inspection, goods will be subject to weighment/counting/measurement. Examination of the goods is more thorough than the inspection of goods.

Examination Report

The examination report is entered by the Examiner in the system and B/E is forwarded to the shed AO. If AO is satisfied, in the case of first check forward the B/E to the Appraising Group for assessment and in the case of second check gives the Out of Charge Order. If any discrepancy is noticed during the second check, B/E is returned to group for further action.

Remission of Duty

Before delivery of goods, if importer find that imported goods, after landing, has been pilfered/lost/destroyed in full or in part, he may seek remission of the duty by arranging a survey and informing the custodian and shed officer. Shed officer will enter the facts in the examination report and the importer may either get the B/E reassessed or apply for the refund of duty under section 27 of the Act. On the other hand, in the case of short delivery of the goods by the supplier, importer has to get the B/E reassessed by producing evidence of the short delivery.

DELIVERY OF THE IMPORTED GOODS

Pass Out of Charge Order is given by the shed appraiser. He generates copies of the B/E and gate pass and custodian of the goods delivers the goods against gate pass. In case of bonded goods, goods are deposited in bonded warehouse.


Ex-Bond B/E

B/E is assessed online in the usual manner. The Bond officer gives the pass out of charge as the goods have already been executed.

Post Clearance Audit

All B/E along with relevant documents collected by the Shed officer are forwarded to PCA for audit. RMS selects the B/E depending on the risk and on random for PCA. All B/E are not audited. PCA Appraiser will issue an advisory memo if notices any discrepancy. If importer agrees, he may pay the duty short levied and matter is closed. However, if does not agree, Department will issue a formal demand/show cause notice and the case will be adjudicated.

CRA Audit

All B/E other than provisionally assessed B/E are sent to Customs Revenue Audit conducted by the Comptroller and Auditor General of India. In case any discrepancy is noticed by the CRA, they issue a audit memo to the Custom House and customs will immediately issue a protective demand within the statutory time limit.

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