IMPORT EXPORT LAWS: AN INTRODUCTORY GUIDE TO EXPORTING GOODS FROM INDIA TO THE UNITED STATES OF AMERICA
Exporting from India to USA means that one will have to consider business laws of not just India, but also USA. While the advice of trained legal counsels is highly recommended, a basic knowledge of the law and procedure would be of great use to the exporter. This article aims to provide the requisite basic understanding of the same. While the article is country-specific, the procedure to be followed from India is nearly same worldwide, and only some additional bilateral agreements and policies may have to be checked if a person wishes to export to any other country.
1. What is the licensing required from the Indian government to export?
A onetime licensing procedure to act as an Exporter/Importer is required to be completed in most countries. In India, IEC number (Import Export Code number) is required to act as an Importer or Exporter. The IE Code must be quoted while sending shipments. Banks require this exporter’s IE Code while receiving money from abroad. An aspiring exporter can easily apply for this IEC Number through the government’s online portal.
Usually, for exportation of goods from Exporting country, a onetime export registration to act as an Exporter/Importer is sufficient. However, if restricted items are exported, separate export licence may be required and there is a separate government agency in that handles and regulates such specific products, and issue specific export license or export permit. Prohibited goods are listed by countries where the goods are being exported to. India itself has a list of items that cannot be imported into the country.
Therefore, an exporter must obtain an Import Export Code and register for exports. Additionally, they may have to apply for additional specific permits for export of restricted items.
2. What is the procedure to export once license is obtained?
Exporting has to be done exactly as per norms to avoid penalties and save oneself from double taxation.
• Meeting Product and Packaging Requirements: Depending on the product that is to be exported, the exporting country may have specific quality, packaging and labelling requirements for the product. They must be followed in their entirety to get approval.
• Documentation: After goods packed for export, necessary export customs clearance documents required by Exporting country’s load port customs are prepared. Invoice cum Packing list and other required export documents for Exporting country’s customs are arranged before movement of export cargo to Customs port of the country. The export documents are filed with Exporting country customs electronically. There are specific details which can be found here that must be followed while exporting.
• Inspection at Customs Port and Movement of Cargo: The cargo is moved from Exporter’s location to customs location where international carriers are also operated. The export cargo is unloaded at Exporting country’s customs bonded area under the control custodian of cargo. Once export process is completed by Exporting country’s customs for export, necessary permission is given by customs authorities to move the export cargo. Necessary export inspection procedures by Exporting country’s customs authorities are undertaken wherever required.
3. What American laws, sometimes product specific, should be kept in mind while planning to export goods to the US?
U.S. Customs and Border Protection (CBP) has some basic information that must be followed while importing goods into the United States. Both CBP and the importing/exporting community have a shared responsibility to maximize compliance with laws and regulations. In carrying out this task, CBP encourages importers/exporters to become familiar with applicable laws and regulations and work together with the CBP Office of Trade to protect American consumers from harmful and counterfeit imports by ensuring the goods that enter the U.S. marketplace are genuine, safe, and lawfully sourced.
Depending on the goods or service to be sent, a licence or permit may be needed for the same to be exported to the US.
There are certain general laws to be kept in mind will exporting to the US from India:
• Customs Duty: The Customs Duty Rate is a percentage. This percentage is determined by the total purchased value of the article(s) paid at a foreign country and not based on factors such as quality, size, or weight. The Harmonized Tariff System (HTS) provides duty rates for virtually every existing item. CBP uses the Harmonized Tariff Schedule of the United States Annotated (HTSUS), which is a reference manual that the provides the applicable tariff rates and statistical categories for all merchandise imported into the U.S.
• Office of Foreign Assets Control: Exporters to the U.S. need to be aware of U.S. sanctions laws and regulations administered by the Office of Foreign Assets Control (OFAC). OFAC acts under Presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under U.S. jurisdiction. Sanctions that target foreign countries may prohibit the import into the U.S. of goods or services originating in the targeted countries.
• Bribery and Corruption Legislation: The United States, like most countries, has well-developed laws and regulations to prevent the bribery or corruption of its officials. The penalties for doing so can be severe.
The above laws on product specifications, tax, procedure, safety and corruption-free export must be strictly followed.
What are the clauses in a good export contract?
Due to different jurisdictions being at play, export contracts are more likely to cause disputes than straightforward domestic contracts. Parties must therefore make their export contracts as clear, precise and comprehensive as is reasonably possible.
To provide a common terminology for international shipping, and minimize misunderstandings over contract terms, the International Chamber of Commerce has developed a set of terms known as "Incoterms." These are the basic terms used in international sales contracts.
Based on the Incoterms suggested by the International Chmaber of Commerce, the following clauses and aspects of an export contract become most relevant:
• Details of parties to the contract
• the contract's validity conditions
• the details of goods to be provided
• the purchase price of the goods and the terms for payment, inspection and delivery of the goods
• where transfer of title to the goods takes place
• any warranty and/or maintenance terms and conditions
• who is responsible for obtaining import or export licences
• who is responsible for paying taxes
• any contract performance security requirements, such as bank letters of guarantee
• what to do if your buyer defaults or cancels
• the provisions for independent mediation or arbitration to resolve disputes, and whether this would take place in the United States or India, or elsewhere, and the contract completion date.
If the contract involves the licensing of proprietary information or technology, it is important that the wording be precise about the licencee's rights. Vagueness can create serious problems and could lead to the loss of one’s intellectual property.
Therefore, these terms must be carefully included, discussed and reviewed while drafting the export contract. It is essential that parties lay out their complete mutual understanding.
By Shiv Mangal Sharma
Advocate Supreme Court