‘In CIF CFR contracts, the seller bears risk of variation in freight rates’

cif in customs
cif in customs

This means that the seller arranges and pays for all relevant expenses involved in shipping goods – from their point of export to a given point of import. Hello Sir, in CIF export when can we enter sales in our accounts ? Right after ship leaves the port or ship reaches destination and goods delivered to customer in the port ? I Mohamed ali starting self employment bussiness, importing A4 paper from Thailand around cost is 1,50,000 Rs/- what could be customes charges i have to pay to receiving in Airport hyderabad.

  • The declaration of the insurance shall be from the delivery of the goods on board the ship at the port of shipment namely ____________.
  • You are the seller of goods and you have contracted with the buyer and agreed to sell the goods on CIF New York price of USD 5750.
  • The CIF contract covers all items and business invoices provided by the seller, as well as the collection and expense of any and all export licences and other official authorizations, as well as the expenses of transportation and insurance coverage.
  • Transport, offloading, and delivery fees for products to their ultimate stop are some of the responsibilities.
  • ClearTax offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India.

CIF determines when the responsibility of the goods transfers from the seller to the buyer. CIF is an ‘Incoterm’ developed by the International Chamber of Commerce. Incoterms are often similar to domestic terms but come with international application. The seller is released from obligation when the items are placed into the ship or “crossed the ship’s line.” Following that course, the buyer accepts all responsibility.

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Is customs included in CIF?

CIF includes duty and charges, where the seller assumes responsibility for export customs proceeding and the buyer for import customs.

It will be the responsibility of the Buyer to obtain a licence for the Import of the goods In its country and to pay all the customs duties, import duties and other clearance charges for clearing the goods from the ship and carrying them to its factory or godown. CIF is only used when transporting products by waterways, hence it cannot be used for air freight. CIF is a good option for buyers who don’t want to deal with the stress of getting insurance, paying freight charges, and taking full responsibility for foreign delivery.

CIF contracts : all you need to know

Bill of lading is one of the most important documents in the shipping process. To ship any goods, a bill of lading is required and acts as a receipt and a contract. It is an official document that gives you permission to send something out of the country for sale.

5.9 Import of goods has been defined in the IGST Act, 2017 as bringing goods into India from a place outside India. All imports shall be deemed as inter-State supplies and accordingly Integrated tax shall be levied in addition to the applicable Custom duties. The integrated tax on goods shall be in addition to the applicable Basic Customs Duty which is levied as per the Customs Tariff Act.

How is CIF calculated?

Under the CIF agreement, the buyer holds full responsibility for the goods once they reach the destination port meaning the buyer may become liable for any extra costs. Therefore the CIF figure is the price before any import duties, taxes, or transport margins have been added.

As soon as the goods change hands, the buyer must pay the agreed price and must, now, cover any additional transportation, inspection, and licensing costs. At the same time, CIF cannot be used for air, rail and road transit. CIF is commonly used in the case of bulk cargo and non-containerised goods, or when the seller has direct access to the vessel for loading the goods. The seller shall enter into the contract at its own expense for the carriage of the goods to the port of destination namely – by the usual route In a seagoing ship for the transport of the said goods. The seller is responsible for the expense of shipping the freight via waterways from the seller’s port to the buyer’s port of destination.

This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on a vessel in the port of destination. This term may be used irrespective of the mode of transport when goods are to be delivered at a land frontier. When delivery is to take place in the port of destination, on board a vessel or on the quay , the DES or DEQ terms should be used. There is one essential point that you should know while getting to know about FOB vs CIF shipping that since the shipping is international there is a set of two currencies involved in the process and there can be hidden costs during the exchange rate. If you make your shipping payment via a bank, the exchange rate used to convert the payment may be marked up by 3-5%, which is a hidden fee you end up paying.

Nature of CIF contracts

The integrated tax is levied again on reverse charge basis on the Ocean Freight for which the writ-applicant is already paying the integrated tax at the time of import with the value of imported coal. So, import of goods or services will be treated as deemed inter-State supplies and would be subject to Integrated tax. While IGST on import of services would be leviable under the IGST Act on reverse charge basis, the levy of the IGST on import of goods would be levied under the Customs Act, 1962 read with the Custom Tariff Act, 1975. Accordingly, the concept of “double taxation” propounded by the applicant in their application is thus found to be unsubstantiated, bereft of merit. The seller shall be responsible for all the risk of loss or damage to the goods until such time as they have passed the rail of the ship at the said port of shipment.

Them to seek to add any amount thereto on the basis that this or that or the other was not covered thereby”. Please read ourTerms of UseandPrivacy Policybefore you use thisExport Import DataDirectory. Cess Rate / 100Customs Education Cess (%)(BD Amt. + CVD Amt. + Edu. Cess. Amt.) x Custom Edu. Cess Rate / 100Special Additional Duty of Customs(Spl.CVD) (%)(AV + BD Amt. + CVD Amt. + Edu. Cess. Amt. + Custom Edu. Cess Amt.) x Spl. There are thirteen Incoterms that are used by businesses and are used in four different areas.

What is FOB and CIF?

The abbreviation CIF stands for ‘cost, insurance and freight,’ and FOB means ‘free on board.’ These are terms are used in international trade in relation to shipping, where goods have to be delivered from one destination to another through maritime shipping. The terms are also used for inland and air shipments.

A Carrier means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport by rail, road, air, sea, inland waterway or by a combination of such modes. It is advised to go with the FOB option for shipping as the buyer gets control over the shipping process and the costs are comparatively cheaper. Whereas in CIF shipping, since the seller has the authority over shipping charges and arranging a ship with the help of a freight forwarder, the cost is higher. In FOB shipping, the buyer is responsible to book a ship via which the products will reach the final destination whereas, in CIF shipping, the seller is the whole sole responsibility for finding a ship.

Essential features of CIF contracts

For calculating additional Customs duty, the value base would comprise of the transaction value CIF plus basic Customs duty plus anti-dumping duty plus surcharge. Proforma invoice/quotation being only an offer for sale of goods at the price mentioned therein is a relevant evidence for sale price. Whilst the EXW term represents the minimum obligation for the seller , DDP represents the maximum obligation. This term should not be used if the seller is unable directly or indirectly to obtain the import license.

cif in customs

The CIF contract’s insurance policy completes the buyer’s protection for the products against loss or damage by providing security in cases in which the carriers would be freed from duty. The insurance must cover the shipment as well as the products covered by the contract of sale for an amount equal to the fair prices of the goods at the time the contract was signed. The buyer is subject to the advantage cif in customs of any excess insurance performed by the seller and protected by the policy issued between both the buyer and seller, however, the parties may agree otherwise. The valuation method adopted in customs consists broadly of the CIF Values . The customs duty payable is calculated on the complete shipping value, which includes the cost of the imported goods, the cost of freight and the cost of insurance.

CIF is a decent option for customers who want to avoid getting insurance, freight charges, and accepting responsibility for foreign delivery. Unload the merchandise at the port terminal and get it from the airport to the delivery location. After that, customs duties and other costs are involved with imported products. Transport, offloading, and delivery fees for products to their ultimate stop are some of the responsibilities.

However, business test is not required to be fulfilled for import of service to be considered as supply. Section 13 of the IGST Act, 2017 provides for determination of place of supply in cases wherein the location of the supplier of services or the recipient of services is outside India. Thus, this section provides the place of supply in relation to international or cross-border supply of services. In the case of transportation of goods, other than by way of mail or courier as is the case in hand, the place of destination of such goods will be the place of supply.

In the other case, it was a German bill of lading and German insurance coverage. In UAE VAT, the import of goods is under reverse charge mechanism. The registered taxpayer importing goods will have to pay VAT at the time of filing VAT Return.

In view of above, it has been decided not to include the stevedoring charges; in the assessable value of the imported goods, as they are adequately covered by the one percent of f.o.b value levied towards loading/unloading and handling charges under Rule 9 of Customs Valuation Rules, 1988. A reference has been received from the Ministry of Chemicals & Fertilizers stating that the Customs Authorities at some of the ports are levying customs duty on stevedoring charges, in addition to the CIF value of the goods. It has been stated that assessments have been kept provisional by the Customs Authorities on this account. DAF means Delivered At Frontier and is followed by a named place, for example DAF El Paso. DAF means that the seller’s responsibility is complete when the goods have arrived at the frontier but before the customs border of the country named in the sales contract. This buyer is responsible for the cost of the goods to clear customs.

Incoterms are a set of simple three letter codes which represent the different ways international shipments may be organized. They allow sellers and buyers from different cultures and legal systems to decide at what point the ownership and the obligation to pay for freight, insurance and customs costs transfer from one to the other. Ocean freight on imported goods has always been a controversial topic in indirect taxation regime. Transport of ocean freight is a physical process of transporting commodities and merchandise goods and cargo through ship line. As per Section 3 of the Customs Tariff Act, 1975, any article imported into India, would be liable to integrated tax, on the value as determined under Section 3. If you’re familiar with shipping or exporting and importing products then you must be familiar with terms like FOB and CIF which in simple language means Free on Board and Cost, Insurance, Freight.

You are the seller of goods and you have contracted with the buyer and agreed to sell the goods on CIF New York price of USD 5750. You arrange to carry the goods to Mumbai port and meet all expenses including customs clearance in Mumbai and pays the ocean freight or airfreight up to New York, by appointing a shipping line or airlines. In other words, all delivery expenses up to New York is borne by the seller. As per Article 141 of the UAE Commercial Transactions Law Federal Law of 1993, a CIF contract is one in which the price of the goods sold, marine insurance charges, and freight via vessel until the destined port, the expenses are all paid in one lump sum amount. The products will be considered sold to the buyer once the vessel has completed its shipment, and the buyer will be responsible for any perishing from that point on.

International Chamber of Commerce introduced the first version of Incoterms – short for “International Commercial Terms” – in 1936. Effective January 1 of 2000, the ICC once again updated Incoterms to follow the modern trends in international trade. They should now be incorporated under the reference “Incoterms 2000” into contracts that are effective from January 2000 or any date thereafter. Especially, CIF terms are utilized effectively to import full container load shipments. This is on the ground the shipping lines can act consistently which prevents fluctuations in agent’s handover fees or hidden charges.

How is CIF calculated?

Under the CIF agreement, the buyer holds full responsibility for the goods once they reach the destination port meaning the buyer may become liable for any extra costs. Therefore the CIF figure is the price before any import duties, taxes, or transport margins have been added.