A High Sea Sales contract/ agreement should be signed after dispatch of goods from origin & prior to their arrival at destination. The agreement should be on stamp paper. On concluding the High Sea Sales agreement, the bill of lading (B/L) should be endorsed in favor of the new buyer. In respect of air shipment, High Sea Sales seller should write to the airline / consol agent informing that an High Sea Sales agreement has been established with the High Sea Sales buyer and that the carrier document should therefore be considered as endorsed in favour of the High Sea Sales buyer and further the Import General Maniface (IGM) should be filed by the carrier in the name of the High Sea Sales buyer. If the electronicdata interchange (EDI) system allows name of High Sea buyer to be entered in the system, then there may not be any need to amend the Import General Maniface (IGM). In this case, the bill of entry/exchange (B/E) is filed in the name of the original importer as the IGM is in thisimporter name. However, the bill of entry/exchange (B/E) shows the name of High Sea buyer under a separate head in the B/E format. If the system has no provision for showing the name of High Sea buyer on the B/E, then the IGM should be got amended and B/E filed in the name of the High Sea buyer.
In the case of High Sea Sales, the cargo in freight (CIF) value for calculation of duty is taken to be the High Sea Sales value.
There is a practice followed in customs that in case the High Sea Sales transfer takes place at import invoice value only , the custom would add 4% of cargo in freight (CIF) value as High Sea Sales loading factor . There have been cases where High Sea sellers have sold at two percent more than import CIF but custom have added 4% of cargo in freight (CIF) as High Sea Sales value addition. Such practice of customs can be challenged at the customs duty is chargeable on genuine transaction value. In High Sea Sales contracts, the High Sea seller may not like to disclose the importvalue to the High Sea buyer. However, the customs can call for the original import invoice, in which case the High Sea seller may have to part with this information. To overcome this, High Sea seller should take on the responsibility of custom clearance and site delivery. After custom clearance, the High Sea seller could withdraw import invoices and only hand over clearance documents with High Sea Sales agreement to the High Sea buyer. The custom bill of entry does not indicate original import value and is prepared on High Sea Sales value.
Sometime High Sea buyers buy goods after their arrival. Such sale are not High Sea Sales. The stamp paper on which the HSS agreement is executed must not bear thestamp paper purchase date as being post cargo arrival date. Such a case can easily be detected by customs as being a post arrival sale.
If the High Sea Sales does not mind disclosing original import values to High Sea buyer, in such case it is better from custom clearance point of view for the seller to endorse the Bill of Lading, invoice , packing list in favour of the High Sea buyer. The endorsement should read “Transferred on High Sea Sales basis to M/S ——– for a sales consideration of (currency and amount in that currency) “. Such endorsement should be stamped and signed by the High Sea seller.
High Sea Sales is considered as a sale carried out outside the territorial jurisdiction of India. Accordingly, no sales tax is levied in respect of High Sea Sales. The CENVAT credit in respect of CVD paid on import is entitled to High Sea buyer.
The bill of lading is considered to be document of title to goods and the sale can be made by endorsement delivery or by mere delivery of a blank bill of lading before the goods cross the customs frontier.
The following is the procedure and the documentation required to make a High Seas Sale:-
- Importer (XYZ) and High Seas buyer (ABC) shall enter into an agreement of sale to effect the sale on high seas of specific goods.
- The document of title i.e. Bill of Lading shall be endorsed by the XYZ as follows:
Please deliver to M/s ABC or order
- It may be noted that airway bill is not a document of title to goods. However, delivery order issued by banker is recognised as a negotiable document. In the Case ofB. M. Shah & Co. (SA no. 139 of 1989 dated 7-2-1992)
- XYZ to retain a copy of the endorsed Bill of Lading and hand over original Bill of Lading to ABC under covering letter.
- ABC shall file Bill of Entry and pay customs duty, clearing charges etc. ( The assessable value for the purpose of custom duty would be sale price as mentioned in High Seas Agreement).
- ABC to arrange for clearance of goods and arrange for transportation.
- Documents to be kept on record by importer:
- Purchase order placed on foreign supplier.
- Import licence.
- Foreign supplier’s sale invoice.
- Letter from foreign supplier informing about dispatch of goods and giving the particular of Bill of lading, Packing list etc.
- Purchase order placed by the High Seas Buyer i.e. High Seas Sale agreement.
- Endorsed copy of Bill of Lading or banker’s delivery order as the case may be.Acknowledged copy of the letter, under which the endorsed Bill of Lading/ Delivery Order has been sent to the High Seas buyer.
- Sales invoice on the buyer.
- Letter by the importer to the customs authorities, intimating that the goods will be cleared by the High Seas buyer.Letter by the High Seas buyer to the customs authorities, intimating that he being the purchaser, he will be clearing the goods.
- Declaration signed by the High Seas Buyer about fulfilling the obligations attached to import of goods purchased on High Seas.
- A copy of the Bill of Entry filed by High Seas Buyer.
- Letter from High Seas buyer informing that he has taken delivery of the goods, sold under High Seas agreement, from the shipping company.
- Proof of payment received from High Seas Buyer.
