High Sea Sales Transaction

(HSST)  In India
Meaning of High Sea Sales

 High Sea Sale Transaction means Sale Transaction done when goods
are actually at High Sea i.e. during sea transit between Port of Loading
and Port of Discharge. The date of transaction (agreement) should be
between Bill of lading date and Vessel arrival date at Port of discharge.

 High Sea Sale is done mostly by Traders, sole Indenting Agent (of the
Foreign Supplier) who buys in large quantity and then look out for
buyers at Destination Country.
Benefits of HSST

 Goods are available at short time to final buyers.

 Also instead of buying entire shipment small quantities also can be
bought for final buyers and
 First buyer can buy large quantity of goods at cheap / reasonable
price and sale at best price to final buyers.
Drawbacks of HSST

 Cumbersome documentation / procedures and

 Loading of pricing for Customs assessment
High Sea Sales

 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 favour of the new buyer.
 and further the import General Manifest (IGM) should be filed by the
carrier in name of High Sea buyer.
 HSS is also applicable to goods imported by air. Sea appearing in
HSS should not be constructed by its grammatical meaning. As long
as the sale is formalized after dispatch from airport / port of origin
and before arrival at the first port of discharge / airport at
destination, such sale is considered as HSS.
HSST before GST

 High Sea sales in considered as sale contract carried out outside the
territorial jurisdiction of India.
 Accordingly, no sale tax is levied in respect of High Sea sales. The Custom
documents (B/E) is either filed in the name of High Sea buyer or such Bill of
entry as endorsement indicating High Sea buyer’s name.
 The title of goods transfer to High Sea buyer prior to entry of goods in
territorial jurisdiction (Customs) of India. The delivery from customs is
therefore on account of High Sea buyer.
 The CENVAT (central Value added Tax) credit in respect of CVD
(Countervailing Duty) paid on import is entitled to High Sea buyer. High
Sea Sales goods are entitled to classification, rates of duty and all
notifications benefits as would be applicable to similar import of goods on
normal sale.
Key Points related to HSST

 HSS is accepted under the import trade control regulation.

 HSS contract/ agreement should be signed after dispatch of goods
from origin & prior to their arrival at destination. The agreement
should be on stamp paper.
 EDI (Electronic Data Interchange) system allows name of HSS buyer
to file the bill of entry in the system. In this case the B/E is filed in the
name of the original importer as the IGM is in this importer name.
 However, the B/E shows the name of HSS buyer under a separate
head in the B/E format. If the system has no provision for showing the
name of HSS buyer on the B/E then the IGM should be got amended
and B/E filed in the name of the HSS buyer.
 In the case of HSS, the CIF value for calculation of duty is taken to be
the HSS value.
Key Points related to HSST

 If the HSS seller does not mind disclosing original import values to HSS
buyer, in such case it is better from custom clearance point of view
for the seller to endorse the B/L, invoice , packing list in favour of the
HSS buyer. The endorsement should read "Transferred on High Sea
Sales basis to M/S -------- for a sales consideration of Rupees --------".
Such endorsement should be stamped and signed by the HSS seller.
Key Points related to HSST

 In HSS contracts the HSS seller may not like to disclose the import value to
the HSS buyer. However, the customs can call for the original import
invoice, in which case the HSS seller may have to part with this information.
To overcome this, HSS seller should take on the responsibility of custom
clearance and site delivery. After custom clearance, the HSS seller could
withdraw import invoices and only hand over clearance documents with
HSS agreement to the HSS buyer. The custom bill of entry does not indicate
original import value and is prepared on HSS value.
 There is no bar on same goods being sold more than once on high seas. In
such cases, the last HSS value is taken by customs for purposes of duty
levying. The last HSS agreement should give indication of previous title
transfers. The last HSS buyer should also obtain copies of previous HSS
agreement as such documents may be called upon by the customs.
High Sea Sales Under GST

 After the high sea sale of the goods, the Customs declarations i.e. Bill
of Entry etc. is filed by the person who buys the goods from the
original importer during the said sale. In the past, CBEC has issued
various instructions regarding high sea sales appropriating the
contract price paid by the last high sea sales buyer into the Customs
valuation.
 Under GST, the question raised by the industry was the
applicability of GST on high sea sales – specially if GST would be
levied on the transaction between the buyer and seller while the
goods were in transit and if GST.
 When levy of GST will happen in high sea sales?
 Who will be responsible for the payment of GST in a high sea
sales?
High Sea Sales Under GST

As per provision of section 7 (2) of the IGST Act, supply of goods in the course
of import into the territory of India, till they cross the Customs frontiers of India
will be deemed to be a supply in the course of Interstate trade or commerce.
Hence, GST would be applicable on the transaction. However, the time of
levy of GST would be different for high sea sales as under.
Time of Levy of GST
 For high sea sales, the GST Council has decided that IGST on high sea sale
(s) transactions of imported goods, whether one or multiple, will be levied
and collected only at the time of importation i.e. when the import
declarations are filed before the Customs authorities for the customs
clearance purposes for the first time. Further, any value addition accruing
in each such high sea sale will form part of the value on which IGST is
collected at the time of clearance. Thus the final buyer would be
responsible for payment of GST on the full value of goods plus any value
addition, at time of import. (Know more about GST on import)
High Sea Sales Under GST

Payment of GST for High Sea Sales

 The GST Councils decision with respect to GST on high sea sales is similar
to that of the rules provided under the Customs Tariff Act, 1975. Under
the Customs Tariff Act, in respect of imported goods, all duties, taxes,
cessess etc will be collected at the time of importation i.e. when the
import declarations are filed before the customs authorities for the
customs clearance purposes.
 The last buyer in the chain and importer would be required to furnish the
entire chain of documents, such as original invoice, high-seas-sales-
contract, details of service charges/commission paid etc, to establish a
link between the first contracted price of the goods and the last
transaction.
 Hence, under GST as well, the final buyer in a high sea sales transaction is
responsible for payment of GST and providing the necessary documents
as required under Customs for clearance of the goods.
Discussion:

 In the case where the shipping company bill is issued in the name of
the original importer but the BoE and HSS agreement is in the name
of the HSS buyer, will the HSS be valid??
Discussion:

 If the bill is issued in the name of someone, it is a STRAIGHT BILL OF

LADING which is non-negotiable and non-transferable, so it cannot
be endorsed to the HSS buyer.. If there is such plans then it is better
to issue as a TO ORDER Negotiable bill so that it can be transferred..
Procedures and formalities

Step 1: Sale by the Foreign Exporter

The Foreign Exporter will make sale to the Indian entity and export the goods
to India. The goods may be sent by ship or air. The term “High Sea Sale”
should not be construed literally. Accordingly, as long as the sale is
formalized after dispatch from airport / port of origin and before arrival at
the first port of discharge / airport at destination, such sale is considered as
High Sea Sale.

Step 2: Entering into High Sea Sale (HSS) Agreement

Once the goods are shipped, the HSS Seller enters into an Agreement of
Sale (High Sea Sale Agreement) with HSS Buyer. The HSS Agreement is to be
entered into after the commencement of movement of goods from the
territorial borders of the country of the exporter but before arrival of goods at
the territorial border of India.
Procedures and formalities
Step 4: Submission of necessary documents to HSS Buyer
HSS Seller prepares invoice on HSS Buyer in local currency (INR). HSS Seller
then delivers the endorsed original Bill of lading (or airway bill), his invoice in
local currency along with import invoice, packing list, certificate of origin,
insurance certificate and other necessary documents, if any, for import
clearance.

Step 5: Filing of import clearance documents with Customs

HSS Buyer files Bill of entry along with other import documents with customs
authorities. HSS Buyer pays the necessary import customs clearance charges
along with import duty, if any.
Important Points
Some important pointers for a High Sea Sale are as under:
 Stamp Paper should be obtained by the HSS Seller for the purpose of
execution of the HSS Agreement. The stamp paper should be dated prior
to the actual HSS Agreement date.
 HSS Agreement should be dated after the date mentioned in the Shipping
Bill / Airway Bill but before the landing date of shipment.
 Intent letter of Sales from HSS Seller on letter head should be signed and
stamped. The same can be sent to the HSS Buyer for submission to customs
along with other import documents.
 Intent letter of Purchase from HSS Buyer on the letter head should be
signed and stamped for submission to customs.
 Seller and Buyer must have Import Export Code, AD code Letter and TIN
No with Weight & Measurement certificate.
 The CIF value for the purpose of calculation of import duty is taken to be
the HSS value.
Thank you