Payment of insurance and freight in BOE

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This discussion clarifies who is responsible for paying insurance and freight costs during international imports. While the importer pays for these on the Bill of Entry and to their Customs House Agent (CHA), these amounts aren't necessarily part of the actual purchase cost if not directly paid to the seller. The assessable value for duty calculation might include estimated freight and insurance, but your accounting should reflect the actual cost of goods purchased.

Ramesh S. Kansara

Ramesh S. Kansara (Querist)

01 September 2021 Who pays the amount of Insurance and freight while importing goods from outside the country?

Let us say
FOB - 10000 $
Freight - 200 $
Insurance - 112.5 $

These brings CIF - 10312.5 $

Importer is liable to pay the amount of FOB to seller but Insurance and freight are part of bill of Entry

Importer further pays to his CHA ( BCD, Surcharge and IGST) but buyer don't pay for insurance and freight.

But while maintaining books of account, seller account is credited as 10312.5 $ but he doesn't pay for it. Then how to close seller's account in importer's books of account?

CMA Poornima Madhava

CMA Poornima Madhava (Expert)

01 September 2021 Freight @20% and insurance @1.125% (if not charged on the invoice) would be added to the FOB value to arrive at the assessable value based on which the duty is calculated. If freight and insurance is not actually paid, the same would not form part of the cost of goods purchased.
So in your case, if no freight and insurance is actually paid, FOB value + duty & swc would be part of cost of purchase.

Ramesh S. Kansara

Ramesh S. Kansara (Querist)

01 September 2021 Then amount is not matching with BOR

CMA Poornima Madhava

CMA Poornima Madhava (Expert)

01 September 2021 AV in BE will differ from actual cost because of reasons explained earlier. That's not a problem here.
Importer will have to consider in the books the actual cost (not the assessable value) as the basic value of the goods imported.

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