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High Sea Sales (HSS) is a sale carried out by the carrier document consignee to
another buyer while the goods are yet on high seas or after their dispatch from the
port/airport of origin and before their arrival at the port/ airport of destination.
As per above definition, for a transaction to be consider as high seas sale, it have to satisfy below three
conditions,
1. A sale or purchase shall be deemed to take place in the course of import of the goods into the
territory of India only if :
A. the sale or purchase either occasions such import, or
B. it is effected by a transfer of documents of title to the goods before the goods have crossed the customs
frontier of India.
2. Section 2(4) of the Sales of Goods Act,1930 defines “document of title to goods,”
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. 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.
3. Section 2(ab) of the Central Sales Tax Act, 1956 defines “Crossing the customs frontiers of India”. It
is defined as under:
“Crossing the customs frontiers of India” means crossing the limits of the area of a customs
station in which imported goods or export goods are ordinarily kept before clearance by
custom authorities
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10/10/13 Buyers Credit on High Sea Sales Transaction | Buyer's Credit & Supplier's Credit
The following is the procedure that is followed in case of High Sea Sales:-
1. High Sea Seller places order with supplier for import of goods.
2. Supplier ships the goods to High Sea Seller and submits the documents to his bank counter. (Assumption
in this case: Payment mode is Documents Against Payment)
3. High Sea Seller sells the goods to High Sea Buyer while the goods are still on High Sea by entering into
an agreement of sale to effect the sale on high sea of specific goods.
4. Documents arrives at banks counter of High Sea Seller’s bank. High Sea Seller makes payment from his
own funds or using buyers credit and gets documents released.
5. The document of title i.e. Bill of Lading is endorsed by the High Sea Seller in favour of High Sea Buyer and
provides him with local invoice (in INR) and other documents required to file Bill of Entry.
6. High Sea Seller retains a copy of the endorsed Bill of Lading and hands over original Bill of Lading to High
Sea Buyer under covering letter.
7. High Sea Buyer shall file Bill of Entry and pay customs duty, clearing charges etc. and gets the goods
released.
8. High Sea Buyer hands over a Copy of Bill of Entry to High Sea Seller for further submission to his Bank.
Conclusion
RBI Master Circular for External Commercial Borrowing and Trade Credit only talks about buyers credit can
be taken against import and thus inference needs to be drawn based on movement of documents and funds.
Incase of High Sea Sale, import is done High Sea Seller and documents are routed to his bank by supplier.
Final payment to supplier is also done by High Sea Seller. Thus buyers credit can be arranged by High Sea
Seller.
Reference
1. Central Sales Tax Act 1956. Section 5 (2) and Section 2 (ab)
2. Section 2(4) of the Sales of Goods Act, 1930
3. RBI Master Circular for External Commercial Borrowing and Trade Credit
1.
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This entry was posted in Buyers Credit, Suppliers Credit and tagged article, Buyers Credit, Finance, Import Finance, International trade, SME Finance, Suppliers Credit, Trade
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Ashish K says:
April 12, 2013 at 10:03 am
Dear Sir, So do you mean we can take buyers credit for high seas sale? because some banks dont issue LOU for high seas
transactions
Reply
High Sea Seller can take buyers credit. And in relation to bank not allowing for such transactions, it might be either
lack of knowledge or customer specific issue.
Reply
Liability of HSS Buyer to HSS Seller is in INR. If the agreed terms of payment between both is Letter of Credit,
that yes it is allowed. At the time of submitting the lc document, HSS Seller will submit Invoice, HSS Agreement,
Transport documents and all other documents as required by LC.
Reply
Dear Sanjayji,
I am looking to import steel from China and enter into a HSS with a customer based in the Middle East to whom I will be
selling the imported steel.
My bankers told me that in case of HSS, they are not willing to issue Letter of Credit. How should I go about this transaction ?
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Thanks in advance.
Reply
The above structure is Merchanting Trade and not High Sea Sales. Difference between them are, incase of High
Sea Sales goods eliminately lands into India where as in Merchanting Trade goods directly goes from China to
Middle East (as per above example).
For further details on Merchanting Trade Refer article: Suppliers’ Credit or Buyers’ Credit is not available for
Merchanting Trade
Reply
B Dubey says:
June 27, 2013 at 8:09 am
Please let me know that in case HSS transaction when the importer gets payment from High Seas Buyer instantly for the
merchandise under the LC; in such case whether the importer customer
still permitted to raise buyer’s credit or not.
Reply
1. RBI Master circular for ECB & Trade Credit has given right of approval for trade credit transactions to bank
for tenure upto 360 days from date of shipment for raw material. RBI has not specified customer specific
criteria to decide tenure. Thus it is internal criteria of PNB which will govern the transaction.
2. Under sanction limit of the client, what is the tenure for buyers credit / non fund based limit been prescribe.
As at the time of sanctioning of limits, credit authority would already have gone through the CMA data / past &
future trends based on which they would have worked out working capital cycle. Thus whatever tenure they
would have mentioned on sanction letter should be final. If customer is expecting longer tenure, than case
should again go back to credit authority.
Reply
Uchit says:
July 7, 2013 at 7:48 am
Buyers Credit sanction done by banks are not on transaction to transaction basis but on the yearly working capital
cycle of the client. Thus if you sanction letter provides for buyers credit, your banker will allow BC for above
transaction as well.
Reply
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ashish says:
July 26, 2013 at 3:11 pm
if in case of A related with B & B imported goods from A & sale it local party on highseas sale basis then SVB or 1% PD is
applicable to B or not
Reply
Dear Sir,
I heard about this from our lawyer. But he does not seem to have much knowledge about this.
Actually We are going to setup a business in India.
My queries are:
1. Will VAT be applicable on the sold products direclty from USA to customers across India? As item will not land in Punjab,
where we have to pay VAT…Item will land in other states across India direct to customers..Please clarify.
2. Do we require CST number to do this type of business?
3. Will Service tax be applicable?
4. We are providing a services type things only..As sending items directly from USA to customer. So, how will this business be
taken care of?
Thanks in anticipation
Reply
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