High Sea Sales in Import Trade
Sell the cargo before it lands. Here's who clears it, how tax works on the chain, and the gap it leaves in the bank's records.
A high-sea sale is the sale of imported goods by the original importer to another buyer while the goods are still in transit, before they are entered for customs clearance in India. CBIC describes it as a common trade practice in which the buyer, not the original importer, then files the bill of entry. FTP 2023 para 2.38 permits it, subject to the policy and any other law in force.
Traders use it to sell a cargo before it lands: a Mumbai steel trader that bought a shipload of coils from Korea finds a buyer in Ludhiana while the vessel is at sea, and transfers the cargo by endorsing the bill of lading. The buyer clears the goods and pays duty; the trader earns its margin without ever handling customs.
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How a High-Sea Sale Runs
- 1
1. Original import contract
The trader contracts with the foreign supplier and pays it, often under an LC issued by its bank.
- 2
2. High-sea sale agreement
Before the goods are entered for customs clearance, the trader signs a high-sea sale agreement with the buyer and issues an invoice, usually at a price above its own cost.
- 3
3. Transfer of title
The trader endorses the bill of lading (the document of title) in favour of the buyer. If the bill of lading is made out to the order of the LC-issuing bank, the bank's endorsement is needed first, so the bank decides when title can pass.
- 4
4. Bill of entry by the buyer
The buyer files the bill of entry under section 46 in its own name and pays customs duty and IGST.
- 5
5. Documents to customs
The buyer furnishes the whole chain: the original supplier's invoice, the high-sea sale contract and details of any service charges or commission, so customs can link the first price to the last.
Tax Treatment
Is the high-sea sale itself a GST supply?
Position
No. Supply of goods by the consignee to another person by endorsing documents of title, after dispatch from the foreign port and before clearance for home consumption, is neither a supply of goods nor of services
Source
CGST Act, Schedule III para 8(b)
When is IGST collected?
Position
Once, at customs clearance, however many high-sea sales occur in the chain
Source
CBIC Circular 33/2017-Customs
On what value?
Position
Customs value plus the value addition in each high-sea sale; the last buyer's contract price is brought into the customs value
Source
Circular 33/2017-Customs, referring to Circular 32/2004-Customs
Can customs reject the value?
Position
Yes. If it doubts the truth or accuracy of the declared value, it can reject it and determine value under the valuation rules
Source
Circular 33/2017-Customs; Customs Act s.14
| Question | Position | Source |
|---|---|---|
| Is the high-sea sale itself a GST supply? | No. Supply of goods by the consignee to another person by endorsing documents of title, after dispatch from the foreign port and before clearance for home consumption, is neither a supply of goods nor of services | CGST Act, Schedule III para 8(b) |
| When is IGST collected? | Once, at customs clearance, however many high-sea sales occur in the chain | CBIC Circular 33/2017-Customs |
| On what value? | Customs value plus the value addition in each high-sea sale; the last buyer's contract price is brought into the customs value | Circular 33/2017-Customs, referring to Circular 32/2004-Customs |
| Can customs reject the value? | Yes. If it doubts the truth or accuracy of the declared value, it can reject it and determine value under the valuation rules | Circular 33/2017-Customs; Customs Act s.14 |
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The Bank's Reconciliation Problem
The original importer's bank remitted foreign exchange to the Korean supplier. Normally it closes that import in IDPMS against the bill of entry filed by its own customer. In a high-sea sale, the bill of entry is filed by the Ludhiana buyer, who may bank elsewhere.
Neither RBI's 2026 Regulations nor the superseded import Master Direction contain a specific high-sea-sale rule. The bank's general duty applies: under Regulation 18 it marks off the IDPMS entry only after ensuring the import payment has been made, and Regulation 4(2) requires it to be satisfied of the transaction's genuineness. So the bank needs evidence linking its customer's payment to a bill of entry filed by someone else. The high-sea sale agreement, the endorsed bill of lading and the buyer's bill of entry are the natural documents; how the bank records the exception is a matter for the import-handling policy that Regulation 19 requires it to have.
How the IIBF Exam Tests This
Expect a question on who files the bill of entry (the high-sea buyer) and one on IGST (collected once, at clearance, on value that includes the high-sea margin). The trap is assuming the high-sea sale attracts IGST separately as an inter-state sale. CBIC answered that in 2017: it does not.
FAQs
Who files the bill of entry in a high-sea sale?expand_more
The high-sea buyer, the person who bought the goods from the original importer before they were entered for customs clearance.
Is GST payable on a high-sea sale?expand_more
Not separately. Schedule III of the CGST Act treats it as neither a supply of goods nor services. IGST is collected once at customs clearance, on a value that includes the high-sea sale margin.
What documents does customs need for a high-sea sale?expand_more
The full chain: the original supplier's invoice, the high-sea sale contract and details of service charges or commission paid, so the first contracted price can be linked to the last.
What is the difference between a high-sea sale and merchanting trade?expand_more
In a high-sea sale the goods are imported into India and cleared by the buyer. In merchanting trade the goods move between two foreign countries and never enter India.
Next steps
- Import Customsarrow_forward
- Merchanting Tradearrow_forward
- Counter Tradearrow_forward
- EDPMS and IDPMSarrow_forward
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