High Sea Sales is a common sales practice carried out by the actual buyer and another buyer while the goods are on high seas or before the goods have crossed the customs frontiers of the specific country.
Let’s try to understand the high sea sales procedure with an easy example. If a buyer from India purchases an item from a seller in the USA and makes a sale to another buyer in India while the item or product is still in transit, it is called high sea sales. There is no bar on the same goods being sold to more than one buyer while being on high seas.
People opt for high sea sales because the end high sea sales’ buyer will be termed or known as the importer and will be eligible for any exemptions on the products or items as they pass through customs. The importer (end high sea sales buyer) can claim exemptions or any concessional tax benefits when they present the bill of entry for home consumption at customs.
The high sea sales procedure includes an over-sea seller (assume the USA) who supplies products or items to a buyer in India (assume Delhi) and after the export procedure is completed, the overseas seller tends to submit all the necessary documents to his bank at the seller’s place.
Then the buyer in India supplies or sells the products or items to another buyer in India (assume Mumbai) under high sea sale. The deal is closed after the products are shipped from the overseas border and are yet to reach the Indian border.
The high sea sale buyer in Delhi will accept the documents sent from the overseas seller and if the payment between the two is on sight LC or DP, the buyer in India will remit the invoice of the products to the seller before collecting the documents. Just in case, if the agreement between a high sea sales buyer in India and an overseas seller is under credit arrangement, then the buyer will remit the invoice of the products as per the arranged credit period. The Bill of Lading (or airway bill) is endorsed by the buyer in India and transfers the title of goods in favor of the buyer in Mumbai.
The transaction between the high sea sales buyer in Delhi and Mumbai will continue in Indian currency, and the buyer in Delhi will provide the original Bill of Lading (or airway bill), his invoice in local currency, import invoice, packing list, certificate of origin, insurance certificate, and any other necessary documents for import clearance, duly endorsed. The overseas buyer will retain a copy of all his documents that he delivers to the buyer in Mumbai.
Then the buyer in Mumbai pays the import custom clearance charges with duties as he files a Bill of entry along with the other import documents delivered by the overseas seller. It is to be noted that the high sea sales buyer in Delhi could also step in to pay the customs clearance charges and deliver the items and products to the buyer in Mumbai. This is done if the buyer in Delhi does not want the buyer in Mumbai to know the price or value of the product or items or any type of transaction that took place between him and the over-sea seller.
Lastly, the buyer in Mumbai will deliver a copy of the bill of entry to the buyer in Delhi and the Delhi high sea sales can file the said bill of entry and other copies of import documents and high sea sales documents with his banks. Even though the high sea sales procedure may look tiring, if you get the hang of it, you’ll find it easy.
High Sea Sales is mostly associated with traders who purchase products in ample amounts and look for buyers in the destination they are located. The calculation of the cost, insurance, and freight value for the product is to be taken as the high sea sale value.
The sales tax on high sea sales is not imposed as the sale is carried out outside the territorial jurisdiction of India.
It should be noted that the high sea sales agreement should be in the favor of the new buyer (here Mumbai) and that the carrier of the shipment or products should be informed about the high sea sales buyer in advance so that all necessary documents are in the buyer's favor.
Once the agreement is finalized between the buyers, the endorsement or shipment should read ‘transferred on High Sea Sales to M/S --- for a sales consideration of Rupees. Please note that the endorsement should be stamped as well as signed by the seller.
The carrier of the shipment for high sea sales should file the import general manifest and the products are entitled to classifications, rate of duty, and all notification benefits as would apply to similar imported goods on normal sale.
It is to be noted that the same shipment or products can be sold to more than one buyer on high seas, but the agreement or contract should have all the required details as the customs officer could call the previous high sea sales buyer to obtain copies of the previous agreement or any such documents.
As a buyer, you have to understand that the title of the goods must be transferred after the agreement of the purchase and before the shipment enters India’s jurisdiction and thus the buyer bears the customs clearance charges.
