Properly manage SVB procedures in India => avoid punitive tariffs
Perhaps you also have the feeling that import duties in India are comparatively high? This could be because your company is paying additional punitive duties (so-called "loadings"), which you may not even be aware of - and this is not absolutely necessary.
Overview
For foreign companies operating in India, navigating the complex customs and import regulations is critical to ensure smooth and cost-effective operations.
One particular area that often leads to financial inefficiencies is the special procedure of the Indian Customs Valuation Office (“Special Valuation Branch", SVB). Together "affiliated" companies, which import into India on a corporate basis, require a form of “permanent import price approval” from the Indian customs authorities. Lack of awareness or poor handling of this process can lead to significant penalties, known in India as “loadingOften, companies pay these penalty surcharges unknowingly for years and mistakenly assume that the high customs duties in India are normal. In our consulting practice, it is not uncommon for us to come across companies that pay 5 to 40% (or even higher) surcharges on the value of imported goods without realizing it.
Often an unfavorable so-called “SVB order“ was even deliberately concealed by the local management from the foreign headquarters in order to avoid their unpleasant questions.
The role of the SVB
The SVB is a specialised department of the Indian customs authorities that checks all import transactions between an Indian importer and the foreign exporter "associated" with them under Indian customs regulations (this therefore only applies to intercompany transactions within your group of companies). It checks whether the import prices correspond to the actual market value (i.e. whether they are "fair" and "customary"; in India these prices are referred to as "at arm's length prices") or have been "manipulated" due to the relationship between buyer and seller. The background to this is the suspicion of the Indian customs authorities that import prices are kept artificially low between the parties in order to have to pay lower import duties.
The correct SVB assessment (without penalties, with 0% loading) is therefore particularly important for companies that regularly import from parent companies or subsidiaries to India. Without a favorable "SVB order", unnecessary additional punitive duties are often levied on all imported goods for an indefinite period, which reduces the cash Flow and company performance can of course be significantly impaired and, in case of doubt, even cause proven business models to falter.
Even if the SVB procedure takes several months, it does not have to hinder import activities. If carried out correctly, it can be carried out in parallel with operational business [see also our upcoming article on so-called PD bonds]. Once an SVB rating has been issued (“SVB Order") remains valid indefinitely for the associated importing companies named in the relevant decision.
Common pitfalls
A key problem facing foreign companies is the lack of understanding of the SVB procedures by the local management of their subsidiaries or the appointed Customs House Agents (CHA). The punitive tariffs usually result from procedural errors, non-compliance with the SVB guidelines or simply sloppy applications by the customs agents.
Your solution: Our expertise
To solve this problem, we offer a tailor-made service that initiates and proactively manages SVB procedures for our customers. By taking full control of the process - from documentation to submission and approval - we ensure transparency and compliance. We have already seen numerous cases in which companies were able to significantly or completely reduce their customs surcharges after years of overpayment by correctly handling the SVB procedure.
Our expertise ensures that import assessments are accurate, fair and in line with market conditions. This prevents the imposition of penalties.
Conclusion
For companies importing goods into India, especially from affiliated companies, the proactive management of the SVB process essential to increase profitability and optimize cash flow. We are ready to help your company manage these complex processes and ensure that they remain compliant and unnecessary costs are minimized.
Please feel free to call us without obligation.
