Buyers Credit on High Sea Sales Transaction

What is High Sea Sales ?

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 defined in Central Sales Tax Act 1956. Section 5 (2) 

A sale or purchase of goods shall be deemed to take place in the course of import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.

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 :
    1. the sale or purchase either occasions such import, or
    2. 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,”

“document of title to goods” include a bill of lading, dock warrant, warehouse-keeper’s certificate , wharfinger’s  certificate, railway receipt, warrant or order for the delivery of goods and any other document used in the ordinary course of business as proof to the possession or control of goods, or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented”;

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

Process flow of High Sea Sales Transaction

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.

Documents Provided By High Sea Seller to High Sea Buyer

  1. High Sea Sale Agreement
  2. Sale Invoice in INR
  3. Consignee Copy of B/L – Duly Endorsed in favour of Buyer
  4. Import Invoice, Packing List, Certificate of Origin & Insurance Certificate-Duly Endorsed in favour the High Sea Buyer


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.


  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. Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers

33 thoughts on “Buyers Credit on High Sea Sales Transaction”

  1. 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

    1. 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.

  2. 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 ?

  3. 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.

      1. 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 non capital goods (Raw Material, Consumables, Accessories, Spares, Components, Parts etc). 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.
  4. Buyer’s credit limit was sanctioned to me from my bank.
    I have imported some material and sold it to an Indian buyer under HSS and got the payment as HSS was against LC.
    Now i do not have imported goods as well do not have debtors as i already got the payments under LC.
    Can i still get Buyer’s credit as i am a first importer?

    1. 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.

  5. 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

      1. Whether HSS can be made in FOB value.Freight and insurance will be paid by the actual buyer. If yes, then how the Bill of entry will be filed.?

  6. 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.

    Step1. Customers from India will place order with us in India.
    Step2. My brother from USA will send the items directly to India. a 3rd party agency will do the delivery and customs clearance for us.

    As of now we are thinking of registring below:
    Sole propetiership
    VAT no for Punjab
    IEC code

    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

  7. We have imported some goods and are selling it on HSS basis to another company in our own family. What amount (percentage) of profit margin should be added to original import value of goods? Is there some minimum criteria?

  8. We are exporters of fabric and we need not take sales tax registration.
    Now we have export order for medicine. Can we buy it high seas from Indian supplier and pay him locally.
    We are interested in turnover in our books. We are not interested in sales tax Registration. Is this possible, , how ?

    1. RBI with its circular dated 08 Nov 2013 has allowed payment to a third party for import of goods, subject to conditions as under:

      A. Firm irrevocable purchase order / tripartite agreement should be in place;
      B. Third party payment should be made to a Financial Action Task Force (FATF) compliant country and through the banking channel only;
      C. The Invoice should contain a narration that the related payment has to be made to the (named) third party;
      D. Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party;
      E. Importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods; and
      F. The amount of an import transaction eligible for third party payment should not exceed USD 100,000. This limit will be revised as and when considered expedient.

      Thus as per above circular, it may be allowed subject to above condition but practical implementation of the same by bank needs to be seem.

  9. This cannot be considered third party payment,as payment is being made to original supplier/exporter of goods. Two parties have entered in HSS Agreement who are sister concerns. Now HSS buyer want to make payment direcly to exporter. Do u consider any problem in this. What can be advantage by entering into HSS in such case to indian parties.

  10. query_ in case of import of restricted good,whose import license will be endorsed, HSS supplier makes payment and HSS buyer get the goods cleared from custom.

  11. Sir,
    Suppose High seas purchases Value is Rs. 104000/- (FOB value +4% Margin). Now Agreement between High seas Purchaser and seller is that Purchases will make direct payment to original Exporter (Value of Import Invoice) and Margin money (Difference between money paid to High seas Invoice and Payment made to direct Exporter) will paid to High seas seller. Is it valid or not ?

  12. In HSS one importer can endorse documents in favour of another party and the customs & other duties are payable by them, he can earn money as commission ,then whether buyers credit can be availed on the same, because title to goods are being endorsed.

  13. I am banker by profession.I had read your article about the high sea sale (HSS) transaction.I want to clarify some of my queries

    1. One customer had come to open the domestic letter of credit on the basis of HSS agreement. ie the usance is as 90 days from the HSS agreement. We have suggested them to open import Letter of Credit (LC) since the transaction is covering the import of goods, but importer is saying that the sale of goods is on the basis of HSS transaction and the domestic LC will be opened as invoice value in INR.

    Since the invoice is in INR and on basis of 60 days from HSS transaction , can we consider as domestic LC?????? and usance tenure will from which date??

    2. What all documents should be called for in Lc to be submitted by HSS Seller ?

    3. Should we advise them for buyer’s credit on the basis of HSS agreement, rather than opening of LC.

    4. Is there any exception in UCP 600 regarding opening of LC on basis of HSS agreement.

    5. What is the RBI guidelines and foreign trade policy regarding opening of LC on the basis of HSS agreement.

    1. 1. Importer is correct. In this case it will be domestic lc for 90 days usance as it is local trade and invoice will be in INR. Usance can be from date of acceptance, from bl or whatever is the agreement between HSB & HSS. Thus Import LC or buyers credit is not an option in this case. This is standard practise.

      2. Local Invoice, complete set of import documents and high sea sale agreement. Bill of Lading should be endorsed by HSS to HSB

      3: Buyers Credit is not workable option as mentioned in point 1. This is local transaction and invoice in INR.

      4. No exceptions which i am aware are there in UCO 600

      5. Existing RBI guidelines on LC are applicable. No specific guidelines

  14. I would like to check with you that can HSS Buyers have terms like CFR – Newyork with HSS Seller , which beans Insurance is on HSS Buyers. HSS seller is an Indian company and Invoice will be INR only
    Also , suggest that Is there any FEMA Violations .

  15. I want to sell goods by High sea sale agreement by receiving of Local LC from my buyer by INR.

    1. can my buyer get buyers credit for the invoice value (INR)from his bank / foreign bank ?

    2. With help of local LC ,it’s possible I can get buyer credit from foreign bank ? (Presently I don’t have LC facility)

    1. Both case answer is no.
      1. Incase of High Sea Sale, high sea seller can take buyers credit
      2. High Sea Seller must have buyers credit limit with his bank to enjoy buyers credit.

  16. I need one advise from you is that, when I procure materials from overseas to India and I resell it to my customer withing India as High Sea Sale. In this case how can I prepare High Sea Docs as per LC clauses, because foreign seller doesn’t know that this will be sold to 03rd party on HSS basis, so they will release the Normal BL but our domestic LC demands to put Consignee, Notify as Issuing bank or HSS buyer’s name. So, how to work in this case.
    Please advise……

  17. We are Importer and selling the Goods in India (Domestic Market) by doing High Seas Sale. Our customer is issuing LC to us. but can we take revolving LC is allowed in High Seas Sale Transaction

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.