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Amardeep Srivastava (Senior Law Officer)     23 June 2010

High Sea Sale Agreement

Dear All,

Two relevant clauses in the High Sea Sale Agreement are reproduced hereunder before posting the query -

"1. All the rights and title of the above goods will be transferred by the seller to the buyer by handing over endoresed Bill of Lading in favour of the buyer.

2. As regards any loss/damage/shortage and or any other claim to the consignment, the seller shall nominate and subrogate his rights to the buyers to recover the amount from the insurance company/shipping line agents/, and/or customs authorities and enable the buyers to deal directly with the people concerned."

Now, on the date when the endorsed bill of lading was handed over to the buyer, the goods were already destroyed in a fire. The present dispute is that the buyer says that he is not liable for payment of goods since on the date of transfer of title by endorsing the bill of lading, the goods were not in existence. The seller's contention is that once the agreement is signed the buyer is liable to make the payment.. For any risk to the goods the seller can subrogate his rights to the buyer.

I am inclined towards the buyer's contention. I wish to know the views of learned members of the forum.




 5 Replies

RAMESH KUMAR VERMA (pursuing company secretary course)     23 June 2010

Dear sir,


1. 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.

2. HSS is accepted under the import trade control regulation. Refer para - of export import policy.

3. HSS contract/ agreement should be signed after dispatch of goods from origin & prior to their arrival at destination. The agreement should be on stamp paper.

4. On concluding the HSS agreement, the B/L should be endorsed in favour of the new buyer. In respect of air shipment, HSS seller should write to the airline / consol agent informing that a HSS agreement has been established with the HSS buyer and that the carrier document should therefore be considered as endorsed in favour of the HSS buyer and further the IGM should be filed by the carrier in the name of the HSS buyer.

5. If the EDI system allows name of HSS buyer to be entered in the system, then there may not be any need to amend the IGM. In this case the B/E is filed in the name of the original importer as the IGM is in this importer name. However , the B/E shows the name of HSS buyer under a separate head in the B/E format. If the system has no provision for showing the name of HSS buyer on the B/E ,then the IGM should be got amended and B/E filed in the name of the HSS buyer.

6. In the case of HSS , the CIF value for calculation of duty is taken to be the HSS value.
7. There is practice followed in customs that in case the HSS transfer takes place at import invoice value only , the custom would add 4% of CIF value as HSS loading factor . There have been cases where HSS sellers have sold at two percent more than import CIF but custom have added 4% of CIF as HSS value addition. Such practice of customs can be challenged at the customs duty is chargeable on genuine transaction value.

8. In HSS contracts the HSS seller may not like to disclose the import value to the HSS buyer. However, the customs can call for the original import invoice, in which case the HSS seller may have to part with this information. To overcome this, HSS seller should take on the responsibility of custom clearance and site delivery. After custom clearance, the HSS seller could withdraw import invoices and only hand over clearance documents with HSS agreement to the HSS buyer. The custom bill of entry does not indicate original import value and is prepared on HSS value.

9. There is no bar on same goods being sold more than once on high seas. In such cases, the last HSS value is taken by customs for purposes of duty levying. The last HSS agreement should give indication of previous title transfers. The last HSS buyer should also obtain copies of previous HSS agreement as such documents may be called upon by the customs.

10. HSS is considered as a sale carried out outside the territorial jurisdiction of
India. Accordingly, no sales tax is levied in respect of HSS. The customs documents (B/E) is either filed in the name of HSS buyer or such B/E has an endorsement indicating HSS buyer's name.

11. The title of goods transfers to HSS buyer prior to entry of goods in territorial jurisdiction of
India. The delivery from customs is therefore on account of HSS buyer. The CENVAT credit in respect of CVD paid on import is entitled to HSS buyer.

12. HSS goods are entitled to classification, rates of duty and all notification benefits as would be applicable to similar import goods on normal sale.

13. HSS is also applicable to goods imported by air. Sea appearing in HSS should not be constructed by its grammatical meaning. As long as the sale is formalized after dispatch from airport / port of origin and before arrival at the first port of discharge / airport at destination, such sale is considered as HSS.

14. Sometime HSS buyers buy goods after their arrival. Such sale are not HSS. The stamp paper on which the HSS agreement is executed must not bear the stamp paper purchase date as being post cargo arrival date. Such a case can easily be detected by customs as being a post arrival sale.

15. If the HSS does not mind disclosing original import values to HSS buyer, in such case it is better from custom clearance point of view for the seller to endorse the B/L, invoice, packing list in favour of the HSS buyer. The endorsement should read "Transferred on High Sea Sales basis to M/S -------- for a sales consideration of Rupees --------". Such endorsement should be stamped and signed by the HSS seller.


Amardeep Srivastava (Senior Law Officer)     23 June 2010

Dear Mr. Kumar,

Thanks for your contribution. But I would like to be enlightened with your views on the dispute and contention of both the parties.



Adv. Gulammayudin A. Gagdani (LEGAL ADVISOR)     23 June 2010

on the date when the endorsed bill of lading was handed over to the buyer, the goods were already destroyed in a fire:

can you provide more details.

correct me if wrong from your facts it seems to be:

In that case as the fact that, seller has Intentionally, have try to hide the facts that the goods is laready burnt into fire.

 but the question is where it burnt at port during the transit.

If at port no need to worry, it should be sellers responsibility for the same, as if the goods damage,loss, or shortage is different things, and goods not available because of fire, it is already burnt is different thing.


Devesh A. Bhatia (Advocate)     19 July 2010

It is an invalid contract due to the destruction of the subject matter. This contract becomes void due to impossibility of performance. 

If seller knew at the time of transfer about the destruction of the goods and in spite of which he transfered the bill of lading to the buyer, seller committed fraud. 

Adv. Swapnil Nagpurkar (Advocate)     04 November 2010

Could anyone forward me a comprehensive format of High Seas Sale Agreement,


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