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Import Management in International Business

Saurabh Sinha

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Introduction

In economics, an import is any good (e.g. a commodity) or service brought into one country from another country in a legitimate fashion, typically for use in trade.

Import goods or services are provided to domestic consumers by foreign producers. An import in the receiving country.

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Type of imports
• There are two basic types of imports:
1. Consumer goods 2. Intermediate goods and services

a. Convenience goods b. Shoping goods
c. Speciality goods

a. Installations b. Accessory equipments c. Raw materials d. Fabricated parts and materials e. Industrial Supplies
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1. Starting Imports

1. Starting an import business is a goal of more than thousands of merchants and businessman. 2. The long term success and profitability of an import business greatly depends on the importer’s knowledge and understanding about the international market and foreign market analysis. 3. Today, importing goods from abroad has becomes a big business. Millions of products are bought, sold, represented and distributed somewhere in the world on a daily basis
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Reasons for Import
1. Availability • For example: • Bananas in Alaska, • Mahogany Lumber in Maine and • Ball Park franks in France 2. Cachet • For example: • Scandinavian furniture, • German beer, French perfume, • Egyptian cotton 3. Price • For example: • Korean toys, • Taiwanese electronics • Mexican clothing

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Total import from India estimated to be around US$ 41779 million in sept. Saurabh Sinha 6 .Import in India The rising middle income groups of consumers in India and their increasing levels on expenditure on various products has resulted a faster rising demand of the Indian import business. newsprint. pulp and paper. India is a bulk importer of edible oil.2012. sugar. crude rubber and Iron and steel.

a government organisation that also controls the export business in India. Saurabh Sinha 7 . DGFT and all its regional offices work under the Ministry Commerce and Industries. Department of Commerce.Import Regulatory Body In India. all the activities related to import are handled by the Directorate General of Foreign Trade (DGFT). Government of India.

it is also important for an importer to obtain all the necessary information in matters associated with foreign trade agreement. Before starting an import. Saurabh Sinha 8 .2. Preliminaries for Starting Import Business Starting an import business needs a proper guidelines and understanding of the foreign market. Starting an import is not a get-richquick-scheme.

Selecting the Market Proper selection of the commodity market is an important factor before starting an import. The right market can be selected by answering the following the following questions. a) Is the product(s) an importer need to conducting his business available domestically? b) c) Is there a lucrative and untapped domestic market for an imported product? Does importing a product increase competitiveness as a business? Saurabh Sinha 9 .

All the rules and regulations related to the Indian import is mentioned in the Schedule I of the ITC. importer of India must evaluate the various government policies and guidelines including the rules and regulation as mentioned in the Foreign Trade Policy Procedures. Saurabh Sinha 10 . An importer is always free to import goods in India provided that such goods are imported under the regulations of ITC.HS ( Indian Trade Clarification based on Harmonized System of Coding) Classifications of Export Import items.Continued… While making the import plan. ITC-HS codes are divided into two schedules.

Saurabh Sinha . hydrocarbons. State Trading Corporation of India is also one of them that import a number of essential commodities to cover the domestic shortfalls and hold the price line. 11 .State Trading Corporation of India There are certain goods that can be only imported outside the country through a recognize agency. metals and minerals and fertilizers. pulses.The STC is responsible for the import of goods such as vanaspati and edible oils.

IEC number or Importers Exporters Code is issued by the DGFT. Registration for Importers Surrender of IEC No. In India.3. The Customs will not allow clearance of goods unless the importer has obtained IEC ( Importer Exporter Code) number from issuing authority. Saurabh Sinha 12 . Any importer who doesn’t want to continue his import business may surrender the IEC number to the issuing authority. Registration of importer is a pre-requisite for import of goods.

Guidelines and Rules for Import Business The various rules and guidelines in respect of various commodities and category of importers are mentioned in the following publications issued by the Ministry of Commerce. Export. The Export Import Policy is updated every year on the 31st of March and the modifications.Import Policy The Government of India notifies the Exim Policy for a period of five years under Section 5 of the Foreign Trade (Development and Regulation Act). Saurabh Sinha 13 . improvements and new schemes became effective from 1st April of every year. Government of India and revised from time to time: 1.

SION (Standard Input Output Norms ) SION in short is standard norms which define the amount of input/inputs required to manufacture a unit of output for export purpose. handicraft. Saurabh Sinha 14 . engineering. food products including fish and marine products. Input output norms are applicable for the products such as electronics. chemical. plastic and leather products etc.2. The Directorate General of Foreign Trade (DGFT) from time to time issue notifications for fixation or addition of SION for different products.

ITC. The total number of chapters in the schedule I is 98. Harmonized System codes are divided into two schedules. Saurabh Sinha 15 . Schedule I of the ITC-HS code is divided into 21 sections and each section is further divided into chapters.HS Codes (Indian Trade Clarification based on Harmonised System of Coding ) Coding was adopted in India for import-export business. Schedule I describe the rules and guidelines related to import policies where as Schedule II describe the rules and regulation related to export policies.3.

• Whether there are import or restricted trade at either end of the transaction. 1. Legal considerations An importer should consider the following factor before import. Selection of Overseas Exporters and Suppliers Selecting an overseas exporter raises a number of issues for the importer such as language differences. • Who is liable if a product causes harm or loss? • Who bears insurance costs at each stage of transit? Saurabh Sinha 16 . The various factors required for consideration of an overseas exporter or supplier and the methods for selecting overseas suppliers. payment methods and increased paperwork requirements. • Whether technical standards in supplier's country meet Indian requirements.4.

Saurabh Sinha 17 . Documentary Collection. so you need to check where your supplier's raw materials have come from. So. Some goods attract a preferential rate of duty. or Lc). Other considerations There is a range of other factors that an importer should bear in mind: Payment methods for international trade transactions are an Language differences import issue for are important. importer just a matter of must take a proper care while selected a communication make sure any payment methods labelling or other such as Letter of printed materials are Credit (Documentary Credit. error-free. Understanding the business and social practices of supplier's country can help build trust and develop relationships.2. Advance Payment Receipt. It's not import.

3. 4. etc. e) Indenting Agent of Foreign Suppliers. Japan yellow pages. available from leading booksellers in India. b) Consulate Generals and Trade Representative of various countries in India and abroad. d) Directorates of Industries. USA yellow pages etc. c) Chambers of Commerce as per addresses. Sources of Information a) Trade Directories and Yellow pages. Confidential information about the exporter may obtain through the banks and Indian embassies abroad. f) International Trade Fairs and Exhibitions Saurabh Sinha 18 . like Singapore yellow pages. Capability of Overseas Supplier Properly verify the foreign exporter before entering into a contract with the exporter.

6. after sale services/warranty coverage etc. delivery schedule. • Import’s contract need to be carefully and comprehensively drafted incorporating there in precise terms. Saurabh Sinha 19 .). all relevant conditions of the trade deal (like. replacement of defective goods supplied. type of packaging. mode of payment. importer can proceed further to finalization the terms of the import contract. port of shipment. Finalizing the Terms of Import • Once importer is satisfied with the sample and the creditworthiness of the overseas exporter.

5. DGFT Delhi office is situated in Udyog Bhawan. consumable and spares. * Sample of Import License a) b) Foreign Exchange Control Copy Customs Copy Saurabh Sinha 20 . * Validity of Import License Import Licenses are valid for 24 months for capital goods and 18 months for raw materials components. Import License is issued by the Director General of Foreign Trade. New Delhi 110011. with the license term renewable. Import License and IEC Code (Importer Exporter) Number In India.

Freely importable items Licensed Imports Categories of Import Canalised Items Saurabh Sinha Prohibited items 21 .

A drugs (by the State Trading Corporation). These include petroleum products (to be imported only by the Indian Oil Corporation). nitrogenous phosphatic. oils and seeds (by the State Trading Corporation and Hindustan Vegetable Oils).Canalised Items • There are certain canalised items that can only be importer in India through specified channels or government agencies. Saurabh Sinha 22 . and cereals (by the Food Corporation of India). potassic and complex chemical fertilizers (by the Minerals and Metals Trading Corporation) vitamin.

Saurabh Sinha 23 . It’s a part of their job to determine whether imports conform to the description in the import License or not. Custom inspector and other custom officials have authority to inspect and evaluate the goods to be imported.Custom Inspection Any violation in the import license is usually scanned by the custom officials of the custom department. Custom official even have right to charge fines and penalties if any violation in the import license is found to be done by the importer.

Import Trade Governing Bodies Ministry of Commerce and Industry a) Department of Commerce b) Department of Industrial Policy & Promotion Directorate General of Foreign Trade (DGFT) Central Board of Excises Customs (CBEC) under Ministry of Finance Saurabh Sinha 24 .

consumer durables. It may include consumer goods. 1952 * Import of samples of goods is exempt from import duties under Geneva Convention of 7th November.6. 1952. machineries (including agricultural machinery) and their accessories. individuals. Saurabh Sinha 25 . Associations. Import samples * The import samples are basically specimens of the product. India is also a signatory to a 1952 convention to facilitate the Importation of Commercial samples and Advertising materials. Research Institutes or Laboratories. Import of samples can be done by the trade. prototypes of engineering goods or even high value equipment. Geneva Convention. which is finally given to the importer. industry. Companies.

000/.g. ivory.5000/. • Value limit For duty free clearance the value of individual sample should not exceed Rs. 1992 are not allowed to be imported as samples e.and aggregate value should not exceed Rs. arms & ammunitions.60.per year or 15 units of samples in a year. Saurabh Sinha 26 . wild birds and parts of wild animals and birds. and Narcotic drugs. wild animals.• Restriction on Import of Samples However. goods which are prohibited under Foreign Trade (Development and Regulation) Act.

the Customs authority may also seal the machinery during its journey from the port of importation to the place of demonstration and it is unsealed only at the place of operation or place of demonstration.• Machinery import Import of machinery products.10000/-. On the request of importer. * Privacy of Import Samples In case of high valued machinery the importer can import a sample under privacy. which are prototypes of engineering goods can also be imported duty free if the value does not exceed Rs. Saurabh Sinha 27 .

There should not be any ambiguity regarding the exact specifications of the goods and terms of the purchase including import price. replacement of defective goods supplied. after sale services/warranty coverage etc. the he can proceed to finalise the terms of the import contract. type of packaging. delivery schedule.• Finalizing Terms of Import Once an importer is satisfied with the product sample and creditworthiness of the supplier or exporter. port of shipment. At this stage importer need to draft the contract terms and conditions very carefully and comprehensively. Saurabh Sinha 28 . mode of payment.

The different aspect of an import contract is enumerated as under some of which may be relevant and other may not be: • • • • • • • • • • • Product Specifications Product Standards Quantity Inspection Terms of Delivery Terms of Payments Import License and Import Permits Duties and Charges Periods of Delivery /Shipment Packing. Labeling and Marketing Insurance Saurabh Sinha 29 .

1975. Custom Import Duty on Importing Goods • The concept of import duty is very wide and is almost applicable to every product or item imported to India barring a few goods like food grains.7. Basic duty Additional customs (Countervailing duty or C. fertilizer. Import duties form a significant source of revenue for the country and are levied on the goods and at the rates specified in the Schedules to the Customs Tariff Act. life saving drugs and equipment etc.D ) Special additional duty Anti-Dumping Duty Saurabh Sinha 30 .V.

8. Import Risk Transport Risk Quality Risk Import Risk Delivery risk Saurabh Sinha Exchange Risk 31 .

9. Methods of Payments in Import Consignment Purchase Cash-inadvance (Pre payment) Down Payment Open Account Documentary Collection Letters of Credit Saurabh Sinha 32 .

an import licence) Saurabh Sinha 33 . unless the goods are transported undeclared to another customs district and arrangements are made for customs treatment there.10. Import documents Import documents shall be submitted to the director of customs in the customs district where the goods are unloaded from the vessel.g. The following documents shall be submitted with an import declaration a) b) c) d) e) f) g) an invoice a bill of lading or a transport document a bill covering freight charges a certificate of origin Packing List Insurance Certificate/Policy Other documents (e.

payment conditions and delivery conditions. discounts and other deductions and the reasons for granting such discounts or making such deductions. as the case may be).Invoices Invoices shall contain the following information: a) name and address of the seller (consignor). weight or measurements. Saurabh Sinha 34 . c) place and date of issue. type of packing. b) name and address of the buyer (consignee). f) the goods contained in a consignment. weight. type. g) the selling price of individual articles and the currency in which the price is specified. make and quantity (number. e) number of pieces. h) terms of payment. marks and numbers. d) when the sale took place.

• An importer places orders to an import agent and imports goods via the agent. Import Personal Baggage • In general a personal import is a direct purchase of foreign goods from overseas mail order companies. Direct Personal Import Indirect Personal Import • An importer himself/herself places orders to foreign mail order companies. retailers. Saurabh Sinha 35 .11. retailers or manufactures and imports directly from them. manufacturers or by an individual for the purpose of personal use.

Import • While travelling passengers are allowed to carry certain items with them. Baggage Rules contain separate concessions for resident tourist and person transferring their residence to India. Importance of • Import Export Code Number or IEC number is not required IEC Number for import of items for for Personal personal use. restricted or prohibited. a buyer must check the item in the ITC-HS code in order to know weather the item is free to import. which are governed by the Baggage Rules 1998. Saurabh Sinha 36 Import of Baggage . since personal import is direct trade or importing any good in India.In any case.

Items that can not be Imported for Personal Use Vegetables and seeds exceeding one pound Tea Books. except hearing aid and other life saving equipments 37 Saurabh Sinha . Arms and ammunitions Consumer electronic items. magazines. journals and literature Items which has been canalized under the Indian Exim Policy (2007) or Foreign Trade Policy.

5. Import of Gifts • The Government has exempted gifts items received from foreign country to persons residing in India from the whole of custom duty under Foreign Trade Act.000/. The sender may not necessarily be residing in the country from where the goods have been dispatched. relatives.000/. Saurabh Sinha 38 . duty free. 5. friends.is the value of the goods in the country from where the goods have been dispatched.is allowed as gift.12. Who can send the gifts? Business associated. import of goods up to the value of Rs. It is important to note that the value of Rs. companies or acquaintances can also send the gifts to the people living in India. In the present scenario.

Custom Clearance Permit of Imported Gifts Application Procedure for Custom Clearance Permit (CCP) An application for the grant of CCP for an item which is otherwise restricted or prohibited in the ITC-HS Classification may be made to Director General of Foreign Trade supported by the following documents: • • Applicant's request on his company’s letter head or plain paper duly signed with all the details. Donor's letter in original duly signed and indicating his name. Saurabh Sinha 39 . • Any other relevant document which applicant would like to enclose. address and the purpose of offering gift. • Self certified copy of Performa invoice. • Bank Receipt in original in duplicate/ Demand Draft / EFT details towards payments of application fee at the prescribed rate.

Import Cars and Commercial and Non Commercial Vehicles Exim policy of India is quite strict in matters related to import of vehicle. * not been sold.13. Saurabh Sinha 40 . the Exim policy of India also states: that the Vehicle should not be * manufactured/ assembled in India. * should have been registered for use in any country prior to being imported to India. leased or loaned prior to being imported to India. Apart from the heavy custom duty on the automobile.

However. import of gold and silver is govern by certain rules and regulation. Import Gold and Silver by NRI • Reserve Bank of India has granted general permission to persons of Indian nationality or origin to bring into India a limited amount of gold and silver. Import of Gold A NRI who has been residing in a foreign country for over one year and is returning to India may be allowed to import jewellery without paying any custom duty in his use up to an aggregate value of ten thousand rupees in the case of a male passenger.14. an individual can import gold of up to rupees twenty thousands. Saurabh Sinha 41 . In case of a female passenger.

Import of Silver A Non Resident Indian can import silver in any form up to 100 kilos at a time provided he is coming to India after 6 months stay abroad.per Kilo. Duty is payable @ Rs. 500/. Saurabh Sinha 42 .

86 1026344.58 9135850.77 3252514.32 4765721.00 5814288.64 4918755.35 14934999.18 GERMANY AUSTRALIA JAPAN SOUTH AFRICA RUSSIA BRAZIL ISRAEL 5413601.23 2238375.17 2065962.15.78 1240862.83 3930930.81 Saurabh Sinha 7809529.57 43 .22 1641666.08 1606429.32 2011-12 27599864.21 7130386. Lacs) Import with 228 countries… Country CHINA USA 2010-11 19807907. Statistical Data of Inadia about Import (Values in Rs.

16. Saurabh Sinha 44 . assessment and evaluation. Also it is important to note that no import is allowed in India if the importer doesn’t have the IEC number issued by the DGFT. Custom Clearance of Imported Goods All goods imported into India have to pass through the procedure of customs for proper examination. appraisal. This helps the custom authorities to charge the proper tax and also check the goods against the illegal import.

Various ways of customs clearance of imported goods Saurabh Sinha 45 .

Allow import of restricted items as per procedure laid down in the Exim Policy. Verify the imported items under the LC. Issue amendments to LC only on the basis of written request. 46 .17. allow commission as per FEMA guidelines Saurabh Sinha Verify whether the payment method in Letter of Credit is done as per FEMA guidelines or not. Allow payment for the bills beyond six months and also allow payment of overdue interest on sight bills for a period not exceeding six months. Allow payment for import by debit to customer’s account. In case of overseas agent. Dos and Don't in Imports Do’s Open LC or import transactions only for customers and open only if the party has got sanction limit. Allow payment to local agents on commission basis. Handover import documents only to drawee or his PA holder against property acknowledgement.

invoice and other papers for future inspection by the custom inspector or the Reserve Bank of India.Do’s Continued… In case of default payment. Allow import provided goods are consigned to bank account opener. Saurabh Sinha 47 . Sell the imported goods. Keep one copy of shipping documents. only after getting permission from ITC authorities. Report to the RBI (Reserve Bank of India) if the bill of entry is not received. Insist for insurance cover at the time of opening the LC. only after getting permission from ITC authorities. crystallise the bill on 10th day of the month. Sell the imported goods.

Saurabh Sinha 48 . Forward the documents to third party without permission from the importer 5.Dont’s 1. Open LC without proper transport documents 3. Allow advance payment without proper documentation 4. Issue the Letter of Credit if the customer doesn’t have IEC number 2. Import prohibited or restricted items without import license.

Allow direct remittance of import bills beyond the limit and without EC copy of bill of entry 7. Open revolving LC without safety clause 8.Dont’s Continued… 6. Amendments to the Letter of Credit for import of those items which is either restricted or prohibited 9. Allow import documents received under collection paid without verifying importers line of business and financial standing Saurabh Sinha 49 .

Advantages and Disadvantages of Imports ADVANTAGES Comparative advantage means lowerpriced goods Importing can mean higherquality products Various benefits stemming from trade agreements Importing grants access to regionally exclusive resources Many governments actively support trade relations and aim to make importing easy for your business 50 Saurabh Sinha .18.

DISADVANTAGES Decreases the number of available jobs Increases risks of other diseases Loss of foreign reserves Saurabh Sinha 51 .

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