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Import Management

Import Its an activity defined as a process of procuring goods and services from the supplier situated in foreign country and outflow of the foreign currency towards payment. Need for Imports  The products are not available in the domestic market  Available but not in sufficient quantity  Available but not of desired quality  The price of the product is higher in the domestic market.

Categories Of Importers:

A) Actual User

Industrial Person who utilizes the imported goods for manufacturing in his own industrial unit Non- Industrial- who uses goods for commercial establishment, laboratory, scientific research, educational institution, service industry.

B) Non-actual users  Importer for stock and sale or import of gifts

Import Process
Company Formation Registration Import Order Contract Procurement/ Shipment Payment

Import Process
Company Formation

Registration Import Order Contract Procurement / Shipment Payment

Selecting the commodity Need Identification Company Bank account Mode of Operations

Company Formation
Need Identification  Lower price  Better quality  Only source available  More advanced technology  Shorter Lead time Company Name Opening up of Bank Account  To open up a a/c in a bank dealing with foreign exchange Mode of operation  Directly from the exporter  Agent

Selecting the commodity:

Banned for Imports: The items cannot be imported for any commercial or personal use. Restricted items: Imports are restricted hence the importer will have to obtain a specific license or permission. Canalised Items Can be imported through specified canalizing agencies (Government agencies). OGL (Open General License) Can be imported without any permission or license.

Import Process
Company Formation Registration Import Order Contract Procurement / Shipment Payment IEC number

For Personal Use

No IEC number is required The item to be located in the commodity index given in classification of ITC and see the import policy / duty for it.

For Commercial Use


IEC no to applied for along with Rs 1000/- bank draft . Bank documents for credit worthiness of importer To be submitted to regional authority.

Import Process
Company Formation Registration

Import Order
Contract Procurement / Shipment Payment

Market Channels of Distribution Seller /Agents Import License

Import Order
Sourcing the overseas supplier Imports can be made from any country of the world except Libya. Import of items from Iraq, prior approval is needed. Floating Import Enquiries Importers to send their enquiries to suppliers indicating Quantity required Desired Quality Time Place where it is needed Price at what it is needed Finding Creditability of Overseas supplier Reputed exporters supply through Indenting agents who have their offices in India for smother operations.

Import License  License required for prohibited, restricted or state trading items  An application to be submitted for the grant of import license to  Regional authority  DGFT  Fee to be submitted depending upon the CIF value of goods imported.  Import license cannot be transferred  The goods covered by license cannot be imported without the permission of DGFT.

Import Process
Company Formation Registration Import Order Contract Procurement / Shipment Payment
Sample Terms of Contract Pricing and Costing Mode of payment Exchange rate protection

Import Contract
I Sample.  Sample /catalogue / Literature  Import of sample of goods is exempted from import duties  Engineering goods imported into India as samples for execution / use in connection with export order are exempted from custom duty. II. Finalising the Terms of Import Product, quantity, Inspection, value, terms of delivery, Taxes, duties, shipment, packing, labeling, discounts insurance, guarantee, remedies and arbitration III. Import Pricing and INCOTERMS Ex- Works, FAS, FOB, CIF

III. Import Payments The import transactions are generally settled by any following modes depending upon credit worthiness of the exporter / importer.

Advance Payment Payment / Acceptance against Documentary collection Payment under Letter of Credit


Advance Payment The buyer sends full or part payment with the firm order before the goods are shipped. The importer to check the reliability of the exporter, exporter country and other risk The authorised dealers may allow advance remittance subject to 1) Import is made in accordance with the import policy. 2) Remittance of payment is made directly to supplier. 3) Amount of advance remittance exceeds $ 25,000 a guarantee from a international bank. 4) Physical imports of goods into India should be made within 3 months (12 mths for capital goods), from the date of remittance and importer should furnish documentary evidence of imports within 15 days.

b) Payment / Acceptance against Documentary Collections Exporter send the documents directly to the importers bank with instructions to deliver the documents to importer against payment or acceptance. Called as: i) Documents against payments (D/P) The exporter bank will send the documents to the importers bank and on payment of the bill of exchange, the importer bank deliver the documents to the importer for the possession of the goods. In D/P bills no credit is involved. ii) Documents against Acceptance (D/A) The bank will submit the bill of exchange to the buyer to indicate the acceptance of the payment obligation. On the due date of payment the bank will ask the importer to credit the money in exporters account.

c) Payment against L/C Payment is settled by means of a L/C issued by importers bank in favour of the supplier aboard. 1) Parties 2) Operations 3) Clauses / Types of L/C 4) Obtaining L/C limit for Import Activities Import L/C limit are sanctioned by banks to importers for  Payment of Import Bill and Customs duties  Regular imports of inputs  Import of capital goods For import L/C, bank may demand additional security or cash margin money as per RBI rules. The margin money is kept by way of fixed deposit and will be released by the bank only after retirement of import bill.

5) Opening L/C Importer to approach the bank where the current a/c is maintained. Fill in the prescribed L/C application Submit a copy of sales contract Exchange control copy of import license Creditability certificate Funds / Security for margin / service charges


Application for the operation of L/C


The full name and address of the beneficiary The description of the goods / price/ quantity / amount of the credit. The type of credit Mode of pricing Whether freight is payable / prepaid Details of the documents required The place of shipment Trans-shipment / partial shipment allowed or not Inspection clause The date and place of expiry of the credit.

Scrutiny of L/C After opening the L/C, the documents are handed over to the importer.  The importer must scrutinize its details with his credit application  L/C is in conformity with the application.  Any discrepancies which violate any of exchange control or import regulation must be rejected.  It is drawn on the person indicated on L/C and duly signed.  Drawn in the same currency as per the L/C  The amount of bill does not exceed the value of L/C  Documents are presented in time  All bills are endorsed correctly by the exporter

IV. Exchange rate protection The sale of foreign exchange for import of goods in India form any foreign country will be made through AD (Auhthorised dealers) FORM A1 Application to be filled by importer and submitted to his banks towards import into India a) remittance in foreign currency b) Transfer of rupees to non-resident bank accounts Payment for bills drawn under L/C as well as bills received for collection against imports must be received by AD. The bank does the conversion of Indian rupees in to foreign currency and it arranges for its remittances by applying the foreign exchange conversion rate as predecided in the forward contract

Import Process
Company Formation Registration Import Order Contract

Procurement / Shipment

Negotiation Of Import Documents


Negotiation of Import Documents

After shipping the goods, exporter prepares the documents as per the terns of L/C. i) Non- L/C case Exporter submit the documents to his bank with the request to purchase / discount the documents. The exporter bank finances or sends the documents to importer bank respectively. ii) L/ C Case The exporter will send the documents to banker for negotiations Before negotiation the bank will examine the documents and send it to importer bank for acceptance The importer bank will advise the importer to collect the shipping documents either against payment or acceptance.

Common Discrepancies in Import Documents


Credit expired prior to the shipment of goods Late shipment / Short shipment of the goods Shipment made between ports other than those stated in credit Credit amount exceeded Clause Bill of Lading Absence of freight paid where credit covers C&F Description of goods differs from that mentioned in L/C Mark and numbers differ between documents Goods under insurance not covered Weight of the consignment shown in various documents differ Bill of exchange drwan on wrong party & for wrong amount

Delivery of Documents Retiring of Documents: When the goods are imported on Cash against documents (CAD), D/P or D/A , the importer is required to take delivery of documents from the banker before completing custom formalities. The importer should apply to AD / Banker :  Funds equivalent to value of documents and the bank charges  Exchange control copy of import license, if applicable  Form A-1 duly completed for remittances of foreign exchange

Import Process
Company Formation Registration Import Order Contract

Procurement / Shipment

Custom Formalities Payment

Custom Clearance Procedure

Import Clearance Procedure

Goods imported into India have to pass thorough the Custom Clearance. The goods are charged custom duties The importer should be aware of the clearance procedure  Importer should have resources for Self clearance  Appoint a custom clearing agents ( who are licensed by the commissioner of custom) Custom Duty to be charged on CIF only If FOB its converted into rupee amount and then Insurance and freight are added. Then CIF value is taken as FOB Plus 20.25% Import General Manifest Under section 30 of the Custom Act, the master of the vessel / agent is expected to furnish a copy of Import manifest within 24 hours of their arrival in the country, in case of aircraft 12 hours. The manifest is a list of all goods carried on board, including goods to be transshipped .

Port Trust  Imported goods are required to be in the custody  Till they are cleared or trans-shipped  Goods remain in the custody of port trusts at various seaports or CWC ( Central warehousing corporation) at Airport Custom Administration  For implementing the provision of Custom Act  Two main wings  Appraisement Collection of revenue  Preventive Prevention of smuggling

Custom Clearance Procedure

Importer receives the advise of the vessel

Importer submit the Bill Of Entry B/E noted the Import dept Endorsement made on the I.G.M B/E presented to Appraising Dept All documents to be submitted Goods Examined Documents are Appraised on classification, value & rate of custom duty

First Check Procedure

B/E is Passed

Noting Of B/E

Custom Clearance Procedure

B/E is sent to License Dept (For Licensing Audit) Payment of duty in Accounts / Cash dept Original copies retained by Accts Dept Duplicate copies returned to the importer

Pays Duty Bond Ex- Bond

Shed Appraiser examines the goods Takes delivery from Port Trust After Port trust Charges are paid

Second Check Procedure

First Check Clearance Procedure:  The Appraiser scrutinizes the documents  Order for examination of goods  Examination Visual / Chemical  Verify the description, type, quantity, quality etc  Goods get examined from Custom / Shed appraiser  Report of Inspection is endorsed on Bill of Entry  Importer pays the duty Second Check Clearance  Goods which are regularly imported  Appraiser passes the Bill of Entry for payment of Custom duty without Inspection  Then gets the goods examined and cleared directly

Bill of Entry
It is a document prepared by the importer / agent On the strength of which clearance of imported goods can be done Bill of Entry is a document which states that the goods of the stated value /description / quantity have entered into the country Types of Bill of Entry  Home Consumption Paying custom duty at the port

Bonded Goods When no custom duty is paid and the goods are transferred to custom recognised bonded warehouse Ex- Bond for Home Consumption Importer intends to clear the goods by paying in part or full from bonded warehouse.

For Imports through POST there is no B/E . A WayBill is prepared by foreign post office for assessment of Duty

When to Present the Bill of Entry



It should be presented for noting in the Import dept After the IGM which gives a detailed description itemwise of the goods brought by the concerned vessel is filled by Steamer Agents The Steamer agents to lodge B/E 30 days in advance of arrival of the vessel So that there is no loss of time and the duty is immediately paid once the goods are landed The date of presentation of B/E is very important as the rate of duty applicable will be rate which is on the date Custom Conversion rate: The custom works out a rate every month based on average of moving rate of past 11 mths. The rate is uniform all over India

Contents Of Bill Of Entry


Name and add of the importer Name and Add of Exporter Import license no Name of port / dock where goods are to be cleared Description of goods Value of Goods Rate and amount of import duty payable Declaration of Importer / Clearing agent Import Documents Commercial Invoice / Packing List / Bill of Lading/ Insurance Policy/ Certificate of origin

Declaration Of tariff Classification for B/E


For any custom tariff heading and exemption Importer to submit to proper Group / Appraiser in the custom house In case the goods are not accepted for exemption then appropriate classification under the custom would be made in the appraising group.

Scrutiny of B/E  Enforcing of prohibitions of restrictions if any  Assessment of the goods entered for deciding the import duty

Warehousing Of Imported Goods

Importer may not be able to clear the goods immediately Or have problems in payment of duty Importer can deposit the goods in public or private Bonded warehouse The importer are required to file a Bond B/E The importer has to pay double the amount of duty Warehousing is allowed for period of 3 mths and can be extended upto one year. The importer has to present Ex-bond B/E for clearance The warehoused goods can be cleared in one or more installment Demurrage Charges Few days of Free period is allowed for storage of goods and thereafter charges are levied on goods Commercial & Non- Commercial Cargo- 7 Days Unaccompanied Baggage 14 days for day of landing

Assessment of Custom Duties

Goods may be classified and evaluated for calculation of custom duty by virtue of  The nature of goods  Of its end use Every item imported can be assessed to duty provided it is allowed for import in terms of import policy Goods not following in the parameter are confiscated or penalized In a bid to simplify the procedure a common eight digit commodity classification code is introduced under BTN ( Brussel Tariff nomenclature)

Types Of Custom Duty

Basic Custom Duty: Different rates of duty for different commodities Different rates of duties for goods imported from certain countries It could be Ad volrem or specific duty Additional / Countervailing Duty It is equal to excise duty levied on like goods when manufactured in India. Its levied on total cost of imported goods. Anti Dumping Duty On goods imported from specified countries to protect indigenous industry from injuries resulting from dumping of goods. Special Additional duties of 4% Education Cess @ 2% of aggregate custom duties Landing Charges 1% of the CIF value Charges paid by the importer to the port trust authorities


Calculation Of Import Duty a) Assessable value ( CIF + Landing Charges @ 1% of CIF) b) Basic Custom Duty (@ 25%) c) Additional Duty (@16% ) On a+ b d) Education Cess (@ 2%) On Additional Duty (c) e) Education Cess @ 2% b+c+d Total Duty Payable ( b+c+d+e)

Rs 100/00 Rs 25/00 Rs 20/00

Rs 0/40

Rs 0/ 90

Rs 46 /30

Case no 1

CIF VALUE $ 2.00/ Kg  Buying & Selling rate Rs 45 & Rs 46  Custom conversion rate US $ = Rs 47  Basic custom duty @ 30 %  Additional duty @ 10%  Education cess @2% each on excise & custom duty Landing charges on Mumbai port 1%

Calculate the custom duty

Case no 2

Total weight 10000 Kg CIF Value Us $ 1/ Kg Buying & Selling rate Rs 45 & Rs 46 Custom conversion rate US $ = Rs 45 Basic custom duty @ 10 % Additional duty @ 20% Education cess @2% each on excise & custom duty Clearing & Forwarding Charges @ Rs 1.00 /Kg Octroi Duty applicable @ 2% of CIF + Custom duty Landing charges on Mumbai port 1%

Calculate the custom Duty

Case no 3 A) Offer from a local Manufacture @ Rs 75 / Kg B) Overseas supplier M/S BPL Electronic offering at us $ 1.20 /Kg  CIF VALUE $ 1.20/ Kg  Buying & Selling rate Rs 45 & Rs 46  Custom conversion rate US $ = Rs 46.50  Basic custom duty @ 10 %  Additional duty @ 8%  Education cess @2% each on excise & custom duty  Clearing & Forwarding Charges @ Rs 2.00 /Kg  Octroi Duty applicable @ 4% of CIF + Custom duty  Landing charges on Mumbai port 1%  Transportation &other expenses@ Rs 1/ Kg Which is the better offer

Case No 4 Which Is a better offer? A) M/S Philips Singapore has quoted at US $ 1.50 FOB Singapore port B) M/S Texas electronics USA is offering at US $ 1.70 CIF Mumbai

Freight rate from Singapore to Mumbai is 20% of FOB Value Insurance premium rate is 0.25% of C & F Buying & Selling rate Rs 45 & Rs 46 Custom conversion rate US $ = Rs 46 Basic custom duty @ 15 % Additional duty @ 16 % Education cess @2% each on excise & custom duty Clearing & Forwarding Charges @ 1% of CIF Octroi Duty applicable @ 2% of CIF + Custom duty Landing charges on Mumbai port 1% Transportation &other expenses@ Rs 1/ Kg