Import Procedure

Introduction 1. We have studied export procedure now we will study import procedure. We will start with the basics of import like how to select a product for import? , how to select the suppliers? Etc. Apart from this we will study about steps to be followed in import procedure, legal dimensions of import procedure, customs formalities for imports, warehousing or storing of imported goods, exchange control provisions for imports and retirement of import documents. Let us start our study with pre-import procedure. Pre-Import Procedure 1) Selecting the right product a) An importer shall select the product for import by considering negative list of imports. b) The negative list of imports contains the name of those import items which are either banned or cannot be freely imported i.e. they can be imported only under license. c) The negative list of import consists of three parts : (i) Prohibited items: Cannot be imported at all. (ii)Restricted items: Can be imported under a license. (iii) Canalysed items: Can be imported only through specified State Trading Enterprises. Besides considering the negative list of items of imports the importer also needs to consider the rules and regulations given in the foreign trade policy, relating to the product selected by him for imports. 2) Selecting the supplier: a) In India, imports can made from any country of the world except for a few items from Iran/Iraq. b) For selecting suppliers, importers can get information from various trade directories, consulate office, international trade exhibitions, trade representatives of various s countries in India and abroad, chamber of commerce, Directorate of industries, popular internet websites, foreign newspapers, etc. 3) Finding out credit worthiness of the supplier: a) An importer has to check the capability and credit worthiness of the supplier to fulfill the contract. b) Information about the supplier can be obtained from banks and Indian Embassies abroad. The importer can take the help of credit information agencies for getting business information about overseas suppliers. c) Reputed foreign suppliers generally have their indenting agents

with offices in India, an importer can place orders with them. It is always a good choice to book orders through indenting agents of foreign suppliers located in India. 4) Availing (using) Services of Suppliers Agent in India: a) Some foreign suppliers have their agents in India. b) The agents take order from Indian importers and arrange for supply of goods from their supplier in foreign country. c) It is always better to import through such agents as they can easily contacted in case of any doubts or compliant about the product. The agent helps the importer if there is any difficulty relating to the product. The agent helps the importer if there if there is any difficulty relating to the product such as Quality of Goods, payment and documentation, etc. 5) Finalizing the terms of import: a) The importer should finalize the terms of import with care. b) Before finalizing the terms of import, the importer should ask for the samples or catalogue and other needed literatures of the item to be imported. c) After being satisfied with the samples and credit worthiness of the foreign supplier, the importer should finalize the terms of contract. d) The contract should be carefully drafted considering all details such as description of goods in terms of quality, quantity, price of goods, mode of payment, type of packaging, port of shipment, replacement of defective good, warranty, etc. STEPS IN IMPORT PROCEDURE

1. FIXING TERMS AND CONDITIONS : (a) After obtaining the import license, the importer should fix terms and conditions of import such as quality, payment terms, after sales service, delivery schedules, etc. (b) The importer should carefully fix the terms and conditions of import. 2. PLACING INDENT(ORDER) : (a) Indent means order of goods. (b) The importer places order of goods. (c) An importer can place order of goods directly with the supplier or through indenting agent. 3. OBTAINING LICENSE : (a) Wherever required the importer has to apply and obtain an import license for import of goods. (b) The import of restricted goods can be done by obtaining license from direct general of foreign trade (DGFT).

(c) An importer has to take licenses from various authorities for various purposes like for EPCG scheme, DFIA Scheme, advance authorization (license) for annual requirement etc. 4. OBTAINING QUOTA CERTIFICATE : (a) The importer has to obtain quota certificate. (b) This certificate mentions the maximum value of goods up to which an importer can import goods. 5. FOREIGN EXCHANGE: (a) The importer has to obtain foreign exchange for his imports. (b) He has to make an application to this bank for obtaining foreign exchange. (c) If the demand for foreign exchange is for an approved purpose and within the powers of the bank, the bank will issue foreign exchange applied for. (d) If the purpose of foreign exchange does not fall within the power of the bank then, the bank will take prior approval of RBI; the bank will forward the application, in duplicate to RBI for its approval. (e) If the application is approved, RBI issues a permit printed on security paper which includes details such as name of the applicant, amount sanctioned, name of the person to whom foreign exchange is to be given, name of the bank from whom the foreign exchange is to be sanctioned.

6. LETTER OF CREDIT: (a) The foreign exporter needs a guarantee that he will get payment that he will get payment for exports made by him. For this, he may ask the importer to open a letter of credit in his name. (b) The importer will approach his bank for opening a letter of credit in favour of the exporter. (c) The letter of credit is secured method of payment of payment thus; the exporter ensures that will get the payment. 7. APPOINTING CLEARING AND FORWARDING AGENT: (a) Clearing and forwarding agents help an importer in getting his goods cleared from customs by fulfilling procedures and formalities relating to custom clearance. (b) The clearing and forwarding agent prepares a Bill of entry containing details of goods for clearance of imported goods can be made.

8. SHIPMENT ADVICE: (a) the exporter sends shipment advice to the importer. (b) Shipment advice includes details such as the date of shipment, the name of the ship , the date of arrival of goods, the port of destination, etc. (c) The exporter sends a copy of bill of lading and commercial invoice to his bank. 9. RECEIVING DOCUMENTS: (a) The exporters bank sends documents to the importers bank. (b) The importers bank verifies them and if all of them are in order, it issues a bank certificate and attested copies of commercial invoice to exporter. 10. OBTAINING DELIVERY ORDER: (a) When the freight is payable the clearing agent has to make payment to the shipping company for getting delivery order for the goods imported. (b) The shipping company gives a delivery order by putting its stamp for delivery on back side of bill of lading. 11. CLEARING OF GOODS FROM CUSTOMS : (a) The clearing and forwarding agent has to pay port dues. (b) After paying it has to submit one copy of PORT TRUST DUES RECEIPT and two copies of BILL of ENTRY to the customs. (c) The customs officer stamps the BILL of ENTRY and gives to it the clearing agents. (d) Then the clearing and forwarding (C & F) agent pays customs duty and clears the goods. (e) The C & F agent charges commission from importer for the service given by him.

12.MAKING PAYMENT FOR IMPORTS: (a) The importer has to make the payment for the goods imported by him as per the terms of the contract (b) If the terms are DOCUMENTS AGAINST PAYMENT (D/P) than the importer makes the payment through sight draft immediately on receiving the documents (c) If the terms are Documents Against Acceptance (D/A) the importer can collect the document by merely accepting the bill of exchange, he makes the payment through Time Draft on a future date. LEGAL DIMENSIONS OF IMPORT PROCEDURE:

1. Finalizing the terms of import:

(a) The importer needs to finalise the import contract carefully.

(b) Before finalizing the terms of import the importer should asks for sample and catalogue and other needed literatures of the item imported. (c) After being satisfied with the samples and credit worthiness of the supplier the importer can finalise the terms of the contract, (d) The import contract should be carefully drafted by including necessary details relating to the description of goods, mode of payment, type of packaging, delivery schedule, warranty, etc.

2. Mode of Pricing:
a) While finalizing the terms of import contract the importer should have knowledge of various mode of pricing and the manner of payment for imports. b) While deciding the modes of pricing the foreign suppliers, should quote the terms use in international trade. c) The importer should know the meaning of technical terms. d) These terms are link between sellers and buyers in different countries and answer question likes : e) Who will arrange pay for the carriage of goods from one point to another? f) Who will bear the risk of loss or damage to the goods in transport? g) Who will bear the risk if the transactions are not carried out, etc.? h) The main function of trade term is to determine at what point the exporter has fulfilled his duties so that the goods in legal sense can be send to be delivered to the buyer. i) International Commercial Terms (INCOTERMS), 2000 have been introduced by international chamber of commerce, which are standard terns universally accepted in the international trade. j) These terms are represented by a three letters symbol. e.g. FOB, CIF, C & F, etc.

k) To use INCOTERMS the seller and the buyer have to only state according to which INCOTERMS they want to fix the price.

3. Mode of Payment:
(a) The payment for imports is made by considering credit worthiness of importer and exporter, demand of the product in the international market, exchange regulations existing in the importers and exporters country.

(b) There are mainly three methods of making payment : (c) Advance payment. (d) Payment against documentary bill. (e) Payment under letter of credit. Letter of credit is the most secured method of receiving payment.

4. Obtaining Importer- Exporters Code Number (IEC Number ) :

(a) It is compulsory in India for every importer exporter to obtain importer-exporter code number. (IEC No.) from DGFT. (b) An exporter or importer cannot export or import his goods without obtaining the IEC numbers. (c) In order to obtain the IEC no. the importer has to submit the following documents along with the application form: i. Bank receipt/Demand draft/ Electronic funds transfer details showing payment of application fee of RS 250. RS 125 per electronically filed application. ii. iii. iv. v. Two copies of passport size photograph of the applicant. Copy of permanent account number (PAN) issued by income tax authority. Self- addressed envelope and stamp of Rs 30. These documents may sent in a file to keep them safety.

(d)An IEC No, allotted to an applicant is valid for all its branches / divisions units/as mentioned on the IEC number.

5. Obtaining Import License:

(a) The importer has to obtain import license wherever required. (b) If the item comes under prohibited list then it needs a licence. (c) If the item comes under restricted list, it needs a license. (d) The importer has to take license from various authorities for a number of purposes like EPCG scheme, DFIA, Advance authorisations (licence) for annual requirement etc.

6. Obtaining Foreign Exchange:

(a) The importer has to make an application to his bank for obtaining foreign exchange. (b) If the application is for an approved purpose and is within the power of the bank, the bank sanctions the amount of foreign exchange. (c) If the purpose of foreign exchange does not come within the powers of the bank then it requires prior approval of the RBI. (d) The bank forwards the application in duplicate to the reserve bank of India if the application for foreign exchange is approved the RBI issues a permit printed on Special security paper mentioning the name of applicant, amount sanctioned, name of the person to whom payment is to be made abroad and name of the bank from whom the foreign exchange can be sanctioned.

7. Financial Planning for Import:

(a) They importers should do financial planning for import in advance so that they have enough money to get their goods released. (b) The exporters can take loans from bank in advance to avoid heavy charges for imported goods remaining uncleared due to non-payment.

8. Obtaining Letter Of Credit from bank :

(a) When the payment is made against letter of credit the importers have to ask their bank in advance to open letter of credit in favour of the exporter. (b) The importer has to fulfil formalities and submit needed documents for opening letter of credit. (c) The letter of credit is issued by the bank when the importer deposits the amount sanctioned. (d) Letter of credit provides safety of payment to the supplier.

Customs formalities for importrs 1] Import manifest: i) According to section (30) of the customs act,1962.the person carrying imported goods should submit within 24 hours of arrival of goods, a document called import manifest to the customers. ii) The import manifest is a complete list of items that the carrier carries on board. iii) After receiving information about the arrival of goods the importer or his agent has to make an entry by filling a bill of entry 2) Presenting the bill of entry: After the bill of entry is noted in the import department, it should be presented to the appraising counters with the following documents: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. Commercial invoice. A copy of letter of credit. Bill of lading / airway bill (Original and duplicate copy) Certificate of origin Packing list (two copies) Insurance policy Weight specification Copy of importer-exporter code number (IEC.NO) Freight and insurance certificate Customs declaration Catalogues/drawing for machinery imported A declaration from importer that he has not paid any commission to agents in india. Import license.

3)the date of presentation of bill of entry is important as the rate of duty on imported goods is the rate which is applicable on that particular date. i. If the documents submitted by the importer are enough for proving the value and description of goods in items of quantity and he has a valid licence then the bill of entry is completed by the appraiser. The rate of duty is notrd on the bill of entry. The bill of entry completed by the appraiser is signed by the assistant collectoe and send with an examination order of goods before cleaning them.

ii. iii.

4) clearing of goods: i. ii. iii. The importer pays duty. The original copy of bill of entry is kept by the customs while other documents are returned to the importer. After checking if the description of goods is found to be correct on the basis of documents and declarations given,goods are declared by customs.\

5) Warehousing (storing) goods: i. The importer can also warehouse or store his goods at the port of shipment. ii. The importer does not pay the duty. He presents Bill of entry for warehousing to the customs along with the bond for twice the amount of duty payable. iii. The importer can clear his goods in installment. Warehousing facility helps an importer in taking delivery at a later date, after their arrival. The importer may not have enough funds for clearance of goods or he may not have place for storage, then he can make use of this facility. WAREHOUSING OF IMPORTED GOODS 1. Warehousing of imported goods means storing of imported goods. 2. Sometimes an importer does not clear his goods after their arrival at the port. 3. He may get his goods cleared in installments or take their delivery at a later date. So, he needs to warehouse his goods at port. 4. Customs bonded warehouse has been set up for storing of imported goods. 5. The facility of warehousing of imported goods in customs bonded warehouses, without payment of custom duty is given under the Customs Act, 1962. 6. The goods kept in a warehouse can be stored up to a maximum period of one year in the bonded warehouse. 7. In the case of capital goods, imported for use in any 100% Export Oriented Unit (EOU), the goods can be stored up to the period of 5 years. 8. The warehousing period can be increased by commissioner of customs for a period of 6 months and by chief commissioner of customs for any other period as considered proper by him. 9. The importers who wish to get their warehousing period increased should file their extension applications before the expiry of the initial/extended warehousing period. 10. While warehousing goods, the officer examines the goods to ensure that they are not likely to deteriorate. 11. In case, the goods are likely to deteriorate the commissioner may reduce the period of one year of warehousing to shorter period as considered proper by him.

12. For obtaining this facility, the importer has to file a Bill of entry for warehouse, yellow colour. All formalities relating to clearance of goods in this case are similar, the only difference is that the duty is paid later. 13. For clearance of goods from warehouses the importer has to submit Ex-bond Bill of Entry. 14. If the importer does not pay the duty, penalty, etc. on the warehoused goods, the customs may after giving notice to the importer

EXCHANGE CONTROL PROVISIONS FOR IMPORTS 1. Import trade is regulated by the Director General of Foreign Trade (DGFT) under the ministry of commerce, Government of India. 2. Policies and procedures for import are announced by DGFT from time to time. 3. Banks are permitted to open letter of credit on behalf of their customers participating in trade while doing this; they follow normal banking practices and procedures. The letter of credit should contain a condition that the bill of lading should indicate the name and address of importer in India as well as the name of the bank opening the credit. 4. Payment of imports under letter of credit or any other method of payment is required to be made against shipping documents airway receipts, Exchange control copies of bill of Entry/postal/courier wrappers etc. 5. RBI has advised banks to be careful in accepting payments in currencies other than permitted currencies. Permitted Currencies is a currency which is permitted by the rules and regulations of the country and can be converted into major currencies like U.S. Dollar, Pound sterling, Euro, etc. 6. In normal imports, payment for imports should be completed within six months from the date of shipment. 7. In Deferred Payment arrangements, that is installment payments, the payment is made after six months from the date of shipment and up to a period of less than three years. Retirement Of Import Documents 1. Loading of Goods and Shipment Advice (a) After loading the goods, the exporter sends shipping advice to the importer. (b) The shipment advice contains details like name of the ship , date of shipment, port of delivery, bill of lading number, description of goods etc. 2. Retirement of Import Duties (a) The exporter prepares the documents and submits them to his bank along with letter of credit. (b) The exporters bank sends them to importers bank for negotiation.

(c) The documents submitted by the exporter are : (i) Bill of exchange. (ii) Commercial Invoice. (iii) Bill of Lading. (iv) Packing list. (v) Certificate of origin (vi) Certificate of inspection (vii) Marine insurance policy etc. (d) For the retirement of documents, the importer has to submit the following documents. (i) Form A1 for the remittance(payment) in foreign exchange. (ii) Exchange control copy of the import license, if applicable (iii) A letter to the bank to debit Indian rupees equal to the value of documents including bank charges. 3. Bill of exchange (a) When bill of exchange is sent along with the documents it is known as Documentary Bill of Exchange. It is of two types: (i) Documents against payment (D\P). (ii) Documents against acceptance (D\A). (i) Documents against payment: In this case, the exporter makes the payment against sight draft; the documents are given to the importer only against payment for goods. (ii) Documents against acceptance: In D\A, the documents are given to the importer against the acceptance of the bill of exchange. The importer only accepts it by signing it. The payment is made through time draft at a future date. (b) After receiving the documents, the importers bank prepares Bill of Exchange. 4. Examination of documents (a) The importers bank carefully examines the documents to ensure that they have been made as per the terms and conditions of letter of credit. (b) After being satisfied the bank gives documents to importer and payment to the exporter. (c) The importers also verify the documents and see that they are as per the contract.

5. Appointment of clearing and forward (C & F) agent: (a) The formalities of clearance of goods are lengthy and complicated. (b) The C & F agents have experience and expertise required for customs clearance of goods. (c) He helps in getting quick clearance of good from customs. (d) The C & F agent prepares the Bill of Entry, which contains detail of goods to be cleared from customs. (e) In case, the C & F agent does have full information about the goods to be cleared, he will prepare a Bill of Sight, This helps him in physically checking the imported goods and prepare a bill of entry on the basis of it.