How to Import

International Purchasing or How To import.

Though every country would decide to produce most of the products endogenously to conserve its foreign exchange, it is not wise as well as practical. Sometimes it may be advisable how to import the goods at laser cost than the indigenous cost of production. Importing has become very simple since Government of India economy. How to import duty have come down substantially up to 40% the products secondly from 1st April 2001 government has lifted restriction on imports. However it would be worthwhile for importer, to note changes is announced in import policy and procedure from time to time as these are subjected to change.

Generally the procedure for importing can be divided into following steps…

1. Locating Foreign Source of Supply.

This can be done now a days by using internet as a tool along with secondary source of information like trade/ manufacturers directories of various countries. Other important contacts can be foreign Chamber of Commerce, Foreign Consulates and agencies, Indian consulates in foreign countries Etc.

2. Procurement.

This can be done directly by company, through merchant importers and by availing the services of organizations like state Trading Corporation, Minerals and metals Trading Corporation etc.

3. Documentation.

Various documents used for importing are bill of lading, invoice, certificate of origin, other certificates, insurance policies etc.

However, before discussing the documentations we will look at the import cycle / steps involved in importing.

A.   How to Import Cycle.

1. Study of Policy.

Once the exact import need is identified one has to find out whether the item to be imported did needs import license. If yes, necessary steps should be initiated to obtain the same. If item is ‘canalized’ item, canalizing agency should be contacted.

2. Supplier Selection.

As explained earlier, overseas source of item to be imported should be located and their quotations should be invited. The quotations should be evaluated properly. Perhaps, negotiation with short supplier may be required to be done for various aspects like price, delivery schedule, payment currency, terms of payment etc.

3. Import License / IEC Number.

Importer has to obtain importer/exporter code number granted by director general of foreign trade (DGFT) office. He should also obtain import license on the basis of final offer from the overseas supplier.

4. Award of Contract.

An agreement of contract covering all terms and conditions should be finalized between importer and overseas supplier.

5. Opening Letter of Credit (L/C).

Importer should open letter of credit in favors of overseas supplier. Importer should approach his bank for opening L/C and inform accordingly to supplier.

6. Shipments and Insurance.

Importers should follow up the shipments and be in touch with supplier. If contract is F.O.B. (Free On Board) the importer has to arrange for freight and insurance as well.

7. Forward of Documents.

After shipment supplier prepares documents according to L/C and forwards them to his bankers for negotiation purpose. Foreign bank of supplier forward these to importer’s bank in India from passing on to the importers

8. Payment against Documents.

Once Importer receives documents through his banker, he verifies them for discrepancies, if any .if the documents are OK in all respects as per L/C, importer has to make a payment depending upon the tenure of the L/C.

9. Clearance Formalities.

On arrival of materials importer has to obtain commercial invoice, bill of lading, packing list, certificate of origin and other necessary documents in original. He has to get “shipping guarantee” from his banker, in favors of the shipping company or agent, which will entitle him to obtain possession of the material, if original documents are not available. These documents are to be forwarded to custom authorities for approval and assessment of duty and payments thereof.

10. Port Clearance.

Physical possession of the goods can be taken after clearance is obtained from custom authorities. Importer has to make arrangements for transporting the materials to The Final Destination after this.

11. Received in Stores.

On arrival, legal formalities, if required, should be completed and then material can be taken on stores record.

B.    How to Import Documents.

Some of the important documents used international trade are as follows.

1. Bill of Lading.

A bill of lading is a document signed by or on behalf of exporter acknowledging the receipt of certain specified goods for transportation and it is an undertaking that the goods will be delivered to the consignee or his representative. The bill of lading should be “clear” and not “Claused”.

Bill of lading is prepared by the shipper as per form of shipping company in 4 copies. 3 copies are signed and unsigned copy is retained by the ship’s master for his records.

Bill of lading contains information like the date and place of shipment, the name of the carrying vessel, the name of the consignor and consignee, the place of destination, the number, contents, identification mark of the goods shipped and the amount of the freight.

2. Commercial Invoice.

This is the supplier’s bill and it should have details like the quantity, price and terms, total value, markings, weights, method of shipment, details of insurance, packing and handling charges, etc. it is important that the description of goods should be same as that of the import license. This is not a document of title and it is also not negotiable. Generally, the amount of invoice must be within the limit set by the letter of credit.

3. Insurance Policy.

This is issued by insurance company for the goods insured.

4. Certificate of Origin.

Certificate of origin is to be certify the origin of goods. This is generally required when the goods from the certain countries receive preferential treatment (in form of custom duties) or the Import of goods from some countries is prohibited.

5. Surveyor’s Report.

A surveyor who inspects the goods issues this report.

6. Packing List.

This indicates the exact nature, quantity and the quality of the contents of each packing in a shipment. This is useful for importer to check goods against order.

7. Letter of Credit (L/C).

The importer approaches the bank in his country to issue a letter of credit in favors of the overseas supplier/exporter. The bank informs the other bank in exporter’s country about the opening of the credit in favors of the exporter. The bank in exporters country intimates exporter’ about the same. The liability for the payment is of the bank who issues L/C and the bank that Honors the drafts drawn by the exporter, is reimbursed by the Bank issuing L/C.

Three type of letter teeth are as under.

I)                    Revocable L/C

This L/C can be cancelled by the buyer before affecting payment.

II)                  Irrevocable L/C

This L/C cannot be altered in any manner and payment must be made by the bank on presenting the documents

III)                Revolving L/C

This L/C is used when a specific quantity of goods is required to be shipped at a predetermined intervals. Due to L/C supplier is assure of prompt payment for the goods he exports while the buyer is assured that the goods will be exported within a specified time at a specified price.

C.    How to Import by Air and Post.

Goods can be imported by air as well as by post. Though airfreight is more than Ocean freight the importer enjoys the advantage of lesser delivery time. Imports by air are resorted to in case of perishable goods flowers, fruits, vegetables etc. and for other products like lifesaving drugs which need quick transportation. High value products like gems and jewelry are also transported by air.

Airway bill is non-negotiable receipt for the goods. It is prepared in triplicate, one copy each for consignor, consignee and airline. Consignee’s copy is carried by airline along with goods and they advise consignee about arrival of goods. Airline hands over the consignee’s copy duly signed on receipt of goods to cosigner.

Other procedures like licensing, duties etc. are same for how to import by air and post as applicable in case of how to import by sea.

 

 

 

Incoterms.

Cost and Freight (C & F)

Incoterms.

Manual & Documentation of incoterms

Incoterm: As regards quoting the prices to the overseas buyers.  The some are quoted in the following international accepted terms. For example.

Ex-Works (Exw).

‘Ex-works’ means that the seller’s responsibility is to make the goods available to the buyer at works or factory.  The full cost and risk involved in bring the goods form this place to the desired destination will be borned in by the buyer.

This term thus represents the minimum obligation for the seller.  It is mostly used for sale of plantation commodities such as tea, coffee and cocoa.

Free Career (FCA).

‘Free Carrier ‘means the seller’s obligations are fulfilled when the goods are delivered to the carrier named by the buyer of the named place. The term may be used for all the modes of transport including multimodal transport.

Free Alongside Ship (FAS).

Once the goods have been placed alongside the ship. The seller’s obligations are fulfilled and the buyer notified. The seller has to contract with the sea carrier for the carriage of the goods to be destination and pay the freight.

The buyer has to bear all the costs and risks or loss or damage to the goods hereafter.

Free on Board (FOB).

The seller’s responsibility ends the moment the contracted goods pass the ship’s rail at the port of shipment named in the sales contract.

This means that the buyer that the buyer has to bear all costs and risks of loss or damages to the goods from that point.  The seller is required to clear the goods for export.

Cost and Freight (C & F).

The ‘Cost and Freight ‘means that the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must on his own risk contract for the carriage of the goods to the port of destination named in the sale contract and pay the freight.

The being a shipment contract. The point of delivery is fixed to the ship’s rail and the risk of loss or to damage to the goods it transferred from the seller to the buyer at the very point as will be seen though the seller bears the cost of carriage to the named destination.

The risks is already transferred to the buyer at the port shipment itself.

Cost insurance freight (CIF).

The terms is basically the same as CIF, but with the addition that the seller has to obtain insurance at his cost against the risks of loss or damage to the goods during the carriage  is most commonly quoted price and it helps both exporter as well as importer to know exact amounts for receipts and payments. Under CIF it is important to mention the name of destination city.

Carriage paid to (CPT).

‘CPT’ means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. The buyer bears all risks and any other costs after the point of delivery.

The seller is required to clear the goods for export.

Carriage and insurance paid to (CIP).

CIP is the same as CPT, with the addition that the seller is also required to procure insurance against the buyer’s risk of loss of or damage to the goods during the carriage.

Delivered at frontier (DAF).

The term is primarily intended to be used when the goods are to be carried by rail or road.  The seller’s obligations are fulfilled when the goods have arrived at the frontier, but before the ‘Custom Border’ of the country named in the sales contract.

 

Delivered Ex-ships (DES).

This is an arrival contract and means that the seller makes the goods available to the buyer in the ship at the name port of destination as per the contract.

The seller has to bear the full cost and risk involved in bringing the goods there. The seller’s obligation is fulfilled before the customs border of the foreign country and it is for the buyer to obtain necessary import licence at his own risk and expenses.

Delivered Ex-Quay (DEQ).

Ex-Quay means that the seller makes the goods available to the buyer at a named quay.  As in the term ‘Ex-ship ‘ the points of division of costs and risks coincide, but they have now been moved one step further from the ship into the quay of wharf i.e. after crossing the  Customs border at destination.

Therefore, in addition to arranging for carriage and paying freight and insurance the seller has to bear the cost of discharging the goods on the quay.

The buyer is required to clear the goods for import and to pay for all formal formalities, duties, taxes and other charges upon import.

Delivered Duty Unpaid (UDP).

‘DDU’ means that the seller delivers the goods to the buyer, at the port of destination.  The seller has to bear the cost and risks involved in bringing the goods thereto.  The buyer has to get the goods unloaded and cleared for import, by paying the applicable duty.

Delivered Duty Paid (DDP).

This term may be used irrespective of the type of  transport involved and denotes the seller’s maximum obligation as opposed to ‘Ex-Works’  The seller has not fulfilled his obligation till such time that the goods are made available at his risk and cost to the buyer at his premises or any other named destination.

In the latter case necessary documents (e.g. transport document or Warehouse warrant) will have to be made available to the buyer to enable him to take delivery of the goods.