Import Mangement

8/6/2019 Import Mangement

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Import Management


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Introduction

ImportIts 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.


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Import Process

Company Formation

Registration

Import Order

Contract

Procurement/ Shipment

Payment


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Import Process

Company Formation

Registration

Import Order

Contract

Procurement /

Shipment

Payment

Selecting the commodityNeed Identification

CompanyBank account

Mode of Operations


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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


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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.


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Import Process

Company Formation

Registration

Import Order

Contract

Procurement /

Shipment

Payment

IEC number


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Registration

For Personal Use

No IEC number is required

The item to be located in the commodity index given inclassification 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.


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Import Process

Company Formation

Registration

Import Order

Contract

Procurement /

Shipment

Payment

Market

Channels of DistributionSeller /AgentsImport License


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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 indicatingQuantity 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.


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Import License

License required for prohibited, restricted or state tradingitems

An application to be submitted for the grant of import licenseto

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 thepermission of DGFT.


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Import Process

Company Formation

Registration

Import Order

Contract

Procurement /

Shipment

Payment

SampleTerms of ContractPricing and Costing

Mode of paymentExchange rate protection


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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 fromcustom 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


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III. Import PaymentsThe import transactions are generally settled by any followingmodes depending upon credit worthiness of the exporter /importer.

Advance Payment Payment / Acceptance against Documentary collection

Payment under Letter ofCredit


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a) Advance Payment

The buyer sends full or part payment with the firm order beforethe goods are shipped.

The importer to check the reliability of the exporter, exportercountry 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.


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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 bankand 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.


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c) Payment against L/C

Payment is settled by means of a L/C issued by importers bank infavour of the supplier aboard.

1) Parties2) Operations

3) Clauses / Types of L/C

4) Obtaining L/C limit for Import ActivitiesImport 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 cashmargin money as per RBI rules. The margin money is kept byway of fixed deposit and will be released by the bank only after

retirement of import bill.


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5) Opening L/C

Importer to approach the bank where the current a/c ismaintained.

Fill in the prescribed L/C application

Submit a copy of sales contract

Exchange control copy of import licenseCreditability certificate

Funds / Security for margin / service charges


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5) Application for the operation of L/C

The full name and address of the beneficiary

The description of the goods / price/ quantity / amount of thecredit.

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.


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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 creditapplication

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


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IV. Exchange rate protection

The sale of foreign exchange for import of goods in India form anyforeign country will be made through AD (Auhthorised dealers)

FORM A1Application to be filled by importer and submitted to his banks

towards import into Indiaa) 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 forcollection against imports must be received by AD.

The bank does the conversion of Indian rupees in to foreigncurrency and it arranges for its remittances by applying theforeign exchange conversion rate as predecided in the forwardcontract


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Import Process

Company Formation

Registration

Import Order

Contract

Procurement /

Shipment

Payment

Negotiation Of

Import Documents


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Negotiation of Import Documents

After shipping the goods, exporter prepares the documents as per theterns 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 importerbank respectively.

ii) L/ CCase

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 acceptanceThe importer bank will advise the importer to collect the shippingdocuments either against payment or acceptance.


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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 incredit

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


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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 ofdocuments 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


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Import Process

Company Formation

Registration

Import Order

Contract

Procurement /Shipment

PaymentCustom Formalities


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Custom Clearance

Procedure


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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 thecommissioner of custom)

Custom Duty to be charged on CIF only

If FOB its converted into rupee amount and then Insurance and freightare added. Then CIF value is taken as FOB Plus 20.25%

Import General ManifestUnder 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, includinggoods to be transshipped .


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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 seaportsor CWC ( Central warehousing corporation) at Airport

Custom Administration

For implementing the provision ofCustom Act

Two main wings

Appraisement Collection of revenue

Preventive Prevention of smuggling


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Custom Clearance Procedure

Importer receives the advise of the vessel

Importer submit the Bill Of Entry

B/E noted the Import deptEndorsement made on the I.G.M

B/E presented to Appraising DeptAll documents to be submitted

Goods Examined

Documents are Appraisedon classification, value & rate of custom duty

B/E is Passed

First Check Procedure

Noting Of B/E


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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 DeptDuplicate copies returned to the importer

Shed Appraiser examines the goods

Takes delivery from Port TrustAfter Port trust Charges are paid

Second Check Procedure

Pays DutyBond

Ex- Bond


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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 ofCustom

duty without Inspection

Then gets the goods examined and cleared directly


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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 ConsumptionPaying custom duty at the port

Bonded GoodsWhen no custom duty is paid and the goods are transferred to customrecognised bonded warehouse

Ex- Bond for Home ConsumptionImporter 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 byforeign post office for assessment of Duty


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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 ofthe goods brought by the concerned vessel is filled by SteamerAgents

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 rateof duty applicable will be rate which is on the date

Custom

Conversion rate: The custom works out a rate everymonth based on average of moving rate of past 11 mths. The

rate is uniform all over India


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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/ InsurancePolicy/ Certificate of origin


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Declaration Of tariffClassification for B/E

For any custom tariff heading and exemption

Importer to submit to proper Group / Appraiser in the customhouse

In case the goods are not accepted for exemption thenappropriate classification under the custom would be made inthe appraising group.

Scrutiny of B/E

Enforcing of prohibitions of restrictions if any

Assessment of the goods entered for deciding the import duty


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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 Bondedwarehouse

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 DaysUnaccompanied Baggage 14 days for day of landing


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Assessment ofCustom Duties

Goods may be classified and evaluated for calculation of customduty by virtue of

The nature of goods

Of its end use

Every item imported can be assessed to duty provided it is allowedfor 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 commodityclassification code is introduced under BTN ( Brussel Tariffnomenclature)


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Types OfCustom Duty

Basic Custom Duty:

Different rates of duty for different commoditiesDifferent rates of duties for goods imported from certain countriesIt could be Ad volrem or specific duty

Additional / Countervailing DutyIt is equal to excise duty levied on like goods when manufactured in

India. Its levied on total cost of imported goods.

Anti Dumping DutyOn goods imported from specified countries to protect indigenousindustry 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 valueCharges paid by the importer to the port trust authorities


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Calculation Of Import Duty

a) Assessable value( CIF + Landing Charges @ 1% ofCIF) Rs 100/00

b) Basic Custom Duty (@ 25%) Rs 25/00

c) Additional Duty (@16% ) Rs 20/00On a+ b

d) Education Cess (@ 2%) Rs 0/40On Additional Duty (c)

e) Education Cess @ 2% Rs 0/ 90

b+c+d

Total Duty Payable ( b+c+d+e) Rs 46 /30


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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


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Case no 2

Total weight 10000 Kg

CIF Value Us $ 1/ Kg


Custom conversion rate US $ = Rs 45 Basic custom duty @ 10 %



Clearing& Forwarding Charges @ Rs 1.00 /Kg

Octroi Duty applicable @ 2% ofCIF + Custom duty Landing charges on Mumbai port 1%

Calculate the custom Duty


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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


Custom conversion rate US $ = Rs 46.50 Basic custom duty @ 10 %



Clearing& Forwarding Charges @ Rs 2.00 /Kg

Octroi Duty applicable @ 4% ofCIF + Custom duty Landing charges on Mumbai port 1%

Transportation&other expenses@ Rs 1/ Kg

Which is the better offer


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Case No 4Which Is a better offer?

A) M/S Philips Singapore has quoted at US $ 1.50 FOBSingapore port

B) M/S Texas electronics US A is offering at US $ 1.70 CIFMumbai

Freight rate from Singapore to Mumbai is 20% of FOB Value

Insurance premium rate is 0.25% ofC& F


Custom conversion rate US $ = Rs 46

Basic custom duty @ 15 %

Additional duty @ 16 %


Clearing& Forwarding Charges@ 1% ofCIF

Octroi Duty applicable @ 2% ofCIF + Custom duty

Landing charges on Mumbai port 1%

Transportation&other expenses@ Rs 1/ Kg

Import Mangement

Documents

Transcript of Import Mangement