Download - 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
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% 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
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% 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
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% ofCIF
Octroi Duty applicable @ 2% ofCIF + Custom duty
Landing charges on Mumbai port 1%
Transportation&other expenses@ Rs 1/ Kg