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Introduction
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.
Import Process
Company Formation Registration Import Order Contract Procurement/ Shipment Payment
Import Process
Company Formation
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
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
Registration
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.
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
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
a)
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
5)
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
Payment
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
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
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
B/E is Passed
Noting Of B/E
Shed Appraiser examines the goods Takes delivery from Port Trust After Port trust Charges are paid
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
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
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
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
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 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%
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%
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