Import Management
- 1. Import: Import Definition Import trade refers to the purchase of goods from the foreign countries. The procedure for import trade differs from country to country, depending upon the import polices, the statutory requirements and customs of different countries. In almost all the countries of the world import trade is controlled by the government. Categories of import items - Freely imported - Restricted items - Prohibited items - Canalised Items - Exim only through the agencies designated by the central government – Wheat/Soya bean etc.
- 2. Why Import?? Inequal distribution of recourses by nature between countries has lead to interdependence among countries. - Countries which have surplus exports and countries which have scarcity import. This interdependence leads to international trade for. E.g England which is very rich in capital goods and has no food grains at all. - Because of this uneven distribution, England depends on Australia for its requirements of food grains and Australia depends upon England for its requirement of capital goods. - Under these circumstances England would import food grains from Australia and Export capital equipment's to Australia. - In short this international trad is beneficial to both England and Australia. - As would be evident from the above both imports and exports play an equal role in international trade. - One professor Hicks has commented and confirmed that no country in the world is self sufficient. It has to import what it does not have and export what it has abundance.
- 3. Why Import?? “Charles” economist has stated that export and import are the two wheels of the cart of international trade. If one wheel that is import is missing the cart of international trade will not be able to move further. Some economist of the European economic union feel that export is income and import as expense. According to them export should be increased and encouraged and import to be curtailed, reduced or totally abolished. They emphasized the tariff, safeguards and exchange control be imposed to restricts imports. WTO has specifically advised that countries adopting these restricted practices for restricting imports would have to face disciplinary action / penalties. WTO concluded that countries should increase their imports from undeveloped and developing countries. It was concluded that if imports are curtailed or totally abolished it would result in total disequilibrium in balance of payment and balance of trade. Resulting in heavy exchange rate fluctuation there by disturbing the entire international trade.
- 4. Key benefits of imports in international trade: To extend profit margins importing goods or raw material is one potential path toward achieving the goal. Import provides a host of benefits, including lower prices, higher quality goods and the advantages associate with international trade agreement. 1) Comparative advantage means lower price goods out of the many benefits of importing goods and raw materials, comparative advantage is the most common reason why the companies choose to import. 2) If you can get the products or materials at a considerably cheaper rate, importing is a quick and easy way to cut cost and boost your profit margins. 3) Importing can mean higher quality products – it is no secret that each country has its own strength and specialities. 4) Nearly all the governments actively support trade relation and aim to make importing easy for business. 5) The various trade agreement negotiated by a country can give you access to unique benefits that make importing easier and cost effective. 6) Foreign exchange outlay – Efficient use of foreign exchange for procuring goods not available indigenously and can be made available by imports only.
- 5. Key benefits of imports in international trade: 7) Foreign exchange outlay – Efficient use of foreign exchange for procuring goods not available indigenously and can be made available by imports only. 8) Technical knowhow facilities through import of technologies 9) Better international relations 10) Access to new market 11) Availability of improved quality 12) Better profitability Fruits of global trades: 1) Import make possible availing fruits of international global trade, we can get the best of the world through imports. 2) Import raise our standard of living. Foreign trade helps I providing a better choice to the consumers. It helps in making available new varieties to consumers all over the world. 3) We can imports French perfume, swiss watches, Chinese toys, best of the cars from Luxemburg Germany.
- 6. 4) Crude oil without which no activity in the world is possible is available only through imports from Gulf and middle east countries like…Iran, Turkey, Saudi Arabia, Egypt and UAE etc. ….. 5) Wall mart, the biggest mall and super store in the world imports / buys from around the world and gives its customer the best in the world. T his has been made possible only through imports. 6) Generate employment opportunities. 7) Because of import of capital goods and technology, a country can generate growth in all sectors of the economy i.e. Agriculture, any industry and service sector. 8) Assistance during natural calamities – During natural calamities such as earthquakes, floods, famines etc., the affected countries face the problem of shortage of essential goods. Foreign trade enables a country to import food grains and medicine from other countries to help the affected people. 9) Maintains balance of payment position – Every country has to maintain its balance of payment position. Since, every country has to import which results in outflow of foreign exchange, it also deals in export for the inflow of foreign exchange. While importing is a great idea for many businesses it is important perform carful research in order avoid costly mistake later.
- 7. Custom Department and its objectives : To handle growing international traffic properly and effectively and to make it administratively possible that all the cargo / goods / passengers etc., imported / coming into India or exported going out of the country by sea, air, land or rail routes are checked by the customs. In tune with international practice the entry / exit of carries / passengers etc. is therefore regulated in this country by law and the custom act, 1962 is the basic statue which governs / regulates this entry / exit of different categories of vessels / crafts / goods / passengers etc., into or outside the country.
- 8. Imports 1) Import documentation, it is a time complex, is an integral part of international business. 2) It is important to have good knowledge and understanding of these documents and procedure, so that there are no mistakes in it compliance. 3) Errors can result in delays in clearance of the imported consignment and penalties such as demurrage and storage charges may be applicable. 4) A set of various standard documents as per customs rules are required for clearance of import shipments. 5) To ensure smooth and quick clearance of cargo, error free documentation are essential. 6) These documents are required to be produce to customs at the time of clearance from customs. 7) In case of the custom officer has any doubts he can ask for any other papers to support the claim and clearance. Here are the list of documents: 1) Commercial Invoices 2) Pack list 3) Bill of Lading / Airway bill 4) CHA authority letter 5) Import licence if required for benefits 6) Copy of purchase order / sales order / Letter of credit 7) Insurance Policy
- 9. 8. Industrial Licence if required. 9. Test report, if required (e.g . Wires) 10. Product catalogue / Technical details 11. Certificate of origin / Non Preferential / Preferential (Concessional Duty benefit) Cargo Arrival Notice It is the notice sent by a carrier or a agent, to the consignee to inform the consignment about the arrival of the shipment. Delivery order It indicates shipping line charges which are required for Delivery order. Letter of Authority, in favour of CHA. This is an authority letter given by the consignee to customs, indicating that they are authorising a particular “CHA – (xyz name)” to clear our shipment from customs on our behalf.
- 10. What is the bill of lading? Ocean Bill of Lading Multi Modal Bill of Lading Seaway / Express / Surrender Bill of Lading A documents signed between shipper (Seller) and carrier (Shipping line / Logistics company) that details type, quantity and description of goods being carried. Seller’s shipping Agent issue 2 set of documents. 1) Original Negotiable bill of lading (Signed and stamped) – 3 copies 2) Non Negotiable bill of lading (without sign and stamped) – 3 Copies4 B/L servers main 3 functions - A RECEIPT that goods have been loaded. - Evidence of CONTRACT of carriage between shipper and carrier. - Documents of “TITLE” of the goods.
- 11. Bill of Lading issued 3 originals… 1st original must be surrender for delivery of goods at destination (Import country) Once goods are “RECEIVED”, all other B/Ls are null and void. Custom clearance of Import Cargo… 1) As per the custom manual, goods imported in a vessel / aircraft have to cross the customs barrier in the country of import, complete the customs clearance procedure and pay applicable custom duty. 2) Detailed customs clearance formalities of the loaded goods have to be followed by the importer. 3) As per the custom Act, custom station and custom authorities effectively have the same meaning. a) Custom station means customs port for ship / by sea. b) Custom airport (for airlines) c) Land custom station for trucks / motor vehicles d) Containerised cargo, the customs formalities can also be completed at ICDs (Inland container depot) or e) Special Economic Zone (SEZs)
- 12. Set up by government or approved by the government In case of goods are being taken to a customs bonded warehouse, the customs clearance formalities can be completed and applicable duty can be paid by the importer at the time of taking delivery of the cart at the warehouse The basic documents required for custom clearance is called the “BILL OF ENTRY” Every importer must file a Bill of Entry a per section 46 of the custom Act, for home consumption or warehousing in a prescribed form. Bill of comprises different copies meant for different purpose. For copies issued - Original retain by custom department. - Duplicate and third copy is meant for the importer - 4th Copy – submission to the bank for making remittance to the foreign supplier.
- 13. Examination of the import cargo - Physical examination of goods is normally done on random basis, as it is physically not possible to examine entire consignment - Based on the finding of examination of cargo by the shed appraiser, the assessing officer assess the duty. - The appraiser also verifies the importer’s declaration for correctness of entries and genuineness of the original documents. - If the goods are cleared, the shed appraiser give “out of charge”. Port Operation - The sequence of variance operations right from arrival of a ship at a port till its departure are as follows… a) Shipping line submit it “IMPORT GENERAL MENIFEST” (IGM), which is a documents giving the description of the ship’s cargo to the custom authorities at the port of destination of the cargo. b) IGM is submitted in advance of the arrival at the ship. c) The ship announces its arrival to the port authorities. d) Port Authorities request the ship to wait on high seas until a vacant berth is available at the port to receive it.
- 14. e) A pilot vessel is sent by the port authorities to high seas to escort the visiting ship to the vacant berth. f) Shipping or cargo Agents complete the paper formalities for the unloading of import cargo and loading of export cargo. g) Unloading and loading operations begin. Import cargo is unloaded and stacked at the designated area in the port premises for customs examination and further formalities. h) Export cargo, which is custom cleared is loaded on board the ship. i) After the port operations are complete, the pilot vessel escorts the ship out of the port back on the high seas.
- 15. TYPES OF RISKS 1) Commercial Risks : - Lack of knowledge about foreign market. - Inadaptability of the products - Longer transit time - Competition - Change in preference and fashion. This risks can be minimized by using forecasting techniques and by keeping carful watch on the changing business scenario in the concerned country. 2) Political Risk : - Change in political power and polices - Civil war - Wars between country (China and USA) - Captured of cargo during war - Insurance companies can agree to cover risks, if paid some additional premium.
- 16. 3. Cargo Risks: Most of cargo are transported by Sea / Air -Storm -Leakage -Fire -Explosion etc. Cargo risks can be covered by taking on insurance policy. 4. Credit Risks : Selling on credit is becoming a common business phenomenon. At the same time, insolvency rates are on the rise and many countries are suffering from balance of payment deficit. Inability of the buyers to pay on the due date. Payment in /out blocked country to county (US and China) This can be avoided by using the services of an insurance policy.
- 17. Organisation covering credit risks: In India, “The Export Risks Insurance corporation (ERIC)” set up in 1957, in order to provide export credit insurance support to Indian exporters. Its renamed “Export credit and Guarantee corporation limited (ECGC) in 1964. Its again re-named, “Export credit Guarantee corporation of India Limited in 1983. Foreign Exchange Risks: Foreign exchange risks occur when the invoice is prepared in foreign currency. If the foreign currency depreciate in terms of rupees, the exporter will receive lesser amount in rupees, and vice – versa.
- 18. QUALITY AND PRE SHIPMENT INSPECTION” The international market is highly competitive and the quality of procedure and important determinant in export and import business. One of the critical problems faced by developing countries is quality or rather lack of it. Therefore, improvements of quality is one of the pre-requisites in driving international business. Quality Control: Qc is a set of producers intended to ensure that a product or services adheres to defined quality criteria or meet the requirements of clients. It is carried by specialized agencies / councils, as per the buyers’ specification. Export inspection agency under the government. The export act 1965 deals with quality and inspections. - Consignment wise inspection - Self certification. - In process quality control – a) Raw material, b) Process control, c) Product control, d) Packaging control
- 19. Incoterms : International commercial Terms, known as incoterms, are a series of international sales terms widely used and accepted through out the world. They divided transactions cost and responsibilities between a buyers and sellers. Incoterms were devised and published by the international chamber of commerce (ICC), and endorsed by the united commission on international trade law. List of incoterms are … EXW ( EX-WORK) FOB (FREE ON BOARD) CFR / C&F (COST AND FREIGHT) CIF (COST INSURANCE AND FREIGHT) DDP (DELIVERY DUTY PAID)
- 21. Methods and Instruments of payment and pricing Incoterms While negotiating sales contract you also have to decide on the way money will be paid to you for your export and import. The best scenario would be that you get money before you make any shipment. But trade is not that simple. You also have to take steps to ensure that there is no delay or default on payment from your buyers. Any delay or default will disturb your trade cycle. So be aware and avoid complications. 1) Advance payment: - An exporter would prefer payment in advance of the shipment. A telegraphic transfer is commonly used for international remittances. - For importer advance payment tend to increase risks. - Buyers are often concerned that the items may not send if payment is made in advance.
- 22. Methods and Instruments of payment and pricing Incoterms 2) Letter of credit : A letter of credit (L/C) is often used to protect the interests of both the buyer and the sellers. When importers do not prefer to pay in advance, exporters may ask then to get a letter of credit opened by well known banks. Since payment by this methods is made on the basis of documents, all terms of payment should be clearly specified in the LC in order to avoid confusion. 3) Delivery against payments: The exporter wishes to get the payment before the importer collect the goods from the port. 4) Delivery against acceptance: The draft states that payment is due by a specific time after the buyer accepted and received the goods. Also called usance bill (Time draft) (like…30 Days after acceptance)