Question

Define import trade. Explain its procedure in detail.

Answer 1

Import trade refers to buying of goods and services from another country or countries i.e. a foreign country. The procedure of import trade varies from one country to another country depending upon the policy implemented in that country. The import of goods and services is controlled by the government in most of the countries India follows the following import procedure, which is divided into four stages.

[A] 1st Stage: Preliminary Stage:

1. Registration: In order to carry out import, the importer has to get himself registered with the authorities given below:
   (I) Director General Foreign Trade (DGFT) in order to get an Import-Export Certificate Number
   (II) The Income Tax department to obtain Permanent Account Number.
   (III) To carry out GST formalities.
2. Negotiation or Trade enquiry: The importer must collect information from overseas suppliers regarding the goods he wants to import of a product. It contains details like
   (a) Price (b) Delivery schedule, (c) Credit period, and (d) Terms and conditions of sale, payment, and delivery.
   

[B] 2nd Stage: Pre import Stage:

1. Import License / Quota Certificate: The Export-Import (EXIM) Policy of our country indicates which goods need a license for the import and which can be imported freely. For goods that require a license, the importer should get a quota certificate and acquire the license. At the time of importing goods, the IEC number is to be mentioned.
2. Foreign Exchange Clearance: The exporter has to be paid in foreign exchange by the importer as he resides in a foreign country. For this, the Indian currency has to be exchanged for foreign currency. This is done by the Exchange Control Department of the Reserve Bank of India (RBI). The importer has to get the foreign exchange sanctioned. For this, he applies in a prescribed form to a bank authorized by RBI. After scrutiny of the documents, the necessary foreign exchange is sanctioned.
3. Placing an Order: Once the foreign exchange clearance is obtained from RBI the importer places an import order with the exporter for the supply of goods. This order contains information on all aspects relating to the goods to be imported. These include quality, quantity, size, grade, price, packing and shipping, ports of shipment, insurance, delivery schedule, and modes of payment. This order is called an indent.
4. Letter of Credit: If the exporter agrees to a letter of credit, then the importer obtains it from his bank and forwards it to the exporter. It minimizes the risk of non-payment for the exporter At the same time the importer should arrange for sufficient funds to be paid on delivery of the goods.
5. Clearing and Forwarding Agent: The importer then appoints C & F agent to look after the various customs formalities and documentation work With respect to the import of goods.
6. Shipment Advice: Once the goods are loaded on the vessel, the exporter sends shipment advice to the importer. This document contains details about the goods, invoice number, bill of lading and name of the vessel, the port of export, and date of sailing of the vessel. This will help the importer with custom clearance and unloading of goods.
   

[C] Stage: Import Stage:

1. Receipt of Document: The importer receives the documents sent by the exporter through his bank. They are as follows Bill of Lading, Certificate of Origin, Certificate of Inspection, Packing List, Commercial Invoice, etc.
2. Bill of Entry: The clearing and forwarding agents, then prepare a bill of entry. This bill is presented to the dock superintendent for the release of goods. The bill of entry has details like the number of packages, quality of goods, and price of goods.
3. Delivery Order: For taking delivery of the goods a delivery order is needed. This is obtained from the shipping company by the C & F agent. Once this is received the freight charges are paid and goods are allowed to be unloaded from the ship.
4. Customer Clearance: The importer has to present the Bill of Lading, Bill of Entry and Packing List to the customer authority who will certify it and give customs clearance.
   

[D] 4th stage: Posts Import Stage:
The various duties that have to be paid in order to take the goods out of the port are:

1. Port Trust Dues: The clearing and forwarding agent has to make the payment of port trust dues.
2. Customer Duty: Also paid by the clearing and forwarding agent to the customs authorities.
3. Insurance Premium: Under the FOB (Free of Board) impact, the importer has to make the payment of Insurance Premium.
4. Payment of Freight: The shipping contract will lay down the amount of freight to be paid and it has to be paid by the importer for getting clearance of goods.
5. Exporters Payment: The exporter draws a bill of exchange on the importer according to the terms and conditions of the contract.
6. Follow Up: It is the duty of the importer to take a follow-up of the goods. If there are any discrepancies in the Order or goods it has to be intimated to the exporter. Thus, the procedure of importing goods comes to an end.