Import Management in International Business

Saurabh Sinha

Introduction

In economics, an import is any good (e.g. a commodity) or service brought into one country from another country in a legitimate fashion, typically for use in trade.

Import goods or services are provided to domestic consumers by foreign producers. An import in the receiving country.

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Type of imports
There are two basic types of imports:
1. Consumer goods 2. Intermediate goods and services

a. Convenience goods b. Shoping goods

c. Speciality goods

a. Installations b. Accessory equipments c. Raw materials d. Fabricated parts and materials e. Industrial Supplies
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1. Starting Imports

1. Starting an import business is a goal of more than thousands of merchants and businessman. 2. The long term success and profitability of an import business greatly depends on the importers knowledge and understanding about the international market and foreign market analysis. 3. Today, importing goods from abroad has becomes a big business. Millions of products are bought, sold, represented and distributed somewhere in the world on a daily basis
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Reasons for Import

1. Availability For example: Bananas in Alaska, Mahogany Lumber in Maine and Ball Park franks in France 2. Cachet For example: Scandinavian furniture, German beer, French perfume, Egyptian cotton 3. Price For example: Korean toys, Taiwanese electronics Mexican clothing

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Import in India

The rising middle income groups of consumers in India and their increasing levels on expenditure on various products has resulted a faster rising demand of the Indian import business.

Total import from India estimated to be around US$ 41779 million in sept.2012. India is a bulk importer of edible oil, sugar, pulp and paper, newsprint, crude rubber and Iron and steel.

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Import Regulatory Body

In India, all the activities related to import are handled by the Directorate General of Foreign Trade (DGFT), a government organisation that also controls the export business in India. DGFT and all its regional offices work under the Ministry Commerce and Industries, Department of Commerce, Government of India.

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2. Preliminaries for Starting Import Business

Starting an import business needs a proper guidelines and understanding of the foreign market. Before starting an import, it is also important for an importer to obtain all the necessary information in matters associated with foreign trade agreement. Starting an import is not a get-richquick-scheme.
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Selecting the Market

Proper selection of the commodity market is an important factor before starting an import. The right market can be selected by answering the following the following questions. a) Is the product(s) an importer need to conducting his business available domestically?

b)
c)

Is there a lucrative and untapped domestic market for an imported product?

Does importing a product increase competitiveness as a business?
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Continued
While making the import plan, importer of India must evaluate the various government policies and guidelines including the rules and regulation as mentioned in the Foreign Trade Policy Procedures.

An importer is always free to import goods in India provided that such goods are imported under the regulations of ITC- HS ( Indian Trade Clarification based on Harmonized System of Coding) Classifications of Export Import items. ITC-HS codes are divided into two schedules. All the rules and regulations related to the Indian import is mentioned in the Schedule I of the ITC.
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State Trading Corporation of India

There are certain goods that can be only imported outside the country through a recognize agency. State Trading Corporation of India is also one of them that import a number of essential commodities to cover the domestic shortfalls and hold the price line.
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.The STC is responsible for the import of goods such as vanaspati and edible oils, pulses, hydrocarbons, metals and minerals and fertilizers.

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3. Registration for Importers

Surrender of IEC No.

Registration of importer is a pre-requisite for import of goods. The Customs will not allow clearance of goods unless the importer has obtained IEC ( Importer Exporter Code) number from issuing authority. In India, IEC number or Importers Exporters Code is issued by the DGFT.

Any importer who doesnt want to continue his import business may surrender the IEC number to the issuing authority.

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Guidelines and Rules for Import Business

The various rules and guidelines in respect of various commodities and category of importers are mentioned in the following publications issued by the Ministry of Commerce, Government of India and revised from time to time:

1.

Export- Import Policy

The Government of India notifies the Exim Policy for a period of five years under Section 5 of the Foreign Trade (Development and Regulation Act). The Export Import Policy is updated every year on the 31st of March and the modifications, improvements and new schemes became effective from 1st April of every year.
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2.

SION (Standard Input Output Norms )

SION in short is standard norms which define the amount of input/inputs required to manufacture a unit of output for export purpose. Input output norms are applicable for the products such as electronics, engineering, chemical, food products including fish and marine products, handicraft, plastic and leather products etc.

The Directorate General of Foreign Trade (DGFT) from time to time issue notifications for fixation or addition of SION for different products.
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3.

ITC- HS Codes (Indian Trade Clarification based on Harmonised System of Coding )

Coding was adopted in India for import-export business.

Harmonized System codes are divided into two schedules. Schedule I describe the rules and guidelines related to import policies where as Schedule II describe the rules and regulation related to export policies.

Schedule I of the ITC-HS code is divided into 21 sections and each section is further divided into chapters. The total number of chapters in the schedule I is 98.
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4. Selection of Overseas Exporters and Suppliers

Selecting an overseas exporter raises a number of issues for the importer such as language differences, payment methods and increased paperwork requirements. The various factors required for consideration of an overseas exporter or supplier and the methods for selecting overseas suppliers.
1. Legal considerations An importer should consider the following factor before import. Whether there are import or restricted trade at either end of the transaction. Whether technical standards in supplier's country meet Indian requirements. Who is liable if a product causes harm or loss? Who bears insurance costs at each stage of transit?
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2. Other considerations

There is a range of other factors that an importer should bear in mind:

Payment methods for international trade transactions are an Language differences import issue for are important. It's not import. So, importer just a matter of must take a proper care while selected a communication make sure any payment methods labelling or other such as Letter of printed materials are Credit (Documentary Credit, or Lc), error-free. Documentary Collection, Advance Payment Receipt.

Understanding the business and social practices of supplier's country can help build trust and develop relationships.

Some goods attract a preferential rate of duty, so you need to check where your supplier's raw materials have come from.

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3. Capability of Overseas Supplier

Properly verify the foreign exporter before entering into a contract with the exporter.

Confidential information about the exporter may obtain through the banks and Indian embassies abroad.

4. Sources of Information a) Trade Directories and Yellow pages, like Singapore yellow pages, Japan yellow pages, USA yellow pages etc. available from leading booksellers in India. b) Consulate Generals and Trade Representative of various countries in India and abroad. c) Chambers of Commerce as per addresses. d) Directorates of Industries, etc. e) Indenting Agent of Foreign Suppliers. f) International Trade Fairs and Exhibitions
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6. Finalizing the Terms of Import Once importer is satisfied with the sample and the creditworthiness of the overseas exporter, importer can proceed further to finalization the terms of the import contract. Imports contract need to be carefully and comprehensively drafted incorporating there in precise terms, all relevant conditions of the trade deal (like, mode of payment, type of packaging, port of shipment, delivery schedule, replacement of defective goods supplied, after sale services/warranty coverage etc.).
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5. Import License and IEC Code (Importer Exporter) Number

In India, Import License is issued by the Director General of Foreign Trade. DGFT Delhi office is situated in Udyog Bhawan, New Delhi 110011.

* Validity of Import License

Import Licenses are valid for 24 months for capital goods and 18 months for raw materials components, consumable and spares, with the license term renewable.

* Sample of Import License

a) b) Foreign Exchange Control Copy Customs Copy
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Freely importable items

Licensed Imports

Categories of Import Canalised Items

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Prohibited items
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Canalised Items
There are certain canalised items that can only be importer in India through specified channels or government agencies. These include petroleum products (to be imported only by the Indian Oil Corporation); nitrogenous phosphatic, potassic and complex chemical fertilizers (by the Minerals and Metals Trading Corporation) vitamin- A drugs (by the State Trading Corporation); oils and seeds (by the State Trading Corporation and Hindustan Vegetable Oils); and cereals (by the Food Corporation of India).

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Custom Inspection
Any violation in the import license is usually scanned by the custom officials of the custom department. Custom inspector and other custom officials have authority to inspect and evaluate the goods to be imported. Its a part of their job to determine whether imports conform to the description in the import License or not. Custom official even have right to charge fines and penalties if any violation in the import license is found to be done by the importer.
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Import Trade Governing Bodies

Ministry of Commerce and Industry
a) Department of Commerce b) Department of Industrial Policy & Promotion

Directorate General of Foreign Trade (DGFT)

Central Board of Excises Customs (CBEC) under Ministry of Finance
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6. Import samples
* The import samples are basically specimens of the product, which is finally given
to the importer. It may include consumer goods, consumer durables, prototypes of engineering goods or even high value equipment, machineries (including agricultural machinery) and their accessories. Import of samples can be done by the trade, industry, individuals, Companies, Associations, Research Institutes or Laboratories.

Geneva Convention, 1952

* Import of samples of goods is exempt from import duties under Geneva Convention of 7th November, 1952. India is also a signatory to a 1952 convention to facilitate the Importation of Commercial samples and Advertising materials.
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 Restriction on Import of Samples

However, goods which are prohibited under Foreign Trade (Development and Regulation) Act, 1992 are not allowed to be imported as samples e.g. wild animals, wild birds and parts of wild animals and birds, ivory, arms & ammunitions, and Narcotic drugs.
Value limit

For duty free clearance the value of individual sample should not exceed Rs.5000/- and aggregate value should not exceed Rs.60, 000/- per year or 15 units of samples in a year.
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 Machinery import

Import of machinery products, which are prototypes of engineering goods can also be imported duty free if the value does not exceed Rs.10000/-.

* Privacy of Import Samples

In case of high valued machinery the importer can import a sample under privacy. On the request of importer, the Customs authority may also seal the machinery during its journey from the port of importation to the place of demonstration and it is unsealed only at the place of operation or place of demonstration.
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 Finalizing Terms of Import

Once an importer is satisfied with the product sample and creditworthiness of the supplier or exporter, the he can proceed to finalise the terms of the import contract. At this stage importer need to draft the contract terms and conditions very carefully and comprehensively. There should not be any ambiguity regarding the exact specifications of the goods and terms of the purchase including import price, mode of payment, type of packaging, port of shipment, delivery schedule, replacement of defective goods supplied, after sale services/warranty coverage etc.

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The different aspect of an import contract is enumerated as under some of which may be relevant and other may not be:
Product Specifications Product Standards Quantity Inspection Terms of Delivery Terms of Payments Import License and Import Permits Duties and Charges Periods of Delivery /Shipment Packing, Labeling and Marketing Insurance Saurabh Sinha

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7. Custom Import Duty on Importing Goods

The concept of import duty is very wide and is almost applicable to every product or item imported to India barring a few goods like food grains, fertilizer, life saving drugs and equipment etc. Import duties form a significant source of revenue for the country and are levied on the goods and at the rates specified in the Schedules to the Customs Tariff Act, 1975.

Basic duty Additional customs (Countervailing duty or C.V.D )

Special additional duty

Anti-Dumping Duty
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8. Import Risk

Transport Risk

Quality Risk

Import Risk Delivery risk

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Exchange Risk
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9. Methods of Payments in Import

Consignment Purchase

Cash-inadvance (Pre payment)

Down Payment

Open Account

Documentary Collection

Letters of Credit

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10. Import documents

Import documents shall be submitted to the director of customs in the customs district where the goods are unloaded from the vessel, unless the goods are transported undeclared to another customs district and arrangements are made for customs treatment there.
The following documents shall be submitted with an import declaration a) b) c) d) e) f) g) an invoice a bill of lading or a transport document a bill covering freight charges a certificate of origin Packing List Insurance Certificate/Policy Other documents (e.g. an import licence)
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Invoices
Invoices shall contain the following information:
a) name and address of the seller (consignor), b) name and address of the buyer (consignee), c) place and date of issue, d) when the sale took place, e) number of pieces, type of packing, weight, marks and numbers, f) the goods contained in a consignment, type, make and quantity (number, weight or measurements, as the case may be),

g) the selling price of individual articles and the currency in which the price is specified,
h) terms of payment, payment conditions and delivery conditions, discounts and other deductions and the reasons for granting such discounts or making such deductions. Saurabh Sinha 34

11. Import Personal Baggage

In general a personal import is a direct purchase of foreign goods from overseas mail order companies, retailers, manufacturers or by an individual for the purpose of personal use.
Direct Personal Import Indirect Personal Import
An importer himself/herself places orders to foreign mail order companies, retailers or manufactures and imports directly from them. An importer places orders to an import agent and imports goods via the agent.

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In any case, since personal import is direct trade or importing any good in India, a buyer must check the item in the ITC-HS code in order to know weather the item is free to import, restricted or prohibited.

Importance of Import Export Code Number or IEC number is not required IEC Number for import of items for for Personal personal use. Import
While travelling passengers are allowed to carry certain items with them, which are governed by the Baggage Rules 1998. Baggage Rules contain separate concessions for resident tourist and person transferring their residence to India.
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Import of Baggage

Items that can not be Imported for Personal Use

Vegetables and seeds exceeding one pound

Tea

Books, magazines, journals and literature

Items which has been canalized under the Indian Exim Policy (2007) or Foreign Trade Policy.

Arms and ammunitions

Consumer electronic items, except hearing aid and other life saving equipments
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12. Import of Gifts

The Government has exempted gifts items received from foreign country to persons residing in India from the whole of custom duty under Foreign Trade Act. In the present scenario, import of goods up to the value of Rs. 5,000/- is allowed as gift,

duty free. It is important to note that the value of Rs. 5,000/- is the value of the
goods in the country from where the goods have been dispatched. The sender may not necessarily be residing in the country from where the goods have been

dispatched.

Who can send the gifts?

Business associated, friends, relatives, companies or acquaintances can also send the gifts to the people living in India.
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Custom Clearance Permit of Imported Gifts

Application Procedure for Custom Clearance Permit (CCP) An application for the grant of CCP for an item which is otherwise restricted or prohibited in the ITC-HS Classification may be made to Director General of Foreign Trade supported by the following documents:

Applicant's request on his companys letter head or plain paper duly signed with all the details. Donor's letter in original duly signed and indicating his name, address and the purpose of offering gift.

Bank Receipt in original in duplicate/ Demand Draft / EFT details towards payments of application fee at the prescribed rate.

Self certified copy of Performa invoice.

Any other relevant document which applicant would like to enclose.

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13. Import Cars and Commercial and Non Commercial Vehicles

Exim policy of India is quite strict in matters related to import of vehicle. Apart from the heavy custom duty on the automobile, the Exim policy of India also states: that the Vehicle should not be

* manufactured/ assembled in India, * not been sold, leased or loaned prior to being imported to India; * should have been registered for use in any country prior to being imported to India.

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14. Import Gold and Silver by NRI

Reserve Bank of India has granted general permission to persons of Indian nationality or origin to bring into India a limited amount of gold and silver. However, import of gold and silver is govern by certain rules and regulation.

Import of Gold

A NRI who has been residing in a foreign country for over one year and is returning to India may be allowed to import jewellery without paying any custom duty in his use up to an aggregate value of ten thousand rupees in the case of a male passenger. In case of a female passenger, an individual can import gold of up to rupees twenty thousands.

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Import of Silver

A Non Resident Indian can import silver in any form up to 100 kilos at a time provided he is coming to India after 6 months stay abroad. Duty is payable @ Rs. 500/- per Kilo.

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15. Statistical Data of Inadia about Import (Values in Rs. Lacs)

Import with 228 countries
Country
CHINA USA

2010-11
19807907.58 9135850.32

2011-12
27599864.35 14934999.18

GERMANY
AUSTRALIA JAPAN SOUTH AFRICA RUSSIA BRAZIL ISRAEL

5413601.64
4918755.83 3930930.77 3252514.22 1641666.08 1606429.86 1026344.81
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7809529.21
7130386.00 5814288.32 4765721.23 2238375.17 2065962.78 1240862.57
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16. Custom Clearance of Imported Goods

All goods imported into India have to pass through the procedure of customs for proper examination, appraisal, assessment and evaluation. This helps the custom authorities to charge the proper tax and also check the goods against the illegal import. Also it is important to note that no import is allowed in India if the importer doesnt have the IEC number issued by the DGFT.
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Various ways of customs clearance of imported goods

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17. Dos and Don't in Imports Dos

Open LC or import transactions only for customers and open only if the party has got sanction limit.

Allow payment for import by debit to customers account.

Verify the imported items under the LC.

Allow import of restricted items as per procedure laid down in the Exim Policy.

Allow payment for the bills beyond six months and also allow payment of overdue interest on sight bills for a period not exceeding six months.

Issue amendments to LC only on the basis of written request.

Handover import documents only to drawee or his PA holder against property acknowledgement.

Allow payment to local agents on commission basis. In case of overseas agent, allow commission as per FEMA guidelines
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Verify whether the payment method in Letter of Credit is done as per FEMA guidelines or not.
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Dos Continued
In case of default payment, crystallise the bill on 10th day of the month. Sell the imported goods, only after getting permission from ITC authorities.

Allow import provided goods are consigned to bank account opener.

Report to the RBI (Reserve Bank of India) if the bill of entry is not received.

Keep one copy of shipping documents, invoice and other papers for future inspection by the custom inspector or the Reserve Bank of India.

Insist for insurance cover at the time of opening the LC.

Sell the imported goods, only after getting permission from ITC authorities.

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Donts
1. Issue the Letter of Credit if the customer doesnt have IEC number 2. Open LC without proper transport documents 3. Allow advance payment without proper documentation 4. Forward the documents to third party without permission from the importer 5. Import prohibited or restricted items without import license.
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Donts Continued

6.

Allow direct remittance of import bills beyond the limit and without EC copy of bill of entry

7.

Open revolving LC without safety clause

8.

Amendments to the Letter of Credit for import of those items which is either restricted or prohibited 9. Allow import documents received under collection paid without verifying importers line of business and financial standing
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18. Advantages and Disadvantages of Imports

ADVANTAGES

Comparative advantage means lowerpriced goods

Importing can mean higherquality products

Various benefits stemming from trade agreements

Importing grants access to regionally exclusive resources

Many governments actively support trade relations and aim to make importing easy for your business
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DISADVANTAGES Decreases the number of available jobs

Increases risks of other diseases Loss of foreign reserves
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