Import Procedure

Import trade is the purchase of goods from a foreign country. The procedure varies from country to country depending on import and customs policies and other statutory requirements. A typical import transaction for bringing goods into India involves the following steps.

1. Trade enquiry — The importer first gathers information about the countries and firms that export the required product, using trade directories, trade associations and organisations. It then approaches the export firms with a trade enquiry — a written request for information on price and terms of export. In reply, the exporter sends a quotation known as a proforma invoice, giving the quality, grade, design, size, weight and price of the product and the terms of export.

2. Procurement of an import licence — Some goods can be imported freely, while others need a licence. The importer consults the Export Import (EXIM) policy in force to check whether the goods need licensing, and if so procures an import licence. In India, every importer (like every exporter) must register with the DGFT or Regional Import Export Licensing Authority and obtain an Import Export Code (IEC) number, which is quoted on most import documents.

3. Obtaining foreign exchange — Since the overseas supplier wants payment in foreign currency, Indian currency must be exchanged for it. In India all foreign-exchange transactions are regulated by the Exchange Control Department of the RBI. The importer applies, in a prescribed form and along with the import licence, to a bank authorised by the RBI; after scrutiny, the bank sanctions the required foreign exchange.

4. Placing order or indent — The importer places an import order (indent) with the exporter for the specified goods, stating the price, quantity, size, grade and quality, and instructions on packing, shipping, ports of shipment and destination, delivery schedule, insurance and mode of payment. It must be carefully drafted to avoid ambiguity and later disputes.

5. Obtaining a letter of credit — If payment is to be by letter of credit, the importer obtains it from its bank and forwards it to the overseas supplier. A letter of credit is a guarantee from the importer's bank that it will honour export bills up to a certain amount — the most secure method of settlement, giving the exporter assurance against non-payment.

6. Arranging for finance — The importer arranges finance in advance to pay the exporter when the goods arrive. Advance planning avoids heavy demurrage (penalties) on goods lying uncleared at the port for want of payment.

7. Receipt of shipment advice — After loading the goods, the overseas supplier sends a shipment advice informing the importer that the shipment has been made. It gives details such as the invoice number, bill of lading/airway bill number and date, name of the vessel and date, port of export, description and quantity of goods, and the sailing date.

8. Retirement of import documents — The supplier prepares a set of documents as per the contract and letter of credit and hands them to its banker for transmission to the importer. The set usually contains the bill of exchange, commercial invoice, bill of lading/airway bill, packing list, certificate of origin and marine insurance policy. The accompanying bill of exchange is a documentary bill of exchange, again of two types:

   • Sight draft (documents against payment) — the bank hands over the documents only against payment.
   • Usance draft (documents against acceptance) — the bank hands over the documents against the importer's acceptance of the bill. Getting delivery of the documents by accepting the bill of exchange is called the retirement of import documents; the bank then releases the documents to the importer.

9. Arrival of goods — The supplier ships the goods as per contract. The person in charge of the carrier informs the officer in charge at the dock or airport of the arrival, providing an import general manifest — a document listing the imported goods, on the basis of which the cargo is unloaded.

10. Customs clearance and release of goods — All imported goods must pass customs clearance, a lengthy process, so importers usually appoint a C&F agent familiar with the formalities. The main steps are:

    • Obtaining a delivery order (endorsement for delivery) — the shipping company endorses the back of the bill of lading or issues a delivery order entitling the importer to take delivery (after paying freight, if not already paid by the exporter).
    • Paying dock dues — the importer submits two copies of an "application to import" to the Landing and Shipping Dues Office, which levies a charge; one copy is returned as a port trust dues receipt.
    • Filling in a bill of entry for assessment of customs import duty. An appraiser examines the documents and gives an examination order; the importer pays the duty.
    • The bill of entry is presented to the dock superintendent, an examiner physically examines the goods and gives a report on the bill of entry.
    • The importer (or agent) presents the bill of entry to the port authority, which, after receiving its charges, issues the release order for the goods.

Major documents used in an import transaction

• Trade enquiry — a written request by the importer for information on price and terms of export.
• Proforma invoice — a document giving the quality, grade, design, size, weight and price of the product and the terms of export.
• Import order or indent — the buyer's order for supply of goods, stating quantity, quality, price, method of forwarding, packing and mode of payment.
• Letter of credit — a guarantee from the importer's bank to the exporter's bank to honour export bills up to a certain amount.
• Shipment advice — sent by the exporter to inform the importer that the goods have been shipped (with invoice number, bill of lading/airway bill number and date, vessel and date, port of export, description and quantity, and sailing date).
• Bill of lading — signed by the ship's master, acknowledging receipt of goods on board and the terms of carriage to the destination. …