STRATEGIC PURCHASE
Kamlakar Gadegaonkar
16th FEB , 2019
Pillai’s HOC Institute of Management ,
Rasayani
IMPORT DEFINITION & STATS
A commodity , article or service brought in the country from abroad are called as imports .
2018 value : $ 45 bn ( 25% higher than 2017 Value )
Crude oil import : $12 bn ( 51% higher in $ terms over 2017 )
Note : oil prices increased by 41% in same period .
Precious metals ( Gold / platinum ) : 14%
Electrical machinery / Equipment – 10%
Nuclear reactors/ Boilers/ machinery – 8%
Organic Chemicals- 4%
Import partners
China : 16%
US – 6%
UAE : 6%
Saudi Arabia – 5%
Switzerland – 5%
WHY IMPORT?
Indians mainly import for following reasons
• Not available in India ( E.g. Oil )
• New product launch in the market
• Reducing costs by bringing in cheaper goods from outside
• Become leader in the industry ( import new product / technology before competition e.g. i-
phone )
• High quality products imported ( Inferior quality in India at times )
TYPES OF IMPORTS
• Industrial & consumer goods
• Intermediate goods and services
Imports can also be classified as below
• Freely imported items
• Licensed imports
• Canalized items ( import / export is restricted. license is required before
importing and import is allowed only through a canalizing agency
nominated in the negative list e.g. DRDO importing Uranium for nuclear
reactors )
• Prohibited items ( import/ export not allowed. E.g. wild animals , exotic
IMPORT INCIDENCE
CFL – Customs Frontier Line
Port ISL – Indian shore line
Open Sea
CBL – customs barrier Line
12 Nautical Miles
CBL
ISL
CFL
Import incidence occurred when the goods cross CFL .
This results in duty liability .
Goods can be cleared beyond CBL only by paying the duty .
PROCEDURES & DOCUMENTS
• Registration for imports
To import or export in India, IEC Code is mandatory
An application for grant of IEC number from Regional Authority of Directorate General Foreign Trade.
IEC Code Online Application Form
Application Fee
Profile of Importer
PROCEDURES & DOCUMENTS
PAN Number
Current Bank Account
Bankers Certificate
IEC Code Number Application Fee Rs. 250/-
The physical application containing required documents should reach DGFT RLA concerned within 15 days of
its online submission.
E-mail is not mandatory.
IMPORT LICENSE
Importers must apply for an import license using the
exporter's pro-forma invoice.
Issued by the 'Office of Chief Controller of imports & exports
Validity of Import License
sample of Import License
€ Foreign Exchange Control Copy
€ Customs Copy
CHECK LIST OF DOCUMENTS FOR IEC CODE
Covering Letter
Two copies of Aayaat Niryaat NF form
Part 1 & Part 4 to be filled by applicants.
Self certified copy of PAN issuing letter or PAN (Permanent Account Number) Card
issued by Income Tax Authority.
Self addresses envelope with Rs.25/- postal stamp
DOCUMENTS TO BE SUBMITTED BY IMPORTER –
Invoice
Packing list
Bill of lading/ Delivery Order
Letter of credit
Certificate of Origin
Import license, etc.
PROFORMA INVOICE
• A Proforma invoice is a quote in an invoice format that may be required
by the buyer to apply :
ø for an import license,
ø contract for pre-shipment inspection,
ø open a letter of credit or
ø arrange for transfer of hard currency.
PRE SHIPMENT INSPECTION
It is the practice of employing specialized private companies to check shipment details
PSI helps to:
ŧ detect over-invoicing to prevent unjustified transfer of foreign exchange abroad;
ŧ determine the classification and valuation of goods; and
ŧ ensure the correct collection of import duties and taxes by Customs authorities
SHIPPING DOCUMENTS:
₫ Commercial invoice:
₫ A document prepared by the seller to inform the buyer how much he knows for the goods
and services being supplied.
₫ Packing list:
₫ The packing list is an extension of the commercial invoice, as such it looks like a
commercial invoice.
LETTER OF CREDIT
Promises to Pay
Instead of Importer Exporter
With a Promises to Pay
Letter of Importer Bank Exporter
Credit
LETTER OF CREDIT
• The bank puts itself in the middle between the buyer and
the seller
• Exporter likes it because it reduces the risk of
noncompletion. Even if there are foreign exchange
blockages the exporter is more likely to get paid since
banks have more access to foreign exchange than most
companies.
LETTER OF CREDIT
• Issued by a bank at the request of an importer
• The bank promises to pay a beneficiary (usually the exporter or
the exporter’s bank) after receiving certain documents specified
in the Letter of Credit
LETTER OF CREDIT - CONTINUED
• Exporter may also get pre-export financing easier
• Importer will often not have to pay until the bank receives the
proper documents and all conditions stated in the LC have been
satisfied.
• Disadvantage – Cost to the importer
MANUFACTURERS CERTIFICATE
CERTIFICATE OF ORIGIN
CERTIFICATE OF WEIGHT
CERTIFICATE OF QUALITY
CERTIFICATE OF INSPECTION
CLEARANCE DOCUMENTS
• AIR WAYBILL
The air waybill is used for the air shipment which serves as:
documentary evidence of the conclusion of a contract of carriage
proof of receipt of the goods for shipment
an invoice for the freight
a certificate of insurance
guide to airline staff for the handling, dispatch and delivery of the consignment. .
MAIN INSTRUMENTS IN EXPORT-IMPORT
• Letter of Credit
• Draft or Bill of Exchange
• Bill of Lading
• There are some open account transactions especially between related companies and
companies that trade frequently with each other
BILL OF LADING
‽ A bill of lading is used for the sea shipment.
It is:
¥ A certificate of ownership to the goods.
¥ A contract
¥ A formal, signed receipt
¥ Clean bill of lading
IMPORT GENERAL MANIFEST NUMBER
The shipping line has to give a detailed report of all the goods on board in a report
known as "Import General Manifest“
Import manifest is required to be submitted before arrival of aircraft or vessel
Grant of Entry Inwards by Customs Officer
BILL OF ENTRY
It is a document certifying that the goods of specified description and value are entering
into the country from abroad.
The Bill of entry-different copy meant for different purposes with different colour.
Bill of Entry for home consumption:
Bill of Entry for Warehouses
Bill of Entry for Ex-Bond Clearance
IMPORT DECLARATION:
• Importers must provide an Import Declaration in the prescribed bill of entry format,
disclosing the value of the imported goods.
INCOTERMS
INCOTERMS
Ex-work
Free on Rail (FOR)/Free on Truck (FOT)
Free Alongside Ship (FAS)
Free on Board (FOB)
Cost and Freight (C & F)
Cost Insurance Freight (CIF)
HSN ( HARMONIZED SYSTEM NOMENCLATURE )
• The full form of HSN means Harmonized System Nomenclature.
•
This post explains about HSN codes classification in to two digit HSN code, 4
digit HSN codes, 6 digit HSN codes and 8 digit HSN Code number.
•
HSN code number is widely used in many countries to classify goods for taxation
purpose, claiming benefits etc. Harmonized System of Nomenclature number for
each commodity is accepted by most of the countries and the said HSN code
remains same for almost all goods. However, HSN number used in some of the
countries varies little, based on the nature of goods classified.
•
In India, when implementing GST, all goods are classified based on HSN number
for GST purpose. At present, HSN number is mainly used for classifying goods to
compute Value Added Tax in India. The same classification code (HSN) is
adopted for classifying Goods and Service Tax, GST.
Thank you &
Wish you a very
