i) Trade interrogation

The importer should declare in the inquiry all the informatiom the goods required, their description,
catalog number or grade, size, weight, and the quantity required. Similarly, the time and method of
delivery, method of packing, terms, and conditions regarding payment should also be indicated.

In reply to this inquiry, the importer will receive a quotation from the exporter, which is generally known
as Pro-forma Invoice (P.I.). Quotation contains the details of the goods available, their quality, etc., the
price at which the products will be supplied and the terms and conditions of the trade.

(ii) Sourcing Finance to open import L/C

The importer needs to arrange for obtaining the required foreign exchange since the importer has to
make payment for the imports in the exporting country's currency. The importer has to submit an
application in the prescribed form along with the import license to any exchange bank as per the
provisions of the Foreign Exchange Control Act and foreign exchange guidelines and gets the necessary
foreign exchange from the exchange bank concerned.

(iii) Giving the order through forwarding L/C:

After the initial formalities are over and the importer has obtained the required amount of foreign
exchange, the next step in importing goods is that of placing the order. It includes the directions from
the importer as to the quantity and quality of goods required, method of forwarding them, nature of
packing, mode of settling payment and the price, etc. Generally, foreign traders are not acquainted with
each other, so the exporter before shipping the goods wants to be sure about the importer's
creditworthiness. The exporter wants to be sure that there is no risk of non-payment. Usually, for this
purpose, he asks the importers to send a letter of credit to him.

(iv) Necessary Documents:

After dispatching a letter of credit, the importer has not to do much. On receipt of the letter of credit,
the exporter arranges for the shipment of goods and sends Advice Note to the importer immediately
after the shipment of goods. An Advice Note is a document sent to a purchaser of goods to inform him
that goods have been dispatched. It may also indicate the probable date on which the ship is expected
to reach the port of destination. The exporter then draws a bill of exchange on the importer for the
invoice value of goods. The shipping documents such as the bill of lading, invoice, insurance policy,
certificate of origin, consumer invoice, etc., are also attached to the bill of exchange. A documentary bill
of exchange is forwarded to the importer through a foreign exchange bank.
There are two types of documentary bills:

(a) D/P, D.P. (or Documents against payment) bills.

(b) D/A, D.A. (or Document against acceptance) bills.

If the bill of exchange is a D/P bill, then the documents of the title of goods are delivered to the drawee
(i.e., importer) only on the bill's payment in full. D/P bill may be sight bill or usance bill. In the case of
sight bill, the payment has to be made immediately on the bill's presentation. However, usually, a grace
period of 24 hours is granted.

Usance bill is to be paid within a particular period. If the bill is a D/A bill, then documents of title of
products released drawee on his acceptance of the bill and retained by the banker until the date of
maturity. Usually, 30 to 90 days are provided for the payment of the bill.

(vii) Customs Formalities and Clearing of Goods:

After receiving the documents of title of the goods, the importer's only concern is to take delivery of the
goods, when the ship arrives at the port and to bring them to his place of business. The importer has to
comply with many formalities for taking delivery of goods. Unless the following mentioned formalities
are complied with, the goods lie in the custody of the Custom House.

(a) To receive approval for delivery or delivery order:

When the ship carrying the goods arrives at the port, the importer must first receive the approval on the
back of the bill of purchase by the shipping company. This approval of the delivery order will allow the
importer to take the delivery of the goods.

The shipping company issues the delivery order only after the payment of freight. If the exporter has not
paid the freight, i.e., when the bill of lading is marked freight forward, the importer has to pay the
freight to get a green signal for the delivery of goods.
(b) To pay Dock dues and obtain Port Trust Dues Receipts:

The importer has to submit two copies of a form known as 'Application to import’. This office charges on
all imported goods for services rendered by the dock authorities connected with the shipment of goods.
After paying the required, the importer receives back one copy of the application to import as a receipt
'Port Trust Dues Receipt'.

(c) Bill of Entry:

The importer will then fill in a form called the Bill of Entry. This is a form supplied by the customs office
and is to be filled in triplicate. The bill of the entry contains the particulars regarding the name and
address of the importer, the name of the ship, packages number, marks, quantity, value, description of
goods, the name of the country wherefrom goods have been imported and custom duty payable.

(d) Bill of Sight:

If the importer is not in a position to supply the detailed particulars of goods because of the insufficiency
of information supplied to him by the exporter, he has to prepare a statement called a bill of sight. The
bill of sight contains only the information possessed by the importer along-with a remark that he is not
in a position to give complete information about the goods. The bill of sight lets him open the package
and examine the goods in the presence of a customs officer to complete the bill of entry.

(e) To pay Customs or Import Duty:

There are three types of imported products

(i) Non-dutiable or free goods,

(ii) Goods which are to be sold within the country or which are for home consumption, and

(iii) Re-exportable goods, i.e., goods meant for re-export. If the goods are duty-free, no import duty is to
be paid at the customs office.
Custom authorities will permit the delivery of such goods after the usual examination of the goods.
However, if the goods are liable for Duty, the importer has to pay custom or import duty, which may be
based on weight or measurement of goods, called Specific Duty or on the value of imported goods Ad-
valorem Duty.

There are three types of import duties. On some goods, quite low duties are charged. They are called
revenue duties. On some others, quite high duties are charged to give protection to home industries
against foreign competition. While goods imported from specific nations are given preferential
treatment for the charge import duties and their full protective duties are not charged.

(f) Bonded and Duty paid Warehouses:

The port and customs authorities maintain two types of warehouses-Bonded and Duty paid. These
warehouses are situated near the dock and are very useful to importers who do not have godowns of
their own to store the imported goods or who, for business reasons, do not wish to carry them to their
godowns.

The goods on which the importer has already paid the Duty can be kept in the Duty paid warehouses for
which a receipt called 'warehouse receipt' is issued. This receipt is a document of title and is
transferable. The bonded warehouses are meant for goods on which the importer has paid Duty. If the
importer cannot pay the Duty, he may keep the goods in Bonded warehouses for which he has issued a
receipt, called 'Dock Warrant.' Dock Warrant, also like warehouses receipt, is a document of title and is
transferable.

The bonded warehouses are used by the importer when:

(i) He has no godown of his own.

(ii) He cannot pay the Duty immediately.

(iii) He wants to re-export the goods and thereby does not want to pay the Duty.

(iv) He wants to pay the Duty in installments.

(g) Appointment of clearing Agents:

By now, we understand that the importer has to fulfill many legal formalities before he can take the
delivery of goods. The importer may take the delivery of the goods himself at the port. However, it
involves much of the time, expenses, and difficulties. Thus, to save himself from the botheration of
complying with all the complicated formalities, the importer may appoint clearing agents for taking the
delivery of the goods for him. Clearing agents are the specialized persons engaged in performing various
formalities required for taking the delivery of goods on behalf of others. They charge some commission
on performing these valuable services.

(h) Making the Payment:

The mode and time of making payments are determined according to the terms and conditions agreed
to earlier between importer and exporter. In case of a D/P bill, the documents of title are released to the
importer only on the payment of the bill in full. If the bill is a D/A bill, the documents of goods are
released to the importer on his acceptance of the bill. The banker retains the bill till the date of
maturity. Usually, 30 to 90 days are allowed to the importer for making the payment of such bills.

(I) Closing the Transactions:

The last move in the import trade system is closing the deal. If the goods are to the pleasure of the
importer, the transaction is closed. However, if he is not satisfied with the quality of products is any
shortage, he will write to the exporter and resolve the matter. In case the goods have been damaged in
transit, he will claim settlement from the insurance company. The insurance company will pay him
compensation under Directions to the exporter.