Purchase of foreign goods is referred as import goods. Depending on a countries export policy the procedures differ from country to country. Typical import transaction for importing goods into Indian Territory is discussed below:
- Trade Inquiry: Detailed information on the country and on firms that exports product is studied. This information's are collected from various sources. A trade inquiry is made for the particular product after gathering information about the firm and product. The inquiry is done to find the available quantity, export terms and conditions and to know the price of that product. A quotation is prepared by the exporter and sends it to the importer. This is known as pro forma invoice which contains details like quality, quantity, size, grade, design and price of that product on which the export will take place.
- Procurement of Import License: Some goods need license and some are free to import. The rules for export and import should be known from the EXIM (export import) policy. In case if a license is required for a product an import license has to be procured. In India every importer and exported has to register with Directorate General of Foreign Trade or Regional Import Export licensing Authority and should get an Import export code number. Most of the import documents should bear this code number.
- Obtaining Foreign Exchange: As the supplier resides in a foreign country he demands payment in foreign currency. This kind of payment requires exchange of foreign currency to Indian currency. In our country Reserve Bank of India's exchange control department regulates all the foreign exchange transactions. The importer makes an application to the bank which is authorized by RBI for sanction of such foreign exchange. On a prescribed format the importer along with import license makes an application. The bank after scrutiny sanctions the required foreign exchange for the import transaction.
- Placing Order or Indent: An indent to exporter is placed by the importer for the supply of specified goods. The indent or import order contains the details of the product with terms and conditions and delivery details like packing, shipping, port of shipment and expected delivery date. The import order should be drafted carefully to avoid conflict between importer and exporter.
- Obtaining Letter of Credit: A letter of credit is a payment term agreed between importer and the overseas supplier. The importer obtains the letter of credit from the bank and forwards it to overseas supplier. The letter of credit is a guarantee issued by the importer's bank which will honor payment up to specified amount of export bills to the exporter's bank. The most valid and appropriate method of international transaction is letter of credit. The exporters need this document to be sure that there is no risk of non-payment.
- Arranging for Finance: The importer makes payment arrangement before the delivery of goods so that the payment can be made to the exporter on delivery of goods. Hence planning in advance for finance to avoid huge demurrage is very important or else penalties for goods lying unlearned at the port will be high and will be an extra burden to the importer.
- Receipt of Shipment Advance: The overseas supplier dispatches the shipment advice to the importer. This advice contains details about the shipment of goods. This includes invoice number, airway bill number, landing bill, name of the vessel with arrival date, the export port, description of goods and their quantity and the sailing date of the vessel.
- Retirement of Import Documents: The overseas supplier hands over a set of documents to his or her banker for their onward transmission and negotiation to the importer in accordance with the letter of credit. This document contains bill of exchange, commercial invoice, packing list airway bill certificate of origin, marine insurance policy etc, this is known as documentary bill of exchange. This documentary bill is of two types one is sight draft and the other is usance draft. In case of sight draft drawer instructs the bank to handover the documents to the importer only against payment whereas in usance draft the drawer instructs the bank to deliver the documents on acceptance of the bill of exchange. The acceptance of bill of exchange is known as retirement of import documents.
- Arrival of Goods: The captain of ship informs the dock incharge or the airport about the arrival of goods in the importing country. The document provided by him for this purpose is called Import general manifest. On the basis of this document the unloading of goods takes place.
- Custom Clearance and Release of Goods: All the goods imported into India have to undergo customs clearance. This is a tedious process and calls for many formalities. Due to this many of them appoint C&F agents who would take care of these formalities. An endorsement for delivery has to be obtained in the first place. This is obtained at the back of bill of landing by the importer and this is done by the concerned shipping company. Some shipping companies issue delivery order instead of this endorsement for delivery. The importer can take the delivery of goods with this order. The importer has to bear the freight charges before possession of goods. The importer also pays the dock dues and takes the port trust dues receipt. To obtain this two copies of application to import duly filled should be submitted to landing and shipping dues office. One of the copies of this bill is handed over to the importer which is known as port trust dues receipt. Then the importer fills a form called bill of entry for the customs import duty assessment. The importer procures the document prepared by the appraiser and pays if any duty being laid by them. After this payment of import duty the bill of entry should be handed over to dock superintendent. After this an examiner examines carefully and releases the goods. Later the port authority issues the release order after receiving the necessary documents.