Import & Export Trade

Import & Export Trade

1. Name : Arshdeep Goklaney Class : XI th (Commerce) Roll No. : 19 Subject : Business Studies Project Work : Import Trade & Its Procedure Submitted to : Mrs. Monika Babbar Project Work : Import Trade & Its Procedure

2. C ertificate

3. A cknowledgement

4. Index Title Slide No. What is Import Trade ? 4 Procedure of Import Trade 5 – 17 Important Documents Used in Import Trade 18 – 25 Which countries does India import its crude oil 26 – 27 5. Largest Trading Partners of India 28 – 29 6 . Questions 30 – 31 Trade Enquiry Obtaining Import Licence Obtaining Foreign Exchange Placing an Indent or Order Sending Letter of Credit (L/C) Arrangement and Shipment of Goods by Exporter Obtaining Document of Title Arrangement of Clearing Agent Clearing of Goods Taking Delivery from Railway or Transport Payment of Octroi Duty

5. I mport T rade When the trader of one country purchases goods from trader of another country, it is known as import trade. A trader cannot import goods, in any manner he wants, but he has to follow a fixed procedure. This procedure is called procedure of import trade. Under this procedure, various formalities are fulfilled. While following this procedure, various documents are also prepared.

6. P rocedure of I mport T rade An Indian importer has to follow the following procedure while importing goods : Trade Enquiry : As soon as a trader thinks of importing goods, he makes trade enquiry. First of all, he collects the information about the availability of goods of his requirements and the name of the country and exporter he has to deal with. He can collect this information from the agents of exporters in India, other importers and trade commissioners of foreign countries. After collecting information about the exporters he contacts them and gathers information from them about the price of product, type of about the price of product, type of product, the terms of payment etc. After satisfying himself with all such information, importer takes the final decision of importing the goods. (2) Obtaining Importer Licence : Certain products are prohibited to be imported. In order to import certain products one requires an importer licence from the government. For

7. taking import licence, an application is given to controller of imports and exports. Along with this application, three statements are submitted : ( i ) Receipt of deposit of licence fee, (ii) Certificate of income tax department, (iii)Certificate attested by chartered accountant giving details of imported goods in the previous year. If the controller of import and export is satisfied with the information provided by the importer, he issues an importer licence to the importer. Along with this import licence, a quota certificate is also given which specifies the value of goods that can be imported.

8. (3) Obtaining Foreign Exchange: After receiving the import licence, the importer has to arrange the foreign exchange. Almost in all the countries, transaction in foreign currency is done by their central bank. In India, this work was done by the Reserve Bank of India. Built in (4) Placing an Indent or Order: Placing an order for goods, in the language 1991, under the liberalisation policy of the government, a foreign exchange market was established. In this market, free sale and purchase of foreign currency is done. Hence, the importer pays the exporter by purchasing the currency from this market. of international trade, is known as indent. The details like name of product, type, quantity, price, packing, time of delivery, insurance instructions etc. are mentioned. Indents are of two types : ( i ) Open Indent – In this indent very little information is mentioned, like quantity of product, types of products etc. All the rest is left on exporter to decide.

9. (ii) Close Indent – In this, all the information regarding goods is mentioned. (5) Sending Letter of Credit (L/C): In international trade, exporters and importers are not known to each other. In such a situation, there is always some doubt in the mind of the exporter about the financial position of the importer. For the satisfaction of the exporter, the importer sends a letter of credit (L/C) to him. L/C is issued by the importer's bank. In L/C, there is a written promise that the Importer's Bank will accept a bill of exchange of a fixed amount .L/C is issued to those customers only who are considered reputed customers of the bank. From those customers who require L/C, bank takes some security and fix their limit of that amount of letter of credit. Customers enjoy the facility of letter of credit up to that specified limit. Bank can also ask its customers to deposit some money out if their L/C amount which is called margin money. Letters of credit are usually of two types:

10. ( i ) Documentary Letter of Credit: When bank adds this clause in letter of credit that all the documents related to goods such as bill of lading, insurance policy, consular invoice, certificate of origination place etc. will be sent by the exporter to the bank (ii) Clean Letter of Credit: The letter of credit in which this clause is not added is called a clean letter of credit. Under this, documents related to the goods issuing the letter of credit, then it is called a documentary letter of credit and this method is known as documentary credit. are sent directly to the importer. This L/C is issued to those customers only who are very reliable to the bank. Letter Of Credit

11. (6) Arrangement and Shipment of Goods by Exporter: As soon as the exporter receive the letter of credit from the importer, he arranges the goods mentioned in indent. He keeps in mind the other things mentioned in indent like quantity, packing etc. and when the goods are ready in all aspects, the exporter appoints a forwarding agent for further proceedings. The forwarding agent arranges the shipment of goods and sends two main documents, i.e., bill of lading and marine insurance policy to the exporter. After receiving these two documents, exporter prepares the invoice and writes a bill of exchange equivalent to the amount of the invoice. In this manner, all the related documents such as bill of lading, marine insurance policy, invoice band bill of exchange are prepared. After this the exporter sends these documents, through his bank to the branch of any foreign bank or to an authorised bank in the importer’s country.

12. These documents are sent through bank only if there is some term related to the payment, otherwise they can be sent directly to the importer also. (7) Obtaining Document of Title: There are two ways of sending all the documents related with the goods to importer. One, if there is no term or condition related with the payment, then all the documents are directly sent to the importer. Two, if there are terms and conditions related with the payment, then document related to goods are sent to the bank. As soon as the importer gets the information about the arrival of the document in bank, he makes arrangement for receiving the documents. There can be two modes of making payment. One, cash payment, second to accept the bill of exchange. If document is “ Document against Payment (D/P)” , then by making payment document can be collected

13. If document is “ Document against Acceptance (D/A)” , then by accepting bill, the document can be collected. When the exporter sends documents related with the goods to the bank, he informs the importer by a letter about the name of the bank, where he has sent the documents. This letter is called advice letter to import trader. (8) Appointment of Clearing Agent: After receiving all the concerned documents, the importer arranges for taking the delivery of goods. The importer, if he wants, can arrange for taking the delivery of the goods by himself but the appointment of a clearing agent is more appropriate. These agents are specialist in this work. Hence, at this stage, after apportioning a clearing agent, all the documents are handed over to him. (9) Clearing the Goods: At this stage, the clearing agent clears the goods by fulfilling the following formalities: ( i ) Payment of Custom Duties: Before taking the goods from the ship, the agent has to go to the

14. custom office where he has to fill three copies of bill of entry. In this bill, full information of the goods imported is given. On the basis of this information, custom authorises determine the custom duties payable. Two copies of bill of entry are returned to the agent. If due to some reasons, clearing does not have full knowledge of the details of the imported goods, then in place of the bill of entry, the bill of sight is filled. The available details are filled in and the remaining columns are left blank. In such conditions, after inspecting the imported goods, the custom duty is determined.

15. (ii) Payment of Dock Dues: After payment of the custom duties, the clearing agent fills up two copies of the Dock challan for the payment of the Dock dues . After payment of the dock dues, one copy is returned to him as a receipt . for delivery. The shipping company’s officer signs only when the freight of the ship and other expenses related with ship have been paid. Endorsement for delivery is an order for the captain of the ship to give delivery of goods. Sometimes, shipping company does not sign the bill of lading but issues a delivery order separately. The captain of the ship gives the delivery of the goods mentioned in the delivery order. (iii) Endorsement for Delivery: Now the clearing agent has to get the bill of lading signed by the officer in the office of the shipping company. This is called endorsement

16. (iv) Taking Delivery of Goods: For taking the delivery of goods, the clearing agent submits the duty receipt, dock dues receipt and the signed the bill of lading or order of the delivery to the port authorities. When the authorities are satisfied with the documents submitted, then they allow the picking of the goods from the dock. At the time of taking delivery of the goods, it is the duty of the clearing agent to check the goods properly. If the goods are damaged, then the shipping company should immediately be informed. The goods should be picked immediately as soon as the acceptance is received from the authorities. If it is not done within a specified time limit, a fine is charged which is called Demurrage. (v) Sale of Goods before Taking Delivery: Sometimes, the importer sells the goods before taking the delivery because he wants that purchaser himself takes the delivery. In such a condition the importer

17. issues written instructions to the dock authorities. This instruction is written on the bill of lading. If all the imported goods have been sold to a purchaser, then he receive the goods in full, otherwise a part of it is received by him and a part by the clearing agent. (vi) Keeping Good in Bonded Warehouse: If, due to some reasons, the importer is not in a position of paying the custom charges immediately or if he does not want to take the delivery immediately, then goods are kept in the bonded warehouse. The officer of the warehouse gives a receipt of receiving the goods to the clearing agent which is called a Dock Warrant. After paying the dues or on requirement , the goods are cleared com the bonded warehouse. (vii)Loading the Goods: If delivery of the goods has been taken immediately, then the clearing agent arranges for its loading. The goods are dispatched either by road transport or by rail transport. If the goods are sent by the railway transport, then after booking the goods with the railway,

18. Railway Receipt (R/R) is received. At the end, the clearing agent sends the information of loading along with railway receipt, commission and other expenses etc. to the importer. (10) Taking Delivery from Railway or Transport: After getting information from the clearing agent, the importer makes arrangement for taking delivery of the goods either from the railway or from the transport company. The delivery can be taken either by him or by his agent or by the clearing agent. (11) Payment of Octroi Duty: When the goods reach the town, local administration imposes a tax on the goods which is called octroi duty. Some goods are exempt from such octroi duty. Whatever the condition is, after paying the octroi duty, the importer can carry the goods to his godown.

19. Import Licence In import trade, various documents are used. These documents have already been explained in detail during the discussion of procedure of import trade. Some of them are as follows: Important Documents Used in Import Trade 2. Indent

20. 3. Letter of Credit 4. Bill of Exchange

21. 5. Bill of Lading 6. Marine Insurance Policy

22. 7. Invoice 8. Advice Letter to Import Trade

23. 9. Bill of Entry 10. Bill of Sight Bill of Sight

24. 11. Dock of Challan 12. Delivery Order

25. 13. Dock Warrant 14. Railway Receipt (R/R)

26. As there has been no major increase in oil prices since it has dropped in 2015 (still below $50 per barrel), this means that India has had no need to change its sources for oil from 2014, just amping up the amounts that it imports [still monetary value is low because of the fact that the oil price is much lower than its 2008 peak ]. Which countries does India import its crude oil  India imports most of its oil from OPEC nations, in a bid to promote trade and build relations with major Middle Eastern partners, such as Iran, Kuwait, and Saudi Arabia, where there is a large number of Indians living and working also. Keeping diversified sources of oil is beneficial as when they get hit with problems, such as Iran with the sanctions, we have other places to get our oil from. Equally, if one nation had a monopoly of all our oil exports they would have a control over us and could use it as a bargaining chip. On the

27. other hand, giving a substancial amount to a certain nation shows that we trust them and want to trade with them.

28. Largest Trading Partners of India According to the Ministry of Commerce and Industry, the fifteen largest trading partners of India represent 59.37% of total trade by India in the financial year 2015-2016. . These figures include trade in goods and commodities, but do not include services or foreign direct investment The two largest goods traded by India are Mineral fuels ( refined/ unrefined) and gold (finished gold ware / gold metal). In the year 2013-14, mineral fuels (HS code 27) are the largest traded item with 181.383 billion US$ worth imports and 64.685 billion US$ worth re-exports after refining. In the year 2013-14, gold and its finished items (HS code 71) are the second largest traded item with 58.465 billion US$ worth imports and 41.692 billion US$ worth re-exports after value addition. These two goods are constituting 53% total imports, 34% total exports and nearly 100% of total trade deficit (136 billion US$) of India in the financial year 2013-14 .  The services trade (exports and imports) are not part of commodities trade. The trade surplus in services trade is US$ 73 billions in the year 2013-14 .

29. Rank Country Value (US$ billion) Share of overall imports 1   China 61.5 15.8% 2   Saudi Arabia 21.4 5.5% 3    Switzerland 21.1 5.4% 4   United States 20.5 5.2% 5   United Arab Emirates 20.3 5.2% 6   Indonesia 13.9 3.5% 7   South Korea 13.1 3.4% 8   Germany 11.8 3% 9   Iraq 11.3 2.9% 10   Nigeria 10.2 2.6% 11   Qatar 9.7 2.5% India imports around 6000 commodities from 140 countries . [ India imported $390.7 billion worth of commodities in 2015, down by 15% from the previous year .  The following table shows India's 11 largest sources of imports

30. Questions ? Q 1. What are products Imported by India ? Q 2. What are ratio of the import of Oil in India ? Answer : Oil, Gems, Precious Metals, Machinery, Medical Equipments, etc. Answer :

31. Q 3. Name the Indian Companies who import some products from Other Countries ? Answer : 1. Hema Connoisseur Collections (P) Ltd. 2. Pernod Ricard India Pvt. Ltd 3. Sula Selections 4. Brindco Ltd.- Importer of wines, spirits & beer  Q 4. Name the government department who check on import trade ? Answer : Directorate General of Foreign Trade (DGFT) organisation is an attached office of the Ministry of Commerce and Industry and is headed by Director General of Foreign Trade. The shift was from prohibition and control of imports/exports to promotion and facilitation of exports/imports, keeping in view the interests of the country. Q 5. Name the Clearing & Forwarding Agents who clears the goods from dock ? Answer : 1. GAT SHIP 2. AMZ TRANSIT 3. Cathol

32. Thank You