Import trade refers to the purchase of goods from a foreign country. The procedure for import trade differs from country to country developing upon the import policy, the statutory requirements and customs of different countries.
In almost all the countries of the world import trade is controlled by the Government. The objectives of these controls are proper use of foreign exchange, restrictions imports of non-essential and luxury goods development of indigenous industries etc. In India, the following steps are involved in importing goods from any foreign country:
1. Trade Enquiry:
The first stage in an import transaction like any other transaction of purchase and sale relates to making trade enquires. An enquiry is a written request from the intending buyer or its agent for information regarding the price and the terms on which the exporter will be able to supply goods.
Image Source: oceanbathrooms.com
ADVERTISEMENTS:
The importer should mention in the enquiry all the details such as the goods required, their description catalogue number of grade, size, weight and the quantity required. Similarly, the time and the method of delivery method of packing terms and condition in regard to payment should also be indicated.
In reply to this enquiry, the importer will receive a quotation from the exporter. The quotation contains the details as to the goods available, their quality etc. the price at which the goods will be supplied and the terms and conditions of the sale.
2. Procurement of Import Licence and Quotes:
The import trade in India is controlled under the imports and exports (control) Act, 1947. A person or a firm cannot import goods into India without a valid import licence. An import licence may be either general licence or specific licence.
ADVERTISEMENTS:
Under a general licence goods can be imported from any country, whereas a specific or individual licence authorizes to import only from specific countries. The Government of India declares its import policy in the import trade control policy book called the red book.
Every importer must first find out whether he can import the goods he wants or not and how much of a certain class of goods he can import during the period covered by the relevant red book for the purpose of issuing licence, the importers are divided into three categories:
(i) Established Importer,
(ii) Actual users, and
ADVERTISEMENTS:
(iii) Registered exporters i.e. those claiming import licence under any of the export promotion schemes
In order to obtain an import licence, the intending importer has to make an application in the prescribed form to the licensing authority. If the person imported goods of the class in which he is interested now during the basic period prescribed for such class, he is treated as an established importer.
An established importer can make an application to secure a quota certificate. The certificate specifies the quantity and value of goods which the importer can import. For this he furnishes details of the goods imported in any one year in basic period prescribed for the goods together with documentary evidence for the same including a certificate from a charted accountant in the prescribed from certifying the C.I.F. value of the goods imported in the selected year.
The CIF value includes the invoice price of the goods and the freight and insurance paid for the goods in transit. The quota certificate entitles the established importer to import upto the value indicated there in (called quota) which is calculated on the basis past imports.
If the importers are an actual user, that is, he wants to import goods for his own use in industrial manufacturing process; he has to certain licence through the prescribed sponsoring authority.
The sponsoring authority certifies his requirements and recommends the grant of licence. In case of small industries having a capital of less than Rs. 5 lakhs, they have to apply for licence through the director of industries of the state where the industry is located or some other authority expressly prescribed by the Government.
Registered exporter importing against exports made under a scheme of export promotion and others have to obtain licence from the chief controller of exports and imports.
The Government issues from time to time a list of commodities and products which can be imported by obtaining a general permission only. This is called as O.G.L or Open General Licence list.
3. Obtaining foreign exchange:
After obtaining the licence or quota in case of an established importer the importer has to make arrangement for obtaining necessary foreign exchange since the importer has to make payment for the imports in the currency of the exporting country.
The foreign exchange reserves of any country are controlled by the Government and are released through its central bank. In India, the exchange control department of the Reserve Bank of India deals with the foreign exchange.
For this the importer has to submit an application in the prescribed from along with the import licence to any exchange bank as per the provisions of exchange control Act.
The Reserve Bank of India sanctions the release of foreign exchange after scrutinizing the application on the basis of exchange policy of the Government of India in force at the time of application. It is to be noted that whereas import licence is issued for a particular period exchange is released only for a specific transaction.
4. Placing the Indent or Order:
After the initial formalities are over and the importer has obtained the licence quota and the necessary amount of foreign exchange, the next step in the import of the goods is that of placing the order.
The order is known as indent. It contains the instructions from the importer as to the quantity and quality of goods required, method for forwarding them.
The indent may be of several types like open indent, closed indent and confirmatory indent. In open indenfall the necessary particulars of goods, price, etc. are not mentioned in the indent, the exporter has the discretion to complete the formalities with his own skill.
A confirmatory indent is one where an order is placed subject to the confirmation indent is one where an order is placed subject to the confirmation by the importer’s agent.
The Indent Houses/Import Houses: The importers can place the indent or order either directly with the exporter or through certain middlemen who specialize in such trade.
The specialized intermediaries are called indent houses. The indent houses are also called as indent firms or import commission houses. They import goods from a foreign country on orders received from home traders.
They also render many services to the importer such as furnishing information on the availability of different types of commodities, arranging credit facilities for the importer, conveying the grievances and complain of the importers to the exporter’s etc. Indent houses charge some commission from the importers for the service rendered to them.