Import of Goods and Services

[Tushar Malik]

The import of goods refers to the process of bringing goods and services from a foreign country into one’s own country for commercial or personal use.

Procedure for Importing Goods into India

The import process is managed by the Directorate General of Foreign Trade (DGFT) and the Customs Department. Importers must follow a set procedure to ensure compliance with the laws and ensure smooth clearance of goods.

Step-by-Step Guide for Importing Goods into India:

1. Obtain Importer Exporter Code (IEC)
   Before importing goods, businesses must obtain an Importer Exporter Code (IEC) from the DGFT. This 10-digit code is mandatory and can be applied for online through the DGFT website.
2. Determine the Import Policy and Restrictions
   Some products have specific restrictions, require licenses, or are banned. Importers should check the Foreign Trade Policy and Harmonized System of Nomenclature (HSN) classification for applicable rules and duties.
3. Find a Supplier and Finalize Terms
   Selecting a reliable international supplier is crucial. The importer should agree on important details like price, quantity, quality, delivery time, and trade terms (FOB, CIF, etc.).
4. Arrange Finance for Import
   Importers may require financing for their transactions. This can be arranged through bank loans, letters of credit, or buyer’s credit, ensuring smooth payment transactions.

Foreign Exchange Approval Process:

4. • The importer submits an application for foreign exchange through their bank.
   • The bank forwards the application to the Exchange Control Department (ECD) of the Reserve Bank of India (RBI).
   • The ECD verifies the details of the import transaction and approves the release of foreign exchange if the application is valid.
5. Obtain Required Import Licenses and Permissions
   For restricted goods, importers must apply for necessary licenses from DGFT or other authorities. Products like food, medicines, and chemicals may need approval from FSSAI, CDSCO, or BIS.
6. Place Order and Arrange Shipping
   The importer places an order in one of two ways:
   • Direct Order: The importer negotiates and places an order directly with the foreign supplier.
   • Through an Indent House (Agent): The importer uses the services of an agent or indent house, which acts as an intermediary.

Canalized Imports:
Some goods are canalized, meaning they can only be imported through designated government agencies. This ensures proper regulation and control over the import of essential or sensitive items.

6. • Canalizing Agencies like MMTC (Metals and Minerals Trading Corporation of India) handle imports of specific goods such as minerals, precious metals, and agricultural products.
   • The importer places an order with the canalizing agency, which imports the goods and supplies them to the importer.
7. Dispatching Letter of Credit (LC)
   Once the supplier confirms the supply of goods, the importer requests their bank to issue a Letter of Credit (LC) in favor of the supplier.

What is a Letter of Credit (LC)?
A Letter of Credit is a financial guarantee from the importer’s bank, ensuring that payment will be made to the exporter once the required shipping and trade documents are presented.

Process of Dispatching an LC:

• Request for LC from the importer’s bank.
• Issuance by the bank.
• Notification sent to the exporter’s bank for verification.
• The supplier ships goods and presents documents.

Document verification and payment release upon meeting conditions.

Purpose of LC:

• Provides security for both importer and exporter.
• Ensures payment only when trade conditions are met.
• Reduces financial risk in international trade.

8. Appointing Clearing and Forwarding Agents
   The importer appoints clearing and forwarding (C&F) agents to clear the goods from customs. This ensures the proper handling of the goods.
9. Receipt of Shipment Advice
   The importer receives the shipment advice from the exporter. The advice details when the goods are loaded onto the ship, helping the importer arrange for customs clearance.
10. Receipt of Documents
    The importer’s bank receives documents such as the bill of exchange, bill of lading, certificate of origin, commercial invoice, and packing list from the exporter’s bank.
11. File Bill of Entry and Customs Clearance
    When the goods arrive at the port, the importer or customs agent must file a Bill of Entry electronically through ICEGATE, along with necessary documents like:

• Commercial Invoice
• Packing List
• Bill of Lading/Airway Bill
• Import License (if applicable)
• Letter of Credit (if applicable)

12. Pay Customs Duty and Taxes
    The importer must pay customs duty, GST, and other applicable charges according to the customs tariff. Payments can be made online through ICEGATE.
13. Goods Inspection and Clearance
    Customs authorities may inspect goods to ensure compliance with regulations. Upon successful inspection, the importer receives a release order for the goods.
14. Delivery Order
    The clearing agents obtain the delivery order from the shipping company once all dues (like freight) are paid.
15. Transportation and Distribution
    After customs clearance, goods are transported to the importer’s warehouse or distribution centers for storage or sale.