Import Procedure:

Import trade refers to the purchase of goods from a foreign country. The procedure for import
trade differs from country to country depending upon the import policy, statutory requirements
and customs policies of different countries. In almost all countries of the world import trade is
controlled by the government. The objectives of these controls are proper use of foreign
exchange restrictions, protection of indigenous industries etc. The imports of goods have to
follow a procedure. This procedure involves a number of steps.

(i) Trade Enquiry:

The first stage in an import transaction, like any other transaction of purchase and sale relates to
making trade enquiries. An enquiry is a written request from the intending buyer or his agent for
information regarding the price and the terms on which the exporter will be able to supply
goods.The importer should mention in the enquiry all the details such as the goods required, their
description, catalogue number or grade, size, weight and the quantity required. Similarly, the
time and method of delivery, method of packing, terms and conditions in regard to payment
should also be indicated.

(ii) Procurement of Import Licence and Quota:

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. Under a general licence goods can be imported
from any country, whereas a specific or individual licence authorises 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.

iii) 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 in many countries 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 form along-with the import licence to any exchange bank as per the provisions
of Exchange Control Act.
(iv) 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 goods is that of placing the
order. This order is known as Indent. An indent is an order placed by an importer with an
exporter for the supply of certain goods.

(v) Despatching a Letter of Credit:

Generally, foreign traders are not acquainted to each other and so the exporter before shipping
the goods wants to be sure about the creditworthiness of the importer. 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.

(vi) Obtaining Necessary Documents:

After despatching 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 despatched. It may also indicate the probable date on
which the ship is expected to reach the port of destination.

(vii) Customs Formalities and Clearing of Goods:

After receiving the documents of title of the goods, the importers only concern is to take
delivery of the goods, when the ship arrives at the port and to bring them to his own 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.

(viii) Making the Payment:

The mode and time of making payment is determined according to the terms and conditions as
agreed to earlier between the importer and the 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 title of the goods are released to the importer on his acceptance of the bill. The
bill is retained by the banker till the date of maturity. Usually, 30 to 90 days are allowed to the
importer for making the payment of such bills.

(ix) Closing the Transactions:

The last step in the import trade procedure is closing the transaction. If the goods are to the
satisfaction of the importer, the transaction is closed. But if he is not satisfied with the quality of
goods or if there is any shortage, he will write to the exporter and settle the matter. In case the
goods have been damaged in transit, he will claim compensation from the insurance company.
The insurance company will pay him the compensation under an advice to the exporter.

Import License and IEC Code Number

Introduction

While the majority of the goods are freely importable, the Exim Policy (2007) of India prohibits
import of certain categories of products as well as conditional import of certain items. In such a
situation it becomes important for the importer to have an import license issued by the issuing
authorities of the Government of India.

An import export business license in India is called an IEC Code. It is a unique, 10-digit code
issued by the government of India to registered Indian companies. The body that is responsible
for providing this code is the Director General of Foreign Trade, or DGFT, which is part of the
Ministry of Commerce. IEC is the short form of Importer Exporter Code, and the eligibility, legal
provisions and other conditions for an IEC Code application is defined under the Foreign Trade
(Regulation) Rules, 1993 stated by the Ministry of Commerce.

An application for granting an IEC Code number should be made by the organizations Head
Office or Registered Office, and to the nearest Regional Authority for the Directorate General
Foreign Trade. The applicant must fill up the ANF2A form, which will also state some
documents that need to be attached with it during submission. When there are BTP, EHTP or
STPI units concerned, the DGFT regional office that has jurisdiction over the location of the
STPI unit head office shall issue the IEC Code.

For each PAN number, there is only one IEC Code number issued. A proprietor who has more
than one IEC Code number would have to surrender the extra ones to the Regional Office and
cancel them.

The ANF2A form, which is short for Aayaat Niryaat Form, is available on Indolegal.com and
you need not walk into the DGFT regional office. Apart from the ANF2A application form, you
would also have to submit an Appendix- 18B form.

This form must be attested by the banker of the applicant, and must contain the applicants
letterhead along with a passport size photograph. You would also need to provide an application
fee of around Rs. 250. This fee has to be paid as a Demand Draft or Pay Order from a designated
bank, drawn in the favour of Zonal Joint Director General of Foreign Trade. The amount can also
be paid through Electronic Fund Transfer from a bank nominated by the DGFT.

The application for an import and export license must be complete in all the specified areas as
per the relevant provisions given by the policies. The applicant also has to sign the application,
according to paragraph 9.9 of the policy. If there is any change in the information given in the
ANF2A form, the import and export license holder has to intimate it accordingly to the Regional
authority that issued the IEC Code number in the first place.

Import License Issuing Authority

In India, Import License is issued by the Director General of Foreign Trade. DGFT Delhi office
is situated in Udyog Bhawan, New Delhi 110011.

Validity of Import License

Import Licenses are valid for 24 months for capital goods and 18 months for raw materials
components, consumable and spares, with the license term renewable.

Sample of Import License

A typical sample of import license consists of two copies-

ForeignExchange Control Copy: To be utilised for effecting remittance to foreign seller or for
opening letter of credit
Customs Copy: To be utilised for presenting to Customs authority enabling them to clear the
goods. In the absence of custom copy, import will be declared as an unauthorised import, liable
for confiscation and or penalty.

Categories of Import

All types of imported goods come under the following four categories:

Freely importable items: Most capital goods fall into this category. Any product
declared as Freely Importable Item does not require import licenses.

Licensed Imports: There are number of goods, which can only be importer under an
import license. This category includes several broad product groups that are classified as
consumer goods; precious and semi-precious stones; products related to safety and
security; seeds, plants and animals; some insecticides, pharmaceuticals and chemicals;
some electronically items; several items reserved for production by the small-scale
sector; and 17 miscellaneous or special-category items.

Canalised Items: There are certain canalised items that can only be importer in India
through specified channels or government agencies. These include petroleum products (to
be imported only by the Indian Oil Corporation); nitrogenous phosphatic, potassic and
complex chemical fertilizers (by the Minerals and Metals Trading Corporation) vitamin-
A drugs (by the State Trading Corporation); oils and seeds (by the State Trading
Corporation and Hindustan Vegetable Oils); and cereals (by the Food Corporation of
India).
 Prohibited items: Only four items-tallow fat, animal rennet, wild animals and
unprocessed ivory-are completely banned from importation.

Category of Importer
On the basis of product to be imported and its target buyer, importers categories are divided into
three groups for the purpose of obtaining import licensing:

1. Actual Users- An actual user applies for and receives a license to import of any item for
personal use rather than for business or trade purpose.

2. Registered exporters; defined as those who have a valid registration certificate issued by
an export promotion council, commodity board or other registered authority designated
by the Government for purposes of export-promotion.

3. Others.

The two types of actual user license are:

1. General Licenses : This license can be used for the imports of goods from all countries,
except those countries from which imports are prohibited;

2. Specific Licenses: This license can only be used for imports from a specific country.

Custom Inspection

Any violation in the import license is usually scanned by the custom officials of the custom
department. Customer inspector and other custom officials have authority to inspect and evaluate
the goods to be imported. Its a part of their job to determine whether imports conform to the
description in the import License or not. Custom official even have right to charge fines and
penalties if any violation in the import license is found to be done by the importer.

Import Incentives under Special Schemes.

Introduction

The Government of India offers many incentives to Indian importer under special schemes.
These schemes are mostly available on those imported product, which will be latter on used for
manufacturing of goods meant for export. This not only stimulates the industrial growth and
development but also brings the foreign currency after the final export process. The following are
some of the important import incentives offered by the Government of India, which significantly
reduce the effective tax rates for the import companies:
Preferential Rates
Any type of import incentive under preferential rate is only applicable for the import o goods
from certain preferential countries such as Mauritius, Seychelles and Tonga provided certain
conditions are satisfied. The certificate of origin is very important in order to avail of the benefits
of such concessional rates of duty.

DEPB
Duty Entitlement Pass Book in short DEPB is basically an export incentive scheme. The
objective of DEPB scheme is to neutralize the incidence of basic custom duty on the import
content of the exported products. Notified on 1/4/1997, the DEPB Scheme consisted of (a) Post-
export DEPB and (b) Pre-export DEPB. The pre-export DEPB scheme was abolished w.e.f.
1/4/2000. Under the post-export DEPB, which is issued after exports, the exporter is given a
Duty Entitlement Pass Book at a pre-determined credit on the FOB value. The DEPB allows
import of any items except the items which are otherwise restricted for imports.

Duty Drawback
Duty Drawback rates in India is the special rebate given under the Section 75 of Indian Customs
Act on exported products or materials. Duty drawback rates or concession are only applicable on
products which are used in the processing of goods manufactured in India and then exported to
foreign countries. Duty Drawback is not given on inputs obtained without payment of customs or
excise duty. In case of re-export of goods, it should be done within 2 years from the date of
payment of duty when they were imported. 98% of the duty is allowable as drawback, only after
inspection. If the goods imported are used before its re-export, the drawback will be allowed as
at reduced per cent.

All industry drawback rates are fixed by Directorate of Drawback, Dept. of Revenue, Ministry of
Finance and Government of India and are periodically revised - normally on 1st June every year.
Section 37 of Central Excise Act allows Central Government to frame rules for purpose of the
Act. Under these powers, Customs and Central Excise Duties Drawback Rules, 1995 have been
framed.

DFRC
Under the Duty Free Replenishment Certificate (DFRC) schemes, import incentives are given to
the exporter for the import of inputs used in the manufacture of goods without payment of basic
customs duty. Such inputs shall be subject to the payment of additional customs duty equal to the
excise duty at the time of import. Duty Free Replenishment Certificate (DFRC) shall be available
for exports only up to 30.04.2006 and from 01.05.2006 this scheme is being replaced by the Duty
Free Import Authorisation (DFIA).

DFIA
Effective from 1st May, 2006, Duty Free Import Authorisation or DFIA in short is issued to
allow duty free import of inputs which are used in the manufacture of the export product (making
normal allowance for wastage), and fuel, energy, catalyst etc. which are consumed or utilised in
the course of their use to obtain the export product. Duty Free Import Authorisation is issued on
the basis of inputs and export items given under Standard Input and Output Norms (SION).
Deemed Exports
Deemed Export is a special type of transaction in which the payment is received before the goods
are delivered. The payment can be done in Indian Rupees or in Foreign Exchange. As the
deemed export is also a source of foreign exchange, so the Government of India has given the
benefit duty free import of inputs.

Agri Export Zones

Various importers that come under the Agri Export Zones are entitled to all the import facilities
and incentives.

Served from India

In order to create a powerful Served from India brand all over the world, the government has
provided different type of import incentive to the invisible export providers. Under the Served
from India Scheme, import incentive is given for import of any capital goods, spares, office
equipment and professional equipment.

Manufacture under Bond

Under the Manufacture under Bond Scheme, all factories registered to produce their goods for
export are exempted from import duty and other taxes on inputs used to manufacture such goods.
Against this the manufacturer is allowed to import goods without paying any customs duty. The
production is made under the supervision of customs or excise authority.

Export Promotion Capital Goods Scheme (EPCG)

EPCG is a special type of incentive given to the EPCG license holder. Capital goods imported
under EPCG Scheme are subject to actual user condition and the same cannot be transferred
/sold till the fulfillment of export obligation specified in the license. In order to ensure that the
capital goods imported under EPCG Scheme, the license holder is required to produce certificate
from the jurisdictional Central Excise Authority (CEA) or Chartered Engineer (CE) confirming
installation of such capital goods in the declared premises. Under Export Promotion Capital
Goods (EPCG) scheme, a license holder can import capital goods such as plant, machinery,
equipment, components and spare parts of the machinery at concessional rate of customs duty of
5% and without CVD and special duty.

Registration for Importers.

Introduction

Application for IEC Number

Process of Online Application

 Guidelines for filling up IEC Form

Duplicate Copy of IEC No

Surrender of IEC No

Introduction

Registration of importer is a pre-requisite for import of goods. The Customs will not allow
clearance of goods unless the importer has obtained IEC Number from issuing authority. In
India, IEC number or Importers Exporters Code is issued by the DGFT.

However, no such import business registration is necessary for persons importing goods from
Nepal or Myamar through Indo-Myanmar border or from china, through Gunji, Namgaya,
shipkila or Nathula ports provided that the Value of a single Consignment does not exceed Rs.
25000/-.

Application for IEC Number:

An application for grant of IEC Code Number should be made in the prescribed Performa given
at Appendix 3.I. The application duly signed by the applicant should be supported by the
following documents:

1. Bank Receipt (in duplicate) / Indian demand draft for payment of the fee of Rs.1000/-
Certificate from the Banker of the applicant firm as per Annexure 1 to the form.

2. Two copies of passport size photographs of the applicant duly attested by the banker of
the applicant.

3. A copy of Permanent Account Number issued by Income Tax Authorities, if PAN has not
been allotted, a copy of the letter of legal authority may be furnished.

4. Declaration by the applicant that the proprietors/partners/directors of the applicant

firm/company, as the case may be, are not associated as proprietor/partners/directors with
any other firm/company the IEC No. is allotted with a condition that be can export only
with the prior approval of the RBI India.

Process of Online Application

On-line form has been designed to ensure feeding of all the required information by prompting
user wherever a field is left blank. Application has to submit scanned copies of PAN (Permanent
Account Number) and bank certificate of deposits along with their application.

There are 2 options for payment of fee.

1. Demand Draft: If fee is paid by Demand Draft, IEC will be generated only after receipt of
the physical copy of the application.
 2. Electronic Fund Transfer: If IEC application fee is paid through Electronic Fund Transfer
facility, IEC number will be generated by the licensing office automatically and the
number can be viewed online by the applicant.

Guidelines for filling up IEC Form

1. All applications must be made in the prescribed form in duplicate, duly accompanied by
Bank Receipt/ Demand Draft evidencing payment of fee.

2. Application form should be submitted in neatly typed bold letters. Handwritten forms are
also accepted.

3. Each page of the document must have the signature of the authorised person with an ink
pen.

4. Supporting documents in duplicate, duly self attested as specified earlier in this chapter
must be enclosed wherever applicable.

5. Items of information relevant to applicant should only be filled in and remaining items
may be marked 'Not Applicable'.

6. Two copies of the passport size photograph of the applicant duly attested by the
applicant's banker shall be submitted.

7. Modifications of particulars of the applicant should also be furnished on this form by

filling the relevant items.

Duplicate Copy of IEC No.

Duplicate copy of IEC Number is issued to those importer (or exporter) who has lost their
original IEC number. Importers are required to submit an affidavit and a fee of Rs.200 to obtain a
duplicate copy of IEC Number.

Surrender of IEC No.

Any importer who doesnt want to continue his import business may surrender the IEC number
to the issuing authority. On receipt of such intimation, the issuing authority shall immediately
cancel the same and electronically transmit it to DGFT for onward transmission to the Customs
and Regional Authorities.

Provision for Import of Gifts in India

The Government has exempted gifts items received from foreign country to persons
residing in India from the whole of custom duty under Foreign Trade Act. In the
present scenario, import of goods up to the value of Rs. 5,000/- is allowed as gift,
duty free. This exemption is allowed only for bonafide gifts imported by air or post.
For the purpose of calculation of this value of Rs. 5,000/- the air freight or postal
charges paid are not added. It is important to note that the value of Rs. 5,000/- is
the value of the goods in the country from where the goods have been dispatched.
The sender may not necessarily be residing in the country from where the goods
have been dispatched.

Who can send the gifts?

Any person living abroad can send a gift to an individual living in India. There is no
specific restriction that only relatives can send the gift items. Business associated,
friends, relatives, companies or acquaintances can also send the gifts to the people
living in India.

Custom Clearance Permit of Imported Gifts

Import of gifts items, which is freely importable need no custom clearance permit.
However, there are certain gift items that are not freely importable. In such a
situation a special permit is required by the custom authorities. The main objective
of the custom clearance permit is to allow the import of gift items which is other
wise restricted or prohibited by Government of India for the use of charitable,
religious or educational institute registered under a law or approved by the Central
or State Government.

Application Procedure for Custom Clearance Permit (CCP)

An application for the grant of CCP for an item which is otherwise restricted or
prohibited in the ITC-HS Classification may be made to Director General of Foreign
Trade supported by the following documents.

1. Applicant's request on his compays letter head or plain paper duly signed
with all the details.

2. Donor's letter in original duly signed and indicating his name, address and
the purpose of offering gift.

3. Bank Receipt in original in duplicate/ Demand Draft / EFT details towards

payments of application fee at the prescribed rate.

4. Self certified copy of proforma invoice.

5. Any other relevant document which applicant would like to enclose.

Import of Passenge Baggage in India

There is no predefined definition of personal import. In general a personal import is
a direct purchase of foreign goods from overseas mail order companies, retailers,
manufacturers or by an individual for the purpose of personal use.
There are two forms of personal import:
 1. Direct Personal Import: An importer himself/herself places orders to foreign
mail order companies, retailers or manufactures and imports directly from
them.

2. Indirect Personal Import: An importer places orders to an import agent and

imports goods via the agent.
In any case, since personal import is direct trade with foreign countries, a
buyer must understand the various rules and regulation while importing such
goods. For importing any good in India, a buyer must check the item in the
ITC-HS code in order to know weather the item is free to import, restricted or
prohibited.

Importance of IEC Number for Personal Import

Import Export Code Number or IEC number is not required for import of items for
personal use.

Import of Baggage
While travelling passengers are allowed to carry certain items with them, which are
governed by the Baggage Rules 1998. Baggage Rules contain separate concessions
for resident tourist and person transferring their residence to India. Special
provisions have also been made for unaccompanied baggage and application of the
rules to the members of the crew.

Items that can not be Imported for Personal Use

There are certain items that can not be imported for personal use. These items are
listed below-

Vegetables and seeds exceeding one pound

Beas

Tea

Books, magazines, journals and literature

Items which has been Canalised under the Indian Exim Policy (2007) or
Foreign Trade Policy.

Arms and ammunitions.

Consumer electronic items, except hearing aid and other life saving
equipments.

Import of items by Registered Courier

For the purpose of taxation, import of goods by registered carrier is not included
under the Baggage Rule Act (1998). Under a new system of assessment, the
clearance of goods is governed by the Courier Imports and Exports Regulation Act
(1998).

Import of items by UN Officials

UN Officials and its authorized agencies are exempted from payment of custom duty
under the United Nation Act (1947).

Import of items by Indian Professionals

All the rules and regulation for the import of goods and item by the Indian
professionals is mentioned in the Rule 5 and Appendix C of the Baggage Rule
(1998).

Import of Samples
All samples are allowed for import mentioned in the ITC-HS Classification of export
and import items are allowed without a license. However items like vegetables,
seeds, bees, and new drugs are not listed under free import and need a special
license.
Samples of tea not exceeding Rs. 2000 (CIF) in one consignment is allowed without
any authorisation form the Custom or Tea Board of India. An individual is also free to
bring a sample of worth Rs- 75,000 (except for gems and jewellery) and Rs- 300,000
for the samples of gems and jewellery.