Legal Dimensions of import Procedure

Posted on 27 April 2023 Category : How to Import

Legal Dimensions of import Procedure

(a) Finalisation of the Terms of Contract: The import contract should be carefully and comprehensively drafted incorporating therein precise terms as well as all relevant conditions of the trade deal. There should not be any ambiguity regarding the exact specifications of the goods and terms of the purchase including import price, mode of payment, type of packaging, port of shipment, delivery schedule, licence and permits, discounts and commission, insurance, arbitration, etc.

(b) Mode of Pricing and INCO TERMS: While finalising terms of import contract, the importer should, inter-alia, be fully conversant with the mode of pricing and the manner of payment for the imports. As regards mode of pricing, the overseas supplier should quote the terms prevailing in international tr. International Chamber of Commerce, Paris, has given detailed of a few standard terms popularly known as 'INC° TERMS'. These terms have almost universal acceptance.

(c) Mode of Settlement of Payment: There are mainly three modes of settling international transactions depending upon the creditworthiness of the importer or exporter, demand for the commodity in the international market, exchange control regulations prevailing in the importer or exporter countries and other relevant factors:

Advance Payment.

Payment or Acceptance against Documentary Collections.

Payment under Letter of Credit.

(d) Obtaining IEC Number: In India, it is obligatory for every importer and exporter to register themselves with the Director General of Foreign Trade (DGFT) and obtain Import-Export Code Number (IEC No.). The application form for obtaining IEC number should be accompanied by a fee of Rs. 250 and two copies of passport size photographs of the applicant duly attested by the banker of the applicant and other relevant documents.

(a) Obtaining Import Licence: If the item to be imported falls in the prohibited list, then such item cannot be imported at all. However, if it falls in restricted list then the necessary clearance must be obtained from appropriate licensing authority. Similarly, if it is subject to the canalisation through State Trading Enterprises (STEs), then the necessary formalities are to be completed pertaining to the same.

(f) Obtaining Foreign Exchange: In India, all foreign exchange transactions are regulated by the Exchange Control Department of the Reserve Bank of India (RBI). Therefore, every importer is required to make an application to the Reserve Bank of India (RBI) for getting sanction for making overseas payments. The Exchange Control Department scrutinises the application and if satisfied, sanctions necessary foreign exchange for the import transaction.

(g) Arranging Finance for Import: It is advisable that the financial planning for imports should be done in advance in order to avoid huge demurrages on the imported goods lying uncleared for want of payment. Banks normally do not extend any fund based assistance to importers. However, they enable industrial units and others to have access to imported inputs and machinery by establishing letters of credit in favour of the overseas suppliers.

(h) Obtaining Import L/C Limit:Import L/C limits are sanctioned by the banks on submission of complete loan proposal as in the case of other types of credit facilities. This requires advance financial planning so as to retire import bills under L/C on time. Any delay in retirement of bills not only strains the relations of the importer with his bank but also results in additional costs by way of extra commission, penal interest, demurrage charges, etc.

(i) Despatching Letter of Credit: If the term of payment agreed between the importer and the overseas supplier is a letter of credit then the importer should obtain the letter of credit from his bank and forward it to the overseas supplier well within the time agreed for the same. The importer must see to it that the letter of credit has been prepared in the strict conformity of the import contract entered between them.

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