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FOREIGN PURCHASE
(IMPORTATION)

FOREIGN PURCHASE(IMPORTATION) IN ORDNANCE FACTORIES

Three types of Procurement are followed:
Central Purchase
Local Purchase
Foreign Purchase

NEED FOR FOREIGN PURCHASE

Non availability of Indigenous sources

Inability of Indigenous sources to provide quality products
Indigenous sources not able to meet delivery schedule
Capacity constraints
Import is economical
PROCEDURE OF FOREIGN PURCHASE
Requisition from User Section (PR)
Generation of MP sheet/SHIS
Concurrence/Vetting by LAO
Source Approval
Tender Enquiry
Tender Opening
Preparation Of CST
TPC activity
Placement of SO
Intimation of readiness of items for Dispatch
Conformation of 10% of total value of contract as bank guarantee

Opening of LC
Sending of necessary documents to enable the payment through the banks
After shipment ,intimation to the embarkation HQ for preparation of AOTR
Receipt of items at the port and inspection of the consignment for any damages

GENERATION OF MP SHEETS/SHIS

Nomenclature of Item
Qty required
Technical Specification
LF No.
LPR
Last Supplier Details
Due qty if any
Qty available in stock
Net requirement

ACCOUNTS CONCURRENCE & SOURCE APPROVAL

After generation MP sheet is forwarded to LAO for provisioning angle

clearance and Vetting

Identification of potential Supplier

Past performance of various sources is checked
A list of Suppliers with good vendor rating is forwarded to Committee

TENDER ENQUIRY & TENDER OPENING

Single Tender(PAC/SKS items)

LTE

On TOD generally after 6 weeks from the date of floating of tender, tender is
openedprocess

CST PREPARATION

CST preparation
CST shows LPR
Total amount involved
DP
Validity of quote

The case file along with CST is forwaded to user for technical
recommendation

TPC LEVELS

LEVEL I . 5 Cr to 20 Cr .GM
LEVEL- II. 1Cr to 5Cr .. AGM
LEVEL- III 50 Lakhs to 1 Cr JTGM
LEVEL-IV . Up to 25 Lakh . WM

TECH RECOMMENDATION/TPC

TPC level-I is convened on the scheduled day of the week after receipt of
Tech Recommendation

Agenda is forwarded to all TPC members

Generally L1 firm is selected
Minutes preparation
Based on TPC decision approval for release of foreign exchange is taken

PLACEMENT OF ORDER
Supply order is placed on the firm decided by TPC
It includes
Name of purchaser
Name of Supplier
Item Description/Part No.
Quantity
Unit rate & Total value
Delivery Schedule
Bank Guarantee & Warranty
Despatch Instruction & Packing & Marking
Inspection
Payment terms..LC
Arbitration clause
The following documents are to be enclosed to the order:
a.Acknowledgement to S.O
b.Claim Protocol
c.End User certificate

BANK GUARANTEE

On receipt of order firm has to open bank guarantee for 10% of the total
order value

Bank guarantee is required to ensure the firm doesnt back out

To ensure timely supplies
To impose LD in case of delay in supplies

READINESS INTIMATION

The firm intimates readiness of Items for delivery

Based on which action is initiated for LC opening

Letter of Credit (LC)
This payment is peculiar to foreign purchase.

It is an arrangement whereby a bank undertakes to pay another firm (Seller)

on behalf of the Customer(buyer) an amount as per agreed stipulations against
presentation of documents.

IRREVOCABLE LETTER OF CREDIT

This is the most commonly used LC .

All LCs are Irrevocable unless specified.
Cannot be cancelled /amended without the consent of all the parties
concerned.

PROCEDURE FOR OPENING OF LC

Factory sends requisition for LC opening to LAO along with the following
documents

Guarantee form
Copy of S.O
Foreign Exchange Sanction
LAO after scrutiny forwards application to RBI along with Undertaking

This forwarding letter is signed by an officer whose signature is on record

with RBI

RBI advises Bank to open LC with Suppliers Foreign bank

Factory intimates the firm about the details of LC

LC APPLICATION DETAILS

Name and address of the applicant

Terms of dispatch i.e. FOB/FAS/CIF should be mentioned

Name of the Issuing bank of the credit

The date of issuance of credit and date and place of expiry of the credit
should be clearly stated

The documents to be presented

The credit amount and its currency are also to be stated

Credit is negotiable by bank of beneficiary's choice,unless explicitly

mentioned.

The LC also states modes of payment i.e. at sight or deferred Payment

terms

PAYMENT AGAINST LC
Firm has to get the following Documents to get payment

Clear bill of lading/AWB

Invoice
Shipping Specifications
Certificate of Inspection
Packing List

Country of origin certificate

Suppliers bank claims payment from our Bank(SBH)and SBH gets reimbursed
from RBI.RBI sends debit advice/claim to LAO and accordingly the LAO
makes payment

INTIMATION TO EMBARKATION HQS

After shipment supplier will intimate the Embarkation HQ giving details of

the cargo vessel and the possible date of reaching Indian port

Based on above info Embarkation HQ will prepare Anticipated Out Turn

Report(AOTR)

AOTR is an advanced intimation report,informing all concerned port

personnel regarding the anticipated arrival of the ship.

Report also contains Packaging details,cargo details,name of shipping

firm,date of dispatch etc.

RECEIPT OF CONSIGNMENT

When the consignment reaches at the port all necessary steps like Custom
clearance and physical inspection are taken by EMHQ

As the import is for defence purpose CD is exempted

If any damage is observed ,then claim is to be made on shipping firm

Physical inspection is carried out in the presence of Shipping firms

agent,reps of Ultimate consignee,and EMHQ rep.

Follow up of claim is done by the EMHQ

TRANSPORATATION TO ULTIMATE CONSIGNEE

EMHQ makes necessary arrangement for transportation to ultimate

consignee.

If the stores is in large qty the same is transported through rail

Other wise road trans port is used
After transportation ,Final out turn report (FTOR) is prepared by EMHQ

FOTR is sent to factory giving details regarding transportation,thus

completing the process

RECEIPT OF MATERIAL AT FACTORY

On receipt at factory MIS is generated

QA-MI conducts inspection

If any item is rejected than committee is formed for raising the claim
protocal

Claim protocal should be sent within 30 days and is sent to supplier by regd
post.

Finally material is taken on charge by stores

This completes the foreign purchase process

Documents to be submitted to Embarkation HQ(Shipping)

Original Bill of Lading

Documents for Air Consignment

Non negotiable copies of Bill of lading4

Invoice ..5 copies
Packing List ..1 Copy
Insurance Policy ,if insured .1 copy
Certificate of quality

..1 Copy

CDE..1 copy
Bank endorsement on banks letter head
Consignee release order
Country of Origin certificate 1 copy

Air way bill copy

Cargo arrival notice

Bankers endorsement (Delivery order)

Consignees release order
Invoice packing list
CDE

CASE STUDY

Importation of 2 type of spares from M/s Metal Export ,Poland

MP Sheet No.M21345
Item 1 :Spares Seal Kit for Pneumatic Vibratory, Qty :2 sets
Item 2 : Pneumatic Drill for Vibratory Separator,Qty : 1 No.

TE is issued with a request for quotation with a validity of minimum 6

months

Quotation was received as follows

Item 1 :Unit Price :Euro 218
Item 2 : Price/set :Euro 2878
Total Value of Quote :Euro 3314
FOB :Polish Airport

CST /TECH RECOMMENDATION

CST is prepared and after scrutiny is forwarded to user for tech

recommendation

Based on tech recommendation ,TPC is convened

TPC is furnished with Exchange rate of Rupee with Euro for release of
foreign Exchange

TPC DECISION

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TPC decides to place the order and recommends release of FE to the tune of
Rs 1,94,200@ 1 Euro = RS 58.60 for the total quote value of Euro 3314

Accounts make a commitment Noting and a 9 Digit No is allotted

S.O is placed on the firm with a request to immediately send Order

confirmation

CDE/END USER CERTIFICATE

Firm confirms order acceptance by fax

5 Copies of CDE on OFC letter head are prepared and sent to OF cell, Delhi
for CDE
Certificate

Firm demands End User certificate for getting Export licence from polish
authorities and forwards a specimen of the Certificate with a request for getting
it countersigned by Polish embassy in India.

CORRESPONDECE WITH POLISH EMBASSY

End user certificate is prepared and forwarded to Polish embassy in New

Delhi for counter signature

Polish embassy demands Rs 2706 as attestation charges,the same is released

through contingent bill

The certificate is collected by hand from Polish Embassy and forwarded to

firm

LC OPENING

Firm confirms readiness of material for dispatch after getting Export license
LC is opened and forwarded to firm
LC is opened with Typographic error in Freight forwarders name

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Firm on observation of typographic error insists for clarification from

Banker

BANKS CLARIFICATION

Banker (SBH) clarifies that since it is a typographic error there will not be
any problem in release of payment

Material is dispatched through Lufthansa Airline

Balmer Lawrie issues arrival notice
Delivery order is collected from Bank

COLLECTION

Stores section is intimated about arrival of imported consignment

A technical write up , request for clearance without opening of boxes,CDE

along with Delivery order are forwarded to Stores

Stores prepares a letter addressed to Custom Authorities for handing over the
consignment to Balmer Lawrie

FINAL COLLECTION

Balmer Lawrie our CHA agent clears the consignment and hands over the
consignment to stores rep

The stores are taken in stock after IGP/MIS preparation /clearance

RV is forwarded to accounts

PAYMENT REIMBURSEMENT

RBI pays the LC amount to SBH and forwards a debit advice to LAO
LAO releases payment to RBI

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