Imports Management

SPMM

Level of Imports (in Rs. Crore)

Year 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 Imports Value 18.40 19.80 32.60 143.80 440.10 453.44 Total Purchases 82 178 364 1377 5189 10835 % 23 11 9 10 8 4.2

2001-02
2002-03 2003-04 2006-07 2007-08 2008-09 2009-10

385.16
463.00 354.00 550 611 813 1151

10950
11598 11372 18700 21352 27495 27876

3.5
4 3 2.9 2.86 2.96 4.13

IMPORTS Important Areas

Import Policy Procurement Procedures Mode of Payment

EXIM Policy or Foreign Trade Policy

Import Policy
Introduced w.e.f. 1st April 1992 Imports/Exports can be done freely except as regulated by the Policy Modus Operandi: Negative Lists, issued as a part of Exim Policy (Foreign Trade Policy);
Prohibited items Restricted Items Canalized Items

Import Policy
Prohibited Items:
Prohibited goods shall not be imported

Restricted Items:
Can be imported but only against a license & by actual user

Import Policy
Imports of Canalized Items:
Through Agencies specified in the Negative List

Items not included in the Negative List:

Can be imported by any one whether actual user or not

Import License
A document issued by DGFT, permitting;
Entry of foreign goods into India Remittance of the foreign currency to overseas supplier For IR, RLO recommends to DGFT for issue of the License

Import License: Terms

Description, Qty, & Value Actual User Condition, if any Export Obligation, if any Country of Origin Validity Period: As specified

Import Regulations
DGFT Stipulations: Hand Book of Import/ Export Procedures, Importer /Exporters guide Internet Search Google etc.

Negative List
A) Prohibited Items
i) Tallow fat, poultry fats, edible fats of animal origin ii) Animal rennet iii) Wild animals, their parts and products iv) Ivory

B) Canalised items
i)
ii) iii) iv) v)

Petroleum Product, Aviation fuel, Crude oil, Motor spirit, High speed diesel: IOC Nitrogenous, Phosphatic and Potassic Fertilizers, Potash: MMTC & STC Coconut oil, Palm Oil: STC Cereals: FCI Clove: STC

Negative List
(Contd.)

C) Restricted Items
Cotton, woolen, silk, manmade & blended fabrics, alcoholic beverages, wine, saffron. Precious semi-precious and other stones Safety / Security related items Fire arms, ammunitions Paper for security printing, currency papers Explosives Chloroform, Hydro carbons Seeds, plants and animals Insecticides & Pesticides

Negative List
(Contd.)

C) Restricted Items (contd.)

Drugs & Pharmaceuticals Chemical & Allied items Items related to small scale sector Miscellaneous items Aircraft & Helicopters Coils Natural rubber Rubber active material Rare earth oxide Naphtha Sodium metal

Procurement Procedures
General: Procurement by Railway Board & Zonal/PU GMs Rlys to obtain FE from Market against Free Resources Standard financial procedure as for authorising rupee expenditure will apply Other than free resources will require Bds approval including for FE release Import of items under negative list requires Bds approval Powers to import are subject to; the essentiality/ inescapability certification & finance concurrence

Procurement Procedures: Tender conditions to cover

Pre-dispatch inspection condition Packing requirements Transshipment not permitted Shipping on deck not permitted Shipping & Insurance requirements

If Indian Agent of Foreign bidder is involved then

Additional information as per Rly Bds L No 89/RS(G)/779/6 dt. 22.1.2009 on Contact particulars of the Indian Agent IT PAN Capability & Responsibility Service only on the contract or general service Past Performance of the Agent

Agency Commission
Paid in Indian Rupees FE Exchange rate ruling on the date of contract finalization
It is a fixed amount

Right to retain commission till the discharge of warranty obligations Commission if higher than 5% can be accepted, by AGM/GM with Fin concurrence
Rly Bds L No 89/RS(G)/779/6 dt. 22.1.2009

Procurement Procedures: Tender Publicity

While issuing Global Tenders, especially against WB loans, tenders to be published; In all member countries of WB
{Including Switzerland}

Send Tender Notice to local official representatives of such countries News Papers of purchasing country Indian Trade Journal

Tender Consideration: Currency

Currency of Bidding:
Price in the bid to be in currency of bidder Price can be in US $,

Currency of Payment:
In which price was quoted by the successful tenderer Purchaser reserves the right to pay in the currency of the country of origin, if price quoted in any other currency Rate of Exchange as on Date of Payment

Tender Consideration:
Bid Evaluation
Bids are to be evaluated in terms of a single currency, for the sake of comparison Exchange rate ruling on the date of tender opening to be taken as the basis Convert total value to local currency, taking Landed cost

Tender Consideration: WB Procedure: Bid Groups

Bid Classification: WB Loans;
Group A: Equipment with indigenous input [value addition] => 30% Group B: Imported item, available in India, on Rupee payment Group C: To be imported (Outside Group
A&B)

If C is costly, cheaper of A&B can be purchased If C is lowest, price of C to be loaded with 15% & compared with A

Tender Finalization: Board

Application by Zonal Rly to RB on proforma with Comparative statement, Note containing technical comments, report on each offer
Contd.

Tender Finalization:Board
(Contd.)

Phased requirement of FE release Foreign Exchange involved & source of financing Justification for Import A note on developmental activities for indigenisation of the item FA&CAOs personal concurrence

Types of Import Contracts

Governed by Incoterms 2010 wef 1.1.2011

prescribed by International Chambers of Commerce

Describe key obligations of sellers, buyers and carriers With regard to: Delivery of Goods, Transfer of Risk & Costs

Incoterms 2010 (came into force wef 1.1.2011)

RULES FOR ANY MODE OR MODES OF TRANSPORT EXW FCA CPT CIP DAT DAP DDP Ex works Free carrier (Upon delivery of goods to the carrier) Carriage paid to Carriage and insurance paid to Delivered at terminal Delivered at place Delivered duty paid

RULES FOR SEA AND INLAND WATERWAY TRANSPORT FAS FOB CFR CIF Free alongside ship Free on board Cost and freight Cost insurance and freight

Types of Import Contracts

FAS (Free Alongside Ship): Suppliers responsibility to get the goods upto alongside the ship & bears all Costs & Responsibility upto this point Buyer/Importer to bear all charges thereafter
a) Loading into the ship b) Freight c) Insurance

Types of Import Contracts

(Contd.)

FOB (Free on Board):

Suppliers responsibility to get the goods loaded into the ship Freight & Insurance to be borne by buyer

CIF (Cost Insurance Freight):

Add the element of Freight & Insurance to FOB Price Total price up to the port of destination borne by seller

Types of Import Contracts

(Contd.)

FOR/FOT (Free on Rail or Transport):

(This is not an Incoterm)
[Applicable when agent handles import]

Agents directly deal with the Principals & Offers submitted by Agent on FOR basis All transactions, including cargo clearance at Indian Port, handled by the Agent

TRANSFER OF COSTS

Customs

Customs

Seller
EXW FCA FAS FOB DAP CFR CIF DAT DDP CPT CIP

Buyer *

Waterborne transport only

*
Import clearance costs on account of the buyer

Transport by land insurance * Transport costs on account of the seller

Customs

Customs

DAP

Shipment
IR Contracts on FOB basis Shipping to be arranged through Shipping Coordination Committee, Indian Flag vessel Age < 15 years It facilitates payment of freight in Indian Rupees

Air Freighting
Electronic / Sophisticated Fragile Urgent requirement Air India Air freighting approval by GM/COS with FA&CAO,s concurrence

Marine Insurance
All the imported cargos are insured Rly Bd finalises TWO types of Open covers for Insurance 1. FPA (Free of Particular Average) Risk Cover 2. All Risk Open Cover

Period covered by these Policies:

Time/place of commencement [WH to WH], Covers course of transit, Terminates on delivery at destination or on expiry of 60 days after discharge at the destination Port [if not moved further]

Marine Insurance
1. FPA (Free of Particular Average) Risk Cover
Covers loss when vessel is stranded, sunk or burnt, due to storm or act of God Steel & Bulk cargo covered under FPA Claim for total loss only entertained Does not cover partial loss/ damage or short landing etc.

2. All Risk Open Cover:

Covers all types of imported stores other than Steel & other Bulk Cargo Covers risks of all sorts including loss/damage, theft, non-delivery

Imports: Payment Process

Payment: Considerations
Supplier & Buyer have no intimate knowledge about each other, not sure of credit worthiness of each other Both the parties are governed by rules of their respective countries, which are different sets of rules

Mode of Payment: Risks

Seller sends goods without payment: Risk of non-payment, late payment Buyer sends payment without good: Risk of non-supply, late supply

Solution: Letter of Credit

Letter of Credit: Definition

It is a documentary commitment by a Bank To place an agreed amount of money at Sellers disposal, On behalf of the Buyer Under precisely defined conditions
Banks charge commission for issuing LC

Letter of Credit:Flow Chart

L/C Issuance:
Buyer
Application for opening L/C

Buyers Bank

2
Contract

L/C Mailed

4
Seller
L/C Notified

Bank in Sellers Country

Letter of Credit:Flow Chart

L/C Utilization:
Buyer
Debit A/C & Send Documents

Issuing Bank

4 1 3

2
Seller
Document Submitted Payment Released

Negotiating Bank

Flows of documents required in a LC / documentary credit procedure

1. contract Shipper Seller 11a. 5a. Dispatch
Shipping docs

Consignee (Buyer) 10a. 11b.

goods

Shipping docs

5b.

goods

Payment

10b.
Ship docs

6.
Credit notify

4.

Shipping 7. payment docs

2. Credit
appn

3. Credit

8. Shipping docs
Corresponding Bank

9. payment

Issuing Bank

Letter of Credit: Negotiating

Documents

Bill of Lading: Evidence of dispatch Marine Insurance Policies Signed Invoices Inspection Certificates, when required Country of Origin certificate Packing List

Types of Letter of Credit

Revocable L/C Irrevocable L/C Revolving L/C Standby L/C

Letter of Credit
Revocable L/C:
May be cancelled or amended anytime, but before the payment is made, without consulting the seller Not preferred by the seller, obviously

Irrevocable L/C:
Issuing Bank gives binding undertaking for making payment provided the seller complies with prescribed conditions Can not be cancelled without the consent of all the parties concerned

Letter of Credit
Revolving L/C:
When regular continuing shipment by seller is involved Amount once utilized is available again Fresh L/C is not required to be obtained for each shipment May indicate max amount to utilized

Standby L/C:
Similar to Performance Bank Guarantee Issuing Bank assures the beneficiary that in the event of Buyer failing to pay, the beneficiary may claim payment from the issuing Bank

Thank You