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Home>>Exports>>ImportProcedure

Import Procedure
HowtoImportIntroduction
PricinpalLaw&ImportExportPolicy
RegistrationwithRegionalLicencingAuthorityandobtainingIECCode
LicenceApplicationFees
ValidityofLicence
ConditionsofLicence
ImportsunderSpecialSchemeforExporters
SelectingtheOverseasSupplier
FinalisingtheTermsofImport
PaymentagainstImports
LetterofCredit
ScrutinyofdocumentsandRetirementofDocuments
Modeofpayment&TimelimitforImportRemittance
CustomsClearanceofimportedgoods
ClassificationofCustomstariffandLevyofCustomsDuty
WarehousingofImportedgoods
ImportbyExportofServices
ImportthroughCourier
Importforpersonaluse
ImportofSamples
ImportofPrototype
ImportofComputer,ComputerpartsandComputerSoftware
ImportofPassengerBaggage

HowtoImportIntroduction
HowtoStartImport
[AsgovernedbytheForeignTrade(Development&Regulation)Act,1992]
With the globalisation of Indian economy and consequent upon comfortable balance of payment position
Government of India has liberalised the Import Policy and practically all Controls on imports have been
lifted.ImportsmaybemadefreelyexcepttotheextenttheyareregulatedbytheprovisionsofImportPolicyor
byanyotherlawforthetimebeinginforce.
PricinpalLaw&ImportExportPolicy
PrincipalLaw
Imports in to India are governed by Foreign Trade (Development & Regulation) Act 1992. Under this Act,
importsofallgoodsisFreeexceptfortheitemsregulatedbythepolicyoranyotherlawforthetimebeingin
force.In exercise of the powers conferred by the Foreign Trade (Development & Regulation) Act 1992 the
GovernmenthasissuedthefollowingRules&Order:
ForeignTrade(Regulation)Rules,1993,whichinteralia,provideforgrantofspeciallicence,applicationforgrant
of licence, fee, conditions for licences, refusal of licence, amendment of licence, suspension of a licence,
cancellation of licence, declaration as to the value and quality of imported goods, declaration as to the
Importer Exporter Code number, utilisation of imported goods, provisions regarding making, signing of any

declaration/statementordocuments,powertoenter the premises and inspect, search and seizure of goods,

documents,thingsandconveyance,settlement,confiscationandredemptionandconfiscationofconveyance.
ForeignTrade(ExemptionfromApplicationofRulesinCertainCases)Order1993
NotificationsunderForeignTrade(Development&Regulation)Act1992.
ImportExportPolicy
Thepresentimportpolicyandproceduresinrespectofvariouscommodities/categoryofimporters,are,inter
alia,containedinthefollowingpublicationsissuedbytheMinistryofCommerceandrevisedfromtimetotime:
ImportExportPolicy,19972002asmodifiedupto31.03.1999
HandbookofImportExportProcedures(Volume1),19972002asmodifiedupto31.03.2000.
HandbookofImportExportProcedures:(Volume2)DutyExemptionScheme:
InputOutputandValueAdditionNorms,19972002.
ITC(HS)ClassificationofImportandExportItems.
NotificationsandCirculars

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TheImportExportPolicyandProcedurebooksissuedbytheGovernmentareamended/clarified/explainedby
theMinistryofCommercefromtimetotime.ThetypesofNotifications/Clarifications/Instructionsissuedbythe
Ministryforthispurposeare:
PublicNotices.
Notifications
PolicyCirculars
Selectthecommodity/Productyouwishtoimport:
Beawareoftheimportpotentialandthecommercialviabilityofthecommodity/product.
Check whether the items of your interest fall in the Restricted list of ITC(HS) Classifications of Exports &
Importsitems.
Prohibiteditemsarenotpermittedtobeimportedatall.ListofProhibiteditemsofimportaredetailedbelow:
Tallow, Fat or Oils rendered, unrendered or otherwise of any animal origin, animal rennet and wild animals
includingtheirpartsandproductsandivoryanypartandproducts,includingivory.
ForimportofitemsappearinginRestrictedlistyouneedsecureimportlicence.Thirdcategoryofitemscomes
under the Canalised list of items. Import of items included in Canalised list are permitted to be imported
throughCanalisingAgencies.
Thus items not appearing in Prohibited list, Restricted list and or in Canalised list can be imported Freely
withoutanyimportlicence.AlargenumberofConsumergoodsarefreelyimportablewithoutlicence.
RegistrationwithRegionalLicencingAuthorityandobtainingIECCode

RegistrationwithRegionalLicensingAuthority:
RegistrationwithRegionalLicensingAuthorityisaprerequisiteforimportofgoods.TheCustomswillnotallow
clearanceofgoodsunless:
TheimporterhasobtainedIECodeNumberfromRegionalLicensingAuthority.However,nosuchregistration
is necessary for persons importing goods from/ to Nepal provided Value of a single Consignment does not
exceedRs.25000/=
ObtainingIECCodeNumber
AnapplicationforgrantofIECCodeNumbershouldbemadeintheprescribedproformagivenatAppendix3.I.
Theapplicationdulysignedbytheapplicantshouldbesupportedbythefollowingdocuments:
BankReceipt(induplicate)/demanddraftforpaymentofthefeeofRs.1000/Certificatefromthe
Banker of the applicant firm as per Annexure1 to the form. Two copies of passport size
photographsoftheapplicantdulyattestedbythebankeroftheapplicant.
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. If there is any nonresident
interestinthefirmandNRIinvestmentistobemadewith repatriable benefits, full particulars
thereofalongwithaphotocopyofRBI'sapproval.IfthereisNRIinvestmentwithoutrepatriation
benefit,asimpledeclarationindicatingwhetheritisheldwiththegeneral/specificpermissionof
theRBIontheletterheadofthefirmshouldbefurnished.Incaseofspecificapproval,acopy
mayalsobefurnished.
Declaration by the applicant that the proprietors/partners/directors of the applicant
firm/company,asthecasemaybe,arenotassociatedasproprietor/partners/directorswithany
otherfirm/companytheIECNo.isallottedwithaconditionthatbecanexportonlywiththeprior
approvaloftheRBI.
Profileoftheexporter/importerinagivenformatatAppendix3.II.
The Registered Office or HO or Branch Office (duly authorized by the HO in this behalf) should apply for
allotment of IEC No. However, only one IEC no. is allotted to a company and the same is valid for all its
branches/offices/units.TheapplilcationforgrantofIECNo.shouldbemadetotheRegionalLicensingAuthority
concernedasspecifiedinAppendix3.III.
The application fee shall be deposited by way of deposit in an authorized branch of Central Bank of India
indicating the head of Account 1453 Foreign Trade and Export Promotion Minor Head 102. Import Licence
ApplicationFee.
The IEC No. is likely to be granted within 3 days of the receipt of the complete application and requisite
documents.
HowtofillupIECapplication:
Application form should be made in the prescribed form in duplicate along with the above enclosures,
mentionedagainstserial1to8ofaboveparagraph,alsoinduplicate.
Theformshouldbeneatlytyped/handwritteninboldcapitallettersonly.
Eachcopyoftheapplicationformshouldbesignedininkbytheauthorisedperson.
Items of information relevant to applicant should only be filled and remaining items may be marked not
applicable.
Modificationofparticularsoftheapplicantshouldalsobefurnishedonthisformbyfillingtherelevantitems.
However,incaseanIECodeholdernolongerwishestooperateundertheallottedcodenumber,thematter
shouldbebroughtunderthenoticeoftheRegionalLicensingAuthoritytomaketheCodenumberinoperative.
ImportPolicy:
For items not mentioned as Prohibited, Restricted or Canalised List for import in ITC(HS) Classification of
ExportandImportitemsimportofsuchitemsarefreelypermitted.Thereisnoneedtoobtainanylicenseor
permission for importing such goods. The ITC(HS) Classification of Export and Import items contains 99
chapters and in each chapter there are column heading covering Exim Code, items description, policy and
natureorrestriction.Theinformationrelatedtoimportpolicyforanyitemcanbeobtainedfromoursiteunder
CustomsDutyCalculatorSchedule.
Proceduretobefollowedforgrantofimportlicense:
AnapplicationforgrantofanimportlicenceorCCPforimportoftheitemsmentionedasrestrictedforimport

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in ITC(HS) Classification of Export and Import items may be made to the regional licensing authority
concerned.
LicenceApplicationFees

FeesforLicenceApplication:
Every application for import licence or CCP should be accompanied by 2 copies of a bank receipt from the
CentralBankofIndiaoraBankDraftfromanyBankindicatingthedepositinaccordancewiththeprescribed
scaleoffees.
Rs.200wherethevalueofgoodsspecifieddoesnotexceedRs.50,000.
Rs.2perthousandorpartthereofsubjecttoaminimumofRs.200andamaximumofRs.1lakh
50thousand,wherethevalueofgoodsexceedsRs.50,000.
Rs. 200 where Application is filed be SSI units where the CIF value of goods specified in the
applicationdoesexceedRs.2lakh.
Rs.200whereapplicationisfrograntofduplicatelicence.
Theapplicationfeeshallbedepositedeither:
By way of deposit in an authorized branch of Central Bank of India indicating the Head of Accounts 1453
ForeignTradeandExportPromotionMinorHead102,ImportLicenceApplicationFee.TheBankreceiptmust
showthenameofthedepartmentviz."DirectorGeneralofForeignTrade".Thebankreceiptshouldbedrawn
infavourofPay&AccountsOfficerconcerned.SuchfeescanalsobedepositedwithIndianMissionsabroad.
Or, Crossed DD on a scheduled bank for the requisite amount should be made in favour of the concerned
licensingauthority.
ValidityofLicence
Besidesimportlicenceforimportofrestricteditemsthereareothervarietyoflicencesandsuchlicenceshave
differentperiodofvalidity.
ExportPromotionCapitalGoodsLicencevalidity24months
CustomsClearancePermit"12months
DEPB"12months
AdvanceLicense/SpecialImprestLicence
ForProject/TurnkeyProject"18monthsorcoterminuswiththecontracteddurationoftheProject
Forthecaseswherethelicenseexpiresbeforethelastdayofthemonth,thelicenseshallbedeemedtobe
validuntilthelastdayofthatmonth.
Revalidation of License: License revalidation can be done on merits but not beyond 12 months by the
concerned licensing authority for a period of six months at a time reckoned from the date of expiry of the
validityperiod.
Last date for filling applications: the last date for receipt of applications for grant of licenses is 28th
Februaryofthelicensingyearunlessotherwisespecified.
ConditionsofLicence
Licensingconditionalities:Thelicenseforimportistakenintoconsiderationprovided:
thegoodscoveredbythelicenseshallnotbedisposedofexceptinaccordancewiththeprovisionsoftheEXIM
Policy,19972002orinthemannerspecifiedbythelicensingauthorityinthelicense
theapplicantforalicenseshallexecuteabondforcomplyingwiththetermsandconditionsofthelicense.
Itshallbedeemedtobeaconditionofeverylicenseforimportthat
no person shall transfer or acquire by transfer any license issued by the licensing authority except in
accordancewiththeprovisionsofthePolicy
the goods for the import of which a license is granted shall be the property of the licensee at the time of
importofwhichalicenseisgrantedshallbethepropertyofthelicenseeatthetimeofimportanduptothe
timeofclearancethroughtheCustoms
the goods for the import of which a licensee is granted shall be new goods, unless otherwise stated in the
license
thegoodscoveredbythelicenseforimportshallnotbeexportedwithoutthewrittenpermissionoftheDGFT
Disposal period for import application: Provided the application is complete in all respects along with
prescribeddocuments,theapplicantimportercanexpectthedisposalin:
IECNo.3workingdays
Dutyfreelicensewhereinputoutputnormsarenotified5workingdays
Duty free license where inputoutput norms are notified but cases are to be placed before ALC 15 working
days
Dutyfreelicensewhereinputoutputnormsarenotnotified,EPCGlicenses/exportlicenses/export
licenses/specificimportlicenses15workingdays
RevalidationoflicenseandextensionofexportobligationperiodbyRLA5workingdays
AcceptanceofBankGuarantee/Legalundertaking3workingdays
RedemptionofBankGuarantee/Legalundertaking/EndorsementofTransferability10workingdays
Issuance/renewalofExportHouse/TradingHouse/StarTradingHouse/SuperStarTradingHouse15working
days
Amendmentofanycategoryoflicense5workingdaysSIL7workingdays
FixationofStandardinputoutputnorms45workingdays
DEPB5workingdays
AlllicensesfallingunderChapter85workingdays
Miscellaneous15workingdays
Fixationofdeemedexportsdrawbackrate45workingdays
N.B.Thisapart,a"CounterAssistance"serviceisprovidedinalltheofficesoftheDGFTforspeedydisposalof
applications.Aforeigntradedevelopmentofficer(FTDO),inchargeofthecounterineachoffice.Onsubmission
oftheapplicationatthecountertheapplicantwillbehandedoveratokenandadvisedtoreturnthesameday

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whenhewillbeinformedwhetherhisapplicationhasbeenfoundcompleteandadmittedforfurtherprocessing
by the office or if there are any deficiency or lacunae. If deficiency is noticed the same is sent back to the
applicant.
Counter Assistance may also be availed of, for amendments of minor nature/enquiries. Applications in such
caseswillbereceivedinthelicensingofficesatthecounter.
Importer's own Identity Card: An application for issuance of an Identity Card may be made in the
prescribedform.IncaseoflossofanIdentityCard,aduplicatecardisissued.
ImportsunderSpecialSchemeforExporters

TheGovt.ofIndiahasframedthecertainschemestopromoteexports.
ExportPromotionCapitalGoodsSchemes:
Capitalgoodsincludingjigs,fixtures,diesandmouldsmaybeimnportedataconcessionalrateofcustomsduty
aspertablegivenbelow.Subjecttoanexportobligationtobefulfilledoveraperiodoftime.Inadditionspares
upto20percentofthecostinsuranceandfreight(CIF)valueofthecapitalgoodsmayalsobeimportedunder
thescheme.
UnderthisschemeCustomsdutyis5%iftheexportobligationis5timestheCIFvalueofthecapitalgoodsor
4timestheCIFvalueofcapitalgoodsonNEFbasis.Theperiodoffulfillmentoftheexportobligationis8years
reckonedfromthedateofissuanceoflicence.
PeriodfromthedateofissueoflicenceProportionoftotalexportobligation
Blockof1stand2ndyearnil
Blockof3rdand4thyear15%
Blockof5thand6thyear35%
Blockof7thand8thyear50%
The licence holder under EPCG scheme shall fulfill the export obligation over the specified period in the
followingproportions:
Anapplicationforgrantoflicenseunderthisschemeshouldbemadetothelicensingauthorityconcernedin
theformgiveninAppendix10AoftheHandbookofProcedures,19972002alongwithdocumentsprescribed
therein.Beforeclearanceofgoodsthroughcustoms,theimporterhastoexecuteabondsupportedbyabank
guaranteewiththeCustomsAuthorityintheprescribedmanner.Thelicenseholderwillalsohavetosubmit
progressreportoftheexport/suppliesmadeandservicesprovided,dulycertifiedbyaChartedAccountant/Cost
andWorksAccountanttotheLicensingAuthority.Thereportshouldbesubmittedintheprescribedform10C
of the Handbook of Procedures, 19972002. For Customs duty exemption exemption in respect of imports
underEPCGscheme,theMinistryofFinancehasissuedNotificationNo.28/97Cus.&29/97Cus.,bothdated
1stApril,1997.
DutyExemptionScheme:
AccordingtotheEXIMPolicy19972000,dutyfreeimportofinputsispermittedunderthefollowingschemes:
AdvanceLicensegrantedtomerchantexporterormanufacturerexporterfortheimportofinputsrequiredfor
themanufactureofgoodswithoutpaymentofbasiccustomsduty.However,suchinputsshallbesubjectto
thepaymentofadditionalcustomsdutyequaltotheexcisedutyatthetimeofimport.Reference:Notification
No.30/97Customsbothdated1.4.97.
AnnualAdvanceLicenseManufacturerexporterwithexportperformanceofRs.1croreintheprecedingyear
and registered with excise authorities, except for products which are not excisable for which no such
registration is required, shall be entitled for Annual Advance License. Export House, Trading House, Star
TradingHousesandSuperStarTradingHousesHoldingthecertificateasmerchantexporterwheretheyagree
totheendorsementofthename(s)ofthesupportingmanufacturerontherelevantannualadvancelicense
shallalsobeentitledfortheannualadvancelicense.
This license and/or material imported thereunder shall not be transferable even after completion of export
obligation. Such annual advance license shall be issued with positive value addition without stipulation of
minimumvalueaddition.Theentitlementunderthisschemeshallbeupto125%oftheaverageFOBvalueof
exportintheprecedinglicensingyear.ImportsagainstthisisexemptedfrompaymentofAdditionalcustoms
duty, Special Additional Duty, Anti Dumping Duty, Safeguard duty, if any, in addition to Basic customs duty
andsurchargethereon.
Advance Intermediate License: This license is granted to a manufacturer exporter for the import of inputs
required in the manufacture of goods to be supplied to the ultimate exporter holding an Advance
License/SpecialImprestLicense.
SpecialImprestLicense:Thislicenseisgrantedforthedutyfreeimportofinputsrequiredinthemanufacture
of goods to be supplied to the ultimate exporter holding an Advance License/Special Imprest License. Such
SpecialImprestLicenseisgrantedfortheDutyFreeimportofinputsrequiredinthemanufactureofgoodsto
besuppliedtotheEoUs/unitsinEPZs/STP/EHTP,holdersoflicenseundertheEPCGscheme,projectsfinanced
bymultilateral/bilateralagencies/fundsasnotifiedbytheDept.ofEconomicAffairs,MoF,FertilizerPlantsifthe
supply is made under the procedure of International Competitive Bidding, supply of goods to refineries and
proejcts/purposesforwhichMpFpermitsimportofsuchgoodsonzerocustomsduty.
AdvanceReleaseOrder:
A duty free license holder except Advance Intermediate License Holder intending to source the inputs from
indigenoussources/canalising agencies/EOUs/EPZ/EHTP/STP units in lieu of direct imports has the option to
sourcethemagainstAdvanceReleaseOrderdenominatedinforeignexchange/Indianrupees.Insuchcases,
thelicenseisinvalidatedfordirectimportandpermission in the form of ARO is issued which will entitle the
suppliertothebenefitsofdeemedexports.
Backtobackinlandletterofcredit:ThisisanalternativetoARO.Forthisthedutyfreelicenseholderintending
toavailsuchfacilitymayapproachabankforopeninganinlandL/Cinfavourofanindigenoussupplier.Before
thisthebankwillensurethatnecessarybankguaranteeorLetterofUndertakinghasbeenexecutedbythe
license holder and endorsement to this effect has been made on the License. The indigenous supplier may
supplythegoodsonthestrengthofL.C.openedinhis favour . For the purpose of claiming Deemed Export

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benefits,anindigenoussuppliershallproducethecopyoftheL/CtogetherwithaphotocopyoftheDutyFree
License,dulyendorsedbythebankconcernedandthesaiddocumentsshallforallpurposesbedeemedtobe
anARO.
Duty Entitlement Pass Book scheme: It aims at neutralising the incidence of customs duty and surcharge
thereonontheimportcontentoftheexportproduct.Thisneutralisationisprovidedbywayofgrantofduty
credit on the deemed import content in the export product as per Standard input output norms and
consideringthevalueadditionachieved.Thisschemeisallowedtobeoperatedonpreandpostexportbasisby
amanufacturerexporterandmerchantexporter.Theschemeallowsexportertoclaimcreditofcustomsduty
at a specified percentage of the f.o.b. value of the exports made in freely convertible currency. DGFT issues
publicnoticefeaturingeligibleproductsalongwiththecreditratesunderthisscheme.Althoughitemsoutside
the restricted list can be exported without Customs duty, DEPB holder may pay additional customs duty in
cash, if any. (vide MoF Customs Notification No. 34/97 Cus. Dated 7.4.1997 and Circular No. 10/97Cus.
Dt.17.4.1997).ThirdpartyexportsarealsopermissibleforgrantofcreditunderthisschemeandDEPBisvalid
for12monthsfromthedateofissue.
Special Import License(SIL): issued to Export/Trading/Star Trading/Super Star Trading houses
Manufacturers/processors with the quality certification from ISO,HACCP,WHOGMP or SSI CMM level 2 and
above certification EOUs/EPZs Deemed exporters exporters of telecom and electronic equipments small
scale exporters(certified) service providers and other exporters. This provision has been withdrawn from
31.03.2000.NoSILlicenseswillbeissuedforexportsmadeafter31.03.2000.
Diamond, Gem & Jewellery Export Promotion Scheme: Exporters of gem and jewellery are eligible to import
theirinputsbyobtainingRep.Licenseanddiamondimprestlicensefromthelicensingauthority.Exportersof
gold/silver/platinumjewelleryandarticlesthereofmayimporttheiressentialinputse.g.preciousmetalsand
stonesinaccordancewiththeprocedurespecifiedinthisregard.
100% EOU/EPZ/FTZ Scheme This means an industrial unit offering its entire production, excluding rejects
and items otherwise specifically permitted to be supplied to the domestic tariff area(DTA), for exports. Such
units may be set up under the EOU/EPZ scheme. While EOUs can be set up anywhere in India subject to
certain locational conditions, units in EPZ/FTZ can be set up in specific areas separated from the DTA by
physicalbarriers.
Hints/Suggestionforfinalisationofimportorder/contract:
Proper selection of the Commodity will depend up on Various Commercial and legal Considerations including
the regulations Contained in the Current Import Export Policy, Procedure, while selecting the product,
particularlyforCommercialpurposesoneshouldknowtheexportregulationsintheexportingCountries.
SelectingtheOverseasSupplier
ImportscanbemadefromanycountryoftheworldexceptFijiandIraq.Theinformationregardingoverseas
suppliercangenerallybeobtainedfromthefollowingsources:
Trade Directories and Yellow Pages, like Singapore yellow pages, Japan yellow pages, USA yellow pages etc.
availablefromleadingbooksellersinIndiaincluding.ConsulateGeneralsandTradeRepresentativesofvarious
countriesinIndiaandabroad.
Friendsandrelativesinforeigncountries.InternationalTradeFairsandExhibitionsforwhichyoumaycontact:
InternationalTradePromotionOrganisation(ITPO),
PragatiMaidan,NewDelhi.
ChamberofCommerce.
DirectorateofIndustries,etc.
IndentingAgentsofForeignSuppliers.
Theadvertisementinforeignpapersmayalsobeuseful.
SimilarinformationsarealsoavailableinourImportExportdatabase.
CapabilityandCreditworthinessofOverseasSupplier
Successfulcompletionofanimporttransactionwillmainlydependuponthecapabilityoftheoverseassupplier
to fulfil his contract.The credit worthiness of the overseas supplier, his capacity to fulfil that contract, etc.
should,therefore,beproperlyverifiedbeforeenteringintoacontractwithhim.Confidentialreportsaboutthe
supplier may be obtained through the banks and Indian embassies abroad. Reputed overseas suppliers
normallyhavetheirIndentingAgentswithofficesinIndiaandcontractcanalsobefinalisedthroughthemfor
smoother operations. The importer can also take the assistance of Credit Information Agencies for specific
commercial information on overseas suppliers. They may also contact Trade Information Centres of the
countryconcerned.
Correctaddressoftheseagenciescanbeobtainedfromtheoverseascountriestraderepresentativespostedin
India.
RoleofOverseasSuppliers'AgentsinIndia
SomeoverseassuppliershaveappointedtheiragentsinIndia.TheseagentsprocureordersfromtheIndian
partiesandarrangeforthesupplyofgoodsfromtheirprincipalabroad.Itisadvisabletoimportthroughsuch
agentsastheycanbereadilycontactedincaseofanydifficultywithregardtoqualityofgoods,paymentand
documentation,etc.
FinalisingtheTermsofImport
Thisisanimportantsubjectandshouldbehandledwithextremecareandcaution.Itisadvisablethatbefore
finalisingthetermsofImportOrder,youshouldcallforthesamplesorcatalogueandotherrelevantliteratures
and the specification of the items to be imported. Import of samples of goods is exempt from import duties
under'Geneva'Conventionof7thNovember,1952.Samplesaresubjecttoreexportandotherconditionsas
specified in the Geneva Convention. Besides, vide Customs Notification No. 154/94 dated 13.07.1994,
commercial samples brought into India as personal baggage by bona fide commercial travellers and
businessmenorimportedintoIntoIndiabypostorbyairareexemptfromthecustomsduty.Similarly,vide
Notification No. 154/94 dated 13.07.1994, prototype of engineering goods when imported into India as
samplesforexecutingorfor use in connection withexport orders are exempt from customs duty. Likewise,

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the Central Government has exempted bona fide commercial samples and prototype of engineering goods
whenimportedintoIndiabypostorbyairorbycourierservicebymanufacturersofexportgoods.
Onceyouaresatisfiedwiththesamplesandthecreditworthinessoftheoverseassupplier,youcanproceedto
finalisethetermofthecontracttobeenteredinto.Forthispurpose,theImportContractshouldbecarefully
and comprehensively drafted incorporating therein precise terms, all relevant conditions of the trade deal.
Thereshouldnotbeanyambiguityregardingtheexactspecificationsofthegoodsandtermsofthepurchase
including import price, mode of payment, type of packaging, port of shipment, delivery schedule, etc. The
differentaspectsofanimportcontractareenumeratedasundersome of which may be relevant and other
maynotbe:
Product,Standardsandspecifications.
Quantity.
Inspection.
TotalvalueoftheContract.
TermsofDelivery.
Taxes,DutiesandChargespayableatExportingCountryandpayableinIndiaonimportation.
PeriodofDelivery/Shipment.
Packing,LabellingandMarking.
TermsofPaymentAmount,Mode&Currency.
DiscountsandCommissions.
LicensesandPermits.
Insurance.
DocumentaryRequirements.
Guarantee.
ForceMajeureorExcuseforNonperformanceofContract.
Remedies.
Arbitration.
ModeofPricingandINCOTERMS
While finalising the terms of import contract, the Importer, should, inter alia, be fully conversant with the
modeofpricingandthemannerofpaymentfortheimports.Asregardsmodeofpricing,theoverseassupplier
normallyquotethetermsprevailingininternationaltrade.
The importer for his benefits should know the meaning of the technical terminology. To avoid ambiguity in
interpretationofsuchterms,InternationalChamberofCommerce,Paris,Hasgivedetaileddefinitionofafew
standard terms popularly known as 'INCO TERMS'. These terms have almost universal acceptance and are
explainedbelow:
Exwork
'Exwork'meansthattheseller'sresponsibilityistomakethegoodsavailabletothebuyeratworksorfactory.
Thefullcostandriskinvolvedinbringingthegoodsfromthisplacetothedesireddestinationwillbeborneby
the buyer. This terms thus represents the minimum obligation for the seller. It is mostly used for sale of
plantationcommoditiessuchastea,coffeeandcocoa.
FreeonRail(FOR)/FreeonTruck(FOT)
Thesetermsareusedwhenthegoodsaretobecarriedbyrail,buttheyarealsousedforroadtransport.The
seller'sobligationsarefulfilledwhenthegoodsaredeliveredtothecarrier.
FreeAlongsideShip(FAS)
Oncethegoodshavebeenplacedalongsidetheship,theseller'sobligationsarefulfilledandthebuyernotified.
Thebuyer has to contract with the sea carrier for the carriage of the goods to the destination and pay the
freight.Thebuyerhastobearallcostsandrisksoflossordamagetothegoodshereafter.
FreeonBoard(FOB)
Thesellers'sresponsibilityendsthemomentthecontractedgoodsareplacedonboardtheship,freeofcostto
thebuyerataportofshipmentnamedinthesalescontract.'Onboard'meansthataReceivedforShipment'
BillofLadingisnotsufficient.SuchB/Lifissuedmustbeconvertedinto'ShippedonBoardB/L'byusingthe
stamp'ShipedonBoard'andmustbearsignatureofthecarrierorhisauthorisedrepresentativetogetherwith
dateonwhichthegoodswere'boarded'.
CostandFreight(C&F)
Thesellermustonhisownriskandnotasanagentofthebuyer,contractforthecarriageofthegoodstothe
portofdestinationnamedinthesalecontractandpaythefreight.Thisbeingashipmentcontract,thepointof
deliveryisfixedtotheship'srailandtheriskoflossorofdamagetothegoodsistransferredfromthesellerto
the buyer at that very point. As will be seen though the seller bears the cost of carriage to the named
destination,theriskisalreadytransferredtothebuyerattheportofshipmentitself.
CostInsuranceFreight(CIF)
ThetermisbasicallythesameasC&Fbutwiththeadditionthatthesellerhastoobtaininsuranceathiscost
againsttherisksoflossordamagetothegoodsduringthecarriage.
Paymentagainstimports
Payment under better of Credit is a universally accepted mode of payment. A Letter of Credit is a Signed
instrument and an undertaking by the banker of the buyer to pay the seller a certain sum of money on
presentationofdocumentsevidencingShipmentofSpecifiedgoodssubjecttoCompliancewiththestipulated
termsandConditions.
LetterofCreditvsBankGaurantee

A letter of credit differs from a bank guarantee. An issuing or confirming bank's obligation is
independent of, and unqualified by, the contract of sale under the transaction. A commercial
creditisneitheraperformancebond,noritisaguaranteeofthequantityorqualityofthegoods

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shipped.
LettersofCreditareSeparateTransactions
A contract for sale of goods between the seller and the buyer incorporates mode of settlement. Letters of
creditbytheirnatureareseparatefromthesalecontract,andbanksarenotconcernedorboundbysuchsale
contractsevenifthecreditsbearreferencetothem.
The credits stipulate documents which have to be tendered for payment and it, therefore, follows that in
credits parties deal with documents and not with goods, services or performances to which the documents
relate.
Itis,therefore,intheinterestofallthepartiesconcernedthattheconditionsandtermsofcreditarecomplete
andpreciseandbarefitofexcessivedetails.
Paymentunderaletterofcreditdoesnotdependontheperformanceobligationonthepartoftheexporter
except those which the credit imposes. Banks accept documents under letters of credit for what those
document purport to be on their face. Contract between the buyer and the seller is obligatory between
themselves.Theseller(beneficiary)cannottakeadvantageofanycontractualtermsinbetweenthebuyerand
theopeningbankandbetweentheopeningbankandtheadvising/confirmingbank.
UniformCustomsandPracticeforDocumentaryCredit
Inthecourseoftime,anumberofpractices,expressionsandtermshaveevolvedbetweenbanksdealingwith
documentarycredits.Toensureuniformityofinterpretationininternationaltrade,theInternationalChambers
ofCommerceinParishasworkedoutthe"UniformCustomsandPracticeforDocumentaryCredit".Thesehave
beenrevisedandbroughtuptodateseveraltimesinthepast.ThelatestinthelineofrevisionsistheUCP
500(w.e.f.January1,1994)whichupdatesandconsolidatesthepreviousUCP400.Theyarenowappliedby
thebanksinnearlyallcountriesincludingIndia.
PartiestoaLetterofCredit:
Followingpersonsaregenerallyparties,toaletterofCredit:
Benificiary : The exporter of goods in whose favour the L/C has been established. Customer/importer : The
personweintendstoimportthegoodsandinstructsbanktoestablishedLetterofCredit.
Issuing Bank: The Banker in the importers Country who opened the L/C. Correspondent Bank or Advising
Bank:Thebankerintheexporterscountry,whoisauthorisedbytheissuingbanktoadvisethebeneficiaryof
the Credit and to effect such payment or to accept and pay such bills of exchange or to negotiate against
StipulateddocumentsandonComplianceofStipulatedtermsandconditionspecifiedbytheimporteronthe
exporter.
ConfirmingBank:Thebankerintheexporters(beneficiary)country,whoatthedesireofthebeneficiaryadds
confirmationtotheletterofCreditsothatbeneficiarycangetpaymentwithoutrecoursefromtheConfirming
bank.TheConfirmingbankmaybecorrespondentbankitselforsomeotherbank.
GenerallyfollowingtypesofLetterofCreditareinoperation.
RevocableorIrrevocableLettersofCredit
ConfirmedCredit
TransferableCredit
WithorwithoutRecourseCredit
RevolvingLetterofCredit
TransitCredit
BacktoBackCredit
TheSightCredit
TheCreditavailableagainstTimeDraft(UsanceCredit)
TheDeferredpaymentCredit.
PrecautionstobetakenatthetimeofestablishingLetterofCredit
Letterofcreditoffersalmostcompleteprotectiontothesellerbutthebuyerisputtomanydisadvantagesand
has to make payments against documents only. Before agreeing to open a letter of credit in favour of the
seller, the opener must be satisfied with the creditworthiness and general reputation of the seller. Entire
successofanL/Ctransactiondependsonproperconductoftheseller.
Confidentialreportonthesellermustbeobtainedatthetimeoffirsttransactionwithhim.
Letterofcreditalsodoesnotofferanyprotectionforthequality/quantityofgoodssuppliedundertheL/C.It
would,thereforebenecessarytoknowthenatureofgoodsandspecifysubmissionofqualityreports/inspection
reportsfromanindependentagencytoensurereceiptofgoodsofproperquality.Thisisparticularlyimportant
in case of import of chemicals and such other goods. The opener has to submit an L/C application to the
openingbank.TheinstructionscontainedintheL/Capplicationisthemandatefortheissuingbankandletter
ofcreditwillbeissuedinaccordancewiththisapplication.Itis,therefore,necessarythatcompleteandprecise
informationmustbegivenintheL/Capplicationformspecifyingthereinthedescription,unitrateandquantity
ofthegoodscoveredunderL/Canddetailsofdocumentsrequiredinabsoluteclearandunambiguousterms.
The reference to underlying sale contract must be avoided as far as possible. The L/C application must
neverthelesscontainalltherequired/informationbasedonwhichL/Ccouldbeopenedbythebank.
AftertheL/Chasbeenissuedbythebank,acopythereofmustbeobtainedimmediately.TheL/Cmustbe
scrutinizedtoensurethatithasbeenproperlyissuedandisinconformitywithL/Capplication.Discrepancy,if
any,mustbebroughttothenoticeofopeningbankimmediately.
Import contact may be concluded either in terms of INR or in foreign currency. Where the contracts are in
INR,therelateddocumentsarealsopreparedinINRandnoconversionisinvolved.However,wherethebillis
drawn in foreign currency, the payment is made in Indian rupees equivalent to the foreign currency. The
equivalentrupeevalueisarrivedatby applying suitable exchange rate. These rates are applied by banks to
standardisetheforeignexchangerupeeconversionprocess.
When the price of foreign currency is quoted in terms of home or local currency it is called direct quotation
basis. This has been in application since 02.08.1993. However, there is a difference between interbank
exchangeratesandmerchantrates.

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Merchantratesaretheexchangeratesappliedbythebankersfortransactionwiththeircustomersforvarious
purposes,includingimportsandexports.Theseratesarecalculatedbythebanksaspertheguidelinesissued
bytheForeignExchangeDealersAssociationofIndia(FEDAI).Interbankratesaretheratefortransactions
amongsttheauthoriseddealersinforeignexchangeanddependonthemarketconditions.
Sinceexchangeratesarevolatile,documentsdeliveredbythebankatthetimeofafavourableexchangerate
willenabletheIndianpurchasertopaylessofIndianrupees.Forexratesarealwaysquotedastwowayprice
i.e.atarateatwhichthebankiswillingtosellforeigncurrency(buyingrate)andatarateatwhichthebank
is willing to buy foreign currency(selling rate). There is always some difference in buying and selling rates.
However,themaximumspreadavailabletobankisrestrictedintermsofcellingimposedbyRBI.Allexchange
ratesbyauthoriseddealersarequotedintermsoftheircapacityasbuyerorseller.
TTSellingRate
ThisrateisappliedforallcleanremittancesoutsideIndia.Forsellingforeigncurrencytoitscustomerbythe
banksuchasforissuanceofbankdrafts,mail/telegraphictransferetc.
TTBuyingRate
ThisrateisappliedforpurchaseofforeigncurrencybybankswhenthebanksinIndiahavealreadyobtained
the cover in India. Thus all foreign inward remittances which are made payable in India are converted by
applyingthisrate.AmailtransferissuedbyabankinDubaiforUS$10,000drawnonanycommercialbank
havingbranchattheoverseasdestinationwillbeconvertedintorupeesatTTbuyingrate.
ReadingRatesTheratesannouncedbythebankseverydaymorningarecardrates.
Reputed importers can always bargain with the bank for improvement in the card rates for reducing their
rupee liability on conversion of foreign currency into Indian rupees. Also a distinction is made between spot
ratesandforwardrates.Spotratesareapplicableonthedayoftransaction,whereasforwardratesarefixedin
advanceforatransactionthatwillmatureataspecifieddateorduringaspecifiedperiodinfutureimports.
HedgingagainstForexrisk:
Exchangeriskarisingonaccountofadversemovementoftheexchangerates,canbeavoidedbythefollowing
methods:
ByrequestingthesuppliertoinvoicethegoodsinIndianrupees(possibleonlywhentheselleragreestoit)
Byenteringintoaforwardexchangecontract.
Thisinvolvesbookingofforwardexchangecontractwiththebankoftheimporter.
ForbookingforwardcontracttheimportershouldapproachhisbankwithwhichanL/Chasbeenopened.The
bank will book a forward contract only against genuine trade transaction. The bank will verify suitable
documentstoensuretheauthenticity and the amount of permitted currency of the underlying transaction.
Theamount,dateandnumberoftheforwardcontractwillbemarkedonsuchdocumentsunderthestamp
andsignatureofthebanktoensurethatmorethanoneforwardcontractisnotbookedinrespectofthesame
underlying transaction. A transaction may be covered either in parts or in whole. The period and extent to
whichanexposureistobecoveredislefttothechoiceofthecustomer.Ordinarily,thematurityoftheforward
contractmatcheswiththatoftheunderlyingtransaction.Ifthedocumentsofimportarenotreceivedwithin
theagreedperiodofthecontract,thecontractneedstobecancelled(anfreshcontractbookedifdesired)for
which the bank will levycancellation charges as per FEDAI rules. In case the documents are received before
thestipulateddateandtheimporterwantsearlydelivery,thebankwillagainlevychargesforearlydelivery,as
perFEDAIrules.
The importers should be careful in chosing the period of forward contract. Otherwise early delivery or
cancellationofforwardcontractwouldleadtounnecessarycharges.TheRBIallowssubstitutionofanimport
orderonspecificrequest,providedthebankissatisfiedwiththecircumstanceleadingtothenonperformance
ofthecontract.
Where the documents are under a contract(NonL/C case), the seller will submit the complete set of
documentstohisbankerswiththerequesttoeitherpurchase/discountthedocumentstohisbankerwiththe
requesttoeitherpurchase/discountthedocumentsorsameoncollectionbasistotheimporter.Intheformer
casetheseller'sbankfinancesthe sellers whereas in the latter case, no financial facility is extended to the
overseas seller. The seller's banker may advance some money against documents sent on collection basis
while,treatingthedocumentsascollateralsecurity.
When the documents are under L/C, the documents are prepared strictly in conformity with the letter of
credit.
Afterpreparingthedocumentstheoverseassellerwilltenderthedocumentstohisbankerfornegotiation.The
bank, after receiving the documents, will examine them to ensure that they are strictly drawn as per the
termsofthecredit.Following this the overseas banker will send the documents to the importer's banker in
India.Theimpoter'sbankwilladvisetheimportertocollecttheshippingdocumentseitheragainstpaymentor
acceptanceasperthetermsofthecontract.
In case the documents are drawn under L/C, the issuing banker(of the overseas supplier) will examine the
documents and if found in order it will hand over the same to the importer after debiting his account with
amountinvolvedoragainstacceptanceasperthetermsofthecredit.
If the documents are not in line with the terms of the credit, the overseas banker can either refuse to
negotiate further and ask the seller to send them on collection basis only or it can contact the importer's
bank(inthebuyer'scountry)forauthorisationoritcanalsomakepaymentunderthereserveagainstseller's
indemnity.
ImportPolicy:
For items not mentioned as Prohibited, Restricted or Canalised List for import in ITC(HS) Classification of
ExportandImportitemsimportofsuchitemsarefreelypermitted.Thereisnoneedtoobtainanylicenseor
permission for importing such goods. The ITC(HS) Classification of Export and Import items contains 99
chapters and in each chapter there are column heading covering Exim Code, items description, policy and
natureorrestriction.Theinformationrelatedtoimportpolicyforanyitemcanbeobtainedfromoursiteunder
CustomsDutyCalculatorSchedule.

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Proceduretobefollowedforgrantofimportlicense:
AnapplicationforgrantofanimportlicenceorCCPforimportoftheitemsmentionedasrestrictedforimport
in ITC(HS) Classification of Export and Import items may be made to the regional licencing authority
concerned.
Scrutinyofdocuments

This is a very important function and this should be done with great care. After receiving the
documentfromtheoverseassupplier'sbanktheimporter'sbankwillscrutinisethemtoverifythe
extent of correctness as per the terms of the L/C. For discrepancies in the documents following
principlesareadopted:
Ifdiscrepanciesaresuchwhichviolatesanyofexchangecontrolorimportcontrolregulations,thedocuments
shouldstraightawayberejected.
Ifthediscrepanciesareoftrivialnaturenotaffectingthecharacterofthetransactionsthedocumentsmaybe
acceptedonmerits.
Ifthedocumentsarerejected,immediatenoticetothateffectshouldbegiventothebanktosafeguardthe
importer's interests.The documents prescribed by the beneficiary are carefully scrutinised by the issuing
banker.Theimportershouldalsoscrutinisethedocumentstoensurethat:
Theywerepresentedwhenthecreditwasinforceandhadnotexpired.
Theamendmentsandspecialinstructionshavebeentakencareof
TheamountofbilldoesnotexceedthevalueofL/C
AlldocumentsrequiredintheL/Chavebeenmadeavailable
Documentscarryrequiredendorsements
Thedocumentsdonotcontaindiscrepancieswhichviolateanyexchangecontrol/importcontrolregulations
Theinvoiceisdulysigned,tallieswithamountofdraft,Exactquantitiesareshownandisdrawninappropriate
currencyoftheoriginofgoods
BillofleadingispresentedinfullsetofnegotiablecopiesandisonboardbillofladinganddulysignedIncase
the goods are imported on cash against documents(CAD), documents against payment(D/P) or documents
against acceptance(D/A) basis, the importer needs to take delivery of documents from the banker before
completionofthecustomsformalities.Thisprocess,knownasretirementofdocuments,needstheimporterto
applytoauthoriseddealer/bankerwhoisinpossessionofdocuments.Thiscanbedonebytenderingthefunds
equivalenttothevalueofdocumentsandthebankchargesexchangecontrolcopyofimportlicense,where
applicable,FormA1dulycompletedforremittanceofforeignexchange.
The documents are released to the importers against payment in case of DP bills and against acceptance in
caseofDAbills.Thepaymentineithercaseisacceptedonlyfromthebankaccountofimporter.Ifthebankis
outoffundstheinterestischargedtotheimporter'saccount.Foranyoverdueperiodapenalinterestwillbe
charged.
ChecklistforDocument(receivedunderL/C)scrutiny:
GeneralcheckwhetheralldocumentsinfullsetsasperL/Ctermshavebeenreceived
Documentshadbeenpresentedbeforetheexpirydate
AllthedocumentsaredatedsubsequenttothedateofissueoftheL/C
Cancellation/overwritinginalldocumentsareauthenticated
BillsofExchangecheckwhether
DrawnonthepersonindicatedintheL/Canddulysignedupbythebeneficiaryofthecredit
DrawingiswithinL/CamountandinthesamecurrencyaspertheL/C
Theamountsinwordsandfiguresarethesameandidenticalwiththeamountstatedintheinvoice
Superscription,regardingdrawingunderL/ChasbeenmadeandtheBillmusthavebeenissuedstamped.
Invoicecheckwhetherinvoice:
IsmadeoutinthenameofthepersonwhohadopenedtheL/C
Quantity,unitpriceandvaluearequotedasperL/C
WhetherunitpriceandvaluearequotedasperL/C
ThedescriptionofthemerchandisecorrespondstothedescriptionintheL/C
Thearithmeticalcalculationsarecorrect
Importlicense/OGL/ContractNo./OrderNo./IndentNo.mentionedasperL/C
NochargeotherthanstipulatedinL/Cinincluded
AdditionalcopyforExchangeControlpurposesissubmitted
Thedateandno.oftheLicense/OGLindicated
Billofladingissubmittedwithin21daysfromthedateofshipment,ifnospecifictimeisbetweenthedateof
issueandexpiryofL/C
ThedateofshipmentisbetweenthedateofissueandexpiryofL/C
Fullquantityofgoodsisshipped,ifpartshipmentisnotallowed
Fullsetissubmitted
Freightisshownasprepaid/payableatdestination,asperL/C
Billofladingshows'onboardshipment'
PartiesarenotifiedasperL/Cterms
Carryingvessel'snamehasbeenmentionedinBillofLading
Thebeneficiary'snameisshownasconsignor,unlessL/Ctermspermitsthirdpartybilloflading
Theconsignee'snameisasperL/C
TheB/Lismanuallysigned
ThedescriptionofgoodsisconsistentwithL/C
Theportsofloading/destinationarementionedasperL/C
Marks,numbers,quantityandweightagreewiththeinvoice
ThecarryingvesselbelongstoanyparticularlineasperL/C
Adequatelystamped

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Properlyendorsed
IfAWB,whetherflightnumberanddateofdeparturementioned
If freight has been added separately in invoice and no separate freight certificate of shipping company is
submitted.B/Lshowsfreightamount.
ScrutinyforInsurancedocumentscheckwhetherthepolicyistakenoutinthenameoftheshipper
Certificate/policyisaccordingtoLetterofCreditterms
Riskcommencesw.e.f.dateofB/L
AmountofinsuranceasperL/Cterms
WhetherdrawninthesamecurrencyastheL/C
DescriptionofgoodsagreewithB/L
RisksasperL/Carecovered
TheplacewhereclaimsarepayableisasperL/Cterms
Adequatelystamped
Detailssuchasnameofcarryingvessel,portsofloading/destination,marks,agreewiththeB/L
Certificateofanalysis,weighment,etc.
ThecertificatesareissuedbytheauthoritystipulatedinL/C
Nameoftheshipperisproperlyshown
Thesamplesdrawnrelatetothegoodsactuallyshipped
Dateofsampleverificationiswithinthedateofshipment
Certificateoforigin
ItisissuedbytheauthoritystipulatedintheL/C
Thedescriptionofgoodsagreeswiththatintheinvoice
Checkingotherdocuments
AllotherdocumentsstipulatedintheL/Careverified
TheyareissuedbytheauthoritiesspecifiedintheL/C
TheycontainthedetailsasrequiredbytheL/C
For matter relating to Documentary Collections and Commercial terms, the importers are likely to be
conversantwiththebrochuresissuedbytheInternationalChamberofCommerce(ICC),Paris.
Followingarethebrochures:
UniformCustomsandPracticeforDocumentaryCollectionandCommercialTerms
UniformRulesofCollections(ICC522)
UniformRulesforaCombinedTransportDocument(ICC298)
INCOTerms1990
RBIregulationsforMakingPaymentsbyimporters
ImportPolicy:
For items not mentioned as Prohibited, Restricted or Canalised List for import in ITC(HS) Classification of
ExportandImportitemsimportofsuchitemsarefreelypermitted.Thereisnoneedtoobtainanylicenseor
permission for importing such goods. The ITC(HS) Classification of Export and Import items contains 99
chapters and in each chapter there are column heading covering Exim Code, items description, policy and
natureorrestriction.Theinformationrelatedtoimportpolicyforanyitemcanbeobtainedfromoursiteunder
CustomsDutyCalculatorSchedule.
Proceduretobefollowedforgrantofimportlicense:
AnapplicationforgrantofanimportlicenceorCCPforimportoftheitemsmentionedasrestrictedforimport
in ITC(HS) Classification of Export and Import items may be made to the regional licencing authority
concerned.
Modeofpayment
Payments in retirement of bills drawn under L/C as well as bills received from abroad for collection against
importsintoIndia,mustbereceivedbyauthoriseddealers,irrespectiveofamount,bydebittotheaccountof
theimporterwiththemselvesorbymeansofacrossedchequedrawnbyhimonhisotherbankers.Payment
against bills should not be accepted in cash. This rule also applies to private imports where the amount
involvedisRs.20,000ormore.
PaymentforimportbillsWheretheimportbillsaredrawninIndianRuppes(INR),anequivalentamount(plus
bankcharges)isdebitedtotheaccountoftheimporterbytheauthoriseddealerandtheamountremittedto
theforeignseller.Incasethebillsaredrawninforeigncurrencies,theINRequivalentisarrivedatbyapplying
theappropriateforeignexchangerate.
Fixing of Re. EquivalentIn order to bring uniformity in the handling of import bills under L/C authorised
dealershavebeendirectedbytheRBIoffollowthefollowingprocedure:
Sight import bills received under L/C and conforming to credit terms, may be held in foreign currency for a
maximumperiodof10daysfromthedateofreceiptofdocumentsbytheBank.
Incaseofnonpaymentbythedraweewithin10days,theimporter'sliabilityontheforeigncurrencybillshall
becrystallisedbyconvertingtheforeigncurrencyamountintorupeeatthe
B.C.Sellingrateprevailingonthe10dayortheforwardexchangecontractratewhereapplicable.Authorised
dealersshallkeepaproperrecordofthedateofreceiptofdocuments.
In case the 10th day is holiday or a Saturday, the importer's liability in rupees shall crystallise in the next
followingworkingday.
Authoriseddealershallcarryswapcostsfromthecustomer.
Authorised dealer shall charge interest at the rate as prescribed by RBI for advances to nonpriority sectors
from time to time on rupees advances made against the import bills pending retirement by the customer.
Suchinterestshallberecoveredfromthedateofnegotiationorthedateofcrystallisationoftherupeeliability
andthereafterpenalinterestshallberecovered.
WhentherupeeliabilityonanimportbilliscrystallisedattheForwardExchangeContractRateanditresultsin
early/latedelivery,thechargesasperFEDAIrule9shallbelevied.

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Authoriseddealersshallchargecommission/handlingchargesattherateof0.15%onthebillamountatthe
timeofconvertingforeigncurrencyintoINRirrespectiveofthefactwhetherthebillisretiredwithin10daysor
later.
Timelimitforimportremittance:
The remittance against imports should be completed not later than 6 months from the date of shipment.
Accordingly,deferredpaymentarrangementsinvolvingpaymentsbeyond6monthsarenotpermissiblewithout
approvalofRBI/Gol.
However,noobjectiontoimporterswithholdingasmallpartofthecostofthegoodsnotexceeding15percent
towards guarantee of performance etc. Authorised dealers may make remittances of amounts so withheld
providedtheearlierremittancehadbeenmadethroughthem.Nointerestpaymentshouldbeallowedtobe
remittedonthesewithheldamounts.
Sometimes,settlementofimportduesmaybedelayedduetodisputes,financialdifficulties,Authoriseddealers
arepermittedbytheRBItomakeremittancesinsuchcaseseveniftheperiodof6monthsexpires,provided
Authoriseddealerissatisfiedaboutthebonafidesofthecircumstancesleadingtothedelayinpayment.
Nopaymentofinterestisinvolvedfortheadditionalperiod.
Incase,wheretheoverseassupplierinsistsonpaymentofinterest,itmaybeallowedinaccordancewiththe
provisions contained in para 7A.12 up to a maximum period of 60 days beyond 180days from the date of
shipment provided the import bill is paid within that period. Remittances against import of books may be
allowed without restrictions as to timelimit, providedno interest payment is involved nor has the importer
forgone any part of the discount/rebate normally allowed to importers towards compensation for delay in
settlementofdues.
Interestremittanceonimportbillsinterestaccruedonusancebillsunder'normalinterestclause'orofoverdue
interest paid on sight bills for a period. not exceeding 6 months from the date of shipment in respect of
importswithoutpriorapprovalofRBI.Incaseofprepaymentofusanceimportbills,remittancesmaybemade
only after reducing the proportionate interest for the unexpired portion of usance at the rate at which the
interesthasbeenclaimedorthe'prime'rate(oritsequivalent)ofthecountryinthecurrencyofwhichthe
goodsareinvoiced,whicheverishigher.Whereinterestisnotseparatelyclaimedremittancesmaybeallowed
afterdeductingtheproportionateinterestfortheunexpiredportionofusanceattheprevalling'prime'.
However,interestundernormalinterestclausewouldmeaninterestattheprimerate(oritsequivalent)of
thecountryinthecurrencyofwhichthegoodsareinvoiced.
Impoter's documentsThe importer should comply with certain obligations: submission of Exchange Control
CopyofBillofEntryforHomeConsumption/PostalWrapperstotheauthoriseddealer.Thiswillactasevidence
thatthegoodsforwhichthepaymentwasmade,haveactuallybeenimportedintoIndia.
Authoriseddealersshouldensurethatinallcases,includingcasesofadvanceremittancespermitted(Videpara
7A,10,thesearesubmittedbytheirimportercustomersandareverified.InrespectofimportsmadeonD/A
basis,sincegoodswouldnormallybeclearedbeforetheduedateofpayment,authoriseddealersshouldinsist
on production of documentary evidence of import i.e. Exchange Control Copy of Bill of Entry for Home
Consumption/postalwrappersatthetimeofeffectingremittanceofimportbill.Authoriseddealersshouldalso
advise this requirement to their importer customers in writing while delivering the documents against
acceptance.
PostalImports
Remittancesagainstbillsreceivedforcollectioninrespectofimportsbypostparcelmaybemadebyauthorised
dealers,providedthegoodsimportedaresuchasarenormallydespatchedbypostparcel.Inthesecasesthe
relative parcel receipts must be produced as evidence of dispatch through the post and on undertaking to
submitimportersshouldfurnishpostparcelwrapperswithinthreemonthsfromthedateofremittance.
If the parcel has already been received in India, the parcel wrapper should be produced in support of the
remittance application. Where goods to be imported are not of a kind normally imported by post parcel or
whereauthoriseddealerisnotsatisfiedaboutthebonafidesoftheapplicationsthecaseshouldbereferredto
RBIforpriorapprovalwithfullparticularstogetherwithrelativeparcelreceipts/orwrappers.
CustomsClearanceofimportedgoods
CustomsAuthoritiesandtheClearingagentsplaythekeyroleintheimportofgoods.Allgoodsimportedinto
Indiahavetopass through the procedure of Customs clearance as they cross Indian border. The goods are
examined,appraised,assessed,evaluatedandthenallowedtobetakenoutofchargeoftheCustomsforuse
bytheimporter.Theentireprocessofcustomsclearanceiscomplexandtocarryoutthisproceduresmoothly,
thehelpofaccreditedcustomsclearingagentshastobetaken.
The importers need to present a Bill of Entry on receipt of the advise of the arrival ofthe vessel. The B/E is
notedinImportDepartment,withcorrespondingendorsementmadeagainsttheconsignmententryintheIGM
along with the date. The B/E will then be presented in the Appraising Department with all the relevant
documentslikeinvoice,BillofLading,Importlicenseandcatalogueliterature.Theappraisingproceduremaybe
oftwotypes.
The First Check ProcedureApplicable only when appraisers/assessing group finds it difficult to complete the
assessmentonthebasisofthedocumentsmadeavailable.
The Scrutinising Appraiser in the group gives the examination order. The goods are then examined in the
docks and the B/E rerutned to the Scrutinising Appraiser for completion and license debit. In this case the
Customs'outofcharge'isgivenbytheAccountsDepartmentsoonaftertherecoveryofduty.
TheSecondCheckProcedureUnderthis80to90percentoftheconsignmentsarecleared.
Ifthedocumentsareadequatefordeterminingtheclassification,value,ITClicense,theformiscompletedby
the Appraiser and then countersigned by The Assistant Collector. It is then forwarded to the License
Department for licensing debit and audit. Then it is returned to the importers for payment of duty in the
Accounts/Cashdepartment.AfterrecoveryofdutytheoriginalB/EisretainedintheAccountsDepartmentand
theduplicateandothercopiesarereturnedtotheimporterforgettingthegoodsexaminedinthedocks.
Inthedocks,theShedAppraiser/Examinershallexaminethegoodsandifinorder,shallgivetheoutofcharge

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fortakingdeliveryfromthecustodianofthegoodsviz.PortTrust,afterpaymentofPortTrustcharges.
Irrespective of the procedure, examination of cargo for assessment purpose is chiefly the function of the
Appraising Department having special staff of examiners in the docks/Air cargo shed. The records of the
examination and weighment should be declared, attested and dated at the time of the examination. If the
examinationspreadsovermorethanoneday,theresultoneachday'sprogressshouldbedisclosed.
TheseapartsomeoftheCustomshouseinIndiahaveintroducedthesimplifiedcomputerprocedureforspeedy
clearanceofconsignmentthroughB/E.
CustomAuthorities
The customs administration vests in CBEC for implementing the provisions of the Customs Act.1962. There
aretwomainwingsofCustomsHouse.Inthe'Appraisement'wingthejobofcollectionofrevenueisassigned,
whilethe'Preventive'oneaimsatpreventionofsmuggling.
The Customs authority functions under the Ministry of Finance (MoF) with the Central Board of Excise &
Customsattheapex.TheboardisheadedbyaChairmanandassistedbyMembers.TheMember(Customs)
looksafterthefollowingmatters:
CustomsLawanditsinterpretationandapplication,policyandbroadprocedures(Otherthanthoseconcerning
antismuggling)
EnforcementofImportExportprohibitions
ForeignTravelandCasesonimportsandexports
Baggageconcessionsandrules
CustomsValuations
TariffClassificationandTariffadvicesCustomsprocedures,CustomsHouse
AgentsRegulations
Warehousing,inlandBondedWarehouses
FTZs,EPZs,100%EOUsetc.
MattersrelatingtoDrawback
Customs Cooperations Council, GATT and ESCAP and international talks and agreements, organisations
concerningcustoms
AllotherworksonCustomsnotspecifiedelsewhere
Supervision and control over Customs Commissionerate of Mumbai, Calcutta, Chennai, Kandla, Bangalore,
Cochin, Delhi , Visakhapatnam, Goa and Tuticorin and Customs Divisions of other Central Excise
Commissioners,AssistantCommissioneratesregardingCustomsworkhandledbythem.
Chemicallaboratoriesand
DirectorateofDrawback
TheMinistryofFinance(MoF)issuesCustomsNotificationstolevydutyontheimportedgoods.TheChanges
aremadeeachyearontheDayoftheFiscalBudget.Customsclearanceoftheimportedgoodsisdonebythe
customsAuthoritiesfunctioningundertheoverallchargeofMoF.ThehierarchyoftheAuthorities:
CentralBoardofExcise&Customs(CBEC)intheMoF
Under which operates:Customs Commissionerates of Mumbai, Calcutta, Chennai, Kandla, Bangalore, Cochin,
Delhi,Vizag,GoaandTuticorin.
DirectorateofDrawback
Field Level:Principal Commissioners Customs ,Commissioners,Addl. Commissioners ,Dy. Commissioners,Asst.
Commissioners,Portofclearance.
ClassificationofCustomstariff

ThebasiclegislationistheIndianCustomsAct,1962readwithCustomsTariffAct,1975.Section
12 of the Customs Act,'62 empowers levy of duties on goods imported into or exported from
India.
However, the rates at which the different import export duties shall be leviable have been respectively
specifiedintheFirstandSecondScheduletotheCustomsTariffAct,1975calledtheimportTariffandExport
Tariffrespectively.
With effect from Feb. 28, 1986, the new tariff import schedule based on international convention of
HarmonisedCommodityandCodingsystem,commonlyknownasHarmonisedCodingSystemcameintobeing.
ThebasicfeaturesoftheImportTariff
Nomenclatureareoutlinedbelow:
Theheadings,theSectionandChapterNotesandtheinterpretiveRules,Customsdutiesareleviedinthree
waysSpecificrateattherateprescribedperunitofitemi.e.weightornumberoflengthAdvaloremduty
leviedonthevalueoftheitemSpecificandadvaloremleviedinbothways.
Types&LevyofCustomsduties:
Basicduty:allgoodsimportedintoIndiaarechargeabletodutyasprescribedinthe1stSchedule
of Customs Tariff Act. This Schedule is amended from time to time of Customs Tariff Act. This
dutycanbeleviedeitherasapercentageofvalueofgoodsorataspecifiedrate.
Surcharge:Itisleviedattherateof10%ofthebasicrateonallcommoditiesexceptcrudeoil
and petroleum products, GATTbound items, gold and silver. Additional Duty: Also known as
countervailingduty,isleviedonthecostofimportedgoodsandisequaltoexcisedutyleviedon
likegoodswhenmanufacturedinIndia.Theobjectiveistoensurethattheprotectionprovidedby
theimportdutytodomesticindustryisnoteroded.
Special Additional Duty: It is levied at the rate of 4%. Antidumping Duty: This is levied on
specified goods imported from specified countries to protect indigenous industry from injury
resultingfromUSA,Koreaandsoon.
CustomsDutyAssessment:TheassessmentofgoodstodutyisdoneonthebasisWhetherthegoodscovered
bytheB/Earesuchasareregularlyimported,orarerequiredtobetestedbythecustomshouselaboratoryfor
fulfilmentoflicenseconditions, or The appeaiser desires to see the representative sample before completing

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thebillofentryforthepurposeofverificationofthevalue/description,etc.orTherequireddocumentisnot
forthcoming.
CustomsDutyRates:WhentheimportinvoiceisinanycurrencyotherthanIndianrupees,customsfixthe
exchange rate for conversion into the Indian rupees at a predetermined rate which is published in customs
housesonadailybasis.
Importsfromspecifiedcountriesenjoypreferentialduty.Thisisgenerallytheresultofspecialstatusaccepted
under bilateral trade agreements or otherwise. However, the incidence of customs duties on various goods
importedareobtainedasfollows:
Total duty payable=(Landed cost including CIF of the item concerned + Basic customs duty under the
CustomsTariffAct+Surchargethereon+Additionalduty+SpecialAdditionaldutyasperFinanceAct).
Getting Import License checkedThe appraising official checks the license for their description, value, validity
period,importersname,etc.Itisfortheimportertoestablishthatthegoodssatisfiedthedescriptioninthe
license unless he is able to establish the fact he would not be entitled to lawful import thereof. If the
appraisingofficialissatisfiedthatthelicenseisinorder,hewillsendthelicensewithB/Etolicensesectionfor
registrationandaudit.Thedepartmentmaintainsaregisterforeverylicenseacceptedanddebitedshowingthe
lastbalanceonthelicense.
The importer is likely to know the term of license, the type of goods and whether they can be lawfully
importedasperthe terms of the license. In case there is any error on the part of the appraising authority
thenpossessionofevenavalidlicensewillnotconferanyrightupontheimporterstoimportsuchgoodsagain
onthebasisofsimilarlicenses.
BillofEntryThisisadocumentonthestrengthofwhichclearanceofimportedgoodscanbeeffected.Itsform
hasbeenstandardisedbytheCentralBoardofExciseandCustoms.Allgoodsdischarrgedfromavessel,from
foreignorcoastalPorts,areclearedonthisprescribedformspresentedundertheB/ERegulations,1971.
Itshouldbepresentedfor'noting'intheimportdept.ofthecustomshouseaftertheimportGeneralManifest
which gives a detailed description item wise of the goods brought by the concerned vessel is filed by the
steamerAgent.
ImportPolicy:
For items not mentioned as Prohibited, Restricted or Canalised List for import in ITC(HS) Classification of
ExportandImportitemsimportofsuchitemsarefreelypermitted.Thereisnoneedtoobtainanylicenseor
permission for importing such goods. The ITC(HS) Classification of Export and Import items contains 99
chapters and in each chapter there are column heading covering Exim Code, items description, policy and
natureorrestriction.Theinformationrelatedtoimportpolicyforanyitemcanbeobtainedfromoursiteunder
CustomsDutyCalculatorSchedule.
Proceduretobefollowedforgrantofimportlicense:
AnapplicationforgrantofanimportlicenceorCCPforimportoftheitemsmentionedasrestrictedforimport
in ITC(HS) Classification of Export and Import items may be made to the regional licencing authority
concerned.
WarehousingofImportedgoods
Animportermaynotliketoclearormayhavecertainproblemsinclearingtheimportedgoodsimmediatelyon
paymentofdutyforhomeconsumption.InthatcasetheimportercandepositthegoodsinaPublicorPrivate
BondedWarehouse,providedheissatisfiedwiththearrangement.Thus,theimportercanavailthefacilityof
deferringpaymentofdutyonimportedgoodspendingtheiractualclearance.Towardsthistheimportershould
fileasetofyellowcolouredB/EknownaswarehousingB/E.
SelfAssessment Scheme: Applicable to goods without any ITC license/CCP or any restrictions thereof. The
objectiveistoenableimporterseffectingrepetitiveimportsofsomecommoditiestoassesstheirownB/Eand
determine their duty liability and pay the duty accordingly. Any importer, including Govt. bodies and PSUs,
withprovenidentityandtrackrecordcanavailofthis.
This process does away with the procedure of processing, and the time consumed by the appraising and
licensingsections.
Whenthedutyispaid,thegoodswouldbeclearedinthedocks,providedthegoodsarepartlyexaminedand
paymentofdutyverified.
Green Channel : This fasttrack facility has been introduced to simplify and expedite the process of cargo
clearance.Instead of going in for a hundred per cent examination only a part of the cargo is checked. Bulk
importers, Govt. Depts. & PSUs, consignment of a single product of well known brand name and importers
withidentifiedandunblemishedtrackrecordareallowedtoavailthisfacility.
Exportofservices
A new Chapter has been added in the revised EXIM Policy 19972002, March 1999 Ed., recognising the
importance of export of services and the potential in the sector. Apart from extending all possible facilities
applicabletomerchandiseexports,thethresholdlimitforrecognitionasServiceExportHouseetc.hasbeen
peggedat1/3rdofthelevelprescribedformerchandiseexports.
ThesalientprovisionsofEXIMPolicyrelatingtoservicesexportsaregivenbelow:
"Services"includeallthe161tradeableservicescoveredundertheGeneralAgreementonTradeinServices
wherepaymentsforsuchservicesisreceivedinfreeforeignexchange.
Facilitiesforserviceproviders:
TheserviceprovidersshallbeeligibleforthefacilityofEPCGSchemeasdescribedinChapter6ofEXIMPolicy.
The provisions of paragraph 6.5(vii) shall also extend to the service providers availing licences under this
scheme.
TheserviceprovidersshallalsobeeligibleforthefacilityofEOU/EPZ/EHTP/STPscheme.
Service providers are also permitted to import drawings, designs, integrated circuits and layout designs,
softwareindiskettesandCDsrelatedtotheirlineofservicesasapartofpassengerbaggagewithoutalicence.
Facilityofimportofrestricteditemsbyserviceproviders:
Service providers shall be entitled to import restricted items up to 10% of the foreign exchange earned by

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them during the preceding licensing year for import of essential goods related to their line of business,
includingofficeandotherequipmentrequiredfortheirownprofessionaluse.
ImportthroughCourier
AslaiddownbythecurrentEximPolicy,importofgoodsthroughcourierispermittedinaccordancewiththe
CourierImports&Exports(Clearance)Regulations,1998.
IftheCIFvalueoftheconsignmentimporteddoesnotexceedRs.100000,therelativeBillofEntryisrequired
tobefiledbytheregisteredcourierservice.
IftheCIFvalueisRs.100000ormore,importersaretofileseparateB/Easinthecaseofotherimports.
In case of remittances for imports through courier services, authorised dealers should ensure submission of
ExchangeControlCopyofBillofEntryforhomeconsumptioninthecaseofimportsvaluedatRs.100000or
more.
Thisisnotregardedasbaggageforthepurposeofassessmentofdutyandclearancetherof.The
practiceofchargingauniformdutyonarticlesimportedthroughcourierhasbeendiscontinued.
Imports by courier are now classified on merits in the respective customs Tariff headings. The
new system of assessment and clearance of goods imported by courier is now governed under
theCourierImports&Exports(Clearance)Regulations1998.
ImportswithoutForexremittances:
Importsnotinvolvingforeignexchangeremittanceisallowedasgivenbelow(videPara5.41oftheHandbook
ofProcedures):
ImportofitemsbyUnitedNationsOrganisationandSpecialisedAgenciesanditsofficialswithoutpaymentof
Customsduty.
ImportofMedicalEquipmentbyIndianDoctorsandProfessionalsisallowedundertheBaggageRules,1994.
GoodsasBaggagebyForeignMountaineeringExpeditionTeamsandPaintingandotherDisplayArticles,except
consumables,areallowed.FoodstuffsandMedicinesbyCharitableorganisationsarealsoallowed.
Importoffoodparcels,exceptalcoholandtobacco,subjecttoalimitofRs.100000perannumisallowedfor
personalconsumptionofforeigncitizens.
Import of free gifts and relief supplies by certain organisations/institutions e.g. Indian Red Cross Society,
NationalDefenseFundisallowed.
Also import of equipments, rawfilms etc. by foreign publicists like Radio, Press, Films, Television teams are
allowed.
Import of exhibits including construction and decorative materials required for the temporary stands of the
foreignexhibitorsattheexhibitions,fairorsimilarshowordisplayforaperiodof6monthsonreexportbasis
isallowedprovidedthesefairsaresponsored/approvedbytheGovt.ofIndiaintheMinistryofCommerce/India
TradePromotionOrganisationandisbeingheldinpublicinterest.
Importforpersonaluse
Importers under this category do not need any IEC number. Import of goods by any person as passenger
baggageispermittedtotheextentadmissibleundertheBaggageRules1994.However,quinineofmorethan
500tabletsor=poundspowderor100ampulesisnotpermissible.
Also,foranytourist,articlesofhighvaluewhosereexportisobligatoryundertheBaggageRulesshallbere
exported on his leaving India. Otherwise, those goods shall be deemed to be regarded as prohibited goods
undertheCustomsAct,1962.
Anytypeofgoodsforwhichthec.i.f.valueshallnotexceedRs.2000canalsobeimportedthroughPostor
otherwiseforpersonaluse,providedtheyarenot:
Vegetableseedsexceeding1poundinweight,bees,tea,booksandperiodicals,alcoholicbeverages,consumer
electronicitems(savehearingaidsandlifesavingequipmentsanditemsforwhichimportiscanalisedunder
EXIMPolicy.
Nevertheless, the customs duty, as applicable, shall have to be paid. As regards the procedure for personal
importsisconcernedthesamemayinvolvesendingofadvanceremittanceifrequiredbytheoverseassupplier,
openingofletterofcredit,retirementofdocumentsandremittanceofforeignexchange,customsclearanceof
thegoodsandpaymentofcustomsduty.
ImportofSamples
Bonafidetechnicalandtradesamplesofitems,eventhoseintherestrictedinITC(HS)ClassificationsofExport
andImportitemsisallowedwithoutalicenseforavaluenotmorethanRs.1lakh(CIF)inoneconsignment
save vegetable seeds, bees and new drugs by any importer. Tea samples not above Rs.2000 (CIF) in one
consignmentisallowedwithoutalicensebyanypersonconnectedwithTeaindustry.
Prototypeimport
This may be allowed on payment of duty without a license to an actual user, industrial ecgaged in the
productionoforhgavingindustriallicense/LoIorresearch,asthecasemaybe,providedthenumberofitems
importeddoesnotexceed10innumberinayear.
ImportofComputer/ComputerSoftware
Computers including personal computers, Keyboards or monitor valued upto Rs. 1.50 lac and Rs. 7000/
respectively can be imported freely without any licence. Computer Software can also be imported freely
withoutlicencedespitethefactcomputersoftwareisregardedasConsumerGoods.
PassengerBaggage
UndertheRulesvariouskindsofarticlescanbeimporteduptocertainvaluelimitdependingupontheduration
ofstayofthepassengerabroadandonthebasisofResidentandNonResidentStatusofthepassenger.
Passenger Baggage Rules and import duty structure for baggage as applicable for such imports under the
BaggageRuleshasbeengivenseperately

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CopyRights2015,MSMEDEVELOPMENTINSTITUTE
Govt.ofIndia,MinistryofMicro,SmallandMediumEnterprises,
65/1,G.S.T.Road,Guindy,Chennai600032.

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