Imports ManagementImports Management

SPMMSPMM

Level of Imports Level of Imports (in Rs. Crore)(in Rs. Crore)YearYear Imports Imports

ValueValueTotal Total

PurchasesPurchases% %

1950-511950-51 18.4018.40 8282 23231960-611960-61 19.8019.80 178178 11111970-711970-71 32.6032.60 364364 991980-811980-81 143.80143.80 13771377 10101990-911990-91 440.10440.10 51895189 882000-012000-01 453.44453.44 1083510835 4.24.22001-022001-02 385.16385.16 1095010950 3.53.52002-032002-03 463.00463.00 1159811598 442003-042003-04 354.00354.00 1137211372 332006-072006-07 550550 1870018700 2.92.92007-082007-08 611611 2135221352 2.862.862008-092008-09 813813 2749527495 2.962.962009-102009-10 11511151 2787627876 4.134.13

IMPORTS IMPORTS –– Important Areas Important Areas

• Import Policy• Procurement Procedures• Mode of Payment

EXIM Policy or Foreign Trade Policy

Import PolicyImport Policy• Introduced w.e.f. 1Introduced w.e.f. 1stst April 1992 April 1992• Imports/Exports can be done freely Imports/Exports can be done freely

except as regulated by the Policyexcept as regulated by the Policy• Modus Operandi: Modus Operandi: ““Negative ListsNegative Lists””, ,

issued as a part of Exim Policy issued as a part of Exim Policy (Foreign Trade Policy); (Foreign Trade Policy); – Prohibited itemsProhibited items– Restricted ItemsRestricted Items– Canalized ItemsCanalized Items

• Prohibited Items:Prohibited Items:– Prohibited goods shall not be Prohibited goods shall not be

importedimported• Restricted Items: Restricted Items:

– Can be imported but onlyCan be imported but only• against a license &against a license &• by actual userby actual user

Import PolicyImport Policy

• Imports of Canalized Items:Imports of Canalized Items: – Through Agencies specified in the Through Agencies specified in the

Negative ListNegative List• Items not included in the Items not included in the

““Negative ListNegative List””::– Can be imported by any one Can be imported by any one

whether actual user or notwhether actual user or not

Import PolicyImport Policy

• A document issued by DGFT, A document issued by DGFT, permitting;permitting;– Entry of foreign goods into IndiaEntry of foreign goods into India– Remittance of the foreign currency Remittance of the foreign currency

to overseas supplierto overseas supplier• For IR, RLO recommends to DGFT For IR, RLO recommends to DGFT

for issue of the Licensefor issue of the License

Import LicenseImport License

Import License: TermsImport License: Terms

• Description, Qty, & ValueDescription, Qty, & Value• Actual User Condition, if anyActual User Condition, if any• Export Obligation, if anyExport Obligation, if any• Country of OriginCountry of Origin• Validity Period: Validity Period:

• As specifiedAs specified

– DGFT Stipulations:DGFT Stipulations: – Hand Book of Import/ Export Hand Book of Import/ Export

Procedures, Procedures, – Importer /ExportersImporter /Exporters’’ guide guide– Internet Search – Google etc.Internet Search – Google etc.

Import RegulationsImport Regulations

Negative ListNegative ListA)   A)   Prohibited Items Prohibited Items 

i)  Tallow fat, poultry fats, edible fats of animal origini)  Tallow fat, poultry fats, edible fats of animal originii)  Animal rennetii)  Animal rennetiii) Wild animals, their parts and productsiii) Wild animals, their parts and productsiv) Ivoryiv) Ivory

B)B)      Canalised itemsCanalised itemsi) Petroleum Product, Aviation fuel, Crude oil, i) Petroleum Product, Aviation fuel, Crude oil,

Motor spirit, High speed diesel: IOCMotor spirit, High speed diesel: IOCii) Nitrogenous, Phosphatic and Potassic ii) Nitrogenous, Phosphatic and Potassic Fertilizers, Potash: MMTC & STCFertilizers, Potash: MMTC & STC

iii) Coconut oil, Palm Oil: STCiii) Coconut oil, Palm Oil: STCiv)iv) Cereals: FCICereals: FCIv) Clove: STCv) Clove: STC

C) Restricted ItemsC) Restricted Items• Cotton, woolen, silk, manmade & blended Cotton, woolen, silk, manmade & blended

fabrics, alcoholic beverages, wine, saffron.fabrics, alcoholic beverages, wine, saffron.• Precious semi-precious and other stonesPrecious semi-precious and other stones• Safety / Security related itemsSafety / Security related items• Fire arms, ammunitionsFire arms, ammunitions• Paper for security printing, currency papersPaper for security printing, currency papers• ExplosivesExplosives• Chloroform, Hydro carbonsChloroform, Hydro carbons• Seeds, plants and animalsSeeds, plants and animals• Insecticides & PesticidesInsecticides & Pesticides

Negative ListNegative List (Contd.)(Contd.)

C) Restricted Items C) Restricted Items (contd.)(contd.)– Drugs & PharmaceuticalsDrugs & Pharmaceuticals– Chemical & Allied itemsChemical & Allied items– Items related to small scale sectorItems related to small scale sector– Miscellaneous itemsMiscellaneous items– Aircraft & HelicoptersAircraft & Helicopters– Coils Coils – Natural rubberNatural rubber– Rubber active materialRubber active material– Rare earth oxideRare earth oxide– NaphthaNaphtha– Sodium metal Sodium metal

Negative ListNegative List (Contd.)(Contd.)

Procurement ProceduresProcurement Procedures• General:General:

– Procurement by Railway Board & Zonal/PU GMsProcurement by Railway Board & Zonal/PU GMs– Rlys to obtain FE from Market against Free ResourcesRlys to obtain FE from Market against Free Resources– Standard financial procedure as for authorising rupee Standard financial procedure as for authorising rupee

expenditure will applyexpenditure will apply– Other than Other than free resourcesfree resources will require Bds approval will require Bds approval

including for FE releaseincluding for FE release– Import of items under negative list requires Bds Import of items under negative list requires Bds

approvalapproval– Powers to import are subject to;Powers to import are subject to;

• the the essentiality/ inescapabilityessentiality/ inescapability certification & certification &• finance concurrencefinance concurrence

– Pre-dispatch inspection conditionPre-dispatch inspection condition– Packing requirementsPacking requirements– Transshipment not permittedTransshipment not permitted– Shipping on deck not permittedShipping on deck not permitted– Shipping & Insurance requirementsShipping & Insurance requirements

Procurement Procedures: Procurement Procedures: Tender conditions to coverTender conditions to cover

• Additional information as per Rly Bds L No Additional information as per Rly Bds L No 89/RS(G)/779/6 dt. 22.1.2009 on 89/RS(G)/779/6 dt. 22.1.2009 on

– Contact particulars of the Indian AgentContact particulars of the Indian Agent– IT PANIT PAN– Capability & Responsibility Capability & Responsibility – Service only on the contract or general Service only on the contract or general

serviceservice– Past Performance of the AgentPast Performance of the Agent

If Indian Agent of Foreign bidder is If Indian Agent of Foreign bidder is involved theninvolved then

Agency CommissionAgency Commission• Paid in Indian RupeesPaid in Indian Rupees• FE Exchange rate ruling on the date of FE Exchange rate ruling on the date of

contract finalizationcontract finalization– It is a fixed amountIt is a fixed amount

• Right to retain commission till the discharge Right to retain commission till the discharge of warranty obligationsof warranty obligations

• Commission if higher than 5% can be Commission if higher than 5% can be accepted, by AGM/GM with Fin concurrenceaccepted, by AGM/GM with Fin concurrence– Rly Bds L No 89/RS(G)/779/6 dt. 22.1.2009Rly Bds L No 89/RS(G)/779/6 dt. 22.1.2009

• While issuing Global Tenders, especially While issuing Global Tenders, especially against WB loans, tenders to be against WB loans, tenders to be published;published;– In all member countries of WB In all member countries of WB

• {Including Switzerland}{Including Switzerland}– Send Tender Notice to local official Send Tender Notice to local official

representatives of such countriesrepresentatives of such countries– News Papers of purchasing countryNews Papers of purchasing country– Indian Trade JournalIndian Trade Journal

Procurement Procedures: Procurement Procedures: Tender PublicityTender Publicity

Tender Consideration: Tender Consideration: CurrencyCurrency

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

• Currency of Payment:Currency of Payment:– In which price was quoted by the In which price was quoted by the

successful tenderersuccessful tenderer– Purchaser reserves the right to pay in the Purchaser reserves the right to pay in the

currency of the country of origin, if price currency of the country of origin, if price quoted in any other currencyquoted in any other currency

– Rate of Exchange as on Rate of Exchange as on ‘‘Date of PaymentDate of Payment’’

– Bids are to be evaluated in terms of a Bids are to be evaluated in terms of a single currency, for the sake of single currency, for the sake of comparisoncomparison

– Exchange rate ruling on the Exchange rate ruling on the date of date of tender openingtender opening to be taken as the to be taken as the basisbasis

– Convert total value to local currency, Convert total value to local currency, taking Landed costtaking Landed cost

Tender Consideration: Tender Consideration: Bid EvaluationBid Evaluation

• Bid ClassificationBid Classification: : WB Loans;WB Loans;– Group AGroup A: Equipment with indigenous : Equipment with indigenous

input [value addition] => 30%input [value addition] => 30%– Group BGroup B: Imported item, available in India, : Imported item, available in India,

on Rupee paymenton Rupee payment– Group CGroup C: To be imported : To be imported (Outside Group (Outside Group

A&B) A&B) • If C is costly, cheaper of A&B can be If C is costly, cheaper of A&B can be

purchasedpurchased• If C is lowest, price of C to be loaded with If C is lowest, price of C to be loaded with

15% & compared with A15% & compared with A

Tender Consideration: Tender Consideration: WB Procedure: Bid GroupsWB Procedure: Bid Groups

• Application by Zonal Rly to RB on Application by Zonal Rly to RB on proforma withproforma with

• Comparative statement, Comparative statement, • Note containing technical Note containing technical

comments, report on each offercomments, report on each offer

Contd.Contd.

Tender Finalization: BoardTender Finalization: Board

• Phased requirement of FE releasePhased requirement of FE release• Foreign Exchange involved & source Foreign Exchange involved & source

of financingof financing• Justification for ImportJustification for Import• A note on developmental activities for A note on developmental activities for

indigenisation of the itemindigenisation of the item• FA&CAOFA&CAO’’s personal concurrences personal concurrence

Tender Finalization:BoardTender Finalization:Board(Contd.)(Contd.)

Types of Import ContractsTypes 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 Ex worksFCA Free carrier (Upon delivery of goods to the carrier)CPT Carriage paid toCIP Carriage and insurance paid toDAT Delivered at terminalDAP Delivered at placeDDP Delivered duty paid

RULES FOR SEA AND INLAND WATERWAY TRANSPORTFAS Free alongside shipFOB Free on boardCFR Cost and freightCIF Cost insurance and freight

Types of Import ContractsTypes of Import Contracts

FAS (Free Alongside Ship):FAS (Free Alongside Ship):• Supplier’s 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 shipb) Freightc) Insurance

FOB (Free on Board)FOB (Free on Board)::– Supplier’s responsibility to get the Supplier’s responsibility to get the

goods loaded into the ship goods loaded into the ship – Freight & Insurance to be borne by Freight & Insurance to be borne by

buyerbuyer

CIF (Cost Insurance Freight)CIF (Cost Insurance Freight)::– Add the element of Freight & Insurance Add the element of Freight & Insurance

to FOB Priceto FOB Price– Total price up to the port of destination Total price up to the port of destination

borne by sellerborne by seller

Types of Import ContractsTypes of Import Contracts(Contd.)(Contd.)

FOR/FOT (FOR/FOT (Free on Rail or Transport):Free on Rail or Transport):((This is not an IncotermThis is not an Incoterm))

[Applicable when agent handles import][Applicable when agent handles import]

– Agents directly deal with the Principals & Agents directly deal with the Principals & Offers submitted by Agent on FOR basisOffers submitted by Agent on FOR basis

– All transactions, including cargo clearance at All transactions, including cargo clearance at Indian Port, handled by the AgentIndian Port, handled by the Agent

Types of Import ContractsTypes of Import Contracts(Contd.)(Contd.)

TRANSFER OF COSTS

Buyer

Seller EXW FCA

CPTCIP

FOBFAS DAP DAT DDP

Waterborne transport only

DAP

CFRCIF

Import clearance costs on account of the buyerTransport

insurance costs on account of the seller

Transport by land

**

*

Cus-toms

Cus-toms

Cus-toms

Cus-toms

ShipmentShipment

• IR Contract’s on FOB basisIR Contract’s on FOB basis• Shipping to be arranged Shipping to be arranged

through through ““Shipping Shipping Coordination CommitteeCoordination Committee””, ,

• Indian Flag vesselIndian Flag vessel• Age < 15 yearsAge < 15 years• It facilitates payment of It facilitates payment of

freight in Indian Rupeesfreight in Indian Rupees

Air FreightingAir Freighting

• Electronic / SophisticatedElectronic / Sophisticated• FragileFragile• Urgent requirementUrgent requirement• Air IndiaAir India• Air freighting approval by Air freighting approval by

GM/COS with GM/COS with FA&CAO,s concurrenceFA&CAO,s concurrence

Marine InsuranceMarine Insurance• All the imported cargos are insuredAll the imported cargos are insured• Rly Bd finalises TWO types of Open covers for Rly Bd finalises TWO types of Open covers for

Insurance Insurance 1.1. FPA (Free of Particular Average) Risk CoverFPA (Free of Particular Average) Risk Cover2.2. All Risk Open CoverAll Risk Open Cover

• Period covered by these Policies:Period covered by these Policies:– Time/place of commencement [WH to WH], Time/place of commencement [WH to WH], – Covers course of transit, Covers course of transit, – Terminates on delivery at destination or on Terminates on delivery at destination or on

expiry of 60 days after discharge at the expiry of 60 days after discharge at the destination Port destination Port [if not moved further[if not moved further]]

1.1. FPA (Free of Particular Average) Risk CoverFPA (Free of Particular Average) Risk Cover– Covers loss when vessel is stranded, sunk or Covers loss when vessel is stranded, sunk or

burnt, due to storm or act of Godburnt, due to storm or act of God– Steel & Bulk cargo covered under FPASteel & Bulk cargo covered under FPA– Claim for total loss only entertainedClaim for total loss only entertained– Does not cover partial loss/ damage or short Does not cover partial loss/ damage or short

landing etc.landing etc.2.2. All Risk Open Cover:All Risk Open Cover:

– Covers all types of imported stores other than Covers all types of imported stores other than Steel & other Bulk CargoSteel & other Bulk Cargo

– Covers risks of all sorts including Covers risks of all sorts including loss/damage, theft, non-deliveryloss/damage, theft, non-delivery

Marine InsuranceMarine Insurance

Imports: Payment Process

Payment: ConsiderationsPayment: Considerations

• Supplier & Buyer have no Supplier & Buyer have no intimate knowledge about intimate knowledge about each other, each other, not sure of credit not sure of credit worthiness of each otherworthiness of each other

• Both the parties are governed Both the parties are governed by rules of their respective by rules of their respective countries, which are different countries, which are different sets of rulessets of rules

• Seller sends goods without Seller sends goods without payment: Risk of non-payment, payment: Risk of non-payment, late paymentlate payment

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

Solution: Solution: Letter of CreditLetter of Credit

Mode of Payment: RisksMode of Payment: Risks

Letter of Credit: DefinitionLetter of Credit: Definition

• It is a documentary commitment by It is a documentary commitment by a Banka Bank

• To place an agreed amount of To place an agreed amount of money at Sellermoney at Seller’’s disposal, s disposal,

• On behalf of the BuyerOn behalf of the Buyer• Under precisely defined conditionsUnder precisely defined conditionsBanks charge commission for issuing LCBanks charge commission for issuing LC

• L/CL/C IssuanceIssuance:

Letter of Credit:Flow ChartLetter of Credit:Flow Chart

11

22

33

44SellerSeller

BuyerBuyer Buyer’s Buyer’s BankBank

Bank in Bank in Seller’s Seller’s CountryCountry

Application for opening L/CApplication for opening L/C

L/C MailedL/C Mailed

L/C NotifiedL/C Notified

ContractContract

• L/CL/C Utilization:Utilization:Letter of Credit:Flow ChartLetter of Credit:Flow Chart

11

22

33

44

SellerSeller

BuyerBuyer Issuing Issuing BankBank

Negotiating Negotiating BankBank

Debit A/C & Send DocumentsDebit A/C & Send Documents

Forw

ard

Forw

ard

Doc

umen

tsD

ocum

ents

Document SubmittedDocument Submitted

Goo

ds D

i spa

t ch e

d G

oods

Di s

pat c

h ed

Payment ReleasedPayment Released

Rei

mbu

rsR

eim

burs

ee

Issuing Bank

contract

Credit

Credit notify

5a. Dispatch goods

Shipping doc’s

Shipping doc’s

payment

Payment

Shipping doc’s

4.

3.

payment

1.

2. 6.

7.

9.

8.

11a. 10a.

Corresponding Bank

Consignee(Buyer)

Credit app’n

ShipperSeller

5b. Shipping doc’s 10b.

Ship doc’s

11b. goods

Flows of documents required in a LC / documentary credit procedure

• Bill of Lading: Evidence of Bill of Lading: Evidence of dispatchdispatch

• Marine Insurance PoliciesMarine Insurance Policies• Signed InvoicesSigned Invoices• Inspection Certificates, when Inspection Certificates, when

requiredrequired• Country of Origin certificateCountry of Origin certificate• Packing ListPacking List

Letter of Credit: Letter of Credit: Negotiating Negotiating DocumentsDocuments

»Revocable L/CRevocable L/C»Irrevocable L/CIrrevocable L/C»Revolving L/CRevolving L/C»Standby L/CStandby L/C

Types of Letter of CreditTypes of Letter of Credit

• Revocable L/C:Revocable L/C:– May be cancelled or amended anytime, but May be cancelled or amended anytime, but

before the payment is made, without before the payment is made, without consulting the sellerconsulting the seller

– Not preferred by the seller, obviouslyNot preferred by the seller, obviously• Irrevocable L/C:Irrevocable L/C:

– Issuing Issuing Bank gives binding undertakingBank gives binding undertaking for making payment provided the seller for making payment provided the seller complies with prescribed conditionscomplies with prescribed conditions

– Can not be cancelled without the Can not be cancelled without the consent consent of all the parties concernedof all the parties concerned

Letter of CreditLetter of Credit

• Revolving L/C:Revolving L/C:– When regular continuing shipment by seller is When regular continuing shipment by seller is

involvedinvolved– Amount once utilized is available againAmount once utilized is available again– Fresh L/C is not required to be obtained for each Fresh L/C is not required to be obtained for each

shipmentshipment– May indicate max amount to utilizedMay indicate max amount to utilized

• Standby L/C:Standby L/C:– Similar to Performance Bank GuaranteeSimilar to Performance Bank Guarantee– Issuing Bank assures the beneficiary that in the Issuing Bank assures the beneficiary that in the

event of Buyer failing to pay, the beneficiary may event of Buyer failing to pay, the beneficiary may claim payment from the issuing Bankclaim payment from the issuing Bank

Letter of CreditLetter of Credit

Thank You