All Import Documentation and Procedures: Import Anywhere

This opening case examines the inspiring tale of an Indian entrepreneur who made a name for himself by successfully importing sporting goods into India and setting up a great business for himself in this direction.

This entrepreneur, Mr. Thomas, started his enterprise with a small amount of capital and a huge dream to succeed within the global market in the area of import. Initially, he confronted many challenges and barriers, such as complex guidelines and documentation requirements for importing sporting goods to India, both from the origin country as well as within the Indian customs.

However, Thomas kept his patience and overcame those demanding situations by acquiring a deep expertise in import documentation and processes. He had to navigate the complicated techniques and procedures with continuous and fast learning. He also developed relationships with dependable intermediaries and suppliers from overseas places of manufacture, who helped him streamline his operations and helped him to keep away from high-priced mistakes.

Through hard work and continuous efforts, Thomas was able to build a hit import commercial enterprise, importing sports items in India. His tale is a suggestion to everybody looking to start importing goods from foreign countries and demonstrates the significance of having a deep understanding of import operations, documentation, and procedures on the way to becoming triumphant in the international marketplace.

As we delve deeper into this course, we can find out more about the precise documentation and procedures that are essential for importing goods to any country from any country. We will also explore real-world practical case research and examples, supplying you with the sensible abilities and knowledge you need to effectively import goods and overseas services.

So, be a part of my learning journey as we explore the exciting world of import documentation and procedures, and learn how to import goods to any country as a seasoned importer would do!

Hello friends.

Welcome back to the next section of this course.

This section is about one opening case study of this course.

Interesting small piece of case study.

This is based on real events, although the names and the company details are changed in this case study for privacy reasons.

The idea is for educational purposes.

This case study is titled by me as a small retail chain to a big hitter.

This case study is about a sporting goods importing company, how it became an importer, and how the idea emerged and matured into a big import-hitting business.

That is the idea of this case study that I am going to share with you.

Let's look at this case study.

Let me share with you the starting point where the idea was generated in the mind of one Mr. Thomas, who is the owner of an Indian retail chain for sporting goods.

And at that time, it was a small retail chain.

That is when this idea was slowly emerging in the mind of Mr. Thomas to do imports.

The company deals in sporting goods and, very especially, in the Tackle business.

Fishing equipment and tackle businesses were very well known in this area.

It was a specialized field, and the brand of this company was reasonably well known in the Indian market.

I'm talking of the Indian market this company was targeting. Mostly the items that were being sold by this company.

Sporting goods and tackle were sourced from Indian vendors and Indian suppliers, and most of these items were imported.

Most of these items are not manufactured in India. They were imported from Europe.

They were imported from the US, China, Taiwan, and even Japan.

The company had its brand that was synonymous with the high quality of such products, sporting goods,

Tackle business. Quality was the buzzword for this company, and it was doing reasonably okay.

The growth of sales was not exponential at that time. Uh, the margins were moderate and reasonable.

But, uh, the main issue was that the growth was not there, sales growth, probably because of price, because there can be many factors, but sales growth was not there.

That probably was the reason why the idea of doing something deeper, some kind of integration, vertical integration, or horizontal integration came to the mind of Mr. Thomas.

That was the idea.

I think if we look at any entrepreneur's mind when growth is not as expected, some idea comes to the mind of the entrepreneur about what to do.

He tries out many things.

That is what happens. Despite having a good brand, despite having good quality products, having deeper knowledge about the thing that you are doing.

Thomas had been himself the Tackle jobber, so he knew many things about this business.

That is the reason he was in this business, and he was doing quite well in this business.

POE purchasing means Port of Entry purchasing.

When goods are imported, the moment they enter the port of entry, they are available for sale. at times. Because the money is involved with the importers, they want to square off their investment immediately when the goods come. And the best thing for any importer is to sell immediately after the goods are cleared from customs, maybe at a lower margin, but that is what generally most of the importers think, and they do like that.

Now, the first experience Mr. Thomas had with the idea of importing came through POE purchasing.

What is this POE purchasing?

POE purchasing means Port of Entry purchasing.

When goods are imported, the moment they enter the port of entry, they are available for sale. at times. Because the money is involved with the importers, they want to square off their investment immediately when the goods come. And the best thing for any importer is to sell immediately after the goods are cleared from customs, maybe at a lower margin, but that is what generally most of the importers think, and they do like that.

There are at least in the Indian market, a lot of activities in the POE purchasing Port of Entry purchasing. The moment goods reach people buy containers or the less-than-container loads.

This is very common.

The goods, as soon as they are imported and cleared at the Indian customs, were handed over to Thomas's company, involved in this POE purchasing. And Mr. Thomas found that he was able to get a better price for the goods.

He already knew the brands; he knew the quality.

It was not difficult for him.

There was no real value that was being provided by the Indian vendors, who were probably buying from the importers and then selling to Thomas earlier.

In the POE purchasing, the idea of the costing that came and that was very transparent actually, in POE purchasing, was the CIF cost.

That is the Cost, Insurance, and Freight.

It means the landed cost at the Port of Entry.

And then added to that other costs like import duties or any taxes, local taxes, or incidentals like the Port Authority's fees or the Customs Fees.

Any additional charges, clearing charges, and those incidentals make it a landed cost.

Landed cost includes the CIF costs, including import duties, taxes, and incidentals, plus 5 to 10% importer's profit that keeps on varying depending on the frequency of the goods coming from where the goods are coming.

What is the quantity of the goods?

It all depends on that.

Generally, the importer's profit at the POE purchasing was approximately 5 to 10%.

This is how it was working.

Apart from the importer's profit, there was the CIF price.

That was also not very transparent, actually. Uh, the invoice price that was the CIF price was in the written form.

And accordingly, the sale was happening at the POE level.

There can be some, uh, consideration for the importer, maybe directly with the supplier.

That was not clear.

But whatever it was, on paper, these were the costs.

And this was the margin that was charged by the importer. Very transparently as such.

This was the situation. At this point, Mr. Thomas learned about importing. clearing, although he was not doing it, he got certain ideas about how import happens and what the benefits of doing direct imports.

That is what was happening.

High Sea Sales (HSS) refers to a transaction wherein the original importer sells the products to a third interested party even as the goods are in transit, i.e, on the high seas or before they actually land at the country of destination, or even if they have landed, these are still to undergo clearing at the customs.

The idea of HSS is broadly used in worldwide trade, especially in cases where the importer is unable to take ownership of the products or wishes to sell them to a 3rd interested party earlier than the actual clearing at customs of the import shipment. This can happen for numerous reasons, which include a change in marketplace situations, monetary constraints, logistical troubles, or, rather, the regular method of carrying out business by the actual importer.

HSS transactions can be complicated, as they involve multiple receiving parties and various legal and regulatory requirements. As such, it's most important for importers, exporters, and other stakeholders to have a thorough understanding of the policies and techniques connected with typical HSS transactions.

In this course, we will navigate the critical methods and information related to HSS transactions, which include the legal and regulatory necessities, documentation requirements, and the different situations in which HSS may be used. By the end of the course, you may have a comprehensive expertise of HSS transactions also and be prepared with the understanding to successfully navigate such transactions.

Direct importing made easy using the latest and modern technology is transforming the way businesses import goods from overseas manufacturers from various countries. With advancements in technology, importers can now streamline the entire process of direct importing, from sourcing suppliers to managing logistics and compliance.

In this course, we will explore the latest technologies and tools available for direct importing, including software for managing the procurement process, digital platforms for communication with suppliers, and real-time tracking systems for shipments. We will also provide practical insights and best practices for using these technologies effectively, based on real-world examples and case studies.

By taking advantage of the latest technology, you can simplify the process of direct importing and reduce the time and cost involved in managing the import process. This can give you a competitive edge in the global marketplace and help you to succeed in today's rapidly changing business environment.

Whether you are an experienced importer or new to the world of direct importing, this course will provide you with the knowledge and skills needed to leverage the latest technology for direct importing easily. Join us and learn how to streamline the import process, reduce costs, and succeed in the global marketplace.

The second experience Mr. Thomas had with importing came from another offer, other types of offers that were being given by the agents, importing agents, not the importers.

And that was the High Sea Sales.

In the high sea sales, the process was that Mr. Thomas was placing orders with an agent.

He was the Indian agent or the overseas agent.

He was representing some of the companies and large sporting goods manufacturers abroad.

Those were being represented by these agents.

And the high sea selling required the orders to be placed through those agents to the companies directly.

Goods are sold actually to the company of Mr. Thomas when goods have been despatched from the port of origin, POO, port of origin, or port of loading, and they are on the sea, they are already on the sea.

In such cases, cost considerations were like this. The CIF cost, that is, the cost, insurance, and freight.

That means the cost up till the goods reach the Indian port, that is the CIF cost plus import duties or any local taxes and incidental costs, including the customs fees, port authorities fees, any clearance fees, or the costs that are associated with goods clearance, plus 2% commission that was charged by the agent.

These were the costs.

Again, it was more lucrative for Mr. Thomas to buy goods on high-seas sales.

But in this clearance process, all customs clearance and the handling of the goods are handled when they reach the Indian port.

How to get it unloaded and all those costs.

Who are the people?

Including the CNF agents and clearing and forwarding agents.

All those vendors became connected with Mr. Thomas, and he started learning the game of imports through high-seas sales.

This was the second experience Mr. Thomas had with importing. As the business started growing further.

The growth of the business was happening because of the POE purchasing and then the high sea sales.

What happened?

The margins and profits were better.

Mr. Thomas was able to promote the goods better. The growth was quite healthy now.

At this point, Mr. Thomas thought of and considered the direct importing options.

What were the advantages of direct importing? Options that might not have been clear to Mr. Thomas, but he realized that he would have a better grip on the manufacturers.

He will be able to get the goods manufactured according to the needs and the uses of the Indian market.

He could probably get some modifications done in the goods, in the labels, or in the packing.

He thought of various possibilities of the benefits of direct importing.

And those things were already coming to the mind of Thomas, including, uh, some leverage on the actual cost, landed cost, or the purchase cost.

That is the point, when, uh, the growth was happening, he had better purchasing power.

He was able to buy goods in larger quantities.

That was the point when Mr. Thomas rightly thought of and considered direct importing.

That is what led him to the first-hand experience with direct importing.

Direct import required someone who had prior knowledge and who could work as the guide for the company, Mr. Thomas.

He had met an import agent at the China Trade Show.

This import agent, uh, he had already met a couple of times, and he was talking to him, and he was having a good rapport with this person.

He involved this import agent to start his direct importing activities. For that, the import agent suggested a visit to a few countries to do some kind of field research, to gain knowledge about the manufacturing, the challenges, and the opportunities that exist in the overseas market when dealing directly with the manufacturers.

It was more of a field research and education trip that was planned.

And the import agent and Mr. Thomas went on a business trip to a few countries, including.

They also visited some of the trade shows in different countries.

This trip was very, very useful.

And, uh, they got a very good response from the manufacturers because the purchasing power of Mr. Thomas was becoming very good now.

Mr. Thomas also committed larger quantities than he could have bought on the strength of having a very good relationship with the other retail chains, similar retail chains that are selling similar goods in India.

He had already talked to them and shared his idea of importing at better prices.

Many of the people who are members of the association of this industry were interested in joining hands with Mr. Thomas and being a partner in the import business by importing the goods in a pooled manner.

A group of other retail chain buyers in India was interested in a combined order to get a better deal from the manufacturers.

The negotiating power and bargaining power increased for Mr. Thomas.

And in this trip, Mr. Thomas used that strength.

Not only his quantities, but also the quantities that were committed by his other friends who were in a similar business.

That is how things looked brighter.

The import agent was also very keen to work with them because Mr. Thomas had quantities in hand, and he was looking at a good commission in this case.

That is what was happening in this first-hand experience of Mr. Thomas with the importing.

Pooling, wherever possible, can bring a new twist to import business. Pooled orders can tilt bargaining power in favor of importers.

What was this combined import order shipment?

It was based on the landed price to the warehouse of the other buyers in the group.

The price that was quoted to the other members of this consortium of importers or the group of importers was based on this landed cost, including all the import duties or taxes, incidentals, or clearing charges.

Everything paid.

All in all, landed cost.

That was the combined import offer given to the Indian parties.

And this combined shipment was there in the form of certain containers, maybe five containers, six containers on a fortnightly basis.

However, in these containers, the shipment was divided into different individual lots according to the partners in the group in the consortium.

Suppose there were five consortium members.

There were five lots in this single shipment.

These lots with individual markings as per the requirement of these importers, as they had desired, what kind of packing they wanted, what kind of labels they wanted, and what MRP they wanted.

It was accordingly, different lots were created as per the request and the instructions given by Mr. Thomas to the manufacturer overseas.

This is how this combined import order worked.

The cost quoted to retailers included the cost delivered to the warehouse of the individual retailers, plus import duties, taxes, local taxes, customs and clearing fees, including the port charges, port handling charges, CNF agent charges, and clearing house urgent charges.

All those charges were part of it.

And the cost of moving the goods from the port of entry to the warehouse of the retailers, as well as to the factory of Mr. Thomas himself, or the warehouse of Mr. Thomas.

These costs included all the breakups.

That was a very important thing not to miss any cost in this.

This required very careful consideration.

Now everything worked very well.

This combined offer idea worked very well.

And uh, the growth, sales growth of the company of Mr. Thomas grew exponentially.

The profits and the sales were skyrocketing already.

And with this success, Mr. Thomas added new items to the import also.

Now the advantage of direct import was visible. Now he was able to increase his portfolio of imported items, and these items now included the fishing tackle that was already there. Now, bikes were also there.

Then, athletic and ski apparel were there.

This apparel business was started again with his brand, and downhill ski and cross-country equipment were also added, and other new sporting goods accessories were included. A very good range of imported items can now be seen in the portfolio, the import portfolio of Mr. Thomas.

At this point, Mr. Thomas was regularly visiting trade shows in Germany, China, and Taiwan.

These were the countries, these were the trade shows where he was able to see new items being introduced in the market, new brands that were becoming trending, and the things that were selling well in other countries and had a lot of potential for sale in India.

All these things came to the notice of Mr. Thomas.

Those things earlier, when he was not into direct importing, were not visible to Mr. Thomas.

And probably that was the reason he was not able to grow his sales of the brand and the portfolio of the items to the extent that he can now. His vendors were now there based on his contacts in the trade shows.

And, uh, starting with the smaller quantities to start with, maybe trial orders, and then finding the suppliers and the goods of good quality and selling better in the Indian market.

Now he had vendors from Japan, South Korea, Italy, China, and Taiwan.

All this was the result of direct importing.

At this point now Mr. Thomas was full scale into the import business, a very successful import business that was supporting his strong sales growth, more profits for the brand, and a great reputation in the Indian market.

That was happening with Mr. Thomas at this stage.

In the next lecture, Dr. Jain explains what immediate benefits Mr. Thomas could derive from direct imports of sporting goods.

At this point, Mr. Thomas also learned new ideas for getting better profits and improving the reputation of the company by learning the margin game.

That was the point when Mr. Thomas started using his past knowledge.

Being a tackle jobber and being in the market for quite some time, he could now play the same margin game that the big boys, the big companies, and the so-called big companies were playing.

The MRP labels that were being provided by the manufacturer exporters included the maximum retail price on every good that was being imported.

The labels were as per the requirements of the Indian market and the local government, and the Indian customs included the cost, price of the goods, import taxes, incidental costs, and, very importantly, the 3 to 4 times markup on the landed cost.

That was already included in the MRP levels.

Based on this, he made great profits, especially in the case of apparel, where he made the maximum profits. In the apparel, the strategy was to leave the goods at the stores for 3 to 4 weeks at the MRP levels, selling at the MRP levels, and then start promoting the lots, the goods that were coming at 25%, and then maybe 30% or maybe a little more.

That was the promotion period, and then came, after a certain time, the clearance sale of the apparel.

That was the strategy that was used.

Clearance sale at 40% or one get one offer was the strategy that was being used.

And even at this clearance sale, the margins were handsome because the markups were 3 to 4 times already.

This is the margin game that he never played before, when he was not into direct importing, and now he is able to play this game.

That is what happened with Mr. Thomas.

And that was the new development in his business.

What are the takeaways from this case study that I want to share with you? Uh, uh, through direct input by Mr. Thomas in his company, the company's profits, sales, and reputation soared sky-high.

That would not have happened without direct reporting.

The way he was doing it earlier was not able to provide those kinds of results.

That is one thing that is very, very clear from this case study.

And it is very clear that as a big importer, if you are a big importer or you are part of a big importing company, you have better numbers to import, better quantities to import, and it can help in the start itself.

But as a small or medium-sized importer or a small company, it is generally not possible.

The other way is to import by pooling orders that can be worked out as Mr. Thomas did.

At least in the initial stages.

Once your business is booming, you have very good sales.

Probably, you can start avoiding any pooling of the shipments.

It all depends on the situation.

It depends on the industry.

What type of industry is there?

India is a very, very big market.

Many, many retail chains that are importing similar items had their own cities to sell, so it was possible to afford to have this kind of pooling of similar items from similar sources.

But it depends.

This call has to be taken by the importer according to the situation.

But if it is possible, then if you do not belong to a big importing company or you do not have very big purchasing power, this route is also available.

These are some of the interesting lessons and the takeaways from this case study.

In the next assignment, which is based on the opening case study, certain questions have been asked. By completing this assignment, you will be able to judge your existing thoughts and knowledge of importing.

Hey there! I wish to congratulate you on making good progress in this course. Here I wish to share with you a complimentary copy of my published book on the subject. You can download the copy from the resources section of the next lecture. Happy eLearning.

Hi there! I hope you are doing well and making great progress in this course.

I wanted to take this small moment to congratulate you on your remarkable progress in this course.

Your dedication and commitment to learning have truly impressed me.

I have been following you and your journey closely, and I must say, I am delighted with the efforts

you are putting in. As a token of appreciation for your hard work,

I would like to offer you a complimentary copy of my recent book on a similar topic that you are learning in this course, which I believe will further strengthen your learning and your grip on the course.

You can download this PDF copy of this book from the resource section of this lecture.

This course is part of the VJ Export Import Mastery Courses Series, a collection of 25 different courses targeting the area of export management designed to equip you with the knowledge and skills needed to excel in the field of export and international trade.

On my part, I am committed to helping you expand your learning journey by providing access to more similar courses in the series. But at the same time, on your part,

I have a small request for you as well.

Your feedback is incredibly valuable in refining this course and ensuring it remains world-class and is refined to its best.

So I kindly ask you to leave a rating for the course along with your feedback if you have not yet done so.

Your input will help me continue to improve and tailor the course to meet your needs and those of future learners.

Thank you once again for your dedication and enthusiasm.

Keep up with the fantastic work that you are doing, and remember, I am here to support you every step of the way.

Together, let's continue on the journey of learning and growth.

In this section, Dr. Jain discusses some of the most commonly used business terms in Import Operations

Hi. You saw in the last section an interesting case study opening case study.

The idea of this case study was to break the ice.

Break the ice for your learning. In this section, also, I'm also going to discuss some of the most common terms that are used in imports.

Again, the idea is to further break the ice.

You need not worry about many of the terms you may not understand in this section.

Just listen to these terms.

The meaning of these terms. Very short, meaning I will give you. Again idea is that the learning starts.

With this section, you will start learning the main terminologies that you will be using in the concepts that we are going to discuss in this course.

Those things will start happening.

That's the idea of this section.

Many of these terms you might have heard about, you might have read about, or you might have even used some of these terms.

You may be aware of some of the terms.

Other terms will have different meanings.

If you do not understand those terms, you need not worry.

When we go further in this course, these terms will be used again, defined, explained, and examples will be there in this course using those terms.

Those things will again come at the end of the course.

Many of these terms are not exhaustively listed in this section.

These are selected terms in this section that I have used here.

You will learn many more terms in this course.

This section is very, very important and necessary at the start. That the learning takes off.

That's the idea.

Let's have a look at some of these terms and the categories to which they belong.

Let's have a look.

The major category that starts in this section is the Incoterms.

What are these Incoterms?

Incoterms are international commercial terms.

The latest version is 2020.

I will be talking in very much detail about the entire concept of international commercial terms that are very, very important for signing the international purchase contract for importing the goods, the contracts that you signed, these international commercial terms are very, very important.

There are 11 terms that I'll be talking about and explaining in subsequent lectures, in subsequent sections, but very common terms like FCA, FOB, CIF, and DAP.

These are the selected 4 terms out of those 11 terms.

For example, FCA means Free Carrier.

FOB means Free on Board, CIF means Cost Insurance and Freight, and DAP means Delivered at the Port.

Port of destination.

These different terms: 4 terms.

Very common terms out of the many terms, International Commercial Terms Incoterms, are very commonly used.

And we will be using these terms very often in this course, and further in this learning journey that we are going to have.

As an importer, knowing about some of the most common shipping terms, like names of the common shipping intermediaries or cargo types, can be very useful. In the course, later at different places, we will be using these terms. Let us discuss some of these terms in the next lecture.

Then the second category I'm talking about refers to the shipping terms.

Shipping terms will be very commonly used words like logistics, international logistics, international supply chain management, or the customs broker, which in some countries are called CHA.

That is the customs house agents.

For example, in India, they are called customs house agents.

These are the broker's customs brokers who get the goods cleared at the customs or the so-called border control.

In some countries, the words used for customs can be different. In many countries, for example, in the US, it is called border control.

Then we have the shipping terms like CNF agents.

These are the clearing and forwarding agents.

These different terms are used interchangeably.

Sometimes they are called freight forwarders, and sometimes they are called import clearance agents.

There are different names, but the very commonly used word for these agents who get the goods cleared is the CNF agents, clearing and forwarding agents.

Then another word that is very commonly used is the shipping space.

Shipping space is provided by the carrier to the supplier. The supplier of your goods that you have ordered, which you are importing the goods.

What shipping space given by the carrier to the supplier is called the shipping space.

All these different terms are used in shipping terms.

There are many, many different terms further.

These are only a few of the selected terms that I have included in this section.

Then another category I will be talking about is called the Shipping Weights and Volumes.

When we talk of the shipping weights and volumes, the terminology used is different for Sea shipments. If your goods are coming by sea. If your goods are coming by air, the shipping weights and volume terminologies will be different.

If the goods are coming by road, in many countries, for example, from Canada to the USA, the goods are shipped many times through trucks.

The terminologies for shipping weights and volumes will be different.

For example, if we use and talk about the terminologies like TL or FTL, those refer to the trailer load and the full trailer load, which means the entire load of the trailer.

When they are coming by lorry, they are coming by trailer, or they are coming by truck.

The common term that is used is TL or FTL.

That refers to the complete trailer and LTL.

LTL means less than the trailer load.

That means the consignment that is coming is less than the full capacity of the trailer.

That is called LTL.

The idea is that we use these terms, LTL or FTL, because the FTL rates per kg, or the LTL rates per kg, will be different. After all, the trucker has to consolidate the shipment to make it a full trailer load.

Because less than the trailer load will be very, very expensive for shipment.

The rates will be different because of the extra efforts made by the truck to consolidate the shipments from different shippers.

Similarly, the same method is used for sea shipment, where the same things are called FCL or LCL.

FCL means full container load.

In sea shipment, we use 40ft containers, 20ft containers, or sometimes 10-foot containers. If the container load is full, and the shipment is an entire container, that will be FCL.

If the entire shipment is not able to cover the complete space that is available in the container, it is called LCL, less than container load.

Then we have terms used like pallets.

What are these pallets?

Pallets are part of the standardization and unitization of the export cargo.

And when we use this term, pallet terms are used both in sea shipments and air shipments.

Pallets are standardized sizes of cargo.

Standardized units that can be mechanically handled for stuffing inside the containers.

When we are talking about sea shipments, we are talking about the sea containers.

And forklifts can pick up and handle these standardized pallets that are usually with wooden bases or plastic base pallets of standard sizes that can be lifted by the forklift and can be stuffed inside the container.

A forklift can go in the container; these are called pallets.

Pallets have helped in speeding up the loading and unloading process in sea shipments, as well as in air shipments.

These are very common terms that are used in shipping and shipping weights and volumes, which we are talking about.

Now, in the next lecture, Dr. Jain will discuss some of the cargo insurance-related terms.

These are very common clauses that are used in insurance.

And then the sea perils.

What are the sea perils?

Sea perils refer to the different types of perils, disasters, or things that can damage your cargo.

For example, sea perils can be sea storms.

Sea perils can be the salty seawater that can enter the container.

The perils can be theft, sea thefts, or sea piracy, or perils can be war or strikes on the way.

Different types of sea perils are covered in the policy.

These ICC clauses A plus B plus C will have different types of disasters or perils, sea perils that will be covered, and that will define the level of protection.

And then you have things like credit insurance.

What is credit insurance?

You, as an importer, are opening a letter of credit, or you have some kind of payment method, and this credit that you have opened or you have committed to.

What is the insurance for in the case of non-delivery of the goods?

We are talking about commercial risk.

You pay for something and you don't get the material.

That risk, that commercial risk, is covered through something called credit insurance that is provided by certain organizations.

Whichever country you belong to, you will have some kind of credit insurance company.

For example, in India, we have, uh, the credit insurance that is provided by the commercial banks or the ECGC.

Different organizations exist in different countries that provide commercial risk, that is, the credit insurance for the import transaction.

And then we have the cargo insurance.

Cargo insurance refers to the insurance of the cargo, the movement of the cargo that can be the main carriage, that is, the sea or air carriage from the country of origin to the country of destination.

That is the main carriage insurance, cargo insurance.

Or it can be the inland cargo insurance from the factory of the supplier to the port of loading, and from the port of discharge, that is, the port of entry, to the warehouse of the importer, that is you, which is called the other type of inland cargo insurance.

Different types of insurance are there.

Comprehensive warehouse-to-warehouse cargo insurance is also available now.

Integrated cargo insurance is also called.

These are the different terms that are used in the insurance category.

And then talking about the customs clearance at the port of entry, which plays a major role for an importer, becomes important. Let us discuss some common use terms in this area.

Another category that I have chosen for this section refers to customs activities, customs domain, or border control activities.

It is the same thing.

Customs or border control, as I just mentioned, are the same thing.

These customs and border controls, the importer's interest is to get the goods cleared from customs or the border control, where terms like IGM

That is the import general manifest that is announced by the shipping company for every vessel that is taking a call at the port of entry.

This particular announcement imports the general manifest, which contains details of all the shipments that are arriving at the port of entry.

You will know, and you need to check whether your shipment is there or not.

This is the most authentic announcement about the arrival of your import cargo.

IGM- import general manifest.

Then the other term that is used is called the Bill of Entry.

The name may be different in different countries.

The word that is used is the Bill of Entry, which refers to the customs declarations of the arriving shipment.

Import shipment that is arriving.

You need to declare to the local customs at the port of entry that the goods are coming.

That would be cleared by the customs.

They are pre-informed through this document.

This document is generally filed online through something called EDI, which is an electronic Data interface or AES automated export system or import system.

That is what it is called in the US.

This bill of entry, you will be very commonly hearing about this document, this, uh, step, a very important step for getting the goods cleared. And things like BCD,

That is the basic customs duty. Very, very basic import duty that is called the BCD.

Over and above it, there are different surcharges, taxes, and a few other types of customs duties, for example, the CVD or the AD that refers to.

For example, CVD refers to the countervailing duty to account for any subsidies that are given by the exporting country's government to the exporters.

To counter or to leverage the effect of those subsidies in imported goods to bring the business to a level playing field for the domestic manufacturers.

This duty is levied in many countries and is called CVD - countervailing duty or anti-dumping duty, that is AD.

Again, anti-dumping duties are levied by the customs or border control in different countries over and above BCD.

That is the basic customs duty to account for any dumping of the goods by the supplier at prices lower than the fair market value of that merchandise.

If that is the case, if the customs feel it is happening.

Temporarily, these duties are levied.

That is called anti-dumping duties - ADs.

The idea of this section, talking about the different terms that I have used in this section in different categories, was to make you understand some of the very common terms that are used in import and import transactions.

With these terms, our learning journey will start in a way that you find understanding much easier and more professional.

Let's go on this journey further in the next section.

Keep watching.

And finally, paying for imported goods is a major area of watch for an importer, to avoid any kinds of payment-related commercial risks. Let us discuss some related terms in the next lecture.

And then we have the category of international payments that you are making.

For payment, you are involved with the banks, and you are involving yourself with things like

LC is a letter of credit that is opened by the LC issuing bank on your behalf.

I'll be talking about these different instruments, international trade financing instruments, later in this course to apprise you about the different methods of making international payments.

And LC is a very common and popular method.

LC is a very commonly used term in payments.

Then you have things like a bank draft or a bill of exchange.

That is the document that is given to the bank.

That's a bank document given by the supplier, who is the exporter to the bank.

You will hear about this document several times when you are transacting for your import shipment.

Or the bank collection.

That is another method of international trade financing, wherein the documents that will be supplied by the exporter to you, the original documents, include the transport documents, the commercial invoice, the performance invoice, and the certificate of origin.

Without these documents, you cannot get possession of your imported goods.

These documents will be collected by the bank and sold to you through an instrument that is called bank collection, and the bank will hand over these documents original documents, a complete set, against payment; you have to pay for it.

This whole process is called bank collection.

This is another alternative to the letter of credit.

Then you will be hearing terms like UCP 500 and UCP 600.

That refers to a code for the commercial banks to handle the transactions or the bank collection transactions internationally.

UCP stands for Uniform Customs and Practices for Documentary Credit or International Trade Financing Instruments, and 500/600 are two different versions.

The latest version is 600; these UCP 500 and UCP 600 are very common terms that you will be using very commonly in this course.

As you can see here, slowly we can break the ice further by talking about these terms.

You are getting into that mode where you can start learning.

You can start your journey in the process of learning the import documentation and procedures.

And this kind of flow will remain in this course.

And step by step, you will start learning.

You need not worry if many of these terms are found by you to be difficult to understand.

Don't worry about that. Slowly, you will understand all these things in this course.

There are things to know before embarking on an import transaction. The knowledge of these basic things is discussed in this section by Dr. Jain.

Welcome back to the course.

In the last section, we learned and talked about different common terms that are used in import activities.

Now in this section, I'll be talking about a few things that are very, very important.

The concepts that are very, very important for you to know and learn about. Those concepts should be reasonably clear to you before you can understand an entire import, documentation, and procedure.

To make the understanding of the procedures and documentation easy, these topics are the foundation prerequisite for this understanding.

Let us look at what the things are that you should know before you learn about the entire step-by-step import procedure and documentation.

Let's see.

What are those areas that you have to know about?

At least the concept, at least the basic knowledge, things like a typical import transaction framework.

What is the typical import transaction framework?

The flow of the documents. The flow of the goods. The flow of the payment. how it happened, who pays whom?

Who are the intermediaries?

The main intermediaries.

Very basic.

Typical import transaction framework.

I'll be talking about what you should know about.

That's also called the game plan or the rules of the game.

This typical transaction framework tells you how this game is played. This understanding is very, very useful and important.

Then the different methods of making international payments.

Before you sign a contract, you should know that.

What are the different ways of making international payments?

Why are they required?

How your bargaining power can protect you to avoid any risk, any commercial risk of non-delivery of the goods.

What are the payment methods?

The options that are available before you sign the purchase order before you sign the international trade contract?

I'll be talking about that.

What are the different methods that are available for making international payments, and which method is safer for you as an importer?

You should also know about that.

I had also talked earlier about the international commercial terms.

That is the INCOTERMS because this whole game of the foreign trade import transaction is based on the delivery, it is based on the risk-taking, it is based on the obligations and responsibilities.

In this movement of goods from the country of origin to the country of destination, there are so many different points, including the port of loading, the port of discharge, the first carrier, and ex-factory.

There are so many different points that can be agreed upon between the buyer and the seller.

That is you as the importer and the supplier.

The point where the responsibility and the cost, and the obligations change hands.

What are those points? And are there some commercial terms for this purpose that are understood internationally?

Those things you should know, we'll be talking about those things.

Then you should have a fairly good knowledge of the international movement of goods.

That means the logistics and shipping.

You should know about what are the different standardized units, Unitization, Palletization, containerization for sea shipment, and similar containers and pallets for air shipment.

What are those options that you have, and what are the basic tenets of sea transportation and air transportation?

What are all the different types of services that are available by sea and by air?

What different options as an importer do you have in international logistics and shipping? This information, that knowledge, basic knowledge, is very important, and I will provide you with that knowledge in this section.

I will tell you all the things in this section, the areas, and the topics that you should know before you embark on your main journey of learning about import documentation and procedures. Then you should have fairly good knowledge about cargo insurance, also called marine insurance for sea shipment. And the general insurance for moving the goods, what are the different options you have?

What different types of insurance are available? What are the basic principles of international cargo insurance?

Those things you should have a fairly good knowledge of, which I'll be discussing in this section.

Then I'll also be giving you the list of the different typical clauses of an import contract.

What are the common clauses that are in a typical type of international purchase contract?

As an importer, when you place the order with the supplier, what are the different clauses to negotiate with the supplier, like you negotiate for the payment terms, and you negotiate for the commercial terms?

Similarly, you have other clauses that are in the contract.

You should know about that.

The purpose of the different clauses.

Only then will you be able to sign a robust and favorable international purchase contract.

Then you should also have a fairly good knowledge, or at least the basic knowledge, about the foreign trade policy of the local governments that are involved.

That means the local government of the home country, the country of import, and the local government of the supplying country, that is, the exporter's country.

What are the basic things in a foreign trade policy? What things should to look into in this foreign trade policy, the things that you should know to become a successful importer.

Those things will help you understand the import documentation, not the entire importation.

That is not the purpose of this course.

The purpose of this course is to make you understand the procedures and documentation.

And what are the areas of the foreign trade policies that relate to the typical import procedures, importation procedures, and documentation?

Those things I'll be talking about in this particular lecture that is related to the foreign trade policies of the partnering countries.

And then you should know the concept of international classifications of the different types of goods that are traded internationally.

What is the role of this International Trade Classification, so-called ITC?

And in a harmonized way, that is the harmonized System HS system. And what are the codes that denote a particular category?

How does this happen? How is this categorization there? And how is it connected with the import tariffs?

Especially the import tariffs in your own country, the importing country.

How are these import tariffs calculated based on these classifications?

Then, finally, one thing that you should understand is that all this game of foreign trade movement of goods from the supplying country to the port of entry is all in alignment with the different types of trade agreements among the countries, among the governments.

We have two types of international trade agreements among countries.

One category is called the multilateral agreement.

Multilateral trade agreements.

These multilateral trade agreements are mainly under the umbrella of the World Trade Organization, under the aegis of the World Trade Organization.

As the member countries, there are more than 180 countries that are members of the World Trade Organization, and in this umbrella organization, they have multilateral agreements of different types that have a direct or indirect impact on your transaction and even on your landed cost.

You should have this knowledge about these multilateral agreements that impact the overall shape of the trade transactions of this type.

That happens.

As an importer, you should have this knowledge.

And then you have the bilateral trade agreements.

The bilateral trade agreements refer to the agreements among a few countries.

The countries that have special agreements with each other, so-called free trade agreements or some kind of preferential agreements where the import duties and preferential import duties are there, and that have a direct impact on the landed cost.

The knowledge about these multilateral and bilateral trade agreements will come in very handy in the overall knowledge about import procedures and documentation.

These are some of the areas, the basic understanding I will give you in this section, through different lectures related to these topics.

Let's go into this section, and let's look at these different areas.

What is this import transaction framework? How is this game played? Some of these ideas are discussed in the next lecture by Dr. Jain.

To start with, let us talk about the typical import transaction framework.

What is this import transaction framework? How is this game played?

Some of the ideas you already must have.

But this particular lecture will help you to recapitulate your knowledge about how this game is played between the supplier and the buyer.

That is the importer, that is you.

You as an importer, approach the supplier, identify the supplier, a potential supplier who can give you a good offer of the goods, who can meet your conditions, the user's conditions, your needs of the packing, all the things he can provide to you and then you identify such exporters and you zero in on some particular supplier to supply you the goods internationally, and you enter into an export contract. For the exporter, it is the export contract, and for you as an importer, it is an international purchase contract.

Whatever the name is, there is a trade contract between the supplier and you as the importer.

This particular purchase contract, an international purchase contract that is signed between the supplier and the importer, that is you, serves as a template for the complete transaction.

But this complete transaction is normally of the shape of this typical transaction, wherein the exporter, that is the supplier, after getting the international purchase order or the export contract, prepares the draft LC conditions.

We are assuming in this typical import transaction framework that the payment method is the letter of credit.

That is the most balanced method of payment, but a little costlier.

But this is the most safe for both parties.

We are assuming that in this framework, we are talking about the letter of credit transaction.

The exporter prepares the draft LC opening instructions based on this international purchase contract that you sign, based on your negotiation, and based on your knowledge.

These draft LC opening instructions are given to you for further processing with the issuing bank that is going to issue the letter of credit in favor of the supplier.

What do you do? Based on this draft LC opening instruction, you do the due diligence of this document and prepare your own LC opening instructions, because this opening instruction is a very, very important document that has to be given to your bank, your local bank, that is the importer's bank in your country.

That is also called the issuing bank because it issues the letter of credit based on your opening instructions.

These LC opening instructions are based on the draft LC opening instructions that are drafted by the supplier.

The letter of credit that is opened by the issuing bank, that is your bank, is advised through the supplier's bank in the supplier's country.

This bank in the supplier's country advises the LC and acts as the advising bank.

The supplier has the option of either accepting the letter of credit or rejecting it.

If the letter of credit is in alignment with the draft LC opening instructions that were prepared by the exporter, that is, the supplier, in a majority of the cases, the supplier will not reject the letter of credit.

And the moment the letter of credit is accepted by the supplier, the LC comes into effect.

The payment is now guaranteed by the LC issuing bank, which is going to charge you for this service.

You, as the importer, have to pay the services of the issuing bank.

Some LC issuing charges will be paid, or any other service that is related to the LC opening by this bank.

All those charges have to be paid by you as an importer, and that is the reason LC is a little expensive proposition for making the initial payment.

I will explain in more detail when I talk about international payment methods in the next section.

Based on the LC, the exporter will prepare the shipment.

The supplier will prepare the complete shipment either by manufacturing or by procuring from the market and will dispatch the goods either by sea or by air, depending on what has been agreed between you and the supplier. And the moment goods are loaded, for example, in this case, let us assume it is a sea shipment.

The goods, as soon as they are loaded on the ship, the documents will be procured by the exporter.

That is the supplier.

That would include the transport documents.

It has already prepared the commercial invoice, the certificate of origin, the packing list, and the other certificates that have been demanded by you, including the quality certificate or any other mandatory certificates that are required by the customs and the border control of your country at the port of entry.

What are the prescribed documents that are mandatory and will be prepared by the supplier to be supplied by the supplier along with the goods?

Those documents will become part of the LC presentment documents, which means the supplier will procure all these documents, original documents, and will present these documents to the negotiating bank in their own country.

Like advising banks, the negotiating bank is the local bank of the supplier's country.

And that bank will collect all these documents and will negotiate those documents with your local bank.

That is the LC issuing bank.

And if all the documents are in order and the shipment is already made, the transport documents are also there.

It will make the payment to the supplier, and these documents will be sold to you by your bank.

That is the LC issuing bank.

You have to pay any pending amount, whatever is there against the letter of credit.

And you will collect all these documents, and you will use these documents to take possession of the goods that might have already reached the port of entry, that is, the port, the seaport, or whatever. the agreed place is there as per the contract.

At that point, you will get the goods cleared from customs. Depending on what has been agreed in the contract and what the international commercial terms are, you may have to get the goods cleared at customs and take possession of the goods from the shipping company by providing the original transport documents along with the other commercial principal documents, so-called LC documents.

These documents you will be using to get possession of the shipment goods.

As you can see here, in this particular typical import transaction framework, you can see the flow of the goods from the port of loading to the port of discharge via the ship.

The carrier will take the goods at the port of loading and will deliver the goods at the port of discharge.

And the flow of the documents, you can see here from the supplier to the supplier's bank and then to the issuing bank.

Your local bank and your local bank will give this document to you.

And these documents will be further given to the carrier or the local government, that is, the customs department and the border control Department.

To get the goods cleared.

This is the flow of the documents.

You can also see in this typical import transaction framework, the flow of the payment from the Importer's bank, that is your bank, the LC issuing bank, to the negotiating bank, and then to the supplier.

This is the flow of the payment.

And this is the flow of the documents.

And this is the flow of the goods.

You can see all these different flows in this typical import transaction framework.

And you should focus on, very importantly, what is the role of the issuing bank?

That is the LC issuing bank.

That is your bank.

What is the role of the home country's customs border control that will prescribe certain documents, very important documents, and mandatory documents without which your customs will not clear goods, your country's customs, and border control?

What is the role of the home country's customs and border control, and the role of the shipping company that is going to deliver goods from the port of origin to the port of destination?

That means the port of entry, how these goods are going to be shipped by the shipping company, and how these goods are going to be handed over to you using the original documents in this shipment?

This is the typical import transaction framework that you should be clear about.

To understand further in this course, the complete and entire import documentation and procedures.

This is the first thing you should have fairly good knowledge about to become conversant with the important things that are going to help you in further learning in this course.

The common methods of international payment can vary depending on the specific circumstances of the transaction and the needs of the parties involved. However, some common methods of payment include:

1. Advance payment: A lump sum payment made by the buyer before delivery of the goods.

2. Letters of Credit: A payment mechanism in which the buyer's bank issues a letter of credit in favor of the seller, guaranteeing payment once certain conditions are met.

3. Documentary Collection: A payment method in which the seller's bank collects payment from the buyer's bank, using shipping documents as collateral.

4. Open Account: A payment method in which the buyer pays for the goods after delivery, without the need for collateral.

5. Escrow: A payment method in which a neutral third party holds the funds and releases them to the seller only once certain conditions have been met.

6. Installments: A payment method in which the buyer makes periodic payments over time, rather than a single lump sum payment.

The choice of payment method will depend on the specific needs and circumstances of the parties involved, including factors such as the size of the transaction, the creditworthiness of the parties, and the level of trust between the parties. The terms of payment should be clearly defined in the contract to minimize the risk of misunderstandings or disputes.

Welcome back to the course.

Now let us talk about what are the different methods of international payments.

It is very, very useful to know the different methods that are available to the importers for making international payments.

As you can see here in this particular diagram, there are several methods of making international payments. Starting with the advance payment to the letter of credit, that is, the documentary credit to the bank collection against the DP.

That means documents against payment and the bank collection against the DA.

These are the documents against acceptance to the open account and the consignment sale.

These different payment methods have their significance, their importance.

Depending on the product, depending on the industry, depending on the practices of a particular country of origin or the country of destination, different payment methods are used and negotiated and bargained depending on the bargaining power of the supplier and the importer.

For example, if you have as an importer very weak bargaining power, you may have to agree to the advance payment to the supplier because it is difficult to get the goods.

And there are very few suppliers.

They enjoy very strong bargaining power.

You may have to go in for the advance payment, which is the least secure method of making a payment because you have already paid money to the supplier.

Now this money can be a 100% payment, or it can be a partial payment.

It all depends on the negotiations and the situation.

Advance payment is one method, much easier for anyone, because there is no involvement of any bank.

And the documentation and everything are much simpler and easier.

But it is a very, very insecure method of payment for the importer.

This is the least secure method of international payment.

And it is just a compromise that you need goods urgently, and you have to make the advance payment because the supplier will not give you the goods without the advance payment.

And these advance payments can generally be made through credit cards or wire transfers.

Different methods of bank transfer.

It is there, but the direct involvement of the bank is not there; the risk of the bank is not there.

Then the second very popular method of making international payments is the letter of credit.

That is the documentary credit.

This is one international trade financing instrument that has been discussed and researched most internationally.

This is supposed to be the best method for both the supplier and the importer, but it is the costliest method.

It has the level of security for both parties, that is, the supplier, as well as the importer, which is balanced.

The risk or the protection for both parties is very similar because of the involvement of the third party, that is, the bank.

And depending on the reputation of the bank, the payment to the supplier is secure, and in the case of any default by the supplier, payment will not be made to the supplier. Depending on the different consequences of the letter of credit, there can be some penalties for the suppliers for the default in supplying the goods or non-delivery of the goods.

There are different situations, and there are a lot of legal implications of the letter of credit because of the involvement of a third intermediary, that is, the bank, which ideally should be a first-class bank, the first-class bank as per the ICC Paris, France. That is the nodal agency that announces the guidelines for the management of these letters of credit, this international trade financing instrument, through a document called UCP.

Different versions are available.

The most popular at present are UCP 500 and 600.

Then the reason why this letter of credit is not that popular is because of the costs that are involved in the letter of credit, because of the risk premium attached to this instrument, the risk premium that is charged by the bank because of the payment risk, and the liability of the payment is of the payment.

This risk premium makes it a very costly instrument.

In such cases, where the cost is not bearable for the importer to make the international payment through a letter of credit, and if the supplier agrees, then the other trade financing instruments that are offered by the international commercial banks are called the bank collection.

The bank collection is generally of two types.

One is the documents against payment, and the second is the documents against acceptance.

In the bank collection, the risk of the bank is not there.

What happens when you agree on these bank collection terms with the supplier? The supplier is supposed to send the original documents for the sea shipment, including the transport documents, the commercial invoice, packing list, certificate of origin, quality certificates, or any other documents that are required by you as an importer.

Those original documents are sent through banking channels. And it comes to your local bank, which is the collecting bank.

After you make the payment, only then will these documents be handed over to you as an importer.

This is the process called the bank collection. Herein, if the payment has to be made immediately for getting the documents, that is, payment at sight.

That kind of situation is called bank collection on the DP terms, that is, the documents against payment.

And if there is some usance period involved, the meaning of that is that you get the documents against the acceptance letter, that you accept that payment has to be made, and this payment will be made after a certain Usance Period, maybe ten days, 15 days, 30 days.

Whatever has been agreed between the importer as well as the supplier on the usance period, makes it necessary for you as an importer to get the documents against the acceptance letter or acceptance.

It is called a bank collection against DA terms.

Starting from the advance payment method to the letter of credit to the bank collection on DP or DA terms, the protection for the importer, that is you, is improving.

An advance payment is less secure for you, and a letter of credit is more secure.

Bank collection is even more secure for you, and bank collection through DA is even more secure because here you are not paying.

You are simply giving the acceptance letter.

And then you have the other methods.

Those are called the open account and consignment payment.

Now, depending on the bargaining power you enjoy, you may make the supplier agree to supply the goods on an open account.

The meaning of that is that goods will be supplied not against payment; they will be supplied, and the documents will be given to you.

The payment will be made as per the open account.

That can be 30 30-day account. That can be 60 60-day account. That can be 90 90-day accounts or even more. Depending on the period of the open account. you make the payment at certain intervals: 30-day intervals, 60-day intervals, or 90-day intervals.

That is called the open account.

Then the consignment terms of international payment in the form of an open account, wherein the payment is made after the goods have been received by you from the supplier and have already been delivered to the end user, or sold to the end user, and the payment has been made by the end user to you.

Based on that payment, the payment will be made to the supplier.

Here, there is no fixed period for the payment.

The meaning of that is the consignment will come to you.

That consignment has to be sold.

Payment has to be received from the buyer and the user customer, your local customer.

And when that payment has been received, you will make the payment to the supplier.

This is the most secure method for you as an importer.

A consignment sale is the most secure method of international payments.

These are the different types of international payment methods that are used depending on the different situations and scenarios of business.

In the next slide, what I will do instead of discussing in depth all these payment methods, I will focus on the letter of credit, which is the documentary credit. If you understand the procedure and the flow of the goods, the flow of the documents, and the payment in the letter of credit, all other methods will be crystal clear to you.

Just by explaining how the letter of credit works, you will understand the complete gamut of the different international payment methods that are used internationally.

So, in a typical case, an international payment is made by a letter of credit. In the next lecture, Dr. Jain talks about A Typical Framework of a Letter of Credit

In this particular diagram, there are a few players in.

I will explain to you who the players are. In this scheme of things for the process of a letter of credit, you can see here who the important intermediaries are: the first party, the second party, which is the importer, and the exporter. The importer is there. Exporter is there. The importer's bank is there. The exporter's bank is there.

These are the four main parties involved in the letter of credit process.

What I had explained also in one of my earlier slides when I was talking about the typical import transaction framework.

We are building upon whatever we discussed in that particular lecture.

Here is the first step after the contract has been signed between the supplier and the importer.

An international purchase order or international purchase contract has already been signed between the two parties.

First party and second party, with the first party being you, the importer.

The second party is the supplier, the exporter.

Based on that international purchase order, whatever has been agreed upon, or there are any addenda, or there are any additional emails or communications, that whole communication in black and white is used by the supplier to draft an LC opening instruction.

This is the draft LC opening instruction that contains the details of the letter of credit that has to be issued by the Importer's Bank.

What are the expectations of the supplier from the letter of credit, the documentary conditions, or any other conditions that are there in the letter of credit?

Those details, those instructions are jotted down by the exporter, that is, the supplier, in the draft LC opening instructions.

This draft is sent to the importer.

Now, the importer studies the draft letter of credit opening instruction LC opening instructions. and if he is satisfied that it is in alignment with the communicated agreements between both parties, he will prepare the final LC opening instructions.

As you can see here in step number two, the LC opening instructions are prepared by the importer and given to the importer's bank, that is, the local bank of the importer, that is, you.

Based on this LC opening instruction in step number three, the LC issuing bank, that is the importer's bank issues the letter of credit in favor of the supplier and sends this LC document for acceptance by the supplier not directly to the supplier, but rather in step number four to the advising bank, that is the local bank of the exporter in the exporter's country that acts as the advising bank.

Step number four, advises the letter of credit to the exporter for the decision to be taken by the supplier, whether to accept the LC or not, to accept the LC.

The exporter also takes the help and the advice of the advising bank to understand the LC, to see all the conditions that are there and match those conditions with the draft LC opening instructions, and if they are in line with the agreed terms and conditions, as per the draft LC opening instructions and the international purchase order that was signed between the first party and the second party, invariably exporter will accept the letter of credit.

In step number five, as you can see here, the exporter, after accepting the letter of credit, makes the shipment through the sea route from the port of loading to the port of discharge to the importer. As soon as the goods are loaded, it can secure all the documents that are demanded by the letter of credit.

The documents required by the letter of credit, including the documentary requirements and conditions, must be procured in their original form by the exporter, as outlined in step number five. these documents are to be presented to the local bank of the exporter, which may be the same bank as the advising bank, or it may be a different bank, but it is a local exporter's bank that acts as the negotiating bank.

The documents are presented to the negotiating bank or the nominated bank.

These banks may have different names.

But I'm just taking the simplistic view and using the very common names.

The names that are by default.

This negotiating bank accepts the documents if there are no discrepancies. If it finds any discrepancies, it suggests that the exporter rectify them as soon as possible.

In case this cannot be rectified, depending on the agreement between the exporter and the negotiating bank, the negotiating bank will finally send these documents in step number six for negotiation to the issuing bank.

The complete set of documents that the exporter presents to the negotiating bank is sent to the Importer's bank, that is, the issuing bank in the importer's country.

The issuing bank, in step number seven, if it finds that the documents that are presented are compliant as per the UCP 500 or 600, whichever has been the agreed version of the UCP of the letter of credit, verifies all the documents.

Suppose the bank finds all the documents compliant in step number seven, the bank that is the issuing bank in the Importer's country. In that case, the Importer's bank debits the importer's account and releases original documents to the buyer, also debiting all the different LC opening charges or any charges that are payable to the importer's bank, and credits the Exporter's bank, that is the negotiating bank for the LC amount, and the Exporter's bank that is the bank.

After the money has been received, hand over or transfer the money to the exporter.

As you can see from the entire scheme of the letter of credit and its operation, these are the key steps involved in the complete LC process.

How it works.

All other payment methods, including advanced payment, letter of credit, bank collection, open account, and consignment sale, are derived from this method.

In those methods that are not the international trade financing instruments of the bank, that is, the letter of credit and the bank collection, all other methods.

The involvement of the bank is not there.

Therefore, those methods, a lower cost of making the payment is less, but they are either insecure for the importer or they are insecure for the supplier.

What is secure for the importer is insecure for the supplier.

This is how it works.

How do you bring a common understanding of risks, costs, and responsibilities of the goods moving across borders, between the buyer and seller? International Commercial Terms play that role. Let us talk about these INCOTERS.

Hello friends.

Welcome back to the course.

In this particular lecture, I will be talking about the international commercial terms that I had given the introduction to in one of my earlier lectures.

These international commercial terms are required for signing the international purchase contract, wherein you have to indicate and agree with the supplier.

What are the points where the obligation and the risk mean the obligation of the cost?

Who bears the cost of the transportation, the loading of unloading, or any incidentals that are related to the shipment?

What are those points at which the obligation of the seller transfers to the importer, that is, you? As well as what are the points where the risk transfers from the seller to the importer?

These two points can be different.

You will soon start understanding in this whole game that the cost angle and the risk angle are not exactly connected.

This is the reason why these international commercial terms become a little complicated, the point at which the obligation of the seller changes hands to the importer, and the point at which risk transfers may be different.

This is what I will try to help you understand in this particular lecture.

And what are those points?

As I had mentioned to you, as per the latest international commercial terms that have been announced by ICC Paris, France International Chamber of Commerce, which has already announced the latest international commercial terms that are effective now from January 2020.

These are Incoterms 2020, those Incoterms 2020 I'll be discussing in this lecture. And there are 11 such terms.

I will explain to you what the points are where the obligation is and what the points are where the risk transfers from the seller to the buyer.

Those things I am going to discuss in this lecture.

As you can see in this diagram, this diagram explains the movement of the goods from the exporter to the importer.

From the exporter, goods are loaded on the first carrier, which may be a truck.

That may be some other kind of carrier.

Generally, it is a truck or a lorry.

Then it is brought to the port of loading, where the goods are loaded on the ship.

The ship carries the goods to the port of discharge, and at the port of discharge, the goods are unloaded and loaded on the truck or the lorry to reach the agreed place or the importer's warehouse buyer's warehouse.

This is a very typical understanding that you already have from the earlier lectures in this course.

You know how the goods move from the exporter to the importer.

Now, if you look at the bottom of this particular diagram, you will find different zones that are there, starting with the exporter's warehouse to the agreed place in the exporter's country, that is the seller's country, supplier's country, the port of loading that is also in the supplier's country, and the high seas.

When the goods are loaded onto the ship, the ship sails in the international seas.

These are the high seas and cross the border of the Exporter's country to reach the high seas, and then finally to the port of discharge. And at the port of discharge, after that, the zone is the place where the goods are to be delivered.

Agreed place.

It is not exactly necessary that the goods will be delivered at the agreed place.

The goods may be delivered at the Importer's warehouse also.

You have to notice all these different zones that are there in this whole process.

These zones signify the areas where the possibility of the shift of the obligation from the seller to the buyer should happen.

And the risk also transfers.

The latest version of INCOTERMS is 2020, which has 11 common INCOTERMS. Let us look at the different features of these 11 terms in the next lecture.

For example, if you look at this zone, the first zone is the exporter's warehouse.

Here, if at the gate itself the exporter delivers the goods to the buyer, both the obligation as well as the risk.

It is called the EXW, Ex Works.

These are the E terms actually in this zone.

The next zone very obvious zone, is the agreed place in the exporter's country.

That is the supplier's country.

It is shown in green.

This agreed place may be near the factory or the warehouse of the exporter, or it may be near the port of loading somewhere in between.

That is convenient for both parties.

This is the agreed place where the first carrier.

What is the first carrier?

Normally, it is the lorry, the truck, or the trailer.

It picks up the goods.

Goods, when they are loaded on the first carrier at the agreed place shown in the green zone.

The moment this loading happens is complete.

At this point, also, the obligation and risk can also be transferred to the importer from the supplier.

That particular point is called FCA Incoterms 2020.

FCA means free carrier.

And at this point, if the obligation of paying the cost up to the agreed place in the buyer's country, if that entire cost of the freight is to be paid also, I'm just talking of the cost.

I'm not talking about the risk.

This cost, if it is to be paid at the very start itself in the green zone of the exporter's country if this cost has to be paid, is called CPT.

That means the cost paid to.

But the risk, like FCA, is already transferred to the buyer.

It is just that the obligation means the cost has to be paid by the seller.

This entire cost at this point has to be paid.

That is called CPT.

Along with the cost until the agreed place in the importer's country, the entire insurance of the cargo, that is, the cargo insurance, also has to be paid by the seller, that is, the supplier, at the agreed place itself.

That means every place in the Exporter's country itself.

Then this particular Incoterms 2020 is called CIP.

That is, the carrier and insurance paid to.

But again, in these agreed terms in the exporter's country, the risk in all three terms

FCA, CPT, and CIP.

The risk is already transferred the moment goods are loaded on the first carrier.

Obligation may be there, but the risk is already transferred.

And then we have the other zone, which is called the port of loading.

What is the port of loading?

This is the port where the ship is taking berth.

And goods have been brought by the seller at this point, at this very point, to the wet port.

Here we have four sea terms, so-called sea terms.

In this zone in the exporter's country, when goods are brought near the ship or to the ship, we have four sea terms that are part of the Incoterms 2020, starting with 'free on board'.

That is FOB.

It means goods have been brought to the port in this zone and are also loaded on the ship.

The meaning of this is that the goods are already on board.

Free on board.

And it is called FOB. At this point, both the obligation and the risk get transferred at this very point from the seller to the buyer.

That means to the importer.

It is also possible that the responsibility of loading the goods near the ship or at the container yard is not the seller's.

Rather, the obligation is of the importer.

In different situations, in different commodities, and in different types of business, the overall cost can be reduced, probably if the responsibility of loading the goods near the ship is not of the seller, but rather of the buyer.

For example, if the buyer is buying the goods in very large bulk from several suppliers in the supplier's country, then all those sellers will be bringing those goods to the ship at the designated time because the ship has a very short time to take berth at the port.

All these suppliers will be bringing those goods there only.

And if the buyer hires the loading company and hires the loading people in one go for all the shipments, it is possible to reduce the cost.

In such situations, for example, the FAS, which is the free alongside term that is INCOTERMS 2020, another sea term, FAS free alongside.

That means the seller just must bring the goods to the container yard where the loading will take place, and that is not the responsibility of the seller; that is the responsibility of the buyer, the cost, even the risk, is of the buyer.

At this point, both the obligation and the risk transfer from the seller to the buyer along the ship.

And then you have another two sea terms.

That means the sea shipment terms.

And also these are the C terms A, B, C, CFR, and CIF.

What is CFR?

CFR is very similar to FOB.

It is just that it is the responsibility of the seller to get the goods loaded on the ship, and also pay for the onward freight that is the main carriage, the goods that will be carried by the ship until the port of discharge.

That freight also has to be paid by the seller.

It is just the obligation that is of the seller, not the risk.

This risk is already transferred in this zone, the port of loading itself.

It's just that he has to pay the freight.

It is called the CFR.

This is also the Sea shipment term, which is also the C term.

The second C term in this zone is CIF, which is cost insurance and freight, the meaning of which is again it is very similar to CFR.

The goods have to be loaded on board by the seller on the ship, as well has to pay for the freight as well as insurance. Insurance of the main carriage from the port of loading until the port of discharge.

That insurance part is also the obligation of the seller.

All these different terms, what you are seeing here are interchangeably used in different contracts, in different situations, in different commodities and goods, and merchandise that are being sent from the supplier to the importer.

Thereby, now we have already covered eight Incoterms 2020 out of 11.

Three more Incoterms 2020 are remaining, which I will just explain to you. Those three remaining terms in Incoterms 2020 are the D terms.

As you can see here, D terms refer to the green zone in the importer's country.

To start with where there are two terms: DPU and DAP.

What are these two terms?

These are delivery terms where not only is the obligation of the seller, but means the cost until the agreed place in the country.

But also, the risk has to be carried by the seller until that point.

Until that zone, the green zone in the country.

The DAP means "delivered at place", that is, delivered at an agreed place in this green zone, but loaded on the lorry itself on the truck.

The truck has already picked up the goods from the ship at the port of discharge.

Unloading obligation is not of the seller, and risk is also not there.

Any charges for unloading, as well as any damages that happen during unloading, are of the buyer.

DAP and DPU are very similar. same thing, except that unloading also has to be done by the seller, both the obligation as well as the risk.

This is the DPU term delivered at the place unloaded.

This is the 10th term in INCOTERMS 2020.

That is in this zone, the green zone, an agreed place in the importer's country.

And finally, one last Incoterm 2020 that is remaining is called DDP, which is delivered duty paid.

And this is in the last zone, the last possible zone in the importer's country, which is your country, in your warehouse.

Importer's warehouse.

The goods are to be delivered till that point, not only delivered but also unloaded. And all an entire responsibility, obligation, and risk until the warehouse of the importer is of the seller. In addition, the obligation to get the goods cleared from the Importer's Border Control Customs Department is also of the seller.

That means not only does he have to get the goods cleared at the customs in the importer's country, but also pay any import taxes, any local taxes, import duties or clearance charges, or any incidentals.

All of it has to be paid by the seller.

It is the warehouse-to-warehouse deal from the warehouse of the exporter that is the supplier until the warehouse of the importer.

All the efforts have to be made by the seller.

These are the 11 different international commercial terms that are very, very useful for you to understand when you negotiate an international purchase contract and finalize the contract.

All these terms have to be clear to you.

Now, in the next lecture, Dr. Jain is summarizing all these INCOTERMS in a concise lecture, using a useful visual presentation.

To make your understanding a little better, you can also look at the next slide, where I will show you all these 11 terms.

And I will show you who is responsible for what portion of the journey so that I can explain.

Maybe that slide will give you an even better idea.

Probably after you have understood this particular slide, it will become easy for you to understand the next slide on the Incoterms 2020, 11 terms that I'm discussing.

Here you can see Incoterms 2020 point of delivery and transfer of risk.

You can see here, uh, you can see this seller, the first carrier alongside the ship port of loading, carrier, destination port, alongside the ship, agreed Place, and the buyer's warehouse; you can see this whole range of the points.

Different points exist at which the possibility of the transfer of the obligation or risk can happen.

In this particular diagram, you can see in the left column you can see all 11 terms starting from EXW to FCA to FAS to FOB to CFR, CIF, CPT, CIP, DPU, DAP, and DDP.

All these 11 terms I have already discussed with you, and here in this diagram, the very important thing to understand is that the seller's obligation is shown by the blue bar. It indicates up to what point the seller is there.

Obligation also means the cost is of the seller.

And this red color star, which is shown in this particular diagram, refers to the transfer of risk from the seller to the importer.

And finally, in the pink shade, you can see that it is the buyer's obligation.

Blue color indicates the seller's obligation.

The pink color indicates the buyer's obligation.

And the red star indicates the transfer of risk.

In this particular diagram, you can copy it. One copy of this image I have placed in the resource section of this lecture.

You can download this image and keep it for your record for future reference.

It will always be handy for you, and you will be able to understand that in different 11 terms that you agree.

What are the points where the transfer of obligation changes from the seller to the buyer?

That is the importer.

And what are the points at which the risk gets transferred?

This particular image will be very, very helpful for you until the next version of Incoterms 2020 comes.

That would come in 2030.

Till that time, you will find this diagram that will be applicable.

An International Purchase Contract is a legally binding agreement between a buyer and a seller to purchase and sell goods across international borders. It outlines the terms and conditions of the transaction, including the price, delivery date, payment terms, and responsibilities of each party. The contract also addresses customs duties, tariffs, and compliance with international trade laws. The purpose of the contract is to minimize the risk of misunderstandings or disputes between the parties and ensure a successful transaction.

There are several advantages to using a formal international purchase contract compared to an informal agreement, including:

Clarity and certainty: A formal contract provides clarity and certainty regarding the terms and conditions of the transaction, reducing the risk of misunderstandings or disputes.

Legal protection: A formal contract provides legal protection for both parties, including the right to enforce the terms of the contract in a court of law.

Evidence of the agreement: A formal contract serves as evidence of the agreement between the parties, which can be useful in the event of a dispute.

Increased credibility: Using a formal contract can demonstrate a higher level of professionalism and increase the credibility of the transaction.

Better risk management: A formal contract allows for a more comprehensive assessment of the risks associated with the transaction and the inclusion of provisions to mitigate these risks.

Increased confidence: A formal contract can increase the confidence of both parties in the transaction, as the terms and conditions have been clearly defined and agreed upon.

Better negotiation: A formal contract can provide a framework for more effective negotiation, as the parties can more easily assess and compare offers.

In summary, using a formal international purchase contract can provide a higher level of protection and security and help ensure a successful transaction.

In the following few lectures, Dr. Jain will discuss the typical clauses that build an international purchase contract. An example of a sales contract, as it is also called, is also discussed at the end of these lectures.

Now is the time to understand something about signing international import contracts.

For an importer, it is very, very useful to know the intricacies of signing the international purchase contract, like how it is to be signed, what the format is, what the different clauses are, and the meanings of those clauses.

If I show you some examples of international purchase contracts that I will be discussing in this lecture, you will gain an idea of a real-life international purchase contract. And the significance and importance of every clause, typical clauses that are generally there in the typical international import contract.

In this lecture, I will first list out the different clauses, typical clauses that are there in international purchase contracts.

And then I will share with you one example, one sample of the international purchase contract between two large companies.

That very similar contract can be used by you as an importer.

I would like to tell you something about smaller orders, international purchase orders, and many times there is no formal international purchase contract; it is good to have one.

But many times, the importers do not sign any formal kind of international purchase contract.

Rather, they rely upon a Proforma Invoice signed Proforma Invoice.

That means the proforma invoice that was raised and sent by the supplier, they simply sign it and confirm the order, maybe via email also, and some of the terms and conditions they may share via email with the supplier.

That is also there.

That is a very common practice, but it is always better to know the intricacies of an international purchase contract, and depending on the situation, depending on the product, depending on the size of the order, you may like to have a simple to medium, or to highly complicated international purchase contract, depending on what is your judgment in a particular situation.

A typical International Purchase Contract includes the following clauses:

Description of goods: A detailed description of the goods being sold, including quantity, quality, specifications, and any other relevant information.

Price and Payment Terms: The agreed-upon price for the goods, including currency and payment terms, such as deposit amounts, payment due dates, and methods of payment.

Delivery Terms: The delivery date and location, and any other relevant details regarding shipping and transportation.

Warranties and Representations: Statements made by each party regarding the goods, including any warranties or guarantees.

Inspection and Acceptance: The process for inspection and acceptance of the goods by the buyer.

Intellectual Property: Provisions regarding the protection of intellectual property rights, such as patents, trademarks, and copyrights.

Dispute Resolution: A mechanism for resolving disputes between the parties, such as arbitration or litigation.

Termination: The circumstances under which the contract may be terminated by either party.

Governing Law and Jurisdiction: The law that will govern the contract and the jurisdiction in which any disputes will be resolved.

Force Majeure: Provisions regarding events outside of the control of the parties, such as natural disasters or political unrest, which may affect the performance of the contract.

These clauses may vary depending on the specific circumstances of the transaction and the needs of the parties involved. In the next few lectures, a set of clauses that are commonly worded and framed in a typical such contract will be discussed.

Let us now first have a look at the typical clauses in an import contract.

What are the typical clauses in a typical international purchase order?

Or you can also call it the sales contract or sales order, whatever it is.

There are clauses and mentions of the subject matter in this way, starting with the parties to the contract, which means who are the parties to the contract?

That is the buyer and the seller, the address, the company name, and the essential information.

At times, you may include the contact name of the person in this, but generally, it is the name of the company and the address of both parties, including the country of origin or the country of the headquarters.

Depending on who is buying the goods, who is supplying the goods, and where they are physically located, generally, it is better to have those addresses here.

In this subject matter, you can include what goods have been purchased.

If they are more than one description, you may list out the details of the material list whatever way.

Depending on the situation, you may have the subject matter, which may sometimes run into several pages, also. Then, about the prices that are being sought for the different goods that are part of this sales contract, and what are the commercial terms, C and F, CIF, FOB.

The next clause refers to the terms of payment.

What are the terms of payment like, an advance payment or a letter of credit?

Or maybe the bank collection, or maybe the open account consignment sales.

Depending on what are the payment terms that have been agreed with the supplier, those have to be explained and described.

In my example, which I will be taking up in this lecture, I will show you how it is to be described.

Then the next clause, a very typical clause, refers to the packing.

It refers to the technical and scientific requirements of the goods to be packed, depending on the contents, depending on the constituents of that material that is being supplied, as well as depending on the mode of transportation.

If it is being transported by sea, then the packing has to be seaworthy.

If it is being transported by air, then the packing has to be airworthy.

All the scientific and technical wisdom has to be applied in describing threadbare about the packing.

That is very, very important because of the distances involved in international trade.

Then the next clause refers to the warranty that is being given by the supplier for the goods that are being supplied to you as an importer.

Whether it is a limited warranty and if it is unlimited one, what are the limitations?

Those things have to be described.

Then in the next typical class, you may require a clause describing the different certifications that are applicable or that may be required, and some of them may be mandatory for importation in your country, your customs, or your border control may need certain certifications.

For example, if you're importing medicines, then your local government may have different types of certificates for the merchandise that is being imported, and this certification may also be required for the technical identification of the goods by the local customs or any other local authorities in your country.

These certifications are important.

Another very important role of these certifications is to ensure that the goods that are being supplied are of the quality that is desired by you.

These are the different purposes of these certifications.

Then, in the next clause, you may be typically talking about confidentiality.

The demand for confidentiality may be absolute.

That may be limited confidentiality.

With some kind of escape for both parties because of some government rules and regulations, you may have to disclose some of the contents of the contract.

With those exceptions in general, confidentiality may be required to be maintained for this contract.

That has to be described in this particular clause.

In my example, I will show you how it has been described in a particular case that I'll be taking up.

Then another typical contract clause refers to the arbitration clause.

In this arbitration clause, the purpose is that what is the jurisdiction of the dispute settlement in case of any conflict that may arise in the course of the execution of this contract and this particular transaction.

For example, what is the jurisdiction, what is the country, the law that will apply to this particular contract, and in case of any dispute, which authority in a particular country or a group of countries would be responsible for the arbitration?

Those things will be described that I will be showing you with my example, uh, very soon in this lecture.

And the next typical clause refers to the Force Majeure.

Force majeure is a very common and general clause that is invariably there in almost all international purchase contracts and refers to the description of the incidents, events, and happenings that are beyond the control of the parties to this contract.

If any such event happens, and it may have some kind of impact on the transaction or the physical safety of the goods, that is beyond the control of anyone.

Those things are described in this particular clause, not to make any of the parties liable for things that are out of their control.

That is the purpose.

Then another typical clause, a very common clause in a typical international purchase contract, refers to the breach liability.

What is this Breach liability?

Breach liability refers to the liability of the parties of the contract in case of any breach of the purpose and significance, and the impact of this contract having an impact on the transaction.

Any kind of breach of the contents and the agreed terms and conditions of this international purchase contract, if any of the parties breaches willingly or unwillingly, knowingly or unknowingly, whatever may be the case, what are the liabilities or the punishments, or penalties that are there for any of the parties that is the breaching party?

Another very typical clause that is, uh, generally there in international business contracts refers to the contract disclosure.

It has some relationship with confidentiality, but it specifically mentions that there may be impending reasons and situations that may require any of the parties to mandatorily or summarily disclose the contents of this contract to certain organizations or authorities.

For example, in the importing country, the local government may make it mandatory for certain goods and certain products, and the nature of the contract that is being signed to make it open in the eyes of the local government.

Local government may like to know and keep a record of the nature of the contract.

It may be mandatory. And during the negotiations, the supplier might have agreed to such disclosures.

The types of disclosures that may be allowed must be specified in this particular class.

Then, another clause that is very, very important and very useful in international practice contracts refers to the Non-Transfer.

What is the meaning of this nontransfer clause?

It is in the interest of the importer, you as an importer, that the order that has been signed, liabilities, and obligations as per the contract are not transferred to any third party that is not present in the present international purchase contract.

Any of the responsibilities, obligations, and risks without the explicit permission of the importer are not transferred to a third party.

To avoid such situations wherein you suddenly realize that you're not dealing with the particular supplier that is part of this contract, and suddenly you find that some other party that is unknown to you is now in the picture, and some other party will supply the goods.

That situation has to be avoided.

This particular clause will be very, very important for that purpose.

Then another clause refers to the miscellaneous items.

Any items that may be important and necessary for the subject matter, for the goods in question, for the situation in question, and the type of transaction.

Some of the things that cannot be included in the other typical clauses of an international purchase contract,

Those things can be included in this particular clause.

That is the miscellaneous clause.

In my example, I will show you what kinds of matters can be part of this particular clause.

Finally, this is not an exhaustive list of the clauses that are included in a typical purchase contract, but these are very common.

The last clause refers to the attachments in this contract.

I will show you one example.

What kind of attachments may be there?

Common attachments to an International Purchase Contract include:

1. Technical specifications: Detailed information about the goods, including their dimensions, composition, and performance specifications.

2. Samples: Physical samples of the goods being sold, which may be used for inspection and acceptance purposes.

3. Drawings and diagrams: Visual representations of the goods, including schematics and diagrams.

4. Test reports: Documentation of any tests performed on the goods, such as quality control or safety tests.

5. Bill of Lading: A document that serves as a receipt for the goods being shipped, and provides evidence of ownership and delivery.

6. Insurance certificates: Evidence of insurance coverage for the goods during transit.

7. Certificates of Origin: Official documents that certify the origin of the goods and may be required for customs purposes.

8. Inspection certificates: Documentation of any inspections performed on the goods, including results and conclusions.

9. Packing lists: Detailed information about the packaging of the goods, including the number and type of containers, and any special packaging requirements.

The attachments included in an International Purchase Contract may vary depending on the goods being sold, the needs of the parties involved, and the laws and regulations applicable to the transaction.

Here you can see three examples of the attachments to international purchase contracts are given here starting with the material list.

In case the material list is very long and cannot be covered in the subject matter, or the material list is more exhaustive than the subject matter in the international purchase contract, that list can be put here as an annexure, and generally, it is to be put first because that is the main subject matter of the contract.

And then if the warranty details are very exhaustive and very descriptive, that again can be part of the attachment as annexure II in this case, for example. Or the inspection process. How will the inspection be carried out?

That may be very different for different products and different types of transactions, depending on the size of the order, the inspection process may be very elaborate, and this whole process may become an annexure, which may be the third annexure in such a contract.

These are three examples of the attachments that can be there in a typical international purchase contract.

Now, in the next lecture, I will take up one sample international purchase contract or sales contract, whatever you may call it.

And I will demonstrate to you what has been included in different clauses.

This particular purchase order that I'm taking as the example in this coming lecture is based on a real contract, a real order, but sensitive and confidential information has been omitted for educational purposes.

Let's go to the next lecture.

Friends, let us look at this example of one of the sales contracts that I wanted to share with you.

This is not the sales contract; that is the original sales contract.

It is the educational copy of one sales contract that is based on the original sales contract, with certain information that is sensitive or for other reasons.

Some information has been suppressed from here. But it will give you a fairly good idea about what different clauses are there, and what kind of content is in these clauses.

That is the idea.

Let us have a look at these different clauses in this particular sales contract.

As you can see here, this particular portion is part of the sales contract, the number of which is given here, and it contains the information about the parties. Which are the parties?

One is the seller and the second is the buyer. The supplier's name, address, and contact details are given there, as well as the official name of the buyer that is going to be in the documents, and all the different documents that have been mentioned here.

The company name and address are all given here.

The contact number not provided here describes a complete sales contract between the seller and the buyer.

The seller is from a Chinese supplier, and the importer is from Germany.

I will just give you a basic idea to start with about this contract.

You will have a better understanding of what all the different clauses are and what the subject matter is.

Basically, the subject matter is like this.

The supplier from China is selling solar modules to one of the importers from Germany.

This particular contract is about that.

What are the different modules? Solar modules, different specifications.

What is the price? And what are the terms of payment, terms of delivery, and commercial terms?

All these things are mentioned in this contract.

And that is the idea basically of this contract, taking it as an example.

The parties to an International Purchase Contract are the buyer and the seller. The buyer is the party who is purchasing the goods and is responsible for making payment. The seller is the party who is selling the goods and is responsible for delivering the goods to the buyer. Both parties are responsible for complying with the terms and conditions outlined in the contract. In some cases, intermediaries, such as brokers or agents, may also be involved in the transaction and may be parties to the contract. The exact identity of the parties will depend on the specific circumstances of the transaction.

In this initial clause, the parties involved in the sales contract are referred to as the supplier and the buyer, specifically the importer. And the subject matter is the goods, the prices.

All are described here in the second part of this contract.

Polycrystalline solar modules of different types, quantities, and different subcategories of the subject matter, the different quantities are there, and an indicative price CIF Euro.

CIF Euro is any European port that may be mutually decided between the importer and the supplier.

The concept is that this is CIF Euro; any convenient port will be there.

What is mentioned here is that the prices are according to the nominal power.

What is the power of the modules?

The indicative price is given there based on the so-and-so price in euros or U.S. dollars.

We'll see what is mentioned here.

And it can be any currency that has been decided per the wattage power.

Whatever the wattage, the power unit price is given there.

And whatever the nominal power of different modules, the price can be calculated.

Convenience, and for simplification, this particular process has been used to indicate the price per watt.

This is what has been done here.

And here the average power is given.

Based on the average power of different modules and the indicative price per watt, it is possible to calculate the total price per quarter amount per quarter is given in Euros.

This is how this particular clause contains the subject matter.

That is the material list, which is not very exhaustive here. You will find that the material list is not exhaustive.

The main categories of the different goods have been mentioned there. The average power price is given there. The indicative price per watt is given there. The quantity is given there, and accordingly, this whole table has been created.

You will soon find that in the attachment part of this contract, as I had mentioned in my last lecture, the detailed material list based on these main categories and subcategories that are listed in the material list in annexure I in the attachment. If you have a better idea, I will explain it to you.

You can see here that different categories are there. Quantities and wattage are given there.

Also, here, the expected months of delivery are mentioned for each module because not all the modules can be supplied in one go.

That is also mentioned here in this particular subject matter.

This is how this whole thing is done.

For further simplification, it is possible to make this kind of table also. Even the numbers can be given.

Model numbers can be given here, and the pieces, wattage, unit price, and total amount can be rewritten here for clarification or a simple view.

It is possible to do that.

That is also possible to do.

This is basically what is being shown in the second clause, as per my lecture that I had taken the last lecture.

The terms of payment in an International Purchase Contract can vary depending on the specific circumstances of the transaction and the needs of the parties involved. However, some common terms of payment include:

1. Advance payment: A lump sum payment made by the buyer before delivery of the goods.

2. Letters of Credit: A payment mechanism in which the buyer's bank issues a letter of credit in favor of the seller, guaranteeing payment once certain conditions are met.

3. Documentary Collection: A payment method in which the seller's bank collects payment from the buyer's bank, using shipping documents as collateral.

4. Open Account: A payment method in which the buyer pays for the goods after delivery, without the need for collateral.

5. Escrow: A payment method in which a neutral third party holds the funds and releases them to the seller only once certain conditions have been met.

6. Installments: A payment method in which the buyer makes periodic payments over time, rather than a single lump sum payment.

The choice of the payment method will depend on the specific needs and circumstances of the parties involved, including factors such as the size of the transaction, the creditworthiness of the parties, and the level of trust between the parties. The terms of payment should be clearly defined in the contract to minimize the risk of misunderstandings or disputes.

Now, in the third clause that I had described, we are talking about the terms of payment.

Here you can see that the terms of payment have been described like this.

The above terms, trade terms, shall be subject to the International Rules for the Interpretation of Trade Terms adopted by ICC International Chamber of Commerce, effective January 2000 January 1st.

Here, this particular sample has been taken from an old version of the sales contract that is also valid today.

That time it was in 2000.

But at present, we are using it in 2020.

So then, we will have to make the changes in the present contracts, where we will be mentioning Incoterms 2020, and uh, after mutual consultation between the importer and the supplier, the terms of delivery are CIF Hamburg port.

Incoterms commercial terms are CIF Hamburg port, Germany, or CIF any other European port.

Depending on the availability of the ships at different times, this particular sales contract is spread over several months in different partial shipments.

Because of that situation, flexibility has been given.

It is not just CIF Hamburg port that is the preferred port, but the flexibility is given that it can be any other European port also.

That is why it was mentioned CIF Euro in the subject matter.

That is the second clause that we were discussing.

This is how it has to be done.

The buyer should effect a significant percentage of the payment in advance for each order quantity by telex transfer within three working days after order confirmation, and the Proforma Invoice is opened by the seller. As soon as the Proforma Invoice is raised by the seller, the buyer will make it some percentage of the payment.

It may be 50%, it may be 25%.

Whatever the advance payment may be.

This is the description of the terms of payment in this contract.

It further says that the remaining percentage, suppose the advance was 25%.

Then the remaining 75% balance of the payment shall be paid for each shipment to the seller upon receipt of the shipment at the buyer's port, as soon as the modules, solar modules, reach the buyer's port.

Maybe in Hamburg, maybe in some other European port, wherever it is.

Payment shall be sent to the seller no later than one working day before receipt of the shipment.

Again, this payment is likely to be either through wire transfer or, uh, the credit card or whatever it may be.

The different modes are there where the direct involvement of the bank is not required.

In this particular case, you can see here that this business is based on the confidence between the importer and the supplier.

The original bill of lading will be sent out to the buyer by express or by courier by DHL, or the bill of lading will be telex released to the buyer as soon as the seller receives the balance payment for each shipment.

The 75% balance payment as soon as it is sent by credit card or whatever means within one working day after the receipt of the goods, the supplier will make arrangements to release the bill of lading, either through telex, that facility is also available, or the original bill will be sent by some fast courier, maybe DHL or Blue Dart or whatever it may be.

This is what has been mentioned here.

If requested by either party, the price can only be adjusted 15 days before each quarter.

Here they are talking of the quarter system. Uh, in one way, it is like an open account.

That is also there.

It is not exactly that way.

It is specific to the shipment.

But there are some elements of the open account terminologies that are used here.

This is how it has been described here.

Now, if you look at clause number three, which deals with the packing of the modules.

I'll explain to you that when we were discussing the packing clause, how it has to be arranged. Here is what it mentions as an example.

This contract is more of an example.

You can just change this contract according to your needs, and a copy of this particular contract in a PDF file is in the resource section of this lecture.

You can download it for your reference, and you can probably use some of the clauses for your future contract also.

All goods shall be packed in a way that prevents damage from dampness, rust, moisture, erosion, and shock.

Packaging shall be adequate for transportation on the seaboard.

That is the ocean.

You can see here that the packing details are given there.

It further says, going deeper into the packing details, the modules are to be packed with 24 pieces per carton. 24 pieces per carton, with one box with two pieces inside on the top.

Total 700 pieces each in the 40ft container.

These are the details that have been negotiated between the supplier and the buyer.

The supplier must have given an idea of how many pieces will come.

They must have done the calculations.

Then, in clause number four, where we were talking about the warranty part, here what has been included in this particular example?

You will get an idea of what details are in the warranty clause.

Seller shall warrant that the performance, quality, and specifications of modules are strictly in conformity with its standard production, descriptions, and explanations provided by the seller, that is, the supplier to the importer, as specified in Appendix Two.

There is an entire Appendix Two that is in the attachment part of this contract that we will be discussing at the end of the contract, where the exact details of the warranty and how it will be provided by the supplier to the importer are described.

This is how the purpose of the attachment part comes, where you put in the different types of annexures.

Then, in clause number five, which deals with the certifications that I had mentioned in my last lecture, it says in this particular case that the supplier will provide IEC 61215 and IEC 61730 certificates granted by TÜV Rheinland, Germany, and UL 1703.

The standards are UL standards for the engineering items that are being supplied, that is, the solar modules.

The UL is the engineering standard, the European engineering standard.

This particular clause, which deals with certifications, will list all the details required by the importer from the supplier, including the type of certificates to be used, as well as whether the modules will be marketed as OEM products.

The buyer guarantees that the OEM certificate provided by the seller will not be abused.

For example, the seller's OEM certificate that will be issued as part of the contract will not be used for other manufacturers' products.

These kinds of things will have to be ordered by the importer, and the seller would like such things to be mentioned.

What are the certificates? What are the limitations? What is the use of copyrighted material?

All those things that are connected with the certifications will be coming into this particular clause.

That is the idea.

A force majeure clause in an International Purchase Contract is a provision that allows either party to be excused from performing their obligations under the contract in the event of an unforeseeable and unavoidable event beyond their control. The events typically included in a force majeure clause are acts of God, natural disasters, wars, terrorism, strikes, and government actions. The purpose of a force majeure clause is to protect both parties from the consequences of events outside their control that make the performance of the contract impossible or impractical.

The specific language of the force majeure clause will vary depending on the needs of the parties and the laws applicable to the transaction. The clause should clearly define what events are considered to be force majeure events, and the process for invoking the clause, such as providing notice to the other party and documenting the impact of the event. The clause may also specify the duration of the excused performance, the process for resuming the performance, and any consequences for the parties, such as termination or suspension of the contract.

It is important to note that a force majeure clause does not relieve the parties of their obligations indefinitely, and the clause should be used only in the event of truly unforeseeable and unavoidable circumstances. The availability of a force majeure clause should not be used as an excuse for poor planning or risk management.

Let us look at clause number six, which deals with confidentiality.

What is written here?

All involved parties shall treat the contents of the agreement and mutual access to the information during cooperation governed by the agreement.

Confidential.

That is a very general statement. In another clause that will come again towards the end of this contract, this clause will come again, where some more details will be given about this warranty and its limitations.

There can be two clauses depending on the requirement of the placement of one of the clauses at the start, where a general statement is given, and the same clause is repeated in the contract, where a detailed description will be given on this particular subject of confidentiality. It is possible to do that.

In clause number seven, which deals with arbitration, it states: All disputes arising from the execution or in connection with the contract in question shall be settled through friendly negotiations. If no settlement can be achieved, if that is the case, the parties shall appeal to the International Chamber of Commerce ICC for arbitration. Here, instead of the country, generally, the countries are involved, and the jurisdiction and jurisdiction-related organizations of different countries are involved.

Maybe some European country, maybe Singapore.

Any of these countries is generally taken as the country for arbitration purposes, but in this case, it is also possible, and it is also very common, to include the involvement of ICC itself, the International Chamber of Commerce, which also does this kind of arbitration.

It also provides arbitration services.

The decision of the ICC is binding for both parties.

Just so you know, while the payments are being done in this particular contract, without the involvement of the banks, the role of ICC comes. But in the contract, ICC also provides these kinds of services of arbitration because they specialize in this area, because of their involvement in this particular international trading system, generation after generation of methods of doing international trade.

They have been there for more than 100 years in this particular field.

It is a very reputable organization that can also be used and mentioned in the arbitration part.

Then force majeure clauses.

That is clause number eight.

What it speaks in this particular contract can be seen here: "No party shall be held responsible for the failure or the delay to perform all or any part of the contract due to the force majeure conditions."

These conditions may include flood, fire, earthquake, drought, war, or any other events that could not be predicted at the time of the conclusion of the contract and could not be controlled, avoided, or overcome by any of the parties to this contract.

However, the parties or the party affected by the event of the force majeure shall inform the other party of its occurrence, so they have to red flag any occurrence of any of these conditions in writing as soon as possible, and thereafter send a certificate of the event issued by the relevant authorities. Some kind of proof, documentary proof, has to be provided.

It will generally be the local relevant authority where the occurrence has happened that has to be notified to the other party, but no later than 15 days after its occurrence.

Now it is possible, depending on the type of condition that has happened, the event has happened.

It may require more than 15 days.

That has to be generally agreed.

What it writes: if the event of force majeure lasts over 90 days, the relevant parties shall negotiate the performance or the termination of the contract.

If it is very severe, that kind of event that is beyond the control of any of the parties, the number of days that would be involved will be 90 days.

And if no solution is to be seen within these 90 days, the relevant parties shall negotiate further on this contract, for a new contract, for the performance, or maybe the termination of the contract entirely.

It depends on the situation.

Clause number nine deals with breach liability.

What it says here, based on the requirement of the seller's commercial strategy, that is, suppliers, the importer buyer warrants that it shall not resell the seller's product into the country where it is mentioned, Israel; it can be any country.

It depends on the context or the subject matter of the contract; failing which, the buyer shall be fully responsible for all of the losses of the supplier.

Breach liability is for the breach of the contract.

If the conditions are breached, the penalty will be paid by the importer in dealings between the buyer and the seller.

Buyer shall under no circumstances reveal the identity of the buyer's customers or other customers.

That should not be done by the importer, either internally or to the parties external to the seller's company.

This has been mentioned here.

All different types of breach liabilities are mentioned in this particular clause that I had mentioned.

Any kind of breach that can be caused by any of the parties' suppliers or importers.

And the thinking process should be there to formulate this kind of clause.

A lot of experience is required in framing these kinds of clauses in international purchase orders.

Then another clause, number ten, deals with the contract disclosure.

As written here, the buyer agrees that the seller may disclose the main content of this contract to the State Security Commission of the country, where the supplier is preparing for its listing affairs, as legally required.

In a given situation, because the seller is in the process of listing its company shares, which is a mandatory requirement of the local authorities, in this case, the State Security Commission.

The importer has to agree on such kind of escapes from the contract, as far as the disclosures are concerned, and that is basically against the confidentiality clause.

However, whatever is mentioned in the contract disclosure must be allowed. These disclosures may also occur in the context of both the supplier and the importer.

Another clause, the next clause that we had talked about in my last lecture, deals with the subject of nontransfer, where I had mentioned the situation that any of the parties can transfer their liabilities.

What it written here is no right to transfer rights or obligations of this contract by any of the parties without the express written approval of the other party.

I had already explained this in my last lecture, and that has been mentioned here.

As I was telling you again, this clause has come with confidentiality, and it has come.

Because there are certain contract disclosures, there are certain new conditions that have come into the contract.

That's why this clause has to be repeated in this contract.

What it says here, both parties agree to maintain confidentiality concerning the details of this contract, except if that disclosure is necessary for each of the financial institutions to finance this contract.

All the escape clauses that were included in different parts of this contract will necessitate rephrasing the confidentiality clause.

The earlier clause was a very general statement.

Here it is being explained.

Then, the clause relates to the miscellaneous inclusions in this contract.

Any of the things that may not fit into the other clauses can come here.

Let us look at what all those things are.

We'll have a better idea of what can be included.

This agreement contains the complete agreement between the parties concerning the subject matter hereof and supersedes any prior understandings, agreements, or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way.

This is one of the things that has been included in the miscellaneous clause of this contract.

The other thing that is included in this miscellaneous clause is that the terms of this agreement may not be amended or waived, except in writing executed by the party against which such amendment or waiver is sought to be enforced.

Different things that do not fit into any other clauses can come here in this particular clause.

Common attachments to an International Purchase Contract include:

1. Technical specifications: Detailed information about the goods, including their dimensions, composition, and performance specifications.

2. Samples: Physical samples of the goods being sold, which may be used for inspection and acceptance purposes.

3. Drawings and diagrams: Visual representations of the goods, including schematics and diagrams.

4. Test reports: Documentation of any tests performed on the goods, such as quality control or safety tests.

5. Some shipment-related documents, if these are already available

The attachments included in an International Purchase Contract may vary depending on the goods being sold, the needs of the parties involved, and the laws and regulations applicable to the transaction.

And then finally the attachments.

That is clause number 14 that deals with the attachments.

Here in Appendix One, the entire material list has been given.

In Appendix Two, the limited warranty details are given as I had mentioned.

Appendix Three contains the inspection process.

What is the inspection process?

This particular contract is in line with what we have discussed.

And it's a very good example of a standard template of international purchase contracts.

Let us again look at the different attachments that I was talking about.

Here, you can see Annexure One contains the material list of the PV modules.

This is a very exhaustive list.

You can include some of the information that could not be brought into the subject matter.

Maybe the model number, maybe some parts number, some technical details, and the certificate number. For each material, what are the different certificates that are applicable?

Those things you do not mention in the subject matter.

Those things can come, even if all the descriptions of all the modules had already been put into the subject matter at the start of the contract. There are many other pieces of information, like the model number or the certificate numbers, that you can bring here.

It may also be repeated. Appendix Two deals with the warranty part.

Again, it mentions, for example, the limited product warranty, five-year repair, replacement, or refund.

And it describes how it will work.

These things are mentioned here.

It also talks about the limited peak power warranty or limited remedy for several years, so that has to be negotiated upon.

This kind of information will come here, or any other limitations or exclusions in the warranty.

Those can come here. Like A., B.

These kinds of different subheadings may be there, and some categories may be there where you can mention these limitations.

It may also include the transferability of the warranty, obtaining warranty performance, or any disputes concerning the warranty and how they will be settled.

All these kinds of sub-clauses are there in Annexure Number Two in the attachment, including the force majeure for the warranty.

There is a separate force majeure clause for the warranty in this section.

Then last finally, Annexure Three in the attachment deals with the inspection process, which is very, very exhaustive.

As you can see here.

It is a very exhaustive inspection process because of the need for the goods.

The goods are technical, and different types of modules require different types of scientific inspection processes.

All these things are mentioned in a very scientific manner, in a very detailed manner.

All these things have been described.

This was the example that I wanted to share with you of a typical international purchase order that will contain all these clauses and attachments, or any miscellaneous clauses.

I hope this particular example will give you a very good idea about the types of international purchase orders that are signed between the importer and the supplier.

You can download this sample copy from the resource section.

Downloadable section.

You can take this copy.

An importer should be aware of the following key aspects of international logistics and supply chain management:

1. Incoterms: Understanding Incoterms, which are standard trade terms used to clearly define the responsibilities of the buyer and seller in international trade transactions, is critical.

2. Freight Forwarding: Hiring a reliable freight forwarder can help simplify the logistics process for an importer.

3. Customs regulations: Familiarizing oneself with the customs regulations of the importing country, as well as the country of origin, can help ensure a smooth customs clearance process.

4. Insurance: Ensuring that adequate insurance coverage is in place for the shipment can provide peace of mind and protection against potential losses.

5. Lead time: Understanding the lead time for delivery of the shipment, including any potential delays, can help the importer plan accordingly.

6. Cost calculation: Knowing the various cost components involved in the import process, including freight, duties, and taxes, can help the importer accurately budget for their shipments.

7. Documentation: Understanding the necessary documentation required for the import process, such as bills of lading, commercial invoices, and packing lists, can help ensure a smooth transaction.

In addition, an importer should know about and choose the right mode of international transportation. Cost, speed, and security of the goods would help decide which mode of transportation should be chosen.

Now, let us understand what an importer should know about moving the goods from the supplier to the point of entry, that is, international logistics and supply chain management.

What are the areas that are required to be understood clearly by an importer to understand the procedures and documentation? The first thing is to understand all the documents that are required for moving the goods, and for bringing the goods.

These documents are mainly related to customs declarations or commercial documents, LC documents like Proforma invoices, packing lists, or certificates of origin, and quality-related documents. The documents that would, uh, ensure that the goods that are being imported are of the right quality of quality that has been ordered.

All these documents are related to the core areas related to customs clearance, related to quality inspection, related to identification of the shipment, and some more documents that will relate to the bank.

This documentation will be discussed in the later sections of this course. Then another focus area for successful import logistics and supply chain management relates to choosing the right mode of transport.

What is the right mode of transportation?

That will depend on factors like the security, the time, and the cost.

These three factors will dictate the choice of the mode of transport.

The common modes of transport are sea transportation, air transportation, and road transportation.

Depending on the availability of the right mode in a particular country of origin and for the country of destination, what are the available modes?

What are the costs that are involved by sea, by air?

How much time does it take for goods to move from the country of origin to the country of destination?

All these factors will have to be clubbed together, and a decision has to be taken.

Depending on all these facts that are related to a particular shipment, to decide on the right choice of the mode of transportation, and that is going to be the critical factor in the overall cost of the shipment, the landed cost. These things with experience, the importer will learn these things, and all the procedures and documentation will be focused on bringing down the overall cost, as well as the other considerations like protection of the goods that are coming.

They should come in a presentable form and in a form that they are useful, and they can give the best performance when they reach the destination.

All those things are very, very important.

Then choose the freight forwarder and the customs broker.

These intermediaries play a very, very important role in getting the goods cleared smoothly and in time, and making sure that the cost of clearance of the goods is the best possible cost that provides the best value to the importer, as well as the import duties and taxes are calculated correctly and accurately.

These freight forwarders and the customs brokers provide all this guidance and support in making sure that the shipment reaches the destination, the warehouse of the importer, in a manner that the price, the landed price at the warehouse, is profitable to the importer.

Then further insurance.

That means the insurance of the cargo.

What kind of insurance is required?

I'll be taking up this topic in the next lecture, where I'll be explaining what are the factors to consider for an importer in understanding cargo insurance.

What is involved in cargo insurance?

What are the areas to focus on when protecting the goods through cargo insurance?

These are some of the major focus areas for successful import logistics and supply chain management.

Not to forget about the Incoterms international commercial terms that I had discussed in this particular section earlier, the international commercial terms.

Depending on the choice of the Incoterms, the obligations and responsibilities will be shared between the buyer and the seller, and those responsibilities and costs can be divided between the supplier and the importer.

A lot of headaches can be reduced by the importer by choosing the right Incoterm also has a direct impact on the landed cost.

Then, inventory management is another area that an importer has to consider and be very, very wise in managing the inventory, both in the port of entry, in the warehouse of the importer, as well as the overseas locations.

Depending on the size of the shipment, depending on the need for the goods, for example, if you take the example of perishable items.

If the perishable items have been purchased in the country of origin on Ex-works or the FCA basis, the responsibility for the management of the movement of those goods from the country of origin, the place of delivery to the place of destination, and the warehouse of the importer.

There is a long distance, and between the right inventory, the right conditions that are required for inventory management have to be planned and considered by the importer.

Then, the lead time management.

The importer has to be very aware of the several lead times at different stages of the movement of cargo from the country of origin to the country of destination at the point of entry.

These lead times include the clearance of the goods in the country of origin, as well as the clearance of the goods through customs and the port authorities.

What are the different formalities involved? What time does it take to get the goods cleared?

That is useful for managing the overall time it takes for the goods to reach the warehouse of the importer.

These are the core focus areas for successful import logistics and supply chain management for the importer.

Let's look at some more areas that are also very critical in this pursuit of getting the goods in a presentable and useful form when they end up at the warehouse of the importer. Watch the next lecture.

If we look at some more areas that are also very critical in this pursuit of getting the goods in a presentable and useful form when they end up at the warehouse of the importer.

The other consideration for the international logistics and supply chain management for importers for imports is packaging. Packaging protects the goods. Packaging has a direct bearing on the cost of the shipment. A proper trade-off is required between the cost and the overall protection required for the goods that are being shipped, whether they are being shipped by sea or they are being shipped by air. Different types of packaging may be required.

Various other factors relate to packaging, including the standardization, containerization, and unitization of the export shipment.

These concepts have made the overall transportation of goods mechanized.

The mechanized methods of movement through containers require the packaging to align with the standardization and palletization of the shipment. This information and knowledge have to be gathered by the importer, either through self-understanding or through the freight forwarders, the clearance agents, and customs brokers.

They can also help you understand the packaging requirements.

What are the standard packages?

What is the pallet size?

Accordingly, the exporter should discuss with the supplier what kind of packaging is required and what the costs that are involved in such packaging.

If anything can be done by the importer, it is in the interest of the importer because ultimately, whatever the cost of packaging, those have to be paid by the importer only. Then there are several local laws and regulations, including the environment-related laws internationally.

Due to the adverse impact of the movement of goods from one country to another on the environment, there is a significant impact that is resulting in climate change.

There are several environment-related laws, local laws, as well as international regulations that have to be clearly understood.

In the absence of that understanding, the goods can get delayed, and the cost overrun can occur.

It is very, very important to plan out the shipment according to these laws and to comply with these laws.

Then the customs clearance and the procedures that are there for getting the goods cleared have to be clearly understood by the importer also. Although this whole job has to be done by the brokers, customs brokers, or freight forwarders, importers should still be very conversant with these customs clearance procedures and processes.

It will help in negotiating the costs of the freight forwarder and the customs brokers.

Then, the role of the latest technologies.

What new developments are happening in international logistics and supply chain management?

The understanding of these new concepts should help the importer to be prepared for the new requirements of the new digital and high-tech environment that is now emerging in the area of international logistics and supply chain management.

The role of the Internet, the role of the Internet of Things, the role of smart sensors, smart contracts, or even the metaverse.

All these new technologies that are emerging are being tried out, and these have covered many, many areas of the movement of goods from one country to another.

This understanding is also very useful for the importers.

And then finally, the considerations related to risk management, the risk management of the things as the political risk that may be there in a particular transaction, or the foreign exchange fluctuation risk.

These are the different risks apart from the commercial risk, that is, the non-delivery or the substandard goods.

Those kinds of commercial risks.

How to cover all these risks, to have a trouble-free import transaction for the importer, will be very useful.

Here are some key things an importer should know about international cargo insurance:

1. Importance: International cargo insurance is important to protect the importer's goods and financial interests during transit. It covers the risk of loss or damage to the goods while they are being transported.

2. Coverage: International cargo insurance can cover a variety of perils, such as theft, fire, natural disasters, and other types of physical damage. It can also provide coverage for liabilities and third-party claims.

3. Cost: The cost of international cargo insurance is typically based on the value of the goods being insured, the mode of transportation, the route, and the type of coverage desired.

4. Choosing the right insurer: It is important to choose a reputable and financially stable insurance company to ensure that the insurance coverage is adequate and that claims will be paid if necessary.

5. Documentation: Importers should ensure that they have the necessary documentation, such as the commercial invoice, bill of lading, and packing list, to support a claim if necessary.

6. Claims process: The claims process can be complex and time-consuming, so it is important to understand the process and have a plan in place in case a claim is necessary.

7. Exclusions: It is important to understand the exclusions and limitations of the insurance coverage, such as the exclusion of war and terrorism risks, to make informed decisions about the coverage needed.

8. Reviewing the policy: The importer should regularly review their insurance policy to ensure that it still meets their needs and that the coverage is adequate for their current operations.

You're talking about different focus areas for an importer concerning cargo insurance.

Talking of cargo insurance, certain areas are very, very important for an importer, starting with the understanding of the importance of cargo insurance. What role the cargo insurance play in the overall import transaction?

If this importance is clear and the long-term vision is there for the importer, the right decisions can be taken by the importer concerning the nature of the cargo insurance that is chosen by the importer.

The overall trade-off has to be made by the importer concerning the costs and the protection of the cargo during the movement from one country to another.

Depending on what is the country of origin, what is the country of destination, the mode of transportation, and what are the different perils that may emerge?

Experience and an understanding of the importance of cargo insurance will help an importer to make the right decisions.

Secondly, it is very useful to know all about the coverages of the different types of cargo insurance that are available to the importers.

Starting from the minimum risk coverage to the maximum risk coverage, so-called ICC clause A, clause B, clause C, and the additional clauses that can be purchased through the cargo insurance, an importer should be aware of all these clauses, as well as what are the different perils are that are covered through these provisions?

Then choose the right insurer, a reputable insurance company that can honor the commitment, and that will take less time for the claim process.

Intermediaries like freight forwarders or banks can also help to guide you to the right insurance companies.

You have to talk to all these intermediaries and make your own decision about the choice of the company, the insurance company that is providing you with the cargo insurance.

This becomes very, very useful. and a critical area for an importer to choose the right insurer.

Then what is the documentation that is involved in the purchase of the cargo insurance policy, and what documents may be required for the claim process in case the goods are damaged or there are claims?

What is the process?

How to reduce the time taken to process the claims?

How can you manage it well will require the right, correct, and accurate documentation. And the knowledge of the process.

What is the claim process?

That knowledge is useful for an importer.

What are the deliverables?

What are the things that have to be done by the importer in case of any disaster or peril?

This understanding should be very clear to the importer.

And finally, what are the exclusions in a particular cargo insurance policy?

The importer should be aware of the things that are not covered.

What are the perils that are not covered in a particular insurance policy that are important for an importer to know about?

Also, the importer should keep reviewing cargo insurance policies for the different transactions, import transactions. To make corrections in the next purchase of the cargo insurance, or if anything can be done in the current insurance policy, if any changes are required with the changing time of changing needs of the importer.

For example, if a particular transaction becomes critical at a certain time, then some changes may be required through a cargo insurance policy.

This review should be continuous and should be considered very important.

These are some of the things that an importer should focus on while considering the cargo insurance protection of the shipment.

In the next lecture, I will show you one sample copy of the cargo insurance policy, and I will give you some explanation how what it looks like.

What are the different clauses that are in the cargo insurance policy?

In the next 2 lectures, Dr. Jain discusses the different parts of a sample of a cargo insurance policy. Keep learning.

Hi. Congratulations on reaching so far in this course.

And in this section where I'm talking about the different concepts you need to understand.

The topics I'm taking in this section are the topics that are to be understood before we go into the actual import procedure and documentation.

In this section, I have discussed many things.

Now I'm talking about the cargo insurance policy. And in the last lecture, I told you about the important aspects of the cargo insurance policy.

It's good progress you are making.

And, uh, as I had promised in the last lecture, I am taking up one cargo insurance policy sample here so you can see that sample here.

I will just show you this sample.

Have a look at what the cargo insurance policy looks like.

As an importer, you have to understand at least what it looks like.

What are the different aspects of the cargo insurance policy paper?

That means the document.

I will just show you this document, and I will show you the different parts of this document, what is given there in the document, how to read it, and how to understand it.

As you can see here, this is a sample of the cargo insurance policy.

And this has been issued by the insurer, that is the insurance company that is based in Vietnam.

The name of the company is BaoViet Insurance Company. BaoViet Insurance Company, which is based in Vietnam, has been chosen by the exporter, the supplier because the supplier is located in Vietnam.

Generally, it is very common that, uh, the suppliers from the different countries, and if they have to buy the cargo insurance policy, generally, they buy it from a company they know about.

Normally, these are local companies.

These companies are based in the supplier's country.

This is very, very common.

Here you can see that the company has its logo, name, telephone number, and fax number.

And, uh, here the policy number is very important.

At the top, the policy number is given in the actual policy that I am showing you.

This sample copy is the actual copy of one of the cargo insurance policies.

Let us see what is given in this particular policy document.

The policy of insurance.

It says witnesses that in consideration of a premium that has been charged by the insurance company, the premium has been charged for this policy as agreed, being paid to BaoViet Insurance by the assured for their own account or the assignee or others.

There can be different parties, and the policy can take into account the different parties.

Normally, depending on the Incoterms, the supplier will buy the insurance policy, maybe on account of the importer.

It all depends on what the Incoterms are and who is responsible for buying the cargo insurance policy and who is responsible for paying the cost.

It further says that the insurer makes insurance on the following goods.

The goods are subject to the general conditions of marine cargo insurance for the following: goods subject to the general conditions of marine cargo insurance as printed overleaf and the conditions and/or clauses as specified hereunder.

This policy has different clauses. Or the annexed hereto or written here on. This policy document, if it has certain annexures, those will be there; those will be part of the policy document.

Here, I will not show you any annexures.

There are lectures on this policy, but they are private.

Information is sensitive.

For educational purposes, I am just showing you the main policy document.

Here, the first clause talks about the name of the assured. Here, the second party, which is the company that has issued this policy, is already there.

Here, only the name of the assured will come.

The name of the assured in this case is not the supplier.

That is not the company in Vietnam.

It is rather the importer.

The name of the importer is given there, so it is not very clearly visible.

But what is written here is Importado S.r.l. Valencia.

This place is based in Spain. This company is from Spain.

The name of the company is given there.

The name of the vessel or the number of the vessel is mentioned here. Nanfang Chen 4620E.

This is mentioned here. The LC number. This business is on a letter of credit or documentary credit.

It is also called the letter of credit.

The number is given here with the reference number.

You can see it here.

These details are specific to the shipment.

What is the LC number? What is the documentary credit number?

Same thing. LC and documentary credit are the same thing.

Documentary credit word is used technically by the bank. In a very popular terminology, the document is called the Letter of Credit LC.

You already know these things that I had already discussed in the earlier lectures. Here, the bill of lading number is also given.

This is very interesting to see because the bill of lading number has to be mentioned in the policy to connect it with the shipment with a definitive link.

This definitive link is established between the policy with the shipment through the BL number. And the contact number, if it is available. And here the port of loading is given there which is based in Vietnam.

The port of loading is Haiphong Port in Vietnam.

And the port of destination or the port of discharge is Valencia, Spain.

These are the initial clauses that are given in this policy.

Now, here in this particular clause, what is written here in this policy? Sailing on or about the approximate date of sailing is given here.

That is the date mentioned here.

And in the next clause, the subject matter is mentioned.

What is the subject matter that has been insured, which means the goods? Here it says 424 bundles that are equivalent to almost 85,000 pieces of bamboo baskets, and the net weight is given there in kilograms.

Gross weight is given there in kilograms.

And, uh, how many containers are there? A 40ft container is mentioned here. A 40ft container contains all these materials.

It is an FCL, full container load.

Now the sum is assured.

What is the total sum that is assured for this shipment?

That is generally 110% of the CIF value, cost, insurance, and freight value.

This comes to, in this case, almost 23,000 USD. Here, the premium can be mentioned if, uh, if it is requested by any of the parties, this premium can be mentioned here.

It is not necessary.

This is private information between the insurance company and the supplier or the person who has purchased this policy.

It is possible to hide this.

Here premium is not mentioned. VAT is not mentioned here.

The premium rate is not mentioned here. The total amount is not mentioned here. The very important thing that is mentioned here is that what is the total amount that has been insured.

This is very important.

In case of any claim, this amount will be important.

No other figure mentioned here will be of any relevance to the claim process.

It will only show the amount that has been insured.

In the further clause, what does it say that what are the conditions or special coverage of this policy?

That is very important because if you remember, I had discussed the coverage part, what is the coverage of the cargo insurance policy?

If you remember, I had talked about ICC, that is, the institute cargo clauses A cargo clauses B, and C, and the additional clauses.

Here is what it says: This policy covers ICC.

That is the institute cargo clause A 1.182 plus SRCC.

It contains the additional clause plus SRCC.

That is the Strike, Riots.

Communal Commotion without franchise. Claims must be payable to the order of the applicant, stating the agent's company representative in Spain.

Here, the claim will be payable to the applicant.

Whoever is the applicant in this case is mentioned.

It is on account of the importer in Valencia, Spain.

That company is the applicant for this insurance policy.

The agent's company, whatever the name of the agent who is the representative based in Spain, has to be mentioned, and that has to be brought into the loop.

The name of that agent is also given here.

In the event of loss or damage, apply for a survey of this company.

This is mentioned here. The contact details are also given there.

The claim is payable in Valencia, Spain, by BaoViet Insurance Corporation, and the company seal is also here.

This is what defines and demonstrates one very useful sample of the cargo insurance policy.

An importer should be familiar with the foreign trade policies (FTPs) of the partnering countries for several reasons:

Tariffs and Quotas: The foreign trade policies of a country can include tariffs, which are taxes on imported goods, and quotas, which limit the amount of a particular product that can be imported. Knowing these policies can help an importer determine the cost of importing goods and make informed decisions about which products to import and from where.

Regulations: Foreign trade policies can also include regulations that dictate the labeling, packaging, and transportation of imported goods. An importer who is not familiar with these regulations may find that their goods are delayed or held at the border.

Trade Agreements: Knowing about the foreign trade policies of a country can also help an importer understand any trade agreements that may be in place. These agreements can have a significant impact on the cost and availability of imported goods.

Market Access: An importer should also be aware of any restrictions or limitations on market access in a foreign country. For example, some countries may have specific laws or regulations that make it difficult or impossible for certain products to be imported or sold.

In conclusion, an importer should be familiar with the foreign trade policies of the partnering countries in order to make informed decisions about the products they import, the cost of these products, and the regulations and restrictions that may apply.

Welcome back, friends.

In this lecture, I will be sharing with you one example, and I will show you with this example that for imports, what are the impacts of the foreign trade policies of the partnering countries?

That means the local governments of the supplier's country and the local government of the importer.

How do these policies impact?

What are the areas? How do these influence the cost, the market access, or the landed cost?

How do these things matter, and how are they accounted for?

The classification of the goods will also be demonstrated in this particular example, which I'm going to take up, the role of the harmonized system, that is, the HS code.

What is the role of that?

And also the SPS TBT barriers, that is, the sanitary, phytosanitary, and technical barriers to trade.

How do you check in your own country?

SPS TBT barriers have to be seen in the country of imports at the port of entry where the goods are entering.

What are the government policies, foreign trade policies, and import policies of that particular government?

In this example, which I'm going to take up, I cannot take the examples of all the countries of the world. In this example, I will be taking the example of one country, India.

The importer is based in India.

And I will explain to you, I will show you how you find out the impact of these foreign trade policies, and how you account for the International Trade Classification of the Goods and Tariff System.

How does it work? And what is the impact of the SPS TBT provisions, and international trade agreements that are there?

What are these technical barriers in the country of import?

In addition, in this particular example, I will also demonstrate to you the impact of the bilateral and multilateral agreements among the countries.

These multilateral agreements and the bilateral agreements will have an impact on the landed cost.

On the import duties that will be charged in the country of import, as well as the market access, what are the limitations?

What are the barriers or the compliances that are required or not required based on the multilateral and bilateral agreements?

This particular example that I'm going to take up will demonstrate to you all these things.

In this particular example, I'll be talking about the importer in India.

But a similar method is to be used for the importation into other countries.

This example is about a case related to Jimmy Shah, who is an exporter of toners.

And now for certain models of photocopiers and laser printers, he wants to import the toners and the related chemicals into India to sell in the Indian market.

In this example, we will see how Jimmy Shah researches which countries to import the toners from to get a better price, to get some benefit, some policy benefit of the Indian government, as well as whether there are any restrictions or any market access issues, or any ban on certain items from the supplier's country.

In this case, probably he will choose another country where such bans are not there.

These things will be covered in this particular example.

By this example, you will understand the complete impact of the foreign trade policies.

You will also understand the HS code system.

You will also understand the impact of the SPS TBT measures as well as the multilateral and bilateral agreements.

All these things will be covered, and automatically, you will understand the role of all these aspects in the import business.

Let us understand this, how Jimmy Shah went to the Indian trade portal, which is the repository of all the information you can carry out based on the HS system, which is the harmonized system of classification of the import goods, and by getting the HS code, how Jimmy Shah was able to find out the different SPS TBT measures, as well as the import tariffs, as well as any provisions of the import policy of India or the foreign trade policy of the supplier's country.

Let us look at how Jimmy Shah went about finding all this information using the Indian trade portal.

Indian Trade Portal, for example, provides most accurate and latest information on the international classification of import goods. In next 3 lectures, Dr. Jain moves forward in this example to demonstrate the impact of FTPs on import tarrifs.

If we go on the Indian trade portal here, what we see here is that, uh, on the Indian trade portal, where we can write over here the HS code, that is the Harmonized System code, if you already have information about the product that you want to explore.

For example, in this case, I do not have the HS code.

I will try to find out what the HS code is.

That is the Harmonized system code.

What are the goods that you want to import into India?

What is the HS code?

Let's look at how he does it.

He types out the description of the toners for photocopiers.

Let us see if he can find some information.

He changes the words, different words, and lets us see if anything else comes here.

Here, the, uh, description is coming. Compatible black toners for laser printers and photocopiers.

He can find the six-digit HS code, which is in this case 370790.

This code is available for six digits, but it is always better to have such a code at least for eight digits that you already know.

We had discussed this point earlier.

Also, you will have a good idea.

You press the import because you want to import this item.

You need to press the import button on the Indian Trade Portal.

A similar method is to be used by the importers in other countries.

In all the countries, the local governments will have such kinds of trade portals, and very similar systems will be available for them to explore the imported products they want to bring into their own country.

Here, what we see is that there are two different eight-digit HS codes, uh, that are related to the black ink toner for the laser printers and photocopiers.

What we see here is that the 37079010 is the most suitable description of the item, which Jimmy Shah wants to import, because he is looking for the finished retail packaging of the toners.

This is ready.

Uh, an item for retail sale.

As it is written here.

You can see it here.

He clicks this particular HS code, which is the eight-digit HS code 37079010.

This uh, code, he can click and, uh, is able to find, uh, from this portal to explore all the different information that is related to foreign trade policies, SPS TBT measures, as well as the impact of the multilateral and the bilateral agreements.

We’ll see to it, uh, the impact of all these, uh, different types of trade agreements, it will be very much visible in this example.

When we press next here, what we see is that this portal provides the top 25 countries as the source of the importation of black toner into India, based on the data that is available from the Indian Statistics and Customs Department. This data that is available based on that data, the government can provide the list of the top 25 countries.

There are listings of other countries also beyond the 25, but we are more interested in the top 25 countries, and we are trying to find out the foreign trade policies of the supplying country. Uh, in this particular cycle, one you can choose to start with, out of these 25 countries, you can choose five countries to compare.

You do this cycle for five countries.

And if you are not satisfied, then you can do one more cycle of the process that I'm doing for another five countries. You can cover almost all the countries.

In this example, I will only show you the comparison of the first five countries that Jimmy Shah knows from his knowledge that these are good sources of black toner, compatible toner for the laser and photocopier machines.

He starts with the choice of China and, uh, based on his already existing knowledge, uh, UAE, that is, uh, Dubai especially is targeting Dubai and the US, uh, then Japan.

Japan is a possible source.

And Switzerland.

Based on his knowledge, he started with the first cycle of five countries.

You can see here that on the right side column, you can see the list of the different multilateral and bilateral agreements that are there with these countries of the importing country, that is, in this case, India.

India has different types of multilateral and bilateral agreements.

These are mentioned here.

The impact of the bilateral agreement will be greater because it will have a direct bearing on the import duties.

It will have a very direct impact on the landed cost.

What we find here is that the MFN agreements, that is, the most favored nations agreements that are there among almost all the countries, are under the aegis of the World Trade Organization.

That is the WTO.

These are multilateral agreements.

The impact of MFN, that is, the multilateral agreement, will not be much because it will apply to all countries.

What will happen is that the price advantage may not be there. But agreements like CEPA, that is, the Comprehensive Economic Partnership Agreement, would be between the two countries.

That is the bilateral agreement.

These will have a significant reduction in import duties for the importer, that is, Jimmy Shah, who is importing the black ink into India.

Because of these agreements, the Indian government will be levying less import duties because of the existence of these bilateral agreements.

Here you can see the agreements like CEPA, India has with Japan. Or with China. also, they have one agreement with APTA, and we will see the impact of this agreement.

And with the UAE, India also has, uh, a CEPA agreement. And with other countries, whatever the agreements we can see here, we will explore what the idea is.

Let us look at these agreements and the impact on the import duties that will be levied by the Indian government for Jimmy Shah's import of the black toner ink.

After choosing these five countries, if you want to make some corrections, you can also do that.

For example, Switzerland is likely to be a costly source of toners for the Indian market.

Maybe you can change it to Singapore.

Interestingly, what we see here is that we have more agreements with Singapore.

That means India has more agreements, bilateral agreements as well as multilateral agreements with Singapore than any other country.

The possibility of importing from Singapore becomes very promising, very promising.

Chances of getting better import duty rates are very high for Singapore.

We can also do that, like, uh, these things, these juggleries, we will be doing in different cycles of choosing five countries at one go, then choosing another five countries at another go.

Those things will be done.

Then we press here next in this, and what we find that we get, uh, a lot of information about the Indian government import policy, about the other measures, SPS TBT measures.

That means the technical trade barriers when you are importing goods into India.

We will also see to this information. Here we find that, uh, uh, the toners are freely importable, so there are no restrictions.

It is not a restricted item like many items could be.

And their GST rates, everything we can find out from this page, we can do.

But very importantly, we have to compare and see this eight-digit code, which is 37079010.

That is the International Trade Classification ITC HS code for compatible black ink for photocopiers and laser printers.

What we see here is that in China, because of the APTA agreement, we have the possibility of getting 6% import duty levied by the Indian government.

But if we look at other countries like Japan, with which India has the CEPA agreement, that is the Comprehensive Economic Partnership Agreement, and the preferential tariff levied by the Indian government on this item is 0%.

There is a zero import duty if you import toner from Japan.

You must shortlist this country. Japan.

Let us see the other countries.

What we find here with Singapore is also the bilateral agreement is also with India.

That is the CEC agreement.

That is the Comprehensive Economic Cooperation Agreement, and under that agreement, the import duty is levied on the goods coming from Singapore.

This particular item, coming from Singapore, attracts only 0% duty.

Again, you can list this particular country.

Here you can shortlist Japan and Singapore.

With the UAE, India also has a Comprehensive Economic Partnership Agreement, and the import duty on this item is 0%.

Again, you can choose, uh, the UAE also. So out of these five countries, that is China, Japan, Singapore, the UAE, and the United States, where in the case of the US, the import duty levied on this item is 10%.

What you find from this exercise to start with is that, out of these five countries, the importation that will attract just 0% import duty is in countries like Japan, Singapore, and the UAE.

You have shortlisted these countries.

Now you can further research any market access issues or any provisions that are generally given there in the form of a PDF file.

When you click this PDF file here, you will find the rules of origin for the ASEAN-India Free Trade Agreement.

Depending on what agreement is applicable and under what agreement you want to import the goods to benefit from the import duty concessions, there will be certain attachments.

In this particular case, our case of Jimmy Shah for the CEC agreement with Singapore.

There are no, uh, any addenda or any attachments, but if it would have been there, they would have helped you to understand any import policy provisions of India.

And similarly, uh, with Japan also, we do not have any, uh, additional provisions, any additional compliances.

It is not there. With the UAE also under the CEPA agreement, there are no additional obligations or compliances that are required.

From this particular part, we are free.

We need not bother about, uh, any, uh, compliances from the point of view of the supplier's country.

If we choose these three countries and shortlist these three countries.

But here we are concerned with the Indian government's policy, and import policy on this product in terms of any technical barriers that will be reflected in the SPS measure, that is, the Sanitary Phytosanitary Measures or TBT, which is the technical barriers of trade.

When we press on this, what we find here is that this HS code that we have chosen indicates the compatible black ink toner, that is, the ink for the laser printer and the photocopiers. What we see here is that all the technical barriers or any compliances that are required to be carried out are available here.

When you click any of these links, you will be able to find any provisions that are there in terms of, for example, the Export Quality Control Act or any other act that may apply to this particular item.

You can go through and research to find out what the different applicable compliances are for the importation of this item.

Is it easy to carry out or not?

If it is easy to carry out, you will have no problem getting this item imported. Even though this particular HS code item is freely importable, there could be some SPS TBT compliance.

That is, the technical trade barriers could be there, but they will come under the international agreement.

That is the SPS TBT agreement that limits the ability of the local governments to levy undue or unreasonable technical barriers on the importation of goods.

That you will benefit from this.

You can do this kind of research based on the eight-digit code HS code of the item that, for example, in this case, Jimmy Shah wants to import.

Jimmy is now able to understand the complete information concerning the impact of the multilateral agreement concerning the impact of the bilateral agreement.

And he can find out the, uh, the HS code of the item he wants to import.

He also understands the import policy of India.

He also understood the impact of the multilateral and bilateral agreements and the impact it has on the import duties that are levied by the local government.

All this information he has been able to find out.

That was the idea of this example.

I hope with this example, it will be now very clear to you why, for an importer, it is very important to understand the foreign trade policies or the import policies or the export policies of the partnering countries, that is, the country of origin and the country of destination, that is, the country of the importer, the port of entry. And also the other related matters like SBS TBT provisions.

What are the provisions and the impact of any policy issues that are there concerning importation?

In this section, you have already learned all these skills and techniques that are required to understand the complete import procedure and documentation.

Now you are equipped with all such things that will be needed.

Foundations, all the topics that are of the nature of the prerequisites of understanding the import procedures and documentation.

You have already completed that, and I wish to congratulate you on that.

In the next section, we will be jumping over to the actual import procedures and documentation.

Let's go there.

Welcome.

In this section, we will be starting with the import procedures.

I will be sharing with you the different steps that are involved in import procedures.

You are now ready with all the ammunition that you need to understand all the concepts that are there in the importation. You will find it very, very easy and comfortable to know about all the things that you have to do in successful importing, concerning the procedures and documentation.

The purpose of this particular course is not to go into the commercial part of the transaction, nor to talk about how to identify the product for importation.

How do you identify the country of origin?

That is not the purpose, but the main purpose of this course is to understand the procedures and documentation.

We will be focusing on that.

In this course, our focus will be especially on the procedures and documentation.

In this section, I will be discussing the procedures.

Let's start with this section.

Let us first talk about the basic steps that are there in importation.

As you can see here, there are typically eight basic steps that are there in import procedures.

Starting with the market research and product selection, finding a supplier for your product that you want to import, obtaining the necessary licenses and permits, and preparing the purchase order.

These are the first four steps.

Basic steps are there for the complete procedures that are involved in importation.

Then the fifth step in the basic import procedure refers to the shipping arrangement that you have to make and the customs clearance.

These two steps are very, very important.

We'll be going into more details about the customs clearance in this particular section itself, and then the payment to the supplier and the delivery, and the inspection.

These are the eight basic steps.

If you look at the first step, that is the market research and product selection. We have to primarily focus on identifying the product.

If you look at the first step, that is the market research and product selection.

We have to primarily focus on identifying the product.

Now, how do you identify the product?

It all depends on the purpose of the import.

What is the purpose that you have envisaged for importation?

You may be importing to sell in the domestic market.

You may be importing to sell in the domestic market through digital channels, or you are importing something for your use for production, manufacturing, or you are importing for re-export.

Depends on what the purpose is, and accordingly, you have to identify the product.

This is a very, very important aspect of the market research. And market research has to be done in alignment with your requirements.

What is your requirement?

How do you want to use the imported product?

What overall import strategy do you have? That is going to be the deciding factor in framing the market research strategy and the product selection.

Also, you need to identify the country of origin.

How do you identify the country of origin?

What are the factors to identify the country of origin?

The landed price.

What is the cost until the goods reach your warehouse?

That is very, very important.

And that also includes the import duties and the taxes that are levied by the local government, that is, the local government of the Importer's country, that is, your country.

What are the import duties that are levied by a particular country?

Depending on the country of origin, the import duties may vary.

As we had discussed in our earlier lecture,

I have shown you by giving the example of the importer from India, wherein, when we went to the Indian Trade Portal, we found that the import duties that are levied by the Indian government for the import of the same item depend on the country of origin.

What are the duties that are levied?

How much is the price that is offered by the suppliers from a particular country?

All those calculations will give you the landed price, and if it is favorable, that is how you identify the country of origin.

There are many, many factors, including the arrangement, shipping arrangements, the ease of getting the goods, and the variety of available products.

Quality of the product.

Many, many factors are there that will help you to identify the country of origin.

Depending on all those factors and the availability of the transport methods.

If it is a country where the mode of transport has to be fair, that will be a costly affair.

It may make your goods costlier when they land in your country.

There are such kinds of several factors that will help you, or that will need to be considered while finalizing the country of origin.

You identify the product, and you identify the country of origin based on so many factors.

This is how you carry out this particular step of market research and product selection.

Once you have identified the product, and you have identified the country of origin, now you have to find a suitable supplier.

Once you have identified the product, depending on how you are going to use it, what is the purpose of the import?

And you have identified the country of origin.

Now you have to find a suitable supplier.

That is the tricky part because the supplier has to be reliable.

The supplier has to be trustworthy. The supplier has to be punctual in making shipments.

How do you identify the supplier?

You have to communicate with them. You probably have to talk to them through digital methods and video conferencing. You talk to the suppliers, and you do the due diligence on the supplier.

Ask the people about their experiences with those suppliers.

Look at the ratings of the suppliers.

You have to be very, very sure about the supplier and its record in supplying those goods, whether it is a manufacturer, whether it is a trader, and what are the advantages of a manufacturer?

What are the advantages of the trader? If it is a trader or the supplier, what is the value you get from a particular supplier in terms of the price, in terms of the quality of the goods, in terms of the delivery schedules? What kind of value do you get?

There are so many factors that will help you in deciding and identifying the suppliers.

And then you have to negotiate with the supplier.

How do you negotiate?

In one of the case studies that we had taken up in this particular course, we talked about pooled orders.

The person in that particular case study pulled the orders from the local markets of the other retailers.

By pooling the orders, he was able to place large orders to the supplier, and he was able to get better prices.

You have to identify and use different strategies for negotiating the terms of payment, the price, the terms of delivery, the delivery schedule, commercial terms, and all the different terms.

And you also have to discuss with the supplier about the protection of the cargo.

Your risk management, the part of your risk management, the packaging, the cargo insurance, all this risk management of the goods when they are moving from the country of origin to the country of destination.

How do you manage the risk of transportation?

That can only happen if the supplier is willing to cooperate with you.

If the supplier is willing to give you the support that you require.

These different factors that are there will help you in locating and finding the right suppliers.

Again, you can notice that all these decisions require a lot of experience and a lot of knowledge, and understanding of the business and business sense.

It depends on your understanding of the product that you are importing, your understanding of the market, where you are going to sell it, and your understanding of the country of origin of the goods.

Maybe you have to visit the supplier, physically visit the supplier, you have to visit the market that supplies those goods, and understand the manufacturing practices and any other aspects, any other challenges that are there in the movement of the goods from the country of origin to the country of destination.

All these skills, techniques, and knowledge will help you in identifying the right supplier, and the shipment from whom will be successful for you. The goods reach your warehouse as per the strategy, as per the expectations of the cost, quality, and schedule.

This is a very critical part of the import procedure.

Then the next step in the typical import procedure, refers to the need for licenses and permits in your country of import.

Then the other important step, the next step in the typical import procedure, refers to the need for licenses and permits in your country of import, so you don't need to obtain the import licenses or permits.

It depends.

You have to understand the import policy concerning that particular product of your government.

In the country where you are importing the goods, you have to learn about and study the import policy of the local government.

And how do you do that?

One of the methods I had explained in one of my earlier lectures, where I had taken the example of the importer in India, and how they used the Indian Trade Portal to find out what the import policies of a particular product that they want to import of the Government of India.

Similar methods can be used by the importers in any of the countries of the world.

They are generally available in physical mode in the offline mode, and in the Handbooks of import procedures.

Handbook of Import Procedures, for example, is available in India and explains the procedures involving both exports as well as imports.

There are separate sections for the procedures involved for the imports based on the HSN code, that is, the Harmonized System code. You can identify what are the government policies concerning the item you want to import using the Handbook of Import Procedure.

These publications are available in all countries at very affordable prices.

You can use this Handbook of Import Procedures to identify and understand all the compliances, all the licenses, or the permits, if they are required, using the HSN code.

And you have to also identify, in case you need any licenses or permits, what is the issuing authority for that particular license or permit, and what is the procedure involved?

You can also use many online resources.

As I had taken the example of the Indian Trade portal, similar online resources are available in many countries. In this step, what is very important is that if the item is restricted for import, if it is not freely importable, then you have to do all this exercise to find out what licenses and permits are required.

Then the next step involves preparing the purchase order and making arrangements for shipping the goods.

Then the next step involves preparing the purchase order.

In one of my earlier lectures, I discussed in great detail the international purchase order and what it looks like. An international purchase order should be very professional, depending on the situation, depending on the item, depending on the industry practices that are there, and depending on the country of origin.

How do they generally supply those goods?

What kind of purchase order do they normally ask for?

Generally, it should be very professional, and it should be a balanced purchase order as we had discussed in one of my earlier lectures.

And it should include all necessary clauses that are necessary.

These clauses we have already discussed, and the significance of those clauses, how they work, and what the implications of those clauses are are what we have already discussed.

That was the purpose of the earlier section: to make you aware of these basic topics, foundational topics, and to understand the import procedure.

You have to look into all such clauses and make sure that all these clauses are there in the final international purchase order.

The original copy is generally sent to the supplier because the supplier needs the original copy many times to deal with the banks, to deal with the local authorities in the country of origin, obtain the necessary documents, and shipping documents to be able to move the goods from the country of origin to the country of destination till the point of entry.

The supplier can only obtain many times using the international purchase order, the original copy.

That's why the original copy has to be sent to the supplier. Many times, depending on the Incoterms that are negotiated with the supplier, the importer has to carry out the shipping arrangements.

These shipping arrangements include deciding the mode of transport, because, uh, the decision of selecting the mode of transport depends on the cost, on the security of the goods that are being brought from the country of origin to the country of destination, and the time available.

What kinds of schedules are there?

What timing is there?

These three factors will decide on the mode of transport.

You have to find the trade-off between all these factors and decide what is the mode of transport.

And you need to negotiate the freight rates with the main carrier as well as the supporting carriers.

There are generally two kinds of carriers, the carriers or the transporter or the truckers for the inland transportation, that is, from the warehouse of the supplier to the wet port, and the main carrier that is generally shipped and from the point of entry to the warehouse of the importer.

These are different transport companies or carriers.

Those have to be approached with the right shipping documents. And the freight rates have to be negotiated.

That would require a lot of experience and ingenuity.

The guidance of intermediaries like freight forwarders can be very, very helpful in this.

In all these activities, the transport risk management strategy has to be created, in association with the supplier. Without the support of the supplier, the transport risk management cannot happen.

That would start with the right packing. seaworthy packing or airworthy packing, and making the right labels on the packages.

Depending on the goods that are being transported, what are the requirements?

The nature of the material that you are bringing in will decide the overall transport risk management.

A very important step now is the customs clearance at the port of entry.

A very important step that invariably is required to be done by the importer is the customs clearance at the port of entry.

This customs clearance at the port of entry requires documentation, a declaration by the importer, dealing with the customs authorities or the border control, or many other local authorities, also dealing with the port authorities for handling the goods.

The process invariably and generally starts with the customs declaration. Right customs declaration. Whether the goods are being used to sell in the local market for actual use, or re-exports, that status has to be declared to the local customs, and the expected date of arrival of the goods also has to be declared.

Generally, the document that I'll be discussing in the next section when I talk about the documentation that is required for the import procedures.

What documents are required?

I'll be talking about that for the declaration also, and for the overall customs clearance.

What documents are required?

Those things I'll be discussing later in the next section.

Then there is something called Import General Manifest (IGM) that is announced by the main carrier, generally the shipping company that uh announces the arrival of a ship at the port of call.

And, uh, this import general manifest contains details of all the shipments that are there in that particular ship.

You need to check whether your shipment is there.

This has to be conveyed to the customs authorities, also to make sure that there is proof that the goods are actually arriving or have already arrived.

This import general manifest is a very, very important document that is issued or announced by the main carrier.

Then, the other documents that are required by the customs for customs clearance, I'll be discussing in the next section, what documents are required by the customs generally.

Those documents I'll be discussing in the next section.

And you have to also understand, calculate, and make the payment of the import duties and local taxes that are levied by the local authorities, especially the customs.

What are those import duties?

What are the surcharges?

What are the different types of import duties?

Those calculations have to be done.

Generally, the calculation of the import duties and taxes includes the basic customs duties that are there and that are easily available through online resources.

You will be able to find out what the basic customs duties are. And then there will be the countervailing duties that we have discussed in one of my earlier lectures, also. The anti-dumping duty and other surcharges.

The final import duty and taxes will be calculated using a slightly complicated and complex method of calculation.

But these calculations can be done by checking all the guidelines and circulars that are available in the public domain, and that are announced by the local customs and border control.

You have to be aware of all such new, updated circulars that will tell you exactly how much total import duties and taxes have to be paid, and those calculations have to be done.

Your clearing and forwarding agent or the freight forwarder can be very, very helpful in helping you calculate the import duties and taxes.

The final step refers to the payment to the supplier as per the agreed terms.

Then the next step refers to the payment to the supplier as per the agreed terms.

What were the agreed terms?

Whether the payment was through a letter of credit, whether the payment was through bank collection, or whether the payment was on some other payment method.

Whatever payment method had been agreed with the supplier as per the international purchase order, you have to make the international payment.

Another very important thing to consider while paying the supplier is the compliance required by the local governments.

Some of the local governments, to control the flow of foreign exchange for import purposes, have certain rules and guidelines.

You should be aware of those rules and guidelines.

They vary from country to country.

Different countries have different rules and guidelines.

You have to comply with those rules and guidelines, including the payment through banks.

Those rules and guidelines have to be followed. Therein, the role of the bank is very important.

The bank can help you in making you understand all these local rules and guidelines.

And what are the timelines for payments?

All such matters can be discussed with the commercial bank that is involved in the international payment.

These can be the different methods of making a successful payment to the supplier.

That may be the payment that is already done before the shipment arrives, or it may be the payment to be made after the shipment arrives at the port of entry.

And then finally, the last step refers to the delivery and inspection.

In the delivery and inspection, you have to check the goods, whether they are as per the specifications and the sample that was agreed upon.

And they conform to all the standards that were discussed.

These are as per the certificates that were issued by the supplier, and there are no problems with the shipment.

If there are any problems, you have to immediately alert the supplier in case you face any issues with the shipment.

The shipment is a short shipment, or some of the parts of the goods that reach you are damaged.

Even though you might have already made the payment.

If you alert the supplier in time to maintain a good relationship, the suppliers generally agree to compensate you for the damages in some form or the other. You have to find out the methods of compensation depending on the country of origin.

What are the rules and regulations of the local government of the country of origin?

The supplier will be able to help you if he is willing to do that. In case the compensation cannot help.

And if you need the replacement, you should at least try to get the replacement of the goods. If it is very necessary, if there is any mistake that is made by the supplier in sending the goods, you can ask for a replacement.

Whether you get the replacement or not will depend on the situation, but at least you can try to get the replacement.

This is the last step that you have to carry out in the typical import procedures.

Hi. In the last section, I discussed import procedures.

I hope you now have a fairly good idea about the typical import procedure.

It is now very easy for you to understand the import documentation.

Let us go into this section and try to find out the world of different documentation that is required.

What different documentation is required?

At what stage, and what is the purpose?

What is the significance of those documents? In this course, the details that are given are very accurate.

They are researched and based on my very long experience with the practical world of importation.

All the information that is given there, all aspects that are taken up in this section, are purely based on practical experience, and much of the information you will not find anywhere.

I will not go into very big detail about every document, because in that case, this course will become very bulky.

To avoid that situation, I will be taking the highlights of the documents, the features of the documents, the purpose, and significance of the documents, and many of these documents you will find very easy to understand because you have gone through certain sections in this course that were related to the things you were supposed to know before we go into the core area of the procedures and documentation. And that I had alerted you that you get used to those topics, you get used to those concepts, and learn about the things that you should know before. That you have already done.

And I wish to congratulate you for doing that now.

It will become very smooth work for you in this section.

Let's go into this section and try to understand all the import documentation, typical documents that are required at different stages for different purposes.

The common documents required in a typical import transaction are:

Proforma Invoice: A document that is sent by the supplier to the importer first as a means of quoting prices with all basic conditions against the enquiry by the importer. And later used as some form of purchase contract in the absence of a comprehensive purchase contract.

Commercial Invoice: A document that shows the details of the goods being imported, including their value, quantity, and other important information.

Bill of Lading: A document that proves ownership of the goods being transported and provides details of the shipment, such as the name of the carrier, the port of departure and arrival, and the type of goods.

Packing List: A document that lists the contents of each package in the shipment, including the weight and dimensions of each package.

Certificate of Origin: A document that certifies the country of origin of the goods being imported.

Import License: A document that is required by some countries to allow the importation of certain goods.

Insurance Certificate: A document that proves that the goods being transported are insured against loss or damage.

Customs Declaration: A document that is required by the customs authorities of the importing country to provide information about the goods being imported and to calculate the import duties and taxes.

Transport Document: Like Bill of Lading, Airway Bill, RR, or LR

Some more documents may be required depending upon the goods being imported country of origin, and the country of import. Many local governments and customs departments demand special certificates and endorsements for certain documents. Those case-to-case situations need special documents. Also, documents are required for SPS-TBT measures of the local government in the importing country.

Let us first talk about the common documents that are required, starting with the commercial invoice that we have talked about many times in this course.

A commercial invoice is the main document.

It is the summary of the contract, the international purchase contract that we had discussed in this course.

Whatever the terms and conditions that have been agreed with the supplier, all those agreed terms in summary form will be reflected in the commercial invoice.

I'll be giving you more details about the commercial invoice and then the packing list that contains the physical description of the goods that are coming in the import shipment.

It will contain all the details about the packages, about the boxes that contain the goods, and the marks and the numbers. I'll explain more about it. Packing list in the subsequent slides, and the insurance policy or certificate.

An insurance policy is required for the single shipment.

If you are periodically importing regularly spread over the complete year, if you are getting the same shipments many times, you may go for a comprehensive insurance policy, against which the insurance company will issue you policy certificates for every shipment.

If it is a single isolated shipment, then you can go for the insurance policy.

If there is a set of shipments, import shipments that are coming, or the same types of shipments of similar value spread over time, then you should go for the insurance policy supported by the certificates for each shipment.

That is the difference between the policy and the certificate.

I will give you a little more detail about this particular document that signifies that the shipment is indeed insured, at least the transportation.

An insurance policy deals with transportation risks.

Other types of risks have other treatments.

Then the certificate of origin. A certificate of origin is required by the local customs at the point of entry.

When goods come to your country, they will be entering your country. Your customs department will require this certificate of origin to ascertain the actual origin of the goods, so that the customs can ascertain what is the import duty.

Because import duty depends not only on the HS code number, not also on the description of the goods, and what goods are there, but also on the origin of those goods.

The customs duties vary from country to country, with different country of origin.

Then the quality certificate.

A quality certificate is required mostly by you because there are distances that are involved, and you want to make sure that the goods that are being imported are of the right quality and as per the agreed samples or the specifications that you had ordered.

A quality certificate is a third-party inspection certificate, kind.

I will discuss it a little bit more.

Then you will have a better idea about this particular document.

Then, the documents that would be required under the SPS TBT measures.

SPS TBT measures I had discussed in the earlier section, also when I was giving you the example of the Indian trade portal. When you go to the Indian trade portal, I have taken one example, one case study, and I explained to you the different SPS TBT measures, that is, the sanitary, phytosanitary, and technical trade barriers.

These requirements of the local government in the importing country require certain documents.

I will give you more explanation of what kind of documents are required and what the requirements could be. I will give you more details in subsequent slides.

Then the customs declaration.

The customs declaration is mandatory for getting the goods into your country at the port of entry, to get the goods cleared from customs. You have to make the advance customs declaration.

This part I had discussed earlier, also in the procedures.

Then, when I had explained to you that, uh, the goods are to be cleared through the Customs Department or the border control.

And that document that is a communication between you and the Customs Department is called the Customs Declaration.

The exact name of this document would be different in different countries.

Very commonly, it is called the Bill of Entry.

Like if you take the example of Indian customs, the Indian customs require a customs declaration, which is called the Bill of Entry for Importation.

Generally, this document is filed electronically.

I'll give you a little bit idea about how it is done in India.

A very similar way is used in many of the countries where the electronic data interface, that is, the EDI system, is there.

I will explain to you how this customs declaration is done.

What are the steps involved?

I'll give you more details about it. And the import licenses or permits.

Why are these required?

What is the significance of these import licenses? What is the impact of these licenses on the shipment?

I will give you some explanation in the subsequent slide.

And finally, the transport documents.

Transport documents are the most important documents to take possession of the shipment. Because when goods are cleared, they are still in the possession of the shipping company or the carrier if it is by sea.

The shipping company.

Shipping line.

If it is by air, then it has the airline.

These transport documents are useful to get this possession.

That is what your aim is. That is the ultimate aim of any important thing: to get the goods.

These documents will be required.

I will give you more details about this set of documents.

The supplier prepares the commercial invoice for an import shipment. The original copy is sent by the supplier along with other principal commercial documents, including transport documents, to the importer either directly or through a commercial bank, depending upon the commercial and payment terms agreed upon between the importer and the supplier.

A typical export commercial invoice usually requires the following information:

1. Contact details of the exporter and importer

2. Description of the goods being exported, including the quantity, unit price, and total value

3. Country of origin of the goods

4. Incoterms (terms of sale)

5. Payment terms

6. Shipping method and port of departure/destination

7. Harmonized System (HS) code of the goods

8. Any applicable licenses or permits

9. Insurance details

10. Declaration of the exporter or authorized representative that the goods are of the declared country of origin as per the certificate of origin attached and comply with the relevant regulations and requirements of the importing country.

Now, let us talk about the commercial invoice.

A commercial invoice generally contains the information that is a summary of the international purchase contracts.

It is a complete summary.

And this is the reason this is the most important document. And it is required at every stage.

This commercial invoice is required by the customs.

It is required by the port authorities. It is required by the banks. It is required by the carrier, whether it is a shipping company or an airline.

They will be asking for the commercial invoice.

Because this commercial invoice identifies the shipment. It is the identity of the shipment.

It is the identity of the transaction that is being done. It identifies what import shipments are there, and what the deal is. It talks about that.

Therefore, it contains all the information that is required, like contact details of the exporter or the consignee.

Consignee means the person who is going to receive the goods.

Invariably, it is the buyer, but if it is not the buyer, then it will also have the name and address of the buyer separately.

There is a separate column.

Just after this particular lecture, I will show you one sample of the commercial invoice, and I will show you how these details are given there.

The format that I will be sharing with you in this sample is based on the aligned document system.

That is the ADS. The aligned Document System is used by more than 180 countries that are members of the WTO.

World Trade Organization.

For standardizing the documents, the format, the size, everything, it is a very common practice to use this ADS system, Aligned Document System.

I will show you this format, this sample, in ADS, how it looks like a commercial invoice. I will show you. Other details in the commercial invoice include details of the goods.

What is the description of the goods in a very summary form?

It will give you an idea of the items that are in the shipment, the quantity, and the HS code.

Very important, because the HS code is the code that is understood by the controlling authorities.

Border controls customs at the port of loading as well as at the port of discharge.

At every stage, wherever there is an intervention required by the intermediaries, especially the customs department in different countries, they would need this ITC HS code that I had discussed in my earlier lecture. And details on the Incoterms.

International commercial terms, delivery schedule, and the mode of transport, whether it is by sea or by air.

All this information will be there. Not to forget about the details, very important details.

That is part of the international purchase order, the price per unit, whatever the unit.

You mentioned the unit also. What is the unit of measure?

How do you measure the unit, whether it is the decent prices per dozen per piece, or set, what is the measure of the unit?

You have to mention that also. And the total amount, as well as the currency of the contract, and the payment terms that have been agreed upon with the supplier.

It also contains the bill of lading number or the Airway Bill number, transport document number. Because this shipment has to be connected with that particular shipment.

The best way to connect with the shipment is the transport document number, and the bill of lading number is the best.

You can also add, if it is available, the contract number, whatever the contract is with the supplier's international purchase order number.

You can write it here or the letter of credit number.

If it is available.

The commercial invoice will also have details concerning the country of origin, port of loading, and port of discharge.

What is the port of origin?

Country of origin?

Which is the port where the loading of the ship, if it is by sea, will take place?

If it is an airport, then the name of the airport first airport where the goods will be loaded, the first point of loading and the final destination of the discharge, the port of discharge, and also details about the insurance policy. If you have the details like the insurance policy number, if it is already available, then you should have it, and whenever it is available, you have to put it.

In the final documents, you should have the insurance policy number also, to make sure that the goods are properly protected, and the customs department and the border control will see to it that the goods are protected, because in many countries it is a regulatory requirement.

And then import license details and any declaration by the supplier. If any declaration is required by the supplier, that the declared country of origin is what has been, uh, authentic information, or about any other detail that is mentioned in the Commercial Invoice.

The declaration by the supplier may be required by the local customs of the Importer's country.

Those have to be incorporated in the commercial invoice.

This commercial invoice has to be prepared by the supplier when the LC is received and accepted by the supplier, and when he is preparing the shipment, he has to start working on the commercial invoice and load the goods.

This commercial invoice has to be in the final form, and it should be ready for dispatch to the importer.

Insurance policy details, import license details, any declaration, all this information is there in the commercial world.

In the next video, I will show you one sample of the commercial invoice so you will have a better idea.

Hi. Let me now share with you one sample of the commercial invoice. You can see it here.

This is the commercial invoice from an Indian party.

The importer is based in France.

This party from India has prepared this commercial invoice for the export of the readymade garments.

You can see here, Malhotra exports from India.

That is exporting the ladies' skirts and blouse sets.

As you can see here. To set up Lauren's company in France.

And the consignee and the buyer are the same.

There is no difference.

You can put the names of both parties here.

And the usual details are there, like the bill of lading number, the buyer's reference number, and any reference number that is the exporter's, supplier's reference number, invoice number, date, and method of dispatch. type of shipment, country of origin of goods, country of final destination, and the vessel name.

Vessel details are given there. A voyage number is given there. Terms and methods of payment are also mentioned here.

Confirmed irrevocable letter of credit. And the port of loading is Mumbai.

The port of final destination is Paris, France. And product code is given there, description of the goods is given there. HS code is mentioned here as I had explained to you. The unit quantity is given here at 700, and the unit type is set.

Price is given here, and the total amount for each product code is given there.

This is a very typical kind of commercial invoice.

The total amount is mentioned here.

Any special packing charges you can include if it is beyond the unit price?

If it is in addition to the normal charges, you can have special packing charges. And the total amount you can mention here. Incoterm is mentioned here in FOB Mumbai, and the currency is Euro as it is mentioned here.

A signatory company is given there. The name of the authorized person and the signature are given there.

Then additional information can be put here.

Any kind of licensing requirement of the importer, that is, the French party.

If they want anything to be written on this commercial invoice, you can put it here, and the bank details are given there.

LC from the first-class international bank advised through the International Bank of India, Mumbai branch.

Anything in these two columns that is, uh, required and makes logical sense for the supplier as well as for the importer.

The importer can request the supplier to put those things here.

This is the typical example of a commercial invoice.

You can get a copy of this commercial invoice from the resource section of this lecture, and this copy you can use for your reference.

These are simple things you are learning in this course.

What is the information?

Logical information is there.

There is nothing in these documents that lacks logic.

This logic I have explained in this course.

I am very sure that you are getting the heck of it.

A packing list is usually prepared by the overseas supplier of the goods, also called a shipper or exporter. A typical packing list usually requires the following information:

• Contact details of the exporter and importer

• Description of the goods being exported, including the quantity, unit of measure, and total weight/volume

• Packing details, including the type of packaging, the number of packages, and the dimensions of each package

• Country of origin of the goods

• Shipping marks and numbers

• Incoterms (terms of sale)

• Shipping method and port of departure/destination

• Harmonized System (HS) code of the goods

• Any applicable licenses or permits

• A declaration of the exporter or authorized representative that the goods are of origin and/or comply with the relevant regulations and requirements of the importing country.

Then the packing list is a very, very important document.

It will be required at different stages, not only at the stage of the goods being loaded by the supplier at the port of entry.

When goods come to your country, they are cleared by customs.

They are being handled by the port authorities.

The only way to identify the shipment and to understand the shipment is a packing list because the packing list contains the physical details, dimensions, and types of the packages.

It identifies the physical nature of the shipment. To identify. It also tells you what the marks and numbers are on the boxes.

What kinds of labels are there?

If the goods are hazardous, it will indicate that the goods are hazardous, it will give a lot of necessary information before anyone would like to physically check it, because in international trade, it is very, very difficult for every shipment to be physically monitored by the authorities.

It is not possible.

The only way to understand the shipment is the packing list.

It has to be very authentic and very accurate. It would contain details very similar to the commercial invoice, but not the details, not financial details, but rather a physical description of the shipment.

Contact details of the supplier. The consignee and the buyer will be there.

Details and descriptions of the goods' quantity and unit weight, volume, and HS code will be there.

Because the focus here is on the physical description of the shipment. And the international commercial terms.

Delivery schedule.

The mode of transport is by sea or air. It is important because the packing list must tell how the goods are coming, to check whether the packing is seaworthy or not, or airworthy or not.

Those details are required.

Then, packing details, type of packing, number of packages, and what are the dimensions?

Net weight, gross weight?

All those details will be there.

Bill of lading number, contract number, or LC number.

Like in the commercial invoice, it will be there in the packing list. The country of origin, port of loading, and port of discharge.

The same information in the same place in a similar format, like a commercial invoice, will be there, minus the financial details, unit price, or total amount.

Those things will not be there. In place of that in the packing list, details containing the information on physical features of the shipment, physical details of the shipment, will be there. And about its nature, hazardous nature, or brittle nature.

Whatever information, those things will be there. And shipping mark numbers, as I have already told you, logically have to be there.

Then import license details.

Any declaration by the supplier will also be there.

Some very important information will be repeated from the commercial invoice to the packing list.

And packing list is the best companion to any commercial invoice.

It actually identifies, along with the commercial invoice, the complete details of the shipment.

Now, let us look at the sample of the packing list.

Very interesting document. it is.

It is the companion of the commercial invoice that I had described it as.

And I'm using the same example that I used in the commercial invoice here.

The exporter is from India and the importer is from France.

This company, Saint Laurent, based in France, is importing readymade garments from India.

The supplier is based in India.

All other information, as you can see here in the packing list, is very similar to the commercial invoice, except that you do not see in this, uh, packing list any reference to the unit price or the total price.

Those things are not there.

The rest of the things are very similar.

Product code, description of the goods, and unit quantity. Here details of the shipment are given there.

Here you can see the differences are coming the kind and number of packages, net weight, gross weight, and measurement.

By measurement, you will be able to indicate the volume.

The purpose of this packing list is to describe the shipment that I explained to you.

And here packing information, in general, you can write any marks and numbers you can mention here. Cartons in five pallets.

Any information that is the highlight of the shipment, you can write it here.

This is a very good example of the packing list.

In the bottom portion of the packing list, you can mention any additional information.

Maybe you want to write that the goods are hazardous, or they are described as a particular schedule number as per the International Classification of the Hazardous Goods, which in this sample case is not there, but there can be a possibility.

Additional information can contain a lot of different things depending on the situation and the product that is being supplied to the importer.

This is a very good illustration of the packing list.

You can see here that this portion is very, very important and indicates the shipment, like when we say 700 quantity units that are set.

They are in cartons.

Each carton contains, as you can see here, seven pieces.

There are 100 cartons.

The total will come to 700.

What is the meaning of this?

Each product code has 100 cartons. And the total number of cartons, as you can see here.

500 cartons are in this shipment.

This is a very interesting thing to see here.

Gross weight, net weight measurement.

Total measurement.

You can right here, cubic meter.

Measurement you can write in terms of the volume also.

It depends on the product to product.

You can make some tweaks to these columns depending on what is the commodity that is being exported.

Maybe these commodities are in liquid form.

You may have a different type of packing details that are to be mentioned here.

This is the thing to be highlighted and noted.

You can just have a look at this packing list.

You'll have a fairly good idea.

The details in the header are very, very similar to what was there in the commercial invoice.

There is nothing that has changed except for the packing information.

Here country of origin was also there in the commercial invoice, and the country of final destination. same thing.

You have to write it here.

The consignee and buyer are not different.

You can put the same name there, or you can leave this particular column blank also.

That is also possible.

A marine cargo insurance policy for an import transaction typically contains the following information:

• Name and address of the insured (exporter) and the insurer

• Policy number and period of coverage

• Description of the goods being insured, including the type, quantity, and value

• The risk covered, such as "All Risks" or "Free of Particular Average" (FPA)

• The sum insured (the maximum amount that will be paid out in the event of a loss or damage)

• The premium amount and payment terms

• The deductible (the amount the insured is responsible for before the insurer pays out)

• The terms and conditions of the policy, including any exclusions and warranties

• Claims procedure and documentation requirements

• Applicable law and jurisdiction.

The insurance policy and or certificate.

I explained to you the difference between an insurance policy and a certificate.

Depending on the situation, whether it is a policy or a certificate will contain details that I had discussed with you in one of my earlier lectures.

I have also shown you one insurance policy sample.

There, I showed you an insurance policy issued by a Vietnam-based insurance company.

Similar details, same information.

It will contain like name and address of the insured as well as the insurer. It all depends on the international commercial terms and the needs of the situation.

What details of the person have to come there, or does the company have to come there?

And definitely, it has to be insured.

But whether the name of the insurer will come or not is a question mark, because in the sample, which I had shown you that only the name and address of the insured were there, and the insurance company, not the insurer.

The actual insurer in many international commercial terms, the exporter is the insurer, but the insured is the importer.

It depends on what the international commercial terms are that are agreed upon between the supplier and the importer, the policy number, and the period of coverage.

What is the period of coverage?

A description of the goods, type, quantity, and value is required.

The description is required. In this sample, I have also shown you that.

Nature of the risks that are covered in the policy, as I had shown you in that example. ICC clauses A, B, C, minimum or maximum risk, or all risks, plus clauses when you include plus clauses like SRCC.

When you add that, you get the maximum cover; you cover all the risks.

Different types of risks can be covered.

Then the sum that is insured is the sum.

Generally, it is 110% of the CIF value.

I had discussed that.

You must remember that and the premium details.

That is not mandatory if, uh, the insurer or the insured requests it should be there, then it will be there then.

Terms and conditions.

What are there?

It could be in the form of some addenda or annexures to the policy.

And the applicable laws and the jurisdiction in case of any claim process.

It will also tell you in the annexure what the claim process is and who to contact.

In the example that I had taken up in this course earlier, there was a section in the policy to contact the surveyor and the representative of the company in Spain, in that example.

Those details will be there.

It depends on the situation. It depends on the goods. It depends on the country of issue and the company that is issuing.

The format can vary.

But I'm just giving you the typical information that is given in the insurance policy.

I'll not take any sample example of the insurance policy that we have already discussed.

We'll go to the next slide.

A certificate of origin is usually prepared by the supplier and endorsed by the authorized agency or chamber of commerce in the country of origin of the goods.

A certificate of origin for an export transaction typically contains the following information:

• Exporter's name, address, and contact details

• Importer's name, address, and contact details

• Description of the goods being exported, including the quantity, unit price, and total value

• Country of origin of the goods

• Harmonized System (HS) code of the goods

• A declaration of the exporter or authorized representative that the goods are of origin and/or comply with the relevant regulations and requirements of the importing country

• Signature of the exporter or authorized representative

• Date of issuance of the certificate

• Any additional information required by the importing country, such as the name and address of the manufacturer, or a statement of non-manipulation

• Any applicable authentication or legalization by a government agency or chamber of commerce.

Another very important document that I had talked about, uh, in my earlier lecture is the Certificate of Origin.

And I told you that a certificate of origin is very important to calculate the import duty.

And it is a mandatory requirement of the customs and local customs of the importer at the port of entry.

A certificate of origin ascertains the origin of the goods.

Whatever is declared in the commercial invoice or the packing list, wherever you mention it, what is the country of origin?

This certificate of origin is the legal document that confirms the actual country of origin, and it contains details like the contact details of the supplier and the buyer, details of the goods, quantity, units, value, HS code, and country of origin of the goods. Exporter's Declaration about the declared country of origin: What is the country of origin?

And sometimes it also requires mentioning the name of the manufacturer, if it is mandatory in the port of entry customs, that is, the importer's country.

If the customs want the manufacturer's name also to be there, in case the exporter is not the manufacturer, then it may be required.

Any details that may be required by the importing country or local authorities. As I give you the example of the manufacturer, there may be some more information that may be required to be included in the certificate of origin, in which case it has to be incorporated by the supplier.

All these documents are to be prepared by the suppliers, except the customs declaration, which I will discuss with you in more detail.

All other documents that we are discussing are the responsibility of the supplier to be obtained, and in original, to be given to the buyer, either directly or through banks, according whatever the payment terms.

These things we had discussed earlier are also in this course.

You already know about these things.

Also, the endorsement, very important, certificate of origin endorsement or legalization by the requisite authority, depending on the type of certificate of origin, is issued by some local chamber of commerce of the supplier's country or by any government agency, depending on what is the use of the certified origin. If it is an ordinary certificate of origin, for the simple ascertaining of the country of origin, in case there is no bilateral agreement between the supplier's country and the Importer's country, then an ordinary certificate of origin can work.

But in case certain bilateral agreements have a significant impact on the actual import duty, which may be significantly different because of the bilateral agreement, then a special type of certificate of origin may be required, wherein the issuing authority will be a specialized or special uh authority that will be specified by the buyer.

That means the importer.

Now, let us look at the sample of the certificate of origin with the same example.

The exporter is from India, and the importer is in France, based in France, uh, in Paris. The name of the importer is Saint Laurent.

And you can see that in the certificate of origin also the details are very similar.

Method of dispatch, type of shipment, voyage number and vessel name, port of loading, and date of departure.

All the information is very similar, except that here the marks, numbers, and details in this particular main column differ.

Here, you are not explaining all the shipments; it is not required.

You are generally giving the summary of the shipment.

As I had explained in the packing list, there are also 500 cartons.

You write it here: 500 cartons of cardboard.

And what are the marks? JAI HIIND was given there and a description of the goods.

Here you are, not describing.

You are simply saying ladies' two-piece sets.

That is okay.

But here you give the HS code, like in the commercial invoice, and the gross weight.

Here you are, not giving the measurements.

The idea of a certificate of origin is not to describe the physical nature of the shipment.

That is not the purpose.

The certificate of origin focuses on these columns, these two columns. A declaration by the exporter about the country of origin and a declaration by the chamber authenticating and legalizing this particular certificate of origin.

Who is the authorizing person from the Chamber of Commerce, whatever, whatever may be the Chamber of Commerce?

The signature and details are given here.

And the declaration of the exporter.

These two things are the most important part of the certificate of origin.

This has to be focused upon.

You can get some good ideas from the samples that I'm showing you. You will have first-hand knowledge of what they look like. You can download this sample of Certificate of Origin from the download section of this lecture for your reference.

A GSP (Generalized System of Preferences) certificate of origin is a document used to demonstrate that a product is eligible for preferential tariff treatment under a particular GSP program. GSP is a trade program that provides preferential tariff rates to certain developing countries, allowing them to export their products to developed countries with reduced tariffs.

To benefit from GSP, a product must meet certain criteria, including being produced in a country that is eligible for the program and meeting the program's rules of origin requirements. The GSP certificate of origin is used to demonstrate that a product meets these criteria and is eligible for the reduced tariff rates.

The GSP certificate of origin typically includes information such as the exporter's name and address, the importer's name and address, a description of the product, the country of origin, and any other relevant details. The specific requirements for the certificate of origin can vary depending on the GSP program and the importing country. It is important to carefully follow the requirements and instructions for completing and submitting the GSP certificate of origin to ensure that the product can benefit from the reduced tariff rates.

Now, this is one very interesting certificate of origin.

It is one variant of the certificate of origin, which is very, very interesting for the importers. Why?

Because it significantly reduced the import duties.

It is a direct benefit to the importers. It is called the GSP certificate of origin.

This GSP certificate of origin is a special type of certificate of origin that applies to the imports of goods in developed countries from a developing or underdeveloped country.

This certificate of origin is part of the multilateral agreements, international agreements under UNCTAD, that is United Nations Council for Trade and Development.

Under UNCTAD, this GSP, the meaning of which is the Generalized System of Preferences.

This system of preferences is there internationally to boost the trade of the developing countries.

This GSP certificate is issued by specialized GSP agencies that are located in all countries.

You need to find out which agencies can provide this certificate to your supplier. Because this certificate has to be obtained by the supplier. You have to discuss with the supplier and uh, demand this GSP certificate if it applies to your imports, in which case you are going to get the direct cost benefit of the imported items.

This GSP certificate also contains similar information, like contact details of the supplier and buyer, details of the goods quantity, units, value, HS code, country of origin of the goods, and the exporter's declaration about the country of origin.

Reduced rates of import tariffs, any details required by the importing countries, and endorsement legalization by the authorized agency for GSP.

This is a very useful document for the importers.

And if it is applicable, no importer should miss this document.

They should ask for this document.

If it is the payment by letter of credit through banks, then it should be part of the documentary conditions in the letter of credit.

Now this is the sample of the GSP certificate of origin.

This format is given there.

This particular document you can download from the resource section of this lecture.

It is very similar to the ordinary certificate of origin.

The most important thing is that, uh, it has to be legalized and authenticated by an authorized agency that can issue a GSP certificate of origin, because a GSP certificate of origin can have a significant impact on the import duties that will be levied in the port of import, that is, the port of entry for the importer.

Depending on what is the situation, the import duties may be highly subsidized.

Because of this certificate.

This is not an ordinary certificate of origin; it has to be authorized and legalized by the specialized agency that you have to find out, depending on which country you are importing your goods from.

A quality or inspection certificate is usually required by the importer to ensure the quality and standards of the goods in an import shipment. Depending upon the goods' type and origin, the certificate may be different from shipment to shipment. Usually, a detailed inspection or quality check process is agreed upon between the buyer and seller and is part of the international purchase contract. And may involve the role of a third competent and reputable party to authenticate or issue the certificate. For example, an international inspection agency like SGS may be involved in the process.

A quality certificate for an export transaction typically contains the following information:

• Exporter's name, address, and contact details

• Importer's name, address, and contact details

• Description of the goods being exported, including the quantity and any relevant technical specifications

• Results of any inspections or tests performed on the goods to ensure compliance with quality standards, such as ISO or ASTM standards

• Statement of conformity to any applicable regulations or industry standards

• Any applicable product certifications or approvals, such as CE or UL marks

• Signature of the exporter or authorized representative

• Date of issuance of the certificate

• Any additional information required by the importing country or the buyer

• Any applicable authentication or legalization by a third party, international inspection agency, government agency, or chamber of commerce.

Then the next document of great use to the importers refers to the quality or the inspection certificate.

If you are importing something you are importing from a foreign nation, you are not sure what quality will be supplied by the exporter.

It is very, very critical for you to get the third-party quality test or inspection.

This certificate will be issued by a reputed third party, something like an organization that is, uh, called, uh, SGS.

It's a Swiss company that has operations in almost all countries in the world.

Even at the very remote locations in those countries. Branches of these organizations, carry out the quality and the inspection of the export cargo in those countries and, uh, assist the importers in making sure that the goods that are being imported are of the right quality and conform to the industry standards, conform to the certificates that are issued by the supplier and based on the agreed terms of the quality of the goods.

This certificate can make the life of the importers very comfortable with its significance.

And of course, it costs money.

Quality certificates will cost money, and ultimately, the cost has to be paid by the importer only.

All these documents, all the compliances that are done by the supplier, ultimately will cost something.

And all those costs have to be paid by the importer only.

This quality inspection certificate typically contains information like contact details of the supplier and the buyer, details of the goods, quantity, and technical specifications that are very, very important.

The results of any inspection or tests.

Statement of conformity with the industry standards, product certification, or approvals.

Any details required by the importing country.

That means the local authorities, like border control, customs, and the document, this certificate has to be endorsed and legalized by a third party, typically a reputed third party, that is neutral for both the exporters as well as the importer.

This is how this certificate has to be obtained by the supplier and supplied in the original to the importer.

Here you can see a sample of one of the quality certificates issued by SGS.

It's a Swiss company and a very popular quality inspection agency that is very reputable and widely referred to, widely mentioned in the letter of credit by the importers for the supplier to get the quality certificate or do the inspection.

There is no standard quality certificate format for such kind of inspection certificate or quality certificate. It depends on the item.

You can see here that some item is given, and their sample description is given. Thermal bonding, non-woven, color is white, fiber contents are given there. The applicant's name is given there.

In this case, the applicant will be the supplier only.

Sample receiving date.

Test performance period. Test performed.

What kind of tests were performed?

Those are mentioned here.

You can see the test results are also given here.

Here you can see the test results.

The test results are put as the addendum to the certificate.

They are very detailed, so they will be attached to the certificate.

The remarks are given.

Their test results have been taken from the report number so-and-so.

This report date is given there, and it will be attached. This test report supersedes the test report number of anything that is there, because it may be the revised report.

The authorized person from SGS has signed it, and the name and designation are given there.

And it is a normal certificate that is given there.

The main important thing here is the Annexures that are in the form of test results.

That is, in the form of any more details about the product that is being tested.

What types of tests have been carried out?

If any detailed information has to be attached, it will be there in the annexure.

For privacy reasons, I am not showing you the annexures to this report, but this sample gives you a fairly good idea of what type of quality inspection certificate it can be.

SPS (Sanitary and Phytosanitary) and TBT (Technical Barriers to Trade) measures are applied to protect human, animal, and plant life, as well as to ensure product safety and quality. These measures are often regulated by countries and can create barriers to imports.

Common documents that may be required for SPS-TBT barriers in typical import transactions include:

Health and Safety Certificates: These certificates are issued by the exporting country's health and safety authorities and are required to ensure that the imported products comply with the importing country's health and safety regulations.

Product Testing and Analysis Reports: These reports provide information on the product's composition, quality, and safety. They are often required for products that may pose a risk to human, animal, or plant life.

Technical Documentation: Technical documentation includes information on the product's design, specifications, and manufacturing process. It may be required to ensure that the product complies with the importing country's technical regulations.

Phytosanitary Certificates: These certificates are required for plant-based products and certify that they are free from pests and diseases.

Import Licenses: These licenses are required in some countries and regulate the import of certain products. They may be used to ensure that the imported products comply with the importing country's regulations.

The specific documents required will depend on the product being imported and the importing country's regulations. It is important to work with a knowledgeable customs broker or trade consultant to ensure that all necessary documents are prepared and submitted correctly.

Then come the SPS-TBT-related documents.

Sanitary and phytosanitary measures by the importing countries, and technical barriers for trade that are generally in place in the importing countries.

What are the reasons why these SPS-TBT barriers are there? So-called trade barriers because of health and safety reasons.

It may ask for the health and safety certificates or for the product testing and analysis report to ensure that the goods that are coming into the country are of quality and serve the right purpose to society and the consumers, and ask for the technical documentation to ascertain the technical description of the goods.

They might not be used for any dual use, some uses that are prohibited in the country of import.

Technical documentation may be requested by the local government through the Customs Department or the border control.

They will ask for the technical documentation to make sure everything is on the board, there is nothing that is being hidden regarding the use of the goods that are being imported, and they will require the standards, the quality, and the health and safety of the society and the consumers in the country.

This technical documentation will invariably be asked for by the Customs Department in case a physical examination happens.

Even if the physical examination is not there, you may be required to submit these documents, which are connected with the SPS-TBT matters.

Then, phytosanitary certificates that are to be used to secure the nation for any animal or living things or the plants, uh, the safety of these plants, any kind of insects or bacteria or any kind of germs that may enter through the shipment to the country.

Phytosanitary certificates may be required for certain goods.

What are these goods?

How is it to be obtained?

What kind of certificate required varies from country to country.

You, as an importer, need to find out the SPS-TBT policy of the country.

Find out what kind of phytosanitary certificates are required, if they are required, and what the things are that have to be done about SPS-TBT measures in that country.

That policy has to be checked.

The import licenses may also be there, which may have a direct or indirect relationship with the SPS-TBT matters, because the import licenses may also be based on similar themes.

What are the themes of the SPS-TBT?

A customs declaration is a document that must be completed and submitted to customs authorities when goods are imported into a country. The information required in a customs declaration can vary depending on the type of goods being imported and the importing country's regulations. Here are some of the common information that may be required in a customs declaration for an import shipment:

Importer/Exporter Information: The full name and address of the importer and exporter are typically required. This includes contact information such as phone number, email address, and fax number.

Shipment Information: This includes information about the shipment, such as the number of packages, weight, dimensions, and value of the goods being imported. It also includes the date of the shipment and the mode of transport used to transport the goods.

Commodity Information: This includes a detailed description of the goods being imported. This description should include the name of the product, the quantity being imported, the country of origin, the harmonized system code, and the value of the goods.

Payment Information: This includes information about the payment terms of the shipment, such as the currency used, the payment method, and the terms of payment.

Licenses and Certificates: If the importing country requires licenses or certificates for the import of certain products, these should be included in the customs declaration.

Incoterms: This refers to the international commercial terms that specify the responsibilities of the buyer and the seller in a transaction. The incoterms used should be included in the customs declaration.

Signatures and Declarations: The customs declaration must be signed by the importer or their agent, indicating that the information provided is accurate and complete.

It is important to ensure that all required information is included in the customs declaration to avoid any delays or penalties at the customs clearance stage. It is recommended to work with a knowledgeable customs broker or trade consultant to ensure that the customs declaration is completed accurately and in compliance with the importing country's regulations.

Then comes some kind of document that is to be prepared by the importer, not the exporter.

This is the main document that has to be prepared by the importer.

And the compliances have to be done by the importer.

And that relates to the customs declaration.

Customs declaration what is the purpose is to inform the local customs border control of the incoming shipment, and the import shipment that is expected in certain near future.

You can file this document invariably through electronic means.

In most countries, the system is electronic, and it is online.

But in many of the countries, like India, you have to visit the customs service centers.

You cannot file this document from your own office.

You have to visit the customs service centers and give the information that is to be submitted in this online process to the customer service operator, and it will feed the information into the system.

Generally, there is a customer portal.

For example, in India, this portal is called IceGate.

In different countries, it may have a different name. In this portal, for example, in IceGate in an Indian customs case, the customer service center operators will fill in all the information.

I'll just share with you what information is generally asked in this kind of document, and will give you the checklist, the complete checklist that will contain all the information for the signature of the importer.

Whatever information has been fed for the customs declaration, the information is correct.

You need to sign it, or your authorized representative has to sign it.

And once that is done, the customs declaration is filed.

And the bill of entry, for example, in India, is called.

In many countries, similar names are there or the same name is there for the customs declaration that is called the Bill of Entry.

This bill of entry will be issued based on this checklist, and this is proof that you have made the customs declaration.

And this is the major compliance by the importer.

And it should contain the information, like, uh, the details of the importer, the name and address of the company and of the supplier, the shipment information, what kind of goods are coming, when they are coming, expected date.

And what is the nature of the goods and the commodity information? Uh, which means in the shipment information, normally you talk about the boxes, you talk about the dimensions, the volume of the shipment. Here in the commodity information, you have to declare the exact goods that are in the boxes.

What goods are there, what is the nature of the goods, and what is the category HS code?

All this information has to be given. Also, the payment information, whether the payment has already been made to the supplier or is to be made.

What is the process?

What is the method of international payment?

That information has to be mentioned here.

Any licenses or certificates that are applicable to those goods or the classification that is the HS code, any import license, or any kind of compliance, have to be declared.

And very importantly, this declaration should also contain the purpose of the import, whether it is for own use or resale, or re-export.

What exactly is the purpose?

Accordingly, this declaration will be made depending on the purpose of the import shipment.

The declaration format will be different. And the international commercial terms at what international commercial terms, this particular import shipment is based.

As we had discussed in my earlier section about international commercial terms like FOB and CIF, 11 terms are there.

Which term has been used that has to be declared?

Finally, the signature of the importer or the authorized representative on the checklist.

And any declaration, the declaration clause will be there in the checklist, and that declaration has to be signed by the importer or the authorized representative.

This is the document that is the main communication bridge between the importer and the local customs, and the supplier has nothing to do with it.

It is purely the document that has to be filed by the importers, mostly online through the EDI system, which is called Electronic Data Interface. In the US, this electronic system is called AES - Automated Export System.

The different names may be of such a kind of interface, an electronic interface in different countries. And the process will be very similar to filing the customs declaration in different countries.

Here you can see one format of the customs declaration by the importer. Import declaration.

There is no format to be filled out by the importer that I explained to you.

You have to give the details to the service operator at the Customs Service centers.

The process may be different in different countries, and you fill in the details, and once you sign the checklist, then you get this kind of format that is pre-filled in by the system.

And you will get a copy of this import declaration.

This will be proof that you have already declared the expected import shipment in a reasonable near future.

Depending on what is the period in advance, you have to declare that may vary from country to country, and you have to find out what is the right duration when you have to inform and file the import declaration to the local customs authorities.

This is the format you can see here, and this format you can download from the resource section of this lecture for your reference.

Certain goods may require import licenses or permits to import into a country because they may pose a risk to human, animal, or plant life, or because they may be subject to specific regulatory requirements. Here are some of the reasons why import licenses or permits may be required for certain goods:

Protecting Human Health: Some goods, such as pharmaceuticals, medical devices, and food products, may require import licenses or permits to ensure that they are safe for human consumption. This may involve testing and certification by the importing country's health authorities.

Protecting Animal and Plant Health: Goods that are derived from animals or plants, such as meat, dairy, fruits, and vegetables, may require import licenses or permits to ensure that they are free from pests and diseases that could pose a risk to the importing country's agricultural industry.

Regulating Hazardous Materials: Hazardous materials such as chemicals, pesticides, and radioactive materials may require import licenses or permits to ensure that they are handled and transported safely and in compliance with the importing country's regulations.

Regulating Trade: Import licenses or permits may be required for goods that are subject to quotas or trade restrictions, such as textiles, sugar, and steel. This is to regulate the amount of these goods that can be imported into the country and protect domestic industries.

Protecting Intellectual Property: Certain goods, such as copyrighted materials, may require import licenses or permits to ensure that they are not counterfeit or infringe on the intellectual property rights of others.

Overall, import licenses or permits are typically required for goods that may pose a risk to public health, the environment, or that are subject to regulatory requirements or trade restrictions. It is important to check the importing country's regulations and work with a knowledgeable customs broker or trade consultant to ensure that all necessary licenses and permits are obtained before importing the goods.

Then something about the import licenses or permits that may apply to certain goods, certain classifications, and certain categories of import shipments.

The purpose of these licenses generally would be to protect human health, protect animal and plant health, and regulate the hazardous chemicals or materials, or any substances that can pose any kind of danger to humans, animals, or plants.

Also for trade reasons. For regulating the trade to protect the domestic industry for certain items, depending on what are the government policies concerning the domestic industries, the regulation of trade will also dictate the reasons why certain categories of goods need import licenses and permits. And very importantly, to protect international property rights, both domestic rights as well as international rights.

Each government has obligations to protect the intellectual property rights of the multinational companies and the smaller companies concerning their intellectual property, brands, logos, inventions, innovations, formulas, and patents.

To protect those intellectual property rights, there are international systems in place that require certain items to be restricted for import through import licenses or permits.

There are several transport documents that are commonly used in a typical import shipment to ensure that goods are transported and delivered to their destination safely and efficiently. Here are some of the most common transport documents used in an import shipment:

Bill of Lading (B/L): This is a legal document issued by the carrier that outlines the terms and conditions of the transportation contract, such as the goods being transported, the origin and destination of the shipment, the vessel or flight number, and the terms of delivery. The B/L serves as proof of ownership of the goods and is required for the release of the goods at the destination port or airport.

Air Waybill (AWB): This is a document issued by the air carrier that serves as a contract of carriage for air freight shipments. The AWB contains details such as the shipper's and consignee's name and address, the flight number, the weight and dimensions of the shipment, and the terms of delivery.

Delivery Order (DO): This is a document issued by the carrier that authorizes the release of the goods to the consignee at the destination port or airport. The DO is usually issued once all necessary fees have been paid.

In addition, if the international movement of the shipment is taking place through trucks or railroads, similar types of transport documents are issued by the transport companies or railways.  The names of these documents may vary from country to country and operator to operator

Overall, these transport documents are essential for the smooth and efficient transportation of goods in an import shipment. It is important to ensure that all necessary documents are prepared and submitted accurately and on time to avoid any delays or issues with customs clearance or delivery of the goods.

And then transport documents.

Very useful, very important, and mandatory.

In the case of sea shipments, original copies of the transport documents, like a bill of lading, without which, in most cases, you cannot take possession of the goods at the port of discharge at the port of entry.

Transport documents are the title documents, negotiable documents that are required to be furnished in original to the carrier, that is, the shipping company, to obtain or take possession of the goods that are imported.

In the case of sea shipment, it is called a bill of lading.

In the case of air shipment, it is called an air waybill.

The air waybill is not negotiable.

Even if the fax copy you have or the email copy you have, those copies can help you get possession.

It is not the document of title as such in the original.

The copies of the document can also serve the same purpose, and it is not a negotiable document. Delivery order of the carrier.

Once the carrier is satisfied that you are the rightful owner of the goods, it will issue you the delivery order that will be required to take actual possession on the spot. And transport documents for other modes.

If the goods are coming through railroads or land routes through trucks, then there will be different documents with different names in different countries.

For example, in many countries, if the goods are coming by train, it is called the railway receipt.

That is very similar to a bill of lading.

And it serves the same purpose.

Some supporting documents may be required along with the transport documents to make it a complete set that will invariably include things like commercial invoices or the packing list.

These supporting documents and the actual transport documents will help you obtain or take possession of the goods at the point of entry at the port of entry.

Now, if we look at this sample of the bill of lading, that is the transport document with the same example that we had taken up in the earlier samples, that is the exporter from India and the importer from France, Paris, and the goods being exported are readymade garments.

You will see that in the bill of lading also, the header is very similar to the commercial invoice, and it has much information that was there in the commercial invoice, along with some changes in the columns. For example, it is mentioned here that the carrier name is Maersk Line, and the address and details are given there of the carrier because that is very important.

Sometimes the logo and the company name may be there on the bill of lading on the top right or left-hand corner.

That is also possible. But this is a general ADS system format that is given there, and some variations are possible in the bill of lading because these are original bills of lading issued by the carrier; the carrier may have a little bit of tweaking in these formats.

Notify the party if not the consignee. In case the buyer is different from the consignee, then the name can come here.

Additionally, notify the party, if there are more than two parties, which may be some representative also of the agency, or maybe someone connected with the shipment logically.

There are two different columns for the notify party here.

Precarriage mentioned here that before goods were loaded on the ship, the goods came to the port by truck or by train. And the place of receipt here mentioned. JNPT. The vessel name is given there.

The vessel voyage number is given there.

Port of loading is given; there is additional information that may be added.

For example, here it is written 5 Pallets, each containing 100 cartons.

Each pallet is five cubic meters as per the packing list.

It can be put here.

And here you can see there are certain changes in the core part of the bill of lading.

Here, the marks and numbers are mentioned. The kind and number of packages cartons hundred cartons of each model.

Here, the model number is not given, but the description is given there.

In the description itself, you can write in brackets these model numbers if you wish.

That is possible.

Net weight, gross weight measurement.

All these things are given there, like in the packing list.

And here are details about the container, details about the original number of the bill of lading.

How many copies are there?

Three copies are mentioned here.

What are the Incoterms?

What is the custom seal number given there, and what is the size of the container?

Is it a 20ft container or a 40ft container?

Container or freight charges, whether they are on a prepaid basis or a postpaid basis.

That means if it is postpaid, they will write, Collect, Freight Collect. And the date of loading of the goods on the ship.

That is very, very important.

The shipped-on-board date is the most important part of the bill of lading because it should be within the date allowed in the letter of credit.

This is very important. In case the date is beyond what is allowed in the letter of credit, then this bill of lading will become a Stale Bill of Lading.

In that case, the bank may refuse to pay without the instructions of the buyer.

The importance of this shipped-on-board date is very, very important because it ensures that the goods are loaded on time.

In case this date is beyond the date that is allowed in the letter of credit, the supplier may not be able to get the payment from the bank against the LC that you had opened. The supplier will have to take your permission as an importer to get the payment and allow the bank to pay you. On your declaration and the instructions to the issuing bank only, the payment will be made to the supplier.

The supplier can only claim the money against the letter of credit if the date shipped on board is within the date allowed in the letter of credit. For you as an importer, if this date is delayed by one or 2, or 3 days, and it does not affect your shipment schedule or your logistics arrangement, and it is not causing any problem for you, you should be able to allow the issuing bank to pay the money.

As an importer, you can instruct the bank to pay the money, even if this date is beyond the date that is allowed in the letter of credit. Place and date of issue of the bill of lading.

Here, it is mentioned that Mumbai and the date are given there.

And the signatory company that is the carrier.

This bill of lading will be signed by the carrier. This original copy has to come to you either through a bank or directly, depending on what are the payment terms.

This original copy, which is three numbers, all three copies should come to you.

All three copies have to be furnished to the carrier to take possession of the goods when the goods arrive at the port of discharge at the port of entry.

This is a sample of the bill of lading.

Import transactions can involve various types of risks, which importers should be aware of to minimize potential losses. Here are some of the most common risks faced by importers in international trade:

Currency risk: Importers are exposed to currency risk, which arises from fluctuations in exchange rates between the importer's currency and the currency of the country from which goods are imported. This can cause the price of imported goods to increase, which can erode profit margins and make it more difficult for the importer to sell the goods at a competitive price.

Commercial risk: Commercial risk refers to the risk of the goods not meeting the importer's requirements or not being delivered on time. This can happen due to various reasons, such as inadequate product quality, shipment delays, or damage to the goods during transit.

Country risk: Country risk refers to the risk of political instability, regulatory changes, or economic factors in the exporting country that could affect the import transaction. This can include changes in import/export regulations, trade sanctions, or changes in currency exchange policies.

Transportation risk: Transportation risk refers to the risk of damage, loss, or theft of goods during transit. This can happen due to various reasons, such as natural disasters, accidents, or theft.

Quality risk: Quality risk refers to the risk of the goods not meeting the importer's quality standards or failing to comply with applicable regulations or safety standards.

Importers can mitigate these risks by carefully researching suppliers, monitoring market trends, establishing sound financial and payment procedures, obtaining insurance coverage, and maintaining good communication with suppliers and other stakeholders involved in the transaction.

Like in exports, imports also entail certain types of risks, which are very normal and can definitely happen in any international transaction.

These are categorized mainly as the most common risks, the first being the transit risk or transport risk.

Whatever may be the mode of transportation—by sea, air, road, or rail—there are possibilities of perils occurring, causing damage to the shipment. These damages can be minor or major.

The loss of goods during transportation is covered under transportation risks.

The second type of common risk refers to quality risks.

Do you think that transactions happening internationally are always honestly executed by suppliers? Whatever sample is shown by the supplier, will he always supply goods of the same quality? And if not, is there any way to ensure that the supplied goods are as per the ordered sample and specifications?

These are the quality risks: whether the goods received by the importer conform to the ordered sample and specifications, and how to ensure that they do.

The third type of very common risk in importation is delivery risks.

This means late or non-delivery.

For example, suppose you are buying goods internationally for a festival season in India, such as Diwali, or someone is importing goods in Europe for Christmas. If the goods do not arrive on time, do you think the importer will be able to sell them?

Seasonal goods must be sold within a specified time frame. If goods are not received on time, the importer will definitely suffer losses. This is called delivery risk.

The fourth common type of risk in importation is foreign exchange risk.

What happens when you order goods, sign the sales contract, but the actual shipment and payment occur much later? There may be a significant gap between the order date and the payment date. During this gap, foreign exchange fluctuations may occur between the domestic currency and the foreign currency, whether that of the exporter or a third currency in which the sales contract is signed.

These fluctuations can result in losses or variations in the expected profits from the business. These are called FX risks.

Do you think these kinds of risks can be managed? To some extent, yes—they can be minimized.

As far as transport or transit risks are concerned, insurance companies can take care of many such risks, whether the goods move by sea, air, or another mode of transport. Insurance policies are available in many varieties with different types of coverage.

What is required is that the importer and the supplier set out in the sales contract what type of cover is to be obtained—comprehensive or minimum. Depending on the expectations of possible losses during transit, the type of cover must be agreed upon. At the same time, the cost of insurance must also be considered, because comprehensive insurance definitely costs more.

The nature of the goods and the type of transaction must justify the higher premium of comprehensive coverage. These factors must be worked out and clearly set out in the sales contract. This is very important.

As an importer, you should always try to obtain insurance cover from your own regular insurance company, preferably located in your own country. You may also opt for a blanket cover, which is bulk insurance valid for a longer period of time if you are frequently importing goods. This is also called an open insurance policy. It offers the cost advantage of bulk billing and the benefits of a regular relationship with the insurance company, often resulting in better premium rates.

Now, talking about quality risks. The objective of any importer is to ensure that the final products received are the same as the sample or at least acceptable to the business.

A few things importers can do are very important. First, investigate the reputation and standing of the supplier. If the supplier’s reputation is good, chances are that, to maintain it, they will supply goods with due diligence and utmost precaution to ensure the goods are as per or better than the sample.

You can also, as an importer, opt for inspection by a third party, for example, SGS, a Swiss company with a presence in most exporting countries. For a certain fee, they will inspect the goods.

The cost of inspection must be weighed against the transaction value and expected profits and included in the sales contract.

Try to make the supplier (the exporter) agree to DA payments if you are going through banks. DA means “documents against acceptance.”

This means you receive the documents—commercial and shipping documents—through the bank with a promise to pay the amount at a later date, usually after the goods have been received.

In case the goods are not as per the sample and there is a serious issue, you can request the bank to stop payment. Mechanisms for this exist. Even if you have promised to pay, you must prove to the bank that the contract was violated and that it was the fault of the exporter, or intentional fraud.

Your effort should be to avoid any legal process later. If you pay and receive bad quality goods, entering into an international legal process is very costly and time-consuming, making it impractical. You must take precautions in advance to avoid such situations.

Here, the role of the importer’s agent in the supplier’s country can be crucial. They can coordinate with the supplier, monitor the process, and alert the importer if anything seems wrong.

Talking about delivery risks—goods not supplied on time—this can seriously impact your profitability and ability to sell goods on time.

If you are re-exporting, you already have timelines, so the goods must arrive as scheduled.

What you can do is make the import contract very specific about the last or latest date of shipment. The contract must be legally binding, making it very difficult for the exporter to default on delivery terms regarding both timing and method.

For example, if goods are to be supplied by air, they must be shipped by air, not by sea.

Such delivery risks can be avoided by including very specific clauses in the sales contract.

If you are using documentary credit through banks, the latest shipment date must be sacrosanct in the LC conditions. If the bill of lading shows a date beyond this, payment should be stopped immediately.

Here also, the role of the importer’s agent in the supplier’s country is very crucial. If they find beforehand that a shipment is delayed, they can alert the importer and pressurize the exporter to ensure timely delivery. If timely delivery is impossible, the importer can make alternative arrangements to avoid missing sales opportunities during festival seasons or other critical times.

Finally, the most tricky part: foreign exchange risk management.

There are many tools available.

The first step is to determine the value of the product in domestic currency and make all calculations of profitability and costs in that currency. This serves as a benchmark to measure deviations when receipts or expenses are calculated in foreign currency.

Based on this financial analysis, you should quote your prices with a margin that covers possible foreign exchange fluctuations.

Ideally, the importer should negotiate the sales contract in their domestic currency. This makes FX risk almost nil.

If that is not possible and the contract currency is foreign (either the exporter’s or a third country’s currency), it is better to enter into a foreign exchange contract through a bank. Banks provide forward rates for expected foreign currency receipts, and such contracts can lock in rates. They do involve costs, so you must factor these into your pricing margins.

Another method of managing FX risk is offsetting fluctuations through export receivables.

If you are also exporting, and the export receipts are in the same currency as your import payables, you can offset one against the other using special bank accounts.

In India, for example, such accounts are called foreign currency accounts.

In certain situations where pre- and post-shipment finance is provided through foreign currency loans in the transaction currency, it is better to repay these loans with export receipts in the same currency.

This is another way of offsetting FX fluctuations.

Incentives for importers vary from country to country and may depend on the specific industry or product being imported. However, some common incentives available to importers in most countries of the world include:

Duty drawback: This is a refund of customs duties paid on imported goods that are subsequently re-exported or used to manufacture goods for export. Duty drawback programs can help importers reduce the cost of imported inputs, making their products more competitive in international markets.

Free trade zones: These are designated areas where imported goods can be stored, processed, or assembled without being subject to customs duties or taxes. Free trade zones can provide importers with cost savings and logistical advantages, as well as access to local labor and raw materials.

Tariff exemptions: Some countries may offer tariff exemptions or reduced tariffs on certain products that are imported to support domestic industries, promote job growth, or enhance consumer welfare.

Import financing: Some governments may provide importers with financing options to help cover the cost of imported goods, such as loans or credit guarantees.

Export promotion: Governments may also provide importers with incentives to export their products either as these are while imported or after reprocessing and repacking, such as grants or subsidies for market research, trade shows, or advertising.

Preferential trade agreements: These are trade agreements between countries that reduce or eliminate tariffs on certain goods traded between them. Importers can benefit from preferential trade agreements by accessing lower tariff rates and expanding their market opportunities.

It's important to note that while incentives can be beneficial for importers, they should also be aware of potential trade barriers or restrictions that may exist in the country they wish to import. It is advisable to consult with local trade experts or legal counsel to understand the specific incentives and regulations in place in the country of import.

Talking about the types of incentives generally available in the import business.

There are a few types, and I am categorizing them here.

For example, imports from bilateral agreement countries.

Many countries, in fact, most of them, have certain bilateral agreements with other countries.

According to these agreements, imports from one country to another and vice versa are either duty-free or available at concessional tariffs.

This is one type of incentive available to importers.

Another possibility is to import within a free trade agreement zone.

This is also called regional economic groupings.

Many countries are part of regional economic groups, within which trade is either completely duty-free or allowed at highly concessional tariffs.

These possibilities exist in free trade agreement zones.

Many governments also have schemes for imports against exports, to promote exports.

Many countries want to promote exports to maintain a healthy balance of payments.

Imports under special local government schemes may also entail certain incentives. We will talk about that.

And finally, imports from GSP countries.

GSP means Generalized System of Preferences.

We will talk about that as well.

Talking about bilateral agreements, as I just mentioned, most local governments have bilateral agreements with several countries.

For example, in the case of India, there is the India-Thailand Free Trade Agreement, which allows absolutely duty-free import of any goods from Thailand and vice versa.

Generally, bilateral agreements may result in either duty-free imports with no tariffs or imports at concessional tariffs.

This has to be explored. Wherever possible, imports should be made from countries with which the home country has bilateral agreements.

Another example of a bilateral agreement is the tripartite free trade zone between North America, Canada, and Mexico, which earlier used to be called NAFTA.

Talking about regional groupings, such as the European Union, ASEAN, or the South Asian Association for Regional Cooperation (SAARC), there are many such groups in the world.

Generally, within these groups, trade is absolutely duty-free or available at highly concessional rates. These considerations should be taken into account by the importer. By sourcing goods from within the regional grouping, a lot of import duty can be saved.

Some restrictions in certain product lines or from certain countries may apply.

Most countries also have several schemes of import incentives if the imports are made for re-export. This means imports of inputs required for the manufacture of goods for export.

Local governments in most countries have several such schemes.

For example, in India, there are schemes like:

• Duty drawback – remission of duty already paid by exporters on exported goods.

• Advance authorization – authorizing the importer to import certain goods even before exporting, under bond, provided the goods are used for manufacturing products that will be exported.

• Basic duty exemption scheme – in India, this is called the DFIA scheme.

• Duty remission scheme.

• Duty-free imports are available in Special Economic Zones (SEZs), which are dedicated 100% to manufacturing for exports, or Free Trade Zones.

The Government of India provides duty-free import provisions under these schemes.

Customs facilities are also available at the gates of many SEZs, making it very convenient to import duty-free inputs required for the manufacture of export goods.

Similarly, companies registered as 100% Export Oriented Units (EOUs) in India can enjoy duty-free imports of goods under this scheme.

These exemptions, remissions, and concessions are not only available in India but also in many other countries. Importers should be well aware of such schemes and check whether their imports fall into any of these categories, to save or eliminate duty.

Many governments in different countries also have special schemes for duty-free or concessional imports of certain items that boost local manufacturing.

For example, in Singapore, import duty concessions are available for certain items if they are sold in Singapore after local value addition. This means the import of intermediate products with some value addition in Singapore, followed by local sales, will enjoy import duty concessions.

Similarly, in India, the government’s Make in India scheme provides duty-free or concessional-rate imports for new investors under the scheme.

Many other countries have similar schemes.

Then there is importation from GSP countries under the Generalized System of Preferences, which is an international convention.

Such GSP obligations exist in rich countries that import goods from poorer countries.

If you are importing goods from developing or least-developed countries and you are located in a developed nation, you can enjoy duty concessions or even duty-free imports for certain items from those countries.

For example, Bangladesh is a beneficiary of this scheme. Many countries source products such as readymade garments and other items from Bangladesh because, under the GSP scheme, local customs apply concessional import duty rates on goods originating from Bangladesh.

The same must be explored for other developing or least developed countries.

If you can source goods from those countries under GSP, you will be able to save on import duties.

But for this, it is important to make sure you acquire the Certificate of Origin from the supplier.

In this case, it should be a special GSP Certificate of Origin.

In the case of bilateral agreements, an ordinary Certificate of Origin generally works for getting concessions under those agreements, as we have already discussed.

These are some of the incentives available for importers in many countries.

Depending on which country you belong to, you have to explore the schemes available in your country.

Import transactions typically involve several costs that importers should be aware of when planning their purchases. Here are several costs that are commonly associated with import transactions and who typically pays them:

Customs duties: These are fees charged by the government for importing goods into a country. Customs duties vary depending on the type of product being imported and the country of origin. In most cases, the importer is responsible for paying customs duties.

Freight costs: Freight costs include the transportation costs for moving the goods from the country of origin to the importer's location. These costs can be paid by either the importer or the exporter, depending on the terms of the sale.

Insurance costs: Insurance costs cover the risk of loss or damage to the goods during transportation. These costs are usually borne by the importer and can be included in the purchase price or paid separately.

Inspection fees: Some countries require that imported goods be inspected to ensure compliance with safety, health, and environmental regulations. Inspection fees are typically paid by the importer.

Bank charges: Importers may need to pay fees to their bank for processing payments, such as letters of credit or wire transfers.

Storage and handling fees: Importers may need to pay fees for storing and handling goods before or after customs clearance.

Value-added tax (VAT) or GST or any other type of local tax: Value-added tax is a consumption tax that is levied on goods and services. The importer is typically responsible for paying the VAT on imported goods.

Importers need to understand the costs associated with their import transactions, as these costs can impact the overall profitability of the transaction. Importers should work with their suppliers and logistics providers to ensure that all costs are clearly communicated and understood.

Some of the very typical types of costs involved in import transactions include commissions and brokerage of overseas brokers, or sometimes home country brokers.

The cost of the container used to bring the imported goods.

The cost of packing — export-worthy packing.

It can be seaworthy or airworthy, depending on the mode of transport you use.

Labor and materials.

Material components and tools, depending on the type of item.

Royalties and license fees may apply if the goods are branded and you are using a brand on the products.

You may also have to pay royalties and license fees, along with the costs associated with the sale of those items, because when you import them, you must sell them in the market.

There will also be distribution costs and warehousing costs.

Such costs of subsequent sales, along with other payments such as the cost of transport up to the place of importation, and even after importation when bringing the goods to the warehouse, will be incurred.

Landing charges, such as Port Authority charges and shipment handling charges, are also included.

There may also be some charges levied by the shipping company.

And of course, the import duties, which we discussed in the last lesson — duties payable to the local government, customs, any levies, surcharges, or taxes.

And finally, insurance.

Insurance in the main transit — carriage by sea or by air, or inland transportation insurance at the seller's place or the buyer's place.

The insurance cost is also a factor.

Do you think these costs can be reduced?

There are many ways to reduce these costs.

I will now attempt to explain how some of these costs can be reduced.

One tip to save costs on imports is to book containers well in advance. If you book in advance, you are likely to get certain discounts.

Every shipping company needs time to plan things out, and if you book containers in advance, there is a strong possibility that you will get heavy discounts.

Avoid any documentation errors to prevent customs-related fines, which can happen either at the seller's end or at the buyer's end.

Especially at the buyer's end, it is very important to make sure that the documents you receive are in order.

Ensure the correct Harmonized System classification — the International Trade Classification of the goods — by having a professional and accurate description of the goods. With any error, customs may classify the product under a different category, which may attract higher import duties.

It is also useful to learn to carry out self-customs clearance.

There are two benefits of doing self-customs clearance:

First, you save money by avoiding charges that must be paid to the CHA (customs house agent), the broker, or the logistics company.

Second, you keep your trade secrets to yourself.

When using a third party, there is always the possibility of documents leaking to your competitors.

It is therefore advisable to learn to carry out self-customs clearance.

You can also save on transit insurance by opting for bulk billing if possible.

If you are regularly importing goods, you can buy transit insurance for a longer duration, covering multiple shipments.

This bulk billing will help you get very attractive discounts on insurance premiums.

If your cargo is not FCL (a full container load) but LCL (less than a container load), it is always advisable to take the help of consolidators.

They will consolidate cargo and give you a much better price per unit of the goods being imported.

Finally, it is always advisable to negotiate with the seller for a CIF contract or a contract under Incoterms in the D category.

In such cases, all the responsibility lies with the seller, taking care of the insurance and handling charges. This way, you can focus on customs clearance and your insurance in your own country.

If you sign FOB contracts, many of the responsibilities fall on you, and it may cost you extra money.

Certain special category import items require special and exclusive understanding to be a successful importer. The same is discussed in the next few lectures.

What exactly are the purposes of the samples that are imported?

Generally, a sample can serve as a specimen for the record of the importer so that he has a benchmark to compare with the actual shipment.

This can help ascertain that the final shipment is as per the sample.

Secondly, importers often import samples to evaluate the quality and how the item has been made.

The sample can be checked for its technical accuracy and the material used — what quality of material has been used, and whether it will serve the intended purpose.

Many times, importers import samples for customer demonstration or familiarization by exposing the sample to potential end users. A sample can also help the importer identify any modifications that may be required in the final product ordered.

It is therefore very important for any importer, before confirming orders, to receive the sample.

Finally, the import of samples for demonstration and familiarization with end users also helps the importer decide on the final quantity of goods to be ordered.

These are the very common purposes of sample import.

Let us look at commonly imported examples of samples.

Examples include consumer goods, consumer durables, prototypes of engineering goods, or even high-value equipment.

It can also be a sample of machinery, which may include agricultural machinery and its accessories.

There can be hundreds of thousands of different types of samples. Whatever is allowed to be imported can be imported as a sample.

Now, talking about who can import these samples.

Any importer from trade or industry, an individual, a company, an association, a research institute, or laboratories, and even the representatives of overseas manufacturers — whether they are coming to the home country, are based there, or located in the seller's country — can import samples. They can carry the samples along or receive them through courier and collect them. All types of individuals, businesses, associations, and research institutes are allowed to import samples.

What is the role of the Geneva Convention of 1952?

Samples are generally exempt in most countries from import duties under the Geneva Convention of 7th November 1952.

For example, India is also a signatory to the Geneva Convention of 1952. However, it specifies that the sample should be a genuine commercial sample received free of cost by the importer. It should not have any commercial value attached to it.

Only then is it allowed as per the Geneva Convention. The individual countries that are signatories to the Geneva Convention can have a realistic limit on the individual value of the sample, and many countries also apply a yearly limit. This means an individual or a company can receive samples free of cost, without paying any import duty, only up to a certain value or quantity.

The yearly limit can be in the form of quantity or value.

Talking about restrictions that apply to the import of samples — generally, in most countries, prohibited items are not allowed for importation, and restricted items require prior permission from regulatory authorities.

For example, in India, the Directorate General of Foreign Trade (DGFT) is the regulatory body for this purpose. For restricted items, the importer has to apply to DGFT.

Similarly, in other countries, similar organizations exist that can be approached to get permission for the import of restricted items.

In most countries, as per the Geneva Convention, there is an individual value limit for every sample imported for exemption purposes.

There is also a yearly limit, and this yearly limit can vary depending on the category of items.

For example, in India, apart from the individual limit of INR 5,000 for general samples and INR 10,000 for machinery, the yearly limit is INR 75,000 or 15 units for non-gems and jewelry items, while for gems and jewelry items, the yearly limit is INR 300,000.

Every country may have different categories of items and different limits, both individual and yearly.

There is also a concept of privacy of imported samples. Why is it required?

Generally, samples are very important for the importer, because if he is importing something for the first time, he would never want the sample to fall into the hands of competitors or unscrupulous persons.

Most customs authorities around the world provide the facility of privacy for importing samples.

This facility generally applies to high-value or unique security items, or new and innovative items.

Under this facility, local customs seize the specimen or sample at the place of importation — such as an airport, seaport, or customs terminal. Customs will seal the specimen, and it will only be unsealed at the place requested by the importer — either the importer’s warehouse or the location of the customer demonstration.

This kind of privacy facility for imported samples is provided to protect sensitive items.

Sometimes, samples received may not be useful because they get damaged in transit or are sent incorrectly.

In such cases, while import duty exemption is available (as the samples are imported free of cost), they can also be re-exported without issuing a commercial invoice, meaning there is no need to seek remittance for the re-exported sample.

However, re-export must be done within a specific time limit.

For example, in India, this time limit is nine months.

What are the different types of personal use imports?

Any import, direct or indirect, for personal use can be considered.

It can also be the import in personal baggage, which is accompanied when you return to your home country from abroad.

There is no clear-cut definition for personal baggage or personal use.

For example, in India, it has been simplified that any item allowed for importation up to INR 100,000 in value is designated as an item for personal use.

Imports for personal use in India do not require an importer-exporter code number or any kind of license.

Talking about personal baggage, in most countries, up to a certain limit, personal baggage is also exempt from import duty.

For example, in India, the personal baggage import limit is INR 40,000.

What are the things to consider before importing goods for personal use?

The first step is to check the ITC HS code of the item being imported for personal use, and to check whether it is in the free list (OGL – Open General License), in the restricted list, or in the prohibited list.

Only the items in the OGL (Open General License) can be imported for personal use.

Secondly, you have to check the landed cost, because that is very important. In most countries, landed cost defines what qualifies as personal use and what does not.

For example, in India, personal-use items should not have a landed value plus 20% of more than INR 100,000.

Different countries have different limits.

Specifically, if we talk about import through baggage, in most countries, the baggage rules apply.

For example, in India, the Baggage Rules of 1988 apply.

There can be two types of personal baggage:

1. Accompanied baggage.

2. Non-accompanied baggage.

The baggage rules provide all rules and regulations for these two different types of personal baggage.

In the personal baggage rules, the status of the person also matters — whether it is a resident tourist, for whom rules and regulations are specified, or a person relocating to their home country.

In this case, for India, the Indian Baggage Rules of 1988 provide different clauses, rules, and regulations for persons intending to relocate to India with personal items.

The rules and regulations are also different for diplomatic baggage, meaning personal items imported by diplomats or people working in embassies and high commissions in the home country.

Additionally, there are separate rules in India’s Baggage Rules of 1988 about crew members. In many countries, similar differences exist in baggage rules.

Talking about personal-use items imported through registered couriers, baggage rules do not apply.

Generally, there are separate rules for imports by courier for items for personal use.

For example, in India, the Courier Imports and Exports Regulations of 1998 apply. Many other countries have very similar regulations.

As for imports by UN officials, in most countries, it comes under the jurisdiction of the UN Act of 1947.

According to this act, personal-use items imported by UN officials are exempt from import duties.

It applies to UN officials, their authorized agencies, and the people working with them.

This act applies to all UN member states.

Typical Details of Importing Selected Categories of Goods

Understanding the specifics of importing various categories of goods is crucial for compliance and efficient trade practices. This lecture delves into the nuances of importing gifts, scrap materials, IT hardware, and pharmaceutical products, highlighting the regulations and restrictions that apply to each category. So in the next lecture, we will cover the following topics.

1. What is an Imported Gift?

2. Restrictions on Importing Gifts

3. Importing Scrap Materials

4. Types of Scrap Typically Allowed for Imports

5. Types of Scrap Typically Not Allowed for Import

6. Major Importers of Metal Scrap

7. Importing IT Hardware

8. Second-Hand IT Hardware

9. New IT Hardware

10. Trends in IT Hardware Imports

11. Importing Pharmaceutical Products

12. Regulations

What is an imported gift?

Any low-value item received from a person or an organization, associated partners, friends, or relatives from abroad is considered a gift if it is sent as a gift without any commercial value and free of cost.

The sender may not necessarily be residing in the country of origin from which that item has originated.

What are the restrictions for the importation of gifts?

First of all, in most countries, prohibited items are not allowed as gifts.

Restricted items require prior permission from the regulatory authorities.

For example, in India, the regulatory authority is DGFT (Directorate General of Foreign Trade). One needs to apply for permission from DGFT with the ITC HS classification of the gift item so that they can determine what kind of treatment should be given and whether permission should be granted or not. The ITC classification will define it.

Value limits apply for such importation.

For example, in India, the maximum value for a gift item is INR 5,000.

In Canada, it is 60 Canadian dollars.

The type of scrap generally allowed for importation can be metallic waste or scrap, several types of waste materials that do not pose any danger or threat to the health and life of people in the home country, or things like waste paper and woolen waste.

In the case of woolen waste, it should be fully mutilated. PET waste (PET plastic waste) can also be imported into many countries, as well as retired old ships or waste machinery.

Old ships are generally imported into countries where there are facilities to break them.

For example, in India, there is an entire town devoted to the shipbreaking industry.

In India, it is allowed to import old ships broken into pieces into industries located there.

Types of scrap generally not allowed for import include e-waste. For example, in India, it is banned.

Metallic waste originating from war-torn regions or countries is generally not allowed because it may contain arms, ammunition, or live shells, which can pose a danger.

Most countries’ customs authorities do not allow waste coming from such regions.

Solid plastic waste is also banned in many countries.

Scraps that may contain radioactive material are not allowed.

Scraps that may contain used or unused arms and ammunition are also not allowed in most countries.

The largest importers of metal scrap are countries that import the maximum amount of metal scrap.

At the top is Turkey, which is far ahead of the others.

Second is India.

Third is the United States, followed by South Korea, Taiwan, the European Union, Mexico, Indonesia, and Canada.

These are the trends of global metal scrap imports.

IT hardware for importation purposes is of two types:

1. Second-hand used IT hardware.

2. New computer hardware, laptops, and parts.

In most countries, there are restrictions on the import of second-hand IT hardware, especially laptops and computer parts.

Because of climate concerns, many countries have either banned second-hand IT hardware or imposed restrictions.

For example, in India, second-hand IT hardware is banned except for certain charitable purposes.

If someone donates computers or laptops to a recognized charitable organization or educational institution in India, it is allowed. Otherwise, it is banned.

As far as new IT hardware is concerned, it is freely importable with varying degrees of import tariffs in different countries.

For example, in India, the import tariff, including GST, is 29.5% for IT hardware.

In addition, in India, individuals can bring one laptop as personal baggage duty-free if they are returning from abroad.

This exemption is available in most countries.

Second-hand IT hardware is also allowed in some countries as donations for non-commercial purposes, including India.

Looking at IT hardware import trends globally, in the financial year 2021, the business saw a substantial rise in demand for IT hardware and ICT (Information and Communication Technology) goods due to the pandemic.

Because of the increased work-from-home culture, demand surged worldwide.

The world market as a supplier is dominated by six to seven companies, which account for almost 70% of the global market share.

This is a unique feature of this market.

Some countries are heavily dependent on imports for ICT goods and needs.

For example, India is highly dependent on imports but is slowly building a manufacturing base.

Many countries are self-sufficient in the manufacture and sale of IT hardware, including the US, China, and Germany.

Yet, they are also the top importers of ICT goods.

At the top is the US, followed by China and then Germany.

These are the top importers of ICT goods and IT hardware globally.

The import of pharma products, drugs, and medicines is highly regulated by local governments.

For example, in India, the Drugs and Cosmetics Act of 1945 governs the import of pharma products and medicines.

In many countries, any new drug or formulation may have special restrictions.

For example, in India, new drug approval is required under the Drugs and Cosmetics Act of 1945.

The situation is similar in other countries.

For example, in the USA, the Food and Drug Administration (FDA) has a highly regulated mechanism for allowing imports of new drugs.

In general, there are extensive regulations governing pharma products and medicines worldwide.

Let us first understand what the legal requirements are for importers in any country if they wish to import anything from China.

Legal requirements are very normal, which exist in most countries. There are no special legal requirements imposed by local governments while importing from China.

Usually, things like an importer-exporter code number or tax registration are required for the firm that wishes to import anything from China.

However, in some countries in recent times, there have been certain regulations for the import of goods from China.

For example, there are embargoes on some products in India and the US.

There are certain trade regulations in the US.

What are the typical steps for the importation of goods from China?

Let us look at this.

We have to start, like in any country, by first finding out what products we want to buy from China, because China is a manufacturing base for so many items.

You have to identify which products you can easily sell in your country.

The second step is to find a good manufacturer or supplier for that particular product.

In the next slides, I will talk about different online resources available for supplier searches in China. You can search for suppliers via large agencies such as Alibaba and many others, which I will mention in the next slide, or through third-party service providers who help with goods procurement.

Some people specialize in helping with the importation of goods from China to a particular country.

They are well-conversant with the Chinese market.

They speak your language.

If you can locate people who spend a lot of time in the Chinese market, they will have very good knowledge of China.

China is a very large manufacturing base.

It is very difficult for newcomers to succeed on the first attempt.

Most new suppliers take the help of third parties.

Then you have to contact the supplier and negotiate a deal with them.

Things like fixing a price, order quantity, and frequency of shipping must be discussed.

If you can book bulk orders, you can get very good discounts.

It is best to first order a few samples to ensure that the products are of high quality. It will also help you gauge how long the shipment is likely to take for customs clearance when you order bulk quantities, and what types of delays you can expect along the way.

This will serve as a trial run for you.

Next, you need to go through the import laws and regulations to ensure you have all the documents and licenses required.

For example, in certain countries in recent times, there have been regulations for the importation of goods from China. In any case, items that you are planning to import from China should meet the local guidelines, classifications, and any restrictions or negative lists.

These have to be checked.

Then you have to coordinate with the freight forwarder or NVOCC (Non-Vessel Operating Common Carrier) to help you manage your shipments.

You need to find a specialized freight forwarder who deals with imports from China to your country.

You also need to prepare for handling the legal documents with the local customs and local government, like the Bill of Entry, and also carry out shipment financials, calculation of the landed cost, and ensure that the landed cost is in line with your expectations.

Finally, you have to keep records of the shipments and carry out any local compliances after receipt.

Compliances vary from country to country.

These things have to be carried out.

The helpful websites to search for Chinese suppliers are:

• Alibaba.com

• AliExpress

• Hong Kong Trade Development Corporation website

• Canton Fair website

• GlobalSources.com

• Made-in-China.com

These are some of the very popular websites to search for suppliers in China.

Some of the products that are suggested for imports from China, depending on your country and what kind of products you can sell, include:

• Clothes and textiles

• Motor vehicles, accessories, and spare parts

• Electronics, smartphone components, smartphones

• Smart TVs

• Pharmaceutical products

• Plastic items, including toys

• Heavy machinery items, capital goods

• Organic fertilizers

• All types of consumer products

You can choose the items and categories you want to enter for importation from China, depending on the research you carry out in your home country and market demands.

Some tips on importing goods from China:

You should be ready to expect delays in shipments coming from China.

It might be a committed period, but there may be delays.

You have to factor in the possibility of delays when planning timelines.

This is very important to avoid losing clients in your country.

You have to choose a good and experienced freight forwarder who specializes in customs clearance and forwarding of China-made products.

It may not be the cheapest freight forwarder, but it is very important to find a reliable one.

Once you order goods from China, you should keep a constant track of your cargo.

That is very important.

You will get an idea of the progress of the shipment, when you can expect the goods, and what delays, if any, are occurring.

These things can be tracked online.

Generally, depending on your business volume, it is better to visit China frequently to know the local market, or at least explore new suppliers online to find price deals on your target products.

Because China has a very large manufacturing base, constant exploration of new suppliers with better prices and deals will help you.

If required, take the help of third parties to get better deals and suppliers.

This kind of constant effort will be very profitable.

Keep in constant touch with the suppliers and ask for clarifications whenever needed.

It is very important to be specific about your requirements so that you and the supplier are on the same page.

If you are buying in bulk, don’t forget to ask for the substantial discounts you are likely to get.

Hello friends!

Some more tips on importing goods from China:

You have to be very focused on the sales contract because it should be detailed and specific.

It is better if you have a translation in Chinese as well.

Focus on exact and detailed specifications and samples of the goods ordered.

There should not be any communication gaps.

The contract should be translated into English and Chinese.

You should also check if the goods manufactured in China meet local product standards, especially for importers in Europe.

European standards must be matched by Chinese manufacturers.

The majority of Chinese manufacturers do not meet European standards, but many do, so this must be thoroughly checked.

It is good practice to attach detailed clarifications of the Incoterms agreed upon, because there can be ambiguity in interpreting Incoterms. Clarify payment terms as well.

All aspects of payment and Incoterms must be clearly defined.

Insist on the last date of onboard delivery in the sales contract.

That is very important to avoid delays.

Never agree to advance payment terms, especially when dealing with a manufacturer for the first time. It is always better to prefer payment through a letter of credit.

Remember, in China, negotiating a price based on volume is the key.

If the volume is high, you can get a very good price.

Friends, the things you should do: you should always try to work on LC terms in importation because it takes care of your interest, and it is the best method of payment.

Always import restricted items as per the procedure laid down by the local foreign trade policy. If there are any restricted items as per the home country, the same should be cleared from customs with due diligence.

It should follow the correct procedure.

You should be well aware of the procedure in advance.

It is a good practice in importation to allow payments of the bills of the suppliers not beyond six months.

Any bill that is beyond six months should be avoided.

The payment should be made within six months.

Allow payment of the overdue interest on sight bills for a period not exceeding six months because that is the local requirement.

For example, in India and in many countries, this requirement is there. In the case of payment to be made to the overseas agent, allow commission as per the local foreign exchange regulations and guidelines.

Most countries have regulations and guidelines for the payment of commissions abroad.

Always verify the imported items supplied against what is given in the LC.

The description should match.

Issue amendments to the letter of credit only based on a written request.

You should never apply for an amendment of the LC based on oral instructions.

It is a good practice to verify whether the payment method in the letter of credit is done as per local foreign exchange regulations and guidelines.

Every country has its own foreign exchange rules and regulations, according to which the LC may have a different structure, so it should comply with the local foreign exchange rules.

In many countries, the documentary credit through DA terms, that is, documents against acceptance, allows the usance period not to exceed 180 days. Like in India, this rule exists. In many countries, this limit applies to DA. You should be aware of that, and accordingly, you have to act.

It is a good practice to allow the opening of a transferable LC, provided the transfer is restricted to a specific second beneficiary whose credit report is satisfactory.

Not only the first party but also the third party to whom the LC has to be transferred requires due diligence, and a credit rating is required for that party. You should be very careful when issuing transferable letters of credit.

Verify the letter of credit application form to ensure that it is properly filled out and stamped.

Any LC instruction that you make to the bank should be thoroughly checked.

All the details and stamping should be meticulous.

Always be quick in reporting to the suitable local authorities if the Bill of Entry is not received from customs, because that is a very important document.

Keep one copy of the shipping documents, all the shipping documents, invoices, and other papers for future inspection by the local customs or central banks.

What you should not do in the import business:

Never open an LC without proper transport documentary conditions.

The need for transport documents in the LC should be the prime objective.

Never allow an advance payment without proper documentation. Never make advance payments to new suppliers. It is always better to go through the letter of credit route. Never import prohibited or restricted items without an import license and compliance with the local procedures as prescribed by the local governments. Never allow direct remittance of import bills beyond the prescribed limit and without the exchange control copy of the Bill of Entry.

This is very important because this exchange control copy is for the central banks that are taking stock of all the goods coming to the country, the home country, and the payments being made.

Never open a revolving LC without a safety clause.

A safety clause is required because a revolving LC is a kind of bulk LC that can be revolving six times, 12 times, or even more.

Things change with time.

There should be a safety clause attached to it.

An interesting closing case study is discussed based on the real events. Names of the persons and firms mentioned in the same have been changed for privacy reasons. However, the educational and learning value is not hampered by these changes.

Hello, friends.

Welcome to this second case study of this course.

This case study is titled Coffee Import from India by a company called Double Dip, based in Schöneberg, Berlin.

Let us look at the case study from the perspective of learning the concepts taught in this course. Let me tell you first the story of this company, Double Dip. One might initially skip over this coffee shop, a very small coffee shop in Schöneberg, a western Berlin neighborhood, a bit off the standard tourist trail.

But it is worth the trip if you are dedicated to starting your day with great coffee at cheaper prices than other shops in the vicinity or in that area.

After all, you are drinking coffee straight from the 2007–2009 world espresso-making champion, Mr. Arnold.

This café is a small one, but quite famous in that area.

You must also notice the unorthodox working hours of the café that start at around eight hours, 29 minutes, and end at 11 hours, 33 minutes.

Mr. Arnold inherited this place and brand from his father, who started this business in the times of East Germany.

Now the second generation, that is Mr. Arnold, is looking at importing premium-quality coffee beans from outside Germany, from the best places in the world.

That is his vision going forward.

He plans that after securing the importing rights, that is, registering for the EORI code number, which is mandatory for carrying out any export or import activities in Germany from the German authorities, he would import the first consignment in his existing company name, Double Dip Coffee Spa. He did three months of desk research. He tried to find out which are the best sources for premium-quality coffee beans.

And who are the big players?

What are the weaknesses and strengths of different sources?

Where are the cultivation and the plantations of coffee being done, and which are the best coffee estates in which countries?

He zeroed in on, to start with, a place called Coorg, which is in the state of Karnataka in India. He found something very interesting here.

According to his desk research, he had a very strong conviction that he would be able to make out what he was looking for to start with.

Mr. Arnold planned to visit India and spend around four weeks there to visit the different coffee estates and study the estates with which he had already corresponded during his three months of research.

He had certain contacts. He also contacted one person to guide him during his stay there, talking to the right people at the right places.

Although he had the addresses, the local language would have been a problem.

The local translator would also help plan out everything, every eventuality for this.

When he visited India, he settled in a coffee estate villa located in the heart of the Coorg coffee estate belt. Coorg has different coffee estates—hundreds of them, large ones and smaller ones.

Many of them also have tourist villas, most of them to earn some extra money.

He chose one of the places there.

Interesting place to stay.

From there, he visited several coffee estates that he had contacted during desk research.

He found—and he had already suspected—that there were many post-harvesting mistakes which the coffee farmers and growers were making in that area, and that was what had attracted him to this place.

Mistakes were easy to correct, and correcting them would mean big gains for both the farmers and Mr. Arnold’s company.

That was the idea.

He saw strong potential for further value addition simply by reducing the post-harvesting mistakes being made by Indian growers in that place.

That was the idea he got.

He suggested the transformation of the growing methods and post-harvest methods. He realized that the coffee quality score of the Coorg coffee estates was very low, despite being naturally shade-grown; Robusta and Arabica coffee scores could be significantly increased.

That is what he realized—up to almost 85 from the current 60 to 62, according to the industry benchmark SCAA rating.

That is the Specialty Coffee Association of America rating, which is an industry benchmark.

By doing this, he realized that it was a win-win for both the exporter as well as the importer, that is, Mr. Arnold.

He realized that if he could bring it to an 85 level of score, it would become a premium coffee, and he could sell it very easily in Germany, distribute it in Germany, and get a very handsome price for the coffee.

That is why he was there. He wanted to spend a good amount of time in India, looking at the poor post-harvesting techniques that he studied there.

One example was that the Indian farmers of coffee were harvesting and processing cherries of all stages—less ripe, medium ripe, and fully ripe—as well as different varieties of coffee, all mixed.

The result was an inconsistent cup taste and lower quality of the coffee.

This was the situation he had guessed—and in reality, it was even worse than he had guessed.

That situation was correctable. That was what he realized, and it was a very simple correction.

No major investment was required for that purpose.

He realized that the need was to train Indian coffee farmers for better post-harvesting techniques.

An example of this is through training in post-harvest techniques such as segregation of the ripened cherry, segregation of different stages of cherries, harvesting and processing of the different varieties separately and individually, as well as drying the coffee beans to proper moisture standards.

Mr. Arnold had hit the jackpot by digging out this weakness of Indian coffee in Coorg, which, by simple means and training, he could turn into premium-quality coffee with a score of almost 85, according to the SCAA rating.

This was very interesting.

He realized that he could start the training. He had thought of a training team that would visit one of the targeted coffee estate farmers.

Over there, this team would train them.

This backup he had already arranged in Germany, and he gave the timelines, signed an MoU with the particular coffee estate, and agreed on the training, the assurance of the price, and the quantity for the first consignment.

What he found, after coming back to Germany and sending the training team to Coorg, was that the farmers learned the post-harvesting techniques very quickly, and the results were fast and visible.

As per expectations, the score reached almost 85 to 86 for the coffee.

He visited again a few months later and placed the first order for the first consignment of coffee with this particular coffee estate.

It was more of a pilot project for him because he wanted to be very sure that the consignment he would get was as per the plan.

The quality was so good, actually, in the first consignment that he found no problem in distributing and selling the coffee beans in Germany at different locations.

This was the most interesting part of the efforts made by Mr. Arnold.

And this was the initial and first success of Mr. Arnold.

His desk research helped a lot. Throughout the entire process, Mr. Arnold had a great focus on the different areas of the process, both in the home country, Germany, as well as the host country, India, to meet the legal and non-legal requirements of both markets.

For example, things like food safety in terms of traceability, hygiene, and control, and the quality of the beans—which he had already worked on, trained for, and checked—were all measured according to the SCAA rating, which was used for the quality standards of different varieties.

The labeling requirement of the German government was the Sustainability and Organic Certificate, which is part of CSR requirements. The products in the consignment had to carry the Sustainability and Organic Cultivation certificate, ensuring they were free from pesticides and molds.

This was a great success story of Mr. Arnold. In this case study, I have changed the names and the places for privacy purposes.

But it is a real story.

A real case study.

The idea is for educational purposes. The events are real, but the names have been changed.

In this particular case study, my idea was to show you that there can be different ways of making both ends meet and gaining profit from an import transaction.

As you can see from this case study, Mr. Arnold's focus was 360 degrees—both in the home country as well as the host country.

He spent a good amount of time on research and study. He visited India, spent time there, and met the farmers. He even trained some of the farmers, which further led to expanded training for other farmers. He created a new method of training and ensured that every person in the fields of the estate learned about good post-harvesting practices. He also introduced some ISO standards and helped the estate obtain them.

European standards, which would have been helpful, also assisted in obtaining the Sustainability and Organic Plantation certificate. Although there was no legal requirement, the CSR requirement helped in marketing the products in Germany.

Overall, his intentions were very good.

He wanted a good product, good quality, and to sell at premium prices, while also giving a very good price to the estate.

The coffee estate had already been exporting the beans at a lower price, but he paid almost 50% extra because the benefits to the coffee estate were due to the improved post-harvesting techniques and practices. He shared the benefits of these better practices.

This brought a lot of motivation among the managers as well as the farmers at the estate to adopt the new practices.

A 50% premium was a very good incentive for them.

It was a win-win situation for both the exporter and the importer.

This case study is a very good example for newcomers who want to import goods from outside their country.

It shows what they have to go through, what steps they should focus on, and what information they should seek out.

All these things have been discussed in this case study.