How to Understand the Import Export Procedure?

The import export procedure is considered as a systematic procedure which is followed by businesses to expand globally. Many business plans to set up a trading company, or wants to start importing or exporting of goods to another country from India. So, this is a valid reason to understand the import and export procedure. However, any entrepreneurs who want to expand their import export business globally need to know the proper steps and rules to avoid delays. In this piece of writing, you will get a step-by-step guide about the import export procedure and more.

What are Import Export Procedures?

Imports and exports in India are managed by the Foreign Trade (Development and Regulation) Act, 1992. This act contributes the central government with the power to prohibit, restrict, or regulate the inflow and outflow of goods and services. It has replaced the previous Import and Exports (Control) Act, 1947. This act also empowers the federal government to develop and standardise foreign trade by prohibiting, restricting, or regulating imports and exports. You will find the updated provisions for exports and imports in the Foreign Trade Policy, 2023.

Import and export procedures involve the right licenses and adherence to all regulations. The general steps will involve obtaining an obligatory Importer-Exporter Code (IEC) and other necessary registrations. Then, it is important to manage customs clearance and paying the required taxes for goods to move across borders.

Steps Involved in Import Export Procedure in India

Here is a detailed overview of the Import Export Procedure:

Import Procedure

Step 1: Obtain e-IEC

Firstly, every business needs to get an electronic Import Export Code (IEC) in India. This is a 10-digit unique number, which is issued by the Directorate General of Foreign Trade (DGFT). This code helps to clear customs, send shipments, and send or getting money in foreign currency. The registration process takes approximately 10-15 days to get an IEC. Thus, it is not compulsory to get an IEC for service exports unless the service provider wants to claim benefits under the Foreign Trade Policy.

Here are the scanned documents required for an IEC application:

Proof of establishment, incorporation, registration.

This can include: Partnership, Registered Society, Trust, Hindu Undivided Family, and Others

b) Proof of address

The address proof can include

Sale Deed, electricity bill, rent agreement, telephone land line bill, mobile, postpaid bill, Partnership deed, and Memorandum of understanding (MoU).

Other acceptable documents for proprietorship only can include Aadhaar card, passport, voter ID, etc.

If the address proof are not in the name of the applicant firm, then, a no objection certificate (NOC) from the property owner and address proof will be submitted as a PDF document.

c) Proof of firm’s bank account

The bank account documents can include: Cancelled check and Bank certificate

In the process of import-export code registration, the Directorate General of Foreign Trade (DGFT) system verifies the Permanent Account Number (PAN) and other information with the Income Tax Department. It signifies that the IEC certificate can be generated in a single day. This code was valid for the entire duration of the existence of the business prior to a rule change in 2021. The requirement for renewing an IEC has been changed in a February 2021 notification.  This means that every holder of an IEC number must renew their IEC certificate annually between April and June.

Step 2: Ensure legal compliance under different trade laws

Once a business has received its IEC, then they will be able to import goods. They must follow the rules of Section 11 of the Customs Act (1962), Foreign Trade (Development & Regulation) Act (1992), and the Foreign Trade Policy, 2023.

There are certain items which are not covered by an Open General License. These kinds of items are subject to regulation and typically fall into three categories. The three categories can include:

1. Items that are restricted and require an import license
2. Items that are banned or prohibited
3. Items that are “canalized”

Thus, this outlines that only government-led companies can import them after cabinet approval.

Step 3: Procure import licenses

If an importer wants to know whether their license is required to import a specific commercial product or service, then they need to classify the item. The item will be classified by identifying its Indian Trading Clarification, which depends on a Harmonized System of Coding or ITC (HS) classification.

ITC (HS) is one of the chief methods of classifying items for trade and import-export operations in India. This is an 8-digit alphanumeric code issued by the Directorate General of Foreign Trade (DGFT). This code represents a certain class or category of goods. This code helps importers to follow regulations for those goods. The first 6-digit code is the common code within the 8-digit code as per the World Customs Organisation (WCO). There is an additional 2-digit code is added.

The ITC (HS) Schedule I and Schedule II specify the item-by-item import or export policy. This policy is in effect on the date of import or export which outlines the importability and exportability of an item.

An import license can be a general license or a specific license. In general license, goods can be imported from any country. On the other hand, a specific or individual license has authorised the import only from specific countries.

Import licenses are applicable to import clearance and renewal. This is usually valid for 24 months for capital goods or 18 months for raw materials components, consumables, and spare parts.

Step 4: File Bill of Entry and other documents to complete customs clearing formalities

Once an importer has an import license, then they must provide an import declaration to custom official by using the prescribed Bill of Entry and permanent account number (PAN). These document depends on the Business Identification Number (BIN), as per Section 46 of the Customs Act (1962).

A Bill of Entry provides information on the exact nature, precise quantity, and value of goods which is landed or entered inwards in the country.

When the goods has been cleared through the Electronic Data Interchange (EDI) system, there is no formal Bill of Entry is filed. It is because it is generated in the computer system. Thus, the importer is required to file a cargo declaration after prescribing particulars after prescribing particulars for processing entry for customs clearance.

In the case of Bill of Entry is filed without using the EDI system, the importer must submit supporting documents. The supporting documents can include a certificate of origin, bill of exchange, certificate of inspection, commercial invoice cum packing list, etc.

Once the goods have been successfully shipped, the customs officials examine and assess the information. The information are furnished in the bill of entry and matches it with the items related to import.  In the case of no irregularities, the officials will issue a “pass out order” for replacing the imported goods from customs.

Step 5: Determine the import duty rate for clearance of goods

India has levied basic customs duty on imported goods as per the first schedule of the Customs tariff Act, 1975. It has also levied good-specific duties like anti-dumping duty, safeguard duty, and social welfare surcharge.

Moreover, the government has also levies an integrated goods and services tax (IGST) under the new GST system. The rates of IGST for imported goods are determined with their classification as per the Schedules notified under Section 5 of the IGST Act (2017).

Export Procedures

Step 1: Obtain Import Export Code (IEC)

In the process of export, it is also important to obtain an IEC number from the regional joint DGFT to export goods to other countries from India. Once the exporter has obtained this code, they will be able to process shipments.

Step 2: Certificates of Origin

As an exporter, you must register with the Indian Chamber of Commerce (ICC) to get a Non-Preferential Certificate of Origin, which certifies the origin of the goods.  

Step 3: Export Documentation

The shipping bill is considered as the primary document which is required to export goods. Other necessary documents can include the Commercial Invoice, Packing List, and any other required export licenses.

Step 4: Customs Clearance

Once you have submitted your shipping documents, the goods will be inspected by the customs officials. When everything is in order, the shipment for export will be approved by customs.

Key Documents for Import and Export

Listed below are the key documents for Import and Export:

However, the additional documents, such as a certificate of origin and an inspection certificate, might be required as per cases.

The regulatory documents can include:

1. GST return forms such as GSTR 1 and GSTR 2
2. GSTR refund form
3. Exchange Control Declaration
4. Bank Realization Certificate
5. Registration cum Membership Certificate (RCMC)

Conclusion

Therefore, the import export procedure is important for every business that wants to expand globally from India. The procedures can include several documentation and other necessary registrations. If they follow the proper rules and steps, they will easily import or export goods to other regions from India. This helps to maintain smooth operations and makes business succeed in the international market. If you have any queries about it, contact Online Legal India.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.

FAQ

Q1. What is the Import Export Procedure?

Import export procedure is the stage-by-stage activity that a business enterprise ought to take in the movement of goods or services across international borders. It includes customs clearance, documentation, transport, and payment formalities. Import and export procedures need to be understood properly by the organizations taking part in international trade for the purpose of compliance with regulations and to facilitate smooth flow.

Q2. Why is it Important to Understand the Import Export Procedure in Business?

The understanding of import exportation procedures helps enterprises avoid legal problems, delays in shipment, and helps to reduce excessive costs.

Q3. What Is the Main Process of Import and Export?

The import and export process generally involves the following stages:

1. Pre-shipment preparation includes the identification of a product, seeking an appropriate market, and subsequently finding a reliable logistics partner.
2. Documentation: Both importers and exporters have to prepare certain documents, which include commercial invoices, packing lists, bills of lading, and certificates of origin.
3. Customs Clearance: Goods must clear customs at both the importing and exporting countries' boundaries to be allowed into or out of the country.
4. Shipping & Transport: Once cleared, merchandise is shipped to the destination, whether by sea, air, or land.
5. Follow-up after shipment: Final delivery, checking up, and processing payment are important in completing the trade.

Q4. Are there any common challenges in the import export procedure?

Yes, some of the common challenges in the import export procedure include:

1. Customs Delays: This can be caused by incorrect documentation or not meeting regulatory requirements.
2. Tariffs and duties vary from country to country, which can add to costs.
3. Logistics and Shipping Issues: There may be shipping delays or damage during transit when goods are to be moved across borders.

Q5. How Do I Track My Shipments During the Import Export Procedure?

Most logistics companies offer a tracking system through which you can track your shipment in real time. You must make sure that you receive the necessary tracking number and always keep communication open with your carrier or freight forwarder to be updated on the status of your shipment.