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Assignment

Assignment

International Business & Finance International Business & Finance

Topic: Procedure of Import Documents Topic: Procedure of Import Documents

Submitted to: Prof. Muhammad Akram

Submitted to: Prof. Muhammad Akram

Submitted by: Abubakar Riaz

Submitted by: Abubakar Riaz

Roll.

Roll. No:

No:

478

478

Section:

Section:

G

G µMorni

µMorning¶ 

ng¶ 

Semester:

8

Semester:

8

thth

Hailey College of Commerce

Hailey College of Commerce

University Of The Punjab University Of The Punjab

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Table of Contents

Table of Contents

Imports:

2

Imports:

2

Types

Types of

of import

import

2

2

Role

Role of

of the

the Inter

Internet

net

2

2

Letter

Letter of

of credit

credit

3

3

Terminology

3

Terminology

3

International

International Trade

Trade Payment

Payment methods

methods

4

4

Documents

6

Documents

6

Procedure

30

Procedure

30

Flow

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Imports:

Imports:

The term "

The term "importimport" is derived from the conceptual meaning as to" is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of  bring in the goods and services into the port of a country. The buyer of  such goods and servi

such goods and services is ces is referrreferred to an "importer" who is based ied to an "importer" who is based in then the country of import whereas the overseas based seller is referred to as an country of import whereas the overseas based seller is referred to as an "exporter".

"exporter".[1][1] Thus Thus an an import import is is any any good good (e.g. (e.g. a a commodity)commodity) or service brought in from one country to another country in a legitimate or service brought in from one country to another country in a legitimate fashion, typically for use

fashion, typically for use in in trade. It trade. It is a good that is a good that is brought in fris brought in fromom another country for sale.

another country for sale.[2][2] Import goods or services are provided toImport goods or services are provided to domestic

domestic consumers consumers by by foreign foreign producers. producers. An An import import in in the the receivingreceiving country is an export to the sending country.

country is an export to the sending country. Imports, alon

Imports, along with g with exports, forexports, form the bm the basis of asis of international trainternational trade.de. Import of goods normally requires involvement of thecustoms authorities in Import of goods normally requires involvement of thecustoms authorities in both the country of import and the country of export and are often subject both the country of import and the country of export and are often subject to import quotas, tariffsand trade agreements. When the "imports" are the to import quotas, tariffsand trade agreements. When the "imports" are the set of goods

set of goods and services imported, "Imports" also means theand services imported, "Imports" also means the economiceconomic value

value of of all all goods goods and and services services that that are are imported.imported. The macroeconomic variable I usually stands for the value of these imports The macroeconomic variable I usually stands for the value of these imports over a given period of time, usually one year.

over a given period of time, usually one year.

Types of import

Types of import

There are two basic types of import: There are two basic types of import:

1.

1. Industrial and consumer goodsIndustrial and consumer goods 2.

2. Intermediate goods and servicesIntermediate goods and services

Companies import goods and services to supply to the domestic Companies import goods and services to supply to the domestic market at a cheaper price and better quality than competing goods market at a cheaper price and better quality than competing goods manufactured in the domestic market. Companies import products that are manufactured in the domestic market. Companies import products that are not available in the local market.

not available in the local market.

There are three broad types of importers: There are three broad types of importers:

1.

1. Looking for any product around the world to import and sell.Looking for any product around the world to import and sell. 2.

2. Looking for foreign sourcing to get their products at the cheapestLooking for foreign sourcing to get their products at the cheapest price.

price. 3.

3. Using foreigUsing foreign sourcing as part of n sourcing as part of their global supply chain.their global supply chain.

Direct-import refers to a type of business importation involving a Direct-import refers to a type of business importation involving a major reta

major retailer (e.g. iler (e.g. Wal-Mart) Wal-Mart) and an overseasand an overseas manufacturer. manufacturer. A retailerA retailer typically purchases products designed by local companies that can be typically purchases products designed by local companies that can be manufactured overseas. In a direct-import program, the retailer bypasses manufactured overseas. In a direct-import program, the retailer bypasses the local supplier (colloquial

the local supplier (colloquial middle-manmiddle-man) and buys the final product) and buys the final product directly from the manufacturer, possibly saving in added costs. This type of  directly from the manufacturer, possibly saving in added costs. This type of  business is fairly recent and follows the trends of theglobal economy.

business is fairly recent and follows the trends of theglobal economy.

ole of the Internet

ole of the Internet

Many online auction websites are now providing wholesalers through Many online auction websites are now providing wholesalers through a wholesale list, generally, the lists that require a fee to view, may not be a wholesale list, generally, the lists that require a fee to view, may not be updated frequently, the data may be old, and the companies listed may no updated frequently, the data may be old, and the companies listed may no longer be in business.

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Another form of online middlemen are B2B trade companies. These Another form of online middlemen are B2B trade companies. These cater mainly to big businesses who are importing large quantities of goods cater mainly to big businesses who are importing large quantities of goods from foreign countries. They also have sister sites that serve smaller from foreign countries. They also have sister sites that serve smaller orders for small businesses. In addressing the concerns of listed orders for small businesses. In addressing the concerns of listed companies' legitimacy and de

companies' legitimacy and dependability, such B2B portals pendability, such B2B portals may inspectmay inspect suppliers at their actual premises before they list suppliers. Alternatively, suppliers at their actual premises before they list suppliers. Alternatively, these companies may also branch out of cyberspace and organize their these companies may also branch out of cyberspace and organize their own sourcing fairs, where thousands of buyers and suppliers can meet own sourcing fairs, where thousands of buyers and suppliers can meet face-to-face.

face-to-face.

L

L

etter of credit

etter of credit

A standard, commercial

A standard, commercial letter of creditletter of credit ("LC") is a document issued("LC") is a document issued mostly by

mostly by a a financial institfinancial institution, ution, used used primarily in primarily in trade trade finance, finance, whichwhich usually provides an irrevocable payment undertaking.

usually provides an irrevocable payment undertaking.

The LC can also be source of payment for a transaction, meaning The LC can also be source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of credit that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value, are used primarily in international trade transactions of significant value, for deals between a supplier in

for deals between a supplier in one country and a customer one country and a customer in another.in another. They are also used in the land development process to ensure that They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, stormwater ponds, etc.) will approved public facilities (streets, sidewalks, stormwater ponds, etc.) will be built. The parties to a letter of credit are usually a

be built. The parties to a letter of credit are usually a beneficiarybeneficiary who is towho is to receive the money, the

receive the money, the issuing bankissuing bank of whom the applicant is a client,of whom the applicant is a client, and the

and the advising bankadvising bank of whom the beneficiary is a client. Almost allof whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or cancelled letters of credit are irrevocable, i.e., cannot be amended or cancelled without prior agreement of the beneficiary, the issuing bank and the without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any. In executing a transaction, letters of credit confirming bank, if any. In executing a transaction, letters of credit incorporate

incorporate functions functions common common to to giros giros and and Traveler's cTraveler's cheques. heques. Typically,Typically, the documents a beneficiary has to present in order to receive payment the documents a beneficiary has to present in order to receive payment include a

include a commercial invoicecommercial invoice , , bill of bill of lading, alading, a nd documend documents prnts proving theoving the shipment was insured against loss or damage in transit. However, the list shipment was insured against loss or damage in transit. However, the list and form of documents is open to imagination and negotiation and might and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped, or their place of origin.

evidencing the quality of the goods shipped, or their place of origin.

Terminology

Terminology

The English name ³letter of credit´ derives from the French word The English name ³letter of credit´ derives from the French word  ³accreditation´, a power to do something, which in turn is derivative of the  ³accreditation´, a power to do something, which in turn is derivative of the Latin word ³accreditivus´, meaning trust. The Application any defence Latin word ³accreditivus´, meaning trust. The Application any defence relating to the underlying contract of sale. This is as long as the seller relating to the underlying contract of sale. This is as long as the seller performs their duties to an extent that meets the requirements contained performs their duties to an extent that meets the requirements contained in the LC.

in the LC.

International Trade Payment methods

International Trade Payment methods

 Advance paymentAdvance payment (most secure for seller)(most secure for seller)

Where the buyer parts with money first and waits for the seller to forward Where the buyer parts with money first and waits for the seller to forward the goods

the goods

 DDocumentary Creditocumentary Credit (more secure for seller as well as buyer)(more secure for seller as well as buyer)

Subject to ICC's UCP 600, where the bank gives an undertaking (on behalf  Subject to ICC's UCP 600, where the bank gives an undertaking (on behalf  of buyer and at the request of applicant ) to pay the shipper ( beneficiary ) of buyer and at the request of applicant ) to pay the shipper ( beneficiary )

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the value of the goods shipped if certain documents are submitted and if  the value of the goods shipped if certain documents are submitted and if  the stipulated terms and conditions are strictly complied.

the stipulated terms and conditions are strictly complied.

Here the buyer can be confident that the goods he is expecting only will be Here the buyer can be confident that the goods he is expecting only will be received since it will be evidenced in the form of certain documents called received since it will be evidenced in the form of certain documents called for meeting the specified terms and conditions while the supplier can be for meeting the specified terms and conditions while the supplier can be confident that if he meets the stipulations his payment for the shipment is confident that if he meets the stipulations his payment for the shipment is guaranteed by bank, who is independent of the parties to the contract. guaranteed by bank, who is independent of the parties to the contract.

 DDocumentary collectionocumentary collection (more secure for buyer and to a certain(more secure for buyer and to a certain

extent to seller) extent to seller)

Also called "Cash Against Documents". Subject to ICC's URC 525, sight and Also called "Cash Against Documents". Subject to ICC's URC 525, sight and usance, for delivery of shipping documents against payment or usance, for delivery of shipping documents against payment or acceptances of draft, where shipment happens first, then the title acceptances of draft, where shipment happens first, then the title documents are sent to the [collecting bank] buyer's bank by seller's bank documents are sent to the [collecting bank] buyer's bank by seller's bank [remitting bank], for delivering documents against collection of  [remitting bank], for delivering documents against collection of  payment/acceptance

payment/acceptance

 DDirect paymentirect payment (most secure for buyer)(most secure for buyer)

Where the supplier ships the goods and waits for the buyer to remit the bill Where the supplier ships the goods and waits for the buyer to remit the bill proceeds, on open account terms.

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D

D

ocuments & 

ocuments & 

Procedure

Procedure

equired for

equired for

Import of a

Import of a

Commodity

Commodity

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Pro forma Invoice

Pro forma Invoice

A pro forma Invoice is much the same as a commercial invoice A pro forma Invoice is much the same as a commercial invoice which, when used in international trade, represents the details of an which, when used in international trade, represents the details of an international sale to the Customs authorities. A pro forma invoice is international sale to the Customs authorities. A pro forma invoice is presented in the place of a commercial invoice when there is no sale presented in the place of a commercial invoice when there is no sale between the sender and the importer, or if the terms of the sale between between the sender and the importer, or if the terms of the sale between the seller and the buyer are such that a commercial invoice is not yet the seller and the buyer are such that a commercial invoice is not yet available at the time of the international shipment. A pro forma invoice is available at the time of the international shipment. A pro forma invoice is required to state the same facts that the commercial invoice would and the required to state the same facts that the commercial invoice would and the content is prescribed by the governments who are a party to the content is prescribed by the governments who are a party to the transaction.

transaction.

INCO Terms:

INCO Terms:

Incoterms rules are standard trade definitions most commonly used Incoterms rules are standard trade definitions most commonly used in international sales contracts. Devised and published by the International in international sales contracts. Devised and published by the International Chamber of Commerce, they are at the heart of world trade.

Chamber of Commerce, they are at the heart of world trade.

Among the best known Incoterms rules are, FOB (Free on Board), Among the best known Incoterms rules are, FOB (Free on Board), CIF (Cost, Insurance and Freight), and

CIF (Cost, Insurance and Freight), and CPT (Carriage Paid To).CPT (Carriage Paid To).

ICC is currently revising Incoterms 2000. The new edition, ICC is currently revising Incoterms 2000. The new edition, Incoterms

Incoterms®® 2010, is expected to enter into force on 1 January 2011.2010, is expected to enter into force on 1 January 2011.

H.S. Code:

H.S. Code:

The

The HarmonizeHarmonized d Commodity DescriCommodity Description aption and Coding System nd Coding System (HS) (HS) of of  tariff nomenclature is an internationally standardized system of names and tariff nomenclature is an internationally standardized system of names and numbers for classifying traded products developed and maintained by numbers for classifying traded products developed and maintained by the

the World World Customs Customs Organization Organization (WCO(WCO) ) (formerly (formerly the the Customs Customs Co- Co-operation Council), an independent intergovernmental organization with operation Council), an independent intergovernmental organization with over 170 member countries based in Brussels, Belgium.

over 170 member countries based in Brussels, Belgium.

Pro forma invoice includes: Pro forma invoice includes:

y

y Name of ImporterName of Importer y

y Name of ExporterName of Exporter y

y Description of goodsDescription of goods y

y There Tarrif number (HS code)There Tarrif number (HS code) y

y QQuantityuantity y

y Price in currency agreed and PackingPrice in currency agreed and Packing y

y INCO TermsINCO Terms y

y Origin of MerchandiseOrigin of Merchandise y

y Payment cPayment condition i.e ondition i.e Irrevocable LC Irrevocable LC at sightat sight y

y Last date of ShipmentLast date of Shipment y

y Country of originCountry of origin y

y Final DestinationFinal Destination y

y Advising bank detailsAdvising bank details y

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Application Form

Application Form

This is the form given by the Advising bank and is filled by the This is the form given by the Advising bank and is filled by the importer. A special adhe

importer. A special adhesive stamp of 100PKR is pastedsive stamp of 100PKR is pasted ..

L

L

C at sight:

C at sight:

LC becomes payable once it is

LC becomes payable once it is presented along with the necessarypresented along with the necessary

documents, e.g. goods orders, shipping documents.

documents, e.g. goods orders, shipping documents.

Transhipment

Transhipment

Transshipment or Transhipment is the shipment of goods or Transshipment or Transhipment is the shipment of goods or container to an intermediate destination, and then from there to yet container to an intermediate destination, and then from there to yet another destination.

another destination.

Partial shipment:

Partial shipment:

Delivery

Delivery of aof an ordn order in er in two or two or more more consignments, consignments, if allowed if allowed byby the customer or under theterms of a

the customer or under theterms of a letter of credit.letter of credit.

Following information is filled: Following information is filled:

y

y Applicat¶s name and full addressApplicat¶s name and full address y

y Benificiary¶s name and full addressBenificiary¶s name and full address y

y Type of LC i.e. LC at Type of LC i.e. LC at sightsight y

y Total amount including C&FTotal amount including C&F y

y Shipment destination from origin to finalShipment destination from origin to final y

y Date of expiryDate of expiry y

y All other charges amount and due writtenAll other charges amount and due written

In case of india shipment and transshipment cant be on In case of india shipment and transshipment cant be on Israeli/Indian vessels/Airlines is Prohibited

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I-Form

I-Form

This is a form for imports and is basically used of taxation purpose. It This is a form for imports and is basically used of taxation purpose. It is the application for permission under the foreign exchange regulation act is the application for permission under the foreign exchange regulation act 1947 to purchase foreign exchange for the payment of

1947 to purchase foreign exchange for the payment of imports.imports.

Beneficary:

Beneficary:

Person or other legal entity for whose present or future interest Person or other legal entity for whose present or future interest (benefit) an annuity,assignment (such as a letter of credit), contract, (benefit) an annuity,assignment (such as a letter of credit), contract, insurance policy, judgment, promise, trust, will, etc., is made.

insurance policy, judgment, promise, trust, will, etc., is made.

Indentor:

Indentor:

The purchaser of the commodity the buyer of the goods The purchaser of the commodity the buyer of the goods

The following information is posted in this document: The following information is posted in this document:

y

y Authorized dealer nameAuthorized dealer name y

y BenefiBeneficiary¶ciary¶s s name and name and addressaddress y

y Indentor¶Indentor¶s name s name and rand regisegistration numbertration number y

y Description of goodsDescription of goods y

y ITC No. (HS code)ITC No. (HS code) y

y QQuantityuantity y

y Port of ShipmentPort of Shipment y

y Date of shipmentDate of shipment y

y Invoice value in Foreign currencyInvoice value in Foreign currency y

y Other terms and conditionsOther terms and conditions y

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Insurance Cover Note

Insurance Cover Note

Document

Document evidenevidencing cing issuissuance ance of of an an insuraninsurance ce policy policy and and givesgives a summary of the informationgiven in a certificate of insurance.

a summary of the informationgiven in a certificate of insurance.

Insurance cover note is issued on pro forma invoice, its is required Insurance cover note is issued on pro forma invoice, its is required for the bank to issue the LC. First the schedule is made then the Final for the bank to issue the LC. First the schedule is made then the Final receipt is issued to importer.

receipt is issued to importer.

War and S

War and SR R CC:CC:

War, Strikes, Riots, and Civil Commotions Risks War, Strikes, Riots, and Civil Commotions Risks

C & F

C & F

(Cost and Freight.) Seller owns goods until they are loaded on (Cost and Freight.) Seller owns goods until they are loaded on vessel; selling price includes all costs so far plus cost of ocean freight.

vessel; selling price includes all costs so far plus cost of ocean freight.

The conditions required for Cover note The conditions required for Cover note

y

y Name of the bankName of the bank y

y Name of participantName of participant y

y Detail of goods covered with their HS codeDetail of goods covered with their HS code y

y The period insuraedThe period insuraed y

y Mode of convanceMode of convance y

y Sum coveredSum covered y

y Contribution calculationContribution calculation y

y Exchange rateExchange rate y

y DeclarationDeclaration y

y Other conditions and warrities like Computer millium charges, radioOther conditions and warrities like Computer millium charges, radio

active exclusion clause, war, strike clause etc. active exclusion clause, war, strike clause etc.

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L

L

C

C

DD

ocument

ocument

What

What DDoesoes Irrevocable Letter Of Credit - ILOC  Irrevocable Letter Of Credit - ILOC MeanMean

A letter of credit that can't be canceled. This guarantees that a buyer's payment to A letter of credit that can't be canceled. This guarantees that a buyer's payment to a seller will be received on time and for the correct amount.

a seller will be received on time and for the correct amount.

This is

This is the document called the µLC¶ it the document called the µLC¶ it shows didderefnt conditions shows didderefnt conditions andand terms on which both the parties are ag

terms on which both the parties are ag reed upon.reed upon.

U

U

CP

CP

R R 

ules:

ules:

The

The UUniform niform Customs Customs and and Practice Practice forfor DDocumentaryocumentary Credits

Credits (UCP) is a set of rules on the issuance and use of (UCP) is a set of rules on the issuance and use of  letters of creditletters of credit.. The UCP is utilised by

The UCP is utilised by bankersbankers and commercial parties in more than 175and commercial parties in more than 175 countries in

countries in trade financetrade finance. Some 11-15% of . Some 11-15% of international tradeinternational trade utilisesutilises letters of credit, totalling over a trillion dollars (US) each year.

letters of credit, totalling over a trillion dollars (US) each year.

eimbursement bank

eimbursement bank

A bank providing cover for a

A bank providing cover for a payment order.

payment order.

Explaination:

Explaination:

y

y First of all the SWIFT code is displayedFirst of all the SWIFT code is displayed y

y Form of LC i.e Irrevocalbe LCForm of LC i.e Irrevocalbe LC y

y Date of Issue; it is read in opposte direction i.e. 080328 this meansDate of Issue; it is read in opposte direction i.e. 080328 this means

28

28thth of 3of 3rdrd month march of year 2008month march of year 2008

y

y Rules that are applicable are mentioned that are UCP Latest versionRules that are applicable are mentioned that are UCP Latest version

i.e. UCP 600 i.e. UCP 600

y

y Applicatn¶s nameApplicatn¶s name y

y Beneficary nameBeneficary name y

y Currency Currency code code and and amountamount y

y Partial shipments allowed or notPartial shipments allowed or not y

y Port of loadingPort of loading y

y Last date of shipmentLast date of shipment y

y Descriptions of goodsDescriptions of goods y

y Charges outside Pakistan are on beneficy¶s accountCharges outside Pakistan are on beneficy¶s account y

y Period of presentationPeriod of presentation y

y Reimbursement bank nameReimbursement bank name y

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SWIFT Code:

SWIFT Code:

(Society for Worldwide Interbank Financial Telecommunication) (Society for Worldwide Interbank Financial Telecommunication)

The SWIFT Bank Identification Code is an internationally-recognized The SWIFT Bank Identification Code is an internationally-recognized system of codes for identifying banks (see ISO 9362). These codes are system of codes for identifying banks (see ISO 9362). These codes are commonly used to identify the banks involved in an international wire commonly used to identify the banks involved in an international wire transfer.

transfer.

It is not the only coding system for banks - individual countries also It is not the only coding system for banks - individual countries also have their own sets of codes which are used to identify banks in national have their own sets of codes which are used to identify banks in national interbank business. For example, ABA numbers (or routing codes) identify interbank business. For example, ABA numbers (or routing codes) identify banks in the US and Canada, Sort Codes identify banks in the UK.

banks in the US and Canada, Sort Codes identify banks in the UK.

SWIFT is the Society for Worldwide Interbank Financial SWIFT is the Society for Worldwide Interbank Financial Telecommunication, a member-owned cooperative through which the Telecommunication, a member-owned cooperative through which the financial world conducts its business operations with speed, certainty and financial world conducts its business operations with speed, certainty and confidence. More than 9,000 banking organisations, securities institutions confidence. More than 9,000 banking organisations, securities institutions and corporate customers in 209 countries trust us every day to exchange and corporate customers in 209 countries trust us every day to exchange millions of standardised financial messages.

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Bill of 

Bill of 

LL

ading/

ading/

R R 

ailway Bill/ Airway Bill:

ailway Bill/ Airway Bill:

A bill of lading (sometimes referred to as a Bloor B/L) is a document A bill of lading (sometimes referred to as a Bloor B/L) is a document iss

issued ued by by a carrier a carrier to to a a shipper, acknowledgishipper, acknowledging ng that that specifispecified goods hed goods haveave been received

been received on board on board as cargo as cargo fofor r conveyance conveyance to a nato a named place formed place for delivery to the consignee who is usually identified. A

delivery to the consignee who is usually identified. A thoroughthorough bill of ladingbill of lading involves the use of at least two different modes of transport from road, involves the use of at least two different modes of transport from road, rail, air, and sea. The term derives from the verb "to lade" which means to rail, air, and sea. The term derives from the verb "to lade" which means to load a cargo onto a ship or other form of transportation.

load a cargo onto a ship or other form of transportation.

The bill of lading issued when the merchandise is loaded on the The bill of lading issued when the merchandise is loaded on the carrier and is the guarantee that the goods has been sent by the exporter carrier and is the guarantee that the goods has been sent by the exporter

Bill of lading Bill of lading

The bill issued will the shipments arrives in ships through sea way The bill issued will the shipments arrives in ships through sea way

Airway Bill Airway Bill

When the goods are shipped through airline, airway bill is issued When the goods are shipped through airline, airway bill is issued

ailwayailway R R eceipteceipt

When the goods are dispatched by railway track, railway receipt is When the goods are dispatched by railway track, railway receipt is issued.

issued.

Ports Ports

Their there two kinds of ports Their there two kinds of ports

D

Dry Portry Port

In Pakistan there are many dry port like At present, there are six dry In Pakistan there are many dry port like At present, there are six dry ports

ports running running under under the the management management of of Railways: LahoreRailways: Lahore¶s ¶s Established Established inin 1973, Karachi Dry Port Established in 1974,

1973, Karachi Dry Port Established in 1974, QQuetta Dry Port Established inuetta Dry Port Established in 1984, Peshawar Dry Port Established in 1986, Multan Dry Port Established 1984, Peshawar Dry Port Established in 1986, Multan Dry Port Established in 1988, Rawalpindi Dry Port Established in 1990

in 1988, Rawalpindi Dry Port Established in 1990

Sea Port: Sea Port:

There are three sea ports in Pakistan that are Port

There are three sea ports in Pakistan that are Port QQasim and Portasim and Port Gwadar, port keti Bander, port karachi.

Gwadar, port keti Bander, port karachi. Port

Port QQasim maximum sea weight capacity is 25,000 MTasim maximum sea weight capacity is 25,000 MT

The mentioned terms required. The mentioned terms required.

y

y Consignee nameConsignee name y

y Notify addressNotify address y

y Currency agreed uponCurrency agreed upon y

y Goods details and HS Code numberGoods details and HS Code number y

y Packing listPacking list y

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Commercial Invoice

Commercial Invoice

A commercial invoice is a document used in foreign trade. It is used A commercial invoice is a document used in foreign trade. It is used as a

as a customs customs declaration declaration provided provided by the by the person operson or corporar corpora tion that tion that isis exporting an item across international borders.

exporting an item across international borders.[1][1] [2][2] Although there is noAlthough there is no standard format, the document must include a few specific pieces of  standard format, the document must include a few specific pieces of  information such as the parties involved in the shipping transaction, the information such as the parties involved in the shipping transaction, the goods being

goods being transporttransported, the ed, the country of manufacture, and country of manufacture, and thethe

Harmonized

Harmonized codes for those goods. A commercial invoice must also include acodes for those goods. A commercial invoice must also include a statement certifying that the invoice is true, and a signature.

statement certifying that the invoice is true, and a signature.

The invoice is the receipt for the goods shipped The invoice is the receipt for the goods shipped

The mentioned things on Commercial invoice The mentioned things on Commercial invoice

y

y Exporter nameExporter name y

y Importer nameImporter name y

y Pro forma NumberPro forma Number y

y VVessel numberessel number y

y Port of loadingPort of loading y

y Final destinationFinal destination y

y Terms and delivery of paymentTerms and delivery of payment y

y Marks and number of Marks and number of containercontainer y

y Description of goodsDescription of goods y

y QQuantityuantity y

y Tariff and HS codeTariff and HS code y

y Rate per KG and amount in currency decidedRate per KG and amount in currency decided y

y Stamped by exporter bankStamped by exporter bank

Invoice contains amount due to the importer Invoice contains amount due to the importer Whereas the packing li

Whereas the packing list includes st includes only the information only the information about packing,about packing, no amount is shown in this list.

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Packing

Packing

LL

ist:

ist:

A

A shipping shipping list, list, packing packing list, list, packing packing slip slip (also (also known known as as a a bill bill of of  parcel,

parcel, unpacking unpacking note, note, packaging packaging slip, slip, (delivery) (delivery) docket, docket, delivery delivery list,list, or

or customer customer receipt), receipt), is is a a shipping shipping document document that that accompanieaccompanies s delivedeliveryry packages, usually inside an attached shipping pouch or inside the package packages, usually inside an attached shipping pouch or inside the package itself. It commonly includes an itemized detail of the package contents and itself. It commonly includes an itemized detail of the package contents and does not include customer pricing. It serves to inform all parties, including does not include customer pricing. It serves to inform all parties, including transport agencies, government authorities, and customers, about the transport agencies, government authorities, and customers, about the contents of the package. It helps them deal with the package accordingly. contents of the package. It helps them deal with the package accordingly.

The mentioned things on Commercial invoice The mentioned things on Commercial invoice

y

y Exporter nameExporter name y

y Importer nameImporter name y

y Pro forma NumberPro forma Number y

y VVessel numberessel number y

y Port of loadingPort of loading y

y Final destinationFinal destination y

y Terms and delivery of paymentTerms and delivery of payment y

y Marks and number of Marks and number of containercontainer y

y Description of goodsDescription of goods y

y QQuantityuantity y

y Packing further detailsPacking further details y

y Tariff and HS codeTariff and HS code y

y Stamped by exporter bankStamped by exporter bank

Packing list includes only the information about packing, no amount is Packing list includes only the information about packing, no amount is shown in this list.

shown in this list.

Whereas the Invoice contains amount due to the importer Whereas the Invoice contains amount due to the importer

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Bill of Entry:

Bill of Entry:

Declaration (on a prescribed form) by an importer or exporter of the Declaration (on a prescribed form) by an importer or exporter of the exact nature,

exact nature,  p precise quantityrecise quantity and and value value of of goods goods that that have have landed landed (entered(entered

inwards) or are being shipped out (entered outwards). Prepared by inwards) or are being shipped out (entered outwards). Prepared by a qualified customs clerk or broker, it is examined by customs

a qualified customs clerk or broker, it is examined by customs authoritiesauthorities forfor its

its accuracy accuracy and and conformiconformity ty with with the the tariff tariff and and regulatioregulations. ns. SeeSee also customs entry.

also customs entry.

When all the duties and charges are paid the Custom Duty officer When all the duties and charges are paid the Custom Duty officer (CDO) issues a bill of entry. And now the importer is allowed to ship the (CDO) issues a bill of entry. And now the importer is allowed to ship the commodity to the desired place.

commodity to the desired place.

D

D

eclared Value:

eclared Value:

It is a value that is declared by the importer It is a value that is declared by the importer

Assessed Value:

Assessed Value:

It is the value that is calculated by the CDO and duties are charged It is the value that is calculated by the CDO and duties are charged on Assessed rate.

on Assessed rate.

The bill of entry contains following information The bill of entry contains following information

y

y Exporter/ Consignor¶s nameExporter/ Consignor¶s name y

y Importer/Consignee¶s namesImporter/Consignee¶s names y

y NTN numberNTN number y

y HS CodeHS Code y

y Currency name and codeCurrency name and code y

y Description of goodsDescription of goods y

y Number of cartonsNumber of cartons y

y Declared value, rateDeclared value, rate y

y Assessed rate and valueAssessed rate and value y

y Port of shipmentPort of shipment y

y Delivery termsDelivery terms y

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Indemnity Bond

Indemnity Bond

It's a bond to repay a lender in the event of a shortfall in a loan

It's a bond to repay a lender in the event of a shortfall in a loan

repayment.

repayment.

Coverage for loss of an oblige in the event that the principal fails to Coverage for loss of an oblige in the event that the principal fails to perform according to standards agreed upon between the

perform according to standards agreed upon between the oblige and theoblige and the principal.

principal.

y

y The indemnity Bond is issued for the collector of customs in theThe indemnity Bond is issued for the collector of customs in the

custom house

custom house

y

y Warehouse name and license numberWarehouse name and license number

y

y Date of deed of Date of deed of indemniindemnityty

y

y Importer¶s nameImporter¶s name

y

y Total sum amountTotal sum amount

y

y 2 witnesses are also required2 witnesses are also required

y

y The bond must be on a stamp paper of above 50PKR or soThe bond must be on a stamp paper of above 50PKR or so

y

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Certificate of Origin

Certificate of Origin

A

A Certificate Certificate of of Origin Origin [1] [1] (often (often abbreviated abbreviated to to CO CO or or COO) COO) isis a

a document document used in used in internationainternational tradl trade. e. It tradIt traditionally statitionally states from es from whatwhat country the shipped goods originate, but "originate" in a CO does not mean country the shipped goods originate, but "originate" in a CO does not mean the country the goods are shipped from, but the country where their goods the country the goods are shipped from, but the country where their goods are actually made. This raises a definition problem in cas

are actually made. This raises a definition problem in cas es where less thanes where less than 100% of the raw materials and processes and value are not all from one 100% of the raw materials and processes and value are not all from one country. An often used practice is that if more than 50% of the sales price country. An often used practice is that if more than 50% of the sales price of the goods originates from one country, that country is acceptable as of the goods originates from one country, that country is acceptable as the country of origin (then the "national content" is more than 50%). In the country of origin (then the "national content" is more than 50%). In various international agreements, other percentages of national content various international agreements, other percentages of national content are acceptable.

are acceptable.

Certificate of origin is a proof that the goods made are purely Certificate of origin is a proof that the goods made are purely manufactu

manufactured into final good red into final good where they awhere they are claimedre claimed

This document shows the following details This document shows the following details

y

y Consignor NameConsignor Name y

y ConsigneeConsignee y

y Consigned throughConsigned through y

y Packages detail is given with their HS CodePackages detail is given with their HS Code y

y Description of goods is givenDescription of goods is given y

y Detailed packing list is given i.e. Bags numbers and kinds of packingDetailed packing list is given i.e. Bags numbers and kinds of packing y

y Gross weight in KGsGross weight in KGs y

y Number of piecesNumber of pieces y

y VValue in Rupees and in dollarsalue in Rupees and in dollars y

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D

D

etailed Procedure:

etailed Procedure:

Eligibility: Eligibility:

The least criteria for importing a commodity are that: The least criteria for importing a commodity are that:

y

y Account Number; LC can also be issued on cash basisAccount Number; LC can also be issued on cash basis y

y Member of ICC; Company must have Membership in internationalMember of ICC; Company must have Membership in international

Chamber of Commerce Chamber of Commerce

y

y Company¶s STN and NTNCompany¶s STN and NTN y

y SECP Registered CompanySECP Registered Company

D

Dealing:ealing:

First of all the both parties who want to purchase and sell the First of all the both parties who want to purchase and sell the Commodity deal with each other and bargain on different points. They Commodity deal with each other and bargain on different points. They settle the product price INCO Terms, its quantity, Weight, Shipment date, settle the product price INCO Terms, its quantity, Weight, Shipment date, payment methods, type of LC, Exchange rate, Freight charges and other payment methods, type of LC, Exchange rate, Freight charges and other information.

information.

Issuance of Performa Invoice: Issuance of Performa Invoice:

When the dealing is finalized

When the dealing is finalized all the agreed conditionall the agreed condition s settled ares settled are then written in printed form called the preformed invoice.

then written in printed form called the preformed invoice.

Insuring the Commodity: Insuring the Commodity:

To issues a LC against a commodity mostly large in quantity, To issues a LC against a commodity mostly large in quantity, insurance of the commodity must be taken, a copy of preformed invoice is insurance of the commodity must be taken, a copy of preformed invoice is given to the insurance company for the issuance of insurance cover note. given to the insurance company for the issuance of insurance cover note. Insurance is issued on some reserve or goodwill of the importer.

Insurance is issued on some reserve or goodwill of the importer. Document

Documents rs r equired areequired are

y

y Performa invoicePerforma invoice y

y Certificate of OriginCertificate of Origin

Certificate of origin is the document assuring the concerned that the Certificate of origin is the document assuring the concerned that the goods/commodity shipped are fully made by the claiming country¶s goods/commodity shipped are fully made by the claiming country¶s company

company

Application for issuance of  Application for issuance of LLC:C:

Once the preformed invoice and cover note is issued, an application Once the preformed invoice and cover note is issued, an application is written to a bank for the issuance of letter of credit against it. The is written to a bank for the issuance of letter of credit against it. The document

documents that as that are required are as belowre required are as below

y

y Performa InvoicePerforma Invoice y

y Insurance Cover NoteInsurance Cover Note y

y Application FormApplication Form y

y I- FormI- Form

Here the I-Form is used for the eligibility of importing a commodity and Here the I-Form is used for the eligibility of importing a commodity and for deduction of tax, nowadays only STN and NTN

for deduction of tax, nowadays only STN and NTN is uis used, the use of Ised, the use of I --Form is very rare.

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L

LCC DDraft:raft:

After this procedure an LC Draft is issued based on all the After this procedure an LC Draft is issued based on all the information given to bank, it is a almost a letter of credit but not yet information given to bank, it is a almost a letter of credit but not yet approved, this is presented to importer to make some corrections and approved, this is presented to importer to make some corrections and changes, once approved by importer and stamped the final LC document is changes, once approved by importer and stamped the final LC document is sent to beneficiary bank/exporter for his confirmation through SWIFT code. sent to beneficiary bank/exporter for his confirmation through SWIFT code.

SWIFT/ TE

SWIFT/ TELLEX:EX:

The advising bank then sends this Letter of credit advice to the The advising bank then sends this Letter of credit advice to the Beneficiary bank in SWIFT Coding, the bank communicate with each other Beneficiary bank in SWIFT Coding, the bank communicate with each other in this coding. Other formalities and payments are also made in this code. in this coding. Other formalities and payments are also made in this code.

Exporter will take notice: Exporter will take notice:

When the exporter receive the letter of credit advice, if he agrees on When the exporter receive the letter of credit advice, if he agrees on it the LC is

it the LC is approved if not then further amendmenapproved if not then further amendments will ts will be done be done up tillup till finalization of terms and conditions. The exporter always gives 7 days µfree finalization of terms and conditions. The exporter always gives 7 days µfree time¶ to pay all the duties and expenses to clearing agent. This time period time¶ to pay all the duties and expenses to clearing agent. This time period can be expanded on request up to 14 and then 21 days in this period no can be expanded on request up to 14 and then 21 days in this period no dammar age is charged.

dammar age is charged.

Shipment

Shipment DDocuments sent:ocuments sent:

When the dealing gets final, the exporter sends original shipping When the dealing gets final, the exporter sends original shipping documents to importer¶s bank and copies to importer. And set of original documents to importer¶s bank and copies to importer. And set of original documents placed in the µcontainer¶ of commodities it.

documents placed in the µcontainer¶ of commodities it. The shipping documents contain:

The shipping documents contain:

y

y Bill of lading/ Airway Bill/ Railway ReceiptBill of lading/ Airway Bill/ Railway Receipt y

y Commercial InvoiceCommercial Invoice y

y Packing ListPacking List y

y Detailed packing listDetailed packing list

Payment to the Advising Bank and retirement: Payment to the Advising Bank and retirement:

When payment is made to the advising bank, the bank then releases When payment is made to the advising bank, the bank then releases the original shipping documents. Then bank then issues a retirement note the original shipping documents. Then bank then issues a retirement note and after that the LC is closed on payment.

and after that the LC is closed on payment.

Further Procedure after retirement of 

Further Procedure after retirement of 

LL

C

C

Clearing of Shipment: Clearing of Shipment:

Once the payment is made the original documents received are given Once the payment is made the original documents received are given to clearing agent.

to clearing agent.

Assessments of Value of Commodity: Assessments of Value of Commodity:

Now as the documents are handed over, the duties are calculated on Now as the documents are handed over, the duties are calculated on assessed rate on the exchange rate decided.

assessed rate on the exchange rate decided. Duties charged are

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y

y Custom duty(CD) i.e. accordinCustom duty(CD) i.e. according to g to the H.S. Code the H.S. Code (mentione(mentioned in FBR)d in FBR) y

y Sales tax (ST) i.e. 16% of the total value. Its fixedSales tax (ST) i.e. 16% of the total value. Its fixed y

y Income tax(IT) i.e. 4% (for commercial), 3% (for manufactures) of Income tax(IT) i.e. 4% (for commercial), 3% (for manufactures) of 

the total value, it¶s also fixed the total value, it¶s also fixed

y

y Federal excise duty(FED) i.e. 1%Federal excise duty(FED) i.e. 1% y

y Additional sales tax i.e. 2%Additional sales tax i.e. 2%

There are also other charges like Dammar age charged on not There are also other charges like Dammar age charged on not clearing the shipment on due date

clearing the shipment on due date

Issuance of bill of Entry: Issuance of bill of Entry:

When all the

When all the duties and charges are paid duties and charges are paid the Custom the Custom Duty officerDuty officer (CDO) issues a bill of entry. And now the importer is allowed to ship the (CDO) issues a bill of entry. And now the importer is allowed to ship the commodity to the desired place.

commodity to the desired place.

Bonded Warehouse: Bonded Warehouse:

Bonded warehouse is used when the importer is not willing or doesn¶t Bonded warehouse is used when the importer is not willing or doesn¶t want to pay the due amount in full. The importer stores the commodity in want to pay the due amount in full. The importer stores the commodity in the bonded warehouse where he can pay for commodity and ship the the bonded warehouse where he can pay for commodity and ship the goods in installment. It requires following documents:

goods in installment. It requires following documents:

y

y Indemnity bondIndemnity bond y

y Post dated cherubPost dated cherub

Indemnity bond is the guarantee by the importer that he will pay the Indemnity bond is the guarantee by the importer that he will pay the full amount as scheduled otherwise the commodities can be confiscated. full amount as scheduled otherwise the commodities can be confiscated.

Payment Flow Chart based on original

Payment Flow Chart based on original

DD

ocuments

ocuments

Beneficiary/Exporter: Beneficiary/Exporter:

Payment is made to importer when the original shipping documents Payment is made to importer when the original shipping documents are handed over to its bank.

are handed over to its bank.

Beneficiary Bank: Beneficiary Bank:

The beneficiary bank sends these documents to the advising bank The beneficiary bank sends these documents to the advising bank and receives the payment form it.

and receives the payment form it.

Guarantee of State Bank Guarantee of State Bank

The state bank gives the guarantee to the beneficiary bank on the The state bank gives the guarantee to the beneficiary bank on the behalf of Government of Pakistan.

behalf of Government of Pakistan.

Advising bank: Advising bank:

The advising bank charges the importer and receives the money and The advising bank charges the importer and receives the money and distributes the documents

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Importer: Importer:

When the importer pays its due amount the bank hands over the When the importer pays its due amount the bank hands over the original shipping documents to it.

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References

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