A Step-by-Step Guide to the Import Trade Procedure in India

Bringing a product into India from another country looks simple from the outside: place an order, wait for the ship, collect the goods. The reality is a sequence of carefully regulated steps, each governed by a different authority and a different document. An importer who skips a stage or files the wrong paper can watch a consignment sit at the port for weeks while charges pile up. This is a clear, stage-by-stage walk through the complete import procedure, from the first trade enquiry to the final payment, so the logic behind each step becomes easy to follow.

Stage one: trade enquiry and securing the import licence 🔗

The procedure begins long before any money changes hands. An importer who wants a particular product first sends out trade enquiries to potential suppliers abroad. A trade enquiry is a written request asking the exporter for the price, quality, quantity, delivery terms, and conditions of sale. In response, the exporter sends a quotation, often called a proforma invoice. The importer collects several such quotations, compares them on price and terms, and selects the most suitable supplier. This comparison stage matters because the quoted price, payment terms, and delivery schedule shape the entire cost of the deal.

Before placing a firm order, the importer must confirm that the goods can legally be brought in. Every business engaged in foreign trade must first register with the Directorate General of Foreign Trade and obtain an Importer-Exporter Code, a ten-digit number that appears on almost every import document. The DGFT then classifies goods into categories: freely importable items need no special permission, while restricted items require a licence or authorisation, certain goods can only be brought in through designated state agencies, and a small list is prohibited outright.

Where a licence is required, it is traditionally issued in duplicate. The first copy is meant for customs clearance, presented to the customs authorities when the goods arrive. The second copy is meant for the foreign exchange formalities, used when applying to release the foreign currency needed to pay the supplier. This two-copy arrangement reflects the two separate controls every import passes through: control over the goods themselves and control over the money leaving the country.

Stage two: arranging foreign exchange 🔗

Paying an overseas supplier means dealing in foreign currency, and India regulates how that currency leaves the country. The Reserve Bank of India oversees these transactions under the Foreign Exchange Management Act. An importer cannot simply buy dollars or euros at will. After obtaining the licence, the importer applies for a release of foreign exchange through a bank authorised to deal in foreign currency, often called an exchange bank or authorised dealer.

The application is made in a prescribed form and submitted along with the import licence. The exchange bank endorses the application and forwards it to the Exchange Control wing of the RBI, which scrutinises it against the foreign exchange policy in force. Once satisfied, the RBI sanctions the release of the required currency, and the importer obtains it from the same exchange bank. This step ensures the country’s foreign reserves are spent only on permitted imports.

Placing the order: open, closed, and confirmatory indents 🔗

With the licence and foreign exchange arranged, the importer places a firm order. In import trade this order is called an indent, a written instruction to supply specified goods at agreed terms. An indent can be placed directly with the manufacturer abroad or routed through specialised intermediaries known as indent houses, which handle the order on the importer’s behalf for a commission.

Indents come in three forms. An open indent leaves some details, such as the choice of brand, price ceiling, or shipping route, to the discretion of the exporter or the indent house. A closed indent spells out every detail precisely, including the exact brand, price, packing, and mode of shipment, leaving nothing to interpretation. A confirmatory indent is one the agent abroad must get confirmed by the importer before the order is treated as final. Choosing the right type depends on how much trust and information the importer has about the supplier.

Stage three: the letter of credit and shipping documents 🔗

An exporter shipping goods to a buyer in another country wants assurance of payment, while the importer wants assurance the goods will actually be shipped. The instrument that bridges this gap is the letter of credit, a written undertaking by the importer’s bank to pay the exporter once the agreed shipping documents are presented. The importer arranges this credit through a bank before the goods are dispatched.

Letters of credit vary by the level of security they offer. A revocable credit can be altered or cancelled by the issuing bank without the exporter’s consent, which gives the seller little protection. An unconfirmed irrevocable credit cannot be changed without the agreement of all parties, but carries only the issuing bank’s promise. A confirmed irrevocable credit adds a second guarantee from a bank in the exporter’s own country, giving the seller the strongest assurance of all. In practice, the international rules that banks follow, known as the Uniform Customs and Practice for Documentary Credits, now treat a credit as irrevocable by default unless stated otherwise, which is why the irrevocable forms dominate modern trade.

The shipping documents the importer receives 🔗

Once the goods are shipped, the exporter prepares a set of documents and routes them to the importer, usually through the banking channel. The core documents include the following. The commercial invoice records the description, quantity, and value of the goods. The bill of lading is issued by the shipping company as proof that the goods have been loaded on board and serves as a document of title that lets the holder claim the cargo. The insurance policy covers the goods against loss or damage during transit. The certificate of origin states the country where the goods were produced, which affects the duty payable and the application of any trade agreements. A packing list often accompanies these to detail how the consignment is packed.

Stage four: clearing the goods at the port 🔗

When the ship reaches an Indian port, the importer cannot collect the goods straight away. Several formalities stand between arrival and release. First, the importer gets the bill of lading endorsed by the shipping company so it can be used to take delivery, and pays any port trust dues charged for the use of port facilities. The importer then files a bill of entry, the central customs document declaring the description, quantity, value, and classification of the imported goods.

The bill of entry is now filed electronically through ICEGATE, the customs department’s online gateway, and its filing is mandatory under Section 46 of the Customs Act, 1962. There are three main types. A bill of entry for home consumption is used when the importer intends to clear the goods for immediate use or sale and pay the duty at once. A bill of entry for warehousing, sometimes called an into-bond bill, is used when the importer wants to store the goods in a customs bonded warehouse without paying duty immediately. An ex-bond bill of entry is filed later to remove those warehoused goods for home consumption once the importer is ready to pay.

On a home consumption bill, the importer pays the applicable customs duty, which today includes basic customs duty, integrated GST, and any cess or surcharge. Once the duty is paid and the goods are assessed, customs grants release and the importer collects the consignment by surrendering the endorsed bill of lading and the port dues receipt to the shipping company. The bonded warehouse route is useful when an importer wants to defer duty and manage cash flow on a large consignment, paying only when the goods are actually needed.

Settling payment: D/A and D/P terms 🔗

The final piece is the settlement of payment, often handled through documentary collection by the banks. Two terms are common. Under documents against payment (D/P), the importer’s bank releases the shipping documents only after the importer has paid the bill. Under documents against acceptance (D/A), the bank releases the documents once the importer accepts a bill of exchange, that is, formally agrees in writing to pay on a future date. D/P favours the exporter because money arrives before documents change hands, while D/A favours the importer by allowing a credit period. The choice usually reflects the bargaining strength and trust between the two parties.

Why the sequence holds together 🔗

Each stage exists to control a specific risk. The licence stage controls what enters the country, the foreign exchange stage controls what currency leaves it, the letter of credit stage protects both buyer and seller against non-performance, and the clearance stage ensures the correct duty is collected before goods enter the market. Read together, the four stages form a single chain in which the document produced at one step becomes the key that unlocks the next. An importer who understands that chain spends far less time waiting at the port and far less money on avoidable charges.

What do you think? If you were importing a high-value consignment from a brand-new supplier abroad, would you choose a confirmed irrevocable letter of credit with D/P terms for maximum security, or would you accept softer terms to win a better price? And in what situations might the bonded warehouse route be worth the extra paperwork rather than clearing the goods immediately?

References

1. https://www.dgft.gov.in/CP/?opt=import-export-authorisation
2. https://www.unionbankofindia.bank.in/pdf/belg_21_invsttreapolicyopeningimportlc.pdf
3. https://www.icegate.gov.in/
4. https://taxinformation.cbic.gov.in/content/html/tax_repository/customs/acts/1962_custom_act/documents/Customs_Act__1962_30-March-2022.html