SUMMER INTERNSHIP REPORT

ON

“COST REDUCTION STRATEGIES IN IMPORT LOGISTICS”

BY

GEET CHAUHAN

A1808711013

MBA-3C(2011-13)

Under the supervision of

COL.SHARAD KHATTAR

(L ecturer-AIBS)

In Partial Fulfilment of Award of MASTER OF BUSINESS ADMINISTRATION (3 CONTINENT-INTERNATIONAL BUSINESS AND OPERATIONS)

AMITY INTERNTIONAL BUSINESS SCHOOL,AMITY UNIVERSITY,UTTAR PRADESH,SECTOR-125,NOIDA-201301.UTTAR PRADESH,INDIA.2012-13

AMITY UNIVERSITY

UTTAR PRADESH

1

DECLARATION

I so l emly dec l a r e t ha t t h i s r epo r t on “COST REDUCTION STRATEGIES

IN IMPORT-EXPORT LOGISTICS” ha s been compi l ed by me and ha s no t

been cop i ed f rom any s t uden t / r e sea r che r / emp loyee i n any un ive r s i t y /

i n s t i t u t i on / o rgan i za t i on o r any o the r pace o f d i s t ance l e a rn ing unde r my

knowledge . I have du ly acknowledged t he sou rce s o f da t a g iven t o me by

my indus t ry gu ide whe reve r t hey have been u sed i n t he p ro j ec t .

I f u r t he r dec l a r e t ha t t he i n fo rma t ion p r e sen t ed i n t h i s p ro j ec t i s t r ue and

o r i g ina l t o t he be s t o f my knowledge .

DATE: GEET CHAUHAN

A1808711013

MBA-3C

AMITY UNIVERSITY UTTAR PRADESH

AMITY INTERNATIONAL BUSINESS SCHOOL

CERTIFICATE OF APPROVAL

2

This is to certify that GEET CHAUHAN,a student of MBA(3C),Class of 2011,Amity

International Business School,Amity University ( Bearing AUUP Enroll.no A1808711013) has

undertaken the Summer Internship Training at INDIA YAMAHA MOTOR PVT. LTD ,during

14th may’2012 to 29th june’2012 .He has worked under my guidance for the project

titled ,”COST REDUCTION STRATEGIES IN IMPORT LOGISTICS”.

This project report is prepared in partial fulfilment of MBA(3 CONTINENT-

INTERNATIONAL BUSINESS AND OPERATIONS) to be awarded by AMITY

UNIVERSITY,UTTAR PRADESH.

To the bet of my knowledge ,this piece of work is original and no part of this report has been

submitted by the student to any other institute/university earlier.

COL. SHARAD KHATTAR

(Faculty,AIBS)

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ACKNOWLEDGEMENT

The Summer Internship Program undertaken by me at the SURAJPUR,GR.NOIDA corporate

office of INDIA YAMAHA MOTOR PVT. LTD. ,was an extremely rewarding experience for

me in terms of learning and industry exposure.

I would like to extend my deep gratitude towards my industry guide Mr. Vinay Gupta(Sr.

Manager-IMPORT LOGISTICS) and Ms.Shilpa Tiwari(Astt. Manager) , INDIA YAMAHA

MOTOR PVT. LTD ,who always motivated me and helped me during the internship. I am

extremely thankful to them for giving me their valuable time and guidance in every step of my

process.

I would like to thank my faculty guide COL.SHARAD KHATTAR who gave his valuable inputs

in suggesting and helping me to decided the topic and preparation of the report.He gave valuable

time from his busy schedule to help me in the analysis and interpretation of my findings.

Student’s name and signature

Enroll.no-A1808711013

Program :MBA (3C) 2011-13

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TABLE OF CONTENTS

CHAPTER CONTENTS PAGE NO.

1 EXECUTIVE SUMMARY 62 IMPORTANCE OF STUDY 7 3 INDUSTRY PROFILE 9 4 COMPANY PROFILE AND HISTORY 135 YAMAHA SWOT ANALYSIS 19 6 FOREIGN TRADE POLICY( 2009-14) 20 7 INCOTERMS 2010 228 FOB-FREE ON BOARD 249 INDIA AND ASEAN-FREE TRADE AGREEMENT 27 10 IMPORT LOGISTICS

REQUIREMENT FOR IMPORT 30 STEP BY STEP PROCESS OF IMPORT LOGISTICS 31 RISK FACTORS IN IMPORT PROCESS 36 IMPORT DOCUMENTATION 38 IMPORT DUTIES 43 COSTS INVOLVED IN IMPORT PROCESS 44 CUSTOM CLEARANCE PROCESS 47 OTHER IMPORT PROCEDURES 49 CONCLUSIONS 52

11 CASE STYDY 5412 BIBLIOGRAPHY 5713 ANNEXURE 58

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1.EXECUTIVE SUMMARY

This project was undertaken to understand the IMPORT and EXPORT LOGISTICS system of

India Yamaha Motor Pvt.Ltd. The main purpose of this project was to analyze those strategies

which were instrumental in the phenomenal success,and helps in cost reduction in the entire

process of logistics.Yamaha imports various machine parts,autoparts,components,chemicals and

other necessary items that are required for the final assembly and production of the bikes ,usually

from south-east asian countries (so as to take benefits from ASEAN-FREE TRADE

AGREEMENT) like Thailand, Singapore, Malaysia, Indonesia etc.It exports its finished bikes to

various countries like Sri lanka,Phillipinnes,South africa, Maldives alongwith latin american

countries like Brazil,Argentina,Equador etc.

OBJECTIVES:

The primary objective of this project was to see how the logistics department works ,processes

the order ,carries out the entire documentation till final delivery of goods and how it coordinates

with factory ,head-office and C/F agents for the respective functions.

The secondary objective was to find and analyze such strategies that would help the company to

reduce cost in both import as well as export logistics process.

The project would also includes:

Growth of exports in last few years and future scope for the same.

Provisions from FTP(Foreign trade policy,2009-14) used in EXPORT-IMPORT process

Various agreements that benefits the company like ASEAN-FREE TRADE

AGREEMENT

Study of INCOTERMS-2010 that are used by the company

Costs calculation(freight ,insurance and custom duty)

Risk factors in both export and import process

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2.IMPORTANCE OF STUDY

The importance of the study is to see the flow of goods and documentation till the completion of

import or export by India Yamaha Motor Pvt.Ltd.Managers try to choose the best path,practices

and methods in order to carry out the logistics-process and give best results in terms of time as

well as cost efficiency.

It chooses its best strategy to dispatch final products after manufacturing, for their delivery to

destination on time and also to receive imported goods after custom clearance and delivery of the

consignment at its own factory.Management of successful logistics system requires accurate and

timely information.It requires efficient planning ,implementation and controlling over the entire

procedure whether in import or the export logistics department.Their are many aspects that are

supposed to be considered and given priority during the process execution such as:

Quality inspection ,both before dispatch of consignment for export and custom clearance

in import.

On-time delivery of goods to the importer and also custom clearance on time at the port. .

List of requirements sent by the buyer as well as that sent by Yamaha to the seller.

Filling of details in the ERP system of the company.

Loading and unloading of goods at port and the factory.

Making and receiving the payment (perfect mode and on time).

Selection of the mode of transport and shipping line.

Selection of the best route to be followed for shipment.

Interaction with Clearing and forwarding agents.

Selection of the best supplier for efficient results.

DATA COLLECTION:To serve the purpose mainly secondary data was collected.The

population sample comprised of respondents who were already associated with the import and

export department and the factory.My industry guides were the main source of data collection

who provided me entire information of the process and also made me to learn how

documentation is done and various costs are calculated.

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3.INDUSTRY PROFILE

Two-wheeler segment is one of the most important components of the automobile sector

that has undergone significant changes due to shift in policy environment. The two-

wheeler industry has been in existence in the country since 1955. It consists of three

segments viz. scooters, motorcycles and mopeds. According to the figures published by

SIAM, the share of two-wheelers in automobile sector in terms of units sold was about

80 per cent during 2003-¬04. This high figure itself is suggestive of the importance of the

sector. In the initial years, entry of firms, capacity expansion, choice of products

including capacity mix and technology, all critical areas of functioning of an industry,

were effectively controlled by the State machinery. The lapses in the system had invited

fresh policy options that came into being in late sixties. Amongst these policies,

Monopolies and Restrictive Trade Practices (MRTP) and Foreign Exchange Regulation

Act (FERA) were aimed at regulating monopoly and foreign investment respectively.

This controlling mechanism over the industry resulted in: (a) several firms operating

below minimum scale of efficiency; (b) under-utilisation of capacity; and (c) usage of

outdated technology. Recognition of the damaging effects of licensing and fettering

policies led to initiation of reforms, which ultimately took a more prominent shape with

the introduction of the New Economic Policy (NEP) in 1985.

However, the major set of reforms was launched in the year 1991 in response to the

major macroeconomic crisis faced by the economy. The industrial policies shifted from a

regime of regulation and tight control to a more liberalised and competitive era. Two

major results of policy changes during these years in two-wheeler industry were that the,

weaker players died out giving way to the new entrants and superior products and a

sizeable increase in number of brands entered the market that compelled the firms to

compete on the basis of product attributes. Finally, the two-¬wheeler industry in the

country has been able to witness a proliferation of brands with introduction of new

technology as well as increase in number of players.

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National Council of Applied Economic Research (NCAER) had forecast two-wheeler

demand during the period 2002¬-03 through 2011-12. The forecasts had been made

using econometric technique along with inputs obtained from a primary survey

conducted at 14 prime cities in the country. Estimations were based on Panel

Regression, which takes into account both time series and cross section variation in data.

A panel data of 16 major states over a period of 5 years ending 1999 was used for the

estimation of parameters. The models considered a large number of macro-economic,

demographic and socio-economic variables to arrive at the best estimations for different

two-wheeler segments. The projections have been made at all India and regional levels.

Different scenarios have been presented based on different assumptions regarding the

demand drivers of the two-wheeler industry. The most likely scenario assumed annual

growth rate of Gross Domestic Product (GDP) to be 5.5 per cent during 2002¬-03 and

was anticipated to increase gradually to 6.5 per cent during 2011¬-12. The all-India and

region-wise projected growth trends for the motorcycles and scooters are presented in

Table 1. The demand for mopeds is not presented in this analysis due to its already

shrinking status compared to' motorcycles and scooters.

It is important to remember that the above-mentioned forecast presents a long-term

growth for a period of 10 years. The high growth rate in motorcycle segment at present

will stabilise after a certain point beyond which a condition of equilibrium will set the

growth path. Another important thing to keep in mind while interpreting these growth

rates is that the forecast could consider the trend till 1999 and the model could not

capture the recent developments that have taken place in last few years. However, this

will not alter the regional distribution to a significant extent.

Following Table suggests two important dimensions for the two-¬wheeler industry. The

region-wise numbers of motorcycle and scooter suggest the future market for these

segments. At the all India level, the demand for motorcycles will be almost 10 times of

that of the scooters. The same in the western region will be almost 20 times. It is also

evident from the table that motorcycle will find its major market in the western region of

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the country, which will account for more than 40 per cent of its total demand.

Table : Demand Forecast for Motorcycles and Scooters for 2011-12

2-Wheeler Segment Regions

South West North-Central East & North-East All India

Motorcycle2835(12.9)

4327(16.8)

2624(12.5)

883(11.1)

10669(14.0)

Scooter203(2.6)

219(3.5)

602(2.8)

99(2.0)

1124(2.08)

Note: Compound Annual Rate of Growth during 2002-03 and 2011-12 is presented in parenthesisSource: Indian Automobile Industry: Optimism in the Air, Industry Insight, NCAER

The present economic situation of the country makes the scenario brighter for short-term

demand. Real GDP growth was at a high level of 7.4 per cent during the first quarter of

2004. Both industry and the service sectors have shown high growth during this period

at the rates of 8.0 and 9.5 per cent respectively. However, poor rainfall last year will pull

down the GDP growth to some extent. Taking into account all these factors along with

other leading indicators including government spending, foreign investment, inflation

and export growth, NCAER has projected an average growth of GDP at 6.7 per cent

during the tenth five-year plan. Its mid-term forecast suggests an expected growth of 7.4

per cent in GDP during 2004-05 to 2008-09. Very recently, IMF has portrayed a

sustained global recovery in World Economic Outlook. A significant shift has also been

observed in Indian households from the lower income group to the middle income group

in recent years. The finance companies are also more aggressive in their marketing

compared to previous years.Combining all these factors, one may visualise a higher

growth rate in two-wheeler demand than presented in Table 1, particularly for the

motorcycle segment.

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There is a large untapped market in semi-urban and rural areas of the country. Any

strategic planning for the two¬-wheeler industry needs to identify these markets with the

help of available statistical techniques. Potential markets can be identified as well as

prioritised using these techniques with the help of secondary data on socio-economic

parameters. For the two-wheeler industry, it is also important to identify the target

groups for various categories of motorcycles and scooters. With the formal introduction

of secondhand car market by the reputed car manufacturers and easy loan availability

for new as well as used cars, the two-wheeler industry needs to upgrade its market

information system to capture the new market and to maintain its already existing

markets. Availability of easy credit for two-wheelers in rural and smaller urban areas

also requires more focussed attention. It is also imperative to initiate measures to make

the presence of Indian two-wheeler industry felt in the global market.

The market shares of the segments of the automobile industry

4.COMPANY PROFILE

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Yamaha's history goes back over a hundred years to 1887 when Torakusu Yamaha founded the

company, which began producing reed organs. The Yamaha Corporation in Japan (then Nippon

Gakki Co., Ltd.) has grown to become the world's largest manufacturer of a full line of musical

instruments, and a leading producer of audio/visual products, semiconductors and other

computer related products, sporting goods, home appliances and furniture, specialty metals,

machine tools, and industrial robots.

   The Yamaha Motor Corporation, Ltd., begun on July 1, 1955, is a major part of the entire

Yamaha group, but is a separately managed business entity from the Yamaha Corporation. The

Yamaha Motor Corporation is the second largest manufacturer of motorcycles in the world.

Yamaha Motor Corporation owns its wholly-owned subsidiary in the U.S. called Yamaha Motor

Corporation, USA, that is handling not only motorcycles, but also snow mobiles, golf carts,

outboard engines, and water vehicles, under the brand name of Yamaha as well.

   In 1954 production of the first motorcycles began, a simple 125cc single-cylinder two-stroke. It

was a copy of the German DKW design, which the British BSA Company had also copied in the

post-war era and manufactured as the Bantam.

   The first Yamaha, the YAI, known to Japanese enthusiasts as Akatombo, the "Red Dragonfly",

established a reputation as a well-built and reliable machine. Racing successes helped boost its

popularity and a second machine, the 175cc YCI was soon in production.

   The first Yamaha-designed motorcycle was the twin-cylinder YDI produced in 1957. The

racing version, producing 20bhp, won the Mount Asama race that year. Production was still

modest at 15,811 motorcycles, far less than Honda or Suzuki.

   The company grew rapidly over the next three years and in 1959 introduced the first sports

model to be offered by a Japanese factory, the twin-cylinder YDSI with five-speed gearbox.

Owners who wanted to compete in road racing or motocross could buy kits to convert the

machine for both road and motocross racing.

   By 1960 production had increased 600% to 138,000 motorcycles. In Japan a period of

recession followed during which Yamaha, and the other major Japanese manufacturers,

increased their exports so that they would not be so dependent on the home market.

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   To help boost export sales, Yamaha sent a team to the European Grand Prix in 1961, but it was

not until the 1963 season that results were achieved.

   After the Korean War the American economy was booming and Japanese exports were

increasing. In 1962 Yamaha exported 12,000 motorcycles. The next year it was 36,000 and in

1964 production rose to 87,000.

The first overseas factory was opened in Siam in 1966 to supply Southeast Asia. In 1967

Yamaha production surpassed that of Suzuki by 4,000 at 406,000 units. Yamaha established a

lead with the introduction of the first true trail bike "the 250cc single-cylinder DTI". The

company also developed a two-liter, six-cylinder, double overhead-camshaft sports car unit for

Toyota Motor. This proved helpful when Yamaha produced their own high-performance four-

stroke motorcycles.In 1969 Yamaha built a full size road racing circuit near their main factory at

Iwata.

   By 1970 the number of models had expanded to 20 ranging from 50cc to 350cc, with

production up to 574,000 machines, 60% of which were for export. That year Yamaha broke

their two-stroke tradition by launching their first four-stroke motorcycle, the 650cc XSI vertical

twin modeled on the famous Triumph twins.

   In 1973 production topped one million (1,000,000) motorcycles per year for the first time,

leaving Suzuki way behind at 642,000 and catching up on Honda's 1,836,000. During the 1970's

Yamaha technicians concentrated on development of four-stroke models that were designed to

pass the ever-increasing exhaust emission laws and to be more economical than the two-strokes

that had made Yamaha's fortune.

About India Yamaha Motor Pvt. Ltd.

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“Yamaha made its initial foray into India in 1985. Subsequently, it entered into

a 50:50 joint-venture with the Escorts Group in 1996. However, in August 2001,

Yamaha acquired its remaining stake becoming a 100% subsidiary of Yamaha

Motor Co., Ltd, Japan (YMC). In 2008, Mitsui & Co., Ltd. entered into an

agreement with YMC to become a joint investor in the motorcycle

manufacturing company "India Yamaha Motor Private Limited (IYM)".

IYM operates from its state-of-the-art-manufacturing units at Surajpur in Uttar

Pradesh and Faridabad in Haryana and produces motorcycles both for domestic

and export markets. With a strong workforce of more than 2,000 employees,

IYM is highly customer-driven and has a countrywide network of over 400

dealers. Presently, its product portfolio includes VMAX (1,679cc), MT01

(1,670cc), YZF-R1 (998cc), Fazer (153cc), FZ-S (153cc), FZ16 (153cc), YZF-

R15 (150cc), Gladiator Type SS & RS (125cc), Gladiator Graffiti (125cc), G5

(106cc), Alba (106cc) and Crux (106cc). “

VISION----------------------------------------------------------------------:

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We will establish YAMAHA as the "exclusive & trusted brand" of customers by "creating

Kando" (touching their hearts) - the first time and every time with world class products &

services delivered by people having "passion for customers".

MISSION--------------------------------------------------------------------

We are committed to:

Be the Exclusive & Trusted Brand renowned for marketing and manufacturing of YAMAHA

products, focusing on serving our customer where we can build long term relationships by

raising their lifestyle through performance excellence, proactive design & innovative technology.

Our innovative solutions will always exceed the changing needs of our customers and provide

value added vehicles.

Build the Winning Team with capabilities for success, thriving in a climate for action and

delivering results. Our employees are the most valuable assets and we intend to develop them to

achieve international level of professionalism with progressive career development. As a good

corporate citizen, we will conduct our business ethically and socially in a responsible manner

with concerns for the environment.

Grow through continuously innovating our business processes for creating value and knowledge

across our customers thereby earning the loyalty of our partners & increasing our stakeholder

value.

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CORE COMPETENCIES-----------------------------------------------

Customer #1

We put customers first in everything we do. We take decisions keeping the customer in mind.

Corporate exellence

We strive for excellence in everything we do and in the quality of goods & services we provide.

We work hard to achieve what we commit & achieve results faster than our competitors and we

never give up.

Team-work

We work cohesively with our colleagues as a multi-cultural team built on trust, respect,

understanding & mutual co-operation. Everyone's contribution is equally important for our

success.

Frank & Fair Organization

We are honest, sincere, open minded, fair & transparent in our dealings. We actively listen to

others and participate in healthy & frank discussions to achieve the organization's goals.

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5.YAMAHA SWOT ANALYSIS

1).STRENGTHS

Excellent branding, advertising and global distribution

Yamaha Motor Corporation has over 39,000 employees

One of the major brand in motorsport like MotoGP, World superbike etc

Yamaha produces scooters from 50 to 500 cc, and a range of motorcycles from 50 to

1,900 cc, including cruiser, sport touring, sport, dual-sport, and off-road

Extremely high Size and reach of company.

2).WEAKNESSES

Small showrooms.

Not much emphasis on aggressiveselling.

Weak product diversity

3).OPPORTUNITIES

Growing premium segment.

Global expansion into the Caribbean and Central America.

Expansion of target market

Increasing dispensable income.

1st mover advantage.

4).THREATS

Cut throat competition

Increasing number of players in the Market

Rising raw material costs

Increasing rates of interest on finance

Strong competition from indian and international brands.

Better public transport will affect two wheeler segment.

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6.FTP - FOREIGN TRADE POLICY (2009-14)The foreign trade policy 2009-14,incorporating provisions relating to export and import of

goods and services came into force from 27th august,2009 and shall remain in force upto

31st march,2014 .Thus it is the sum total of a country’s relationship with internal and

external actors while pursuing its goals and objectives.This five year policy is issued by

Ministry of Commerce for five years .It includes number of policies ,initiatives,frameworks

and regulations to control and regulate exports as well as imports of the country.Some of

them which are used by Indian firms for their imports are as follows:

1).GENERAL PROVISIONS REGARDING EXPORTS AND IMPORTS:The itemwise

export and import policy shall be ,as specified in ITC(HS)notified by DGFT,as amended

from time to time.Every importer or exporter shall comply with the provisions of FT(D&R)

Act,the rules and orders made under FTP. DGFT may specify the procedure to be followed

for an exporter or importer for the purpose of implementing provisions of FT(D&R)

Act.Restricted goods are mentioned in the list of ITC(HS).

2).DUTY EXEMPTION AND REMISSION SCHEMES:These schemes enable duty free

imports of inputs required for export production .Duty exemption schemes consist of (a)Advance

Authorisation scheme and (b) Duty Free Import Authorisation scheme.On other hand Duty

Remission scheme enables post export replenishment/remission of duty on inputs used in export

product.Duty Remission schemes consist of (a)Duty entitlement passbook scheme and (b)Duty

Drawback scheme.

An Advance authorisation is issued to allow duty free import of inputs,which are physically

incorporated in the export products.It can be issued either to a manufacturer exporter or merchant

exporter tied to supporting manufacturer.

DFIA is issued to allow duty free import of inputs,fuel,oil,energy sources and catalyst which are

required for production of export product.

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DEPB scheme is not in use,but Duty drawback scheme is used in applicable cases.

3).EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME:Concessional 3% duty

EPCG scheme allows import of capital goods for pre production,post production and production

at 3% customs duty,subject to an export obligation equivalent to 8 times of duty on capital goods

imported under EPCG scheme ,to be fulfilled in 8 years reckoned from authorisation issue-date.

7.INCOTERMS

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The INTERNATIONAL COMMERCIAL TERMS,are the set of rules which defines the

responsibilities of the sellers and buyers for the delivery of goods under sales contracts for

domestic as well as international trade.They are published by the ICC and are widely used in

international commercial transactions.First incoterms were published in 1936 after which

they have been revised time to time.The most latest and recent version of

INCOTERMS,2010 were launched in september,2010 and became effective from january

1,2011.

These terms provide a common set of rules to clarify responsibilities of seller and buyers for

the delivery of goods under sales contracts.They significantly reduces the

misunderstamdings among traders and thereby minimize trade disputes and litigation.

1).FAS-FREE ALONGSIDE SHIP(named port of shipment)

The seller place the goods alongside the ship at the named port.The seller must clear the

goods for export.It is suitable only for the maritime transport but NO for multimodal sea

transport incontainers.It is usually used for heavy-lift or ulk cargo.

2).FOB-FREE ON BOARD(named port of shipment)

The seller must load the goods on board the vessel nominated by the buyer.Cost and risk are

divided when the goods are actually on board of the vessel.The seller must clear the goods for

export.The buyer must instruct the seller the details of the vessel and the port where the goods

are to be loaded.

3).CFR-COST AND FREIGHT(named port of destination)

Seller must pay the cost and freight to bring the goods to the port of destination.However ,risk is

transferred to the buyer once the goods are loaded on the vessel.It is used only for maritime

transport only insurance for goods is not included.

4).CIF-COST ,INSURANCE AND FREIGHT(named port of destination)

It is exactly same as CFR except that the seller must in addition procure and pay for the

insurance maritime transport only.

5).EXW-EX WORKS(named place ofdelivery)

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The seller makes the goods available at its premises.It places the maximum obligations on the

buyer and minimum obligations on the seller.It means that the seller has the goods ready for the

collection at his premises on the date agreed upon.The buyer pays all transportation costs and

also bears the risks for bringing the goods to their final destination.

6).FCA-FREE CARRIER(named place of delivery)

The seller hands over the goods ,cleared for export ,into the disposal of the first carrier(named by

the buyer),at the named place.The seller pays for carriage to the named point of delivery and risk

passes when goods are handed over to the first carrier.

7).CPT-CARRIAGE PAID TO(named place of destination)

The seller pays for carriage.Risk transfers to buyer upon handling goods over to the first carrier.

8).CIP-CARRIAGE AND INSURANCE PAID TO(named place of destination)

The containerized transport/multimodal equivalent of CIF.Seller pays for carriage and insurance

to the named destination point ,but risk passes when the goods are handed over to the first

carrier.

9).DAT –DELIVERED AT TERMINAL(named terminal at port or place of destination)

Seller pays for change to the terminal,except for costs related to import clearance and assumes all

risks upto to the point that goods are unloaded at the terminal.

10).DAP-DELIVERED AT PLACE(named place of destination)

Seller pays for the carriage to the named place,except for costs related to import clearance,and

assumes all risks prior to the point that good are ready for unloading by the buyer.

11).DDP-DELIVERED DUTY PAID(named place of destination)

Seller is responsible for delivering the goods to the named place in the country of the buyer and

pays all costs in bringing the goods to the destination including import duties and taxes.It places

maximum obligations on the seller and minimum obligations on the buyer.

8.FOB-FREE ON BOARD

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This term is used usually for the sea or the inland waterway transport.FOB means that seller will

deliver the goods on board the vessel nominated by the buyer at the named port of shipment or

procures the goods already so delivered.The risk of loss or damage to the goods passes when the

goods are on board the vessel ,and buyer bears all costs from that moment onwards.FOB may not

be appropriate where goods are handed over to the carrier before they are on board the vessel,for

example goods in containers,which are typically delivered at the terminal.FOB requires the seller

to clear the goods for export,where applicable.The seller has no obligations to clear the goods for

import ,pay any import duty or carry out any import customs formalities.

THE SELLER’S OBLIGATIONS-The seller must provide the goods and the commercial

invoice in conformity with the contract of sale of contract of sale and any other evidence of

conformity that may be reaquired by the contract.

1).Licences,authorizations,security clearances and other formalities-Where applicable the

seller must obtain at its own risk and expense any export licence or other official authorization

and carry out all customs formalities necessary for the export of goods.

Contract of carriage:The seller has no obligations to the buyer to make a contract of

carriage.

Contract of insurance:The seller has no obligations to the buyer to make a contract of

insurance.

2).Delivery-The seller is suppose to deliver the goods either by placing them on board the vessel

nominated by the buyer at the loading point or by procuring the goods so delivered.In either case

the seller must deliver the goods on agrred date or within the agreed period and in manner

customary at the port.If no specific loading point has been indicated by the buyer,the seller may

select the point within the named port of shipment that best suits its purpose.

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3).Tranfer of risks-The seller bears all risks of loss or damage to the goods until they have been

delivered in with exception of loss or damage in the circumstances.The seller must pay :

All costs relating to the goods until they have been delivered other than those payable by

the buyer,

The costs of customs formalities necessary for export as well as all duties , taxes and

other charges payable upon export.

4).Notice to buyer-The seller must ,at the buyer’s risk and expense ,give the buyer sufficient

notice either that goods have been delivered or that the vessel has failed to take the goods within

the time agreed.There need to be presence of the usual proof that goods have been delivered.

5).Checking-packaging-marking-The seller must pay :

The costs for checking operations (checking quality,measuring,weighing and counting)

that are necessary for the purpose of delivering the goods

Costs of any pre-shipment inspection mandated by the authority of the country of export.

Costs of packaging the goods appropriately for their transport (marked properly).

THE BUYER’S OBLIGATIONS-The buyer must pay the price of the goods as provided in the

contract of sale.

1).Licenses,authorisations,security clearances and other formalities-It is upto the buyer to

obtain at its own risk and expense,any import license or other official authorisation and carry out

all custom formalities for the import of the goods and for their transport through any countries.

Contract of carriage:The buyer must contract at its own expense for the carriage of the

goods from the named port of shipment.

Contract of insurance:The buyer has no obligation to the seller to make a contact of

insurance.

2).Taking delivery-The buyer must take delivery of the goods when they have been delivered.

25

3).Transfers of risks-The buyer bears all the risks of loss or damage to the goods from time they

have been delivered.The buyer bears all risks of loss of or damage to the goods:

From the agreed date ,or in the absence of an agreed date

From the date notified by the seller within the agreed period ,or ,if no such date has been

notified.

From the expiry date of any agreed period for delivery ,provided that the goods have been

clearly identified as the contract goods.

4).Allocation of costs-The buyer must all of the following costs:

All costs relating to the goods from time they have been delivered

Any additional cost if buyer fails to give appropriate notice or the vessel nominated fails

to arrive on time.

All duties,taxes,charges as well as costs of carrying out customs formalities payable upon

import of the goods and the costs for their transport through any country.

5).Notices to the seller-The buyer must give the seller sufficient notice of the vessel

time ,loading point and where necessary the delivery time within the agreed period.The buyer

must accept the proof of the delivery provided.

6).Inspection of goods-The buyer must pay the costs of any mandatory pre-shipment inspection .

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9.INDIA AND ASEAN-FREE TRADE AREA

Its now more than 10 years ,the partnership between INDIA and the ASSOCIATION OF

SOUTH EAST ASIAN NATIONS(ASEAN) comprising Brunei, Cambodia, Indonesia, Laos,

Malaysia, Myanmar, Phillippines, Singapore, Thailand and Vietnam has been developing at quite

a fast pace.

India became a sectoral dialogue partner of ASEAN in 1992.Mutual interest led ASEAN to

invite India to become its full dialouge partner during fifth ASEAN summit in Bangkok in

1995.India also became a member of ASEAN Regional forum (ARF) in 1996.India and ASEAN

have been holding summit level meetings on an annual basis since 2002.

In August 2010,Singapore,Thailand and Malaysia accepted the FTA on goods .The other seven

ASEAN countries are expected to operationalise the FTA by August ,2010.

India and ASEAN are currently negotiating agreements on trade in services and investment .The

services negotiations are taking place on a request offer basis,wherein both sides make request

for the openings they seek and offers are made by the receiving country based on the requests.

The deepening of ties between India and ASEAN is reflected in the continued buoyancy in trade

figures. India’s trade with ASEAN countries has increased from US$ 30.7 billion in 2006-07,to

US$ 39.08 billion in 2007-08 and to US$ 45.34 billion in 2008-09.

At the second ASEAN - India summit in 2003,the ASEAN-India framework agreement on

comprehensive economic cooperation was signed by the leaders of ASEAN and India.The

framework agreement laid a sound basis for the eventual establishment of an ASEAN –India

regional trade and investment area(RTIA),which includes FTA in goods ,services and

investment.

The 7th ASEAN –India summit in CHA-AM HUA HIN,Thailand on 24th october 2009 agreed

to revise the bilateral trade target to 70 billion USD to be achieved in next two years,noting that

the initial target of USD 50 billion set in 2007 may soon be surpassed.

In august 2009,India signed a free trade agreement (FTA) with the ASEAN members in

Thailand.Under the ASEAN – India FTA,ASEAN member countries and INDIA will lift import

27

tariffs on more than 80 percent of traded products between 2013-16.India and ASEAN are

currently negotiating agreements on trade in services and investments.

BENEFITS OF FTA(FREE TRADE AREA) TO INDIA:

The FTA liberalized tariffs on about 4,000 items accounting for nearly 80% of trade

between INDIA and ASEAN.It includes long list of electronics,chemicals,spare and

machine parts.

The agreement became effective from Jan,1 2010, tariffs on products covered will sink to

zero between 2013 and 2016.

Now,its one of the members of large integrated market of ASEAN with low product

cost,high market competion and lowered tariffs.

India’s imported goods worth US$ 26.3 billion in 2008-09 from ASEAN ,during the period april-

december 2009-10,India’s imports from ASEAN totalled US$ 18.09 billion,according to data

released by the minstry of commerce and industry.

SOME MAJOR SUPPLIERSTO INDIA:

SINGAPORE-It continues to be the single largest investor in India among the ASEAN

countries .The total bilateral trade during 2008-09 was US$ 16.1 billion,an increase of 3.86

percent over US$ 15.5 billion in 2007-08.Also, the FDI inflows from Singapore during 2000 and

2010 were US$ 10.2 billion,according to data released by the department of industrial policy and

promotion(DIPP).

MALAYSIA-The bilateral economic relationship between India and Malaysia has been steadily

moving ahead.Bilateral trade among the two countries amounted to US$ 10,604.75 million

during 2008-09,(increase of 23.48%) according to data released by the ministry of commerce.

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THAILAND- The bilateral trade betweenthe two countries touched US$ 4.6 billion in 2008-

09,registering a growth of 12.9 percent ,according to data released by ministry

ofcommerce.Also,Total FDI inflow during the period april 2000-march2010 from Thailand was

US$ 77.97 million.

INDONESIA-The bilateral trade between Indonesia and India totalled US$ 9.3 billion in 2008-

09 ,an increase of 32.08 percent after 2007-08.They both are targeting bilateral trade worth US$

20 billion by 2020,according to Indonesian ambassador to India.

MYANMAR,VIETNAM,PHILIPPINES AND CAMBODIA-India’s trade with these countries

have also shown progress with time in last few years and is increasing continuously.As far as

imports are considered, there is small list of items that India imports from these countries.

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10.1.REQUIREMENT FOR IMPORT:Yamaha ,at its Surajpur plant produces only some of the components such as fuel tank,body

cover etc.Most of the components are locally purchased from other states of India such as

Maharashtra,Karnataka,Haryana etc.They constitute the local purchase and rest of the parts

are imported from other countries.

The ratio goes as :

OWM MADE PARTS-5-10%

BOUGHT OUT PARTS(Locally purchased)-70-80%

IMPORTED-5-10%

Major Suppliers:

Thailand

Singapore

China

Japan

Indonesia

Taiwan

Malaysia

Imports mainly includes:

Components- like Ignition Coil, CDI unit, Rotor, Stator, Starting Motor etc.

Hardware- like Nuts, Bolts, Screws, Pins, Circlips etc.

Raw materials- like Paints, Welding Wire, Grease, Hot rolled sheets etc.

Machinery parts- like spare parts of CNCmachine, testing machine etc.

30

10.2.STEP BY STEP PROCESS OF IMPORT LOGISTICS:

PARTICIPANTS IN IMPORT PROCESS:

BUYER

SELLER

FORWARDER

SHIPPER

CUSTOM HOUSE AGENT

CUSTOM OFFICIALS

BANK

1).PLACING OF ORDER:

The final placing of order by the buyer to the supplier involves number of steps:

Buyer would ask for QUOTATION i.e mainly the price details for the required

consignment from the supplier.

It includes: ITEM DESCRIPTION, PRICE, INCOTERMS,PAYMENT TERMS,LEAD

TIME & VALIDITY etc.

Supplier then sends the quotation for consideration to the buyer.

On the basis of Quotation, Buyer finally send PO (Purchase order),alongwith the details

of FORWARDER to the supplier.

2).ROLE OF LOGISTICS Department:

Selection of the forwarding agent.

Selection of CHA(CUSTOM HOUSE AGENT).

Tracking of the entire shipment process on behalf of the company.

Timely payment of custom duty.

ROLE OF FORWARDER:

Arrangement of vessel / flight booking for the consignment.

Arrangement of Transportation from Origin Port to Destination Port

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Other necessary arrangements for receiving order at port.

Constant coordination with the shipping line,buyer as well as supplier.

Giving timely information to the logistics department regarding shipping process and

proceedings.

3).SUPPLIER DELIVERS THE ORDER:

Supplier then makes all necessary arrangements as per the buyer’s conditions,for the execution

of the order from dispatch of order from its own port to its delivery at the Buyer’s port.

4).SHIPPING DOCUMENTS TO BUYER:

Supplier sends the shipping documents to buyer, which are sent by buyer to their

CHA(CUSTOM HOUSE AGENT),for the purpose of custom clearance.

5).ROLE OF CHA OR C/F AGENTS:

The CHA on receiving the shipping documents and details,file the BILL OF ENTRY as per

details in the documents and then confirm the CUSTOM DUTY to the buyer.CHA may also be

responsible for following activities:

Arrangement of warehousing at the port.

Arrangement of containers at the port.

Arranging the marine/cargo insurance of the shipment.

Arrangement for assessment of damage to the goods to file claim with the insurance

company.

Arrangement for handling goods if rejected by the importer or not collected on time.

Arrangment for transport of goods to the factory after custom clearance.

6).PAYMENT OF CUSTOM DUTY:

The buyer would make the payment for the custom duty ,usually through e-payment and then

send the bank-receipt to the CHA.

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7).CLEARING OF CONSIGNMENT:

After the bank-receipt is being received , the CHA clears the consignment from the custom and

gives the shipping arrival information to the buyer.CHA will arrange for the domestic transport

of order from the port to the buyer’s location or factory.On final delivery of goods the CHA

sends the original bill of entry to the BUYER.

IMPORT LOGISTICS PROCESS CHART

ACTIVITIES RESPONSIBILITY

DURATION REFERENCE DOCUMENTS

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1).Buyer ask for quotation to supplier.

2).Supplier sends quotation and forwarder details with full details of item to buyer.

3).Buyer places final order in form of Purchase order.

4).Forwarder regulates entire shipment from origin port to destination port.

5).Supplier sends the shipping documents to buyer.

6).Buyer sends the shipping documents to CHA.

7).CHA files BILL OF ENTRY and sends the B/E number to appraising group.

8).Appraising group carries out examination and verification of the consignment.

9).CHA calculates the custom duty and informs it to buyer.

10).Payment of custom duty by the Buyer.

11).Final clearing of consignment from the port.

BUYER

SUPPLIER

BUYER

FORWARDER

SUPPLIER

BUYER

CHA

CUSTOM OFFICIALS

CHA

BUYER

WITHIN 1 WEEK

AT THE TIME OF SHIPMENT

NEXT DAY OF STEP-6

WITHIN 3 DAYS OF SHIPMENT

WITHIN 5 DAYS (AFTER STEP-9)

QUOTATION

PURCHASE ORDER

INVOICE,PACKING LIST,COA,B/L,AIRWAYBILL

BILL OF ENTRY

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10.3.RISK FACTORS IN IMPORT PROCESS:There are various kinds of risks involved while importing goods .They are mainly classified under following categories:

1).TRANSPORT RISK:This involves the risk associated with loss of goods during

transportation

First of all the importer need to ensure that the goods supplied by the exporter is insured.

It is always advisable to set out the agreement betwen the parties as to the type of cover

to be obtained in the contract of sale.

Importer preferably wish to obtain insurance cover from their own insurance company

under “open policy” thus taking advantage of bulk billing and other relationships.

2).QUALITY RISK:This involves the quality of the final received goods.

It is important for the importer to ensure that the final products are as good as

sample.importer must take necessary protective measures in advance.

Importer must investigate the reputation and standing of the supplier.

Inspection must be done from the importer side and the exporter side or by the third party

agency.

Importer is able to inspect the goods before payment is made to the supplier at the

maturity date in case of Bill of exchange,with documents released against acceptance.

It is found better that the importer can have the agent in the supplier’s country for closer

supervision to be maintained over the shipments.

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3).DELIVERY RISK:This is the risk that arises on when goods are not delivered on

time.Delivery on time is the important factor for importer to reach the target market.

Importer must make the import-contract very specific,so that importer always has an

option of refusing the payment if goods are not delivered on time.

The “latest date if shipment” is included by the issuing bank in the terms of credit.

(when payment is through documentary credit)

Also,very import the importer need to collect the consignment from the port on time

other wise charges are ready to be paid.

4).EXCHANGE RATE RISK:This involves the risk that arises due to change in the value of

currency.

The importer must determine the value of the product in domestic currency because

there is always a gap between the time of entering into the contract and actual

payment for the goods is received.

It must enter into foreign exchange contract(HEDGING is most commonly used

where rate of exchange is pre-fixed by both the parties to prevent future risk of high

rate) through bank.

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10.4.IMPORT DOCUMENTATION

The availability of right documents,the correctness of the information available in the documents

as well as the timeliness in submitting the documents and filling the necessary applications for

the customs clearance determines the efficiency of the customs clearance process.Any delay in

filling or non-availability of documents can delay the process and thereby importers stands not

only to incur demurrage on the imported cargo but also stand to loose business

opportunities.Custom clearance process requires the set of documents to be submitted by the

importer .By the airline,shippingline or the freight forwarder as well as the customs

documentation prepared and submitted by the clearing agent on behalf of the importer.Some

major documents required in import logistics are as follows:

1).COMMERCIAL INVOICE:This document certifies the sales as well as gives the

description of the items as well as reflects the pricing or the value of the cargo.Custom valuation

is based on the value reflected on the commercial invoice.Some major entries in commercial

invoice are as follows:

Customer code

Invoice no.

Date

Shipped by

From to/via

Payment

Currency

Mark and number

No. of packages

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Description

Quantity

Unit-price

Total

2).PACKING LIST:It is mandatory to put the shipping marks on all the cargo covering each

and every individual piece or parcel.The details of the number of parcels in the

consignment ,their dimension ,the shipping marks,the gross and net weights of each of the

parcels along with the number of units contained in each parcel is catalogued in form of the

packing list.It is used to identify the parcels as belonging to the particular consignment under the

said invoice.Major entries:

Customer code

Invoice no.

Date

Shipped by

From to/via

Payment

Mark and number

No.of packages

Description

Quantity

Gross weight

Net weight

Measurement

3)BILL OF LADING(NON-NEGOTIABLE OCEAN-SEA TRANSPORT):This is issued by

the shipping line certifying carriage of the said cargo under the specific invoice on behalf of the

exporter or importer depending upon terms of sale.In FOB,”ON BOARD BILL OF LADING” is

usually considered to be the apt bil of lading that signifies that the cargo has been loaded on

board.This is also required for negotiations of payment from importer to the exporter.Major

entries:

38

Consignee

Notify party

Pre-carriage by

Place of receipt

Ocean vessel

Port of loading

Port of discharge

Place of delivery

Number of original B/L

Carrier’s receipt

Particulars furnished by shipper – carrier not responsible

Container no./seal no.

Marks and numbers

No. of containers packages

Kinds of packages ,description of goods

Gross weight

Measurements

Total no. containers or packages in words

Freight and charges

Prepaid

Collect(freight collect)

Declared value charges

Declared value of US $

Prepaid at

Payable at

Ex rate

Place of issue

Date

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4).AIRWAY BILL (IN CASE OF AIR TRANSPORT):This is issued by the airline or a

freight forwarder who consolidates the air freight cargo.It includes:

Shipper’s name and address

Shipper a/c no.

Consignee name and address

Issuing carrier agent name and city

Agent tata code

Account no.

Airport of departure and requested routing

Airport of destination

Flight /date

Accounting information

Amount of insurance

Gross weight

Chargeable weight

Total

Nature and quantity of goods

Charges at destination

Total collect charges

Signature of shiper or his agent

5)CERTIFICATE OF ORIGIN:Certain bilateral agreements and multilateral agreements

would enjoy favorable tariffs for import duties.In such cases when the consignments are exported

from such member countries,the designated export agency issues certificate of origin to the

importer for submission to customs.Based on this the custom department classifies the cargo

under specific schedule.It avoids the third party countries from routing imports through member

countries and effecting third party export to avoid duty ,quantity or license restrictions.It

includes:

Goods consigned from

Goods consigned to

Reference to

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Means of transport and route-departure date ,vessel’s name/aircraft,port of discharge

For official use:

1.preferential tariff treatment given under ASEAN –India free trade area preferential

tariff.

2.preferential tariff treatment not given.

Item number

Marks and number of packages

Description of goods

Origin criterion

Gross weight or other quantity and value

Number and date of invoices

Declaration of exporter

Certification

6).SOME OTHER IMPORTANT DOCUMENTS:Besides above ,there are various other

documents that are necessary to be filled as per terms and conditions:

Insurance certificate(in case CIF incoterm)

Catalouge(in case of machinery items)

Fumigation(document for wooden palletisation)

Test report/MSDS certificate (in case of chemicals)

Material safety date-sheet(in case of chemicals and hazardous goods)

41

10.5.IMPORT DUTIES

The concept of import duty is applicable to each and every product or item whether its any

equipment ,raw material ,machine or auto parts.Import duties form a significant source of

revenue for the country and are levied on the goods and at the rates specified in the schedules

to the customs tariff act,1975.Territorial water extends upto 12 nautical miles into the sea

from the coast of india and so the liability to pay import duty commences as soon as goods

enter the territorial waters of india.

BASIC DUTY:It is type of duty or tax imposed under the customs act(1962).Basic

custom duties varies for different items from 5% to 40%.The duty rates in the first

schedule of the customs tariff act,1975 and have been amended from time to time

under the finance act.The central government has the power to reduce or exempt any

good from these duties.

COUNTERVAILING DUTY:It is also known as countervailing duty and is equal to

excise duty imposed on a like product manufactured or produced in india.It is

implemented under the section3(1),of the indian custom tariff act.

ADDITIONAL DUTY:This duty is imposed at the rate of 4% in order to provide a

level playing field to indigenous goods which have to bear sales tax.This is to

computed on the aggregate of the: Assessable value+Basic duty of

customs+Surcharge + Additional duty of customs leviable ,under section 3 of the

customs tariff act,1975.

ANTI-DUMPING DUTY:Dumping means exporting goods in a foreign market at a

price which is less than their cost of production or below their “fair”market

value.Thus to counteract this dumping,the indian government has formulated certain

guidelines and policies.Imposing duty on imported goods is also one of them and is

known as anti-dumping duty.

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10.6.COSTS INVOLVED IN IMPORT LOGISTICS:

1).FREIGHT COST:This is the cost incurred in moving goods.It includes packing , palletizing ,

documentation and loading unloading charges ,carriage costs and marine insurance costs.The

freight rate is a price at which a cerain cargo is delivered from one point to another.It depends

upon:

Mode of transport(ship,air,rail,truck)

Weight of cargo

Distance to delivery

Volumetric weight of the cargo

Calculating freight cost:

FOB(FREE ON BOARD)=PRODUCTION COST+PROFIT+EXPENSES+TRANSPORT TO

THE PORT OF ORIGIN

CIF(COST INSURANCE FREIGHT)=FOB+FREIGHT FROM PORT OF ORIGIN TO THE

PORT OF DESTINY + INSURANCE

It also includes SURCHARGES .

2).CUSTOM DUTY:This is the tax or tariff being imposed on the importation(usually) and

exportation (unusually) of goods.To calculate the final landing cost of the imported goods to the

factory,following method is used for calculation.

Calculation of the custom duty begins after the calculation of the CIF value of the goods i.e

COST+FREIGHT+INSURANCE.

STEP1. CALCULATING ACCESIBLE VALUE:

CIF(VALUE OF GOODS)+ 1%HANDLING CHARGES = ACCESIBLE VALUE

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STEP2. BASIC CUSTOM DUTY

As per the commodity / item-Decided by the CENTRAL BOARD OF EXCISE AND

CUSTOMS

STEP3: CVD-COUNTER VAILING DUTY

12% on Accessible value as well as Basic duty.

STEP4: EDUCATION CESS-CUSTOM DUTY

3% on Basic duty and CVD.

STEP5: SAD-SPECIAL ADDITIONAL DUTY

4% Accessible as well as all three kinds af duties(BASIC + EDUCATION CESS + CVD).

3).Insurance costs :The incoterm CIF includes all of the freight cost,custom duty as well as cost

of insurance.It first ofall, depends upon the consignment i.e item,type,weight,quantity and

country from which it is imported.Obviously ,critical items such as chemicals and petroleum

products are imposed with high insurance costs.Their are various policies for the purpose of

insurance which are adopted as per the conditions,requirements and their benefits.There are

mainly two kinds of policies:

OPEN POLICY – In this,yearly premium is paid by the company depending upon its

overall turnover.Rates vary as per the output and turnover.

SHIPMENT TO SHIPMENT POLICY-In this ,insurance cost is paid as per the

individual shipment is done depending upon the consignment ,its type and quantity.

4).Port charges:These are the charges that are imposed by the port administration as per their

fixed norms and conditions.These are charged for processing the entire proceedings at the port

for clearance of the imported consignment.

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5).Custom clearance charges and Inland transport charges:These charges may include costs

for CHA/Forwarding agent and the costs for inland transport to carry the goods from domestic

port to final destination factory.

6).Total landing costs:

CIF + Total custom duty – Recoverable MODVAT(CVD and SAD are recoverable)= Total

landing cost to factory(IMPORTER).

7).Some other irregular costs:

a).Detention costs:This is the costs imposed by the shipping line against per container/per day.

b).Demurrage costs:After 3 free days,it is charged by the custom to the buyer whenthe

consignment is not collected by the time.

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10.7.CUSTOM CLEARANCE

The custom clearance formalities have to be compiled with by the importer after arrival of the

goods at the other customs station.There could also be cases of transhipment of the goods after

unloading to a port outside INDIA.Latestly followed is the EDI system as follows:

For the goods which are offloaded , importers have the option to clear the goods for home

consumption after payment of the duties leviable or to clear them for warehousing without

immediate discharge of the duties .

STEP 1.BILL OF ENTRY:

In the case of EDI system,no formal Bill of Entry is filed as it is generated in the computer

system ,but the importer is required to file a cargo declaration having prescribed particulars

required for processing of the entry for customs clearance.

STEP 2.TYPES OF BILL OF ENTRY Bill of Entry ,where filed is to be submitted in a set

different copies meant for different purposes and also given different colour scheme ,and on the

body of the bill of entry the purpose for which it will be used is generally mentioned in the non-

EDI system.For the purpose of domestic consumption ,bill of entry has to be filed in 4 copies:

Original for customs

Duplicate for customs

One for importer

Last for bank for making remittances.

STEP 3.THE EDI SYSTEM:

46

Under EDI system,the importer does not submit documents as such for assessment but submits

declarations in the electronic format containing all the relevant information to the service

centre.A checklist is generated for the verification of data by the importer/CHA.After

verification the data is to be submitted to the system by the service centre operator and system

then generates a B/E number ,which is endorsed on the printed checklist and returned to the

importer/CHA.

STEP 4.BILL OF ENTRY NUMBER:

For processing of bill of entry in the EDI system ,the streamer agents get the manifest filed

through EDI or by using the service centre of the custom house which also generates bill of entry

number.

STEP 5.APPRAISING GROUP:

After noting or registration of the bill of entry ,it is forwarded manually or electronically to the

concerned appraising group in the custom house dealing with commodity sought to be cleared.

STEP 6.ASSESSMENT:The basic function of assessing officer in the appraising groups is to

determine the duty liability taking due note of any exemptions or benefits claimed under

different export promotion schemes.They also check that there are any restrictions or

prohibitions on the goods imported and if they require any permission/license/permit etc.Also if

not satisfied then the appeal can be made to appropriate appellate authority within the time limits

and in manner prescribed.

STEP 7.CALCULATION OF DUTY:On the receipt of examination report the appraising

officers in the group assesses the bill of entry .He indicates the final classification and valuation

in the bill of entry indicating separately the various duties such as basic,countervailing,anti-

dumping,safeguard etc.All calculations are done by the system itself.

STEP 8.DUTY PAYMENT:After the assessment and calculation of the duty liability the

importer’s representative has to deposit the duty calculated with the treasury or the nominated

banks,whereafter he can go and seek delivery of the goods from custodians.

47

STEP 9.FINAL DELIVERY:Where the goods have already been examined for finalization of

classification or valuation no further examination/checking by the dock appraising staff is

required at the time of giving delivery and the goods can be taken delivery after taking

appropriate orders and payments of dues to the custodians,if any.

10.8.OTHER IMPORT PROCEDURES

(1).IMPORT OF GOODS BY POST:

When the goods are imported by post parcel,the postal authorities transfer such goods on the

receipt of custom office attached to the foreign post office.A demand-cum-show cause notice is

issued to the importer to file requisite documents,namely:

Commercial invoice

Packing list

Copy of registered post parcel receipt

Certificate of origin

Customs purpose copy of import license in original

An other registeration certificate in support of eligibility of importer to import such

goods.

On the basis of these documents ,goods are examined and assesed for the duties payable in the

presence of importer or agent.Finally,custom duties are paid and goods are received.

This method is used only for small consignments with less quantity/weight/volume.

(2).WAREHOUSING OF IMPORTED GOODS:

48

If the importer faces any problem while clearing the goods or payment of duty,then it can deposit

the goods in private or public bonded wrehouse.It allows the facility of deferring payment of

duty on imported goods,pending actual clearance for home consumption on payment of

duty.Followng are the essential steps to be taken:

The importer are required to file a set of yellow coloured bill of entry commonly known

as warehousing or Into—bond bill of entry if they want facility of warehousing.The

procedure for this bill of entry is same as normal bill of entry except that the payment of

duty is deferred.

After the assesment of goods for the levy of the import duty is completed,the scutinising

appraiser debits the import license where necessary,and the set of warehousing bill of

entry (WR B/E)undergoes usual counterchecks by the assistance collector of customs.

The formalities of calculation,license,registration and its pre-audit are also gone through

as in the case of a home consumption B/E.

The W.R Bill of entry,is thereafter audited by the internal audit department and then sent

to import bond department,where the importer’s file the requisite warehousing

bond,under section 59 of custom act,1962.

The bond after scrutiny is accepted by A.C (bond) and registered in the bond department

and WR number is impressed on all copies of B.E.The original copy is kept in the bond

dpartment ,while the others are handed over to importers/clearing agent.

The goods are thereafter examined by the dock appraising staff on the basis of orders of

scrutinising appraiser on duplicate copy,and if found in order,the same are allowed to be

physically warehoused by the dock appraiser under the escort of a preventive officer.

49

In order to clear the dutiable imported goods from the warehouse,the importer is required

to present an ex-bond bill ofentry,printed on green paper in the imported bond

department.

The importer after getting the ex-bond B/E registered in the import bond department

submits it to the appraising department alongwith triplicate copy of related Into bond B/E

and invoice packing list,for verification of the particulars furnished on the B/E .

The concerned group appraiser classifies and reassesses,if necessary.The assessed B/E is

thereafter handed over to the importer/clearing agents for payment of duty and taking

delivery of the goods after the usual counter check,by concerned group A.C and

calculation of import duty.

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10.9.CONCLUSIONS:

First of all,selection of mode of transport is the critical issue.Sea tranport results in less

ocean freight and port charges while air transport have high freight charges.However,air

transport is beneficiary in faster delivery,minimised breakage and loss of

consignment.Thus air transport,is used when time constraint is strict and considering the

factors of weight,volume and value. Prominently ,Sea transport is used due to huge

difference in frieght charges as compared to air transport.

Secondly,it is better to have a single insurance company ,preferably on the regular basis

due to inherent advantages and convenience.If insurance is arranged continuously with

the same insurance company ,it would bring in a considerable amount of savings in the

long run which may be in the range of lakhs

It is found better to use Open policy instead of Shipment to Shipment policy for payment

of insurance costs.Shipment to shipment policy results in much more higher costs as it

involves payment of insurance on individual shipments.

In the case,when air transport is used,it could be made more economical by using

Consolidators for which the air freight charges are very less.This involves combining of

various shipments for delivery to the carrier in full container load shipment.

Special attention to be paid to approach and timings for negotiations with the

counterparts with foreign countries.This requires to provide your counterpart with

51

appropriate future business plans and proposals to gain their understanding and full

cooperation.

Selection of optimal mode of payment is the another important aspect to be considered in

terms of cost.EX-WORKS,CFR and CIF results in higher cost while FOB results in less

cost as well as less risk factors,thus most efficient as compared to other incoterms.

Integrating and simpifying the import clearance process with brokers at the port reduces

any kind of delay in the clearance process at the port.It ensures timely delivery of the

consignment with documentation,inspection and payment also on time avoiding any kind

of demurrage or detention charges.Also,their should be maintenance of a complete audit

trail for each shipment.

52

11.CASE STUDY: DEVELOPING BEST LOGISTICS MODEL FOR INDIA YAMAHA MOTORS PVT.LTD.

INDIA YAMAHA MOTORS PVT LTD at its surajpur plant began production initially for

domestic selling to other states of India .After acquiring prominent and major share in Indian

two-wheeler sale and purchase,it started its production for export of bikes to other countries

which went above on graph year by year.Export of bikes began with all south east nations like

Thailand,Singapore,Malaysia,Indonesia and Phillipines and today Yamaha exports to countries

like South Africa and even to Latin American countries like Brazil,Argentina and Equador.

But as far as Imports by Yamaha are concerned,there exists a long history of changes made in the

Import logistics model by the company .In the early 90’s there were very limited logistics chains

and options available to the company,for domestic as well as international transport.But

today,there exists number of Logistics chains for all kind of transports .Yamaha have thus,

choosen best of them in terms of performance,time-efficiency as well as cost efficiency.Also,

developing long term contracts with single logistics company have proven beneficial to the

company because changing them year by year have made losses to far extent.NISSIN ABC

Logistics is the ingoing company that have stayed fixed with Yamaha for last six years due to its

continuous best performance.

Around 5-10%,of the parts are imported by Yamaha,as follows:ignition coil,brakepads,catalic

converter,kickcrank assembly,axlemain,axledrive,nuts,bolts,bears,bearings,rectifier

regulator,valves,rotors,stator,starting motoretc.This are majorly imported from south east asian

countries so as to take advantages from ASEAN free trade area.Apart from these other major

exporters to Yamaha are china,korea and taiwan.

As far the comparison between Air and Sea transport,it is sea transport that have proved more

cost efficient as compared to air transport always.Air transport is used when the consignment is

53

of less size.Usually ,cargo upto five thousand tonnes are preffered to be transported by air.And

the situation where time constraint is a boundation and the cargo is needed within a week or

two,air transport is only the option with no other consideration.Air transport benefits with faster

delivery,minimized breakage and loss of consignment.Use of freight consolidators have proven

beneficial to some extent in case of air.But,Sea freight is also very low as compared to air

freight.Port charges as well as ocean freight are much less. Ratio goes 7:3 for sea to air logistics.

Now comes the most important,critical and crucial part i.e Documentation.With time this part

have grown with complexity to prevent any kind of fraud and negative activity.FTP have been

kept on changing its norms and regulations in every five years as per requirements of the indian

trade.Important documents involved in import process includes Invoice,Packing list,Certificate

of origin and Bill of lading/Airway bill.These are the main shipping docs that are suppose to be

sent by the supplier to buyer .Apart this Bill of entry is another important formality to be fulfilled

as per custom clearance process.Instead of manual bill of entry,now it is processed through EDI

system.

Thus,number of changes have been made through out the model of logistics of the company in

order to ensure efficient and effective imports in terms of quality,time and cost.

First of all, selection of mode of transport is the critical issue. Sea transport results in less ocean

freight and port charges while air transport have high freight charges. However, air transport is

beneficiary in faster delivery, minimized breakage and loss of consignment. Thus air transport ,is

used when time constraint is strict and considering the factors of weight, volume and value.

Prominently ,Sea transport is used due to huge difference in frieght charges as compared to air

transport. Secondly ,it is better to have a single insurance company ,preferably on the regular

basis due to inherent advantages and convenience. If insurance is arranged continuously with the

same insurance company ,it would bring in a considerable amount of savings in the long run

which may be in the range of lacs

54

It is found better to use Open policy instead of Shipment to Shipment policy for payment of

insurance costs. Shipment to shipment policy results in much more higher costs as it involves

payment of insurance on individual shipments. In the case, when air transport is used ,it could be

made more economical by using Consolidators for which the air freight charges are very less.

This involves combining of various shipments for delivery to the carrier in full container load

shipment. Special attention to be paid to approach and timings for negotiations with the

counterparts with foreign countries. This requires to provide your counterpart with appropriate

future business plans and proposals to gain their understanding and full cooperation .Selection of

optimal mode of payment is the another important aspect to be considered in terms of cost. EX-

WORKS,CFR and CIF results in higher cost while FOB results in less cost as well as less risk

factors, thus most efficient as compared to other incoterms. Integrating and simplifying the

import clearance process with brokers at the port reduces any kind of delay in the clearance

process at the port. It ensures timely delivery of the consignment with documentation, inspection

and payment also on time avoiding any kind of demurrage or detention charges. Also, their

should be maintenance of a complete audit trail for each shipment.

55

12.BIBLIOGRAPHY

1).Website links:

http://www.dgft.org/ www.eximguru.com/ indian -customs-duty/Default.asp www. yamaha - motor - india .com/ www. eximpolicy .com pib.nic.in/archieve/ForeignTradePolicy/ForeignTradePolicy.pdf www.iccwbo.org/ incoterms www. aseans ec.org www.india- asean businessfair.com commerce.nic.in/eidb/default.asp www.cybex.in/ Indian -Customs/ India - Imports - Data .asp jp.yamaha.com/about_yamaha/ir/publications/pdf/an-2011e.pdf www. yamaha .com/about_ yamaha /ir/publications/pdf.../an-2010e.pdf www. shippersdocs .com www.cbec.gov.in www. custom-duty .com www. exportimports tatistics.com www.infodrive india .com/ www.eximguru.com/indian-customs-duty/Default.aspx

2).Other sources:

Company’s annual reports Company’s brouchers Company’s catalogues

56

13.ANNEXURE

A-1:INCOTERMS

57

INVOICE

Exporter

ADI SPAREPARTS PVT.LTD

6D-87 STREET,MONG PATHOM

BANGKOK 341109

THAILAND

Invoice No & Date

83670

22/05/2012

Exporter's reference

Buyer's Order No & Date-S6980

Other reference(s) IECNo-59083219

  RBI No

Consignee

INDIA YAMAHA MOTORS PVT.LTD

SURAJPUR,GR.NOIDA

UTTAR PRADESH-201301

INDIA

 

Buyer (if other than Consignee)

Same

Pre-carriage by

Truck

Place of Receipt

Nhava sheva-India

Country of Origin of Goods

Thailand

Country of final

destination-India

Vessel:

IYM-5300

Port of loading-

Laem chabang-Thailand

 Payment term-

FOB

Port of discharge- Final destination-

Noida

Marks & Nos

Container No

Mode of

Packing

No of

pkg

Description of

goods

Qty Gross weight Net

weight

Unit

price

 IYM-5300

83670

Corrugate

d Box

 

 10

 

 

 

 

 

 

 

 

 

 

 

 

 

 BRAKEPADS  40000  16000kgs 20

tonnes

 $5

58

PACKING LIST

Exporter

ADI SPAREPARTS PVT.LTD

6D-87 STREET,MONG PATHOM

BANGKOK 341109

THAILAND

Invoice No & Date-83670

22/05/2012

Exporter's reference

Buyer's Order No & Date-S6980

Other reference(s) IECNo-59083219

  RBI No:

Consignee

INDIA YAMAHA MOTORS PVT.LTD

SURAJPUR,GR.NOIDA

UTTAR PRADESH-201301

INDIA

 

 

Buyer (if other than Consignee)

Same

Pre-carriage by

Truck

Place of Receipt

Nhava sheva-India

Country of Origin of Goods

Thailand

Country of final destination-

India

Vessel:

IYM-4870

Port of loading-

Laem chabang

 

Port of

discharge-

Nhavasheva

Final destination-

Noida

Marks & Nos

Container No

Mode of

Packing

No of

pkg

Description of

goods

Qty Size of pkg

LxWxH (inch)

Net wt

in kgs

Gr wt

kgs

 IYM-5300

83670

Madein

Thailand

Corrugate

d Box

 

 10

 

 

 

 

 

 

 

 

 

 

 

 

 

 BRAKEPADS  4000

0

 ONE 20 FT.

CONTAINER.

 16000kg

s

 20000kgs

.

59

60

Shipper/exporter (name and address including zip code):

ADI SPAREPARTS PVT.LTD

6D-87 STREET,MONG PATHOM

BANGKOK 341109

THAILAND

NON - NEGOTIABLE BILL OF LADINGSEAWAY BILL:

KKLUJJKT284474

Consignee (name and address):

INDIA YAMAHA MOTORS PVT.LTD

SURAJPUR,GR.NOIDA

UTTAR PRADESH-201301

INDIA

 

AYUNG NAING LONG SHIPPING LTD.

Pre carriage by:

Truck

Port of loading/export:

Laem chabang

Transportation method:

SEA

Place of discharge:

Nhavasheva

Place of delivery:

New delhi

Container No. / Seal No. / Marks and Numbers: Number of

Packages:Gross weight (kg):

KINDS OF PACKAGES, MEASUREMENT

DESCRIPTION OF GOODS

61

IYM5300

83670

Made in Thailand

10

20000kgs

ONE TWENTY FOOTER CONTAINER ONLY

62

Exporter(name and address)

ADI SPAREPARTS PVT.LTD

6D-87 STREET,MONG PATHOM

BANGKOK 341109

THAILAND

Reference number:

IC2013-0126785

Consignee (name and address):

INDIA YAMAHA MOTORS PVT.LTD

SURAJPUR,GR.NOIDA

UTTAR PRADESH-201301

INDIA

 

CERTIFICATE OF ORIGIN

MINISTRY OF COMMERCE-THAILAND

Date of shipment: 20/06/2012

Mode of transport: SEA

Country of destination of goods:

INDIA

Supplementary details:

Pre-carriage by:

TRUCK

Place of receipt:

Nhava-sheva

Vessel/flight no:

Jota sabas-3567w

Port of loading/export:

Laem chabang

Place of departure:

Thailand

63

Shipping marks:

Number of Packages:

Description of commodities,

Model/Serial number, harmonized number Gross weight (kg): Invoice no. and date:

IYM-5300

83670

Made in Thailand

10 (Component parts for YAMAHA MOTORCYCLE):

40000 BRAKEPADS

20000 kgs.

83670

22/05/2012

64