How to do banking for Import
Import Export Bank of India play a critical role in international trade by providing trade finance products that reduce the risk of importing and exporting. Banks play a major role by providing assistance in many ways to facilitate international trade business. The bank was established to faster international trade in India. The bank also coordinates various institutions engaged in exports and imports.
How to open bank account
When setting up any new business, a bank account will be required for the flow of money and funds. Current is a business purpose. A current can be opened in a commercial bank. The account has no transactional limit. So, one can withdraw cash as many times you prefer to.
If you are running an export business, your interaction with the bank will be even more as compared to their business. Because of foreign exchange, line of credit, bank guarantees & guarantees, and another miscellaneous requirement.
To apply for a current account, you can either visit a branch or website for applying. Information required to open a current account, like name, address, identity proof details, owner control, and banking service.
You will have to furnish specific documents in order to open a current account in a bank. These documents will vary depending on the type of export business entity, which could be a sole proprietorship, a partnership firm, a limited liability partnership, a private limited company, or a public limited company.
AD Code Registration
An authorized debit code (AD code) is a 14-digit numerical code provided by the bank with which your business has a current account.
Exporters have to register in every port where they are clearing goods from customs.
At the time of customs clearance, your CHA asks you to give me your AD Code registration for a particular port.
AD code is registered to port where we export goods, but it can be registering only one time or it is a one-time process in one port.
AD codes are registered to the port from where goods are exported; however, they may only be registered once or as a one-time process in a single port.
How to get AD Code from Bank
You will need to register your ad code with every port from which you intend to export your goods.
Every port from which you plan to export your goods requires that you register your ad code.
To obtain an AD code, you will write a letter to the bank to issue an AD code. And you will address this request from the bank manager in the prescribed format. Then the bank will issue a 14-digit ad code on its letterhead in the format prescribed by DGFT.
How to get finance for Import
If you are a beginner in the import-export business, you might need some finance to get started, but the question is, how do you get finance for import?
While it’s possible to make good money in an import business and resell goods, it may be difficult to get bank financing for an import business. Before you import goods, you will pay the manufacturer for goods and shipping costs. There are several ways to get import financing on hand; traditional finance institutions like banks and credit unions will give you finance.
Ways of getting finance
You can source funds to finance your business, like personal savings or owner capital. You can source money from wealthy families. Banks provide the major source of funds to business investors, who provide a lot of money for business start-ups, financing companies, etc. You have to determine how much money you need for the import business.
How to open LoC for import
You can approach your bank to open LC. The bank manager will help you in filing the necessary application to open an LC. Since the LC is opened on the basis of your purchase order/Performa invoice/contract, it has to be produced with other documents as required.
Types of Letters of Credit
Sight Letter of Credit
Deferred payment Letter of Credit
Commercial Letter of Credit
Bank to Bank Letter of Credit
Revolving Letter of Credit
Stand by Letter of Credit
Red Clause Letter of Credit
Irrevocable Letter of Credit
Irrevocable LC cannot be modified without consent of beneficiary (Seller). This LC represent the entire liability of the bank to the other.
Revocable Letter of Credit
Revocable Letter of Credit can be cancelled or modified by the buyer (issuer) without consent of the seller.
Bank shall have no liability on the beneficiary after cancellation of L.C.
Stand by Letter of Credit
This LC is closer to bank guarantee and give more flexible collaboration to buyer & seller.
Bank is taking guarantee If the buyer is fail to payment.
Transferable Letter of Credit
This LC is enabling the seller to assign or transfer to another party.
This LC is beneficial in those cases when seller is not sole manufacturer of goods & purchase some parts from other parties.
Because it removes the need to open multiple LCs for different parties
Confirmed Letter of Credit
The bank guarantee of the issuer, This LC is confirmed by the seller bank or any other bank. Bank is conforming the LC, is that responsible for performance of obligation.
Terms & Condition in LC
This LC enable to assign part of the Letter of Credit to other party. This LC is beneficial in those cases when seller in not a sole manufacturer of goods & seller is purchase from other parties. As is eliminates the necessity of opening serval LC for other parties.
Best payment terms in Import
Payment is an importing part of getting a profitable trade whenever you’re exporting or importing goods. But the payment terms that are utilized can play an even more important role in attracting goods trades in the first place, especially for sellers.
The buyer will delay payment as much as possible, preferably until they receive the goods and sell the goods. Sellers also want to receive payment as early as possible; they prefer payment received in advance.
Swift Transfer & TT Payment
The term telegraphic transfer is used as a broad description for many different methods of moving money between accounts.
Swift payment or international wire transfer are those money-moving methods that use the Swift network to move money between accounts based in different countries.
Forward Contract
A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. A derivative is an investment contract between two or more parties whose value is tied to an underlying asset or set of assets.
Ex: Commodities, market indexes, foreign currency, and individual stocks can all be underlying assets for derivatives.
In a forward contract, the buyer takes a long position while the seller takes & short position. The idea behind a forward contract is that the parties involved can use it to manage volatility by looking at pricing for the underlying assets. A forward control is managing a currency risk.
How to send money in Import
There are a variety of ways that payment can be made, like telegraphic transfer, mail transfer, bank draft and check, bill of exchange, and letter of credit.
A letter of credit is the most well-known method of payment in international trade.
Under the letter of credit importer is an open letter of credit from their bank. And the bank will guarantee payment to the exporter. If the importer is defaulting in payment, the bank will be responsible for paying the supplier.