COMMERCE: FORM THREE: Topic 7 - IMPORT TRADE

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TOPIC 7: IMPORT TRADE

Import Trade

The Meaning of Importance of Import Trade

Explain the meaning and importance of import trade

Import trade is the trade that involves buying goods from abroad. Examples of goods in Tanzania they are bought from abroad are cars, petrol and computer.

There are basically five main reasons for which a country may decide to import a certain good or service:

1. it simply does not exist in the country: a mineral which is not in the country's soil, an agriculture product that can't be produced there, an innovation that has been introduced in other countries;
2. it does not exist at a specific level of quality; thus, a country imports better products than domestic production, also as far as advertising or packaging are concerned;
3. it represent a product variety that is appreciated domestically but not produced exactly in this horizontal or mixed differentiation;
4. it is cheaper abroad, since producers there are more efficient, are faced by lower costs, better exploit economies of scale and/or accept lower profits;
5. at the current domestic price, producers do not supply enough good or service as the demand requires, also because of ex ante coordination problems; accordingly, consumers buy abroad for insufficient domestic production.

IMPORTANCE OF IMPORT TRADE

• Enable a country to obtain goods it cannot produce due to geographical and technological reasons.
• Goods are imported to satisfy certain cultural, religious and sentimental feeling.
• It encourage specialisation
• Stimulating international understanding
• Foreign earning; international trade enables a country to earn foreign currencies and revenue through tariffs.

The Main Organizations Involved in Import Trade in (Tanzania)

Identify the main organizations involved in import trade in (Tanzania)

Import procedures

Introduction

Import means goods and services brought to Tanzania from a foreign country. Importprocedures have to be followed in order to clear goods from Customs control as per the East Africa Community Customs Management Act (EACCMA) 2004.

Imports to Tanzania are subjected to different stages whereby the importer is advised to make declaration through his appointed Clearing and Forwarding Agent by lodging documents at least seven days before arrival of the vessel.

Importation procedures to Tanzania

• The importer is required to appoint a Licensed Clearing and Forwarding Agent (CFA) to clear goods
• List of Clearing and Forwarding Agents
• Documentation process is done online through Tanzania Customs Integrated System (TANCIS) and can be completed before arrival of thegoods
• Customs agents/importers are urged to complete a Declaration and self assessment through Tanzania Customs Integrated System (TANCIS) and attach along with other relevant import/ supporting documents at least 7 days prior to the arrival of the goods

Import documents include:

• Final Invoice
• Agent’s Authorization Letter from the importer
• Import permits from TFDA, TBS etc
• Exemption documents (If applicable)
• Packing List
• Transport documents i.e Bill of Lading/Airway Bill/Road Consignment note

Note

TRA rejects illegible and incomplete with insufficient descriptions through Integrated Query System (IQS) which is available in TANCIS. Pre – Arrival Declaration Procedure

What is Pre – Arrival Declaration?

Pre – Arrival Declaration (PAD) is the system used by Customs and Excise department to process importation documents during clearance of goods. However the initial process starts with the importer through his/her appointed Clearing and Forwarding Agent. (CFA)

Note: The following regimes do not undergo Pre – Arrival Declaration Process

• Diplomatic cargos
• Qualified returning residents Baggage Declaration forms
• Post Parcel and courier services
• ZNZ cases
• Temporary Importation
• EPZD
• Export declarations
• Petroleum products
• Goods cleared under Provision declarations
• Transit declarations

The importer hands over the importation documents either manually or electronically to the CFA who uploads them in the PAD system and lodges the same to TRA; whereby a reference number is automatically generated; these include:

• Final Invoice
• Declaration Form C 36
• Agent’s Authorization Letter
• Import permits i.e. TFDA, TBS, chemical permit etc
• Exemption documents
• Packing List
• Transport documents i.e Bill of Lading/Airway Bill/Road Consignment
• TIN Certificate (importer)

Note: Legible copies of Pro-forma invoices are acceptable for verification and registration purposes only but not for issuance of any clearance report (P-PAD, A-PAD etc.)

Note: Current other stations exclude Dar es salaam and Tunduma

TRA will verify the submitted PAD application for completeness, legality and confirm acceptance by registering the number generated upon lodgment by the agent. An automatic email notification is sent to the CFA.

• TRA performs Customs Tariff Classification and Valuation and issues a Pre-Assessed PAD (P-PAD) for PADs registered with complete set of final documents. PAD registered with incomplete set of final documents are held pending for submission of same.
• TRA issues a Pre-Assessed PAD (P-PAD) which is available for download by CFAs from the TRA PAD online for review.
• The agent is supposed to pass over the P- PAD to the importer to go through and check for correctness for accepting the P-PAD or reject the same through IQS
• If P-PAD is accepted by the importer; CFA will apply for an Assessed PAD (A-PAD) via www.trapad.co.tz along with scanned documents as applicable, such as permits and/or certificates issued by Other Governments Departments (TBS, Government Chemist, TDFA etc.) and supporting documentation to justify tax exemptions, if any.
• TRA verifies the application and issues an Assessed PAD (A-PAD) available for download by CFA’s from this website. An automatic email notification is sent to the CFA.
• The A-PAD EDI data becomes available for download by CFAs from this website for upload into On the basis of the A-PAD issued the CFA will assess Duties and Taxes through TANZANIA SINGLE ADMINISTRATIVE DOCUMENT(TANSAD)
• The agent will hand over TANSAD to the importer ready for payment of duties and taxes to the Bank.
• TRA perform the selectivity process by subjecting the TANSAD to Computerized Risk Management System (CMRS); basing on the results.

Note: GREEN color signifies direct release while YELLOW documentary check/SCANNER and RED physical examination or scanner.

• Goods are examined and released from Port or Airport

Note: For TANCIS users (Currently Dar es salaam and Tunduma)

• If declaration is “Rejected” CFA is supposed to submit a fresh declaration to accommodate TANCIS requirement.
• TANSAD will be processed to payment stage before manifest is submitted.
• Cargo Manifest write-off is shifted to a Customs Release Order stage (CRO).
• CFA will get Acceptance Notice with a Payment Notice generated based on declared Values.
• CFA will get Amendment Acceptance Notice once amendment they sent passes the validation check. If the officer rejects the amendment CFA will get Amendment Rejection Notice for TANSAD; otherwise officer will work on the document classification, valuation and verification.
• Once verification is completed, the results will be registered by the officer.
• Verification results will be submitted to the supervisor for approval.
• CFA will receive Assessment Notice.
• CFA has to accept or object the Assessment Notice
• CFA has to object the officer Assessment through Integrated Query System (IQS)
• If CFA accept the Notice and the assessment have increased compared to the declared values, an Additional Payment Notice will be generated within the assessment notice. This payment notice value will be the difference of the final amount and initial generated payment notice.
• If there is a discrepancy between manifest data and declaration, CFA will receive Clearance Suspension Notice. CFA will need to amend the declaration as guided by inspection results and re-submit.
• When Payment is received, inspection completed accordingly, CFA will receive Release Order for the respective goods.

How long does this process take before getting my goods?

• A total number of 48hours (4 days) has been set for processing of Pre-Arrival Declarations from registration to issuance of the necessary clearance report (A-PAD) for PADs submitted with or upon receipt of sufficient documentation that meet the required standard.
• The P-PAD for PADs submitted with complete set of final documents should be processed and issued within 48 hours.
• Note: The P-PADs for PADs registered without complete set of final documents should be processed and issued 48 hours after receipt of the same, i.e if the final documents are received after two weeks, the process starts that day.
• A-PADs should be processed and issued within 24 hours after receipt of an A-PAD application together with complete set of the required documents.
• After lodgement of TANSAD and payment of duties if any, selectivity will be conducted within 24 hrs.
• Goods are selected for direct release, green will get the release order from the port or entry point, those selected for documentary check will be checked at CSC, and those selected for physical verification are examined and release at the port and point or entry

Difference between Two Types of Imports Direct and Indirect

Differentiate, the two types of imports direct and indirect

TYPES OF IMPORT TRADE

• Direct import-in these case goods are imported for the sole use of the importer himself for the furtherance of his production programme. For instance, if a company wants to operate a bottling plant and requires machinery for that specific purpose, it has to import all that is wanted in its name directly, without making use of middlemen.
• Indirect import these are channelled through wholesale import merchants. The merchant in this case do not use the goods themselves; but sell them at a profit to shopkeepers who operate the retail business.

The Import Procedure and Formalities with Special emphasis on: Documentation; Terms of Payment; Terms of delivery

Explain the import procedure and formalities with special emphasis on: Documentation; term of payment; Terms of delivery

Some of the most important documents used in import trade are as follows: (i) Indent (ii) Bill of Lading (iii) Bill of Entry (iv) Letter of Credit (v) Bill of Sight (vi) Dock Challan (vii) Dock Warrant.

There are many documents used in import trade which have already been discussed in the Import Procedure.

To name a few, the most important documents used in import trade are:

1. Indent: An indent is an order placed by an importer with the exporter for the supply of certain goods. It is usually prepared in duplicate or triplicate. The indent may be of several types like open indent, closed indent and confirmatory indent. An indent contains the following information: (a) Quantity of goods to be imported (b) Quality of goods (c) Method of forwarding the goods (d) Nature of packing (e) Mode of setting payment (f) Price to be charged (g) Sale of delivery
2. Bill of Lading: It is an acknowledgement of receipt of goods on board of the ship. It contains terms and conditions on which the goods are to be taken to the port of destination. The exporter sends one copy of bill of lading to the importer enabling him to clear the goods from the ship.
3. Bill of Entry: This is a form supplied by the custom office to the importer and is to be filled in triplicate. The bill of entry contains following particulars: (a) Name and address of the importer (b) Name of the ship (c) Package number (d) Marks on the package (e) Description of goods (f) Quantity and value of goods (g) Name, address and country of the exporter (h) Port of destination (i) Custom duty payable
4. Letter of Credit: A letter of credit, popularly known as ‘L/C or ‘L.C:’ is an undertaking by the issuer (usually importer’s bank) that the bills of exchange drawn by the foreign dealer on the importer will he honoured on presentation up to a specified amount. Letter of credit is needed because exporter wants to be sure that payments will be made as agreed by the importer.
5. Bill of Sight: If the importer is not in a position to supply the detailed particulars of goods because of insufficient information supplied by the exporter, he (importer) has to prepare a statement called ‘bill of sight’. The bill of sight contains only the information possessed by the importer along-with a remark that he is not in a position to give complete information about the goods. The bill of sight enables him to open the package and examine the goods in the presence of custom officer so as to complete the bill of entry.
6. Dock Challan: It is a form to be filled by the importer or his clearing agent in the dock for payment of dock charges. Dock charges are paid when all the formalities of the customs are completed. The goods imported will be delivered only when dock charges are paid.
7. Dock Warrant: This is document issued by Warehouse keepers to the persons who have deposited the goods with them. Transport Documents

• Shipping Order S/O; A document with details of the cargo and the shipper's requirements, and is the basic document for preparing other transport documents such as bill of lading, air waybill, etc. Prepared by: shipper / transport companies
• Dock Receipt D/R or Mate's Receipt; A receipt to confirm the receipt of cargo on quay / warehouse pending shipment. The dock receipt is used as documentation to prepare a bill of lading. It has no legal role regarding processing financial settlement. Prepared by: shipping company
• Bill of Lading (B/L); An evidence of contract between the shipper of the goods and the carrier. The customer usually needs the original as proof of ownership to take possession of the goods. There are two types: a STRAIGHT bill of lading is non-negotiable and a negotiable or shipper's ORDER bill of lading (also a title document) which can be bought, sold or traded while goods are in transit and is used for many types of financing transactions. Prepared by: shipping company
• House Bill of Lading (Groupage) A bill of lading issued by a forwarder and, in many cases, not a title document. Shippers choosing to use a house bill of lading, should clarify with the bank whether it is acceptable for letter of credit purpose before the credit is opened. Advantages include less packing, lower insurance premiums, quicker transit, less risk of damage and lower rates than cargo as an individual parcel / consignment. Prepared by: forwarder
• Sea Waybill A receipt for cargo which incorporates the contract of carriage between the shipper and the carrier but is non-negotiable and is therefore not a title document. Prepared by: shipping company
• Air Waybill (AWB) A kind of waybill used for the carriage of goods by air. This serves as a receipt of goods for delivery and states the condition of carriage but is not a title document or transferable / negotiable instrument. Prepared by: airline
• House Air Waybill (HAWB) An air consignment note issued by an air freight agent to provide the cargo description and records. Again, it is not a title document. Prepared by: forwarding agent
• Shipping Guarantee Usually a pre-printed form provided by a shipping company or the bank, given by an importer's bank to the shipping company to replace the original transport document. The consignee may then in advance take delivery of goods against a shipping guarantee without producing the original bill of lading. The consignee and the importer bank will be responsible for any loss or charges occurred to the shipping company if fault is found in the collection. It is usually used with full margin or trust receipt to protect the bank's control to the goods. Prepared by: importer's bank / shipping company / consignee
• Packing List (sometimes as packing note) A list providing information needed for transportation purpose, such as details of invoice, buyer, consignee, country of origin, vessel / flight date, port / airport of loading, port / airport of discharge, place of delivery, shipping marks / container number, weight / volume of merchandise and the fullest details of the goods, including packing information. Prepared by: shipper

Financial Documents

• Documentary Credit D/C A bank instrument (issuing or opening bank), at the request of the buyer, evidencing the bank's undertaking to the seller to pay a certain sum of money provided that specific requirements set out in the D/C are satisfied. Prepared by: the issuing bank upon an application made by the importer
• Standby Credit An arrangement between a customer and his bank by which the customer may enjoy the convenience of cashing cheques, up to a value. Or a credit set up between the exporter and the importer guaranteeing the exporter will pay the importer a certain amount of money if the contract is not fulfilled. It is also known as performance bond. This is usually found in large transactions, such as crude oil, fertilizers, fishmeal, sugar, urea, etc. Prepared by: exporter / issuing bank
• Collection Instruction An instruction given by an exporter to its banker, which empowers the bank to collect the payment subject to the contract terms on behalf of the exporter. Prepared by: exporter
• Bill of Exchange (B/E) or Draft An unconditional written order, in which the importer addressed to and required by the exporter to pay on demand or at a future date a certain amount of money to the order of a person or bearer. Prepared by: exporter
• Trust Receipt (T/R) A document to release a merchandise by a bank to a buyer (the bank still retains title to the merchandise), the buyer, who obtains the goods for processing is obligated to maintain the goods distinct from the remainder of his / her assets and to hold them ready for repossession by the bank. Prepared by: importer
• Promissory Note A financial instrument that is negotiable evidencing the obligations of the foreign buyer to pay to the bearer. Prepared by: importer

Government Documents

• Certificate of Origin (CO) This certifies the place of manufacture of the exported goods to meet the requirements of the importing authorities. Prepared by: Trade and Industry Department and five Chambers of Commerce [1]
• Certificate of Origin Generalized Systems of Preferences (GSP) Form A (or as Form A) A CO to support the claim for preferential tariff entry (a reduced or zero rate) of the exporting country's products into the GSP donors under the GSP they operate. In general, a Form A is issued only when the goods concerned have met both the origin rules of the preference receiving country as well as the origin criteria of the respective donor country's GSP. Prepared by: Trade and Industry Department and five Chambers of Commerce
• Import / Export Declaration A statement made to the Director of Customs at port of entry / exit, declaring full particulars of the shipment, eg. the nature and the destination / exporting country of the ship's cargo. Its primary use is for compiling trade statistics. Prepared by: exporter / importer
• Import / Export Licence A document issued by a relevant government department authorising the imports and exports of certain controlled goods. Prepared by: Trade and Industry Department, Customs & Excise Department, etc
• International Import Certificate (IIC) A statement issued by the government of country of destination, certifying the imported strategic goods will be disposed of in the designated country. In Hong Kong, it is issued only to meet an exporting country's requirement. Prepared by: Trade and Industry Department
• Delivery Verification Certificate (DVC) A statement issued by the government of country of destination, certifying a specific strategic commodity has been arrived in the designated country. In Hong Kong, it is issued only to meet an exporting country's requirement. Prepared by: Trade and Industry Department
• Landing Certificate A document issued by the government of country of destination, certifying a specific commodity has been arrived in the designated country. In Hong Kong, it is issued by the Census and Statistics Department. Application requirements include letter stating the reason for the application, import declaration & receipt; bill of lading, sea waybill & land manifest; supplier's invoice; and packing list (if any). Prepared by: Census and Statistics Department
• Customs Invoice A document specified by the customs authorities of the importing countries stating the selling price, costs for freight, insurance, packing and payment terms, etc, for the purpose of determining the customs value. Prepared by: exporter

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

• FAS Free Alongside Ship; “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a key or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
• FOB Free On Board ; “Free On Board” means that the seller delivers 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 of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
• CFR Cost and Freight; “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
• CIF Cost, Insurance and Freight; “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

INTERMEDIARIES IN IMPORT TRADE

• Clearing agent
• Freight forwarder, forwarder, or forwarding agent, also known as a non-vessel operating common carrier (NVOCC), is a person or company that organizes shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer or final point of distribution.^[1]Forwarders contract with a carrier or often multiple carriers to move the goods. A forwarder does not move the goods but acts as an expert in the logistics network. These carriers can use a variety of shipping modes, including ships, airplanes, trucks, and railroads, and often multiple modes for a single shipment. For example, the freight forwarder may arrange to have cargo moved from a plant to an airport by truck, flown to the destination city, then moved from the airport to a customer's building by another truck.

Role of Clearing Agents

A clearing agency assume the following duties:

1. furnish, whenever required by Customs Administration, an authorization from each of the firms or persons by whom he is employed to act as their Customs Agent;
2. not represent a client in Customs in any matter which the licensee dealt as an officer or employee of Tanzania Revenue Authority or of the facts of which he gained knowledge while in Government service;
3. where he knows that a client has not complied with the law or has made any error in or omission from any document which the law requires such client to execute, advise his client promptly of the fact of such non-compliance, error or omission and immediately bring the matter to the notice of the appropriate officer of Customs in writing;
4. Exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any Customs operations;
5. Not withhold information relating to Customs operations from a client who is entitled to such information;
6. promptly pay over to Government when due, all sums received for payment of any duties, taxes or other debts or obligations owing to the Government and promptly account to his clients any money received for them from Government, or received from them in excess of Governmental, or the other charges properly payable in respect of the clients Customs operations
7. not attempt to influence the conduct of any officer of Customs in any matter pending before the Customs by the use of threat, false accusation, duress or the offer of any special inducement or promise of advantage, or of any gift or favour or other thing of value;
8. not procure or attempt to procure, directly or indirectly, information from Customs records or other Government sources of any kind to which access is not granted by proper authority;
9. not employ in any capacity, with power of attorney, by delegation or otherwise, for the promotion of or in connection with the work relating to the licence: (a) any person whose application for licence or Customs Clearance identity card has been refused; or (b) any person whose licence or Customs clearance identity card has been revoked or whose conduct as a partner, manager, director, officer or servant has been the cause of the revocation of the licence or Customs Clearing agent identity Card;
10. Not lend money to any officer or employee in the service of the Rwanda Revenue authority or become surety for the repayment of money borrowed by any such officer or employee; and
11. Inform the Customs administration any change of address before such change is affected.