Import

What is Import?

The term Import can be defined as the process of buying of goods and services between two nations. It refers to the purchase of goods and services that are produced in a foreign country. The purchaser of the goods and services from another nation is known as importer. 

Summary

• Import defined as the process of buying of goods and services in one nation from other.
• When countries import more than its exports, it may cause trade deficit.
• Imports help the countries to make their strategic relations better with each other.

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Understanding Import

Every country is enriched with different skills and resources; import allows countries to exchange these resources. Some countries are rich in technology, some are in natural resources, and some countries are in agriculture. Countries import the goods and services, which are not available in their nation.

Import offers different variety of goods and services, advanced technology, and natural resources to the counties, importer will import the goods and services according to the need of the domestic economy. Sometimes countries import more than its exports which leads the situation of trade deficit, in this situation nation has to borrow from other nations to pay the extra imports. Importer always import by keeping the balance between the import and export of the nation. 

Frequently Asked Questions (FAQs)

What are the objectives of Import?

Countries do import with various objectives:

• Accelerate industrialisation: Countries import with the motive of developing the industrial process through advanced equipment, scarce raw material, and new technology.
• Meet the demand of domestic economy: A country imports goods and services to meet the demand of its industries and people. The goods that are not much in supply or available in the nation are imported.
• Conquer natural disasters: Natural calamities are unpredictable, countries import the essentials such as grain, food, and other goods to prevent starvation. The natural disasters may include earthquake, cyclone, flood, and other natural calamities.
• Enhance standard of living: Import increases the standard of living of people, by importing suppliers offers varieties of products of high quality.
• Ensure national defence: Sometime countries import high technology’s equipment from other country to strengthen the defence of a nation. 

How does import work?

A country has to follow several steps for importing the goods and services. These steps are as follow:

• Trade enquiry and sending quotations: The importer sends an inquiry related to the price, quality, mode of delivery, and terms and the conditions to the exporter. The exporter will revert back with a quotation, which consists of all the information asked by the importer.
• Procurement of import license: The importer needs an import license.
• Obtaining foreign exchange: The importer has to pay in the foreign currency as it involves overseas transaction.
• Placing order or indent: The importer will place the order for importing after receiving the quotation if it is suitable for him.
• Obtaining letter of credit: After placing the order, importer has to send the receipt of credit to the exporter.
• Arrangement of finance: The importer has to settle the payment when shipment is about to arrive in the destination.
• Receipt of shipment advice: The exporter sends a shipment advice to the importer after storing the order which contain the information related to the invoice number, port, ship name, fate of sailing, and other details.
• Arrival of goods: After that, the exporter dispatches the goods as per the agreement and contract.
• Customs clearance and release of goods: After reaching the consignment, the importer has to take clearance from the customs after passing the nation’s border. 

What are the advantages of Import?

Advantages of import are:

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1. Helps in increasing the profit

Profit is the life blood of every business. In today’s era of competition, increasing the profit with same technology or quality is slightly hard. Companies import advance technology and new equipment’s to maximise the profit by giving tough competition in the market.

2. Focused on good quality

With the rise in the standard or living of consumer and the availability of variety of options, consumer focused on the quality of the goods and services. Companies import the high-quality raw material just to meet the demand of their consumers.

3. Reducing manufacturing Costs

Importing helps in reducing the manufacturing cost such as raw material costing, Operation cost, intermediate goods cost, and wages. It will help the companies in generating high profit. Reduction of manufacturing cost is one the main concern of a company.

4. Helpful during Natural Calamities

When a country faces the situation of emergency due to natural calamities like shortage of resources and food then importing is the way to avoid starvation. These natural calamities are unpredictable such as earthquake, flood, drought, cyclone etc.

5. Good & Strategic Decision

Imports help the countries to make their relations better with each other. International trade is all about import and export which leads good strategic relation between them. 

What are the disadvantages of Import?

Import is good in many ways for a country or a business but in some ways, it has a few disadvantages:

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1. Currency Risk & Outflow of Foreign Exchange

Outflow of foreign exchange is one of the biggest disadvantages of imports as a company has to pay in their currency for importing goods and services, which pressure the domestic currency and lead reduction in foreign exchange of the country. Counties have to maintain their Outflow of Foreign Exchange. If a country imports more than its export, the currency rate will fall in international market and other currency will take dominating position.

3. Domestic Manufacturers get a bad hit

Imports directly affect the domestic manufactures and local industries. Domestic industries would shut down one day if a country focused on buying goods from other countries instead of their local suppliers. This is not good for the domestic economy.