financialtreat – will explain the Import Finance Steps That Prospective Importers Must Know that you will get in the following article. let’s see this article carefully!
Import is an activity or activity of buying a product of goods from abroad to meet basic needs in the country. International trade activities carried out by entering goods from abroad into the customs area in accordance with laws and regulations are called import transactions. Then, how to import finance?
In this article, everything about imports will be discussed thoroughly, starting from the understanding to the method import finance. Are you curious about the full explanation? Let’s take a look at the discussion below.
Definition of Import
Import can also be interpreted as the activity of entering goods or services from one country to another. Import activities involve two countries that have interests between the two countries. For example, Indonesia does not have sufficient wheat products for domestic needs. So it must bring in wheat products from abroad so that domestic wheat needs are met.
In large-scale shipments of imported goods, a process of assistance by customs is required. In simple terms, the government will apply a tax on each product to each of its importers. Not all goods are licensed to enter as imported goods.
The government through the Directorate of Customs has established laws and regulations that allow and prohibit the entry of imported goods. Imported goods containing elements of pornography, illegal drugs, firearms, and animals are prohibited from entering.
Purpose and Reason for Import
Many assumptions circulate that imports are only activities aimed at the interests of importers. Whereas no country stands alone without the help of other countries. Every country must carry out import activities from other countries to meet domestic needs. Here are 3 reasons a country imports.
- Production incompetence
- Expensive production costs
- Insufficient production needs
Benefits of Import
Import activities often trigger debates in the community, especially the fierce price competition of local products in the market caused by imported products. Not a few domestic goods are less competitive due to the impact of importers, in addition to importing activities also reduce the country’s foreign exchange reserves. However, imports are not entirely detrimental. There are many benefits of imports that can be felt directly, those benefits include:
- Obtaining a supply of foreign products that cannot be produced domestically
- More modern means of technology transfer
- Controlling inflation because the price of imported goods is more affordable
Types of Imports
Full Container Load
This type of import activity uses container transportation services by one sender, not combining goods from other senders. The cargo contains only the goods of the owner of one shipper sent to the destination country of one importer. There are advantages and disadvantages in this shipping method.
Less Than Container Load
This type of shipping less than container load goods uses a container that contains goods belonging to more than one sender that will be sent to the same destination country.
Indonesian Imported Products
Import activities in Indonesia are carried out to meet the needs of consumer goods products, raw materials, auxiliary materials, and capital materials. The following is the meaning of each Indonesian imported product:
- Consumer goods, are goods that are consumed daily for daily needs, such as staple foods, drinks, and rice.
- Raw materials, the main material for the purpose of making manufactured goods.
- Auxiliary materials, materials for the purposes of the production process that are used only for a certain time such as fertilizers, steel, or chemicals.
- Capital goods, are goods for domestic industrial business capital, such as machines, computers, spare parts, to heavy equipment.
Imports can provide benefits but also bring losses. Especially for domestic producers who are less competitive in terms of price and quality due to colonized imported products.
In addition, imports also reduce the country’s foreign exchange reserves, which has the potential to cause a country’s trade balance to experience a deficit. Until now, no country has been able to live alone without the need for goods or services from other countries.
Import Payment Methods
If you are an importer who wants to successfully sell products between countries, you must be able to offer attractive sales methods. Even with exporters, you must be able to negotiate to minimize the risk of loss or fraud that usually occurs when buying goods from abroad.
In short exporters want their goods to be sold to customers. As for importers, they want to get the desired product without having to be afraid of fraud. Want to know more about exports and imports? Read the full list below:
Cash in Advance
The CIA is a direct payment method sent to the exporter from the party who purchased the item. For exporters, this is certainly an advantage because they can get early payment. The importer may feel a little trouble if they pay first. Because, they have to trust exporters because fraud can happen. But if the importer has gotten used to it, it doesn’t seem to be a big deal.
In contrast to Cash in Advance, Open Account is a payment method in import export that benefits importers. This is because the repayment of all transaction money is given after all products arrive in their hands.
Usually, the Open Account is rarely done by the exporter for fear of being deceived by the importer. What’s more, transactions occur between countries whose distance must be very far. However, exporters may use Open Accounts to importers who have become their regular customers. Again, everything is in accordance with the terms and agreements that have been set at the first time of negotiations.
Consignment is similar to dropshippers but the difference is between countries. In short, the importer will receive the goods from the exporter without having to pay first. If all products sell well, then the profit will be divided according to the agreement.
Arguably, consignment is a form of cooperation that is currently trending towards being carried out. Examples of this are in the field of fashion, such as sneakers. There are so many consignment agents in Indonesia who get exporters from abroad.
To find out more about consignment and its advantages and disadvantages in business, you can click here.
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Letter of Credit
Guarantee paper issued by the advising bank of the importer to be given to the exporter as a condition of payment. L/C can also be referred to as a third party or intermediary that provides more secure payment services. Both parties, both importers and exporters, will not feel disadvantaged if they use this payment method because the transaction is guaranteed by the state.
In its application, collection is divided into two, namely document against payment (D / P) and document against acceptance (D / A). D/P starts from the exporter sending products to ships or planes for loading. Then, the exporter heads to the bank to provide the delivery documents addressed to the party Importer. On the other hand, the importer can get that document after paying off all the bills of his product.
D/A is conceptually almost similar to D/P. But what distinguishes it is the payment deadline that requires approval. That is, D/P allows importers to get their products and pay later according to approval, usually it is 30 days, 60 days or 90 days.
And that’s an explanation of import, along with how to import finance. Hopefully, the information will be useful. And see you in the next article.