– Foreign purchase from start to finish
In the following article, which is sourced from the Chamber of Commerce, we discuss how an overseas foreign purchase proceeds from start to finish.
Foreign purchase registration procedures:
- Purchase Request: Either notified by the engineering unit of a company to the business unit or a trader independently imports.
- Sourcing: Depending on the type of goods we want to import, we should look for sellers or manufacturers of that product overseas, which can be done in different ways: 1- Checking our previous and similar purchases or our partner companies, 2- Searching the Internet, 3- Inquiries from the Chambers of Commerce
- Purchase / Inquiry Submission: It is usually a written inquiry from the seller which may be a direct inquiry or a tender. This query specifies the type – number – how the shipment and other commercial items are requested by the seller.
- Performa Invoice receipt: Upon receipt of the Performa Invoice from the seller, the business case – price and technical items are reviewed and approved (if necessary technical approval).
- Technical Approval: If required technical verification of product specifications should be approved by the relevant expert.
- Financing: If the purchase is visual (cash), the whole amount will be financed by the financial entity to the seller’s account and if the purchase is by letter of credit the amount will be paid in advance. (Usually 2%) and the rest should be paid to the bank before the transaction date.
- Business Order Registration Operation: The goods must have an entry permit to enter the country, which can be obtained by filling in the order forms and receiving a 2-digit code.
- Shipment Insurance Contract: Due to the fact that in all terms of Incoterms purchase insurance contract and its cost with the buyer and insurance policy is one of the requirements required to open a documentary credit. Therefore, the buyer must obtain an insurance policy from one of the Iranian insurance companies.
- Banking: Depending on the type of payment, the buyer will request a direct payment to the seller or a request for credit by referring to the bank.
- Shipment and Inspection Contract: Taking into consideration the term of delivery of the goods and the need to inspect the buyer simultaneously with the banking operations, the shipment companies inspect the price and then conclude the contract.
- Build / Send Order: Upon receipt of the Swift from the Bank to send the seller a payment to the Buyer, the relevant Swift will be sent to the Seller with a request to make or send (in writing).
- Manufacture and Delivery: The seller can wait for the bank to receive a notice but usually starts to build or send in good faith. And deliver the goods to the company in the said place.
- Delivery of shipping documents: After receiving the bill issued by the shipping company together with the other shipping documents, the seller requests to the bank and requests the requested amount in credit. And the bank is obliged to pay if the documents are not in conflict with the letter of credit.
- Freight Supervision: After receiving the bill of lading, the seller sends a copy of the bill of lading to the buyer to inform the buyer of its shipping and timing.
- Delivery of goods to Customs: The carrier delivers the goods to the Customs and receives from the Customs the warehouse bills the warehouse bill remains in the hands of the carrier to pay the carrier the shipping cost to the carrier. The customs office also sends a declaration stating that the goods have been delivered to the buyer’s address.
- Customs clearance: In addition to the customs warehouse receipt, the buyer needs clearance documents to clear the bank to receive the clearance and receives the documents for the total settlement of the credit and related fees.
– Order registration operations at the Ministry of Commerce
All merchandise (except for some of the goods listed in the Export and Import Regulations each year, such as passenger and freight exchange in border areas) must be licensed by the Ministry of Commerce. Order forms at the Ministry of Commerce are considered as entry clearance when stamped with oval seal:
The following documents are required to submit an order to the Ministry of Commerce.
- Membership Card: You need to have a business card and deposit money into that office to join the order registration office.
- Order Forms filled by machine type 2 copies (2 copies if purchased without currency transfer)
- Two copies of Performa Invoice: one of which must be original, and the requirements of each Performa Invoice have been met.
- Product specification catalog: The product catalog should be attached to the Performa Invoice if required by the relevant expert.
- Certificate of the relevant organization if required: According to the Export and Import Regulations, all items requiring the approval of a ministry are numbered from one to nine, each number representing a specific ministry. If the number is not entered or zero, it indicates that the goods are authorized.
– Things to consider in Performa Invoice.
- Manufacturer or seller company name and phone number
- Seal and signature of seller company
- Full name of the buyer company
- Country and address of seller company
- The date of issuance of Performa Invoice and its validity
- Duration of construction and shipment
- Description of the item and counting unit
- Unit and total price
- Payment method and seller account number
- Customs Tariff Code mentioned in Export and Import Regulations (Harmonized System)
- Delivery term
- Place of loading of goods
- International Standard Number and Type if required.
- Inspection items
- Product warranty period
- Insert standard number
– Shipping documents
Shipping documents include the following documents:
- Certificate of Origin is a document issued by the chamber of commerce of the seller’s country indicating that the goods are manufactured in the country of the seller and usually require the seller to certify the origin certificate by the embassy or consulate of the buyer country.
- Inspection Certificate: This certificate states that the product is in quantitative, qualitative and packaging terms conforming to the requirements of the information referred to as “Verification of Conformity”.
- Packing List: A list that specifies the number of packages, the quantity or the number and unit of goods in packages ready to load.
- Performa Invoice: is a sale offer where the business is considered and finalized with a Performa Invoice agreement agreed upon by the parties and recorded as a contract between the buyer and the seller.
- Bill of Lading: This is a document issued by a shipping company, and if it is written in the name of anyone, it is recognized as the owner of the goods.
- Freight Invoice: This is a document showing the seller’s freight payment. Either Prepaid or will be Collect.
In the terms CFR or C&F and CIF, DAF, CPT, CIP, DDU, DDP, DES, DEQ, as stated in the bill of lading, Prepaid Rental is pre-paid.
For more information about terms which mentioned above, click here.