A Study of Import Process of Nestl Bangladesh

Nestl is Worlds largest health, nutrition and wellness company founded by the Henri Nestl.
Nestl Bangladesh Limited started its commercial operation in 1994. Nestl Bangladesh
established its factory in Sreepur 55 km north of Dhaka. The factory produces the instant noodles
and cereals and repacks milks, soups, beverages and infant nutrition products. This company is
continuously growing through the policy of constant innovation, concentrating on its core
competencies and its commitment to high quality food to the people of Bangladesh. To ensure
high quality product Nestl Bangladesh import most of their raw materials , the also use local raw
materials as well but compare to imported raw materials it is low. The whole import procedure of
raw material is done by Supply chain and Treasury Department. Supply chain place their
requirement of raw material to respective suppliers through purchase order. Once the order is
confirmed they request treasury department to open up a Letter of Credit or CAD (Cash against
Documents), L/C is the most popular international trade payment method in Bangladesh as well
as in Nestl Bangladesh, which covers the issues like potential risk that the parties in
international trade namely the importers and exporters wish to face or share between them.
There are different parties involved in opening a Letter of credit and it also requires authorized
papers to submit to their Authorized LC opening bank and they will facilitate NBL and give
guarantee to the respective suppliers about the payment procedure. Once NBL opened the LC
supplier get to know through their bank and they shipped the goods to the destined location. In
this paper the whole procedure of LC opening to retirement is briefly explained.
Specific Objective

To know about Nestl Global and Nestl Bangladesh Ltd.

To know about the companys current mission, vision,objectives,and goals

To have a very practical idea about the Import process of Nestl Bangladesh
Methodology
The study is conducted on systematic procudure starting from the selection of the topic to final
presentation. I presented this report on the basis of my experince as an intern in Nestl
Bangladesh Ltd. During these four months I have conducted descriptive research and used my
practical experience .
Sources of Data
Primary Data: Sevaral disucussion with the different deparment of Nestl Bangladesh. Moreover
at the time of doing my task, gathered the required information.
Secondary data: Along with primary sources, several information collected from the Internet and
from the website of Nestl Bangladesh.

Corporate Portfolio of Nestl

The brand portfolio delivers the message once again how big Nestl in the food industry. It is the
trust and effort of the Nestl professionals which created the scenario. Today Nestl covers

almost every food and beverage category giving consumers tastier and healthier products.
Baby food:Cerelac, Gerber, Gerber Graduates, NaturNes, Nestum
Bottled Water: Nestl Pure Life, Perrier, Poland Spring, S.Pellegrino
Cereal:Chocopic, Chini Minis, Cookie Crisp, Estrelitas, Fitness, Nesquik Cereal
Chocolate & confectionary:Areo, Butterfinger, Cailler, Crunch, kit kat, Orion, Smarties, Wonka
Coffee: Nescaf, Nescaf 3 in 1, Nescaf Cappuccino, Nescaf Classic, NescafDecaff,

Nescaf Dolce Gusto, Nescaf Gold, Nespresso.

Culinary Chilled and Frozen food:Buitoni, Herta, Hot Pockets, Lean Cusine, Maggi
Dairy: Carnation, Coffee-Mate, La Laitre, Nido
Drinks:Juciy juice, Milo, Nesquick, Nestesa
Food Service: Chef, Chef-Mate,Maggi, Milo, Minors, Nescaf, Nestea, Sojra
Healthcare nutrition: Boost, Nutren Junior, Peptamen, Resource
Ice Cream: Dreyers, Extreme, Haagen-Dazs, Movenpick
Petcare: Alpo, Bakers Complete, Benful, Cat Chow, Chef Michael s Canine Creation, Dog
Chow

History of Nestl
1866-1905
In the 1860s Henri Nestl, a pharmacist, developed a food for babies who were unable to
breastfeed. His first success was a premature infant who could not tolerate his mothers milk or
any of the usual substitutes. People quickly recognized the value of the new product, after
Nestls new formula saved the childs life, and soon, FarineLacte Henri Nestl was being sold
in much of Europe.
1905-1918
In 1905 Nestl merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the
company was operating factories in the United States, Britain, Germany and Spain. World War I
created new demand for dairy products in the form of government contracts. By the end of the
war, Nestls production had more than doubled.
1918-1938
After the war Government contracts dried up and consumers switched back to fresh milk.
However, Nestls management responded quickly, streamlining operations and reducing debt.
The 1920s saw Nestls first expansion into new products, with chocolate the Companys second
most important activity.
1938-1944

Nestl felt the effects of World War II immediately. Profits dropped from $20 million in 1938 to $6
million in 1939. Factories were established in developing countries, particularly Latin America.
Ironically, the war helped with the introduction of the Companys newest product, Nescafe, which
was a staple drink of the US military. Nestls production and sales rose in the wartime economy.
1944-1975
The end of World War II was the beginning of a dynamic phase for Nestl. Growth accelerated
and companies were acquired. In 1947 came the merger with Maggi seasonings and soups.
Crosse & Blackwell followed in 1960, as did Findus (1963), Libbys (1971) and Stouffers (1973).
Diversification came with a shareholding in LOral in 1974.
1975-1981
Nestls growth in the developing world partially offset a slowdown in the Companys traditional
markets. Nestl made its second venture outside the food industry by acquiring Alcon
Laboratories Inc.
1981-1995
Nestl divested a number of businesses1980 / 1984. In 1984, Nestls improved bottom line
allowed the Company to launch a new round of acquisitions, the most important being American
food giant Carnation.
1996-2002
The first half of the 1990s proved to be favorable for Nestl: trade barriers crumbled and world
markets developed into more or less integrated trading areas. Since 1996, there have been
acquisitions including San Pellegrino (1997), Spillers Pet foods (1998) and Ralston Purina
(2002). There were two major acquisitions in North America, both in 2002: in July, Nestl merged
its U.S. ice cream business into Dreyers, and in August, a USD 2.6bn acquisition was
announced of Chef America, Inc.
2003 +
The year 2003 started well with the acquisition of Mvenpick Ice Cream, enhancing Nestls
position as one of the world market leaders in this product category. In 2006, Jenny Craig and
Uncle Tobys were added to the Nestl portfolio and 2007 saw Novartis Medical Nutrition, Gerber
and Henniez join the Company.
Corporate Mission:
At Nestl, they believe that research can help them make better food so that people can live a
better life. As consumers continue to make choices regarding foods and beverages they
consume, Nestl provide selections for all individual taste and lifestyle preferences.

Research is a key part of their heritage at Nestl and an essential element of their future. They
know there is still much to discover about health, wellness and the role of food in our lives, and
they continue to search for answers to bring consumers Good Food for Good Life.
Corporate Vision:
Nestl has an aim to meet the various needs of the consumer every day by marketing and selling
food of a consistently high quality.
Good Food is the primary source of Good Health throughout life. Nestl strive to bring consumers
foods that are safe, of high quality and provide optimal nutrition to meet physiological needs. In
addition to Nutrition, Health and Wellness, Nestl products bring consumers the vital ingredients
of taste and pleasure.
Confidence that consumers have in Nestl respected brands, is a result of their companys many
years of knowledge in marketing, research and development, as well as continuity consumers
relate to this and feel they can trust Nestls products.
The objectives are to deliver the very best quality in everything, from primary produce, choice of
suppliers and transport, to recipes and packaging materials.
Nestl in Bangladesh
Popular Nestl brands started entering this part of the sub-continent during the British rule and
the trend continued during the pre-independence days of Bangladesh. Nestl Bangladesh limited
started its commercial operation in Bangladesh in 1994. In 1998 Nestl S.A. took over shares
from local partner when Nestl Bangladesh became a fully owned subsidiary of Nestl S.A. The
only factory produces the instant noodles and cereals and repacks milk soups beverages and
infant products.
In Bangladesh Nestls vision is to be recognized as the most successful food and drink
Company in Bangladesh, generating sustainable, profitable growth and continuously improving
results to the benefit of shareholders and employees.
Products in Nestl Bangladesh
Globally the product line of Nestl is very large but in Bangladesh currently there are only 11
products. Nestl believes all foods and beverages can be enjoyable and play an important role in
a balanced and healthy diet and lifestyle; as a result how short the product line may be but it
ensures the same quality in compare to the other countries.

Functions of Nestl Bangladesh

Day by day the demand and trust on the Nestl products are growing. Focusing on the
substantial growth and the other business perspective, the company developed its own functional
areas.
Every functions main aim is to gain the ultimate excellence. Every function contributes from their
end to meet the corporate goal. General Management takes cares of the overall operation and
makes the key decision. Finance and control deals with the financial transaction and most
importantly they also apply the control mechanism to remain the company complaint financially.
Human resource focuses the management of employees and organizational Culture and also
recruit best employee for NBL. Supply chain ensures the stable supply of the products according
to the demand of the consumers; they are responsible to communicate with the supplier and
import raw materials accordingly with the help of Finance and Control. Marketing looks after the
existing brands, market share and product development. As Nestl is the world s largest Nutrition
Company so they have separate department Nutrition to look after the Nutritional products like
CERELAC. Finally Sales and Nestl Professionals are responsible for earning revenue for the
company, but sales look after the retail distributer and Nestl professionals look after institutional
sales.
Flow of Import System
As Nestls tag line is Good Food Good Life they produce the product using high quality raw
material. NBL imports most the raw materials and also locally procures some of raw materials.
NBL imports

RAW Material
CAPX items
Finish Goods
Packaging Material

Importation of Goods looks after by jointly Supply chain Department and Treasury Department,
but behind import every department has their assigned jobs, Import is the final part of a Trade
Cycle.

L/C opening Request

When NBL decides the volume for monthly then Demand Planner sent it to Procurement
department and procurement department contact with the supplier for purchasing the raw
materials and place Purchase Order (PO). As soon as they confirmed the deal with supplier, they
asks for
Pro-forma InvoiceDescription of the product

Country of origin

Quantity

Payment terms

tolerance level (if required)

Product price.
Logistic Department contacts with the Shipping Agent In case of FOB term and asked forFreight Certificate: The rate of freight has been set depending on the country and the container
size. When they got the PI, procurement Department sent the L/C request to open a L/C to
treasury department mentioning the following information

Purchase Order (PO)

Pro-forma Invoice with detail description
Inco Term [FOB (Freight on Board), CFR (Cost and Freight), CPT (Cost Paid To)]
Port details
Terms & condition
PSI(Pre shipment inspection) Mandatory/ Exempted
S Code (Harmonized Commodity Description and coding system)
Product Description
Bank Name
Port of Delivery
Port of Shipment

Letter of Credit or CAD (Cash against Documents)

Trade transaction is gradually increasing in the international arena and for this international trade
payment is particularly very crucial. There are so many factors that may affect the matter of
securing payment for an international transaction. Most important among them are the potential
risk and cost that the exporters and the importers are willing to face or share between them.
There are some methods among them Nestl Bangladesh follow 2 methods

Letter of Credit or Documentary Credit

Cash Against Documents

Letter of Credit or Documentary Credit
The most important of the payment methods used universally is a Letter of Credit which is also
called Documentary Credit. Letter of credit is an instrument issued by a bank on behalf of the
importer to make payment of agreed sums in foreign currency as stipulated to the exporter when
the conditions specified in the document are met.
Letter of Credit (L/C) is the most popular international trade payment method in Bangladesh as
well as in Nestl Bangladesh, which covers the issues like potential risk that the parties in
international trade namely the importers and exporters wish to face or share between them. This
process is governed by a widely recognized and popular guiding framework of ICC (International
Chamber Of Commerce) known as Uniform Customs and Practices for Documentary Credit
publication number 600.
Forms of Letter of Credit
There are many types of Letter of Credits that are used in different countries of the world.
But International Chamber of Commerce (ICC), UCPDC- 600, which denotes only two types of
LETTER of Credit are as follows
Revocable letter of credit:
If any letter of credit can be amendment or charge of any clause or cancelled without the consent
of the exporter and importer is known as revocable letter of credit. It can be amended or

cancelled by the issuing bank at any time without prior notice to the beneficiary. It does not
constitute a legally binding undertaking by the bank to make payment.

Irrevocable letter of credit:

If any letter of credit cannot be changed or amendment without the consent of the importer and
exporter is known as irrevocable letter of credit. It constitutes a firm undertaking by the issuing
bank to make payment. It therefore, gives the beneficiary a high degree of assurance that he will
be paid to his goods or services provide he complies with terms of the credit.
**Nestl Bangladesh Follows Irrevocable Letter of Credit process.
Advantages & Disadvantages of L/C

Advantages
The importer is assured that the documents required by the letter of credit (if issued subject to

the UCP) must be presented in compliance with the terms and conditions of the documentary
credit and UCP rules.
The buyer is assured that the documents presented will be examined by banking personnel

knowledgeable in letter of credit operations.

The importer is confident that the payment will only be made to the exporter after the fulfilment
of the terms and conditions of documentary credit.

Disadvantage
High bank charges.
Cash against Documents
Greater involvement of costs in letter of credit operations is one of the main reasons of switching
to other modes of payment like Cash against Documents which is another payment process
followed by Nestl Bangladesh. In this process importer directly deals with the supplier fixed their
terms and conditions and place the requirements. Banks have no role in this process. Nestl
Bangladesh open LCA in case of their most trustworthy suppliers on whom they can rely because
the requirement we need, quality of the raw materials provided by the suppliers is totally based
on trust we have on the supplier because we cannot bind them legally as there is no bank
involvement. If they dont provide the raw material as per our requirement unless accepting

those we dont have anything to do. The process is given below

Importer Contacts with the Supplier and fixes deal

Supplier Exports the Goods

Supplier Provide Shipping Documents to their Bank

Bank sends the documents to Importers Bank

Importer pays their bank for the Goods

Importers Bank gives the shipping Documents to Importer

Importers Bank transfer the payment to Exporters bank

Exporters Bank pays off to the Exporter

Here Bank does not take any responsibilities for verifying the shipping documents. They just
charge fees for facilitating Cash against Documents Transaction. Importer and Exporter both
have to pay the charge advised by their own bank.
Advantage&Disadvantagesof LCA (Cash against documents)
Advantage
Less bank charges involved as importers directly deals with the supplier

Disadvantage
Importer cannot bind the supplier legally if they don t provide the raw materials as per our

requirements as bank dont verify the documents that are provided by the supplier. So if any
complications arrive regarding the documents and raw material unless accepting the risks
associated with this we dont have any option.
In case of Finish goods as per the import policy (2013-2015) under Chapter 2 section 8 and

sub section 4 it says that permissible goods (IRC commercial) goods can t be imported more than
USD 1 lac in per fiscal year.
Demand projection is difficult to be accurate. Nestl Bangladesh requires frequent amendment

depending on market condition so in case of LCA we can t amend, for this reason L/C is more
preferable.
In case of Importing Raw materials we can open LCA but for FONTERRA products (Growing

up Milk Powder, Whole milk Powder Instant Fortified) amendment is frequently required so we
cant import these two products through LCA.
As CAPX item import very infrequent so Nestl Bangladesh opens it through L/C but there is
no objection to import it through LCA.

After getting the L/C request we contact with the insurance company for the risk coverage. We
provide them the Pro-forma invoice and they assess the Premium that has to be paid before
opening the L/C. We communicate with our bank to pay the premium, when insurance company
gets the bill they provide the cover note. According to Imported Import policy
(2012-2015) chapter 2 sections 5 sub section (e) says that before opening L/C, necessary
insurance cover note shall be purchased from the respective Insurance Company by paying the
Premium against the Goods.
Insurance process for opening a LC
In Bangladesh Marine Cargo Insurance policies are prepared and issued in line with the
recommendation of the United Nations Conference on Trade And Development(UNCTD) making
the revised wording of the Institute Cargo Clause (ICC) mandatory from 31-3-1983. With the
introduction of new policy form the new century old policy form and perils have been withdrawn
and replaced by ICC (A) ICC (B) ICC (C) clauses respectively
The Mode of transportation:

Using which transport the product will be imported is one of the main factors for determining
premium. The charges are different for different mode of transport. The Modes of transports are:
1.
A) Marine B) Air C) Road & Railway
And each of the modes has different Categories. Based on these two factors premium has been
charged on the import.
Marine:
This marine cargo insurance covers the damaged or detriment by perils of the seas whilst in
course of transit and therefore, the owner of the imported goods can always insure against the
possible losses.

The Company also grants wider cover like Theft, pilferage and non-delivery (TPND) with ICC(C)
on payment of additional premium as per tariff.

All the perils mentioned below may be obtained with ICC (B) on payment of additional premium.
Scratching/Splitting, Breakage, hooks, holing, bursting, tearing,

Leakage, rain water damage, theft pilferage & non-delivery.

The following additional perils are automatically covered under the Marine Policy:(1) 60 days cover at sea port from the date of discharge from the ship under A B & C
(2) WAR & SRCC covers are available on payment of additional premium.
Goods Carried By Rail/Lorry/Truck
Goods or cargo covered by above transports may be covered as under
1) By Rail/Lorry/Truck Risk only
2) By Rail/Lorry/Truck All Risks.
Goods Carried By Air
Goods or cargoes conveyed by above transport may be covered as under:
Air Risk Only
Air All Risks
Premium Rates

All insurance company has to follow the Tariff book in order to set the Premium amount for

import & export which is regulated by IDRA (Insurance Development Regulatory Authority).
Use Air all and Lorry all risk for importing through Air and Lorry.
Also take WAR & SRCC covers on payment of additional premium
Stamp Duty/ Vat and other taxes:
Marine policy shall carry stamp duty as per the stamp Act 1889 (and subsequent amendments

thereto). The stamp duty shall be recoverable from the Assured

VAT and other taxes shall be charged to the insured as per law.

L/C Opening Process

Documents that needed to open a L/C
Fund Transfer Letter: letter that confirms we have transferred the premium for the coverage of
the imported Goods.
LC form: In this form we mentioned in details of our requirements ( Address of supplier, L/C
value , Shipment date ,Expiry date ,Product description , H.S code, VAT reg no. , Inco term,
Payment procedure )
L/C terms and condition: If we have any additional terms and conditions like In case of import of
milk, milk food, milk products, edible oil and other food items produced in any country according
to import policy (2012-2015) chapter 4 (Miscellaneous Provision) section 16 (Applicable
conditions for import of food for human consumption) requires Health certificate, Melamine test
Certificate, Hormone Certificate, Radioactivity levels certificate to submit. It also requires a
certificate of county of origin. Under this term and condition all the additional requirements that
needed by Govt. we have to mention.

LCA (Letter of Credit Authorization form): There are 5 copies of form and in each of the copies
we have to mention the H.S code, Product description, L/C value clearly. According to Import
Policy 2012-2015 Chapter 2 General provision for import Section 8 Import Procedure Sub section
16 (c) In case of import by opening L/C or without L/C, the authorized dealer bank shall get the
LCA form registered and submit copies to Bangladesh Banks import Department Chief controller
of Imports and Exports Importer Customs Authority Bank Office (For NBL)
Pro-forma Invoice
IMP / Foreign Exchange form: In this form we have mention the H.S code L/C value. Up to all
this documents need to be signed by finance authority. Then we sent documents to bank. Then
bank send the swift copy which is a confirmation copy, they also send one copy to beneficiary
bank to let them know that the L/C is open.
By getting the L\C, the exporter prepares the goods and ships the same as per instruction of the
L\C and obtains a Bill of Lading from the shipping Authority.
Supplier set the Shipment Plan according to our requirement and delivers the product according
to the Inco term. If they are sending it through Ship then they send Bill of lading which confirmed
that the product is shipped to importer destination, if by truck then they provide truck receipt and
for Air they provide master airway bill to importer s bank. Then Bank informed NBL and NBL pay
the L/C amount to the bank in order to release the documents.
Inco term
The Inco terms (International Commercial Terms), also known as terms of delivery, are standard
trade definitions most commonly used in international sales contracts. Developed and
administered by the International Chamber of Commerce in Paris (ICC), Inco terms are
universally recognised and followed to by the major trading nations of the world.
According to Import Policy (2012-2015) Chapter 2 section 5 general condition of import of goods
Goods can be imported on CFR,CPT,FOB,CIF,CIP,DAT,DAP, provided that in case of import on
FOB basis the concerned importer shall have to comply with foreign exchange regulation.
Nestl Bangladesh Mostly imports their raw materials in order to uphold the quality. The Inco
terms they used for importing are given below.
FOB (Freight on Board): FOB is one of the most common terms used in international trade.
Under this term exporter takes the responsibility to carry the cost up to their named port. Exporter
is responsible for export customs clearance and loading them onto the vessel. Form exporter s
port to Importers Warehouse all transportation cost has to be taken by Importer.
In Incoterms the point of transfer of responsibilities under FOB is described as the point when
the goods pass the ships rail Literally, that means that if during the loading onto the ship, the

goods would fall on the jetty or into the water, Exporter is responsible for losses, but if the goods
fall on the deck of the ship, the losses are the Importers responsibility.
Under FOB Importer is responsible for handling, loading, stowage and other port charges.
CFR (Cost and Freight): CFR is formerly known as C&F and/or CAF (Incoterms 1990). Under
this term exporter takes the transportation responsibility up to Importer s Port. But they added
their cost with the invoice value.
CPT (Carriage Paid To): Under this term all transpiration (Road & Air) responsibility to the place
mentioned by the buyer is carried by the importer.
As exporter is responsible for inland freight in importers country the importer is responsible for
the import customs clearance and all duties, taxes and other costs but Importer take a charge for
their responsibility.
Retirement
The importer receives the intimation and gives necessary instruction to the bank for retirement of
the import bills or for the disposal of the shipping document to clear the imported goods from the
customs authority. The importer may instruct the bank to retire the documents by debiting his
account with the bank.
When NBL has a payment for L/C they communicate with L/C opening Bank to check and
negotiate the exchange rate of the currency that has to be paid. If the negotiated rate is satisfying
then NBL informed the bank to debit their account with dollar equivalent BDT.
Then the bank releases the documents. Normally the bill of lading arrives before the product, but
in case if the product arrives before, then the NBL bank takes the payment according to that
days exchange rate and protects the supplier and release the product. When the Bill of lading
comes then NBL again negotiate with the bank regarding the exchange rate of that particular day
and according to settled rate NBL will get back the access amount or will give the remaining
amount and clear the bill of lading.
Amendment of L/C
In case of revocable L\C, amendment can be brought without prior notice of the beneficiary or
issuing bank. But in case of irrevocable L\C, prior notice of the beneficiary is essential. Issuing
bank will accept amendment of the L\C after consent of both the importer and exporter. The

following clauses of L\C are generally amended:

Increase/ Decrease value of L\C and Increase / Decrease of quantity of goods.
Extension of shipment/negotiation period.
Terms of delivery i.e, FOB, CFR, CIF etc.
Mode of shipment
Inspection clause

Name and address of suppliers

Name of the reimbursing bank
Name of the shipping line etc.

Process of releasing product from Port

After reaching the Product at Port HOMEBOUND (Clearing and Forwarding agent of NBL) takes
all the responsibility to deliver the product at specified destination for Raw Material and
Packaging Material the destination is Factory and for Finish Good the destination point is
Distribution Center.
When the product arrives at port Customs issue bill of entry Homebound takes the paper on
behalf of us and places the product on port and submits the papers to customs and asked to
verify the product and give certificate of Noting.
HOMEBOUND clears charges on behalf of NBL are given below
Association Fee

Port charge

Shipping agent charges

Labor Charges

Transportation Charges

Agency Commission

BSTI fee

Transportation fee for sample

Service charges

After delivering the product Homebound submit their bills to NBL after verifying NBL makes the
payment to HOMEBOUND

Recommendation
Local Supplier Development: Nestle Bangladesh need to develop local suppliers of our country
to gain benefit in longer period of time. For this they should teach the local raw materials
suppliers about the cultivation methods. Now-a-days in terms of quality products and materials
our local companies are also doing well. Especially for Milk Powder, Spices or Oil items they can
develop local supplier. This will save huge amount of money and time for Nestle and also will be
beneficial for our country too.
Import Lead time reduction: At present most of the raw materials are imported and for most of
them the lead time (Order to Factory arrival time) is very high. Average lead time is 2 months to 4
months. Here Nestl Bangladesh needs to reduce lead time by negotiation with international
suppliers or Nestle inters market subsidiaries.
Convince the supplier to accept CAD: If Nestl can import goods through CAD (cash against
document) then the huge bank charge for open up a L/C will be reduced. As in CAD bank has no

role to play. Importer and exporter take all risk and responsibilities for importing and exporting
goods.