Scenario 23 — Import Procurement (Foreign Vendor + LC + Customs)
📊 Business Case
Import procurement is buying material from a foreign vendor, where the price you pay the supplier is only part of the story. Sea freight, marine insurance, customs duty and bank charges all pile on top — and in SAP they must be capitalized into the inventory value of the goods (the "landed cost"), not written off as expense. A Letter of Credit (LC) is the banking instrument that guarantees the foreign seller gets paid. This is one of the most complex P2P flows because one PO spawns several invoices from several vendors in multiple currencies.
🕐 When to use it
Whenever you buy from an overseas supplier — raw materials, machinery, spares — and freight/customs/insurance must be added to the material's cost rather than expensed.
❓ Why it matters
It uses planned delivery costs on the PO so freight, customs and insurance capitalize at GR into inventory. Get this wrong and your inventory is undervalued and margins are misstated.
👤 Who triggers it
The import/procurement buyer raises the PO; Treasury/FI opens the LC with the bank; the customs broker, freight forwarder and insurer each invoice separately.
🔁 The key distinction
One PO, many vendors and currencies. The goods vendor invoices in USD; the forwarder, customs broker and insurer invoice in PKR — each clears its own delivery-cost GR/IR, but all roll into one inventory value.
💰 Financial Impact — The Easy-Money Example
PakSteel imports 100 TO of coking coal from Shanghai Steel Trade Co. The supplier's invoice is USD 50,000 = PKR 14,000,000 @ 280:1 — but that is not what the coal is worth on the balance sheet. Watch the landed cost build up:
The big idea: the foreign supplier invoice (PKR 14M) is only ~83% of what the coal actually costs you. The remaining freight, insurance and customs capitalize through planned delivery costs, so inventory carries the true landed value of PKR 16.8M. Each of the four vendors then invoices separately and clears its own clearing account.
🇵🇰 The Business Story
🎯 What you'll learn
- Use Planned Delivery Costs on a PO — freight, customs, insurance enter the PO line so they capitalize at GR
- Multiple currencies — vendor invoice in USD, books in PKR (exchange rate at PO date vs invoice date can differ → variance)
- Multiple invoices per PO — main vendor (goods), customs broker (duty), forwarder (freight), insurance company
- Each cost has its own G/L account but all roll up to inventory value at GR
- LC is FI/Treasury domain — MM just records the PO terms (Incoterms FOB/CIF/DDP)
⚙️ Config Prerequisites
- Foreign vendor BP created (VEN-IMPCH) with currency USD, country CN
- Condition types defined for Freight (FRA1), Customs (Z_CUST from Sc 21), Insurance (INS1)
- Pricing procedure includes these conditions
- Exchange rates maintained — OB08 rate type M for USD ↔ PKR
- OBYC entries for FRE (freight clearing), customs clearing G/L
RM-COAL-01 (ROH — same steps as RM-IRON-01) — create steps · how to create a ROH.
🔧 Step-by-Step — Transaction Flow
23.1 — Create Import PO · ME21N with planned delivery costs
- ME21N · Doc Type
ZIMP(or NB) · Vendor VEN-IMPCH - Header → Currency =
USD· Exchange Rate: from OB08 (auto) - Header → Incoterms:
CIF(Cost Insurance Freight) · Karachi Port - Line: Material RM-COAL-01 · Qty 100 TO · Net Price USD 500/TO · Plant PK01
- Click line → Conditions tab:
- FRA1 (Freight): USD 30/TO planned
- INS1 (Insurance): 1.5% on goods+freight
- Z_CUST (Customs): 5% on CIF
- For each delivery cost: enter Vendor of Freight Forwarder, Customs Broker, Insurance Co (these are separate vendors!)
- Save
SAP commits planned costs — they'll capitalize at GR.
23.2 — GR — capitalizes goods + planned costs
At GR, SAP capitalizes:
| Inventory RM-COAL (300100) | Dr PKR 16,800,000 | (goods + freight + insurance + customs all included) |
| GR/IR (191100) - Main | Cr 14,000,000 | Main vendor |
| Freight Clearing (191500) | Cr 840,000 | Forwarder |
| Insurance Clearing (191600) | Cr 252,000 | Insurance Co |
| Customs Clearing (191700) | Cr 1,708,000 | Customs broker |
All 4 vendors will invoice separately — each MIRO clears its own GR/IR.
23.3 — Goods Invoice · MIRO in USD
- MIRO · Vendor VEN-IMPCH · Currency USD · Amount 50,000
- SAP translates to PKR at invoice date exchange rate
- If rate differs from PO/GR rate → posts variance to "Exchange Rate Difference" G/L
23.4 — Planned Delivery Cost Invoices · MIRO (3 more)
- MIRO → Transaction = "Planned Delivery Costs" (instead of Invoice)
- Reference original PO · select freight forwarder vendor · enter freight invoice amount
- Repeat for customs broker, insurance
- Each clears its own delivery cost GR/IR
23.5 — LC Settlement (FI side — outside MM)
FI consultant handles: Open LC against bank, debit margin from vendor, eventual payment via bank → vendor account cleared.
- FBR Customs General Order rates change annually — keep customs duty % updated in OB08 / condition records
- Sales tax on imports @ 17% (or current FBR rate) charged at port; recoverable as input tax
- WeBOC integration optional (Web-Based One Customs system) — some Pakistani implementations integrate via IDoc
- GIDC (Gas Infrastructure Development Cess) applies to some imports
✅ Verification
| # | T-code | Check |
|---|---|---|
| 1 | ME23N | Import PO shows currency USD, Incoterms CIF, and FRA1/INS1/Z_CUST conditions with their own vendors |
| 2 | MMBE / MB51 | RM-COAL-01 in stock at PK01; GR document valued at the full landed cost (~PKR 16.8M) |
| 3 | MB5B / material doc | Inventory G/L 300100 debited with goods + freight + insurance + customs combined |
| 4 | FBL3N | Each clearing G/L (191100/191500/191600/191700) cleared as its vendor's MIRO posts |
| 5 | MR51 | All four invoices (goods USD + 3 planned-cost PKR) reference the same PO |
🎓 Interview-Ready Answers
Q: How do freight and customs end up in the material's inventory value?
By entering them as planned delivery costs (condition types like FRA1 freight, INS1 insurance, customs) on the PO line. Because they are planned at PO time, at goods receipt SAP debits the full landed cost to inventory and credits a separate delivery-cost clearing account for each. When the forwarder/customs/insurance vendor invoices via MIRO "Planned Delivery Costs," that clearing account is cleared. The costs are capitalized, never expensed.
Q: One import PO produces how many invoices, and why?
Typically four: the goods vendor (in USD), the freight forwarder, the customs broker, and the insurance company (each in PKR). Each delivery cost was assigned its own vendor on the PO, so each invoices separately and clears its own GR/IR clearing account — but all four amounts roll into the single inventory value posted at GR.
Q: What causes an exchange-rate difference on an import, and where does it post?
The PO/GR are valued at the OB08 rate on the PO date; the supplier invoice (MIRO) is translated at the invoice-date rate. If the rate moved, the difference between the GR/IR value and the invoice value posts to an Exchange Rate Difference G/L — not to inventory.
Q: What is MM's role with the Letter of Credit?
The LC itself is an FI/Treasury instrument — opening it with the bank, the margin, and final payment all sit in FI. MM's job is to capture the commercial terms on the PO: the Incoterms (FOB/CIF/DDP), currency, and the delivery-cost conditions. MM records the procurement; FI handles the banking.