142401619 288 33 Powerpoint Slides Chapter 18 International Trade Procedures Documentation

Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationInternational BusinessRakesh Mohan Joshi Professor & Chairperson, IIFT New Delhi 1

Copyright @ Oxford University Press International Business R. M. Joshi

Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationINTERNATIONAL TRADE PROCEDURES AND DOCUMENTATION Chapter 18


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationLearning Objectives

To outline the framework of international trade transactionsTo elucidate the export-import proceduresTo explain the INCOTERMSTo explicate the significance of documentation in international trade transactionsTo discuss commercial and regulatory documents used in international trade


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationSignificance of International Trade Procedures & DocumentationOver a period of time, international trade transactions evolved a customary and regulatory framework so as to facilitate smooth flow of cargo from exporter to importer and ensure receipt of payment from the importer. In order to carry out cross-country trade, a certain set of procedures are followed with a wide range of documents.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationExport-Import Procedures Compliance with Legal Framework Concluding an export dealArranging Export Finance Procuring or Manufacturing of GoodsPre-shipment Inspection Central Excise Clearance on Goods for Exports Packaging, Marking, and Labeling of Goods Appointment of Clearing and Forwarding (C & F) Agents

Arranging Cargo Insurance Booking Shipping Space Dispatch of Goods to Port Port Procedures and Customs Clearance Dispatch of Documents to the Exporter Sending Shipment Advice Presentation of Documents at the Negotiating BankClaiming Export Incentives


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationCompliance with Legal FrameworkEach country has its own legal framework for export import transactions which need to be complied by those entering into international trade. In India, exporters are requested to: Obtaining Import Export Code Number Registration with Sales Tax and Central Excise Authorities Registration with Export Promotion Organisation


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationConcluding an Export Deal While concluding an export deal an exporter should negotiate the terms of the deal in detail, including the price, the product description, packaging, port of shipment, and delivery and payment terms.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationProcess of Concluding an Export Deal Identify and negotiate with importerConfirm the export dealReceive an export contractExamine the export contract thoroughly and ask for amendments, if anyReceive letter of creditScrutinize the L/C thoroughly, compare with terms of contract, ask for amendments, if neededReceive amended letter of credit


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationArranging Export FinanceThe exporters may avail packing credit facility from commercial banks, generally at concessional rates to meet their working capital requirements for manufacturing, purchasing, and packaging of goods.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationProcuring or Manufacturing of Goods After receiving the confirmed export order, the exporting firm should make preparation for the procurement or production of goods, which include:

Send delivery note to factory/purchase departmentGoods manufactured/procuredPre-shipment inspectionCentral excise clearancePacking, marking or labellingDispatch of goods to the port


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationPre-shipment Inspection

At the time of exports before clearing the shipment, Customs authorities require submission of an inspection certificate in compliance with the rules and regulations of the exporting country regarding compulsory quality control and pre-shipment inspection.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationCentral Excise Clearance on Goods for ExportsThe exports are free from the incidence of indirect taxes as per internationally accepted practice. Therefore, all goods exported from India are exempt from payment of central excise duties for which exporters have following options:

Export of goods under claim for excise duty rebateExport of goods under bond


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationPackaging, Marking, and Labeling of Goods Proper packaging of export cargo facilitates in minimizing transit and delivery costs and losses. After packaging marking of the packages is done so as to facilitate identification of goods during handling, transportation, and delivery. Labelling contains detailed instructions and is carried out by affixing labels on the packs or by stencils.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationAppointment of C & F Agents Services offered by C&F Agents:Advising exporters on choice of shipping routesReservation of shipping spaceInland transportation at portStudying provisions of L/C or contract and taking necessary action accordinglyWarehousing insurancePort, shipping, and customs formalitiesArranging overseas transport serviceRendering assistance in filing claimsMonitoring movements of goods to importerGeneral advisory services.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationArranging Cargo Insurance The marine insurance cover is arranged by the exporter based on the conditions of the export contract.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationBooking Shipping Space

The shipping space is reserved in the vessel by sending shipping instructions either through the C&F agent or through freight broker who works on behalf of the shipping company.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationDispatch of Goods to Port On receiving information on reservation of shipping space, the production department makes arrangements for transport of goods to the port of shipment, either by road or rail. The goods are generally consigned to the port town in the name of the C&F agent.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationPort Procedures and Customs Clearance Exporters generally avail the services of C&F agents to comply with procedures for the Customs clearance and other port formalities at the port town.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationDispatch of Documents to the Exporter Soon after obtaining the B/L from the shipping company, the C&F agent sends the documents to the exporter.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationSending Shipment Advice Soon after the shipment, the exporter sends a Shipment Advice to the importer intimating the importer about the date of shipment, name of the vessel, and its ETA at the port of discharge. The Shipment Advice is accompanied by commercial invoice, packing list (if any), and a non-negotiable copy of B/L so as to enable the importer to take delivery of the shipment.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationPresentation of Documents at the Negotiating Bank The exporter has to present the foolowing documents to the negotiating bank after the shipment:Bill of Exchange (first and second of original)Commercial invoice (two or more copies as required)Full set of clean on board B/L (all negotiable and non-negotiable as required)GR Form (Duplicate)Export order/contractLetter of Credit (Original)Packing listMarine insurance policy (two copies)Consular and/or Customs invoice, if requiredBank certificate (in the prescribed form)


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationClaiming Export Incentives The exporter files claims for getting export incentives after the shipment as follows:Claiming excise rebateReceiving duty drawback


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationTerms of Delivery in International Trade Transactions The International Chamber of Commerce (ICC), Paris has developed the uniform rules for interpretation of International Commercial Terms (INCOTERMS) defining the costs, risks, and obligations of buyers and sellers in international transactions.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationINCOTERMS 2000 EXW (Ex works) named place: Any mode of transport is used; seller makes goods available to buyer at sellers premises or other location, not cleared for export and not loaded on a vehicle.FCA (Free carrier) named place: Any mode of transport used; seller delivers goods, cleared for export, to the carrier named by the buyer at the specified place.FAS (Free alongside ship) named port of shipment: Seller delivers when the goods are placed alongside the vessel at the named port of shipment and clears the goods for export.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationFOB (Free on board) named port of shipment: Maritime and inland waterway only; seller delivers when the goods pass the ships rail at the named port. The seller clears the goods for export.CFR (Cost and freight) named port of destination: Maritime and inland waterway only; seller delivers when the goods pass the ships rail at the port of export and pays cost and freight for bringing the goods to the foreign port and clears the goods for export.CIF (Cost, insurance, and freight) named port of destination: Maritime and inland waterway only; seller delivers when the goods pass the ships rail at the port of export and pays cost and freight for bringing the goods to the foreign port, obtains insurance against the buyers risk of loss or damage, and clears the goods for export.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationCIP (Carriage and insurance paid to) named place of destination: Seller delivers the goods to a carrier it nominates and pays the cost of bringing the goods to the named destination and obtains insurance against the buyers risk of loss or damage during carriage and clears the goods for export.CPT (Carriage paid to) named place of destination: Any mode of transport; seller delivers goods to carrier it nominates and pays costs of bringing goods to the named destination and clears the goods for export.DAF (Delivered at frontier) named place: Any mode of transport to a land frontier; seller delivers when goods are placed at the buyers disposal on the arriving means of transport (not unloaded), cleared for export but not cleared for import before the Customs border of the destination country.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationDES (Delivered ex ship) named port of destination: Maritime and inland waterway only; seller delivers when goods are at the buyers disposal on board the ship not cleared for import. The buyer pays discharging costs.DEQ (Delivered quay) name port of destination: Maritime and inland waterway only; seller delivers when the goods are placed at the buyers disposal, not cleared for import, on the dock (quay) at the named port of destination and pays discharging costs, but the buyer pays for import clearance.DDU (Delivered duty unpaid) named place of destination: Any mode of transport, seller delivers the goods to the buyer not cleared for import and not unloaded from the arriving means of transport at the named destination, but the buyer is responsible for all import clearance formalities and costs.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationDDP (Delivered duty paid) named place of destination: Any mode of transport; seller delivers goods to the buyer, cleared for import (including import licence, duties, and taxes) but not unloaded from the means of transport.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationDocumentation for International Trade Transactions Trade documentation is considered a critical constituent of international sales as export transactions involve much complex documentation work. It facilitates international transactions, protecting interest of exporters and importers located in two different countries governed by different statutory and legislative frameworks.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationCommercial Documents Those documents which, by customs of trade, are required to be prepared and used by exporters and importers in discharge of their respective legal and other incidental responsibilities under the sales contract. These are required for effecting physical transfer of goods and their title from exporter to the importer and realization of exports sales proceeds.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationCommercial InvoiceThe key documents for an export transaction prepared by the exporter serves three main functions:As a document of contentAs a sellers billAs apacking list


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationPacking ListProvides details of how the goods are packed, the contents of different boxes, cartons, or bales, and details of the weights and measurements of each package in the consignment. It is used by the carrier while deciding on the loading of the consignment.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationTransport DocumentsAll the documents that evidence shipment of goods, are collectively known as transport documents such as: Ocean (marine) bills of lading (in ocean transport),Way Bill or Consignment Note (for rail, road, air or sea transport) Combine or multimodal transport document (in multimodal transport), Receipt (in postal or courier delivery)


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationCertificate of Origin Used to establish evidence of origin of goods into the importing country. It is used for deciding whether the import from the country of origin is partially or completely prohibited and also for deciding the liability and rate of import duty in the importing country.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationInspection Certificate In India, under the Export (Quality Control and Inspection) Act 1963, it is mandatory to obtain an export inspection certificate for a number of products by the notified agency such as Export Inspection Agency (EIA), BIS (Agmark), CDSCO, Tea Board, Coffee Board, etc. To ensure quality of goods exported, importers often insist upon inspection from a nominated private agency.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationInsurance Policy/Certificate In order to provide protection to the cargo-owner, an insurance cover is necessary while the cargo is in transit from consignor to consignee. Risks covered under a cargo insurance policy is governed by international practices.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationMates Receipt On receipt of cargo on board, the master of the vessel issues mates receipt to the port authorities which is required by the shipping company for issuing bills of lading.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationBill of Exchange (draft) An unconditional order in writing prepared and signed by the exporter and addressed to the importer requiring the importer to pay on demand (Sight Bill of Exchange) or at a future date (Usance Bill of Exchange) a certain sum of money ( contract value) to the exporter or his or her nominee (or endorsee).


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationShipment Advice

Soon after the shipment has taken place, the Shipment Advice is sent to the importer informing him or her of the details of the shipment such as vessel or flight number, port of discharge and destination, export order or contract number, description of cargo, quantity, etc.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationRegulatory Documents

Those documents which are required to fulfill the statutory requirements of both importing and exporting countries. These documents are related to various government authorities, such as the relevant department or its principal agency controlling foreign trade.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationExchange Control Declaration Forms

Under the Foreign Exchange Management (Export of Goods and Services) Regulations, 1999, for every export taking place out of India, the exporter has to submit an exchange control declaration form in the prescribed format such as :GR formSDF form PP formSOFTEX


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationShipping Bill/Bill of Export It is the main document required by the customs authorities which mentions the description of goods, marks, numbers, quantity, FOB value, name of the vessel or flight number, port of loading, port of discharge, country of destination, etc.


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationBill of Entry

It is required to get customs clearance on imported cargo.

Types of Bill of Entry:

Bill of Entry for home consumption (white)Bill of Entry for warehousing (yellow) Ex-bond Bill of Entry (green)


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationDocuments Required for Central Excise Clearance Invoice Personal ledger account (PLA)ARE-1 (application for removal of excisable goods-1) ARE-2 (application for removal of excisable goods-2)CT-1


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationBlack List Certificate

Countries which have strained political relations or at war require the Black List Certificate as evidence thatThe origin of goods is not from a particular countryThe parties involved, such as the manufacturer, bank, insurance company, shipping line etc. are not blacklisted The ship or aircraft would not call at ports of such country unless forced to do so


Copyright @ Oxford University Press International Business R. M. JoshiChapter 18: International Trade Procedures and DocumentationHealth/Veterinary/Sanitary CertificateTo ensure that imported cargo is not contaminated by any disease or health hazard the importer or the importing countys customs department sometimes requires such certificate for export of foodstuff, livestock, marine products, hides and skins, etc., from health, veterinary, or sanitary authorities


142401619 288 33 Powerpoint Slides Chapter 18 International Trade Procedures Documentation

Documents

international tradecopyright

crosscountry trade

port port procedures

certain set of procedures

export import transactions

regulatory framework

regulatory documents

wide range of documents