Documentation Final

IMPORT,EXPORT,DOCUMENTATION & FOREIGN TRADE POLICY

By Dr. Vikas Dahiya

Agenda Documentation: Overview – Commercial and

Regulatory documents Understanding - Invoice, Packing List, Inspection

Certificate, Certificate of Origin, Shipping Bill, ARE-1, Mate Receipt, GR/SDF, Bill of exchange, Bank Realisation Certificate, Bill of Lading and Airway Bill, Bill of Entry etc.

Incoterms Terms of payment Letter of credits - Concept, Types of L/C, Parties

to L/C, L/C mechanism.

Agenda Export Procedures Import Procedure Export Promotion Schemes under Foreign Trade

Policy

Overview of Documentation

Significance of Documentation Documents are important for the following

reasons:

(a) as an evidence of shipment and title of goods; (b) for obtaining payment; (c) to provide a specific and complete description of the

goods; (d) for assessment of correct Duty for clearance purpose;(e) for obtaining Export Licences;(f) for obtaining export finance;(g) for completing Pre-shipment Inspection;(h) for claiming export benefits like Duty Drawback, etc.

Commercial / Regulatory Documents Commercial set of documents are mainly used for

Commerce. In other words these are documents normally exchanged between buyer and seller.

Regulatory documents are required in dealing with various regulatory authorities such as customs, RBI, Excise, Licencing authorities Inspection and other Export Promotion bodies for availing incentives etc.

Commercial / Regulatory Documents

Documents are categorized into two categories, namely Commercial Documents and Regulatory Documents.

Commercial RegulatoryCommercial Invoice Shipping BillInspection Certificate ARE1 from (Excise)Insurance Certificate RBI Declaration Forms

(GR/PP)Bill of Lading / AWB Application for remittance

of currencyCertificate of Origin Various LicencesBill of Exchange Bill of EntryShipment AdvicePacking List

Commercial / Regulatory Documents

Referring to the Commercial set of documents, it may please be observed that these set of documents are prepared from other set of documents (some of these only). These are known as auxiliary documents.

These documents may not be required by the foreign buyer, but these are must for preparation of main export documents, known as Principle Commercial Documents.

Commercial Documents

8. Letter to Bank for negotiation of documents

8. Bill of Exchange7. Shipping Instructions7. Packing List6. Shipping order6. Shipment Advice5. Mate Receipt5. Bill of Lading

4. Application for Certificate of Origin

4. Certificate of Origin3. Declaration for Insurance 3. Insurance Certificate2. Intimation for Inspection2. Inspection Certificate1. Proforma Invoice1. Commercial Invoice

AuxiliaryPrincipal

Pre-shipment Documents Documents at pre-shipment stage are those

documents, which are required to be made, till the consignment is presented to the customs department for clearance.

The following documents can, therefore, be treated as pre-shipment documents:- Proforma Invoice Confirmed order or contract Letter of Credit Pre-shipment Inspection Certificate Packing list Shipping Bill Export Declaration Forms (GR/SDF) ARE

Post-shipment Documents Documents at Post-shipment stage are naturally

those which are prepared after the shipment.

These documents include the following:- Mate Receipt Bill of Lading Airway Bill Roadway/Railway Bill Post Parcel/ Courier Receipt Invoices Certificate of Origin Insurance Certificate or Policy Bill of Exchange

Documents for availing various Export Benefits Documents are also divided, depending upon,

whether the benefit has to be claimed prior to exports or after the exports.

For claiming benefits one has to make different applications with various government authorities.

Contd….

Documents for availing various Export Benefits At the pre-shipment stage the following

documents are note-worthy. Application for pre-shipment finance from the bank. Application of Advance Authorization or Duty Free

Import Authorisation with DGFT. Application for execution of Bond with Central Excise

authorities. Application for obtaining CT-1 in case of a Merchant

Exporter

Documents for availing various Export Benefits At the post shipment stage, the following

documents are note-worthy. Application of Duty Entitlement Pass Book. Application for Focus Market or Focus Product Scheme.

Import Documentation

Important Documents–Imports Invoice Packing list Bill of Lading or Delivery Order/Airway Bill GATT declaration form duly filled in Importers/CHA’s declaration Licence/Authorisations in original wherever necessary Letter of Credit/Bank Draft/wherever necessary Insurance document Import license Industrial License, if required Test report in case of chemicals Catalogue, Technical write up, Literature in case of

machineries, spares or chemicals as may be applicable Certificate of Origin No Commission declaration

Understanding Documents

Understanding Documents All documents whether it is for export or import transaction

generally contain following information Name and address of the exporter and importer Document No. and date. Order No. and date Port of discharge Port of destination Country of origin Description of Goods Marks and nos., model nos. [if any] Weight HS Code No. Value Currency Terms of payment Terms of shipment etc.

Understanding Documents However, depending upon the nature of the

document, specific information is to be mentioned.

For e.g. apart from the above details, Shipping Bill will include what export benefit is being claimed against that particular shipment, etc. Similarly, Packing List will give information about how goods are packed.

Let us now study each document in depth.

Invoice It is itemized statement prepared and issued by a

seller at the time of dispatching the goods to the buyer.

It helps the Customs Authorities to: ensure that goods shipped are permitted by the export

policy. compute the customs duty, if any, payable on the export or

the import. check the quantity of goods. They generally open a few

packages at random and check the veracity of details in the invoice.

check if there is any over-invoicing or under-invoicing (that may be resorted to by the importer to reduce the import duty payable).

Invoice Invoices are often called bills.

Various types of invoices used in International Trade are

• Proforma Invoice• Commercial Invoice• Leagalized Invoice• Customs Invoice

Packing List It is a consolidated statement in a prescribed format

detailing how goods are packed, marked and numbered including weight and dimensions of each package. 

It is useful for customs at the time of examination and warehouse keeper of buyer to maintain inventory record and to effect delivery.

It have many details common from invoice but it does not indicate unit rate value of goods.

The exporter or his/her agent, the customs broker or the freight forwarder, reserves the shipping space based on the gross weight or the measurement shown in the packing list.

Packing List Customs uses it as a check-list to verify:

the outgoing cargo (in exporting) and the incoming cargo (in importing).

Basic functions of Packing List are: To confirm the contents of a shipment as it left the

exporter’s premises. To indicate weights, measures and the piece count (i.e.

the number of cartons or cases) in that shipment.

It is prepared in 7-10 copies or as per the requirement.

Inspection Certificate “Certificate of Inspection” is issued by the Inspection

Agency concerned certifying that the consignment has been inspected before shipment as per the requirements of the Exports (Quality Control and Inspection) Act, 1963.

It satisfies the conditions relating to quality control and inspection as applicable to it and is certified export worthy.

This certificate bears cross references of invoice or contract number.

Inspection Certificate Inspection can be done by

Inspection Agency appointed by the Government of India, i.e. Export Inspection Agency, Textile Committee, Central Silk Board etc.

Inspection Agency may also be nominated by importing countries’ Government

Sometimes buyer himself appoints an independent private inspector to inspect the goods.

If an inspection is a part of transaction, then exporter is required to arrange for necessary inspection.

It can be a certificate of quality, weight, analysis, or the like.

Certificate of Origin [COO] It is a certificate indicating the fact that the goods which

have been exported have originated or manufactured in a particular country. So it is a sort of declaration testifying the origin of export.

It is normally required by an importer to clear goods from the customs.

For political and social reasons, it is insisted by Customs Authority of importing country before goods are allowed to enter in the country.

It helps the importer to take an advantage in duty concession, if any. For e.g. goods imported under FTA.

Certificate of Origin [COO] On the basis of COO, Customs can ensure that certain

prohibited goods of particular countries are not imported.

It also ensures that goods have not been reshipped by a seller who has brought them into his own country from some other place of origin.

It is sent to the importer by the exporter.

It is issued or signed by an independent official organization, such as a Chamber of Commerce, on prescribed form.

Shipping bill Shipping Bill is an important document required to seek

permission of customs to export goods by Sea/Air. It is prepared by the exporter and submitted to the Customs.

The exporter of any goods has to file a “SHIPPING BILL” as an entry for the purpose of export by air or sea and a “BILL OF EXPORT” in respect of export by land.

Cargo will be allowed to be carted to Dock/Port sheds only after stamping and passing of the shipping bill by customs authorities.

The exporter has to sign a declaration in the Shipping Bill regarding the truth of its contents.

Shipping bill Shipping Bill normally contains:

• the name and address of the importer/consignee and exporter,

• invoice number and date, • name of vessel carrying the goods, • name of master or agents, • port at which goods are to be discharged, • country of final destination, • description of goods, quantity details of each case,• value of the goods as defined in the Sea Customs Act, • number of packages with total weight,

Shipping bill Types of Shipping Bills:

FREE SHIPPING BILL: Used for export of goods which neither attract any Export duty nor entitled to any Duty Drawback

DUTIABLE SHIPPING BILL: Used when export goods are subject to Export Duty Duty is charged either on quantity basis (Fixed amount per kg. or per Metric tonne) or on certain percentage of assessable value.

DRAWBACK SHIPPING BILL: Used when Duty Drawback is to be claimed.

SHIPPING BILL FOR SHIPMENT EX-BOND: Used when the goods are to be exported which have been imported earlier and kept in bond prior to re-export.

Shipping bill Types of Shipping Bills:

DEPB SHIPPING BILL: When DEPB benefit is to be claimed.

DEEC SHIPPING BILL: This shipping bill is used for export of goods under Advance Authorisation (Duty exemption scheme).

DEEC CUM DRAWBACK SHIPPING BILL: This shipping bill is used for export of goods where both the schemes Duty Exemption as well as Drawback are to be taken into account.

Shipping bill Shipping bill is required to be submitted in quadruplicate. If

Drawback/DEPB claim is to be made, one additional copy should be submitted.

Copies of Shipping Bill are as under: Customs Copy: For record of Customs Exporter’s Copy: For record of Exporters/ Exporter may

forward it to shipping company. Export Promotion Copy: For office of DGFT. This copy is the

most important document for claiming duty Neutralisation/Exemption benefits plus export incentives wherever applicable.

Exchange Control Copy: For negotiating the export documents in bank. It is Proof of export for exchange purposes.

DEPB Copy: For use in the import cell of customs for registration of licence.

ARE ARE stands for application for removal of

excisable goods for exports by Air/Sea/ Post/Land.

Goods which are sold overseas are exempted from payment of excise duty or entitled for Rebate of Excise Duty, if excise paid goods are exported. Under both these circumstances, the document to be used is ARE.

When goods are removed without payment of duty for the purpose of export, they will get covered under the provisions of Rule 19 of the Central Excise Rules.

ARE

ARE is prepared before clearance of goods from the factory gate. ARE will specify whether goods are exported under Rule 19 or under Rule 18.There are three types of ARE:

a) ARE 1: is used for physical export of goods.b) ARE 2: is used when goods are removed for

manufacture and packing of the goods to be exported.

c) ARE 3: is used when goods are supplied as deemed exports.

Mate Receipt Mate’s receipt is a receipt issued by the Master or Mate of the

vessel stating that certain goods have been received on board his vessel.

It is prima-facie evidence that the goods are loaded in the vessel.

It contains:the name of shipping line and vessel, port of loading, port of discharge and place of delivery, number and kind of packages, gross weight,description of goods, container status/seal number,

shipping bill number and date andcondition of cargo at the time of its receipt on board the vessel.

It is serially numbered.

Mate Receipt

Port authorities recover port dues from exporter on production of this receipt.

On payment of Dock dues, the exporter or his agent collects the receipt from the Port-Trust authorities and hands over to shipping company for preparing Bill of Lading.

Bill of Lading is prepared on the basis of Mate’s Receipt.

It is of a transferable nature.

In case of ascertaining the exact date of shipment, the mate’s receipt date is also very important.

Normally, the date of Export is regarded as “the date of Mate Receipt or the date of Bill of Lading, whichever is later”.

Export Declaration Forms (GR/SDF)

As per the exchange regulations, exporters, wishing to ship goods abroad, are required to submit Export Declaration Forms to the Customs authorities (whenever the value of the shipment exceeds US $ 25,000) before any export of goods from India is made.

Export Declaration Forms (GR/SDF)

GR Form

: Used for exports to all countries made other than by post including export of software in physical form i.e. magnetic tapes/discs and paper media - When S/B is filed manually. [prepared in duplicate]

SDF Form

: Appended to the shipping bill, for exports declared to Customs Offices notified by the Central Government which have introduced Electronic Data Interchange (EDI) system for processing shipping bills notified by the Central Government. [prepared in duplicate]

Relevant Declaration Forms, as prescribed by RBI under Foreign Exchange Management (Export of Goods and Services) Regulations, 2000.

Export Declaration Forms (GR/SDF) These forms normally contain:

Name and address of exporter, IEC code number and description of goods.

Name and address of authorised dealer through whom the proceeds of the exports have been, or will be, realised.

Details of commission due to foreign agent or buyer should be correctly declared. Otherwise, difficulties may arise at the time of remittances of such commission/ payment. An exporter should note this point very carefully.

An exporter is required to give analysis of full export value, a break-up of FOB value, freight, insurance, discount, commission, etc.

Statutory Declaration Form [SDF] Procedure for Distribution / disposal of

copies of SDF

The SDF form should be submitted in duplicate to the Commissioner of Customs concerned.

After verifying and authenticating the declaration in form SDF, the Commissioner of Customs will hand over to the exporter, one copy of the shipping bill marked ‘Exchange Control Copy’ in which form SDF has been appended for being submitted to the bank within 21 days from the date of export.

Statutory Declaration Form [SDF]

Banks should accept the Exchange Control (EC) copy of the shipping bill and form SDF appended, submitted by the exporter for collection of shipping documents.

The manner of disposal of EC copy of shipping Bill (and form SDF appended) is the same as that for GR forms.

Bill of Exchange Bill of Exchange [BE] is a document drawn and is

an order by the exporter to the buyer to pay the money in specified exchange.

It is also known as a draft.

A bill of exchange is accompanied by commercial documents which are presented by a bank and released to the buyer either against payment (at sight) or against a signature for payment on a specified future date.

It is an unconditional written order.

Bill of Exchange

It is prepared either in an international currency or Indian rupees depending on the terms of the contract.

Accordingly, the bill is known by the name of currency in which it is drawn. e.g. a bill drawn in US dollars is known as a “Dollar Bill” and when drawn in Rupees, it is termed as “Rupees Bill”.

Bill of Exchange The most common versions of a bill of

exchange are:

A) Sight Draft – When the drawer (exporter) expects the drawee

(importer) to make payment immediately upon the draft being presented to him.

Unless and until the Draft is received, the Negotiating/ Collecting Bank does not hand over the Shipping documents and the buyer cannot take delivery of goods.

Bill of Exchange

B) Usance Draft – When draft is drawn for payment at a date

later than the date of presentation. It may be a fixed future (specific) date or

determinable date according to the period of credit viz. 30 days, 60 days or 90 days etc.

It is presented to the drawee (importer) who will retire the documents by accepting the draft by putting his signature and date.

Bill of Exchange When the payment is received in advance no Bill

of Exchange is required to be drawn.

Parties to a bill of exchangei. Drawer – who makes the order for

making payment. ii. Drawee – whom the order to pay is

made. iii. Payee – whom the payment is to be

made.

Bill of Exchange Features of a Bill of Exchange:

A bill must be in writing, duly signed by its drawer, accepted by its drawee and properly stamped.

It must contain an order to pay. Words like ‘please pay US $ 5,000 on demand and oblige’ are not used.

The sum payable mentioned must be certain The parties to a bill must be certain.

Bank Realisation Certificate Once the export proceeds are realised, the

exporter has to prepare Bank Certificate of Export and Realisation for the purpose of claiming export benefits, incentives, etc.

It is prepared as per Form No.1, given in Appendix 22A of Handbook of procedures 2004-09 (Vol. I).

To prepare this certificate, the date of realisation is most essential, as the exporters have to apply for the export benefits, incentives, etc. within six months following the month/quarter of the realization month.

Bank Realisation Certificate It is signed by the authorized signatory of the

firm/company with full name in block letters with designation, full official and residential addresses.

Bankers attest this certificate as true and correct after verifying the particulars, including the date of mate receipt. This date is the most important, as this is the actual date of export.

Bank Realisation Certificate It is signed by an authorized signatory of the bank

with his name and designation.

Bankers affix certificate number and date and also mention the Authorized Foreign Exchange Dealer's Code number allotted to Bank by Reserve bank of India.

For this purpose, this certificate must be

accompanied with the following documents:- A copy of invoice, A copy of customs attested export promotion copy of the

shipping bill, A copy of Bill of Lading/ PP receipt/ Airway bill, A copy of the insurance certificate/Insurance policy/cover.

Bill of Lading (B/L) Bill of Lading is the transport document

associated with Sea freight.

It is issued by the Shipping Company or its agent or master of a ship acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified.

It is a document of title to the goods and, as such, is freely transferable by endorsement and delivery.

Bill of Lading (B/L) Bill of Lading serves three purposes as:

Receipt given by Shipping Company as goods described on document has been received by it/carrier.

Evidence of the contract of carriage by sea between the shipping company and the shipper (exporter or importer).

Document of title to the goods and can be used to obtain payment or a written promise before the merchandise is released to the importer.

For the bill of lading to be negotiable it must be: 1. made out to the order to the shipper. 2. signed by the steamship company.

Bill of Lading (B/L) It is the only evidence to file a claim against the

shipping company in the event of non-delivery, defective delivery or short-delivery of the cargo at the destination.

For preparation of B/L the exporter should submit the complete set of B/L together with mate receipt to the shipping company which will calculate the freight amount on the basis of measurement or weight.

On payment of freight, the shipping company returns the B/L duly signed and supported by requisite adhesive stamps.

Bill of Lading (B/L) Generally made out in the sets of two or three

originals duly signed by the master of the ship or the agent of the steamship company.

All the originals are equally valid for taking the delivery of the goods. Once one original is utilised the other originals become null and void.

Bill of Lading (B/L) Bill of Lading contains the following information:

Shipping company’s name and address. Consignee’s name and address. Notify party Name of the vessel, Port of loading/Shipment and port of discharge. Shipping marks and Numbers, Cubic measurements, weights Description of the goods Number of packages. Shipped on board with date-rubber stamp. Gross weight and net weight. Freight details Signature of the shipping company’s agent. Container number if any. Shipper’s name and address. B/L Number and Date Originals Terms (on reverse)

Bill of Lading (B/L) Bill of Lading can be further described as

under:- Shipped on Board :- When goods are actually shipped

on board.

Received for shipment :- When goods have been handed over to agent for shipment.

Through B/L:- When two or more carriers/ different modes of transport form i.e. road, rail, air, and sea employed to reach goods to their final destination.

Bill of Lading (B/L) Transhipment B/L:- When there is no direct service

between the two ports and shipowner is prepared to tranship the goods at an intermediate port.

Stale B/L:- i.e. a late B/L that has been held too long before it is passed on to a bank for negotiation or to the consignee.

Clean B/L:- Where the carrier has noted that the goods have been received or loaded in ‘apparent good condition’ (no apparent damage, loss, etc.).

Bill of Lading (B/L) Claused B/L:- Which contains additional

clauses/notations limiting the responsibility of the shipping company which specify deficient condition(s) of the goods and/or packaging.

Combined Transport B/L:- When different modes of transport are used; usually issued when goods stuffed at shipper’s premises and delivered at consignee’s premises.

Bill of Lading (B/L)

Freight Paid B/L:- When freight is paid at the time of shipment or in advance, the B/L is marked, freight paid.

Freight Collect B/L:- When the freight is not paid and is to be collected from the consignee on the arrival of the goods, the B/L is marked, freight collect.

Airway Bill (AWB) Airway Bill is a transport document associated with

Airfreight.

It serves as a receipt for goods and an evidence of the contract of carriage, but it is not a document of title to the goods. Hence, the AWB is non-negotiable.

It contains the following details: number of packages dimensions or volume gross weight

The goods in the air consignment are consigned directly to the consignee.

Airway Bill (AWB)

On the reverse side of the airway bill are the airline’s terms and conditions of carriage whereby an airline is obligated to transport a consignment to its final destination once it has confirmed receipt of the shipper’s consignment.

Airway bill can be comprised in two parts: MAWB (Master Airway bill) – shipments sent on a direct

basis, not consolidated.

HAWB (House Airway bill) – shipments sent on a consolidation basis whereby grouping together various clients consignments under one MAWB being issued by the freight forwarder.

Bill of Entry The document on the strength of which

clearance of imported goods can be affected is known as Bill Entry, the form of which has been standardized by the Central Board of Excise and Customs.

Every importer has to submit it under section 46 of the Customs Act, 1962.

Under EDI system, Bill of Entry is actually printed on computer in triplicate only after ‘out of charge’ order is given. Duplicate copy is given to importer.

Bill of Entry Salient features of a Bill of Entry which is

to be presented for clearance of goods for home consumption are mentioned below: Origin & Vessels Particulars Particulars of the Goods Value Duties Leviable Code Declaration of Importers/Clearing Agents

Types of Bill of Entry – There are three types. Out of these, two types are for clearance from customs while third is for clearance from warehouse.

Bill of Entry BILL OF ENTRY FOR HOME CONSUMPTION - When the

imported goods are to be cleared on payment of full duty. Home consumption means use within India.

BILL OF ENTRY FOR WAREHOUSING - If the imported goods are not required immediately, importer may like to store the goods in a warehouse without payment of duty under a bond and then clear from warehouse when required on payment of duty. This will enable him to defer payment of customs duty till goods are actually required by him. It is also called ‘Into Bond Bill of Entry’ as bond is executed for transfer of goods in warehouse without payment of duty.

BILL OF ENTRY FOR EX-BOND CLEARANCE - It is used for clearance from the warehouse on payment of duty.

Bill of Entry Documents required by customs authorities are required to

be submitted to enable them to (a) check the goods (b) decide value and classification of goods and (c) to ensure that the import is legally permitted.

Documents presented to customs along with the Bill of Entry generally include:

• Invoice, • Packing List, • Bill of Lading or Delivery Order, • Import Licence(s) / Customs Clearance Permit, • Letter of Credit / Bank Draft wherever necessary• Insurance Policy, • Certificate of Origin etc. • GATT declaration form duly filled in • Importers / CHAs declaration duly signed

Tips for Proper Documentation Implications of all Regulatory documents must be studied

carefully. For example; declaration on ARE1 forms.

Filing of Shipping Bill electronically requires correct entries including HS code for the product. Many times, small mistakes are extremely difficult to correct later on.

Shipping bills must be filed according to the scheme the exporter wants to avail . For example; DEPB /DFIA/Drawback etc.

Extra care should be taken when combination of schemes is intended to be used. For example; DEEC – Drawback.

Co-relation between customs, excise and DGFT is extremely important. Many times documents do not match with each other, which results in delay or denying of some benefit under one or the other scheme.

Tips for Proper Documentation

Each regulatory document is important from the point of view of claiming various benefits associated with exports. Each document therefore should be carefully looked into as to correctness of the contents, description, quantity, weight, currency, declaration etc.

Maintenance of statutory records: Since most of the schemes are in the nature of the exemption / remission of the duty, documentary compliances are insisted upon by all the government departments. For example; Appendix 23 – Consumption register.

Thought for the Day…

“Where ignorance is our master, there is no possibility

of real peace”

Shri Dalai Lama

Thank You