EXECUTIVE SUMMARYA freight forwarder often referred to as a
forwarder is a professional logistics provider. Freight forwarders
are third parties and their objective is to dispatch shipments via
asset based carriers such as ships, airplanes or trucks. The main
purpose of turning to the services of freight forwarders is
arranging cargo movement to an international destination quickly
and easily. Freight forwarding companies have the expertise
required to arrange all the activities related to the international
shipping process.
Freight forwarding services are typically used by companies that
deal with international import and export activities. The freight
forwarding company is a third party it doesnt ship the cargo
itself. However, the freight forwarder acts as a professional
intermediary between the client and the transportation services.
Shipping various products between countries and territories usually
involves a multitude of carriers, requirements and legal
documentation. The freight forwarding services is specialized in
handling the great amount of logistics this intricate process
requires, helping the client ship goods securely and quickly. At
kedan.co.uk you can read more about our extensive freight
forwarding services.
Major companies and corporations greatly depend on professional
freight forwarders in their import and export activities. The
freight forwarding company guarantees that a certain cargo reaches
the proper destination upon an agreed date. Furthermore, turning to
the services of a freight forwarder is practically the only way you
can be certain that your products arrive at the specified
destination in good condition. These days, its virtually impossible
for a company to ship goods at an adequate price without a
forwarder. Freight forwarding companies have an established
long-term relationship with carriers of all kinds and will obtain
the best deals in the least amount of time. The freight forwarder
of your choice will practically negotiate the most advantageous
price possible with a reliable carrier, helping you make
hassle-free transactions worldwide.
Conclusion :
The freight forwarder plays an integral part in the
transportation process. Freight forwarders act on behalf of the
exporter in arranging ocean or air transport services. They are
familiar with the import rules and regulations of foreign
countries, methods of shipping, and documents connected with
foreign trade.Freight forwarders can provide a number of services.
During the initial planning phases, they can help choose the
carrier and the most economical shipment size. At the beginning of
the sale, the freight forwarder can provide an exporter with
quotations on a number of costs. This information can be used in
preparing an accurate price quotation to foreign customers.
Choosing the right freight forwarding company is very important if
you want maximum efficiency and reasonable costs.
THEORETICAL BACKGROUNDLogisticsis the management of the flow of
goods and services between the point of origin and the point of use
in order to meet the requirements of customers or corporations.
Logistics involves the integration of
information,transportation,inventory,warehousing,material handling,
and packaging, and oftensecurity. Logistics is a channel of
thesupply chainwhich adds the value of time and place utility.
Today the complexity of production logistics can be modeled,
analyzed, visualized and optimized by plant simulation software,
but is constantly changing. This can involve anything from consumer
goods such as food, to IT materials, to aerospace and defense
equipment.According to the Council of Logistics Management,
logistics contains the integrated planning, control, realization
and monitoring of all internal and network-wide material-,part- and
product flow including the necessary information flow in industrial
and trading companies along the complete value-added chain (and
product life cycle) for the purpose of confirming to customer
requirementsLogistics managementLogistics is that part of thesupply
chainwhich plans, implements and controls the efficient, effective
forward and reverse flow and storage of goods, services and related
information between the point of origin and the point of
consumption in order to meet customer and legal requirements. A
professional working in the field of logistics management is called
a logistician.Logistics management is known by many names, the most
common are as follows: Materials Management Channel Management
Distribution (or Physical Distribution) Business or Logistics
Management or Supply Chain Management
Warehouse management systems and warehouse control
systemsAlthough there is some functionality overlap, the
differences between warehouse management systems (WMS) and
warehouse control systems (WCS) can be significant. Simply put, a
WMS plans a weekly activity forecast based on such factors as
statistics and trends, whereas a WCS acts like a floor supervisor,
working in real time to get the job done by the most effective
means. For instance, a WMS can tell the system it is going to need
five ofstock-keeping unit(SKU) A and five of SKU B hours in
advance, but by the time it acts, other considerations may have
come into play or there could be a logjam on a conveyor. A WCS can
prevent that problem by working in real time and adapting to the
situation by making a last-minute decision based on current
activity and operational status. Workingsynergistically, WMS and
WCS can resolve these issues andmaximize efficiencyfor companies
that rely on the effective operation of their warehouse or
distribution center. LOGISTICS OUTSOURCINGLogistics outsourcing
involves a relationship between a company and an LSP which,
compared with basic logistics services, has more customized
offerings, encompasses a broad number of service activities, is
characterized by a long-term orientation, and, thus, has a rather
strategic natureThird-party logisticsThird-party logistics (3PL)
involves using external organizations to execute logistics
activities that have traditionally been performed within an
organization itself.According to this definition, third-party
logistics includes any form of outsourcing of logistics activities
previously performed in-house. If, for example, a company with its
own warehousing facilities decides to employ external
transportation, this would be an example of third-party logistics.
Logistics is an emerging business area in many countries.
MODE OF TRANSPORTATION AIR TRANSPORT OCEAN TRANSPORT RAIL
TRANSPORT ROAD TRANSPORT OCEAN TRANSPORT More than 95 per cent of
international trade is conduced by sea routes since ancient times,
sea routes are being used for transportation of cargo from one
continent or country to Coastal shipping is also used for
transporting the cargo from one port within the country to another.
For example in India the cargo can be transported from Chennai port
to Visakhapatnam port using the costal shipping route. Sea routes
are used for carrying bulk commodities like such as coaling and
thermal coal mires, fertilizers rock phosphate etc, and liquid go
like crude oil ammonium acids etc Ideally the goods with high
volume and kiw vakye are suited die ocean transport in the era of
containerization even the high value cargo can be safely enabled
the cargo carryingcapacities of the ship to increase many fold. In
1956, the first containerized ship belonging to sea land corp.
carried 58 twenty feet containers. The modern ships have the
capacity to carry 7000 containers. One of the biggest ships owned
by Maersk-sea land is 1,138 feet long from end to end and 140 feet
wide at mid ship. Such ships are called Post-Panamax ship. Cargo
ship categorized into followings Cargo ship categorised into
followings: Liners ships : Liners ship represent the organized
sector of theshipping industries due to their fixed schedules of
arrival anddeparture, Pre-determined voyages and trade routes and
publishedocean freight rates. Liner shipping is governed by
shipping conferenceand offers the following advantage to shippers:-
Regular sailings to scheduled ports of call. Stable freight rates
for a long period of time which helps the shipper to quote C &
F prices with confidence. Uniform rates for all shippers. Coverage
of wide range of ports. Rebates of freight rates based on loyalty
agreements Tramp ships :- Tramp ships on the other hand have the
following characteristics They are free to move anywhere on the
high seas at their will. Their voyage routes and schedules are
flexible. They travel from the port to another port o various trade
routes looking for the cargo and carrying the same to various
routes looking for the cargo and carrying the same to various
destinations around the world. They arrive or depart without a
fixed route or schedule. They fix their voyages according to
availability of cargo and as per the requirement of the shippers of
these cargoes. The freight rates of tram ships depend upon the
demand and supply conditions in the shipping industry. If there is
a glut of shipping space the tramp freight rates plummet. Whereas
in case of shortage of shipping space, the tramp freight rates
shoot up. The cargo space on the tramps is booked by the brokers
located in major port cities like New York, London, Rotterdam
Hamburg, and Hong- Kong etc. They work as a link between tramp
operators and shippers.
TYPES OF CONTAINER :
EXIM FLOW CHART
Freight ForwarderA freight forwarder (often just forwarder) is a
third party logistics provider. As a third party a forwarder
dispatches shipments via asset-based carriers and books or
otherwise arranges space for those shipments. Carrier types include
waterborne vessels, airplanes, trucks or railroads.Freight
forwarders typically arrange cargo movement to an international
destination. Also referred to as international freight forwarders,
they have the expertise that allows them to prepare and process the
documentation and performance related activities pertaining to
international shipments. Some of the typical information reviewed
by a freight forwarder is the commercial invoice, shipper's export
declaration, bill of lading and other documents required by the
carrier or country of export-import, or transhipment. Much of this
information is now processed in a paperless environment.The FIATA
short-hand description of the freight forwarder as the 'Architect
of Transport' illustrates clearly the commercial position of the
forwarder relative to his client. In Europe there are forwarders
that specialize in 'niche' areas such as Rail freight and
collection and deliveries around a large port. The latter are
called Hafen (port) Spediteure (Port Forwarders). A forwarder in
some countries may sometimes deal only with domestic traffic and
never handle international traffic.The original function of the
forwarder, or was to arrange for the carriage of his customers'
good by contracting with various carriers. His responsibilities
included advice on all documentation and customs requirements in
the country of destination. His correspondent agent in far-away
lands looked after his customers' interests and kept him informed
about matters that would affect movement of goods. In modern times
the forwarder still carries out those same responsibilities for his
client. He still operates either with a corresponding agent
overseas or with his own company branch-office. In many instances,
the freight forwarder also acts as a carrier for part of a movement
it can happen that in a single transaction the forwarder may be
acting either as a carrier (principal) or as an agent for his
customer.
HISTORY OF FREIGHT FORWARDERSThe original function of the
forwarder, or was to arrange for the carriage of his customers'
good by contracting with various carriers. His responsibilities
included advice on all documentation and customs requirements in
the country of destination. His correspondent agent in far-away
lands looked after his customers' interests and kept him informed
about matters that would affect movement of goods.In modern times
the forwarder still carries out those same responsibilities for his
client. He still operates either with a corresponding agent
overseas or with his own company branch-office. In many instances,
the freight forwarder also acts as a carrier for part of a movement
it can happen that in a single transaction the forwarder may be
acting either as a carrier (principal) or as an agent for his
customer.
TYPICAL JOB ROLE OF FREIGHT FORWARDER
Freight forwarders process orders for the import and export of
freight, compile documentation for clearance by customers, produce
invoices, process stock transfers, check the contents, compile and
check documents of freight goods. They also tally and record
consignments and destination details of articles, containers and
passengers, and make freight and transport bookings and related
arrangements.
A freight forwarder may perform the following tasks:
check the number of articles or containers in consignments of
goods received or despatched. make sure articles are in good
condition and correspond to invoices, manifests or other records.
arrange internal distribution of goods received. prepare and attach
documentation to articles to be despatched. make sure clearance
procedures (eg. payment of any customs entry fees or duties) are
carried out, despatch goods and arrange delivery promptly on
arrival. spend time in warehouses packing and unpacking goods.
Drive between wharves, container terminals, airports and government
departments. weigh items. contact senders to fix shortages and
arrange replacement of damaged goods. maintain records of receipts
and despatches. Undertake clerical work such as filing, accounting,
updating customs records, preparing correspondence, and inputting
and retrieving information from computers.
RESPONSIBILITY OF FREIGHT FORWARDERS
Although freight forwarders have acted as respected
professionals since the last century, the legal nature of their
activities has only recently attracted real attention. This is
because freight forwarders have become prominent links in modern
transportation systems, due to the importance of containers, and
multimodal transport.
In times of excess vessel capacity, too, freight forwarders have
increased authority because it is they who are able to provide
cargoes, thereby becoming influential participants in a buyer's
market. It is for this reason that on occasion freight forwarders
have voyage chartered and even time chartered ships.The legal
responsibility of freight forwarders often seems mysterious because
freight forwarders have assumed two different legal roles - agents
and principal contractors. Nor are the activities of freight
forwarders directly regulated by any international convention,
although their acts naturally bridge national borders. The result
is that various national laws control their actions, giving rise to
conflicts of law.
In the light of the foregoing - the emerging importance of
freight forwarders, the often puzzling national laws, and the lack
of international uniformity - it is apparent that an international
convention is necessary. The Multimodal Transport Convention 19801
is just such a convention. Its adoption would give certainty to the
law and protection to both the public and to freight forwarders
themselves.
The Multimodal Transport Convention 1980 has the advantage of
clarity and simplicity and is not encumbered with other maritime,
albeit important, matters such as freight, liens and electronic
commerce, which make the Convention less likely to be enacted.
FREIGHT FORWARDER FUNDAMENTAL ROLES1. The freight forwarder
ensures that your goods receive the priority it requires; your
documentation is appropriately filled and your goods reach its
destination in the specified time.2. The increasing specialization
on transportation of goods and decimations operations means that
the exporter of products would prefer to leave these formalities to
"freight forwarder" in order to concentrate on his own business.3.
An efficient "freight forwarder" can offer advice, on the special
requirements of different countries as well as to offer a number
(sea, air, rail etc.) of quotations for a particular consignment
being sent from point A to B.4. The "freight forwarder" role is
often underestimated as one of the most important elements in
shipping.5. The "freight forwarder" is there to ensure that your
goods receive the priority it requires; that your documentation is
appropriately filled and most importantly, your goods reach its
destination in order and in the specified time.6. The next most
important and effective function of the "forwarder" is to be an
adviser and agent for the shipper, and that, is the "forwarder's"
prime consideration.7. The transportation of goods from one place
to another over short or long distances, is a fundamental activity
in materials handling with many complexities in international cross
bordertransportation i.e. large number of documents are required to
document the movement goods.8. The basic activities of a "freight
forwarder" include booking cargo space on ship, airplane, train, or
any other form of goods/cargo transportation, route planning,
various documentation, export packing, insurance, warehouse,
collection and delivery consignment.9. And to provide service which
involves establishing various inland depots and clearing offices so
that customs clearance at the port of entry is done by the
"forwarder" as well as delivery to consignee's doorstep, without
actually involving the consignee.
Freight Forwarder - Dual Role
The freight forwarder traditionally acts as an agent who
arranges for the shipment of goods belonging to his client/the
shipper. The freight forwarder as agent typically arranges for
transportation, pays freight charges, insurance, packing, customs
duties, etc., and then charges a fee, usually a percentage of the
total expenses. All the costs are (or should be) disclosed to the
client. The specific scope of the forwarding agents duties,
however, is determined primarily by its contract with the customer
(ordinarily the shipper) who retains its services. At times, the
freight forwarder has acted as principal contractor arranging the
carriage in his own name. His fee, payable by the shipper, is a
straight freight charge. He then arranges to pay lower freight
rates to the carrier and obtains his profit from the difference
between the two. Very often, the freight forwarder consolidates the
cargoes of a number of clients into a single container, resulting
in savings which benefit the freight forwarder and the clients. The
forwarding carrier may also provide other services, such as
packing, warehousing, cartage, lighter age and/or insurance. On
these occasions the freight forwarders responsibility to the
shipper is often that of a carrier.Whether acting as agent or
principal, the freight forwarder (as is normal in commerce) usually
attempts to contract out of as much responsibility as possible.
This has often resulted in very confusing standard trading
conditions, where the two contradictory roles and kinds of
responsibility - of the agent and of the principal - are set
out.The responsibility of the freight forwarder, as agent and as
principal contractor, will be described in the light of the civil
law, the common law and certain national laws.
Freight forwarder plays integral part of transportation
process.The freight forwarder plays an integral part in the
transportation process. Freight forwarders act on behalf of the
exporter in arranging ocean or air transport services. They are
familiar with the import rules and regulations of foreign
countries, methods of shipping, and documents connected with
foreign trade.Freight forwarders can provide a number of services.
During the initial planning phases, they can help choose the
carrier and the most economical shipment size. At the beginning of
the sale, the freight forwarder can provide an exporter with
quotations on a number of costs. This information can be used in
preparing an accurate price quotation to foreign customers. At the
shipper's request, the freight forwarder can make the actual
arrangements and provide the necessary services for expediting the
shipment to its overseas destination. This can include: 1.
Providing advice on foreign import regulations,2. Arranging for
inland transportation,3. Booking space with the ocean or air
carrier, 4. Completing export documentation,5. Arranging for cargo
insurance, 6. Providing guidance on packaging, marking and
labelling, 7. Arranging for products to be packed and
containerized, 8. Freight consolidation, but this is not a standard
service.
Freight forwarders operate on a fee basis paid by the exporter.
The fees consist of an agreed-upon amount, plus documentation
charges. The cost for the services should be figured into the price
charged to the customer. Freight forwarders also collect a
percentage of the freight costs from the carrier. There are several
criteria to consider when selecting a freight forwarder: 1) Is the
freight forwarder licensed or approved by the appropriate entities?
Ocean freight forwarders must be licensed by the Federal Maritime
Commission to handle ocean cargo. Although not legally required,
the International Air Transport Association (IATA) registers
freight forwarders to deal with international air cargo shipments.
2) Is the freight forwarders company big enough to handle your
business when the forwarder is away from the office? Just because
the forwarder is on a vacation, your export efforts shouldn't come
to a halt because there is no one to answer questions or handle
shipping instructions for your product. 3) Is the freight
forwarding firm stable? Has the company "been around" very long?
Does it have financial stability? Commercial banks and trade
references can help with checking these criteria. 4) Can the
freight forwarder handle whatever product you want to ship,
whichever way you want to ship it (air or sea)? The freight
forwarder should be an import broker to handle the customs angle
for you in case you need to import something or have goods returned
from overseas. 5) Does the freight forwarder have a good network of
agents overseas, particularly in your target market? What do these
agents handle? A good network of overseas agents ensures a smooth
path for your product with a minimum of delay. This is important
for perishable products or ones that need special handling. A
container of wine on a dock in warm weather can pose a real hazard
to your product's reputation. 6) Can the freight forwarder
communicate with you as a novice? Is the freight forwarder willing
to take the time to explain the terms and procedures in a way you
can understand? 7) What is the freight forwarders document
turnaround time? Is the freight forwarder located near the airport,
steamship offices and banks? A strategic location cuts document
turnaround time and ensures you get paid quickly via the banks. 8)
Does the freight forwarder have some knowledge of your product? If
possible, choose a freight forwarder who has some knowledge of the
special needs of your product. If the freight forwarder usually
handles only furniture, will the company be attuned to the needs
for shipping wine or fresh produce? 9) Have you checked the freight
forwarder's references? It is crucial to check references for any
company that will be handling your business. Also check customer
satisfaction. 10) Does the freight forwarder have errors and
omissions insurance? Even the most conscientious freight forwarder
can make a mistake. A minor error on documents can delay your
product, hurt sales and stall your receiving payment for the goods.
Make sure your freight forwarder has "errors and omissions
insurance" to provide for just this eventuality. What is an
International Freight Forwarder?"Once upon a time, people thought
of customs brokers and freight forwarders as simply agents somehow
linked to the shipping industry. Now, at last, these go-betweens
are being given their due as crucial middlemen in making life
easier for importers and exporters. .... Simply put, the freight
forwarder is the cargo expediter. As intermodal transportation
becomes more complex, the job of freight forwarder becomes more
essential and difficult. He must coordinate the complexity of
financial, transport and other service activities. For example, he
will:
- Arrange to receive export shipment for a client at any point
of origin in the United States.- Arrange consolidations of
less-than-container load lots.- Arrange forwarding to seaboard of
the cargo loaded aboard ship.- Arrange for insurance coverage.- If
necessary, arrange free domicile delivery abroad.
Here are five ways international freight forwarders can really
bring out the best in your company: 1. Clearance through customs:
Customs paperwork is a tricky and sordid maze, especially if all
you know about are the business-to-business commerce aspects of
trade. Customs authorization is a complex area that will only
further tax your understanding and clog your ability to take care
of customers, vendors, and marketing. International freight
forwarders, in addition to knowing all the ins and outs of proper
shipping procedures, offer customs clearance services to aid you in
simplifying your business. 2. Any and all issues arising with
documentation: In order to receive your payment from a bank, there
are many documents that may be required to satisfy the involved
bank or financial institution. One such document is the bill of
lading. A proper bill of lading will facilitate fast payment, so
you can keep your business moving along with your freight. 3.
Insurance: Not only do many freight forwarders provide insurance
options for your shipments, they know what is best for the needs of
your business, and can quickly determine the most protective and
cost efficient way that you can complete each transaction. 4.
Inventory management: Who better to help you with inventory
management than the service that handles your freight? Freight
forwarders and international freight forwarders can help ensure
your product, which means you will always have a clear handle on
your company's assets. 5. Logistics and supply-chain management:
Logistics is, of course, the management of the flow of goods and
resources between the point of origin and the point of consumption.
Careful planning is a necessity of successful freight flow, and
freight forwarders are professionals at accomplishing this task.
What specific functions does a freight forwarder normally
perform?
1. Preliminary advice to the exporter: Explaining exporter's
responsibilities / obligations under Terms of Sale (Inco terms)
requested. Assist in negotiating inland and ocean rates; provide
ideas on optimal and most cost effective shipping alternatives.
Assist in determining the best way to ship i.e. - container vs.
break bulk, consolidation vs. exclusive use, conference vs.
non-conference, air vs. ocean. Packing / Marking recommendations.
Explain port functions in connection with export Advice as to what
the exporter should accomplish and what the forwarder will
accomplish for him. Review import licenses, where applicable.
Recommendations regarding receiving payments for exports --
explanation of methods of payment. Interpret and control Letters of
Credit. Advice as to possible problems may encounter: Improper
packing, cheapest method of shipping not always the best, document
discrepancies that can cause slow or nonpayment and/or confiscation
of freight in foreign port, consequences resulting from late
delivery of freight and/or late documents. Estimate complete Export
transportation and related costs for quotes (on Performa invoice)
and L/C. Advise of drawback opportunities for previously imported
cargo being exported. Can put exporter in touch with experts in the
fields of trade financing, international marketing, government
export requirements, international banking, and marine insurance.
Most forwarders have a "library" of information on U.S/overseas
ports, which exporters can use as guidance.2. Booking the freight /
Shipping Operations: Provide custody and control of material in
transit. Expedite production and delivery. Coordination of
positioning empty container to be delivered / returned (inland
carrier), where stuffing takes place. Choosing the steamship line
as required. Mechanics of booking and shipping: special handling
considerations, ETA destination required port of export, port of
destination, direct vs. transshipment, number/kind of packages,
commodity precise description, size and type of container. Handling
freight or other moneys advanced by shippers, or remitting or
advancing freight or other moneys or credit in connection with the
dispatching of shipments. Provide NVOCC consolidation services to
exporters for LCL and FCL modes.3. Documentation for shipping:
Certify and notarize invoices. Normally prepare dock receipt, bill
of lading; warehouse receipt, insurance certificate, AID documents,
certificate of origin, special customs invoices, inspection
certificate. May prepare or assist in preparing with exporter:
commercial invoice, packing list, draft, transmittal letters,
consular invoices, export license, drawback forms, and shippers
export declaration.4. Notifications made in connection with the
shipment: Notification normally made to exporter/shipper,
consignee, and consignees broker. Notification made for insurance,
L/C, contract, payment, and advice purposes. While shipment is
underway, forwarder may trace as necessary, assist in filing claim
when necessary and correct errors learned after the fact. 5.
Distribution of negotiable documents for collections: Forward
documents to Bank, exporter's foreign sales representative,
consignee or consignee's broker.How freight forwarder helps you to
export?They can provide advice on the permits, licenses,
inspections, and other documents and proceedings that are required
according to the import laws in the country of destination. And
they help with customs clearance in the country of destination,
working with a customs broker.ProductPreparation
Freight forwarders understand the different types of packaging
and containers best suited for your shipment. They know the
markings and labels the products need in order to get through
customs and be able to enter the country of destination, and to
meet the requirements of the different free trade agreements, in
order to take advantage of duty-free treatment as applicable.
When the shipment is relatively large, it will most likely be
transported in a container by ship, where it is possible to share
space with other exporters. The freight forwarder knows how to
secure the cargo against changes in temperature, vibrations, and
impacts that result when the cargo is loaded and unloaded. In the
majority of cases, insurance does not cover damages that are due to
inadequate packing, and it is therefore important to count on the
experience of packing professionals.
Documentation
When goods are transported internationally, packaging and
documentation are critical to the export process. One of the main
differences between selling inside the country and exporting is the
documentation required.Export documentation requirements are very
specific. A missing document or one that is not correctly filled
out can delay the shipment in customs or in some other point along
the way. Freight forwarders are familiar with the documentation
requirements and can advise the exporter, and even prepare the
documents that are required, in order to ensure an expeditious
shipment.
When the order is ready to be shipped, the freight forwarder can
review the letter of credit, the commercial invoice, and the
packing list to ensure that everything is in order, and can prepare
the bill of lading and any other special documentation that may be
required, depending on the product being shipped. And after the
shipment, the freight forwarder can send all the documentation
directly to the customer, or the customer's bank that is going to
pay for the import on the customer's account.
COST ESTIMATES
A freight forwarder can provide the exporter with an estimate of
the costs involved in the exporting process. This estimate is very
important when the exporter quotes a price to a customer abroad,
because the price must be sufficient to cover all the costs related
to the delivery of the product to its destination. Therefore, it
may be advantageous to consult a freight forwarder before
negotiating the price, in order to get a quote for the freight
costs, port costs, insurance costs, customs fees, charges for
special documentation, and the freight forwarder's
Freight forwarders work on the basis of a fee they charge the
exporter, which normally consists of an agreed-upon amount plus
charges for documentation. Freight forwarders also collect a
percentage of the freight they contract with transportation
companies.Once you have an estimate of all the costs involved in
delivering your product to the customer abroad, you are in a
position to quote a final price to the customer, and if your quote
is accepted and the customer sends you an order, you can prepare
the pro forma invoice, with a complete breakdown of all the
components of the amount billed.
How to find a freight forwarder? There are numerous freight
forwarders in the principal export and transportation services
markets. A good way to look for a forwarder would be to ask other
exporters, especially companies similar to yours in terms of size
of the company, point of origin, target market, and your line of
business or the product you are exporting. By consulting directly
with another exporting company, you can obtain their personal
perspective regarding the freight forwarder, and their overall
experience, such as the services provided, the results achieved,
and any particular advantage or problem they encountered.
MODES OF TRANSPORTATIONThe freight forwarder should be able to
evaluate the relative advantages of transportation by air, ocean
freight, truck, or rail, and make recommendations regarding the
best mode of transportation based on your product and the timeframe
for delivery. You should find out how the freight forwarder
determines how long a shipment will take to reach its destination,
what stops the shipment makes along the way, and what changes have
to be made from one mode of transportation to another. Freight
forwarders should explain the factors they take into
accountinordertoavoidproblemswiththeshipment.
FREIGHT COST QUOTATIONThe cost of freight can be a significant
component of the overall cost of exporting, so the freight
forwarder should be able to explain how they get freight quotes
from shipping companies; whether freight rates are quoted based on
volume, weight, type of product, or some other criteria; the
formulas used to calculate the cost of freight, the factors that
affect the cost of freight; how long a freight quote is valid; and
the trends the freight forwarder sees in the cost of freight, and
its projection for changes in freight costs in the future.
INSURANCEThe freight forwarder should be able to explain the
different types of insurance available, what events are covered by
insurance, the cost of insurance, the process for presenting a
claim for lost or damaged cargo, who is responsible for preparing
the loss report and presenting the claim, how the claim is
processed, and the timeframe in which a
reimbursementcanbeexpected.
CUSTOMS You should be able to understand from the freight
forwarder how your products will clear customs in the destination
country, whether the freight forwarder works with a customs broker,
how much the customs broker charges and who pays that cost, who
pays the duties and customs fees, and who processes duty drawbacks
when applicable.
DOCUMENTATION You should determine whether the freight forwarder
is familiar with the export documentation required, which documents
are prepared by the freight forwarder and which you must prepare as
the exporter, how much the forwarder charges for preparing the
documentation, the process for reviewing export documentation, and
whether documents can be transmitted electronically. If you are
exporting using a letter of credit, you should determine how the
freight forwarder ensures that all documents are in accordance with
the terms of the letter of credit, and the responsibilities and the
relationship between the exporter, the freight forwarder, and the
bank regarding the presentation of the documentation required
according to the letter of credit.
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EXPORT DOCUMENTATION
EXPORT SALES & CONTRACT TERMS & CONDITIONSVery often
exporters do not enter into any formal contract and finalize the
trade deal through the exchange of letters, cable, telex etc. It
is, however, expedient that the parties (exporters & importers)
incorporate all important terms & conditions of their trade
deal in a separate document or contract that will avoid disputes
arising out of uncertainty or ambiguity. Export contract may be
sent in duplicate along with the Proforma Invoice to the overseas
buyer.
NATURE OF INTERNATIONAL TRADE COUNTRACTS.There are certain,
peculiar characteristics of international trade contract which are
not present in those for sales of goods in the domestic
marketWhereas the parties to a domestic trace contract normally
needs only agree on the elements which are necessary for their
particular trade transactions like price, description, quality and
quantity of goods, delivery terms etc the situation will be quite
different when the buyer and the seller to sale/purchase contract
belong to different countries. The parties to all international
trade contracts provide all their relative rights and obligations
in several waysFor example, they may agree to adopt either the Law
of the country of the buyer or that of the seller. The traders are
normally reluctant to leave the determination of the rights and
obligations by implications under the legal system of eithers
country. They prefer to make explicit provisions regarding the
rights and obligations by including a set of detailed and precise
terms and conditions in their contract.
EXPORT OF SAMPLES\GIFTS.Exports of bonafide trade and technical
samples of freely exportable items shall be allowed without any
limit. Goods including edible items of value not exceeding Rs.
100000/- in a licensing year, may be exported as a gift. However
items mentioned as restricted for exports in ITC(HS) shall not be
exported as a gift without a licence/certificate/permission, except
in the case of edible items.STANDARD CONTRACT FOMS:Notwithstanding
the efforts made by various national/international organizations
like the United Nations Commission on the International Trade Law,
there is still no perfection or a device which would give the
parties an accurate and complete idea of each others understanding
of various trade terms, the commercial practices and the rights and
the obligations vis--vis each other so that the misunderstandings
are practically eliminated.Nevertheless, the Indian Council of
Arbitration published in 1966 a booklet on Standard Contract Forms
and Model Arbitration Clause for use in Foreign Trade Contracts. It
was revised and reprinted in 1969 and 1977. It can be referred to
by exporter for various clause to be incorporated in the Export
Contract.
ENTERING INTO AN EXPORT CONTRACT In order to avoid disputes, it
is necessary to enter into an export contract with the overseas
buyer. For this purpose, export contract should be carefully
drafted incorporating comprehensive but in precise terms, all
relevant and important conditions of the trade deal.There should
not be any ambiguity regarding the exact specifications of goods
and terms of sale including export price, mode of payment, storage
and distribution methods, type of packaging, port of shipment,
delivery schedule etc. The different aspects of an export contract
are enumerated as under: Product, Standards and Specifications
Quantity Inspection Total Value of Contract Terms of Delivery
Taxes, Duties and Charges Period of Delivery/Shipment Packing,
Labeling and Marking Terms of Payment-- Amount/Mode & Currency
Discounts and Commissions Licenses and Permits Insurance
Documentary Requirements Guarantee Force Majeure of Excuse for
Non-performance of contract Remedies It will not be out of place to
mention here the importance of arbitration clause in an export
contract Court proceedings do not offer a satisfactory method for
settlement of commercial disputes, as they involve inevitable
delays, costs and technicalities. On the other hand, arbitration
provides an economic, expeditious and informal remedy for
settlement of commercial disputes. Arbitration proceedings are
conducted in privacy and the awards are kept confidential. The
Arbitrator is usually an expert in the subject matter of the
dispute. The dates for arbitration meetings are fixed with the
convenience of all concerned. Thus, arbitration is the most
suitable way for settlements of commercial disputes and it may
invariably be used by businessmen in their commercial dealings.
EXPORT DOCUMENTSAny export shipment involved various documents
required by various authorities such as customs, excise, RBI,
Inspection and according depending upon the requirements, there are
categorized into 2 categories, namely commercial documents and
regulatory documents.A. Commercial Documents. : - Commercial
documents are required for effecting physical transfer of goods and
their title from the exporter to the importer and the realisation
of export sale proceeds. Out of the 16 commercial documents in the
export documentation framework as many as 14 have been standardised
and aligned to one another. These are proforma invoice, commercial
invoice, packing list, shipping instructions, intimation for
inspection, certificate, of inspection of quality control,
insurance declaration, certificate' of insurance, mate's receipt,
bill of lading or combined transport document, application for
certificate origin, certificate of origin, shipment advice and
letter to the bank for collection or negotiation of documents.
However, shipping order and bill of exchange could not be brought
within the fold of the Aligned Documentation System,1. Commercial
Invoice: Commercial invoice is an important and basic export
document. It is also known as a 'Document of Contents' as it
contains all the information required for the preparation of other
documents. It is actually a seller's bill of merchandise. It is
prepared by the exporter after the execution of export order giving
details about the goods shipped. It is essential that the invoice
is prepared in the name of the buyer or the consignee mentioned in
the letter of credit. It is a prima facie evidence of the contract
of sale or purchase and therefore, must be prepared strictly in
accordance with the contract of sale.Contents of Commercial Invoice
Name and address of the exporter. Name and address of the
consignee. Name and the number of Vessel or Flight. Name of the
port of loading. Name of the port of discharge and final
destination. Invoice number and date. Exporter's reference number.
Buyer's reference number and date. Name of the country of origin of
goods. Name of the country of final destination. Terms of delivery
and payment. Marks and container number. Number and packing
description. Description of goods giving details of quantity, rate
and total amount in terms of internationally accepted price
quotation. Signature of the exporter with date.Significance of
Commercial Invoice It is the basic document useful in preparation
of various other shipping documents. It is used in various export
formalities such as quality and pre-Shipment inspection excise and
customs procedures etc. It is also useful in negotiation of
documents for collection and claim of incentives. It is useful for
accounting purposes to both exporters as well as importers.2.
Inspection Certificate: The certificate is issued by the inspection
authority such as the export inspection agency. This certificate
states that the goods have been inspected before shipment, and that
they confirm to accepted quality standards.3. Marine insurance
policy: Goods in transit are subject to risk of loss of goods
arising due to fire on ship, perils of sea, theft etc. marine
insurance protects losses incidental to voyages and in land
transportation. Marine insurance policy is one of the most
important document used as collateral security because it protects
the interest of all those who have insurable interest at the time
of loss. The exporter is bound to insure the goods in case of CIF
quotation, but he can also insure the goods in case of FOB
contract, at the request of the importer, but the premium payment
will be made by the exporter. There are different types of policies
such as SPECIFIC POLICY: This policy is taken to cover different
risks for a single shipment. For a regular exporter, this policy is
not advisable as he will have to take a separate policy every time
a shipment is made, so this policy is taken when exports are in
frequent. Floating Policy: This is taken to cover all shipments for
some months. There is no time limit, but there is a limit on the
value of goods and once this value is crossed by several shipments,
then it has to be renewed. Open Policy: This policy remains in
force until cancelled by either party i.e. insurance company or the
exporter. Open Cover Policy: This policy is generally issued for 12
months period, for all shipments to one or more destinations. The
open cover may specify the maximum value of consignment that may be
sent per ship and if the value exceeded, the insurance company must
be informed by the exporter. Insurance Premium: Differs upon
product to product and a number of such other factors, such as,
distance of voyage, type and condition of packing, etc. Premium for
air consignments are lowered as compared to consignments by sea.4.
Consular Invoice: Consular invoice is a document required mainly by
the Latin American countries like Kenya, Uganda, Tanzania,
Mauritius, New Zealand, Myanmar, Iraq, Australia, Fiji, Cyprus,
Nigeria, Ghana, Guinea, Zanzibar, etc. This invoice is the most
important document, which needs to be submitted for certification
to the Embassy of the importing country concerned. The main purpose
of the consular invoice is to enable the authorities of the
importing country to collect accurate information about the volume,
value, quality, grade, source, etc., of the goods imported for the
purpose of assessing import duties and also for statistical
purposes. In order to obtain consular invoice, the exporter is
required to submit three copies of invoice to the Consulate of the
importing country concerned. The Consulate of the importing country
certifies them in return for fees. One copy of the invoice is given
to the exporter while the other two are dispatched to the customs
office of the importer's country for the calculation of the import
duty. The exporter negotiates a copy of the consular invoice to the
importer along with other shipping documents.
Significance of Consular Invoice for the Exporter It facilitates
quick clearance of goods from the customs in exporter's as well as
importer's country. Certification' of goods by the Consulate of the
importing country indicarer that the importer has fulfilled all
procedural and licensing formalities for import of goods. It also
assures the exporter of the payment from the importing
country.Significance of Consular Invoice for the Importer It
facilitates quick clearance of goods from the customs at the port
destination and therefore, the importer gets quick delivery of
goods. The importer is assured that the goods imported are not
banned for imported in his country.Significance of Consular Invoice
for the Customs Office It makes the task of the customs authorities
easy. It facilitates quick calculation of duties as the value of
goods as determine by the Consulate is considered for the
purpose.5. Certificate of Origin: The importers in several
countries require a certificate of origin without which clearance
to import is refused. The certificate of origin states that the
goods exported are originally manufactured in the country whose
name is mentioned in the certificate. Certificate of origin is
required when:- The goods produced in a particular country are
subject to preferential tariff rates in the foreign market at the
time importation. The goods produced in a particular country are
banned for import in the foreign market.Types of the Certificate of
Origin(a) Non-preferential Certificate, of Origin: -
Non-preferential certificate of origin is required in general by
all countries for clearance of goods by the importer, on which no
preferential tariff is given. It is issued by: The authorised
Chamber of Commerce of the exporting country. Trade Association. Of
the exporting country.(b) Certificate of Origin for availing
Concessions under GSP :- Certificate of origin required for
availing of concessions under Generalised System of Preferences
(GSP) extended by certain, countries such as France, Germany,
Italy, BENELUX countries, UK, Australia; Japan, USA, etc. This
certificate can be obtained from specialised agencies, namely;
Export Inspection Agencies. Jt. Director General of Foreign Trade..
Commodity Boards and their regional offices. Development
Commissioner, Handicrafts. Textile Committees for textile products.
Marine Products Export Development Authority for marine products.
Development Commissioners of EPZs(c) Certificate for availing
Concessions under Commonwealth Preferences (CWP): Certificate of
origin for the purpose of Commonwealth Preference is also known as
'Combined Certificate of Origin and Value'. It is required by two
member countries, i.e. Canada and New Zealand of the Commonwealth.
For concession under Commonwealth preferences, the certificates or
origin have to be submitted in special forms obtainable, from the
High Commission of the country concerned.(d) Certificate for
availing Concessions under other Systems of Preference:-
Certificate of origin is also required for tariff concessions.
under the Global System of Trade Preferences (GSTP), Bangkok
Agreement(BA) and SAARC Preferential Trading Arrangement (SAPTA)
under which India grants and receives tariff concessions On imports
and exports. Export Inspection Council (EIC) is the sole authority
to print blank Certificates of Origin under BA, SAARC and SAPTA
which can be issued by such agencies as EPCs, DCs of EPZs, EIC,
APEDA, MPEDA, FIEO, etc...Contents of Certificate of Origin Name
and logo of chamber of commerce. Name and address of the exporter.
Name and address of the consignee. Name and the number of Vessel of
Flight Name of the port of loading. Name of the port of discharge
and place of delivery. Marks and container number. Packing and
container description. Total number of containers and packages.
Description of goods in terms of quantity. Signature and initials
of the concerned officer of the issuing authority. Seal of the
issuing authority.Significance of the Certificate of Origin
Certificate of origin is required for availing of concessions under
Generalised System of Preferences (GSP) as well as under
Commonwealth Preferences (CWP). It is to be submitted to the
customs for the assessment of duty clearance of goods with
concessional duty. It is required when the goods produced in a
particular country are banned for import in the foreign market. It
helps the buyer in adhering to the import regulations of the
country. Sometimes, in order to ensures that goods bought from some
other country have not been reshipped by a seller, a certificate of
origin IS required.6. Bill of Lading: The bill of lading is a
document issued by the shipping company or its agent acknowledging
the receipt of goods on board the vessel, and undertaking to
deliver the goods in the like order and condition as received, to
the consignee or his order, provided the freight and other charges
as specified in the bill have been duly paid. It is also a document
of title to the goods and as such, is freely transferable by
endorsement and delivery.Bill of Lading serves three main purposes:
As a document of title to the goods; As a receipt from the shipping
company; and As a contract for the transportation of goods.Types of
Bill of Lading Clean Bill of Lading: - A bill of lading
acknowledging receipt of the goods apparently in good order and
condition and without any qualification is termed as a clean bill
of lading. Claused Bill of Lading: - A bill of lading qualified
with certain adversere marks such as, "goods insufficiently packed
in accordance with the Carriage of Goods by Sea Act," is termed as
a claused bill of lading. Transhipment or Through Bill of Lading: -
When the carrier uses other transport facilities, such as rail,
road, or another steamship company in addition to his own, the
carrier issues a through or transhipment bill of lading. Stale Bill
of Lading: - A bill of lading that has been held too long before it
is passed on to a bank for negotiation or to the consignee is
called a stale bill of lading. Freight Paid Bill of Lading: - When
freight is paid at the time of shipment or in advance, the bill of
landing is marked, freight paid. Such bill of lading is known as
freight bill of lading. Freight Collect Bill of lading :- When the
freight is not paid and is to be collected from the consignee on
the arrival of the goods, the bill of lading is marked, freight
collect and is known as freight collect bill of ladingContents of
Bill of Lading Name and logo of the shipping line. Name and address
of the shipper. Name and the number of vessel. Name of the port of
loading. Name of the port of discharge and place of delivery. Marks
and container number. Packing and container description. Total
number of containers and packages, Description of goods in terms of
quantity. Container status and seal number. Gross weight in kg. and
volume in terms of cubic meters. Amount of freight paid or payable.
Shipping bill number and date. Signature and initials of the Chief
Officer. .Significance of Bill of Lading for Exporters It is a
contract between the shipper and the shipping company for carriage
of the goods to the port of destination. It is an acknowledgement
indicating that the goods mentioned in the document have been
received on board for the Purpose of shipment. A clean bill of
lading certifies that the goods received on board the ship are in
order and good condition. It is useful for claiming incentives
offered by the government to exporters The exporter can claim
damages from the shipping company if the goods are lost or damaged
after the issue of a clean bill of lading.Significance of Bill of
Lading for Importers It acts as a document of title to goods, which
is transferable endorsement and delivery. The exporter sends the
bill of lading to the bank of the importer so as to enable him to
take the delivery of goods. The exporter can give an advance
intimation to the foreign buyer about the shipment of goods by
sending him a non-negotiable copy of bill of ladingSignificance of
Bill of Lading for Shipping Company It is useful to the shipping
company for collection of transport charges from the importer, if
not collected from the exporter.7. Packing List: The exporter
prepares the packing list to facilitate the buyer to check the
shipment. It contains the detailed description of the goods packed
in each case, their gross and net weight, etc. The difference
between a packing note and a packing list is that the packing note
contains the particulars of the contents of an individual pack,
while the packing list is a consolidated statement of the contents
of a number of cases or packs.8. Bill of Exchange: The instrument
is used in receiving payment from the importer. The importer may
prefer Bill of Exchange to LC as it does not involve blocking of
funds. A bill of exchange is drawn by the exporter on the importer,
to make payment on demand at sight or after a certain period of
time. B/E is a means to collect payment. B/E is a means to demand
payment. B/E is a means to extent the credit. B/E is a means to
promise the payment. B/E is an official acknowledgement of receipt
of payment. Financial documents perform the function of obtaining
the finance collection of payment etc. 2 sets. Each one bearing the
exclusion clause making the other part of the draft invalid. Sight
B/E. Usance B/E. It is known as draft. Immediate payment Sight
draft. There are two copies of draft. Each one bears reference to
the other part A&B. when any one of the draft is paid, the
second draft becomes null and void.Parties to bill of exchange.1.
The drawer: The exporter / person who draws the bill.2. The drawee:
The importer / person on whom the bill is drawn for payment.3. The
payee: The person to whom payment is made, generally, the exporter
/ supplier of the goods.B. Auxiliary Documents: These documents
generally form the basic documents based on which the commercial
and or regulatory documents are prepared. These documents also do
not have any fixed formats and the number of such documents will
wary according to individual requirements.1. Proforma Invoice: The
starting point of the export contract is in the form of offer made
by the exporter to the foreign customer. The offer made by the
exporter is in the form of a proforma invoice. It is a quotation
given as a reply to an inquiry. It normally forms the basis of all
trade transactions. Contents of Proforma Invoice Name and address
of the exporter. Name and address of the importer. Mode of
transportation, such as Sea or Air or Multimodal transport. Name of
the port of loading. Name of the port of discharge and final
destination. Provisional invoice number and date. Exporter's
reference number. Buyer's reference number and date. Name of the
country of origin of goods. Name of the country of final
destination. Marks and container number.. Number and packing
description. Description of goods giving details of quantity, rate
and total amount in terms of internationally accepted price
quotation. Signature of the exporter with date. Importance of
Proforma Invoice It forms the basis of all trade transactions. It
may be useful for the importer in obtaining import licence or
foreign exchange.2. Intimation for Inspection: Whenever the
consignment requires the pre-shipment inspection, necessary
application is to be made to the concerned inspection agency for
conducting the inspection and issue of certificate thereof.3.
Declaration of Insurance: Where the contract terms require that the
insurance to be covered by the exporter, the shipper has to give
details of the shipment to the insurance company for necessary
insurance cover. The detailed declaration will cover: Name of the
shipper \ exporter. Name & address of buyer. Details of goods
such as packages, quantity, value in foreign currency as well as in
Indian Rs. Etc. Name of the Vessel \ Aircraft. Value for which
insurance to be covered.4. Application of the Certificate Origin:
In case the exporter has to obtain Certificate of Origin from the
concerned authorities, an application has to be made to the
concerned authority with required documents. While the simple
invoice copy will do for getting C\O from the chamber of commerce,
in respect of obtained the same from the office of the Textile
Committee or Export Promotion Council, the documents requirement
are different.5. Mate's Receipt: Mate's receipt is a receipt issued
by the Commanding Officer of the ship when the cargo is loaded on
the ship. The mate's receipt is a prima facie evidence that goods
are loaded in the vessel. The mate's receipt is first handed over
to the Port Trust Authorities. After making payment of all port
dues, the exporter or his agent collects the mate's receipt from
the Port Trust Authorities. The mate's receipt is freely
transferable. It must be handed over to the shipping company in
order to get the bill of lading. Bill of lading is prepared on the
basis of the mate's receipt. Types of Mate's Receipts Clean Mate's
Receipt: - The Commanding Officer of the ship issues a clean mate's
receipt, if he is satisfied that the goods are packed properly and
there is no defect in the packing of the cargo or package.
Qualified Mate's Receipt: - The Commanding Officer of the ship
issues qualified mate's receipt, when the goods are not packed
properly and the shipping company does not take any responsibility
of damage. to the goods during transit. Contents of Mate's Receipt
Name and logo of the shipping line. Name and address of the
shipper. Name and the number of vessel. Name of the port of
loading. Name of the port of discharge and place of delivery. Marks
and container number. Packing and container description. Total
number of containers and packages. Description of goods in terms of
quantity. Container status and seal number. Gross weight in kg. and
volume in terms of cubic meters. Shipping bill number and date.
Signature and initials of the Chief Officer. Significance of Mate's
Receipt It is an acknowledgement of goods received for export on
board the ship. It is a transferable document. It must be handed
over to the shipping company in order to get the bill of lading.
Bill of lading, which is the title of goods, is prepared on the
basis of the mate's receipt. It enables the exporter to clear port
trust dues to the Port Trust Authorities. Obtaining Mate's Receipt
The goods are then loaded on board the ship for which the Mate or
the Captain of the ship issues Mate's Receipt to the Port
Superintendent. 6. Shipping order: it is issued by the
Shipping/Conference Line intimating the exporter about the
reservation of space for shipment of cargo which the exporter
intends to ship. Details of the vessel, poet of the shipment, and
the date on which the goods are to be shipped are mentioned. This
order enables the exporter to make necessary arrangements for
customs clearance and loading of the goods.7. Shipping
Instructions: at the pre-shipment stage, when the documents are to
sent to the CHA for customs clearance, necessary instructions are
to be give with relevance to The export promotion scheme under
which goods are to be exported. Name of the specific vessel on
which the goods are to be loaded. If goods are to be FCL or LCL. If
freight amount are to be paid / collected. If shipment are covered
under A.R.E.-1 procedure. Instructions for obtaining Bill of Lading
etc.8. Bank letter for negotiation of documents: at the post
shipment stage, the exporter has to submit the documents to a bank
for negotiation or discounting or collection for forwarding the
same to the customer and also for realization of export proceeds.
The bank letter is the set of instruction for the bank as to how to
handle the documents by them and by the bank at the buyers country
which may include Name and address of the buyer. Details of various
documents being sent and the number of the copies thereof. Name and
address of the buyers bank if available. If the documents are sent
L/C or on open terms. If the proceeds are to adjusted against any
pre-shipment packing credit loan. If the bill amount is to be
adjusted against any forward exchange cover. In case of credit bill
who has to bear the interest, either exporter or if the same is to
be collected from the buyer.Instructions in case
non-acceptance/non-payment by the buyer.C. Regulatory Document:
Regulatory pre-shipment export documents are prescribed by the
different government departments and bodies in order to comply with
various rules and regulations under the relevant laws governing
export trade such as export inspection, foreign exchange
regulation, ex port trade control, customs, etc. Out of 9
regulatory documents four have been standardised and aligned. These
are shipping bill or bill of export, exchange control declaration
(GR from), export application dock challan or port trust copy of
shipping bill and receipt for payment of port charges.1. Shipping
Bill: Shipping bill is the main customs document, required by the
customs authorities for granting permission for the shipment of
goods. The cargo is moved inside the dock area only after the
shipping bill is duly stamped, i.e. certified by the customs.
Shipping bill is normally prepared in five copies :- Customs copy.
Drawback copy. Export promotion copy. Port trust copy.Types of
Shipping BillBased on the incentives offered by the government,
customs authorities have introduced three types of shipping bills:-
Drawback Shipping Bill: - Drawback shipping bill is useful for
claiming the customs drawback against goods exported. Dutiable
Shipping Bill: - Dutiable shipping bill is required for goods which
are subject to export duty. Duty-free Shipping Bill: - Duty-free
shipping bill is useful for exporting goods on which there is no
export duty.In order to facilitate easy recognition and quick
processing, following colours have been provided to different kinds
of shipping bills :Types of goodsBy SeaBy AirDrawback shipping
billGreenGreenDutiable shipping billYellowPinkDuty-Free shipping
billWhitePinkContents of Shipping Bill Name and address of the
exporter. Name and address of the importer. Name of the vessel,
master or agents and flag. Name of the port at which goods are to
be discharged. Country of final destination. Details about
packages, description of goods, marks and numbers, quantity and
details of each case. FOB price and real value of goods as defined
in the Sea Customs Act. Whether Indian or foreign merchandise to be
re-exported Total number of packages with total weight and
value.Significance of Shipping Billa) Shipping bill is the main
customs document, required by the customs authorities for granting
permission for the shipment of goods.b) The cargo is moved inside
the dock area only after the shipping bill is duly stamped, i.e.
certified by the customs.c) Duly endorsed shipping bill is also
necessary for the collection of export incentives offered by the
government.d) It is useful to the Customs Appraiser while
determining the actual value of goods exported.2. A.R.E. 1 form
(Central excise): this form ARE-1 is prescribed under Central
Excise rules for export of goods. In case goods meant for export
are cleared directly from the premises of a manufacturer, the
exporter can avail the facility of exemption from payment of
terminal excise duty. The goods may be cleared for export either
under claim for rebate of duty paid or under bond without payment
of duty. In both the events the goods are to be cleared under form
A.R.E-1 which will show the details of the goods being exported,
the relevant duty involved and if the duty is paid or goods being
cleared under bond, details of goods being sealed either by the
exporter or Central Excise officials etc.3. Exchange Control
declaration Form (GR/PP/SOFTEX): under the exchange control
regulations all exporters must declare the details of shipment for
monitoring by the Reserve Bank of India. For this purpose, RBI has
prescribed different forms for different types of shipments like
GRI, PP forms etc. These declaration forms must be presented to the
customs officials at the time of passing of export documentation.
Under the EDI processing of shipping bill in the customs, these
forms have been dispensed with and a new form SDF has to be
submitted to the customs in the place of above forms.4. Export
Application: this is the application to be made to the customs
officials before shipment of goods. The prescribed form of the
application is the Shipping Bill/Bill of Export. Different types
are required for shipment like ex-bond, duty free goods, and
dutiable goods and for export under different export promotion
schemes such as claims for duty drawback etc.5. Vehicle Ticket/Cart
Ticket/Gate Pass etc.: before the goods are being taken inside the
port for loading, necessary permission has to be obtained for
moving the vehicle into the customs area. This permission is
granted by the Port Trust Authority. This document will contain the
detail of the export cargo, name and address of the shippers, lorry
number, marks and number of the packages, drivers licence details
etc.6. Bank Certificate of Realisation: this is the form prescribed
under the Foreign Trade Policy, wherein the negotiating bank
declares the fob value of exports and for the date of realisation
of the export proceeds. This certificate is required fore obtaining
the benefit under various schemes and this value of fob is reckoned
as fob value of exports.D. Other Document: Black List Certificate:
it certifies that the ship/aircraft carrying the cargo has not
touched the particular country on its journey or that the goods are
not from the particular country. This is required by certain
nations who have strained political and economical relations with
the so called Black Listed Countries. Language Certificate:
Importers in the European Community require a language certificate
along with the GSP certificate in respect of handloom cotton
fabrics classifiable under NAMEX code 55.09. Generally four copies
of language certificate are prepared by the concerned authority who
issues GSP certificate. Three copies are handed over to the
exporter. A copy is sent along with the other documents for
realisation of export proceeds. Freight Payment Certificate: in
most of the cases, the B/L or AWB will mention the transportation
and other related charges. However if the exporter does not want
these details to be disclosed to the buyer, the shipping company
may issue a separate certificate for payment of the freight charges
instead of declaring on the main transport documents. This document
showing the freight payment is called the freight certificate.
Insurance Premium Certificate: this is the certificate issued by
the Insurance Company as acknowledgement of the amount of premium
paid for the insurance cover. This certificate is required by the
bank for arriving at the fob value of the goods to be declared in
the bank certificate of realisation. Combined Certificate of Origin
and Value: this certificate is required by the Commonwealth
Countries. This certificate is printed in a special way by the
Commonwealth Countries. This certificate should contain special
details as to the origin and value of goods, which are useful for
determining import duty. All other details are generally the same
as that of Commercial Invoice, such as name of the exporter and the
importer, quality and quantity of the goods etc. Customs Invoice:
this is required by the countries like Canada, USA for imposing
preferential tariff rates. Legalized Invoice: this is required by
the certain Latin American Countries like Mexico. It is just like
consular invoice, which requires certification from Consulate or
authorised mission, stationed in the exporters country.Pre-Shipment
Documents: Shipping bill. Export order/Sales contract/Purchase
order. Letter of Credit Commercial invoice. Packing list.
Certificate of origin. Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or
SDF. Certificate of Inspection. Various declarations required as
per custom procedure.Exchange Control Declaration Form: all exports
to which the requirement of declaration apply must be declared on
appropriate forms as indicated below unless the consignment is of
samples and of No Commercial Value GR FORM: to be completed in
duplicate for exports otherwise than by post including export of
software in physical form i.e. magnetic tape/discs and paper media.
SDF FORM: to be completed in duplicate and appended to the Shipping
Bill for export declare to the customs offices notified by the
Central Government which have introduced EDI system for processing
Shipping Bill. PP FORM: to be completed in duplicate for export by
post. SOFTX: to be completed in triplicate for export of software
otherwise than in the physical form i.e. magnetic tapes/discs and
paper media.These forms are available for sale in Reserve Bank of
India Export declaration forms have utmost importance and are
binding on the exporters. It is, therefore, necessary that enough
care is taken while declaring exports on these forms, with special
reference on the following points. Name and address of the
authorised dealer through whom proceeds of exports have been or
will be realized should be specified in the relevant column of the
form. Details of commission and discount due to foreign agent or
buyer should be correctly declared otherwise difficulties may arise
at the time of remittance of such commission. It should be clearly
indicated in the form whether the export is on outright sale basis
or on consignment basis and irrelevant clauses must be stuck out
Under the term analysis of full export value a break up of full
export value of goods under F.O.B value, freight and insurance
should be furnished in all cases, irrespective of the terms of
contract. All documents relating to the export of goods from India
must pass through the medium of an authorised dealer in foreign
exchange in India within 21 days of shipment. The amount
representing the full export value of goods must be realized within
six months from date of shipment. METHODS OF RECEIVING PAYMENT
AGAINST EXPORTSBefore we proceed to understand the concept of
Letter of Credit, let us understand the various types of payment
methods available against export.METHODS OF PAYMENTThere are three
methods of payment depending upon the terms of payment, and each
method of payment involves varying degrees of risks for the
exporter. The methods are: Payment in advance Documentary Bills
Letter of Credit Open Account Counter TradeA. PAYMENT IN
ADVANCEThis method does not involve any risk of bad debts, provided
entire amount has been received in advance. At times, a certain per
cent is paid in advance, say 50% and the rest on delivery. This
method of payment is desirable when: The financial position of the
buyer is weak or credit worthiness of the buyer is not known. The
economic/ political conditions in the buyers country are unstable.
The seller is not willing to assume credit risk, as un the case of
open account method.However, this is the most unpopular methods as
a foreign buyer would not be willing to pay advance of shipment
unless: The goods are specifically designed for the customer, and
There is heavy demand for the goods (a sellers market situation).
B. DOCUMENTARY BILLS:Under this method, the exporter agrees to
submit the documents to his bank along with the bill of exchange.
The minimum documents required are full set of bill of lading
commercial Invoice Marine Insurance policy and other document, if
required.There are two main types of documentary bills: Documents
against Payment, Documents against Acceptance.Documents against
payment (D/P): The documents are released to the importer against
payment. This method indicates that the payment is made against
Sight Draft. Necessary arrangements will have to be made to store
the goods, if a delay in payment occurs.The risk involved that the
importer may refuse to accept the documents and to pay against
them. The reason for non-acceptance may be political or commercial
ones. In India, ECGC covers losses arising out of such risks. Under
this system, as compared to D/A, the exporter has certain
advantages: The document remain in the hands of the bank and the
exporter does not lose possession or the ownership of goods till
payment is made, Other reason may include that the exporter may not
be able to allow credit and wait for payment. Documents Against
acceptance (D/A): The document are released against acceptance of
the Time Draft i.e. credit allowed for a certain period, say 90
days. However, the exporter need not wait for payment till bill is
met on due date, as he can discount the bill with the negotiating
bank and can avail of funds immediately after shipment of goods. In
case of D/A as compared to D/P bills, the risk involved is much
grater, as the importer has already taken possession of goods which
may or may not be in his custody on the maturity date of the bill.
If the importer fails to pay on due date, the exporter, will have
to start civil proceedings to receive his payment, if all other
alternatives fails. The risk involved can be insured with ECGC.C.
LETTER OF CREDIT (L/C):This method of payment has become the most
popular form in recent times, it is more secured as company to
other methods of payment (other than advance payment).A letter of
credit can be defined as an undertaking by importers bank stating
that payment will be made to the exporter if the required documents
are presented to the bank within the variety of the L/C.
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