Project IEM

8/3/2019 Project IEM

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PROJECT REPORT ON

INDIAS EXPORT PROCEDURE & DOCUMENTATION

PREPARED BY

HARKARAN SINGH PURI

UNDER THE GUIDANCE OF

Prof. TUSHAR RATHORE

SUBMITTED TO UNIVERSITY OF PUNE IN

FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF

POST GARADUATION DIPLOMA IN IMPORT AND EXPORT MANAGEMENT

ACADEMIC YEAR

2010 2011

MATRIX BUSINESS SCHOOL


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DECLARATION

I Mr. Harkaran Singh Puri of Matrix Business School of PGDIEM (SEMESTER II)

HEREBY DECLARE THAT I HAVE COMPLETED THIS PROJECT ON INDIAS EXPORT

PROCEDURE AND DOCUMENTATION IN THE ACADEMIC YEAR2010 2011. THE

INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY

KNOWLEDGE.

DATE:

PLACE: (SIGNATURE OF THE STUDENT)


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CERTIFICATE

I Prof. Tushar Rathore HERBY CERTIFY THAT Mr. Harkaran Singh Puri of Matrix

Business School of PGDIEM. (SEMESTER II) HAS COMPLETED THE PROJECT ON INDIAS

EXPORT PROCEDURE AND DOCUMENTATION IN THE ACADEMIC YEAR 2010 2011.

THE INFORMATION SUBMITTED IS TRUE, ORIGINAL AND AUTHENTIC TO THE BEST OF

MY KNOWLEDGE.

SIGNATURE OF DIRECTOR SIGNATURE OF PROJECT GUIDE)

(Dr. J.N. Pol) (Prof. Tushar Rathore)


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ACKNOWLEDGEMENT

IT IS THE MATTER OF GREAT PLEASURE AND PRIVILEGE TO BE

ABLE TO PRESENT THIS PROJECT REPORT ON INDIASEXPORT

PROCEDURE AND DOCUMENTATION.

THE COMPILATION OF THE PROJECT IS A MILESTONE IN THE LIFE

OF THE MANAGEMENT STUDENT AND ITS EXECUTION IS INEVITABLE

WITH THE CO-OPERATION OF THE PROJECT GUIDE. I WISH TO RECORD

A DEEP SENSE OF RESPECT AND GRATITUDE TO MY PROJECT GUIDE,

PROF. TUSHAR RATHORE FOR HIS ENCOURAGEMENT TO COURSE OF

MY WORK. IT IS DUE TO THE ENDURING EFFORT AND GUIDANCE OF

MY GUIDE THAT ULTIMATELY MADE IT SUCCESS.


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INDEX

SERIAL

NUMBER

CONTENT

1 INTRODUCTION

2 HOW TO SET UP AN EXPORT ORGANISATION

3 HOW ONE BEGINS TO DO EXPORT

4 EXPORT SALES & CONTRACT TERMS & CONGITIONS

5 TERMS OF SHIPMENT INCOTERMS.

6 PROCESSING AN EXPORT ORDER

7 FINANCIAL RISK INVOLVED IN FOREIGN TRADE

8 EXPORT DOCUMENTS

9 QUALITY CONTROL AND PRE-SHIPMENTINSPECTION

10 METHODS OF REICEIVING AGAINST EXPORTS

11 PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK

12 SHIPMENT THROUGH COURIERS

13 EXPORT IMPORT DATA BANK

14 CONCLUSION

15 BIBLIOGRAPHY


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INTRODUCTION

India has a mission to capture 2% of the global share of trade by 20010, up from the present level of less

than 1%. Export is one of the lucrative business activities in India. The government also provides various

promotional schemes to the exporters for earning valuable foreign exchange for the country and for

meeting their requirements for importing modern technology and essential inputs. Besides, the income

from export business is also exempted to the specified extent under the Income Tax Act, 1961, Refund

of Central Excise and Custom Duty on export is also made under the Duty Drawback Scheme of the

Government. There is no Sales Tax on products meant for exports.

Exports can be of goods which can be moved physically from one country to another or

can be of service rendered. Detailed list of services are given in the Foreign Trade Policy covering more

than 160 items e.g. Insurance, Hospital, Postal and Telecommunication etc.

TWO CLASSES OF EXPORTS:

Physical Exports: If the goods physically go out of the country or services are rendered

outside the country then it is called as physical export. Deemed Exports: Where the goods do not go out

of the country physically they can be termed as deemed exports. This will be subject to certain

conditions as prescribed by the DGFT. Under Deemed Exports, the goods may be supplied to the

manufacturer exporter who ultimately export a finished product of which this supply forms a part and

ultimately go out of the country. E.g. Supply of fabrics to the garment exporter who exports the

garments made out of the said fabric.

The government may announce from time to time the types of supplies that may be

considered as deemed export. The Foreign Trade Policy gives the list of supplies considered under the

Deemed Export Category. The policies and procedures are different for Physical Exports and Deemed

Exports as also the benefits available. In a nutshell, Deemed Exports do not enjoy all the benefits that

are available under Physical Export. The Foreign Trade defines exports as taking out of India any goods

by land, sea, air. Although the act does not term them as Physical Exports, we have to put phrase to

distinguish it from Deemed Exports which is sales in India but considered as exports for limited

purpose.


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TYPES OF EXPORTERS:

Exporters can be basically classified into two groups

yManufacturer Exporter: As the exporter has the facility to manufacturer the product he intendsto export and hence he exports the products manufactured by him.

y Merchant Exporter: An exporter who does not have the facility to manufacture an item. But, heprocures the same from other manufacturers or from the market and exports the same.

An exporter can be both a manufacturer exporter as well as a merchant exporter, he can

export product manufactured by him or he can export items bought from the market.

Once it is decided to export, it is mandatory on your part to follow certain procedures,

rules and regulations as prescribed by various regulatory authorities such as DGFT, RBI, and Customs.

These procedures, rules and regulations are laid down in the Exim Policy 2004-09, Exchange Control

Manual, Customs Act etc. Accordingly Export documents are required to be prepared keeping in view of

the requirement of the foreign buyers and our regulatory authorities.

HOW TO SET UP AN EXPORT ORGANISATION

The proper selection of organization depends upon

y Ability to raise finance.y Capacity to bear the risk.y Desire to exercise control over the business.y Nature of regulatory framework applicable to anyone

If the size of the business is small, it would be advantageous to form a sole proprietary

business organization. It can be set up easily without much expenses and legal formalities. It is subjectedto only few governmental regulations. However, the biggest disadvantage of sole proprietorship

business is limited ability to raise funds which restricts the growth. Besides the owner has unlimited

personal liabilities. In order to avoid this disadvantage, it is advisable to form a partnership firm.


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The partnership firm can also be set up with ease and economy. Business can take

benefit of the varied experiences and expertise of the partners. The liability of the partners though joint

and several, is practically distributed amongst the various partners, despite the fact that the personal

liability of the partner is unlimited. The major disadvantage of partnership firm of business organization

is that conflict amongst the partners is a potential threat to the business. It will not be out of place to

mention here that partnership firms are governed by the Indian Partnership Act, 1932 and, therefore

they should be formed within the parameters laid down by the Act. Company is another form of

business organization, which has the advantage of distinct legal identity and limited liability to the share

holders.

It can be a private limited company or a public limited company. A private limited can be

formed by just two persons subscribing to its share capital. However, the number of its shareholders

cannot exceed 50, public cannot be invited to subscribe to its capital and the members right to transfer

their share is restricted. On the other hand, a public limited company has a minimum of seven members.

There is no limit on the maximum number of its members. It can invite the public to subscribe to its

capital and permit the transfer of share. A public limited company offers enormous potential for growth

because of access to substantial funds. The liquidity of investment is high because of easiness of transfer

of shares. However its formation can be recommended only when the size of the business is large. For

small business, a sole proprietary concern or a partnership firm will be the most suitable form of

business organization. In case it is decided to incorporate a private limited company, the same is to be

registered with the Registrar of Companies.

CHOOSING APPROPRIATE MODE OF OPERATIONS:

You can choose any of the following modes of operations

y Merchant Exporter i.e. buying the goods from the market or from the manufacturer and thenselling it to foreign buyers.

y Manufacturer Exporter i.e. manufacturing the goods yourself for export.y Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the seller and charging

the Commission.


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y Buying Agent i.e. acting on behalf of the buyer and charging Commission.y Service provider i.e. providing service from India to another country.

NAMING THE BUSINESS

Whatever form of business organization has been finally decided, naming the business is

an essential task for every exporter. The name and style should be soft, attractive, short and meaningful.

Open a current account in the name of the organization in whose name you intend to export. It is

advisable to open the account with a bank which is authorized to deal in Foreign Exchange.

STRUCTURE OF AN EXPORT ORGANISATION

y marketing manager for generating salesy Commercial manager for looking activities of the execution of the orders.y staff personnel for carrying out the day-to-day activities namely

o Preparation of pre - shipment documents.o Co-coordinating with clearing agents on the progress of the shipment to be made.o Co-ordination with the ware house\C. excise department regarding packing and

clearance of the goods for export.

oPreparation of post shipment documents foe banks.

o Follow-up with the bank on dispatch of documents, receipt of payment, availment ofbank loans etc.

y To look into the requirement of licenses, claiming of export benefits filing of documents with theGovernment Authorities in Discharge of Export Obligations, if any, filing of returns to the various

Government Agencies which are mandatory, prepare and keep an information bank of various

transaction of the company, their domestic as well as international competitors.

y An office boy for doing leg work.y A clearing and forwarding agent to handle the documents and the goods in the customs

premises\ in the ports of lading.

Depending upon the size of the business the numbers of personnel under each category

may increase. For example if a company is transacting substantial volume of business in more than one


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product. Then it is necessary to have marketing manager for each product so that the person can

concentrate on a particular trade to enhance the business.

REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING IMPORTER EXPORTER CODE

(IEC) NUMBER.

The Customs Authorities will now allow the exporter to export or import goods into or from

India unless he holds a valid IEC number. Before applying for IEC number it is necessary to open a bank

account in the name of the company with any commercial bank authorized to deal in foreign exchange.

The duly signed application form should be supported by the following documents.

y Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. 1000/-y Certificate from the banker of the applicant firm as per Annexure 1 to the form given.y One copy of PAN number issued by Income Tax Authorities duty attested by the applicant.y One copy of Passport Size photographs of the applicant duly attested by the banker to the

applicant.

y Declaration by the applicant that the proprietor/partners/directors as the case may be of theapplicant company, are not associated as proprietor/partners/directors in any other firm, which

has been caution, listed by the RBI. Where the applicant declares that they are associated as

proprietor/partners/directors in any other firm, which has been caution, listed by the RBI, they

will be allotted IEC No. but with an additional condition that they can export only with RBIs

prior approval and they should approach RBI for the purpose.

y Each importer/exporter shall be required to file importer/exporter profile once with thelicensing authority shall enter the information furnished in Appendix 2 in their database so as to

dispense with changes in the information given in Appendix-2, importer/exporter shall intimate

the same to the licensing authority.

IEC EXEMPT CATEGORIES.

The following importer exporter is exempted from the requirement of IEC code number.

y Ministries \ Department of Central or State Government.y Person importing or exporting goods for their personal use not connected with trade or

manufacture or agriculture.


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y Persons importing\exporting goods from\to Nepal & Myanmar provided the CIF value of singleconsignment does exceed Indian Rs. 25000\-.

APPLICATION FOR OBTAINING AN IEC NUMBER

For obtaining IEC number apply in the prescribe form along with the documents listed above to

Regional Licensing Authority (Office of the Regional DGFT). The registered office or the head office may

apply for allotment of IEC No.

Whenever, there is a change in the name, address or constitution of the holder of IEC No., such change

should be intimated within 30 days to the concern authorities.

IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is also endorsed to the

concerned banker.

VALIDITY:

The IEC No allotted to a firm/company will be valid for all its branches/divisions units/factories as

indicated in the IEC No. Import/Export of any commodity by that firm/company. There being no date of

expiry, the IEC once allotted is valid till it is revoked. But, if no import or export is affected in the

previous financial year, the same will be made inoperative. However, this can be made operative by a

formal request to the DGFT.

IDENTITY CARD (For conducting transactions with the office of DGFT):

As it is not always possible for the top man or directors, promoters of the company to visit DGFT

frequently. There is a provision of issuance of identity cards to the proprietors/partners/directors and

their authorized representatives. An application of Issuance of an identity card may be made in the form

(Appendix-5) the document/ License/Certificate/Permissions may be delivered to the identity card

holder and officials of the Licensing Authority (DGFT) shall not be responsible for any loss etc. In case of

loss of an identity card a duplicate card may be issued on the basis of an FIR & affidavit. In addition to

obtaining the IEC No. the exporter is also required to obtain Business Identification No(BIN). For this

exporter is required to contact DGFT online on web site. The licensing authority issues BIN in


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coordination with customs authorities. This BIN is required to be mentioned on the shipping bills at the

time of customs clearance of the export cargo.

RCMC (Registration-Cum-Membership Certificate) REGISTRATION WITH EXPORT PROMOTION

COUNCILS

In order to enable the exporter to obtain benefits/concessions under the Foreign Trade Policy, the

exporter is required to register him with an appropriate export promotion agency by obtaining

registration-cum-membership certificate. (RCMC). If the export product is that it is not covered by any

EPC, RCMC in respect thereof may be issued by FIEO. An application for registration should be

accompanied by a self certified copy of the Importer-Exporter Code number issued by the regional

licensing authority concerned and bank certificate in support of the applicants financial soundness. The

RCMC shall be valid for 5 years ending 31st March of the licensing year.

REGISTRATION WITH SALES TAX AUTHORITIES:

Goods that are to be shipped out of the country for export are eligible for exemptions from both Sales

Tax and Central Sales Tax. For this purpose, exporter should get himself registered with the Sale Tax

Authority of is state after following the procedures prescribed under the Sales Tax Act applicable to his

state.

HOW ONE BEGINS TO DO EXPORT

Before entering into the venture of exports, one must look for the product to be exported and the

market where he intends to export.

In case of a manufacturer, obviously he would like to export the product he manufactures as is or with

possible modification as may be required by the market. However, in case of a merchant exporter or a

trader, one has to identity the product to export. If the exporter is already in the trade in the domestic

market and is familiar with the product it would be an advantage to export the said product of which he

has reasonable knowledge.

Before selecting a product, one must simultaneously made a study and find out the prospective market.

For finding out the market for the selected product, the following methods will help.


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y Get statistical information as to imports of the product by various countries and theirgrowth prospects in the respective countries

y Approach the chamber of commerce for their guidance to find out the market.y Approach the Export Promotion Council dealing in the product of selection to get more

information.

The Preliminary

Once you are ready with the product you wish to export and have found the market for the same, you

are ready to proceed further. Following sequences can be followed:

y Any one, who wishes to export, must first of all get an Importer Exporter Code Number (IECode).This can be obtained by making a formal application to the office of the Regional

Directorate General of Foreign Trade (DGFT).

y Get yourself registered with the related Export Promotion Council andbecome a member.Also arrange to obtain Registration-Cum-Membership Certificate (RCMC) from the council.

This has twin objectives:

o Under the Foreign Trade Policy, it is mandatory that an exporter gets him registeredwith the Export Promotion Council to avail of various export facilities.

o Being a member, you will have access to all the information relating to the product thatcould be made available by the council

o Many foreign buyers send their enquiries for the imports to the Export PromotionCouncil. Hence you will have few customers interested in your product.

y If you are a manufacturer, find out the provisions under the EXIM Policy of getting the rawmaterials duty free.

y Get familiar with the excise formalities as goods meant for export can be cleared withoutpayment of C. Excise duty on the finished product subject to compliance of certain formalities.

y Understand the local government regulations in relations to the export of the product.y Get information of the governments regulations of the importing country as to restrictions on

the quantity, product specification, packing regulations, customs regulations, requirement of

specific documents/information etc.

y Availability of Vessels/Airlines, the transport charges, frequency of operation etc.,y To look for a Custom House Agent (CHA) (also known as freight forwarders or clearing agents)

for handling the documents/cargo in the customs.


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y If the product is covered under any quota regulation, find out the agency/council who arehandling the quota distribution for the product and the availability of quota for exports.

FINDING A CUSTOMS

Once you have selected the market, the next step is to find a prospective customer. This you can get

y From the directory of importers of the countryy By writing to the Embassy of India in that country for assistancey By writing to the chamber of commerce of that countryy By means of participation in a Fair/Exhibition abroad either directly or through the Export

Promotion Council

y By participating in international fair if organized locallyy Through the personal contacts in that country. By these processes one can only have the list of

customers. One has to dialogue or correspond with these customers by sending samples, getting

feedback from the customers etc. to ultimately select the customer with whom to deal with. It is

necessary to know the financial standing of the company which can be obtained through the

bank channel or through the office of ECGC.

NEGOTIATING CONTRACT.

Once the prospective customer is found, the business deal has to be concluded. The following

aspects may be considered before entering into a final contract with the buyer.

y Credit Worthiness of the Customer.y Availability of the Steamer/Airlines and the frequencyy The freight chargesy The full product specificationy The quantity, Pricey Terms of Paymenty Type of packing and markings on the packagesy Mode of shipment & Shipment scheduley Tolerance of quantity to be shipped


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y Documentation requirement for the customery Documentation requirement of the government of importing countryy Compliance of the local governmental rules and regulations

Before entering into contract one should take note of the above factors. While these are indicative, the

requirements will vary from country to country, product to product and buyer to buyer.

EXPORT SALES & CONTRACT TERMS & CONDITIONS

Very 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 Performa 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 market

Whereas 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 ways

For 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.


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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 l icense/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 themisunderstandings 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 CONTRACTIn 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:

y Product, Standards and Specificationsy Quantityy Inspectiony Total Value of Contract


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y Terms of Deliveryy Taxes, Duties and Chargesy Period of Delivery/Shipmenty Packing, Labeling and Markingy Terms of Payment-- Amount/Mode & Currencyy Discounts and Commissionsy Licenses and Permitsy Insurancey Documentary Requirementsy Guaranteey Force Majeure of Excuse for Non-performance of contracty

Remediesy Arbitration clause

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.

ARBITRATION:

Arbitration clause recommended by the Indian Council of Arbitration:All disputes or differences

whatsoever arising between the parties out of / relating to the meaning, construction and operation or

effect of this contract or the breach thereof shall be settled by arbitration in accordance with the rules

of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be

binding on the parties (or any other arbitration clause that may be agreed upon between the parties).


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PROCESSING AN EXPORT ORDERYou should not be happy merely on receiving an export order. You should first acknowledge the

export order, and then proceed to examine carefully in respect of

y Itemsy Specificationy Pre-shipment inspectiony Payment conditionsy Special packagingy abeling and marketing requirementsy Shipment and delivery datey Marine insurancey Documentation requirement etc.

If you are satisfied on these aspects, a formal confirmation should be sent to the buyer, otherwise

clarification should be sought from the buyer before confirming the order. After confirmation of

the export order immediate steps should be taken for procurement/manufacture of the export

goods. In the meanwhile, you should proceed to enter into a formal export contract with the

overseas buyer.

Before accepting any order necessary homework should have been done as to availability of the

production capacity, raw material e.t.c. It would be in the interest of the exporter to look into

entering into forward contract to safeguard against exchange rate fluctuations. Ensure that the

mode of payment is also agreed upon. In case of shipment against letter of credit, the buyer

should be advised to open the credit well in advance before effecting the shipment.


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FINANCIAL RISKS INVOLVED IN FOREIGN TRADE

As an exporter while selling goods abroad, you encounter various types of risks. The major risks which

you have to undergo are as follows:

y Credit Risky Currency Risky Carriage Risky Country Risk

You can protect yourself against the above risks by initiating appropriate steps.

Credit Risks :

You can cover your credit risk against the foreign buyer by insisting upon opening a letter of credit in

your favor. Alternatively one can avail of the facility offered by various credit risk agencies. A specific

insurance cover can also be obtained from ECGC (Exports Credit & Guarantee Corporation) to cover your

country risk besides covering credit risk.

Currency Risks:

As regards covering the currency risk, due to the exchange rate fluctuations, you can request your

banker to book a forward contract.

Carriage Risk:

The carriage risk can be covered by taking an appropriate general insurance policy.

Country Risk:

ECGC provides cover to protect the exporter from country risks. A detailed procedure how an exporter

can get himself protected against the above risks are given in separate chapters later.


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EXPORT DOCUMENTS

Any 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 realization of export sale

proceeds. Out of the 16 commercial documents in the export documentation framework as

many as 14 have been standardized 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

y Name and address of the exporter.y Name and address of the consignee.y Name and the number of Vessel or Flight.y Name of the port of loading.


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y Name of the port of discharge and final destination.y Invoice number and date.y Exporter's reference number.y Buyer's reference number and date.y Name of the country of origin of goods.y Name of the country of final destination.y Terms of delivery and payment.y Marks and container number.y Number and packing description.y Description of goods giving details of quantity, rate and total amount in terms of internationally

accepted price quotation.

y Signature of the exporter with date.Significance of Commercial Invoice

y It is the basic document useful in preparation of various other shipping documents.y It is used in various export formalities such as quality and pre-Shipment inspection excise and

customs procedures etc.

y It is also useful in negotiation of documents for collection and claim of incentives.y 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


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y SPECIFIC POLICY: This policy is taken to cover different risks for a single shipment. For aregular 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.

y Floating Policy: This is taken to cover all shipments for some months. There is no timelimit, 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.

y Open Policy: This policy remains in force until cancelled by either party i.e. insurancecompany or the exporter.

y Open Cover Policy: This policy is generally issued for 12 months period, for allshipments 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.

y Insurance Premium: Differs upon product to product and a number of such otherfactors, 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.


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Significance of Consular Invoice for the Exporter

y It facilitates quick clearance of goods from the customs in exporter's as well as importer'scountry.

y Certification' of goods by the Consulate of the importing country indicarer that theimporter has fulfilled all procedural and licensing formalities for import of goods.

y It also assures the exporter of the payment from the importing country.Significance of Consular Invoice for the Importer

y It facilitates quick clearance of goods from the customs at the port destination andtherefore, the importer gets quick delivery of goods.

y The importer is assured that the goods imported are not banned for imported in hiscountry.

Significance of Consular Invoice for the Customs Office

y It makes the task of the customs authorities easy.y 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:-

y The goods produced in a particular country are subject to preferential tariff rates in the foreignmarket at the time importation.

y The goods produced in a particular country are banned for import in the foreign market.


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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:

y The authorized Chamber of Commerce of the exporting country.y Trade Association. Of the exporting country.

(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin required for availing

of concessions under Generalized 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 specialized agencies, namely;

y Export Inspection Agencies.y Jt. Director General of Foreign Trade..y Commodity Boards and their regional offices.y Development Commissioner, Handicrafts.y Textile Committees for textile products.y Marine Products Export Development Authority for marine products.y 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


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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

y Name and logo of chamber of commerce.y Name and address of the exporter.y Name and address of the consignee.y Name and the number of Vessel of Flighty Name of the port of loading.y Name of the port of discharge and place of delivery.y Marks and container number.y Packing and container description.y Total number of containers and packages.y Description of goods in terms of quantity.y Signature and initials of the concerned officer of the issuing authority.y Seal of the issuing authority.Significance of the Certificate of Origin

y Certificate of origin is required for availing of concessions under Generalized System ofPreferences (GSP) as well as under Commonwealth Preferences (CWP).

y It is to be submitted to the customs for the assessment of duty clearance of goods withconcessional duty.

y It is required when the goods produced in a particular country are banned for import in theforeign market.

y It helps the buyer in adhering to the import regulations of the country.y Sometimes, in order to ensure 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


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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:

y As a document of title to the goods;y As a receipt from the shipping company; andy As a contract for the transportation of goods.

Types of Bill of Lading

y Clean Bill of Lading: - A bill of lading acknowledging receipt of the goods apparently in goodorder and condition and without any qualification is termed as a clean bill of lading.

y Clause Bill of Lading: - A bill of lading qualified with certain adversere marks such as, "goodsinsufficiently packed in accordance with the Carriage of Goods by Sea Act," is termed as a clause

bill of lading.

y Transhipment or Through Bill of Lading: - When the carrier uses other transport facilities, suchas rail, road, or another steamship company in addition to his own, the carrier issues a through

or transhipment bill of lading.

y Stale Bill of Lading: - A bill of lading that has been held too long before it is passed on to a bankfor negotiation or to the consignee is called a stale bill of lading.

y Freight Paid Bill of Lading: - When freight is paid at the time of shipment or in advance, the billof landing is marked, freight paid. Such bill of lading is known as freight bill of lading.

y Freight Collect Bill of lading :- When the freight is not paid and is to be collected from theconsignee on the arrival of the goods, the bill of lading is marked, freight collect and is known as

freight collect bill of lading

Contents of Bill of Lading

y Name and logo of the shipping line.y Name and address of the shipper.y Name and the number of vessel.y Name of the port of loading.


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y Name of the port of discharge and place of delivery.y Marks and container number.y Packing and container description.y Total number of containers and packages,y Description of goods in terms of quantity.y Container status and seal number.y Gross weight in kg. and volume in terms of cubic meters.y Amount of freight paid or payable.y Shipping bill number and date.y Signature and initials of the Chief Officer. .

Significance of Bill of Lading for Exporters

y It is a contract between the shipper and the shipping company for carriage of the goods to theport of destination.

y It is an acknowledgement indicating that the goods mentioned in the document have beenreceived on board for the Purpose of shipment.

y A clean bill of lading certifies that the goods received on board the ship are in order and goodcondition.

y It is useful for claiming incentives offered by the government to exportersy 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

y It acts as a document of title to goods, which is transferable endorsement and delivery.y The exporter sends the bill of lading to the bank of the importer so as to enable him to take the

delivery of goods.

y The exporter can give an advance intimation to the foreign buyer about the shipment of goodsby sending him a non-negotiable copy of bill of lading

Significance of Bill of Lading for Shipping Company


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y It is useful to the shipping company for collection of transport charges from the importer, if notcollected from the exporter.

7. Airway Bill: An airway bill, also called an air consignment note, is a receipt issued by an airline

for the carriage of goods. As each shipping company has its own bill of lading, so each airline has its own

airway bill. Airway Bill or Air Consignment Note is not treated as a document of title and is not issued in

negotiable form.

Contents of Airway Bill

y Name of the airport of departure and destination.y The names and addresses of the consignor, consignee and the first carrier.y Marks and container number.y Packing and container description.y Total number of containers and packages.y Description of goods in terms of quantity.y Container status and seal number.y Amount of freight paid or payable.y Signature and initials of the issuing carrier or his agent.

Importance of Airway Bill: It is a contract between the airlines or his agent to carry goods to the

destination. It is the document of instructions for the airline handling staff. It acts as a customs

declaration form. Since, it contains details about freight it also represents freight bill.

7. Shipment Advice to Importer:- After the shipment of goods, the exporter intimates the importer

about the shipment of goods giving him details about the date of shipment, the name of the

vessel, the destination, etc. He should also send one copy of non-negotiable bill of lading to the

importer.8. 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.


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9. Bill of exchange: The instrument is used in receiving payment from the importer. The importermay 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.

y B/E is a means to collect payment.

y B/E is a means to demand payment.

y B/E is a means to extent the credit.

y B/E is a means to promise the payment.

y B/E is an official acknowledgement of receipt of payment.

y Financial documents perform the function of obtaining the finance collection of

payment etc.

y 2 sets. Each one bearing the exclusion clause making the other part of the draft invalid.

y Sight B/E.

y Usance B/E.

y It is known as draft.

y Immediate payment Sight draft.

y 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 thecommercial 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.


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Contents of Performa Invoice

y Name and address of the exporter.y Name and address of the importer.y Mode of transportation, such as Sea or Air or Multimodal transport.y Name of the port of loading.y Name of the port of discharge and final destination.y Provisional invoice number and date.y Exporter's reference number.y Buyer's reference number and date.y Name of the country of origin of goods.y

Name of the country of final destination.y Marks and container number. .y Number and packing description.y Description of goods giving details of quantity, rate and total amount in terms of

internationally accepted price quotation.

y Signature of the exporter with date.Importance of Proforma Invoice

y It forms the basis of all trade transactions.y It may be useful for the importer in obtaining import license 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 fornecessary insurance cover. The detailed declaration will cover:

y Name of the shipper \ exporter.y Name & address of buyer.


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y Details of goods such as packages, quantity, value in foreign currency as wellas in Indian Rs. Etc.

y Name of the Vessel \ Aircraft.y 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

y Clean Mate's Receipt: - The Commanding Officer of the ship issues a clean mate's receipt, ifhe is satisfied that the goods are packed properly and there is no defect in the packing of

the cargo or package.

y Qualified Mate's Receipt: - The Commanding Officer of the ship issues qualified mate'sreceipt, 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

y Name and logo of the shipping line.y Name and address of the shipper.y Name and the number of vessel.y Name of the port of loading.


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y Name of the port of discharge and place of delivery.y Marks and container number.y Packing and container description.y Total number of containers and packages.y Description of goods in terms of quantity.y Container status and seal number.y Gross weight in kg. and volume in terms of cubic meters.y Shipping bill number and date.y Signature and initials of the Chief Officer.

Significance of Mate's Receipt

y It is an acknowledgement of goods received for export on board the ship.y It is a transferable document. It must be handed over to the shipping company in order to

get the bill of lading.

y Bill of lading, which is the title of goods, is prepared on the basis of the mate's receipt.y 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 thereservation 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 CHAfor customs clearance, necessary instructions are to be give with relevance to

yThe export promotion scheme under which goods are to be exported.yName of the specific vessel on which the goods are to be loaded.yIf goods are to be FCL or LCL.


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yIf freight amount are to be paid / collected.yIf shipment are covered under A.R.E.-1 procedure.yInstructions 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

y Name and address of the buyer.y Details of various documents being sent and the number of the copies

thereof.

y Name and address of the buyers bank if available.y If the documents are sent L/C or on open terms.y If the proceeds are to adjusted against any pre-shipment packing credit loan.y If the bill amount is to be adjusted against any forward exchange cover.y In case of credit bill who has to bear the interest, either exporter or if the

same is to be collected from the buyer.

y 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,

export trade control, customs, etc. Out of 9 regulatory documents four have been standardized 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 customsauthorities 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 :-


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y Customs copy.y Drawback copy.y Export promotion copy.y Port trust copy.y Exporter's copy.

Types of Shipping Bill

Based on the incentives offered by the government, customs authorities have introduced three types of

shipping bills:-

y Drawback Shipping Bill: - Drawback shipping bill is useful for claiming the customs drawbackagainst goods exported.

y Dutiable Shipping Bill: - Dutiable shipping bill is required for goods which are subject to exportduty.

y Duty-free Shipping Bill: - Duty-free shipping bill is useful for exporting goods on which there isno export duty.

In order to facilitate easy recognition and quick processing, following colours have been provided to

different kinds of shipping bills :

Types of goods By Sea By Air

Drawback shipping bill Green Green

Dutiable shipping bill Yellow Pink

Duty-Free shipping bill White Pink

Contents of Shipping Bill

y Name and address of the exporter.y Name and address of the importer.y Name of the vessel, master or agents and flag.y Name of the port at which goods are to be discharged.y Country of final destination.


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y Details about packages, description of goods, marks and numbers, quantity and details of eachcase.

y FOB price and real value of goods as defined in the Sea Customs Act.y Whether Indian or foreign merchandise to be re-exportedy Total number of packages with total weight and value.

Significance of Shipping Bill

a) 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 ofshipments 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.


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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 license details etc.

6. Bank Certificate of Realization: this is the form prescribed under the Foreign Trade Policy,

wherein the negotiating bank declares the fob value of exports and for the date ofrealization of the export proceeds. This certificate is required for obtaining the benefit

under various schemes and this value of fob is reckoned as fob value of exports.

D. Other Document:

y Black List Certificate: it certifies that the ship/aircraft carrying the cargo has nottouched 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.

y Language Certificate: Importers in the European Community require a languagecertificate 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.

y Freight Payment Certificate: in most of the cases, the B/L or AWB will mention thetransportation 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


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main transport documents. This document showing the freight payment is called the

freight certificate.

y Insurance Premium Certificate: this is the certificate issued by the InsuranceCompany 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.

y Combined Certificate of Origin and Value: this certificate is required by theCommonwealth 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.

y Customs Invoice: this is required by the countries like Canada, USA for imposingpreferential tariff rates.

y Legalized Invoice: this is required by the certain Latin American Countries likeMexico. It is just like consular invoice, which requires certification from Consulate or

authorised mission, stationed in the exporters country.

Special Provision under Uniform Customs and practice for Documentary Credit UCP-500, for

Commercial Invoice.

y Article-37: Commercial Invoiceo Must appear on their face to be issued by the beneficiary named in the

credit.

o Must be made out in the name of the applicant.o Need not be signed

y Banks may refuse Commercial Invoice issued for amounts in excess of the amountpermitted by the credit except otherwise stated.


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y The description of the goods in the commercial invoice must correspond with thedescription of the credit. In all other documents the goods may be described in the

General in general terms not inconsistent with description in the credit. In all

documents goods may be described in general terms not inconsistent with the

Description of the goods in the credit.

Pre-Shipment Documents:

y Shipping bill.y Export order/Sales contract/Purchase order.y Letter of Credity Commercial invoice.y Packing list.y Certificate of origin.y Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or SDF.y Certificate of Inspection.y 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

y GR FORM: to be completed in duplicate for exports otherwise than by post includingexport of software in physical form i.e. magnetic tape/discs and paper media.

y SDF FORM: to be completed in duplicate and appended to the Shipping Bill forexport declare to the customs offices notified by the Central Government which

have introduced EDI system for processing Shipping Bill.

yPP FORM: to be completed in duplicate for export by post.

y SOFTX: to be completed in triplicate for export of software otherwise than in thephysical form i.e. magnetic tapes/discs and paper media.

These forms are available for sale in Reserve Bank of India


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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.

y Name and address of the authorised dealer through whom proceeds of exports havebeen or will be realized should be specified in the relevant column of the form.

y Details of commission and discount due to foreign agent or buyer should becorrectly declared otherwise difficulties may arise at the time of remittance of such

commission.

y It should be clearly indicated in the form whether the export is on outright salebasis or on consignment basis and irrelevant clauses must be stuck out

y Under the term analysis of full export value a break up of full export value of goodsunder F.O.B value, freight and insurance should be furnished in all cases, irrespective

of the terms of contract.

y All documents relating to the export of goods from India must pass through themedium of an authorised dealer in foreign exchange in India within 21 days of

shipment.

y The amount representing the full export value of goods must be realized within sixmonths from date of shipment.

Disposal of Copies of Export Documentation Form

y GR forms covering export of goods other than jewellery should be completed by theexporter in duplicate and both the copies should be submitted to customs at the

port of Shipment. Customs will give their running serial number on both the copies

of the GR forms after verifying the particulars and admitting the corresponding

shipping bill. The value declared by the exporter will also be verified by the customs

and they will also record the assessed value. Duplicate copy will be returned to the

exporter and the original will be remained by the customs for onward submission to

the Reserve Bank. Duplicate form of the GR form will again be presented to the

customs at the time of actual shipment. After examination of goods and certifying

the quantity passed for shipment the duplicate copy will again be returned to

exporter for submission to an authorised dealer. However, an exception to


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submission of GR forms to the Customs authorities have been made in case of deep

sea fishing.

y (a) PP forms are to be first presented to an authorised dealer for countersignature.The form will be countersigned by the authorised dealer only if the post parcel is

addressed to his branch or correspondent bank in the country or import. The

concerned overseas branch or correspondent is to be instructed to deliver the post

parcel against payment or acceptance of relevant bill, as the case may be.

(b) For post parcel addressed directly to the consignee, the authorised dealer willcountersign the form, provided

(i) an irrevocable letter of credit for the full value of export has been opened infavour of exporter and has been advised through authorised dealer

concerned; or

(ii) the full value of shipment has been received in advance by the exporterthrough an authorised dealer; or

(iii)On receipt of full value of shipment declared on this form the authoriseddealer will forward to RBI the duplicate copy along with the certified copy of

shippers invoice.

(iv) The authorised is satisfied on the basis of standing and track record of theexporter and arrangements made for realisation of the export proceed that

he could do so. If the authorised dealer is not satisfied about standing etc.

of the exporter, the application is rejected. No reference is entertained by

the Reserve Bank in such cases.

(c) The original PP form countersignature will be returned to the exporter by theauthorised dealer and the duplicate will be retained by him. Original PP form

should then be submitted to the post office along with the parcel. The post

office through the goods have been dispatched will forward the original to RBI.

The export of computer software may be undertaken in physical form i.e. software prepared on

magnetic tape and paper media as well as in non-physical form by direct data transmission through

dedicated earth stations/satellite links. The export of computer software in physical form is subject to


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normal declaration on GR/PP form and regulations applicable there to will also be applicable to such

exports. However, export of non-physical form should be declared on SOFTEX Form. Besides computer

software, export of video / T.V. Software and all other types of software products / packages should also

be declared on the SOFTEX forms. Since export of software is fraught with many risks and special

guidelines have been framed for handling such exports.

MARINE INSURANCE POLICY

Goods in transit are subject to risks of loss of goods arising due to fire on the ship, perils of sea, thefts

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 the shipment is made, so

this policy is taken when exports are infrequent.

Floating Policy:This policy is taken to cover all shipments for same 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 all

destinations. The open cover may specify the maximum value of consignment that may be sent pre ship

and if the value exceeded, the insurance company must be informed by the exporter.


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Insurance Premium: Differs upon from product to product and a number of other such factors, such as,

distance of voyage, type and condition of packing etc. Premium for air consignments are lower as

compared to consignments by sea.

The Insurance Policy Normally Contains:

y The name and address of the insurance company.y The name of the assured & description of the risk covered.y A description of the consignment.y The sum insured & the date of issue.y The place where claims are payable together with details of the agent to whom claims may be

directed & Any other details, as applicable.

QUALITY CONTROL AND PRE-SHIPMENT INSPECTION

Realizing the importance of the need for supplying quality goods as per international standards, the

Government of India has introduced Compulsory Quality Control and Pre-Shipment Inspection of over

1050 items of export under Export (Quality Control and Pre-Shipment Inspection) Act 1963.

At present, the export items that are subjected to compulsory inspection includes food and agricultural

products, chemicals, engineering, coir, jute and footwear.

Compulsory Pre-shipment Inspection:

y Foods and Agriculture & Fisheryy Mineral & Orey

Organic & Inorganic Chemicals

y Refectories & Rubber Productsy Foot wear & Foot wear componentsy Ceramic Products & Pesticidesy Light Eng. Productsy Steel ;Products


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y Jute Productsy Coir & Coir Products

Exemption from compulsory Pre-shipment Inspection:

y Status Housesy Certification by Units IPQC approved by EIAy EUO/EPZ/SEZy Firm Letter from the overseas buyery Specified products such as Eng/Fishery average level of Rs.1.5 Cr.for the last three years no

compliant.

For monitoring pre-shipment inspection, Govt. of India has set up Export Inspection Council (EIO)

The EIC has set up 5 Export Inspection Agencies (EIA). The EIAs are located one each at Mumbai,

Calcutta, Cochin, Delhi and Chennai. The EIAs has a network of nearly 60 offices throughout India.

Each EIA is given certain jurisdiction for inspection purpose. For instance, EIA of Mumbai has

jurisdiction over Maharashtra, Gujarat and Goa.

Systems ofQuality Control:

For the purpose of pre-shipment inspection, EIC has recognized three systems of inspection namely:

y Self-Certificationy In-Process Quality Controly Consignment Wise InspectionSelf-Certification:

Under this system, complete authority is given to the manufacturing units to certify their own

products and issue certificates for export. The manufacturing units which have been recognized

under this scheme have to pay a nominal yearly fee at the rate of 0.1% of FOB price subject to

minimum of Rs.2,500/- and maximum of Rs.1 lakh in a year to the concerned EIA


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In-ProcessQuality Control (IPQC):

In this system, companies/units adjusted as having adequate level of quality control right from raw

material stage to the finished product stage including packaging are eligible to get the inspection

certificate on a formal request by the exporter. Over 800 units all over India are operating under this

system.

Constant vigil and surveillance are kept on units approved under IPQC and self-certification system.

Units approved under the above two systems are often known as Export worth Units, because of their

consistent standards of quality.

Consignment wise Inspection:

Under this system, each and every consignment is subject to compulsory inspection. The exporter has to

follow a certain procedure such as:

y He has to make an application to Export Inspection Agency with certain documents.y The EIA deputes inspector to inspect the goodsy After the inspection, the goods are repacked with EIA sealy The inspector then makes a report to Deputy Director of EIAy

The Dy. Director of EIA then issues Inspection Certificate in triplicate if the inspection report isfavorable

y If the inspection report is not favorable, a rejection note is issued.o It is to be noted that goods marked with ISI/AGMARK/BIS14000/ISO 9000 are not

required to be inspected by any agency

o Overseas buyer may depute his own inspection team to inspect the goodso Inspection of textile goods is conducted by Textile Committee in respect of those

exporters who are registered with the textile committee.

Norms:

y Adequate Testing Facilityy Raw Material Testing & Process Controly After Sales Services & Maintaining Product Quality


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y Control on bought out componentsy Meteorological Control & PKG.y Independent Quality Audit & Houses.Fumigation: For ensuring that no insects or bacteria are carried with the export certain types of

export products are fumigated before shipment. The fumigation is carried out in the port of

shipment.

METHODS OF RECEIVING PAYMENT AGAINST EXPORTS

Before we proceed to understand the concept of Letter of Credit, let us understand the various types of

payment methods available against export.

METHODS OF PAYMENT

There 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:

y Payment in advancey Documentary Billsy Letter of Credity Open Accounty Counter Trade

A. 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:

y The financial position of the buyer is weak or credit worthiness of the buyer is not known.y The economic/ political conditions in the buyers country are unstable.


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y 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:

y The goods are specifically designed for the customer, andy 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

y full set of bill of ladingy commercial Invoicey Marine Insurance policy and other document, if required.

There are two main types of documentary bills:

y Documents against Payment,y 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:

y The document remain in the hands of the bank and the exporter does not lose possession orthe ownership of goods till payment is made,

y Other reason may include that the exporter may not be able to allow credit and wait forpayment.


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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 ascompany 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.

PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK

NEGOTTIATION /PURCHASE

Document against exports should normally be realized through an authorized dealer foreign exchange.

However payment of export can be received directly from the overseas buyer in the form of bank draft,

pay order, bankers cheque, personal cheque foreign currency notes, foreign currency travelers cheque,

etc. Without any monetary limit provided the exporters track record is good, he is a customer of the

authorized dealers through whom documents are to be negotiated and prima facie the instrument of

payment represents export proceeds realization. Take care to submit various documents in a proper

manner and within the prescribed time schedule. Apply to the Reserve Bank for extension of time in

case you feel there is likely to be a delay in realizing export proceeds.


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The following are the steps in realizing export proceeds:

y Approaching a Bank: After dispatch of the goods, either by sea, or by air, the exporter shouldapproach his bank (authorized dealer) with a formal request to realize sale proceeds from the

foreign buyer. It is obligatory to submit the shipping documents to an authorized dealer within

21 days of the date of shipment (subject to certain exceptions). In India, the exporters have to

realize the full value of exports within 180 days from the date of shipment, (unless the payment

terms offered are deferred payment terms). Where it is not possible to realize the sale

proceeds within the prescribed period, the exporter should apply for extension in prescribed

form ETX (in duplicate) to RBI.

y Submission of Documents to the Bank: The exporter should submit the following documentso Bill of Exchangeo Full set of Bill of Ladingo Commercial Invoice Copieso Certificate of Origino Insurance Policyo Inspection Certificateo Packing Listo GR (duplicate copy to forward it to RBI)o Bank Certificateo Other relevant documents.

The above documents need to be submitted in two complete sets, because it is customary to

dispatch two sets of documents, one after the other. This is because, if one set is misplaced or

delayed in transit, the importer can get at least the other set and clear the goods.

y Verification of Documents: The bank will verify the documents to findo Whether the required documents are in order.o Whether the required documents are attested by customs and other authorities.

y Letter of Indemnity: If the exporter wants immediate payment from his bankers, then hisbankers may provide advance payment only when the exporter signs an indemnity letter. The


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implications of an indemnity letter is that in the event of refusal of payment by the issuing bank

in respect of LC, then the negotiating bank can ask the exporter to pay back the money

advanced along with necessary charges.

Common Document Discrepancies

o Credit Expiredo Late shipmento Presented after permitted time from date of issue of shipping documentso Short Shipmento Credit Amount Exceededo Underinsuredo Description of goods on invoice differ from that of credito Mark and numbers differ between documentso Bill of lading, Insurance documents, Bill of Exchange not endorsed correctlyo Absence of Documents called for under credit.o Insurance certificate submitted instead of policy.o Weight in different document differs.o Class of Bill of lading no acceptable-charter party or House B/L.o Insurance cover expressed in currency other than that of credit.o Absence of signature, where required on documents.o Bill of exchange not drawn as per tenor stated in credit.o Bill of exchange drawn on wrong party.o Insurance risks covered not being those specified in credit.o Absence of freight paid statement on B/L in CFR of CIF shipment.o Bill of lading doses not carry shipped on broad stamp.o Amount shown on invoice and bill of exchange differ.o Shipment not make to port specified.o Transshipment/part shipment undertaken where expressly forbidden.

y Discounting of bills: the bank may discount or negotiate the bills drawn against LC, and makeimmediate payment to the exporter, if so required.

y Dispatch of documents: before the submission of documents for negotiation/collection, thebank examines them thoroughly with reference to the terms and conditions of the buyers


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order. Letter of credit and the laws relating to foreign exchange control. If any scrutiny, the

documents are in order, the bank dispatches them to its overseas branch/correspondent branch

as early as possible. The overseas branch of the bank then submits the document to the

importers bank, and the importers bank hands it over to the importer.

SHIPMENT THROUGH COURIERS

In addition to the exporter by sea, air, rail or road, exports are also allowed by courier under the courier

imports or exporters (clearance) Regulation Act, 1998.

These regulations shall apply for clearance of goods carried by authorized courier on outgoing flights on

behalf of exports. Consigner for a commercial consideration.

Export Terms & conditions:

Export of any item can be affected by courier, except the following.

y Goods which are subject to access.y Goods proposed to be exported with claim of duly drawback.y Goods proposed to be exported under DEPB, EPCG, AL (Advance License)y Where the value of goods is more than Rs. 25,0000/-y Goods where weight of individual packet is more than 32 kg.


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Department of CommerceExport Import Data Bank

Total Trade: Top 40 countries

Dated: 12/02/2011Values in Rs Crore

Year: 2010-2011(Apr-Jun)

Rank Country Export ImportTotalTrade

1. U ARAB EMTS 33,708.65 29,026.94 62,735.58

2. CHINA P RP 13,747.58 42,613.99 56,361.57

3. U S A 27,702.96 19,904.00 47,606.96

4. SAUDI ARAB 5,361.73 22,220.73 27,582.46

5. SINGAPORE 12,839.26 7,949.51 20,788.76

6. HONG KO NG 10,485.68 7,506.08

7. GERMANY 6,018.51 11,865.92 17,884.43

8. AUSTRALIA 1,456.81 14,593.57 16,050.38

9. NIGERIA 2,063.25 13,315.12 15,378.37

10. BELGIUM 4,832.06 10,469.67 15,301.74

11. JAPAN 6,697.27 8,183.01 14,880.28

12. SWITZERLAND 668.79 13,763.89 14,432.68

13. IRAN 1,573.79 12,464.