study material for b.com import & export procedures semester ...

STUDY MATERIAL FOR B.COM IMPORT & EXPORT PROCEDURES

SEMESTER -IV, ACADEMIC YEAR 2020 - 21

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UNIT CONTENT PAGE Nr

I INTERNAL AND INTERNATIONAL TRADE 02

II BALANCE OF TRADE 06

III EXPORT PROCEDURE 12

IV IMPORT PROCEDURE 20

V EXPORT PROMOTION 27



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UNIT - I INTERNAL AND INTERNATIONAL TRADE

Internal trade: Buying and selling of goods and services within the boundaries of a nation are called

internal trade. It takes place between buyers and sellers in the same locality, village, town or city or in different states, but definitely within the same country. Internal trade is also called domestic trade or home trade. International trade:

International trade refers to the exchange of goods and services between the countries. In simple words, it means the export and import of goods and services. Export means selling goods and services out of the country, while import means goods and services flowing into the country. DIFFERENCE BETWEEN INTERNAL AND INTERNATIONAL TRADE:

BASIS INTERNAL TRADE INTERNATIONAL TRADE

1. Meaning Internal trade refers to buying and selling of goods within the geographical limits of a country.

International trade refers to buying and selling of goods beyond the geographical limits of a country.

2. Countries involved Only one country is involved.

Minimum two countries are involved.

3. Risk Low degree of risk is involved.

High degree of risk is involved.

4. Currency used Payments are made and received in-home currency only.

Payments are made and received in foreign currency only.

5. Procedure involved No long procedures or formalities are required.

Long procedures and many formalities are required.

6. Mode of payment Payments are made by cash or cheque.

Payments are made through bills of exchange or through banks.

7. Legal rules and regulations

National laws, rules and regulations are applicable.

International rules and regulations are applicable.

8. Mode of transport It uses road and railway mode.

It uses sea and air transport.

9. Cost involved Operating cost is lower. Operating cost is high due to long distance.

10. Effect on foreign reserve

No effect on foreign reserve of a country.

Direct impact on foreign reserve of a country.



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FEATURES OF INTERNATIONAL TRADE: IMMOBILITY OF FACTORS: (mirtw;wjd;ik)

The degree of immobility of factors like labour and capital is generally greater betweencountries than within a country. Immigration laws, citizenship, qualifications, etc. often restrict the international mobility of labour. HETEROGENEOUS MARKETS: (guk;giu)

In the international economy, world markets lack homogeneity on account of differences in climate, language, preferences, habit, customs, weights and measures, etc. The behaviour of international buyers in each case would, therefore, be different. DIFFERENT NATIONAL GROUPS:

International trade takes place between differently sound groups. The socio-economic environment differs greatly among different nations. DIFFERENT POLITICAL UNITS:

International trade is a phenomenon which occurs amongst different political units.

DIFFERENT NATIONAL POLICIES AND GOVERNMENT INTERVENTION: Economic and political policies differ from one country to another. Policies pertaining to

trade, commerce, export and import, taxation, etc., also differ widely among countries though they are more or less uniform within the country. DIFFERENT CURRENCIES:

International trade involves the use of different types of currencies. So, each country has its own policy in regard to exchange rates and foreign exchange. ADVANTAGES OF INTERNATIONAL TRADE: Optimal use of natural resources:

International trade helps each country to make optimum use of its natural resources.Each country can concentrate on production of those goods for which its resources are best suited. Wastage of resources is avoided. Availability of all types of goods:

It enables a country to obtain goods which it cannot produce or which it is notproducing due to higher costs, by importing from other countries at lower costs. Specialization:

Foreign trade leads to specialization and encourages production of different goods in different countries. Goods can be produced at a comparatively low cost due to advantages of division of labour.



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Advantages of large-scale production: Due to international trade, goods are produced not only for home consumption but for

export to other countries also. Nations of the world can dispose goods which they have in surplus in the international markets. This leads to production at large scale and the advantages of large-scale production can be obtained by all the countries of the world. Stability in prices:

International plays vital role in fluctuations in prices. It equalizes the prices of goods throughout the world (ignoring cost of transportation, etc.)

Exchange of technical know-how and establishment of new industries:

Underdeveloped countries can establish and develop new industries with the machinery, equipment and technical know-how imported from developed countries. This helps in the development of these countries and the economy of the world at large.

Increase in efficiency:

Due to international competition, the producers in a country attempt to produce better quality goods and at the minimum cost. This increases the efficiency and benefits to the consumers all over the world.

Development of the means of transport and communication:

International trade requires the best means of transport and communication. For the advantages of international trade, development in the means of transport and communication is also made possible.

International co-operation and understanding:

The people of different countries come in contact with each other. Commercial intercourse among nations of the world encourages exchange of ideas and culture. It creates co-operation, understandingand cordial relations amongst various nations.

Ability to face natural calamities(RopTfs;):

Natural calamities such as drought, floods, famine, earthquake etc., affect the production of a country adversely. Deficiency in the supply of goods at the time of such natural calamities can be met by imports from other countries.

DISADVANTAGES OF INTERNATIONAL TRADE: Impediment in the Development of Home Industries:

International trade has an adverse effect on the development of home industries. It a threatens the survival of infant industries at home. Due to foreign competition and unrestricted imports, the upcoming industries in the country may collapse.



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Dependence: The underdeveloped countries have to depend upon the developed ones for their

economic development. Such reliance often leads to economic exploitation. For instance, most of the underdeveloped countries in Africa and Asia have been exploited by European countries.

Political Dependence:

International trade often encourages subjugation and slavery. It impairs economic independence which endangers political dependence. For example, the Britishers came to India as traders and ultimately ruled over India for a very long time.

Mis-utilisation of Natural Resources:

Excessive exports may exhaust(ntspNaw;w) the natural resources of a country in a shorter span of time than it would have been otherwise. This will cause economic downfall of the country in the long run.

Import of Harmful Goods:

Import of spurious (Nghyp) drugs, luxury articles, etc. adversely affects the economy and well-being of the people.

Storage of Goods:

Sometimes the essential commodities required in a country and in short supply are also exported to earn foreign exchange. This results in shortage of these goods at home and causes inflation. For example, India has been exporting sugar to earn foreign trade exchange; hence the exalting prices of sugar in the country.

Danger to International Peace:

International trade gives an opportunity to foreign agents to settle down in the country which ultimately endangers its internal peace.

World Wars:

International trade breeds rivalries(Nghl;bfs;) amongst nations due to competition in the foreign markets. This may eventually lead to wars and disturb world peace. Hardships in times of War:

International trade promotes lopsided development of a country as only those goods which have comparative cost advantage are produced in a country.



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UNIT - II BALANCE OF TRADE

MEANING: Balance of Trade (BOT) is the difference in the value of all exports and imports of a

particular nation over a period of time. A positive or favourable trade balance occurs when exports exceed imports. A negative or unfavourable balance occurs when the opposite happens. If a country exports more than what it imports, for a given period of time, it has a positive BOT. BALANCE OF TRADE VS BALANCE OF PAYMENT:

BASIS OF COMPARISON BALANCE OF TRADE BALANCE OF PAYMENT

1. MEANING Balance of trade is a statement that captures the country’s export and import of goods with the remaining world.

Balance of payment is a statement that keeps track of all economic transactions done by the country with the remaining world.

2. RECORDS Transactions related to goods only.

Transactions related to both goods and services are recorded.

3. CAPITAL TRANSFERS Are not included in the balance of trade

Are included in balance of payment

4. WHICH IS BETTER? It gives a partial view of the country’s economic status.

It gives a clear view of the economic position of the country.

5. RESULT It can be favourable, unfavourable or balanced.

Both the receipts and payments sides tallies.

6. COMPONENT It is a component of current account of balance of payment.

Current account and capital account.

COMPONENTS OF BALANCE OF PAYMENTS: The BOP comprises of two accounts: Current and Capital. Current Account The four major components of the Current account are as follows:

1. Visible trade This is the net of export and imports of goods (visible items). The balance of this visible

trade is known as the trade balance. There is a trade deficit when imports are higher than exports and a trade surplus when exports are higher than imports.

2. Invisible trade This is the net of exports and imports of services (invisible items). Transactions mainly

consist of shipping, IT, banking and insurance services. 3. Unilateral transfers to and from abroad

https://www.forbes.com/sites/realspin/2017/05/24/deficits-in-trade-and-deficits-in-understanding/

http://lexicon.ft.com/Term?term=trade-surplus%2Fdeficit&mhq5j=e6



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These refer to payments that are not factor payments. For example, gifts or donations sent to the resident of a country by a non-resident relative.

4. Income receipts and payments These include factor payments and receipts. These are generally rent on property,

interest on capital, and profits on investments. Capital Account

The Capital account is used to finance the deficit in the current account or absorb the surplus in the current account. The three major components of the Capital account:

1. Loans to and borrowings from abroad These consist of all loans and borrowings given to or received from abroad. It includes

both private sector loans, as well as public sector loans.

2. Investments to/from abroad These are investments made by non-residents in shares in the home country or

investment in real estate in any other country.

3. Changes in foreign exchange reserves Foreign exchange reserves are maintained by the central bank to control the exchange

rate and ultimately balance the BOP. A Current account deficit is financed by a surplus in the Capital account and vice versa.

This can be done by borrowing more money from abroad or lending more money to non-residents. EQUILIBRIUM AND DISEQUILIBRIUM IN THE BALANCE OF PAYMENTS:

A country’s balance of payments is said to be always ‘balanced’ in accounting sense so there would be no ‘imbalance’ in a country’s BOP. However, the term ‘equilibrium’ (சமநிலை)

or ‘disequilibrium’ in relation to a country’s BOP. This is because the term ‘balance’ ‘imbalance’ is used in accounting sense while the term ‘equilibrium’ ‘disequilibrium’ is used in economic sense.

The distinction between autonomous and accommodating transactions is useful in defining equilibrium/disequilibrium (surplus/deficit) in balance of payments. Equilibrium in BOP

A country’s balance of payments is said to be in equilibrium when its autonomous receipts (credits) are equal to its autonomous payments (debits). Equilibrium in BOP → Autonomous Receipts = Autonomous Payments Disequilibrium in BOP

A country’s balance of payments is said to be in disequilibrium when its autonomous receipts (credits) are not equal to its autonomous payments (debits). Disequilibrium in BOP → Autonomous Receipts ≠ Autonomous Payments CAUSES OF DISEQUILIBRIUM:



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There are several factors which cause disequilibrium in the BOP indicating either surplus or deficit. Such causes for disequilibrium in BOP are listed below: Economic Factors:

1. Imbalance between exports and imports 2. Large scale development expenditure which causes large imports, 3. High domestic prices which lead to imports, 4. Cyclical fluctuations (like recession or depression) in general business activity, 5. New sources of supply and new substitutes

Political Factors:

Experience shows that political instability and disturbances cause large capital outflows and hinder Inflows of foreign capital. Social Factors:

a. Changes in fashions, tastes and preferences of the people bring disequilibrium in BOP by influencing imports and exports.

b. High population growth in poor countries adversely affects their BOP because it increases the needs of the countries for imports and decreases their capacity to export.

MEASURES FOR CORRECTING DISEQULIBRIUM EXCHANGE CONTROL: Export promotion:

Exports should be encouraged by granting various bounties to manufacturers and exporters. At the same time, imports should be discouraged by undertaking import substitution and imposing reasonable tariffs. Import:

Restrictions and Import Substitution are other measures of correcting disequilibrium. Reducing inflation:

Inflation (continuous rise in prices) discourages exports and encourages imports. Therefore, government should check inflation and lower the prices in the country. Exchange control:

Government should control foreign exchange by ordering all exporters to surrender their foreign exchange to the central bank and then ration out among licensed importers. Devaluation of domestic currency:

It means fall in the external (exchange) value of domestic currency in terms of a unit of foreign exchange which makes domestic goods cheaper for the foreigners. Devaluation is done by a government order when a country has adopted a fixed exchange rate system. Care should be taken that devaluation should not cause rise in internal price level. Depreciation:



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Like devaluation, depreciation leads to fall in external purchasing power of home currency. Depreciation occurs in a free market system wherein demand for foreign exchange far exceeds the supply of foreign exchange in foreign exchange market of a country (Mind, devaluation is done in fixed exchange rate system. EXCHANGE CONTROL: MEANING:

Exchange control refers to the policy of the government through which it controls or intervenes in the foreign exchange market. In other simple words, government puts restrictions on the sale and purchase of foreign currencies and refers a measure which influences the foreign exchange rate and closing free movements of foreign exchange in the country. IMPORTANT OBJECTIVES OF EXCHANGE CONTROL ARE AS FOLLOWS: Correcting Balance of Payments:

The main purpose of exchange control is to restore the balance of payments equilibrium, by allowing the imports only when they are necessary in the interest of the country and thus limiting the demands for foreign exchange up to the available resources. Sometimes the country devalues its currency so that it may export more to get more foreign currency. To Protect Domestic Industries:

The Government in order to protect the domestic trade and industries from foreign competitions, resort to exchange control. It induces the domestic industries to produce and export more with a view to restrict imports of goods. To Maintain an Overvalued Rate of Exchange:

This is the principal object of exchange control. When the Government feels that the rate of exchange is not at a particular level, it intervenes in maintaining the rate of exchange at that level. For this purpose the Government maintains a fund, may be called Exchange Equalization Fund to peg the rate of exchange when the rate of particular currency goes up, the Government start selling that particular currency in the open market and thus the rate of that currency falls because of increased supply.

On the other hand, the Government may overvalue or undervalue its currency on the basis of economic forces. In over valuing, the Government increases the rate of its currency in the value of other currencies and in under-valuing; the rate of its over-currency is fixed at a lower level. To Prevent Flight of Capital:

When the domestic capital starts flying out of the country, the Government may check its exports through exchange control. Policy of Differentiation:

The Government may adopt the policy of differentiation by exercising exchange control. If the Government may allow international trade with some countries by releasing the required foreign currency the Government may restrict the trade import and exports with some other countries by not releasing the foreign currency. Other Objectives:

https://www.businessstudynotes.com/others/methods-exchange-control-objectives/



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Apart from the above there may be certain other objectives of exchange control. They are:

1. To earn revenue in the form of difference between selling and purchasing rates of foreign exchange;

2. To stabilise the exchange rates; 3. To make imports of preferable goods possible by making the necessary foreign

exchange available; and 4. To pay off foreign liabilities with the help of available foreign exchange resources.

METHODS OF EXCHANGE CONTROL: In order to achieve goals of exchange control, two main methods are applied which are as under:

➢ Unilateral methods ➢ Bilateral methods

Unilateral Methods

In unilateral methods of exchange control, a government applies exchange control without consultation with other governments. These methods are discussed are as under; Exchange Pegging

It is the method of exchange control. Exchange pegging refers to the policy of fixing the exchange value of the current according to some desired rate. When it is fixed higher than market rate, it is “Pegging up”. but if fixed lower than market rate, it is known as “pegging down”. Clearing Agreement

Another method of exchange control is clearing agreement. It is an undertaking between two countries to exchange goods and services in accordance with a predetermined or specified rate of exchange. This method is applied to check fluctuation in exchange rate and to maintain equilibrium in balance of payments. Standstill Agreement

In this agreement the relationship between two countries in terms of capital movements remains unchanged. Debtor country is allowed to repay her loan in installments or the short-term loan is converted into long term loan. Compensation Agreement

According to this agreement, goods of just equal value are exported and imported from each other country. Hence, no balance is left and no foreign exchange is involved. Payment Agreement

In this method, creditor country will export more and more to Creditor County and the creditor country will import less and less from debtor country to settle the accounts.

Foreign Exchange Rationing



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Government has the right to direct all the exports and other investors to surrender all foreign exchange with the central banks. Foreign exchange, so collected can be rationed by fixing quota of amount and rate of foreign exchange. Blocking of Foreigner Accounts

During emergency, a country may block or restrict the foreigners to transfer their funds in their home accounts. But rarely this step is taken by the countries. Bilateral Methods

In bilateral methods of exchange control, a government applies exchange control with mutual understanding and consultation of the other government.

Clearing Agreement

When two countries agree to settle their accounts in their home currencies, through their central banks, this method is known as clearing agreement.

Moratorium Application

A legal authorization to debtor to stop payment is known as Moratorium. To solve temporary problems of payment, a country can stop to make payment for imports and interest on capital.



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UNIT - III EXPORT PROCEDURE

Meaning:

Exports are the goods and services produced in one country and purchased by residents of another country.It doesn't matter what the good or service is. It doesn't matter how it is sent. It can be shipped, sent by email, or carried in personal luggage on a plane. If it is produced domestically and sold to someone in a foreign country, it is an export.

Procedures:

The exporting activity involves several commercial and regulatory procedures. The export documentation involves the preparation or specified number of copies of the prescribed documents pertaining to the different procedures. Step 1. Receipt of an Order

The exporter of goods is required to register with various authorities such as the income tax department and Reserve Bank of India (RBI). In addition to this, the exporter has to appoint agents who can collect orders from foreign customers (importer). The Indian exporter receives orders either directly from the importer or through indent houses. Step 2. Obtaining License and Quota

After getting the order from the importer, the Indian exporter is required to secure an export license from the Government of India, for which the exporter has to apply to the Export Trade Control Authority and get a valid license. You can get a license from here too. The quota is referred to as the permitted total quantity of goods that can be exported. Step 3. Letter of Credit

The exporter of the goods generally ask the importer for the letter of credit, or sometimes the importer himself sends the letter of credit along with the order. Step 4. Fixing the Exchange Rate

Foreign exchange rate signifies the rate at which the home currency can be exchanged with the foreign currency i.e. the rate of the Indian rupee against the American Dollar. The foreign exchange rate fluctuates from time to time. Thus, the importer and exporter fix the exchange rate mutually. Step 5. Foreign Exchange Formalities

An Indian exporter has to comply with certain foreign exchange formalities under exchange control regulations. As per the Foreign Exchange Regulation Act of India (FERA), every exporter of the goods is required to furnish a declaration in the form prescribed in a manner. The declaration states:

I. The foreign exchange earned by the exporter on exports is required to be disposed of in the manner specified by RBI and within the specified period.

II. Shipping documents and negotiations are required to be done through authorised dealers in foreign exchange.

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https://cleartax.in/s/letters-of-credit/



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III. The payment against the goods exported will be collected through only approved methods.

Step 6. Preparation for Executing the Order The exporter should make required arrangements for executing the order:

I. Marking and packing of the goods to be exported as per the importer’s specifications.

II. Getting the inspection certificate from the Export Inspection Agency by arranging the pre-shipment inspection.

III. Obtaining insurance policy from the Export Credit Guarantee Corporation (ECGC) to get protection against the credit risks.

IV. Obtaining a marine insurance policy as required. V. Appointing a forwarding agent (also known as custom house agent) for handling

the customs and other related matters. Step 7. Formalities by a Forwarding Agent The formalities to be performed by the agent include –

I. For exporting the goods, the forwarding agent first obtains a permit from the customs department.

II. He must disclose all the required details of the goods to be exported such as nature, quantity, and weight to the shipping company.

III. The forwarding agent has to prepare a shipping bill/order. IV. The forwarding agent is required to make two copies of the port challans and

pays the dues. V. The master of the ship is responsible for the loading of the goods on the ship.

The loading is to be done on the basis of the shipping order in the presence of customs officers.

VI. Once the goods are loaded on the ship, the master of the ship issues a receipt for the same.

Step 8. Bill of Lading

The Indian exporter of the goods approaches the shipping company and presents the receipt copy issued by the master of the ship and in return gets the Bill of Lading. Bill of lading is an official receipt which provides the full description of the goods loaded on the ship and the name of the port of destination. Step 9. Shipment Advise to the Importer

The Indian exporter sends shipment advice to the importer of the goods so that the importer gets informed about the dispatch of the goods. The exporter sends a copy of the packing list, a non-negotiable copy of the Bill of Lading, and commercial invoice along with the advice note.



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Step 10. Presentation of Documents to the Bank

The Indian exporter confirms that he possesses all necessary shipping documentsnamely;MarineInsurancePolicy. The Consular InvoiceCertificate of Originthe Commercial Invoice the Bill of LadingThen the exporter draws a bill of exchange on the basis of the commercial invoice. The bill of exchange along with these documents is called Documentary Bill of Exchange. The exporter then hands over the same to his bank. Step 11. The Realisation of Export Proceeds

In order to realise the proceedings of the export, the exporter of the goods has to undergo specific banking formalities. On submission of the bill of exchange, these formalities are initiated. Generally, the exporter receives payment in foreign exchange. Processing of an Export Order Having an Export Order: Processing of an export order starts with the receipt of an export order. An export order, simply stated, means that there should be an agreement in the form of a document, between the exporter and importer before the exporter actually starts producing or procuring goods for shipment. Generally, an export order may take the form of proforma invoice or purchase order or letter of credit. You have already learnt these just in the preceding section. Examination and Confirmation of Order:

Having received an export order, the exporter should examine it with reference to the terms and conditions of the contract. In fact, this is the most crucial stage as all subsequent actions and reactions depend on the terms and conditions of the export order.

The examination of an export order, therefore, includes items like product description, terms of payment, terms of shipment, inspection and insurance requirement, documents realising payment and the last date of negotiation of documents with the bank. Having being satisfied with these, the export order is confirmed by the exporter. Manufacturing or Procuring Goods:

The Reserve Bank of India (RBI), under the export credit (interest subsidy) scheme, extends pre-shipment credit to exporter to finance working capital needs for purchase of raw materials, processing them and converting them into finished goods for the purpose of exports. The exporter approaches the bank on the basis of laid down procedures for the pre-shipment credit. Having received credit, the exporter starts to manufacture / procure and pack the goods for shipment overseas. Clearance from Central Excise:

As soon as goods have been manufactured/ procured, the process for obtaining clearance from central excise duty starts. The Central Excise and Sale Act of India and the related rules provide the refund of excise duty paid. There are two alternative schemes whereby 100 percent rebate on duty is given to export products on the submission of the proof of shipment. Pre-Shipment Inspection:



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There are number of goods whose export requires quality certification as per the Government of India’s notification. Consequently, the Indian custom authorities will require the submission of an inspection certificate issued by the competent and designated authority before permitting the shipment of goods takes place. Inspection of export goods may be conducted under:

(i) Consignment-wise Inspection (ii) In-process Quality Control, and (iii) Self-Certification.

The Inspection Certificate is issued in triplicate. The original copy is for the customs

verification. The second copy of the certificate is sent to the importer and the third copy remains with the exporter for his reference purpose. Appointment of Clearing and Forwarding Agents:

On completion of the process of obtaining the Inspection Certificate from the custom agencies, the exporter appoints clearing and forwarding agents who Performa number of functions on behalf of the exporter.

The main functions performed by these agents include packing, marking and labelling of consignment, arrangement for transport to the port arrangement for shipment overseas, customs clearance of cargo, procurement of transport and other documents. Goods to Port of Shipment:

If goods are sent through a road carrier to the port, no specific formality is involved. In case, the goods are sent by rail to the port of shipment, allotment of wagon needs to be obtained from the Railway Board. The following documents are submitted to the booking railway yard/station:

(i) Forwarding Note (A Railway Document)

(ii) Shipping Order

(iii) Wagon Registration Fee Receipt

Port Formalities and Customs Clearance: Having received the documents from the export department, the clearing and

forwarding agent takes delivery of the cargo from the railway station or the road transport company and stores it in the warehouse. He also obtains customs clearance and permission from the port authorities to bring the cargo into the shipment shed.

The custom department grants permission for export at the office of the customs and physical verification of goods in the shipment shed. The clearance for export is given on the Shipping Bill. Dispatch of Documents by Forwarding Agent to the Exporter:

After obtaining the Bill of Lading from the Shipping Company, the clearing and forwarding agent dispatches all the documents to his / her exporter. These documents include:

(i) Commercial Invoice (attested by the customs)



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(ii) Export Promotion Copy (iii) Drawback Copy (iv) Clean on-Board Bill of Lading (v) Letter of Credit (vi) AR4/ AR4A and Gate Pass (vii) GR Form (in duplicate)

Certificate of Origin: On receipt of above documents from the forwarding agent, the exporter now applies to

the Chamber of Commerce for a Certificate of Origin and obtains it. If the goods are exported to countries offering GSP concessions, the exporter needs to procure the GSP Certificate of Origin from the concerned authority like Export Inspection Agency. Dispatch of Shipment Advice to the Importer:

At last, the exporter sends ‘Shipment Advice’ to the importer intimating the date of shipment of the consignment by a named vessel and its expected time of arrival at the destination port of the importer.

The following documents are also sent to the importer to facilitate him for taking delivery of the’ consignment:

(i) Bill of Lading (non-negotiable copy) (ii) Commercial Invoice (iii) Packing List (iv) Customs Invoice

Submission of Documents to Bank: At the end of the process, the exporter presents the following documents to his bank for

realisation of his amount due to the importer. EXPORT DOCUMENT RELATED TO SHIPMENT. INTRODUCTION

The export process is made as difficult complex by the wide variety of documents that the exporter needs to complete to ensure that the order reaches its destination quickly, safety and without problems. For shipment process, certain certificates will be required. MATE RECEIPT

A Mate Receipt is a receipt issued by the Commanding Office of the ship when the cargo is loaded on the ship and contains information about the

1. Name of the vessel 2. Berth 3. Date of shipment 4. Description of packages 5. Marks and numbers 6. Conditions of the cargo at the time of receipt onboard the ship etc.

➢ The mate receipt is first handed over to the Port Trust authorities so that all the port dues mat be paid by the exporter.



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➢ After paying all the port dues, the merchant or the agent may collect the mate receipt from the Port Trust authorities.

➢ The bill of lading is prepared by the shipping agent after the mate has been obtained. SHIPPING BILL:

➢ The shipping bill is the main document on the basis of which the Customs’ permission for export s given.

The shipping bill contains 1. Particulars of the goods exported 2. The name of the vessel master or agent’s flag 3. The port at which goods are to the discharged 4. The country of final destination, the exporter’s name and address etc. It also

contains details of the packages and the goods, such as number and description, marks and numbers, quantity details.

The following three forms of the shipping bill are available with the customs authorities:

1. Dutiable shipping bill for goods for which there is export duty. 2. Free shipping bill for goods for which there is no export duty. 3. Drawback shipping bill which is required for claiming the Customs drawback

against exported goods.

CART TICKET A cart ticket also known as a cart chit, vehicle and gate pass, is prepared by the exporter

and includes details of 1. Export cargo in terms of the shipper’s name 2. The number of packages 3. The shipping bill number 4. The port of destination 5. 5.The number of the vehicle carrying the cargo.

The driver of the vehicle cargo should possess the ticket and the vehicle is brought at

port gate, it should be presented to the gate warden/inspector/keeper along with other shipping and port documents.

The gate keeper/warden/inspector, after satisfying himself that the vehicle is carrying the cargo as mentioned in the document allows it to pass the gate. CERTIFICATE OF MEASUREMENT

➢ Freight is charged either on the basis of weight or measurement. ➢ When it is charged on the basis of weight, the weight declared by the shipper may be

accepted. ➢ However, a certificate of measurement from the Indian Chamber of Commerce or other

approved organization may be obtained by the shipper and given to the shipping company of the calculation of the necessary freight.

The certificate contains

1. The name of the vessel



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2. Port and destination 3. The description of goods 4. The quantity, length, breadth, depth, etc of the packages.

BILL OF LADING

➢ The bill of lading is a document wherein the shipping company gives its official receipts for the goods shipped in its vessel and at the same time contracts to carry them to the port of destination.

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

➢ A bill of lading serves three main purpose As a document of title to the goods As a receipt from the shipping company As a contract for the transportation of goods.

➢ Each shipping company has its own Bill of lading. ➢ The exporter prepares the Bill of lading in the forms obtained from the shipping

company or from the agents of the shipping company. The information continued in the bill of lading includes

1. The date and place of shipment 2. The name of the consignor 3. The name and destination of the vessel 4. Quantity and destination of the goods 5. The marks and numbers 6. The invoice number and the date of export 7. The gross weight and net weight 8. The number of packages 9. The amount of freight etc.

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 each airline has its own airway bill. ➢ The same details as mentioned in Bill of Lading (for ship) are mentioned in the Airway

bill. ➢ The goods may actually take off after a cooling period of 48 hours for Aircraft safety.

DOCUMENTS RELATED TO PAYMENT:

1. Letter of credit 2. Bill of exchange 3. Trust receipt 4. Letter of hypothecation 5. Bank certificate of payment

1. Letter of credit:

Letter of credit is the payment method commonly used in all international trade. A Letter of Credit is an arrangement whereby Bank acting at the request of a customer (Importer / Buyer), undertakes to pay for the goods/services, to a third party (Exporter / Beneficiary) by a



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given date, on documents being presented in compliance with the conditions laid down. It is also known as Documentary Credits. 2. Bill of Exchange:

The Bills of Exchange Act 1914 in Mauritius, defines a bill of exchange as “an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer. 3. Trust receipt:

If the buyer fails or unable to pay for the goods arrived, the buyer’s bank may make the goods available to the buyer by making an agreement after the buyer deal or sign with the trust receipt. By this agreement, the buyer is allowed to sell the goods and the buyer acts as an agent for the bank. The buyer didn’t own the ownership of the goods until the full payment is done to the bank. 4. Letter of hypothecation:

If the importer (buyer) fails or refuses to pay for the shipped goods, the exporter may submit the document (letter of hypothecation) to the bank that the exporter gives full power to sell the goods and get paid from the bank. 5. Bank certification of payment:

This is issued by the negotiating bank of the exporter, proves that all bill covering the shipment has been negotiation and export procedures are completed by the exporter. The payment is received in accordance with exchange control regulations in the approved manner.



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UNIT – IV IMPORT PROCEDURE

Meaning:

An import is a good or service bought in one country that was produced in another. Imports and exports are the components of international trade. If the value of a country's imports exceeds the value of its exports, the country has a negative balance of trade (BOT), also known as a trade deficit. Import Procedure:

Import trade refers to the purchase of goods from a foreign country. The procedure for import trade differs from country to country depending upon the import policy, statutory requirements and customs policies of different countries. In almost all countries of the world import trade is controlled by the government. The objectives of these controls are proper use of foreign exchange restrictions, protection of indigenous industries etc. The imports of goods have to follow a procedure. This procedure involves a number of steps. Obtaining I.E.C. No.:

Before starting the import procedure, the importer has to obtain an I.E.C. (Import-Export Code) number. This number is used in filling the formalities of import procedure, To get this number, the importer has to apply to the regional Import-Export Licensing Authority in the prescribed form. Obtaining Registration Cum Membership Certificate (RCMC):

Importers get various benefits in the form of subsidies and exemption in excise duty, tax, etc. To get these benefits, they have to show RCMC. After getting the I.E.C. number, the importer applies for RCMC. The RCMC is issued by:

a. Import Promotion Council. b. Federation of Indian Import Organization. c. Import Development Authority, etc.

Along with the application, the importer has to submit a bank certificate and IEC number. If the authority is satisfied, then they will issue RCMC. Opening a letter of credit:

Better of credit is issued by the importer’s bank in favour of the exporter. In this letter, the bank undertakes guarantee for making payment on behalf of the importer. The importer approaches his bank and instructs the j bank to issue a letter of credit in favour of the exporter. The importer also instructs the bank about the documents to be collected from exporter before making payment. Arrival of goods:

Goods are shipped by the exporter as per the specifications of the importer. When goods reach the importer’s country, the captain of the ship informs the dock officer and

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instructs him to receive the goods and record the details about the goods on the document called import general manifest. This document gives details of about imported goods. Informing importer:

After the arrival of goods, the dock authorities inform the importer about the arrival of goods. The importer prepares a document called bill of entry which contains details about the imported goods and submits this document to the customs officer to get customs clearance. Customs clearance:

The customs officer examines the bill of entry carefully and assesses the custom duty to be paid by the importer and after assessing the duty amount, the bill of entry is given to the appraiser officer who verifies the details given in the bill. If the appraiser officer is satisfied with the information given in bill of entry, then he returns the bill to the importer for making payment of custom duty The steps taken in import procedure are discussed as follows: Trade Enquiry:

The first stage in an import transaction, like any other transaction of purchase and sale relates to making trade enquiries. An enquiry is a written request from the intending buyer or his agent for information regarding the price and the terms on which the exporter will be able to supply goods.

The importer should mention in the enquiry all the details such as the goods required, their description, catalogue number or grade, size, weight and the quantity required. Similarly, the time and method of delivery, method of packing, terms and conditions in regard to payment should also be indicated. Procurement of Import Licence and Quota:

The import trade in India is controlled under the Imports and Exports (Control) Act, 1947. A person or a firm cannot import goods into India without a valid import licence. An import licence may be either general licence or specific licence. Under a general licence goods can be imported from any country, whereas a specific or individual licenceauthorises to import only from specific countries.

The Government of India declares its import policy in the Import Trade Control Policy Book called the Red Book. Every importer must first find out whether he can import the goods he wants or not, and how much of a certain class of goods he can import during the period covered by the relevant Red Book. For the purpose of issuing license, the importers are divided into three categories:

a)Established importer, b)Actual users, and c)Registered exporters, i.e., those import under any of the export

promotion schemes.

In order to obtain an import licence, the intending importer has to make an application in the prescribed form to the licensing authority. If the person imported goods of the class in



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which he is interested now during the basic period prescribed for such class, he is treated as an established importer.

An established importer can make an application to secure a Quota Certificate. The certificate specifies the quantity and value of goods which the importer can import. For this, he furnishes details of the goods imported in any one year in basic period prescribed for the goods together with documentary evidence for the same, including a certificate from a chartered accountant in the prescribed form certifying the c.i.f. value of the goods imported in the selected year. The c.i.f. value includes the invoice price of the goods and the freight and insurance paid for the goods in transit. The quota certificate entitles the established importer to import upto the value indicated therein (called Quota) which is calculated on the basis of past imports. If the importer is an actual user, that is, he wants to import goods for his own use in industrial manufacturing process he has to obtain licence through the prescribed sponsoring authority.

Registered exporter importing against exports made under a scheme of export promotion and others have to obtain licence from the Chief Controller of Exports and Imports. The Government issues from time to time a list of commodities and products which can be imported by obtaining a general permission only. This is called as O.G.L. or Open General Licence list. Obtaining Foreign Exchange:

After obtaining the licence (or quota, in case of an established importer), the importer has to make arrangement for obtaining necessary foreign exchange since the importer has to make payment for the imports in the currency of the exporting country.

The foreign exchange reserves in many countries are controlled by the Government and are released through its central bank. In India, the Exchange Control Department of the Reserve Bank of India deals with the foreign exchange. For this the importer has to submit an application in the prescribed form along-with the import licence to any exchange bank as per the provisions of Exchange Control Act.

The exchange bank endorses and forwards the applications to the Exchange Control Department of the Reserve Bank of India. The Reserve Bank of India sanctions the release of foreign exchange after scrutinizing the application on the basis of exchange policy of the Government of India in force at the time of application.

The importer gets the necessary foreign exchange from the exchange bank concerned. It is to be noted that whereas import licence is issued for a particular period, exchange is released only for a specific transaction. With liberalisation of economy, most of the restrictions have been removed as rupee has become convertible on current account. Placing the Indent or Order:

After the initial formalities are over and the importer has obtained the licence quota and the necessary amount of foreign exchange, the next step in the import of goods is that of



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placing the order. This order is known as Indent. An indent is an order placed by an importer with an exporter for the supply of certain goods.

It contains the instructions from the importer as to the quantity and quality of goods required, method of forwarding them, nature of packing, mode of settling payment and the price etc. An indent is usually prepared in duplicate or triplicate. The indent may be of several types like open indent, closed indent and Confirmatory indent.

In open indent, all the necessary particulars of goods, price, etc. are not mentioned in the indent, the exporter has the discretion to complete the formalities, at his own end. On the other hand, if full particulars of goods, the price, the brand, packing, shipping, insurance etc. are mentioned clearly, it is called a closed indent. A confirmatory indent is one where an order is placed subject to the confirmation by the importer’s agent. Despatching a Letter of Credit:

Generally, foreign traders are not acquainted to each other and so the exporter before shipping the goods wants to be sure about the creditworthiness of the importer. The exporter wants to be sure that there is no risk of non-payment. Usually, for this purpose he asks the importers to send a letter of credit to him.

A letter of credit, popularly known as ‘L/C or ‘L.C is an undertaking by its issuer (usually importer’s bank) that the bills of exchange drawn by the foreign dealer, on the importer will be honoured on presentation upto a specified amount. Obtaining Necessary Documents:

After dispatching a letter of credit, the importer has not to do much. On receipt of the letter of credit, the exporter arranges for the shipment of goods and sends Advice Note to the importer immediately after the shipment of goods. An Advice Note is a document sent to a purchaser of goods to inform him that goods have been despatched. It may also indicate the probable date on which the ship is expected to reach the port of destination.

The exporter then draws a bill of exchange on the importer for the invoice value of goods. The shipping documents such as the bill of lading, invoice, insurance policy, certificate of origin, consumer invoice etc., are also attached to the bill of exchange. Such bill of exchange with all these attached documents is called Documentary Bill. Documentary bill of exchange is forwarded to the importer through a foreign exchange bank which has a branch or an agent in the importer’s country for collecting the payment of the bill. There are two types of documentary bills: (a) D/P, D.P. (or Documents against payment) bills.

If the bill of exchange is a D/P bill, then the documents of title of goods are delivered to the drawee (i.e., importer) only on the payment of the bill in full. D/P bill may be sight bill or usance bill. In case of sight bill, the payment has to be made immediately on the presentation of the bill. But usually a grace period of 24 hours is granted. (b) D/A, D.A. (or Document against acceptance) bills.



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Usance bill is to be paid within a particular period after sight. If the bill is a D/A bill, then the documents of title of goods are released to the drawee on his acceptance of the bill and it is retained by the banker till the date of maturity. Usually 30 to 90 days are provided for the payment of the bill.

Customs Formalities and Clearing of Goods:

After receiving the documents of title of the goods, the importer’s only concern is to take delivery of the goods, when the ship arrives at the port and to bring them to his own place of business. The importer has to comply with many formalities for taking delivery of goods. Unless the following mentioned formalities are complied with, the goods lie in the custody of the Custom House. To obtain endorsement for delivery or delivery order:

When the ship carrying the goods arrives at the port, the importer, first of all, has to obtain the endorsement on the back of the bill of lading by the shipping company. Sometimes the shipping company, instead of endorsing the bill in his favour, issues a delivery order to him. This endorsement of delivery order will entitle the importer to take the delivery of the goods.

The shipping company makes this endorsement or issues the delivery order only after the payment of freight. If the exporter has not paid the freight, i.e., when the bill, of lading is marked freight forward, the importer has to pay the freight in order to get green signal for the delivery of goods. To pay Dock dues and obtain Port Trust Dues Receipts:

The importer has to submit two copies of a form known as ‘Application to import’ duly filled in to the ‘Lading and Shipping Dues Office’. This office levies a charge on all imported goods for services rendered by the dock authorities in connection with lading of goods. After paying the necessary charges, the importer receive back one copy of the application to import as a receipt ‘Port Trust Dues Receipt’. Bill of Entry:

The importer will then fill in form called Bill of Entry. This is a form supplied by the customs office and is to be filled in triplicate. The bill of entry contains the particulars regarding the name and address of the importer, the name of the ship, packages number, marks, quantity, value, description of goods, the name of the country wherefrom goods have been imported and custom duty payable.

The bill of entry forms are of three types and are printed in three colours-Black, Blue and Violet. A black form is used for non-dutiable or free goods, the blue form is used for goods to be sold within the country and the violet form is used for re-exportable goods, i.e., goods meant for re-export. The importer has to submit three forms of bill of entry along-with Port Trust Dues Receipt to the customs office. Bill of Sight:

If the importer is not in a position to supply the detailed particulars of goods because of insufficiency of information supplied to him by the exporter, he has to prepare a statement called a bill of sight. The bill of sight contains only the information possessed by the importer



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along-with a remark that he is not in a position to give complete information about the goods. The bill of sight enables him to open the package and examine the goods in the presence of custom officer so as to complete the bill of entry. To pay Customs or Import Duty: There are three types of imported goods:

I. Non dutiable or free goods, II. Goods which are to be sold within the country or which are for home

consumption III. Re-exportable goods i.e. goods meant for re-export. If the goods are duty

free, noimport duty is to be paid at the custom office.

Custom authorities will permit the delivery of such goods after usual examination of the goods. But if the goods are liable for duty, the importer has to pay custom or import duty which may be based on weight or measurement of goods, called Specific Duty or on the value of imported goods Ad-valorem Ditty.

There are three types of import duties. On some goods quite low duties are levied and they are called revenue duties. On some others, quite high duties are charged to give protection to home industries against foreign competition. While goods imported from certain nations are given preferential treatment for the levy of import duties and in their case full protective duties are not charged. Bonded and Duty paid Warehouses:

The port trust and custom authorities maintain two types of warehouses-Bonded and Duty paid. These warehouses are situated near the dock and are very useful to importers who do not have godown of their own to store the imported goods or who, for business reasons, do not wish to carry them to their own godowns.

The goods on which the duty has already been paid by the importer can be kept in the duty paid warehouses for which a receipt called ‘warehouse receipt’ is issued to him. This receipt is a document of title and is transferable. The bonded warehouses are meant for goods on which duty has been paid by the importer. If the importer cannot pay the duty, he may keep the goods in Bonded warehouses for which he is issued a receipt, called ‘Dock Warrant’. Dock Warrant, also like warehouses receipt, is a document of title and is transferable. The bonded warehouses are used by the importer when:

I. He has no go down of his own. II. He cannot pay the duty immediately.

III. He wants to re-export the goods and thereby does not want to pay the duty. IV. He wants to pay the duty in installments.

A nominal rent is charged for the use of these warehouses. One special advantage of

these warehouses is that the importer can sell the goods and transfer the title of goods merely by endorsing warehouse receipt or dock-warrant. This will save the importer from the trouble and expenses of carrying the goods from the warehouses to his godown.



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Appointment of clearing Agents:

By now we understand that the importer has to fulfil many legal formalities before he can take delivery of goods. The importer may take the delivery of the goods himself at the port. But it involves much of time, expenses and difficulty. Thus, to save himself from the botheration of complying with all the complicated formalities, the importer may appoint clearing agents for taking the delivery of the goods for him. Clearing agents are the specialised persons engaged in the work of performing various formalities required for taking the delivery of goods on behalf of others. They charge some remuneration on performing these valuable services. Making the Payment:

The mode and time of making payment is determined according to the terms and conditions as agreed to earlier between the importer and the exporter. In case of a D/P bill the documents of title are released to the importer only on the payment of the bill in full. If the bill is a D/A bill, the documents of title of the goods are released to the importer on his acceptance of the bill. The bill is retained by the banker till the date of maturity. Usually, 30 to 90 days are allowed to the importer for making the payment of such bills.

Closing the Transactions:

The last step in the import trade procedure is closing the transaction. If the goods are to the satisfaction of the importer, the transaction is closed. But if he is not satisfied with the quality of goods or if there is any shortage, he will write to the exporter and settle the matter. In case the goods have been damaged in transit, he will claim compensation from the insurance company. The insurance company will pay him the compensation under an advice to the exporter.



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UNIT -V EXPORT PROMOTION

Meaning Export promotion has been defined as “those public policy measures which actually or

potentially enhance exporting activity at the company, industry, or national level”. Although many forces determine the international flow of goods and services, export promotion is one of the principal opportunities that governments have to influence the volume and types of goods and services exported from their areas of jurisdiction (mjpfhutuk;G) Objectives of Export promotion

➢ Compensate the exporters for the high domestic cost of production. ➢ Assistance to new and infant exporters to develop export business. ➢ Increase the profit of export business. ➢ Improve in technologies and quality to compete.

ORGANIZATIONAL SET UP

Government has established or sponsored a number of organizations to provide different types of assistance to the exporters. Apart from the organizations established exclusively for export promotion, there are also a number of other institutions which assist the export sector. An outline of the important organizations which help to promote exports is given below: MINISTRY OF COMMERCE

The Ministry of Commerce, Government of India, is the most important organ concerned with the promotion and regulation of foreign trade in the country. The ministry has elaborated organizational arrangement to look after various aspects of trade regulation and promotion. The Department of Commerce in the Ministry of Commerce is assigned a very important role in different matters concerned with foreign trade of the country including commercial relation with other countries, promotion and regulation of foreign trade, state trading, etc. Matters related to foreign trade are dealt with eight divisions in the Department of Commerce, namely,

(i) Administrative and General Division, (ii) Finance Division, (iii) Economic Division, (iv) Trade Policy Division, (v) Foreign Trade Territorial Division, (vi) Exports Products Division, (vii) Services Division, and (viii) Industries Division.

AUTONOMOUS BODIES



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Commodity Boards: The following are the statutory Commodity Boards namely Tea, Coffee, Cardamom,

Rubber, Coir, Coconuts, Handicrafts, Handloom and Silk responsible for production, development and export.

Export Inspection Council:

The Export Inspection Council, a statutory body, was set up in 1964 under the export quality control and Inspection Act 1963, is responsible for the enforcement of quality control and compulsory pre-shipment inspection of various exportable commodities. Indian Institute of Foreign Trade:

The Indian Institute of Foreign Trade an autonomous organization, registered under the Societies Registration Act 1964. It is primarily concerned with developing training programme, research and marketing studies. The main functions of the institute are:

a) Training of personnel in modern techniques of international trade; b) Organization of Research in problems of foreign trade; c) Organization of marketing research, area surveys, commodity surveys and

market surveys; Indian Institute of Packaging:

The Indian Institute of Packaging is registered under the Societies Registration Act 1964. The main aims of the institute are to undertake research on raw materials for the packaging industry, to organize training of programmes on packaging technology, to stimulate consciousness of the need for goods packaging technology, to stimulate consciousness of the need for good packaging, etc.

Export Promotion Councils:

There are number of Export Promotion Councils under the administrative control of Ministry of Commerce. These Councils are registered as non-profit organizations under the Companies Act. The Councils perform both advisory and executive functions. These Councils are also the registering authorities under the Import Policy for Registered Exporters.

Federation of Indian Export Organizations:

The Federation of Indian Export Organizations is an apex body of various export promotion organizations and institutions. It also functions as a primary servicing agency to provide integrated assistance to Government recognized Export Houses and as a central co-coordinating agency in respect of export promotion efforts in the field of consultancy services in the country.

Indian Council of Arbitration:

The Indian Council of Arbitration set up in 1965 under the Societies Registration Act 1964, promotes arbitration as a means of settling commercial disputes and popularizes arbitration among the traders, particularly those engaged in international trade. Its main objectives are:



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Maintenance of panels of some persons to act as arbitrators a) Popularization and propagation of the idea of commercial arbitration in relation

to foreign trade b) Through the panel of members founded by it, arranging arbitration of disputes in

international trade EXPORT INCENTIVES

Export incentives are widely employed strategy of export promotion. The main aim of these incentives is to increase the profitability of export business. Important export incentives in India include rebate of duties, cash compensatory support, income tax concession, interest subsidies, freight subsidy, etc. It has been common to describe these as incentives. However, as the AbidHussain Committee has observed, they are more a compensation for the comparative disadvantages faced by the Indian exporter than incentives. A multi-pronged strategy has been evolved for promotion of exports to achieve the goals envisaged.

Extension of the scheme of supply of raw materials at international prices as are

operating presently for steel, rubber and certain chemicals to other areas including aluminium, where they form a significant part of the cost.

A liberal approach, on a case by case basis, in making available contemporary

technology for the thrust sectors where necessary, linked to export obligations. Permission, on a case by case basis, in selected areas to large firms to manufacture

products which are in the small-scale reserved sector, provided 60 per cent of the production is exported and such units are set up in backward districts.

Full remission of excise and other duties borne by the products that are exported

subject to certain exceptions Exemption from the requirement of licensing of any expansion in capacity exclusively for

export production Permission, in principle to allow use of 5 to 10 per cent of the net foreign exchange

earnings by exporters for export promotion under a new blanket permit scheme, to be announced by the Reserve Bank of India.



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Marketing assistance

An important export promotion measure taken by the Government is institution of the Market Development Assistance (MDA). Assistance under the MDA is available for market and commodity researchers; trade delegations and study teams; participation in trade fairs and exhibitions; establishment of offices and branches in foreign countries; and grants-in-aid to EPCs and other approved organizations for export promotion on Export Credit by commercial banks and approved cooperative banks enjoyed a subsidy out of the MDA. Most of the MDA expenditure in the past was absorbed by the Cash Compensatory Support. The Cash Compensatory Support helped the exporters to increase the price competitiveness of the Indian products in foreign markets.

IMPORT FACILITIES FOR EXPORTERS

Export Promotion Capital Goods Under the Export Promotion Capital Goods (EPCG) Scheme, manufacturer exporters, merchant exporters tied to supporting manufacturers and service providers are eligible to import capital goods both new and second hand, including spares up to 20% of the CIF value of capital goods, and computer systems at a concessional/zero rate customs duty subject to export obligation. Two windows are available under this Scheme: This scheme was modified several times. The export promotion capital goods scheme helped the establishment and expansion of efficient export production capacities. Duty Exemption Scheme: Duty exemption consists of Duty-Free License and Duty Entitlement Pass Book (DEPB). Duty Free License:

Duty Free License includes Advances License, Advance Intermediate License and Special Impress License. Import of inputs like raw materials, intermediates, components, consumables, parts, accessories, mandatory spares (not exceeding 5% of the CIF value of a duty free license) and packing materials may be permitted against a duty free license. An Advance License is granted to a merchant / manufacturer exporter for the import of inputs required for the manufacture of goods without payment of basic customs duty. Duty Entitlement Pass Book:

Under the DEPB scheme, an exporter is eligible to claim credit as specified percentage of FOB value of exports made in freely convertible currency. Any item, expect those in the negative list, is allowed to import without payment of customs duties against the credit under a DEPB. Third party exports are also admissible for grant of DEPB. Import and Export Duties:

The tax or duties imposed by the Government of a country on the incoming goods in the country is called import duty, similarly, the tax charged by the Government on the sale of goods to another (foreign) country is called export duty. The traders should also properly understand the rates and regulations of these different types of duties which are summarized as under: Ad Valorem Duty:



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When duties are levied according to the value of the goods, they are called ad - volorem duties. Specific Duties:

When duty is levied according to the weight or quantity of the goods, it is called specific duty, e.g., per ton, per litre, etc. Preferential Duties:

Sometimes, the Government wants to encourage the import from a particular country; therefore, it levies less duty on imports from the country. It is called preferential duty. Tariff: The list in which the details of the different duties are given is called tariff. Protective Duties:

If the country’s Government wants to promote the export of the goods to other countries, it can give some subsidies in the form of duties so that the cost of the goods can further be reduced. This preference may be given for few specific countries only. Above duties are imposed by the Government on the basis of comparative trade advantages with a particular country and also depending on the political relationship. MAJOR PROBLEMS OF INDIA’S EXPORT SECTOR: High GovernmentControl

One of the biggest problems faced by the Indian export sector is the high restrictions that the government has put on the trade. Not just the Indian government, but also the government of countries with which you are trying to make trade. A number of licenses and permissions need to be taken by both the countries that create confusion in the mind of the traders who refrain from making export due to this. InconsistentTrade Policies

The Indian trade policies are not on the same pace with the international trade policies or requirements. The international traders see India as a very complex market that has many barriers to trade. There are many reasons behind this complexity like paying high taxes, construction permits, cross-border trading, enforced contracts etc. ImportTariffs

An increased import tariff dissuades many exporters to make trade in India. Increased import tariff leads to an appreciation in the real exchange rate of the country. Additionally, high import tariff encourages traders to lean towards illegal means of import/export. This leads to smuggling which today has become a full-fledged industry. Traders think Indian market to be corrupt and hesitate from making any trade. LackofProperInfrastructure

Another factor that leads to low export in India is the lack of proper infrastructure facilities. There is inadequate space, both at the seaports and airports for keeping and storing various goods. In addition to that, many goods require special facilities that India is,



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unfortunately, still trying hard to provide. India’s export trade would see considerable improvement if the infrastructure facilities are improved here. LowExportPublicity (Or) Promotion

India has a pretty good inclination towards adopting means to substituting import and regards export promotion or publicity at a lower scale. Promoting export trade in India is one of the chief issues that Indian government should work on in order to have a considerable growth in terms of export trade. If people don’t get to know about the goods and services that the country has, then they would never be attracted to making trade relations. In fact, India should also implement many tax reforms and concessions to promote export business and set a step forward in Indian export growth. Lengthy andComplexProcess

It is an undeniable truth that trading in the international sphere calls for more time and energy. However, it is known that the export procedure of India is not only lengthier but complex too when compared to other countries. Various documents are required for export trade which makes the process more time as well as money consuming.

These were the major problems that are creating a hindrance in the India’s export business. In addition to that, there are many other factors like language difference, lack of information, jealousy among companies and corruption at borders that can be stopping people making an export trade with India.

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