Table of Contents

SUMMER TRAINING PROJECT REPORT

Undertaken at

INDO ALUSYS INDUSTRIES LIMITED

Submitted in partial fulfillment of the requirement for the award of the degree of

MASTER OF INTERNATIONAL BUSINESS

By

Abid Husain

Roll no 09-MIB-02

Enrollment no- 06-3162

CENTER FOR MANAGEMENT STUDIES

JAMIA MILLIA ISLAMIA, NEW DELHI- 110025

DECLARATION

I, ABID HUSAIN, a bonafide student of MIB(full time) programme at the centre for management studies, jamia millia islamia, new delhi, hereby declare that I have undergone the summer training at Indo Alusys industries limited under the supervision of Mr. M.C. Gupta(DGM-Mrktng) on and from 1st june 2011 to 15th july 2011.

I also declare that the present project report is based on the above summer training and is my original work. The content of this project report has not been submitted to any other university or institute either in part or in full for the award of any degree, diploma or fellowship.

Further, I assign the right to the university, subject to the permission from organization concerned, use the information and contents of this project to develop cases, caselets, case leads and papers for publication and/or for use in teaching.

Signature of student

Place:new delhi Name of studentDate: Roll no

Acknowledgement

I am very thankful to all those involved who have enabled me to

successfully complete my project on ‘Export Procedure &

Documentation’.

It was a great opportunity for me to work at indo alusys industries

limited, a reputed aluminium products exporter. During my training I

was exposed to a variety of fields which are unique to this industry. At

the same time what mattered the most were the people around me

without whom support neither would have this project been possible

nor would have my stay at the organization for these 7 weeks been so

productive.

It was indeed a great experience for me to be associated with this

organization which has contributed to a great extent in enriching me

as an individual. Since I had the opportunity to work in many

departments of this organization, I could meet a host of amiable

people each of whom helped me to learn a lot and in this process I

have made life long contacts.

Specially, I am grateful to Mr. S. veeramani and Mr. syed mohd wajid

ali, whose valuable support and inspiration to go ahead has motivated

me. I would like to thank Mr. M.C.GUPTA who provides me guidance

and co-operation for this project.

Regards

Abid Husain

S.No.

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Acknowledgement

Executive Summary

Statement Of Objective

Focus Of The Study

Export managementa)need for export mngt.b)types of documents.

Profile of the company

Procedure Of Exports and Its Documentation1. Pre-Export Activities2. Processing Of Export Order

i. Stage 1st -- Confirmation of Export Contract

ii. Stage 2nd – Sourcing of Export Orderiii. Stage 3rd – Dispatchingiv. Stage 4th – Pre Shipment Operationsv. Stage 5th – Custom Clearancevi. Stage 6th – Post Shipment Operations

3. Work Flow Chart of Company

Modes Of Payment

Government Incentives For Exports

Summary

Conclusion

Limitations of the Study

Bibliography

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14. Refrences

EXECUTIVE SUMMARY

The present study is a comprehensive study of EXPORT

DOCUMENTATION AND PROCEDURE . The research work is done in

collaboration with INDO ALUSYS INDUSTRIES LIMITED to assess the

overall export procedure & documentation. On concentrating the

objective of project, the maximum information is summed up

sequentially. The executive summary of the study describes...

Objective

The main objective of the study is to formulate the overall procedure of

export orders say ‘how to export’, documentation, modes of payment

& incentives from Govt. for Indo alusys industries limited

Research Methodology

Research comprises defining and redefining problems. Research

purpose is to discover answer to question through the procedure of

scientific procedure. Interviews and discussion with the supervisors

and officials to get the root of the pre-determined objective and in

order to outline the ‘a to z’ steps of processing export order.

Findings & Recommendations

On the execution of the objective of study, it might be conclude that

processing of export order can be a tedious and costly activity. A

careful planning and implementation of appropriate procedure can

reduce time and cost drastically. A fair documentation not only reduces

the threats of frauds, bottlenecks and risks but also enhances the

business relationship between Exporters, Importers & Governments in

the whole world.

STATEMENT OF OBJECTIVES

The complexity of business operations greatly accentuate as

businessmen cross the national boundaries. A lot of formalities and

modalities of several organizations have to be compiled to and as error

can create bottle necks in the free flow of goods, documents,

information and payments.

Documentation is definitely one of the prime specialized

functions of international business. The documents safeguard the

interests of Exporter, Importer, Banks, Governments, Transport

Agencies, Insurance Agencies and Inspection Agencies.

Main Objective of the Study

The main objective of the training was to study the systematic export

procedure & documentation of a reputed export house say INDO

ALUSYS INDUSTRIES LIMITED to overcome any kind of error,

bottleneck, frauds and mistake for the awareness and implementation

of standardized rule-regulations & documentation to contribute the

integration of International Business up to any extent.

Sub Objectives of the Study

The sub objectives of the study were:

To study the department wise functions & sequential

documentation for various operations in export orders adopted by

INDO ALUSYS INDUSTRIES LIMITED.

To study the standard modes of payment in export-import.

To identify the incentives, discounts & duty drawbacks to

exporters by the Government.

FOCUS OF THE STUDY

The focus of the study was the formulation the multifunction

procedure of an export unit named INDO ALUSYS. The focus of the

study was on identifying the activities of different divisions and

departments of INDO ALUSYS having an impact on the export

procedure of this unit. Focus was to outline the standard modes of

payment for export houses. Researcher analyzed the pre-export

formalities and necessities for exportation. The project is an attempt to

formulate the ‘how to export’ concept finally to contribute to national

and international economy & business relationship

EXPORT MANAGEMENT

Export documents play a vital role in international marketing as it facilitates the smooth flow of goods and payment there of across national frontiers. Cateora and Graham say that ‘the each export shipment involves many documents to satisfy government regulations controlling exporting as well as to meet requirements for international commercial payment transactions’. They further writes that ‘the paper work involved in successfully completing a transaction is considered by mean to be the greatest of all non-tariff trade barriers. There are 125 different documents in regular or special use in more then 1000 different forms. A single shipment may require over 50 document and involve as many as 28 different parties and government agencies, or requires as few as.’ It shows that the exporting activity involves several commercial and regulatory procedures. These procedures also involve considerable documentation requirements. Besides, the documentation pertaining to the commercial aspect of the export business, there are documentation requirements of a regularly nature like excise clearance, foreign exchange regulations etc.

The most frequently required documents are export declarations, consular invoices or certificate of origin, bills of lading, commercial invoices, and insurance certificates. Additional documents such as import licences, export licences, packing lists, and inspection certificates for agricultural products are often necessary.

Export documentation is, however, complex as the number of documents to be filled-in is large so able is the number of concerned authorities to whom the relevant documents are to be submitted. These documents must be properly and correctly filled. Cateora and Graham opine that ‘incomplete or improperly prepared documents leads to delay in shipment. In some countries, these are penalties, fines and even confiscation of goods as results of errors in some of these documents. Export documents are the result of requirements imposed by the exporting government, of requirements set by the commercial procedures established in foreign trade, and in some

cases, of the supporting import documents required by the importing government. An exporter should have the complete knowledge of these documents and he should be well familiar with complete export procedure.

Exporting is the process of earning money by selling products or services in foreign markets. It is finding customer and enterprise which can serve better than these customer’s current suppliers. It is in serving these customers successfully that the enterprise grows and prospers, simultaneously increasing direct and indirect employment. At this point, “selling” and “marketing” applies to a product that the market needs.

The need to export of a country to others countries is to boost the economy of the country from where the export is made. For this very purpose of the govt. of the country formulate export policies so declared by the government the exporting industries needs export management to streamline their export activities. Export management is the application of managerial process to the functional area of exports. It is a form of management which is required to bring about coordination and integration of all those involved in an export business. It is thus, concerned with securing export orders and achieving their successful completion in time as per the requirements specified by the foreign buyers.

The main objectives of export management are-

1) To secure export orders.2) To ensure timely shipment of goods as per prescribed norms of

quality and other specifications including terms and conditions agreed to between the exporter and the importer.

EXPORT

The term "export" is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to an "exporter" who is based in the country of export whereas the overseas based buyers referred to as an "importer". In International Trade, "exports" refers to selling goods and services produced in home country to other markets.

In economics, an export is any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in trade. Export goods or services are provided to foreign consumers by domestic producers.

Export of commercial quantities of goods normally requires involvement of the customs authorities in both the country of export and the country of import. The advent of small trades over the internet such as through Amazon and e-Bay have largely bypassed the involvement of Customs in many countries because of the low individual values of these trades. Nonetheless, these small exports are still subject to legal restrictions applied by the country of export. An export's counterpart is an import.

The definition of Export is when you trade something out of the country. In economics, an export is any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in trade.

Barriers to Export

Trade barriers are generally defined as government laws, regulations, policy, or practices that either protect domestic products from foreign competition or artificially stimulate exports of particular domestic products. While restrictive business practices sometimes have a similar effect, they are not usually regarded as trade barriers. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services.

Advantages of exporting

Ownership advantages are the firm's specific assets, international experience, and the ability to develop either low-cost or differentiated products within the contacts of its value chain. The locational advantages of a particular market are a combination of market potential and investment risk. Internationalization advantages are the benefits of retaining a core competence within the company and threading it though the value chain rather than obtain to license, outsource, or sell it. In relation to the Eclectic paradigm, companies that have low levels of ownership advantages either do not enter foreign markets. If the company and its products are equipped with ownership advantage and internalization advantage, they enter through low-risk modes such as exporting. Exporting requires significantly lower level of investment than other modes of

international expansion, such as FDI. As you might expect, the lower risk of export typically results in a lower rate of return on sales than possible though other modes of international business. In other words, the usual return on export sales may not be tremendous, but neither is the risk. Exporting allows managers to exercise operation control but does not provide them the option to exercise as much marketing control. An exporter usually resides far from the end consumer and often enlists various intermediaries to manage marketing activities.

Disadvantages of exporting

For Small-and-Medium Enterprises (SME) with less than 250 employees, selling goods and services to foreign markets seems to be more difficult than serving the domestic market. The lack of knowledge for trade regulations, cultural differences, different languages and foreign-exchange situations as well as the strain of resources and staff interact like a block for exporting. Indeed there are some SME's which are exporting, but nearly two-third of them sells in only to one foreign market. The following assumption shows the main disadvantages:

Financial management effort: To minimize the risk of exchange-rate fluctuation and transactions processes of export activity the financial management needs more capacity to cope the major effort.

Customer demand: International customers demand more services from their vendor like installation and startup of equipment, maintenance or more delivery services.

Communication technologies improvement: The improvement of communication technologies in recent years enable the customer to interact with more suppliers while receiving more information and cheaper communications cost at the same time like 20 years ago. This leads to more transparency. The vendor is in duty to follow the real-time demand and to submit all transaction details.

Management mistakes: The management might tap in some of the organizational pitfalls, like poor selection of overseas agents or distributors or chaotic global organization.

IMPORT

The term "import" is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is refered to an "importer" who is based in the country of import whereas the overseas based seller is refered to as an "exporter". Thus an import is any good (e.g. a commodity) or service brought in from one country to another country in a legitimate fashion, typically for use in trade. It is a good that is brought in from another country for sale. Import goods or services are provided to domestic consumers by foreign producers. An import in the receiving country is an export to the sending country.

Imports, along with exports, form the basis of international trade. Import of goods normally requires involvement of the customs authorities in both the country of import and the country of export and are often subject to import quotas, tariffs and trade agreements. When the "imports" are the set of goods and services imported, "Imports" also means the economic value of all goods and services that are imported. The macroeconomic variable usually stands for the value of these imports over a given period of time, usually one year.

On the basis of above discussion, export documents may be divided on the following four categories:

(i) Commercial documents (ii) Regulatory documents

(iii) Export assistance documents(iv) Documentation required by importing countries.

Commercial documents are those documents by which physical transfer of good and its ownership is transfer to importer and the procedure of export sales is performed. The major commercial documents are as follows:

(a) Commercial invoices(b) Bill of exchange.(c) Bill of lading.(d) Marine insurance policy.

Regulatory documents are the documents which are required for complying with the rules and regulations governing export trade transactions. The major regulatory documents are as follows:

(a) Foreign exchange regulations.(b) Customs formalities.(c) Export inspections etc.

In export assistance documents, those documents are involved which are required for claming assistance under the various export assistance measures. Documentation required by importing countries are:

(a) Certificates of origin.(b) Consular invoice.(c) Quality control certificate etc.

Main documents used in export transactions: The main documents used in an export transaction are as follows:

1. Commercial Invoice: This is the basic document in an export transaction. According to Cateora and Graham, ‘every international transaction requires a commercial invoice, that is, a bill or statement for the goods sold. This documents often serves several purposes; some countries require a copy of customes clearance, and it is one of the financial document which contains all the information which are required for the preparation of all other documents. It is, thus, a document of contents. “A commercial invoice is a bill for the goods from the buyer to seller. It contains a description of goods, the address of buyer and seller, and delivery and payment terms. Many governments use this form to assess duties.”

There is no set format of this invoice. The exporter may design his own form. Some countries, however, prescribe their own forms. In such case, the exporter has necessarily to use the form prescribed by the importing country. The commercial invoice gives the description of following things:

Invoice Number date of dispatch. goods description. price charged. the terms of shipments. the marks and numbers on the packages containing the

merchandise. date, name and address of both seller and buyer. Name of the shipping vessel. Port of debarkation.

Commercial invoice may be prepared according to mutual agreement between the buyer and seller. According the Price, the invoice may be of the following types.

(A) Free on board or F. O. B. : Free on board at a named inland point of origin, at a named port of exportation, or at a named vessel and port of export. The price includes the cost of goods and

delivery. All other charges are the buyer’s concern. In simple words, under F.O.B. quotation, the exporter will deliver the goods free on board a ship as per contract as the port named; that is, to say he will pay all expenses and give delivery of goods on the board of the ship. The buyer must take responsibility from then on, and must pay for freight, insurance and all subsequent expenses.

(B) Cost, Insurance and Freight (C.I.F.): C.I.F. to a named overseas port of import. A.C.I.F. quote is more meaningful to the overseas buyer because it includes the costs of goods, insurance, and all transaction and miscellaneous charges to the named place of debarkation. The buyer responsible for loss or damage after the goods are delivered to the shipowner and must pay all expenses, custom duties etc., on arrival at the port of destination.

(c) Cost and Frieight (C&F): C & F to a named overseas port. The price includes the cost of goods and transportation costs to the named place of debarkation. The cost of insurance is borne by the buyer.

(d) Free Along Side (F.A.S.) F.A.S. to a named U S port of export. The price includes cost of goods and charges for delivery of the goods alongside the shipping vessel. The buyer is responsible for the cost of loading onto the vessel, transportation and insurance.

(e) Ex. (named point of Origin): The price quoted concerns costs only at the point of origin. All other charges the buyer’s concern.

Consular Invoice: Some countries require consular invoice. A consular invoice sometimes is required by countries as a means of monitoring imports. Government can use the consular invoice to monitor prices of imports and to generate revenue for the embassies that issue the consular invoice. In those countries where ad valorem duties are charged, it is in the interest of the importer to present to the custom authorities to the importing country, the document called ‘Consular invoice’, in order to save time and trouble while taking the delivery of the goods. This invoice has to sent by the exporter who fills in a special form and gets it duly certified by the counsal of the importing country stationed in the exporting country. The exporter is required to pay a prescribed fee for obtaining this invoice. The exporter has to submit four copies of the commercial invoice to the mission of the importing country with the requisite amount of fee.

Performa Invoice: ‘A Performa invoice is an invoice, like a letter of intent, from the exporter to the importer outlining the selling

terms, price and delivery if the goods are actually shipped. If the importer like the terms and conditions, he will send purchase order and arrange for payment. At that point, the exporter can issue a commercial invoice is simply a temporary commercial invoice which is sent by the exporter to importer. This covers contemplated shipment which may or may not be made in future. An importer may require it for the following two reasons:

(a)It helps him to obtain an import license.(b)It helps in opening a letter to credit in the favour of exporter.

2. G.R.Form : This form has been prescribed by the Reserve Bank of India under FERA to ensure that the foreign exchange receipts in respect of exports are impatriated to India. It is prepared in duplicate and it submitted to the custom authorities at the port of shipment. This authority verifies if (value declared by the exporter) and send one copy of Reserve Bank of India and second copy of exporter.

3. Letter of Credit:- “A letter of credit is a document containing the guarantee of a bank to honour drafts drawn on its by an exporter, under certain conditions and upto certain amounts, provided that the beneficiary fulfills the stipulated conditions.” The letter of credit is an assurance that the bill will be paid by the bank if it is a sight bill or accepted by the bank if it is a time bill. Insurance of letter of credit by a bank in favour of an exporter substitutes the credit of the individual importer by its own credit and thereby gives the exporter guarantee assurance of payment. It is a popular method of securing payment and most important single document in international trade. It forms the basis of very large amount of world trade. Cateore and Graham. Opines that “letter of credit shift the buyer’s credit risk to the bank issuing the letter of credit. When a letter of credit is employed, the seller ordinarily can draw a draft against the bank issuing the credit and receive dollars by presenting proper shipping documents. Except for cash in advance, letters of credit afford the greatest degree for protection for the seller.

A letter of credit it of two types: irrevocable and revocable. An irrevocable letter or credit means that once that seller has accepted the credit, the buyer can not alter it in any way without permission of the seller. On the other, a revocable letter of credit may be cancelled at any time by banker without giving pre- intimation. The exporter does not favour this letter of credit as it is liable to bring him into trouble on any time. In other words, an irrevocable letter of credit can not be cancelled by the bank without giving prior notice and is, therefore, safer than the revocable letter from the point of view of

exporter. The exporter should carefully examine the terms and conditions of the letter of credit to ensure should carefully examine the terms and conditions of the letter of credit to ensure:

(a) that he can meet them, and(b) That they confirm to the basic contract he has

entered into with the importer

If there are any differences, he should get in touch with the bank and the Importer to arrange for an amendment. Some of the discrepancies found in documents that can delay in honoring drafts or letter of credit including the following.

(i) Insurance defects, such as inadequate coverage, no endorsement, or counter signature, and a dating other than the bill of lading.

(ii) Bill of lading defect, such as the bill lacking ‘on-board’ endorsement or signature of carrier, missing an endorsement, or failing to specify prepaid freight.

(iii) Letter of credit defects, such as an expired letter or one that is exceeded by the invoice figure.

(iv)Invoice defects, such as missing signatures or failure to designate terms of shipment as stipulated in the letter of credit.

4. Bill Of Exchange: When a draft is drawn on a foreign bank, it is known as a foreign draft or bill of exchange. A bill of exchange is, thus a means of collecting payment from the foreign buyer through the banking channel. It is also method of extending credit. Cateora and Graham say that ‘in letter or credit, the credit of one or more banks is involved, but in the use of bill of exchange, the seller assures all risks until the actual dollars are received. The typical procedure is for the seller to draw a draft on the buyer and present this with the necessary documents to the seller’s bank for collection. The documents required are principally the same as for letter of credit. On receipt of draft, the bank forwards it with the necessary documents to a correspondent bank in the buyer’s country; the buyer is then presented with the draft for acceptance and immediate or later payment with acceptance of the draft, the buyer receives the properly endorsed bill of lading that is used to acquire the goods from the carrier.

There are the following important types of bill of exchange:

(i) Sight Bill of Exchange: A sight bill is one which is required to be paid by the drawee immediately on presentation of the bill. In order words, a sight bill requires acceptance and payment on

presentation of the bill and often before arrival of the goods. Here, the format of this bill is given below:1550 Park Street Stamp London July 15,2003 Sixty (60) days after sight of this First Bill of Exchange (Second and third of this same tenor and date unpaid), pay to the Punjab National Bank or order the sum of one thousand five hundred Pounds Sterling only, value received. To Messers Hiralal Motilal 81, Kalba Devi Road Martin & Co. Mumbai

(ii) Arrival Bill: An arrival bill requires payment be made on arrival of the goods.

(iii) Date Bill: A date bill has an exact date for payment and in no way is affected by the movement of the goods. Time designations may be placed on sight and arrival bills to stipulate a fixed number of days after acceptance when the obligation must be paid.

(iv) Documentary Bill of Exchange: Under this agreement, the exporter sends the documents through his bank to be delivered to the importer against the importer’s acceptance or payment of an accompanying bill of exchange. This bill may be a D/P or D/A bill of exchange.:

5. Shipping Bill : This is a custom documents. In fact, it is the main documents on the basis of which the custom’s permission for export is given. The shipping bill contains particulars of the goods, the name of the vessel, master or agents, flag, the port at which goods are to be discharged, the country of final destination, the exporter’s name and address etc. The exporter is required to fill in three copies of shipping bills, or the shipping bill must be prepared according to the category of the export goods.

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

(a)Shipping bill for free goods, for which there is no export duty.(b)Dutiable shipping bill for gods for which there is export duty.(c) Duty drawback shipping bill which is required for claming the

customes drawback against goods exported. Here a format of shipping bill is given below:

6. Marine Insurance Policy: The goods that are exported may be subject to certain maritime perils. The risks of such perils may be covered under marine insurance policy. Cateora and Graham feel that ‘the risk of shipment due to political or economic unrest is some countries, and the possibility of damage from see and weather, make it absolutely necessary to have adequate insurance covering loss due to damage, war, or riots. Typically, the method of payment or term of sale require insurance of the goods, so few export shipment are uninsured.’ A policy is a contract and a legal document. An exporter must put up the marine insurance policy as a collateral security when he gets an advance against his bank credit.

(7) Bill of Lading: It is a document which is issued by the shipping company acknowledging that the goods mentioned therein have been placed on board the ship and an undertaking that the goods in like order and conditions as received will be delivered to the consignee, provided that the freight specified therein has been duly paid. In other words, ‘a bill of lading is a receipt for goods delivered to the common carrier for transportation, a contract for the services rendered by the carrier, and a document of title.

Cateora and Graham Write that the ‘bill of lading is the most important document required for establishing legal ownership and facilitating financial transactions. It serves the following purposes:

(i) as a contract for shipment between the carrier and shipper,

(ii) as a receipt from the carrier for shipment, and (iii) As certificate of ownership or title to the goods.

Bill of lading frequently are referred to as either clean or foul:

(a) Clean Bill of Lading : A clean bill of lading means the items presented to the carrier for shipment are properly packaged and clear of apparent damage when received. In other words, a clean bill of lading is one which bears no super-imposed clause or statement

declaring a defective condition of goods or of the packaging or of some other aspect of consignment.

(b) Four Bill of Lading : A foul bill of lading means the shipment was received in damaged conditions and the damage is noted on the bill of lading.

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. Bill of lading contains the following information:

Date and place of shipment The name of consigner. Name and destination of the vessel. The description, quality and destination of the

goods. The marks and numbers. The invoice number and the date of export. The gross weight and net weight. The number of packages. The amount of freight.

As said earlier that each shipping company has its own bill of lading; where

there is no direct shipping link between the buyer’s port and the seller’s port, arrangement should be made for the goods to be transferred to a second ship at another port. In such a case, it is necessary for the exporter to obtain a though bill of lading covering the whole voyage.

Unless specifically authorized in the credit, bill of lading of the following nature will be rejected:

(a) Bills of lading issued by forwarding agents.(b) Bills of lading which are issued under and are

subjects to the conditions of a charter party.(c) Bills of lading covering shipment by sailing vessels.

A bill of lading that has been held too long before it is passed on to a bank or the Consignee, is called a state bill of lading. Besides, when freight is paid at the time of shipment or in advance, the bill of lading is marked. ‘freight paid’; if the freight is not paid and is to be collected from the consignee on the arrival of the goods, the bill of lading is marked ‘ freight collect’.

Functions of bill of lading are as follows:

(i) It denotes the contract of carriage of goods entered in by the exporter and the importer

(ii) It entitles the importer to take the delivery of goods.(iii) It is a document of title to goods. A possessor of this

documents becomes the owner of goods.(iv) It is a semi-negotiable instrument.(v) It is transferable by endorsement and delivery.

Here, the format of Bill of Lading is given below:

BILL OF LADING

SHIPPED on good order and condition by M/s Rathore Brothers & Co. Ltd. In and upon the “STEAMSHIP JALUSHA” where of is Master for Present voyage Mr. Black and now riding at anchor in Mumbai and bound for London, 1000 Bales of Cotton Marks,

555 J.A London

being marked and numbered as stated to be delivered in the like good order and well conditioned at the aforesaid Port of London (the Act of God, the Enemies of the Country, Fire, Machinery, Boilers, Steam and all and every other Dangers and Accidents of the Seas, rivers and Steam Navigation of whatever nature and kind expected) into John Abbot & Sons; or to their Assigns, Lading Charges and Freight for the said goods paid with Average as per York, Antewerp Rules, 1924 and charges as accustomed.

IN WITNESS where of the Master of the said ship hath affirmed to three bills of Lading jail of this Tenor and Date, the one of which three Bills being accomplished, the other two are to stand void. Dated at Mumbai 30th October, 2003 J. Black Value and Contents unknown Master This bill is issued subject to the contents of 14 and 15 Geo. V.C. 2

8. Mate’s Receipt: This document is got from the caption of the ship or the mate, who is his assistant, and who can not allow the shipping of the goods unless the shipper presents to either of them a copy of the shipping bill and the shipping order. The mate issues a receipt after examining a packing and counting of the packages. This receipt is called the ‘Male Receipt’.

If the mate is not satisfied with the packing of the goods, a remark to that affect is made on the receipt. A receipt with this remark thereon is regarded as dirty or foul receipt.

The exporter must take proper care in packing his goods so as to avoid this remark on the Mate’s receipt without any bad remark is termed as a claim Mate’s receipt. This remark is transferred to the bill of lading when the exporter gets it in exchange for the Mate’s receipt.

9. Certificate of origin: A certificate of origin indicates where the products originate and usually is validated by an external source, such as the charter of commerce. It helps countries determine the specific tariff schedule for import. In other words, a certificate of origin is a certificate which specifies the country of the production of the goods. This certificate has also to be produced country may require this procedure. This certificate is necessity where a country offers a preferential tariff to India and the former is to ensure that only goods of Indian origin benefit from concession.

10. Packing Note and List: An export packing list indicates that the type of package itemises the material in each individual package indicates the type of package, and it attached to the outside of the package.

The shipper or freight forwarder, and sometimes custom officials, use the packing list to determine the nature of the cargo and whether the correct cargo is being shipped. The difference between a packing not and a packing list is that the packing note refers to the particulars of the contents of an individual pack, while the packing list is consolidated statement of the content of a number of cases of packs.

A packing note include the following things: Packing not number. the date of packing. name and address of the exporter. name and address of the importer. Order number Date.

Shipment for S/S bill of lading number and date. Marking numbers. Case number to which the note relates. Contents of the goods in terms of quantity and weight.

It should be noted here that no particular form has been prescribed for the packing

Note and packing list. Normally, ten copies of the packing note/list is prepared in which the first is sent with the shipping documents, two copies in advance to the buyer, one to the shipping agent and the remaining are retained by the exporter.

11. Other documents:

(a) Certificate of inspection: It is a certificate issued by the Export inspection Agency. This agency certifies that the consignment has been inspected as require under the Export (quality control and inspection) Act, 1963, and satisfies the conditions relating to quality control and inspection as applicable to it, and is certified export worthy. Usually Export Promotion Council does the pre-shipment inspection. Emphasis is on quality control and not on inspection for export. EIC gives an inspection certificate in triplicate to the exporter.

(b) G.P.Forms: A GP form is a gatepass for the removal of excisable goods from a factory or warehouse. Form GP 1 is used for the removal of excisable goods or payment of duty and form GP 2 is used for the removal of excisable goods without payment of duty.

(c) Cart Ticket: A cart ticket is prepared by the exporter and includes details of the export cargo in terms of the shipper’s name, the number of packages, the shipping bill number, the port of destination, and the number of the vehicle, carrying the cargo.

(d) Custom formalities: Goods may be shipped out of India only after customs clearance has been obtained. For this purpose, the following documents should be presented by the exporter to the custom authorities:

(i) Shipping bill.(ii) Declaration regarding truth or statement made in

the shipping bill.(iii) Invoice(iv) GR from.(v) Export license (wherever required).(vi) Quality control inspection certificate.

(vii) Original contract, wherever available or correspondence leading to contract.

(viii) Contract registration certificate.(ix) Letter of credit.(x) Packing list.(xi) AR-4 from(xii) Any other documents.

(e) License: Export import licenses are additional documents frequently required

in export trade. In those cases, where import licenses are required by the country of entry, a copy of license of license number is usually required to obtain a consular invoice. Wherever a commodity requires an export license, it must be obtained before an export.

(f) Shipper’s export declaration: A shipper’s export declaration is used by the exporter’s government to monitor exports and to compile trade statistics.

(g) Indent or order: An exporter gives a quotation or an offer for sale to the foreign buyer or importer. It may be in the form of a pro-forma invoice, and offer to sell but given in the form of an invoice.

The exporter, at first receives the order or indent from the importer or his agent. The indent contains all important particular of the transaction. Hence, a foreign order is called an indent.

When a proforma invoice is accepted by the buyer, it becomes a confirmed order. An exporter is usually treated as confirmed order when letter of credit is established if favour of the exporter. There may be a formal sale contract also.

(h) Principal export documents: There are eight principal export documents which the exporter is required to send to the importer. These documents are:

(i) Commercial invoice(ii) Packing list(iii) Bill of lading(iv) Combined Transport Document(v) Certificate of Inspection/Quality Control(vi) Insurance policy of certificate (vii) Certificate of Origin

Introduction about the company Indo alusys industries limited (formerly mahavir aluminium limited) is promoted by the jain group of industries in the year 1979 with the main objective to manufacture sophisticated quality aluminum extrusions in India.

In a short span of time, the company geared up to multi dimentional activities with world class aluminium extrusion products, aluminium extrusion window, aluminium architectural products and alloy ingots. The manufacturing facilities of indo alusys industries limited is located in the highly developed industrial area of bhiwadi, in alwar district of rajasthan, which is about 70 kms from the national capital, new delhi. The company has an installed capacity of 14000 mt/ year of aluminium extrusions, alloy ingot capacity of 10000 mt/year, powder coating and finishing capacity of 2400 MT and anodizing/ electro- coloring capacity of 2000 MT per annum. We also have a fabrication capacity of 1000000 sq.mtrs/year for doors and windows, structural glazing, curtain wall, aluminium cladding, skylights, frameless glazing.

The company has german aluminium extrusion press and Italian know how of anodizing, electro-coloring and powder coating.

Export has been thrust area of our company. The quality range of our products has been internationally accepted by European and middle east for their persistent reliability and competitive edge.

Future outlook

With a view to boom in building construction industry, real estate/ infrastructures in India, the company has been consistently developing a large team of dedicated technical manpower, designers, planners etc and resources to meet future requirements.

To meet ever-growing demand in the auto ancillary industry, the company has future plans to manufacture the aluminum casting components and assemblies thereafter. We also have growth plan for fabricated extrusion products to be used in industrial applications.

On a diversification spree, real estate/ infrastructural projects are under planning. With a view to future, company ushers with host of ideas and innovations for greener and healthier environment.

INDO CABLE

Ultra modern manufacturing unit of indo alusys industries limited with the state of the art laboratory and testing facility is located at bhiwadi, rajasthan state which is approximately 60 kms from the capital, new delhi. Corporate office and sales divison is centrally located at connaught place, new delhi. INDO CABLE products meet the highest quality standards. Our range of world- class lt cables includes single and multi core armoured and un armoured cables cables, control cables, instrumentation cables and also lsf, frls, lsoh and custom cables to meet the requirement of a broad spectrum of applications ranging from power distribution, industrial, petrochemical, oil and gas, aeronautical, construction, instrumentation, hospitals, hotels and security etc.

With a management team of professionals who have more than 30 years experience in the http://www.indoalusys.com/ industry, the company has ventured in to cable and conductor industry. All the departments of the INDO CABLE are managed by vastly experienced and highly qualified professionals from large cable industry.

INDO CABLE is committed to the development of products and provides competitive prices and quality products and services required by our esteemed clients. Company has plans to open sales offices at all the metropolitan cities and other major cities in the country for better services of our customers.

INDO CABLE is in the process of registering with major organizations in the public sector and private sector, EPC’s, transmission and distribution companies, consultants etc.

OUR VISION

To ensure that through our product offering, we attain leadership in our industry in quality and performance, exceeding expectation of our customers.

OUR MISSION

To continuously strive for excellence in all aspects of our business through the integration of sustainable business development and innovations, enhancing shareholder value and outstanding customer service.

Values and principles

- Build sustainable growth through innovation- Transparency in all our actions- Promoting and environment of open communication for all.- Integrity driven accountability- Continued integration of world class quality management.- Safety is not compromised- Responsible corporate citizenship in compliance to environment

norms- Source high quality raw material from most reliable and

established sources

QUALITY ASSURANCE

Quality Policy

Quality assurance is a way of life at indo alusys industries ltd safety and reliability of its products is of paramount importance. It is driven by central philosophy based up on three key issues- partnership, innovation and quality.

Quality policy statement

Indo alusys industries ltd for fulfilling and surpassing expectations of its customers and other stakeholders, related to performance and reliability of the products and services on continuous basis. This is achieved through effectively implementing and continually improving the quality management system with employee participation and empowerment.

Standard product

TeeBars

TubesAngles Channels

Architectural building profiles

Doors Windows Curtain wallStructural glazingPartitions

Architectural hardware

Door handle HingesTower bolts Aldrops/latchMisc

Industrial applications

- heat sink exchangers- conveyer sections- air conditioning equipments/cable wrap- motor body profile- electrical bus bars- water filters- auto components- expanded metal profiles/grills- lighting- visi cooler- misc

Transport

- H/F an windows sextions- Mouldings - Structural profiles- Flooring

Miscellaneous

- electronic/ telecom

PRODUCTION

The manufacturing facilities of indo alusys industries limited is located in the developed industrial area of bhiwadi, in alwar district rajasthan, which is about 70 kms from the national capital, new delhi. The company has an installed capacity of 11,000 MT of aluminium extrusions, alloy ingots of 10000 MT, powder coating and finishing capacity of 2400 MT and anodizing/electro-coloring apacity of 2000 MT per annum.

The plant has coveted with ISO 9001-2000 certificate there in house facility for checking other parameters in our quality control lab as per Bs-1474:1987 and as per Is: 733, 1285, 6477, 3965. the plant of the company is equipped with latest and most advanced plant and machinery and other supported/balancing equipment mostly imported. Further, the technologies are updated with latest know-how available in the world to give its products an edge over its competitors, to manufacture extrusions of high precision and quality compared to the best in the world.

The company has two oil hydraulic extrusion presses of 1650 UST capacity designed by schloeman of germany and manufactured by Sutton usa and 1250 ust capacity designed and manufactured by ferrel.

The operations of both the presses are controlled by micro processor based technology and programmable logic control(PLC) systems. The above presses are capable of producing extruded sections with a circumscribing circle of 6.5 inches dia from container size upto 8 inches dia. The plant has a most foundry having facilities to melt and cast aluminium alloy billets of very high quality applying direct chilled vertical casting process. The alloy composition of the billets is controlled by a computerized spectrometer at the stage of melting and subsequent casting.

Extrusions dies which form the heart of an extrusion press are manufactured in house. The most modern die shop is equipped with computerized edm wire cut machine, spark-erosion-cum-electrial discharge mahines, extrudehone die polishing machine and other most modern equipments with highly skilled die makers and technicians to achieve a very high degree of dimensional accuracy, close tolerance and smooth surface finish for its extruded profiles and sections.

The plant also have sophisticated extrusion handling systems/equipments which includes an extrusions puller and other

related equipments to avoid manual handling to produce a scratch free material suitable for subsequent surface treatments like anodizing, electro coloring and powder coating.

The plant also has in house facility for surface treatment of aluminium profiles such as anodizing, electro coloring and powder coating.

Aluminium architectural division

The architectural products division of the company is engaged in providing and fixing architectural door hardware, aluminium doors, windows, partitions, curtain wall systems and structural glazing for various constructions needs in the country. The new generation aluminium architectural systems saves wood and thus protecting the environment, with the changing focus of customers from traditional wooden material to light metals to light metals like aluminium and with versatility available for its design.

The success of this division is due to the fact that it sells its own systems manufactured in their extrusion plant. Through its constant research and development, indo alusys industries maintain a leading position in the Indian architectural aluminium systems. With substantial resources devoted to using the most advanced CAD technology, great ideas can be swiftly converted into great products to the direct benefits of architects, aluminium fabricator and ultimately to the clients.

Products and services

Product excellence is not the end of indo alusys industries architectural products story. With its international quality and vested interest in ensuring that its products are not only well designed but also successfully installed and high performance standards, once in place it continue to operate at peak level to the satisfaction of the clients.

DESIGN

With the use of the latest CAD technology, ideas can be swiftly converted into great products, which enable to provide flexible design solutions and speed up problem solving. Thus help its clients with combined qualities of aesthetic appearance, originality, solar control, thermal insulation, sound suppression and over all economy. Indo alusys industries work harmoniously with its clients providing them full

design service right from the planning stage to the implementation of the project on a time bound schedule with quality finish and high performance products.Products: windows, doors, curtain walls, structured glazing, accessories, glass, insulated glass, toughened glass, colored glass.

Manufacturing

Indo alusys industries products are engineered to highest quality with its research, development and testing programme, which ensure that its products retain the state of art sophistication and leading role in the modern building technology. The techniques for high performance cladding using synthetic rubbers, quality aluminium frames, glass and other accessories using by indo alusys industries are resistant of whole climatic conditions, air infiltration and extreme surface temperature. Because of the above qualities renounced architects and builder are appreciating the design, flexibility and reliability of indo alusys industries products.

INSTALLATION

Indo alusys industries design and manufacturing capabilities are backed by a team of highly qualifies and experienced engineers and technicians and skilled fitters, which give guarantee to a job that is well done, on schedule, from start to finish. The highly trained and skilled team, who are familiar with the products and the technique of its installation are instrumental for the speedy and timely completion of the projects.

MAINTENANCE

Indo alusys industries take interest not only in completion of a project but also in the performance of its systems/products installed, hence its follow- up facilities include a comprehensive maintenance, repair and refurbishment of its products to ensure its products are in excellent repair.

REFURBISHMENT

Indo alusys industries product range has also been designed to offer a wide choice for those who are seeking major refurbishment. The refurbishment ensures that old, out of date building are rejuvenated externally with new life and internal benefits of new structure like less noise, low surface temperature and easy maintenance.

Aluminium Ingots Division

Indo alusys industries limited has ventured into alloy ingots production which can meet the stringent national and international standards like IS/BS/DIN/ASTM or as per customer specification. The proposed manufacturing capacity is 12,000 tons per annum. Aluminium alloy ingots are consumed in automobile sector extent for manufacturing pressure die casting components namely:

Alloy wheels, cylinder head, cylinder head cover, intake manifold, axle hosing, gear box hosing etc. requirement of alloy ingots is growing manifold as India is turning out to be a manufacturing hub and out sourcing centre for automobiles and auto components for the whole world. IAIL is in a position to honor its commitment to its customers with reference to high quality of product, timely delivery and customer satisfaction. Based on the concept of total quality management hub and out sourcing centre for automobiles and auto components for the whole world.

IAIL is in a position to honor its commitment to its customers with reference to high quality of product, timely delivery and customer satisfaction. Based on the concept of total quality management, we are following strict quality norms at every stage of manufacturing process namely:

- raw material inspection- segregation and sorting of scrap - melting and casting - testing and analysis and finally- packing

every lot is checked for chemical composition and also grain structure, gas content and other physical properties. The plant and equipments available for the above manufacturing facility is as under.

Rotary furnaces coupled with rotary casterTilting furnances coupled with conveyorised casterUniversal testing machine for checking the tensile strengthSpectrometer for instant analysis of the chemical compositionFork lift for handling of scrap and finished ingotsQuality and testing equipments to meet quality standards at each level of production.

In process inspection is carried out as per following method:

Proper segregation and sorting out of raw materialProper temperature controlProper de gassing and fluxingProper testing of chemical componentsProper grain refinementMicro structure/grain structure testPourcity test

Financial performance

Year 2007-2008

Particulars 2007-2008 2006-2007

Gross sales 16522.96 11325.81

Profit before interest and depreciation 875.79 652.44

Less: interest 243.12 128.02

Profit after interest but before depreciation 632.67 524.42

Less: depreciation 127.23 92.82

Profit for the year before taxation 505.44 431.60

Less: provision for

- current tax 150.16 102.11

- fringe benefit tax 8.50 7.20

net profit after tax 346.78 322.29

less- deferred tax 35.69 46.06

less- taxation adjust. For prev. year (1.71) (0.65) profit after tax 312.80 276.87

add: profit brought forward 1254.63 977.76

balance carried to balance sheet 1567.43 1254.63

OPERATIONS

Turnover: the company has recorded turnover of rs 165.22 crores during the year as against Rs 113.26 crores during the previous year with an increase of 45.88%.

Profit : the company has registered higher profit of Rs 505.44 lacs as compared to Rs 431.60 lacs in the previous year with a growth of 17.11%.

Performance overview: during the year under review, the company has recorded year of impressive performance with highest ever top and bottom lines. The aluminium business delivered outstanding results with tremendous growth business grew due to expanded volumes for better asset utilization and optimal load distribution, coupled with an increased share of value added products. Cost pressure on account of input price escalation was contained in some measures through cost reduction programmes initiated earlier.

Export: with the emergence of indigenous overseas markets, expert globally have become very competitive. Nevertheless , the company is making continous concerted efforts to sustain its existing markets and at the same time widen the horizon its products in new overseas markets by becoming internationally competitive by its expertise and cutting costs all the operational levels without compromising on the quality of the products.

PROCEDURE OF EXECUTION OF AN EXPORT ORDER

Stage-1 sT Confirmation of Export Contract

The exporter scrutinizes the export order with reference to

the term & conditions of the contract. According to section 4(1) of the

Sale of Goods Act, 1930,” A contract of sale of goods is a contract

whereby the seller transfer or agree to transfer the property in goods

to the buyer for a price,” therefore, this Act includes both a ‘Sale’ and

an ‘Agreement to sell’.

This is the most crucial stage. All subsequent actions and reactions will depend on the terms and conditions of the export contract. It should be ensured that the contract has been entered into in accordance with the prevalent export promotion policies of the country and the foreign exchange regulations. The export order must specify the mode of the payment in unmistakable terms such as letter of Credit, Documents of Payment, Documents against Acceptance, etc. The specifications stipulated by the importer in the export order and the L/C such as delivery schedule, packing, inspection, marking, etc., must be strictly adhered to. The documents required by the foreign buyer must be prepared and submitted to the negotiating bank in the exact specified form and manner.

ELEMENTS OF EXPORT CONTRACT

An export contract, as described above, should be as clear as possible.

The various elements of it should clearly define the duties and

responsibilities of the parties; determine the exact point at which the

title and/or risk change from seller to buyer. The various elements of

an export contract are as follow:

1. Product, Standards and Specifications

2. Quantity

3. Inspection

4. Total Value of the Contract

5. Terms of Delivery/Commercial Terms

6. Taxes, Duties and Charges

7. Period of Delivery Shipment/Part Shipment etc

8. Packing Labeling and Marking

9. Terms of Payment-Amount, Mode & Currency

10. Discounts and Commissions

11. Licenses and Permits

12. Insurance

13. Documentary Requirement

14. Guarantee

15. Force Majeure or Excuse for Non-Performance of

Contract

16. Remedies.

17. Arbitration.

Besides these main elements, an export contract may

contain other elements desired by the parties to the contract. Export

order should be confirmed by the exporter only after the terms and

conditions of the L/C have been found to be in order.

Stage-2 nd Sourcing of Export Order

Upon confirmations of the export order preparations for the dispatch of

goods are started. A ‘Delivery Note’ (in duplicate) or ‘Production Order’

is sent to the Work Manager or the Factory manager. This note should

contain the description of the goods as has been given in the export

order, along with a copy of the instructions given by the importer. The

date by which the goods must be manufactured, the date by which the

necessary formalities must be completed, the requisite time margins

to be given and the shipment must be clearly intimated to Works

manager. This is what the manufacturers. The specifications and

instructions to be intimated to the supplier of export goods shall,

however, remain the same. While sourcing the goods from suppliers,

merchant exporter has to lay down clear cut specifications of quality

norms because the ultimate accountability to the buyer is of the

exporter only. In case of poor quality, the exporter may not be in

position to get repeat order from the foreign customers who have wide

choice of the exporters in the world market.

Sourcing of export order in INDO ALUSYS INDUSTRIES

LIMITED is based upon quality production system. Merchandiser finals

the export contract with his correspondent buyer and receives an

export order via fax, e-mail or courier. After receiving the export order,

merchandiser orders a production order to Production Manager in

written form. This production order contains the following entities:

P.O. Number

Invoice Number

Product Name

Product Specifications ( colour , size, weight etc)

Quantity

Instructions(stitching, labeling etc)

Dispatch Date

Required quantity is produced in fully by production unit

after the recommendation of production samples in accordance with

order sample. Produced quantity is delivered to Packing Department

for dispatching operations.

Stage-3 rd Dispatching

As the Production unit delivers the goods to Packing

Department, the following procedures are to be followed in order to

dispatch the goods:-

1)Packing

The Packing Incharge receives the importer’s instructions for

packing from the Merchandiser and covers the following operations:

i) Final finishing of the goods(final passing, clipping etc)

ii) Tagging & Folding(according to importer’s instructions)

iii) Packing(Cartoon, bale or pair-packing)

2) Labeling

Specific marketing and labeling is used on report shipping cartons &

containers to:

i) Meet shipping regulations

ii) Ensure proper handling

iii) Conceal the identity of contents

iv) Help receivers identify shipments

In overseas buyer usually specifies export marks that

should appear on the cargo for easy identification by receivers.

Many markings may be needed for shipment. Exporters need to put

the following markings on cartons to be shipped:

Shipper’s mark

Country of origin

Weight marking(in Lbs or Kgs)

No. of packages & size of cases

Cautionary markings such as ‘this side up ’ or ‘use no

hooks’

(In English and in language of country of destination)

Port of entry

3) Inspection

After packing and labeling, goods are inspected by the inspection

agent or buying agent on behalf of importer. That means importer

sends his own agency to inspect the goods. The inspector has right

to open any of the carton or bale to verify the goods in accordance

with invoice, packing list and desired quality scale.

If he finds any defect he can send these goods for processing

again, otherwise, he issues Inspection Certificate. If buyer demands

handloom certificate then exporter ask textile committee to inspect

the consignment and provide them handloom inspection certificate.

This certificate can be helpful to suit against importer in case of

disputers or undue rejection of goods by importer.

4) Containerization

A container is an article of transport equipment, strong enough for

the repeated use, to facilitate handling and carriage of goods by

one or other modes of transport.

Normally containers having following dimensions are used in

handloom field:-

i) 20 ft. 26 cbm

ii) 40 ft. 54 cbm

iii) 30 ft. 60 cbm (high cube)

INDO ALUSYS makes use of container of 20 & 40 ft. il.(according

to the goods to be dispatched).

5) Locking of Containers

Before locking the container, excise authorities select 10% of rolls

as samples and inspect them. The samples are sent for further sub-

mission to customs. After examination of cargo, the excise seal

along with the seal of shipping line on the container and endorse

the excise invoice, AR-2 form, gate-pass etc. The main check point

in the excise documents are:-

Name & Address of Consignee

Destination

Description of goods & Specifications

FOB value of goods

Quantity

Movements of goods(from -- to --)

Container no. & Truck no.

Identification marks & Excise no.

For additional security of goods, in transit, the doors of container

are locked with the iron rods with seals. In case of any shortage

reported by the buyer and when a claim is required to be filled,

excise endorsed documents play extremely crucial role.

Stage-4 th Pre-Shipment Operations

Documents used for Pre-Shipment

The singed with the buyer defines the specification of the goods to the supplied. On the basis of this contract, invoice instructions are given the packing department packs the rolls depending on these instructions, the validation of above instructions are done by pre-shipment department. On linking the bales by packing department, the pre-shipment documents are generated, which primarily includes shipment advice from, invoice, packing includes shipment advice from, invoice, packing list etc.

1) Shipment Advice Form : It is a sort of covering letter,

showing the list of documents enclosed with it. It also contains

some other details like Lorry Receipt No., RBI Code No. B/L

particulars etc. The shipping advice is particularly important in

short-sea trades, for example within the Asian countries where the

goods may arrive at the port of destination before the shipping

documents, and in the ports of destination where theft and pilferage

of the imported goods is rampant.

2) Letter of credit: A standard, commercial letter of credit is

a document issued mostly by a financial institution, used primarily

in trade finance, which usually provides an irrevocable payment

undertaking. The letter of credit can also be source of payment for a

transaction, meaning that redeeming the letter of credit will pay an

exporter. Letters of credit are used primarily in international trade

transactions of significant value, for deals between a supplier in one

country and a customer in another. They are also used in the land

development process to ensure that approved public facilities

(streets, sidewalks, storm water ponds, etc.) will be built. The

parties to a letter of credit are usually a beneficiary who is to

receive the money, the issuing bank of whom the applicant is a

client, and the advising bank of whom the beneficiary is a client.

Almost all letters of credit are irrevocable, i.e., cannot be amended

or canceled without prior agreement of the beneficiary, the issuing

bank and the confirming bank, if any.

Sample document LC:

THE MOON BANKINTERNATIONAL OPERATIONS

5 MOONLIGHT BLVD.,EXPORT-CITY AND POSTAL CODE

EXPORT-COUNTRY

OUR ADVICE NO.      MB-5432

ISSUING BANK REF. NO. & DATE

SBRE-777     January 26, 2001   

                                                                                      TO UVW Exports

88 Prosperity Street East, Suite 707Export-City and Postal Code

Dear Sirs:

We have been requested by     The Sun Bank, Sunlight City, Import-Countryto advise that they have opened with us their     irrevocable           documentary credit number     SB-87654for account of     DEF Imports, 7 Sunshine Street, Sunlight City, Import-Countryin your favor for the amount of     not exceeding Twenty Five Thousand U.S. Dollars (US$25,000.00)

available by your draft(s) drawn on     us                                                      at     sight                                       for     full             invoice value

accompanied by the following documents:

1.   Signed commercial invoice in five (5) copies indicating the buyer'sPurchase Order No. DEF-101 dated January 10, 2001.

2.   Packing list in five (5) copies.

3.   Full set 3/3 clean on board ocean bill of lading, plus two (2) non-negotiable copies, issued to order of The Sun Bank, Sunlight City, Import-Country, notify the above accountee, marked "freight Prepaid", dated latest March 19, 2001, and showing documentary credit number.

4.   Insurance policy in duplicate for 110% CIF value covering Institute Cargo Clauses (A), Institute War and Strike Clauses, evidencing that claims are payable in Import-Country.

Covering:     100 Sets 'ABC' Brand Pneumatic Tools, 1/2" drive,

                complete with hose and quick couplings, CIF Sunny Port

Shipment fromMoonbeam Port, Export-Country       to     Sunny Port, Import-Country

Partial shipment

Prohibited

Transshipment Permitted

Special conditions:

1.   All documents indicating the Import License No. IP/123456 dated January 18, 2001.

2.   All charges outside the Import-Country are on beneficiary's account.

Documents must be presented for payment within     15               days after the date of shipment.Draft(s) drawn under this credit must be marked

      Drawn under documentary credit No. SB-87654 of The Sun Bank,      Sunlight City, Import-Country, dated January 26, 2001

We confirm this credit and hereby undertake that all drafts drawn under and in conformity with theterms of this credit will be duly honored upon delivery of documents as specified, if presented atthis office on or before     March 26, 2001

  Very truly yours,

  Authorized Signature

Unless otherwise expressly stated, this Credit is subject to the Uniform Customs and Practice for Documentary Credits, 1993

Revision, International Chamber of Commerce Publication No. 500.

Letter of Credit Particulars:

a) Latest Negotiation Date

The latest negotiation date is the last day of the period of time allowed by the letter of credit (L/C) for the presentation of documents and/or draft(s) to the bank. The latest negotiation date is not necessarily the L/C expiry date. In the sample letter of credit the latest negotiation date can be March 26, 2001 or 15 days after the date of shipment, whichever comes first.

In case the L/C does not stipulate the latest negotiation, it is within 21 days after the date of issuance of the transport documents, but on or before the L/C expiry date.

b) Expiry Date and Place

The expiry date and place is the last day of validity of the credit and the place allowed by the letter of credit (L/C) for the presentation of documents and/or draft(s) for payment, acceptance or negotiation. In the sample letter of credit the expiry date is March 26, 2001 and the place for presentation of document is Export-City, which is the beneficiary's city.

In case the validity of an L/C is stated in a period of time, for example "this credit is valid for three months" or "this credit is available for two months" or "this credit is good for one month", but does not specify the date from which the time is to run, its validity starts from the issuance date of L/C by the issuing bank. The bank normally discourages stating the L/C validity in a period of time.

In case the expiry date and/or the latest negotiation date falls on a day on which the bank is closed for reasons not including the acts of God, strikes, riots, civil commotions, lockouts, insurrections, wars or any other causes beyond the bank's control, the expiry date and/or the latest negotiation date is extended to the succeeding first day on which the bank is opened. Such extension, however, does not extend the latest date of shipment.

c) Draft(s) Drawn On

The draft(s) drawn on answers the question "Which bank or who is the drawee (the payer) of the draft?" The draft is most often drawn on the confirming bank or the issuing bank. In some cases, the draft is drawn on the applicant. In the sample letter of credit the draft is drawn on the confirming bank, which is The Moon Bank.

d) Draft(s) Drawn At

The draft(s) drawn at answers the question "The draft is drawn at what terms?" It can be a sight draft (i.e., payment on demand or on presentation) or a term draft (i.e., payment at a fixed or determinable future time). In the sample letter of credit the draft is drawn at sight.

e) Draft(s) Drawn Under

The draft(s) drawn under answers the question "The draft is drawn under which credit and the credit is of which bank?" In the sample letter of credit, the L/C requires that the draft(s) be marked "Drawn under documentary credit No. SB-87654 of The Sun Bank, Sunlight City, Import-Country, dated January 26, 2001" (please see the completed sample draft).

f) Latest Shipment

The latest shipment---latest date of shipment or last date for shipment---is the last day of the period of time allowed by the letter of credit (L/C) for shipment, dispatch or taking in charge. In the sample letter of credit the latest shipment date is March 19, 2001.

g) Port or Point of Origin and Port or Point of Destination

The port or point of origin is the port or place of loading, dispatch or taking in charge. The port or point of destination is the port or place of discharge or delivery. Some of the expressions that may appear in the letter of credit (L/C)

indicating the origin and the destination are:

"shipment from ... to ..." "dispatch from ... to ..." "carriage from ... to ..." "delivery from ... to ..." "forward from ... to ..." "taken in charge at ... for transportation to ..."

In the sample letter of credit the origin is Moonbeam Port, Export-Country and the destination is Sunny Port, Import-Country.

3) Commercial Invoice : The commercial invoice is a record

or evidence of transaction between the exporter and the importer.

Invoice is a bill for itemized goods or services. The pre-shipment

invoice is a shipment detailing the transaction.

It is one of the most important documents prepared and

signed by exporter with whose help other documents are prepared.

The description of merchandise as given in the commercial invoice

must correspond to the description in the L/C and other documents

must contain the similar description are:

Specific Language Requirements in the Commercial Invoice

Certain importing countries may require that the commercial invoice and the packing list be made out in, or translated to, the language of the importing country, for example, in French for shipment to France, in Italian to Italy, and in Spanish to Mexico and Venezuela.

Declaration on Commercial Invoice

The declaration on the commercial invoice for some countries must be in a specified wording. The exporter may check the wording with the customs broker, the government external trade department, or the foreign government trade office concerned in the exporting country.

The content of a typical declaration includes a sworn statement from the exporter indicating that the goods in question are manufactured in the exporting country, and that the amount shown in the invoice is the true and correct value.

Certification and/or Legalization of Commercial Invoice

The letter of credit (L/C) from certain importing countries, in particular from the Middle East, requires the certification and/or legalization of the commercial invoice.

The certification, which usually is performed by the local Chamber of Commerce of the exporting country, is to confirm that the invoice and declaration (in the invoice) are correct. The legalization, which is done by The Consulate or The Commercial Section of the Embassy of the importing country, is to verify that the invoice is correct.

The certification and legalization are most often satisfied with a stamp or a seal on the invoice and payment of a fee. The processing time may take one week

Signature and/or stamp

The commercial invoice and packing list need not be signed, unless otherwise stipulated in the letter of credit (L/C). In practice, the original and the copy of the commercial invoice and packing list are often signed.

Description of Goods

The description of the goods in the commercial invoice must correspond with the description in the letter of credit (L/C). In all other documents, the description can be in general terms provided it is not inconsistent with the description in the L/C.

Shipping Marks & Numbers

Quantity

If the letter of credit (L/C) does not stipulate the quantity in a stated number of units (i.e., it does not state in units such as piece, set, box, dozen, or gross), or unless the L/C stipulates that the quantity of the goods specified must not be exceeded or reduced, a tolerance of 5% more or 5% less quantity is permitted, provided the total amount does not exceed the amount of the L/C.

In the sample L/C the stated quantity is 100 Sets, thus the quantity in the invoice must be 100 Sets. If such sample L/C does not state the quantity, the UVW Exports can ship between 95 sets and 100 sets of pneumatic tools, but not over 100 sets as the total amount will exceed the L/C amount of US$25,000. If such L/C does not state the quantity and the L/C amount is US$26,250 or more, the exporter may ship between 95 and 105 sets.

If the L/C quantity is indicated using the words "about", "approximately", "circa" or similar expressions, the quantity in the invoice cannot exceed 10% more or 10% less than the quantity indicated in the L/C. For example, if the L/C quantity is "about 100 sets", the quantity in the invoice can be any quantity between 90 sets and 110 sets, provided the total amount does not exceed the amount of the L/C.

Unit Price

If the letter of credit (L/C) unit price is indicated using the words "about", "approximately", "circa" or similar expressions, the unit price in the invoice cannot exceed 10% more or 10% less than

the unit price indicated in the L/C. For example, if the L/C unit price is "about US$250", the unit price in the invoice can be any unit price between US$225 and US$275, provided the total amount does not exceed the amount of the L/C.

Amount

Unless otherwise stipulated in the letter of credit (L/C), the amount must not exceed the amount permitted by the L/C. If the L/C amount is indicated using the words "about", "approximately", "circa" or similar expressions, the amount of the invoice cannot exceed 10% more or 10% less than the amount indicated in the L/C. For example, if the L/C amount is "approximately US$10,000", the amount of invoice can be any amount between US$9,000 and US$11,000.

Explanations:Fields in the Preamble of the Commercial Invoice

" For account and risk of Messrs. "Enter the complete name and address of the importer (the consignee) in the field (For account and risk of Messrs.). The title Messrs. stands for Messieurs in French meaning gentlemen. It is used to address a business firm in a formal manner, the same way the title Mr., Mrs. or Miss is used to address a person.

" Letter of Credit No. " ,   " Date "   and   " Issuing Bank "

Referring to the sample L/C, enter "SB-87654", "January 26, 2001" and "The Sun Bank" in the respective fields in the documents. The sample L/C does not stipulate indicating this information in the documents except the draft(s), thus UVW Exports may choose not to enter it in the documents, but there is no harm if it is entered in the documents.

" Import Permit/License No. "   and   " Date "

Referring to the sample L/C, enter "IP/123456" and "January 18, 2001" in the commercial invoice and all other documents, including bill of lading and insurance policy.

" Buyer's P.O. or Contract No. "   and   " Date "

The letter of credit may require the documents to show the purchase order (P.O.) or contract number. Referring to the sample L/C, enter "DEF-101" and "January 10, 2001" in the respective fields in the documents.

" Buyer's Department / Store No. "

The department or store number is often required when dealing with the chain stores. It is the identification number of the store or branch of a chain store. The store number is used in the routing of goods by the chain store. It identifies the store that places the order or to which branch (of the chain store) the goods will be delivered.

" Shipment on or about "

Shipment on or about is the ETD (estimated time of departure) or the ETS (estimated time of sailing). In practice, the date of loading on board, dispatch or taking in charge is often regarded as the ETD.

" From (Port of Loading) "   and   " To (Port of Discharge) "

The port of loading is the port or point of origin and the port of discharge is the port or point of destination. Referring to the sample L/C, enter "Moonbeam Port, Export-Country" as the origin and "Sunny Port, Import-Country" as the destination in the fields.

" Via (Tranship At) "

The via (tranship at) refers to the transhipping port or point in a transhipment. For example, if a consignment destined for landlocked Afghanistan has to tranship at Karachi, Pakistan, enter "Karachi, Pakistan" in the field.

" For Transhipment To "

For transhipment to is the final destination in the onward routing or carriage, which is often the consignee's place (city).

4) Packing List : It is a document showing the details of goods

contained in individual packages, which helps customs authorities

and receives in identifying the contents of specific package.

It contains almost all the information provided in invoice

along with details of packing like:

No. of bales or cartons

Gross weight

Net weight

Dimensions etc.

For the purpose of explaining other fields in the packing list, it is assumed that the pneumatic tools in the sample L/C contain the following data:

 The catalogue or item number of the pneumatic tools is A380

Each set is in an inner box and there are two boxes in

an export master carton, or a total of 50 cartons for the 100 sets

Each master carton:

  Net Weight (N.W.) .....   20 kgs.  (44.1 lbs.)  Gross Weight (G.W.) ..... 23 kgs.  (50.7 lbs.)  Measurement (Meas.) ..... 0.113 CBM  (4 cft.)

     61 cms. x 61 cms. x 30.5 cms.(2' x 2' x 1')

" Package No. "

The entries preferably arranged in sequence from the lowest number to the highest, that is, from package No. 1 and up. From the sample L/C, enter "C/No. 1-50" or the like in the field (Package No.), provided it is not inconsistent with the marks and numbers on the master cartons.

" Item No. "   and   " Description of Goods "

The description of the goods in the packing list can be in general terms, provided it is not inconsistent with the description in the L/C. From the sample L/C and data of the pneumatic tools above, entering "A380" and "'ABC' Brand Pneumatic Tools" in the fields will satisfy the requirements.

" Quantity "

It shows the total quantity within a stated range of the package number and the breakdown in each package. The stated range is C/No. 1-50, enter:

100 Sets2 Sets/Ctn.or 100 Sets2 Sets @ Ctn.

or the like in the field. The / and @ used here stands for per or each.

" Weight "

It shows the total weight within a stated range of the package number and the weight of each package. The stated range is C/No. 1-50, enter:

1,150 Kgs.23 Kgs./Ctn.or 1,150 Kgs.23 Kgs. @ Ctn.

or the like in the field and put a notation "Gross Weight".

As far as the carrier is concerned, the gross weight or measurement of a consignment is needed to calculate the freight. In case the goods are assessed in the importing country or exported on the net weight basis, it is necessary to show the net weight and gross weight in the packing list. The entry may appear as:

N.W. 1,000 Kgs.

G.W. 1,150 Kgs.

" Measurement "

Ocean shipments are most often charged by the cubic meter (CBM or cbm). Enter:

5.65 CBM0.113 CBM/Ctn.

in the field (Measurement). Sometimes, it is necessary to include the size or dimensions (length-width-height) of the master package. The entry may appear as:

5.65 CBM0.113 CBM/Ctn.@ 61 x 61 x 30.5 Cms.

The @ stands for at or each.

Some carriers may calculate the freight on a cubic feet (cft. or cu. ft.) basis. In the case of an irregular shaped cargo, take the three widest dimensions that describe the smallest cubic space enclosing the cargo to determine the measurement.

" Signature and/or Stamp "

The packing list and commercial invoice need not be signed, unless otherwise stipulated in the letter of credit (L/C). In practice, the original and the copy of the packing list and commercial invoice are often signed.

Summary of Totals in a Consignment Total Number of Packages

For example a consignment where the range of the carton number is as follows:

C/No. 1-8C/No. 9-17C/No. 18-23C/No. 24-30C/No. 31-42C/No. 43-50

- Product A- Product B- Product C- Product D- Product E- Product F

put a summary "Total 50 Cartons" in a succeeding row after the "C/No. 43-50".

Total Quantity

If a consignment consists of different units, preferably show all the units used in the summary of totals. For example, a shipment includes:

100 dozen- Product A

200 dozen300 boxes400 boxes   

- Product B- Product C- Product D

as such the total shows "300 Dozen and 700 Boxes".

Total Weight and Total Measurement

If the net weight and gross weight are used in the breakdown, the summary must show the total net weight and the total gross weight. If kgs., lbs., CBM and cft. are used in the breakdown, the summary must show the total of kgs., lbs., CBM and cft..

Under certain circumtances, such as in a consignment consisting of a few master cartons where each carton contains several small items of different sizes, it is necessary to show the breakdown of the quantity of each item. There is no need to show the breakdown of the weight and measurement of each carton. Simply entering the total weight and the total measurement of the consignment in the summary row would satisfy the export requirements.

5) ARE-1 Form : This document is prepared by exporter & it acts

as a excise document. This document contains details like

Description of package

Marks and number on packages

Gross weight

Net weight

Description of finished goods

Value

Invoice number and date

Amount of rebate claimed under rule 18.

6 copies of this document are prepared which are as

follows:

(1)Original (White) - is sent with container

(2)Duplicate (Buff) - is sent with container

(3)Triplicate (Pink) - to excise authority

after proof

(4)Quadruplicate (Green) - shipment is obtained

(5)Quintuplicate (Blue) - kept for office

record

(6)Sixtuplicate (Yellow) - to control

excise authority

6) Bill of Exchange : A bill of exchange is also known as draft,

which contains an order from the exporter INDO ALUSYS to the

importer to pay a specified amount to a person. To whom it is

directed to pay is called maker of a bill means exporter (INDO

ALUSYS).

When the goods are shipped by Sea, the bills are drawn in

sets and two mailed to the foreign correspondent through an

authorized dealer for presentation to the importer. A bill of

exchange is to two types:-

a) Sight Bill: When the importer makes the payment immediately

after the draft presented to him. It is called a sight bill.

b) Usance Bill: When the exporter (INDO ALUSYS) has agreed to

give credit to the foreign buyer, he draws a bill, which is called

usance bill. A usance bill is drawn for payment at a date later

than the date of presentation. There is no aligned document for

draft; the same can be prepared by the exporter in the usual

format.

Drafts Drawn On the Bank

In the sample L/C the draft is drawn on the confirming bank.

Sample Instrument:  Draft

The "No." (number) in the above sample draft may be used for the exporter's reference number. Blank drafts are available at the paying bank.

First of Exchange (Second Unpaid) and Second of Exchange (First Unpaid)

In practice, it is not uncommon that two drafts are drawn on the drawee bank in a letter of credit (L/C) to ensure that at least one draft reaches the drawee when they are dispatched separately.

The issuance of more than one draft in a letter of credit follows the same logic as in the issuance of bill of lading in more than one original. At times even three drafts may be drawn on the drawee bank, this practice was not uncommon before in certain countries.

In contrast, normally one draft is issued in a documentary collection where the draft is drawn on the importer.

The sample draft shown above is the first draft, marked "First of Exchange (Second Unpaid)" and the number "1". In the second draft, if any is issued, is marked "Second of Exchange (First Unpaid)" and the number "2". Some drafts may not be numbered "1" or "2".

The Letters of Undertaking Instead of the Drafts

In certain exporting countries, the government levy a heavy tax on drafts. In such a circumstance, the exporter may request the importer to specify in his/her letter of credit (L/C) application that "No drafts be issued". When the documents are presented to the negotiating bank, the bank issues a letter of undertaking indicating when and where the money will be paid, instead of accepting a draft drawn by the exporter.

'Availed' Term Drafts

The word "aval" in French means endorsement. A term draft accepted by the importer does not guarantee payment on maturity, hence it is not readily accepted for discounting or as collateral in a loan. The exporter may arrange to have the accepted draft to be 'availed' by the importer's bank---the bank adds its endorsement as guarantee of payment. The 'availed' term draft can be readily discounted, thus providing the exporter with immediate funds.

The Parties in the Collection of Drafts

Drawer

The drawer is the party who issues the draft and to whom the payment is made. The drawer is the seller (the exporter) and the payee of the draft. The payee could be another party rather than the exporter, or could be the bona fide holder (the bearer) of the draft.

Drawee

The drawee is the party who owes the money or agrees to make the payment and to whom the draft is addressed (made out). The drawee is the buyer (the importer), the acceptor and the payer of the draft in a documentary collection. In a letter of credit the drawee most often is the confirming bank or the issuing bank, which is the acceptor and the payer of the draft.

Remitting Bank

The exporter's bank to whom the exporter sends the draft, shipping documents and documentary collection instructions, and who subsequently relays them to the collecting bank in a documentary collection is called the remitting bank.

The term remitting bank as used under a letter of credit may refer to a nominated bank from whom the issuing bank or the confirming bank, if any, receives the shipping documents.

Collecting Bank (Presenting Bank)

The bank in the importer's country (the importer's bank usually) involved in processing the collection---presents the draft to the importer for payment or acceptance, and thereafter releases the shipping documents to the importer in accordance with the instructions of the exporter---is called the collecting bank or the presenting bank.

7) Certificates of Origin

The certificate of origin is a document certifying the country in which the product was manufactured, and in certain cases may include such information as the local material and labor contents of the product.

Some importing countries require a certificate of origin to establish whether or not a preferential duty rate is applicable. A popular example of the certificate of origin is the Form A, which is often called the GSP Form A.

The certificate of origin (C/O)is an alternative to the declaration or the certification and/or legalization of the commercial invoice. The C/O is based on the rules of the country of origin.

The country of origin is the country where the goods are grown, produced or manufactured. The manufactured goods must have been substantially transformed in the exporting country as the country of origin, to their present form ready for export. Certain operations such as packaging, splitting and sorting may not be considered as sufficient operations to confer origin.

The certificate of origin includes the Form A, Chamber of Commerce Certificate of Origin, Exporter's Certificate of Origin, and Free Trade Market Certificate of Origin. The trade agreement, import practice, and letter of credit (L/C) stipulation determine the type of C/O needed.

Sample Form: Form A

Free Trade Market Certificates of Origin

 NAFTA Certificate of Origin

The North American Free Tree Agreement (NAFTA) Certificate of Origin is used within the NAFTA countries (i.e., Canada, USA and Mexico). The form is available at the customs office. It is self-certified by the exporter.

 EC Certificate of Origin

The European Community (EC) Certificate of Origin, as its name implies, is used in the European Community. It is issued by the Chamber of Commerce of the exporting country, usually with payment of a fee.

EC countries consist of Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and United Kingdom.

 Movement Certificates

Different Movement Certificates are being used in the European Union (EU)---EC (European Community) and EFTA (European Free Trade Association) countries. The certificates require endorsement by the customs of the exporting country.

EFTA countries consist of Austria, Finland, Iceland, Norway, Sweden, Switzerland, and Liechtenstein.

DOCUMENT CONNECTED WITH TRANSPORTATION OF GOODS

Air Way Bill (AWB) Air consignment Note.  The receipt issued by an airline or its agent for the carriage of goods is called airway bill or air consignment note. It is issued in terms and conditions of the contract of carriage of goods.  It is not a document of title and it is not issued in a negotiable form. Generally AWB is issued in three copies, viz; for the carrier, for the consignee and for the consignor. 

Postal Parcel Receipt (PPR).  Like the AWB, the PPR evidence merely the receipt of the goods to be exported to the buyer and is not a document of title. 

Bill of Lading (B/L).  A Bill of Lading is the most important document in Foreign Trade. It is generally issued by a shipping company. It services as a receipt  from the shipping company who undertakes to deliver the goods at agreed destination on payment of freight in a prearranged manner and also a document of  title to the goods.  B/L is generally made out in the sets of two or three originals.  All the originals are duly signed by the master of ship  or the agent of the steamship company and all the originals are equally valid for taking the delivery of goods and once one original copy is utilized the other originals become full and void. B/L is  nor a negotiable instrument in terms of Negotiable  instrument Act, However, it is a practice to call the original copies as negotiable copies. 

Ocean (Marine) Bills of LadingThe bill of lading (in ocean transport), waybill or consignment note (in air, road, rail or sea transport), and receipt (in postal or courier delivery) are collectively known as the transport documents.

Please see the sample Ocean Bill of Lading below. The bill of lading (B/L) serves as a receipt for goods, an evidence of the contract of carriage, and a document of title to the goods. The carrier issues the B/L according to the information in a dock receipt, or in some cases according to a completed working copy of the B/L supplied by the customs broker.

The B/L must indicate that the goods have been loaded on board or shipped on a named vessel, and it must be signed or authenticated by the carrier or the master, or the agent on behalf of the carrier or the master. The signature or authentication must be identified as carrier or master, and in the case of agent signing or authenticating, the name and capacity of the carrier or the master on whose behalf such agent signs or authenticates must be indicated.

Unless otherwise stipulated in the letter of credit (L/C), a bill of lading containing an indication that it is subject to a charter party and/or that the vessel is propelled by sail only is not acceptable.

Sample Document:Ocean Bill of Lading

INSURANCE DOCUMENTS  

Letter of insurance.  This is analogous to cover note issued by the broker. It is stated that particular subject are placed under insurance and certificate/policy of insurance will be issued later on. 

Broker’s Certificate  This is also not acceptable as broker issues the same, as broker acts for the insured and cannot compel insurer to accept the proposal of insurance. 

Insurance Certificate  The insurance on “open cover” or “floating” policy covering all shipment on certain terms and subjects to conditions laid down.  Unless the insurance certificate gives details of the conditions of cover it is not so much value to third party who negotiate the shipping documents. 

Insurance Policy  This is a basic legal document-evidencing contract of insurance between the insurer and insured.   It gives full details of all the risks covered.  Marine or transit insurance policies can be assigned by the insured merely by endorsement and delivery.   Insurance policies are issued in different forms like floating policy, open policy or cover, specific policy etc… A floating policy is a contract of insurance for covering a number of shipments, the details of which are not finalized when the contract of insurance is conclude.  The relevant details like name of the vessel, destination, description of cargo etc. is therefore required to be declared subsequently and endorse in the policy. An open cover /policy is valid for a given period of time or permanently open.  As per this policy the insurer undertakes to insure all the shipments for which the details are already intimated to the insurer.  A specific policy covers specific shipments and such policy is readily available for submitting with the export documents. The coverage of risks is classified into categories like A, B, C etc. and the insurance policies are issued accordingly. 

Parties involved in Pre-Shipment:

1) Marketing Department

2) Pre-shipment

3) Warehouse

4) Excise department

5) Clearing and forwarding agent

6) Inland Container Depot

Stage-5 th Customs Clearance

Custom House Agent (CHA) and freight forwarders, who

are known as clearing and forwarding agents, generally act on behalf

of importance and exporters for handling their export shipments or

clearing their import consignments.

They handle all documentation work through the customs & port

authorities and other regulatory agencies

Documents required for customs clearance:

1)Shipping Bill : Shipping bill is the main document required by

customs authority for allowing shipment. The exporter (INDO

ALUSYS) has to submit some documents for shipping bill which are

as follows:

SDF (GR Form) in duplicate for shipment.

Four copies of packing list giving contents, quantity gross and

net weight of each package

Four copies of invoice indicating all relevant particulars such

as number of packages, quantity, unit rate, total FOB/CIF

value, correct and full description of goods etc

Purchase Order, Letter of Credit

Inspection certificate

Each shipping bill set consist of following copies”-

i) Original - Retained by customs

ii) Duplicate - Exporter’s certificate

iii) Triplicate - Drawback copy/DEEC copy

iv) Quadruplicate - to excise department

v) Quintuplicate - Export Promotion Copy

vi) Sixtuplicate - Exchange Control Copy

* Exchange control copy is also called GR Form/SDF Form.

Types of Shipping Bills:

i) Free (White in colour): Used in cases where exported goods

do not get any export benefits.

ii) Drawback (Green in colour): Used in cases where the

exported goods attract the benefit under drawback rules.

iii) Dutiable (Yellow in colour): Used where the exported goods

are manufactured in bond (EOU Goods).

iv) Bond (Pink in colour): Used where the exported goods are

manufactured in bond (EOU goods).

2)GR/SDF Form : GR/SDF form is filled and submitted by the

exporter. The exporter give this form to his shipping agent to get it

stamped from the customs office after clearance of goods from

custom. GR/SDF form is prepared in duplicate. The original copy

remains with authorities and they submit it to the Reserve Bank of

India. Duplicate copy is submitted to Negotiating Bank, after

mentioning the date of receipt of payment on GR/SDF form they

also send it to RBI.

Contents of GR Form:

i) Name of advising bank (if exports is under L/C arrangement)

ii) Name of bank through which payment is to be realized.

iii) Customs assessable value.

iv) Quantity of goods.

3) Bill of Lading : The bill of lading is a document issued

by the shipping company or its agent acknowledging the receipts of

the goods mentioned in the bill for shipment on board and undertaking

to deliver the goods in who like order and condition as received to the

consignee or his order provided the freight and other charges specified

in the bill of lading require will depend upon the terms of better of

credit.

CONTAINERISATION Modern ship building technology has brought forth dry cargo bulk carriers and tankers to reduce per unit cost of transportation in tramp shipping.  Likewise the container technology has brought in the cellular ships to carry general cargo in containers to reduce cargo-handling cost and promote faster movements.    The container system of transportation involves bulking of the break-bulk cargoes by putting them in containers of standard sizes shown below: - Length Streadth Height 10’ X 8’ X 8’ 20’ X 8’ X 8’-81/2’-9’-91/2’30’ X 8’ X 8’40’ X 8’ X 8’ The movement of containers would progress in the following phases: -  

From port to port (Pier to Pier)- the carriage of containers is confined to the scalage of journey.

From Inland Container Depot (ICD) in one country to ICD in another country- the movement of containers is extended to the interior parts of the country and

Door to Door-the movement of containers is further extended right to the factory gates of the manufacturer/exporter to the door of the importer’s warehouse in a foreign country.

  Thus the container transportation system through effective co-ordination of international movements operates on a much wider scale and endeavors to provide maximum convenience to cargo owners.  The system aims at: - 

Faster and reliable delivery of goods. Better protection of fragile & containable cargoes. Ensuring original quality of goods. Reduction in pilferage. Physical separation of dirty cargoes. Simplification of documents & procedures. Reduction in the Packing cost of the cargo. Reduction in cargo handling cost & ship’s time at ports.

Volumetric Calculation of Weight for charging: - When shipping lightweight and bulky packages, use the following formula to help you determine their volumetric weight: Multiply the width by the length by depth of your shipment and divide the total by 6000.  

 For example If the width is 50cm, length 40cm and the depth 30cm.  Vol. Wt. = 50cm x 40cm x 30cm   = 10 Kgs6000 

Stage-6 th Post-Shipment Operations

This document, also called as commercial invoice, is widely

used in commercial transaction. The seller generates this after the

shipment is done. It is the statement of account of sale rendered by

the seller to the buyer and is prepared in a specific format. The invoice

is usually made out for the full realization amount of goods. It is one of

the documents required for negotiation.

The post-shipment department is done for preparing this

invoice, the bill of lading-number and date, shipping bill number and

date, GR number and date, freight details, quota details and letter of

credit or contract copy is required.

This invoice is actually a commercial invoice. The major

difference between pre and post invoices are as follow:-

The pre-shipment invoice is used for customs clearance

while the other one is sent to the L/C opener/buyer for

getting the realization through the bank.

The post shipment invoice may contain the discount or

partial advance payment, if any, thereby reducing the bill

amount compared to the pre-shipment.

Negotiation / Collection through Bank

Once the goods have been shipped and the necessary documents are

dispatched to the importer, the next step is to collect the payment

from the importer. It is obligatory for the exporter to submit the

shipping documents to your bank with in 21 days of the shipment of

goods for onwards dispatch to the overseas correspondent bank. Who

will arrange the payment of the same to your bank describing the

documents enclosed with it.

1) Documents sent to the Bank:

The exporter presents the following documents to

the bank for negotiation:-

Commercial Invoice No. 5 copies

Packing list 7 copies

Bill of Lading 2 orig. + 3 copies

Customs Invoice No. 10 orig. + 4 copies

Single Entry Declaration 1 copy

Weight List 10 orig.+ 1 copy

Original copy of Letter of Credit

Additional Documents:

Certificate of Origin:

There are certain countries that require their importers to

obtain certificate of origin from the exporter, without which

clearance of goods is not allowed.

Generalized System of Performance (GSP Certificate):

It is a document which is a special requirement of EEC

member countries and a few other European countries.

Under the GSP manufacturers and semi-manufacturers

from developing countries including India are entitled to a

cocsessional rate of import duty.

When the documents are submitted to the bank, it is a request to

the bank to negotiate the documents if the same are drawn under the

letter of credit.

The bank examines all the documents in a process

which is as follows:

a) The bank examined all the terms and conditions are according

to the original order and also that of letter of credit.

b) The set of all these documents is sent to the importer bank by

the first airmail. After that the second set is also sent by the

second airmail for the confirmation of first set.

c) A duplicate copy of GR form is transmitted to the exchange

control department of Reserve bank of India on receipt of

payment from abroad.

d) The original copy of the bank certificate as applied for by

exporter along with attested copies of commercial invoice is

returned to the exporter.

2) Documents sent to the Party:-

Bill of Lading 3 Copies

Commercial Invoice 5 Copies

Packing list 5 Copies

Special Customs Invoice 5 Copies

Single Entry Declaration 2 Copies

Weight List 2 Copies

FLOW CHART OF EXPORT PROCEDURE

MODES OF PAYMENT

UNDERSTANDING THE REQUIREMENT & ACCESSING THE

CAPABILITIES & CAPACITIES

ACCEPTENCE FOR SAMPLING

SAMPLING PREPARATION

SAMPLE APPROVED BY

BUYER

ORDER RECIVING & EXPORT CONTRACT

FINALALIZING

P.O. TO PRODUCTION INCHARGE

SOURCING (DYING, CUTTING, STITCHING,

LABELING FINISHING OF PRODUCTS)

DISPATCHING(TAGGING, FOLDING, PACKING, INSPECTION & TRANSPORTATION)

PREPARATION OF PRE-SHIPMENT DOCUMENTS

(PACKING LIST, COMMERCIAL INVOICE, AR-2 FORM, BILL OF EXCHANGE ETC)

CUSTOM CLEARANCE & SHIPPING(SHIPPING BILL, BILL OF LADING ETC)

POST SHIPMENT OPERATIONS(NEGOTIATING DOCUMENTS, COLLECTION OF

PAYMENTS THROUGH BANKS)

RECEIPT OF INQUIRY FROM BUYER

NO

NO

REVIEWBUYER’S

COMMENT

FEEDBACK

Managerial functions tend to become more and more

complicated as the operations of a company cross the boundaries of

the nation in which it is operating. Exports finance is no exception to

this generalization. The risk dimension accentuates significantly as

soon as the goods are sold to a buyer outside the country. Some of the

risk factors are inadequate personal knowledge about the foreign

buyers, possible restrictions on transfer of funds from importer’s

country, fluctuations in rates of exchange, obstacles to payments for

reasons such as wars, political disturbances payment delays and a lot

of other socio political factors. It may be appreciated that these risk

factors originate out of one common reason i.e. the business

operations are done in different of business environment.

The final indicator of success any business is its financial

viability and in exports the inflow of funds is from across the borders.

So, an export transaction is deemed to be complete only after the final

payment has been received. The payment is influenced by several

factors such as government rules and practices, bankers, Policies,

importer’s financial position and the prevailing trade practices in the

industry. The payment can influence other factors of marketing mix,

price being the most significantly affected. The exports managers must

take the following factors into account while evolving their payment

policies.

a) The institutional aspect – the operations of the mechanism and

credit facibilities.

b) Foreign exchange and its relation to export terms and receipt of

the export proceeds.

c) The methods of receiving payments.

d) Other factors.

i) Exporter’s knowledge of the buyer.

ii) Buyer’s financial position.

iii) Security of payment and risk factors.

iv) Time taken for payment

Methods of Payment in Exports

Due to the significance of risks in exports payments, the methods of

payment can be classified into following categories depending upon

the risks associated:

Payment in Advance.

Open Account.

Documentary Bills.

Shipment on Consignment Basis.

Documentary Credit under Letter of Credit.

GOVERNMENT INCENTIVES FOR EXPORTS

Benefits for Export House/Trading House/Star Trading House/Super

Star Trading House:

a) Off shore trading /merchanting with advance payment to suppliers.

b) Membership of Policymaking open bodies and business delegations.

c) Self declared pass scheme.

d) Duty exemption scheme with legal undertaking instead of B/C.

e) E.P.C.G. scheme with legal undertaking instead of B/G (Bank

Guarantee).

f) Import of cars as one time facility once in five years against their

valid status.

g) No prior approval required for opening offices abroad.

h) Foreign equity can be raised up to 51%.

i) Marketing development assistance through FIEO.

j) Higher Entitlements for foreign exchange for foreign travel.

k) EEFC funds utilization for setting up offices abroad.

Duty Drawback

The duties suffered on the raw material used in the final export

product, whether imported or procured indigenously, are refunded to

the exporter through duty drawback scheme.

The cost/duty figures supplied by all industries are used arrive at

duty drawback rates, which are published as all industry rates. In case

exporter is not satisfied with this rate, he has an option of getting a

special band rate.The current scheme does not allow drawback, if the

exporter has already audited MODVAT credit.

Duly Exemption Scheme

I. DEEC.

II. DEPB

I. Duty Exemption Entitlement Certificate

(DEEC): Under this scheme, exporter is given license to import

raw material without payment of duty. This license is called an

Advance License. The transaction under the license as to be logged

by customs in a book called DEEC book. This book has two separate

parts for exports and imports. The exporter has to undertake an

export obligation in terms of value and quantity. The licensing

authority, Director General of Foreign Trade, monitors the export

obligation.

The license could be two types:

Quantity based Advance License

Value based Advance License

The exporter has twelve months time to fulfill export

obligation. Non-fulfillment of the obligation attracts the duty waired

easier on the imports of raw material plus interest plus penalties.

II. Duty Entitlement Pass Book Scheme (DEPB):

A manufacturer- exporter or an exporter granted an

EH/TH/STH/SSTH certificate shall be eligible to avail the benefits of

this scheme.

This scheme shall apply only for the export of the product

where standard input-output norms have been published in hand

book of procedures.

Pass book shall be issued quantity based only.

The export goods shall not be eligible for drawbacks on the

inputs for which credit is taken in pass book.

Pass book will be valid for a period of two years from the

date of issue.

In pass book scheme exporter have to first export the

goods and get the credit in pass book then one can import

utilizing the credit.

Exports Promotion Capital Goods Scheme

(EPCG Scheme)

The scheme allows import of new capital goods as well as computer

software systems at 5% customs duty subject to export obligation

equivalent to 5 times CIF value of capital goods to be fulfilled over a

periods of 8 years reckoned from the date of issuance of license over a

period of 8 years. However, in export of EPCG license for Rs.100 crore

or over, the same export obligation shall be required to be fulfilled over

a period of 12 years. The capital goods shall include jigs, fixtures, dies

and molded spares may also be imported under the scheme up to 20%

of CIF value of capital goods.

A person holding an EPCG license may source the capital goods

from domestic manufacturers supplying capital goods to EPCG license

holders shall be eligible for deemed export benefit.

Period from the date of Proportion of total

export

Issuance of license obligation

1) Block of 1st & 2nd year Nil

2) Block of 3rd & 4th year 15%

3) Block of 5th & 6th year 35%

4) Block of 7th & 8th year 50%.

However, the export obligation of particular block of year may be

set off by the excess exports made in the proceeding block of the year.

In respect of license of Rs.100 crore or more, the export

obligation shall be fulfilled over a period of 12 years in the following

proportions:-

Period from the date of issue Proportion of

total export

Of license obligation

1) Block of 1st & 5th year Nil

2) Block of 6th & 8th year 15%

3) Block of 9th & 10th year 35%

4) Block of 11th & 12th year 50%.

An application for grant of an EPCG license shall be made in

APPENDIX 9 of the Handbook of procedure along with documents

prescribed there in.

The licensee holder shall submit a yearly report on progress

made in fulfillment of export obligation in Appendix 9A & 9B of

Handbook of procedures, duly certified by Chartered Accountant to the

concerned licensing authority.

 SUMMARY OF EXPORT PROCEDURE

PROCEDURE:

1.  Seller and Buyer conclude a sales contract, with method of payment usually by letter of credit (documentary credit).

2. Buyer applies to his issuing bank, usually in Buyer's country, for letter of credit in favor of Seller (beneficiary).

3. Issuing bank requests another bank, usually a correspondent bank in Seller's country, to advise, and usually to confirm, the credit.

4. Advising bank, usually in Seller's country, forwards letter of credit to Seller informing about the terms and conditions of credit.

5. If credit terms and conditions conform to sales contract, Seller prepares goods and documentation, and arranges delivery of goods to carrier.

6. Seller presents documents evidencing the shipment and draft (bill of exchange) to paying, accepting or negotiating bank named in

the credit (the advising bank usually), or any bank willing to negotiate under the terms of credit.

7. Bank examines the documents and draft for compliance with credit terms. If complied with, bank will pay, accept or negotiate.

8. Bank, if other than the issuing bank, sends the documents and draft to the issuing bank.

9. Bank examines the documents and draft for compliance with credit terms. If complied with, Seller's draft is honored.

10. Documents release to Buyer after payment, or on other terms agreed between the bank and Buyer.

11. Buyer surrenders bill of lading to carrier (in case of ocean freight) in exchange for the goods or the delivery order.

COST FACTOR OF EXPORT-IMPORT GOODS

COST FACTORS OF EXPORT-IMPORT GOODS

  1    Materials, labor and overhead Custom packagings Inspection fees Licensing fees Royalties

2 Buying agent's commissions Trader's markups

3

Bank charges and commissions Overseas agent's commissions Freight forwarder's charges Documentation charges Insurance premiums Export license fees Certification fees Consular fees Advertising

4 Road freight (cartage, drayage) and/or rail freight Routing costs (canal and inland waterway links) Uninsured damages Theft and pilferages Handling charges Demurrage

5 Brokerage fees Export levies

6 Insurance premiums

Air freight

7 Theft and pilferages Overtime charges Handling charges Warehousing Loading fees Demurrage Wharfage

8 Insurance premiums Ocean freight Lighterage

9 Uninsured damages (e.g. war and acts of God) Pilferages

10 Lighter age

11 Theft and pilferages Quarantine charges Overtime charges Handling charges Unloading fees Warehousing Demurrage Wharf age

12 Import duties and taxes Bank charges and commissions Import license fees Brokerage fees

13 Road freight (cartage, drayage) and/or rail freight Routing costs (canal and inland waterway links) Theft and pilferages Uninsured damages Handling charges Demurrage

14 Warehousing Interest charges Advertising

INTERNATIONAL COMMERCIAL TERMS (INCOTERMS)

I NTERNATIONAL COMMERCIAL TERMS

  Ex Works

EXW

  FAS

Free Alongside Ship

  FCA

Free Carrier

  FOB

Free On Board

  CFR

Cost and Freight(The former acronym of Cost and Freight was C&F)

  CIF Cost, Insurance and Freight

CIP Carriage and Insurance Paid To

  CPT

Carriage Paid To

  DAF

Delivered At Frontier

  DDP

Delivered Duty Paid

  DDU

Delivered Duty Unpaid

  DEQ

Delivered Ex Quay

  DES

Delivered Ex Ship

Incoterms or international commercial terms are a series of international sales terms, published by International Chamber of Commerce (ICC) and widely used in international commercial transactions. They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-of-the-art transportation practices

Group F – Main carriage unpaid

FCA – Free Carrier (named place) The seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes of transport, including carriage by air, rail, road, and containerized / multi-modal transport.

FAS – free alongside Ship (named loading port) The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export; this changed in the 2000 version of the Incoterms. Suitable for maritime transport only.

FOB – Free on board (named loading port) The seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the goods for export. Maritime transport only. It also includes Air transport when the seller is not able to export the goods on the schedule time mentioned in the letter of credit. In this case the seller allows a deduction of sum equivalent to the carriage by ship from the air carriage.

Group C – Main carriage paid

CFR or CNF – Cost and Freight (named destination port) Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship's rail. Maritime transport only.

CIF – Cost, Insurance and Freight (named destination port) Exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Maritime transport only.

CPT – Carriage Paid To (named place of destination) The general/containerized/multimodal equivalent of CFR. The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier.

CIP – Carriage and Insurance Paid (To) (named place of destination)

The containerised transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.

Group D – Arrival

DAF – Delivered At Frontier (named place) This term can be used when the goods are transported by rail and road. The seller pays for transportation to the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The passing of risk occurs at the frontier.

DES – Delivered Ex Ship (named port) Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer. The seller pays the same freight and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties, taxes, etc are for the Buyer. A commonly used term in shipping bulk commodities, such as coal, grain, dry chemicals - - and where the seller either owns or has chartered, their own vessel.

DEQ – Delivered Ex Quay (named port) This is similar to DES, but the passing of risk does not occur until the goods have been unloaded at the port of destination.

DDU – Delivered Duty Unpaid (named destination place) This term means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale. The goods are not cleared for import or unloaded from any form of transport at the place of destination. The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination. However, if the buyer wishes the seller to bear cost and risks associated with the import clearance, duty, unloading and subsequent delivery beyond the place of destination, then this all needs to be explicitly agreed upon in the contract of sale.

DDP – Delivered Duty Paid (named destination place) This term means that the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty. Also used interchangeably with the term "Free Domicile".The most comprehensive term for the buyer. In most of the importing countries, taxes such as (but not limited to) VAT and excises should not be considered prepaid being handled as a "refundable" tax. Therefore VAT and excises usually are not representing a direct cost for the

importer since they will be recovered against the sales on the local (domestic) market.

CONCLUSION

It is clear from the above study that the complexity of international

import-export business can be overcome easily by a systematic export

procedure & fair documentation. This is only the documentation which

safeguards the interests of Exporter, Importer, Banks, Governments,

Transport Agencies, Insurance Agencies and Inspection Agencies. Thus

the whole study concludes in brief …

To survive & grow in today’s international market for any

export house, the systematic export procedure is compulsory.

To overcome any kind of error, bottleneck, fraud and mistake;

the awareness and implementation of standardized rule-

regulations & documentation is necessary.

The final indicator of success any business is its financial

viability and in exports the inflow of funds is from across the

borders. Thus mode of payment must be decided on the basis

of best business suitability according to the Govt. & RBI

policies.

Also the Government of India has instituted many support

programmes with a view to give thrust to our sectors. These

programmes have been made to facilitate the exporters in their

exports efforts at various stages of export process.

LIMITATIONS OF THE STUDY

Partial information of negotiable documents because of

securities reasons.

No direct knowledge of the operations of Forwarding Agents.

All the findings are based on the information from Seller/Exporter

side only.

Export Rules, Regulations & Compliances are too wide to cover

thoroughly in short term project.

Primary data is analyzed though interview of executives and they

may not be available and may not be part of research.

Less sufficient response of executives & supervisors in respect to

information related to securities & weakness matter of unit.

BIBLIOGRAPHY

WEBPAGES

export911.com

indiandata.com

Superindian.com

HOW TO EXPORT A NABHI PUBLICATION

NEW IMPORT-EXPORT POLICY A NABHI PUBLICATION

EXPORT-IMPORT by: AJAY

SRIVASTAVA

COMPANY WEB SITE

www.indoalusys.com

Refrences: