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Export Procedure

Its Documentation



Exports are key to the economic survival of a nation. Exports not only help a country earn
foreign exchange, they help create jobs, peace, prosperity, and the power to influence.
To be successful in exporting and importing, it helps to know why so many export and import
businesses do not succeed. Success cannot be rushed by high hopes. Rather, it comes
The success of an export business is often attributed to luck. Work harder and there will be more
luck. The export success of Taiwan, China, Japan, South Korea, Germany and other countries
(areas) is not a miracle, it is the result of hard work. The business miracle will not happen
without working hard. However, success cannot be rushed by hard work.
The events in a large number of export offices worldwide are comparable to the events in a
football game. It is not unusual to see colleagues kicking responsibilities back and forth, just like
football players do the ball. It is important that employees' responsibilities are clearly spelled out
and that systems of operation are flexible in order to accommodate the rapidly changing needs of
world markets.

Dangers of Imbalance in International Trade

Trade surplus---favorable balance of trade---is an excess of exports over imports. Trade
deficit---unfavorable balance of trade---is an excess of imports over exports. In layperson's
parlance, the trade surplus means earn more and spend less, while the trade deficit means spend
more and less.
The trade surplus and deficit is analogous to one person's fortune is another person's misfortune.
The danger is imminent in either situation. A country with a record trade surplus is often
threatened with sanctions and trade barriers from a deficit-ridden importing country. A country
with a record trade deficit is usually faced with the internal social upheaval.
The imposition of trade barriers, such as import quotas and higher duties, is not a solution to
meeting the international challenge. The trade barrier will be confronted with a trade retaliation.
A trade retaliation will be faced with a counter-retaliation. The conflict will not end if an
agreement is not reached. The remedy to beat the trade imbalance is to understand foreign
cultures and business practices, and to provide competitive products and services.
It is a good practice to diversify export markets. Concentrating exports to only a few markets
poses imminent danger to an exporting country. Too much export concentration in a market

usually invites protectionist trade laws from the importing country. In case the importing country
imposes sanctions, the effect to the economy of the exporting country and the livelihood of its
people can be devastating.

Changing Global Marketplace and Meeting Challenges

The world markets have changed enormously in the past decade. New markets have been opened
with the end of cold war. New economic blocks have been formed. New trading alliances are
shaping. Inevitably, a new way of thinking and approach to doing business is necessary in order
to survive in the fast changing economy.
Exports are key to the economic survival of a nation. A nation that exports more will grow
stronger. The stronger a nation is, the more recognition and respect it will earn.
Increased Worldwide Competition
There can be no growth without competition. As the world population grows, which is
estimated at a rate of 1.7% annually, more products and services are needed. Business
people worldwide are keenly competing to fill these needs. World trade grew in volume at
an average of 5% annually over the past 25 years. With the end of cold war, more
resources worldwide are geared towards exporting. The export business has become more
competitive. Exporting becomes more challenging with continued population growth and
the addition of new exporters.
Effects of Social Upheaval and Recession
Any form of instability in a country can ruin its economy and may place its international
trade in disarray. With the end of cold war, the earth has become a more peaceful place to
live. However, an alarming occurrence is the growing number of permanent lower class in
numerous countries, including in developed nations. The adverse effect of social upheaval
is paramount. It can undermine the economic progress of a nation. There is an urgent need
to stop the growing number of the lower class. The task requires a concerted effort from
the government and people. The task is not easily done.
The effect of recession is immense, businesses sink, dreams of a lifetime shatter, and the
lower class increases. Vigorous export promotions, increase in exports, and diversification
of export markets can help reduce the number of the lower class.
Use of Terminology in Different Countries
The use of terminology differs from country to country. The term salesperson is easy to
decipher as the salesman or saleswoman, but it is a term that is unheard of in some
countries. The account manager is the sales representative, the buyer is the purchaser,
the accounting assistant is the bookkeeper, the human resources department is the

personnel department, the flat is the apartment, the chop is the stamp, the motor carrier
is the trucking company, and the letter carrier is the postman.

The Role of Export-Traders and Buying Trend

Export-traders play a crucial role in international trade. Prior to the 1970's when export
product quality was a common problem in many less developed countries, foreign buyers
relied on export-traders for product sourcing and pre-shipment inspections. The nature of
the order then normally was fewer items and more volume, that is, the number of items
was few and the quantity of each item was large. At that time, many manufacturers did
not know how to export, thus they relied upon export-traders for exporting, known as
indirect exporting.
There were far fewer exporters worldwide before the 1970's. The foreign buyers then did
not have many export sources from which to compare an offer. The export business was
lucrative due to much less competition. As time progressed, competition built. The
manufacturers competed on providing better quality products and lowering prices. The
price war made the traditional practice of single source of supply difficult for exporttraders to maintain. The export-traders changing the source of supply of similar products
from one manufacturer to the other became inevitable. The manufacturers needed to
survive and direct exporting was the solution. Many manufacturers started exporting
directly in the mid-1970's.
Export product quality in general improved markedly in the late 1970's. However, the
problem of quality remains a nightmare to some importers. During the oil crisis of the
late 1970's, there was a significant increase in the number of manufacturers who export
directly. Many foreign buyers deal directly with the manufacturers to save commission or
fees and/or markups of export-traders.
Tools of Export-Import Communication
The telecommunication technology 'explosion' in the past decade has changed the way
people interact around the world. With new technology on hand, some of our prime tools
of export communication, for example telex (teletype exchange or teleprinter and
exchange), have become obsolete.
The telex, like a fax (facsimile) or an e-mail (electronic mail), uses a telephone line in
transmitting the messages. Telex was the 'e-mail of yesteryear'. But instead of a computer
screen, you have a roll of paper, which may come in duplicate, triplicate or quadruplicate,
either carbonless or the much older type having a carbon paper in between the sheets,
where the outgoing and incoming messages appeared, that is, where the messages are
typed. And instead of saving the typed message in a computer disk or hard drive, each
alphanumeric character that was keyed (typed) in a telex, aside from appearing on the
paper roll, is simultaneously translated and stored in a paper tape in coded form in a
series of punched holes. Keying a wrong character may mean retyping the message from

the beginning. The 'final' tape is rerun to send the message out or make additional copies
of the message. The advantage of having a 'final' tape is to save the transmission time and
cost. Or, you can send the message directly. Each character that was keyed (typed) will
instantly appear at the receiver's end. Therefore, as long as the line is 'on', the sender and
the receiver can 'talk' over the telex, that is, exchange messages over the telex while the
line is 'on'.Although the e-mail is popular nowadays, the fax remains as an important tool
of export communication in many countries.



In exporting, it is not a prerequisite for a business to sell to its domestic market before selling
abroad. There are many successful export-traders and export-manufacturers, notably in Asia,
who have been selling their products entirely to the foreign markets.
Exporting is not for large companies only. Contrary to a belief that only large companies can
export, in fact there are more small and medium-sized companies than large companies in the
world that are engaged in exporting. The size of a company is not static. Most large companies at
one time were small companies. Not to mention, small and medium-sized companies are the
leading source of job creation in many countries.
Export Phobia
Fear comes naturally to anyone new to exporting. Fear of the unknown, or lack of
information, is one of the reasons that many businesses that are doing well nationally are
reluctant to engage in exporting.
Export Mindset
The business ground is a battleground. Exporting, like any other business, involves risks.
It is necessary to prepare for the challenges and the consequences. Engaging in exporting
is akin to engaging in a war. It is a war of price, quality, delivery and service. It is a battle
for the business orders. It is a fight for the company's survival---profits and growth. In
practice, rough strategies are often used by some exporters in order to win contracts.



Export businesses are mainly classified into export-traders, export-manufacturers and serviceexporters.
Merchant Exporters (Traders)
The export-traders include the export companies known as trading houses, trading
companies, buying offices, buying agents, purchasing agents, resident buyers, sourcing
agents, export representatives, export distributors, export agents, export management
companies (EMCs), and manufacturers' representatives.
The export-trader operates on a buy-and-sell basis or a commission/fee basis, or a
combination of these two. In the buy-and-sell basis, the export-trader buys from exportmanufacturers and adds a markup to the export price. In the commission/fee basis, the
export-trader collects a commission or fee from the export-manufacturer or the foreign
importer, or from both of them without adding a markup to the price.
Export-manufacturers include the manufacturers, producers, assemblers and processors
of export goods. Export-manufacturers either directly export the goods or indirectly
export the goods through the export-traders.
Service-exporters include the banks, ocean shipping (steamship) companies, air cargo
companies or airlines, trucking companies, rail carriers, insurance companies, freight
forwarders or consolidators, consulting firms, and miscellaneous service companies.
Service-exporters provide services to export-traders and export-manufacturers.


The planned group work for export order processing can greatly facilitate subsequent operations
and avoid the hassles associated with the process. The pre-export activities can be divided into
the following sets of activities:
A. Study Of Government Rules And Regulations
B. Identifying Various Parties And Liasion
C. Registration
D. Obtaining I/E Code Number.

A) Study Of Govt. Rules And Regulations

International trade is governed by a plethora of rules and regulations of various government
bodies of exporter and importer. A careful study of these as a pre-requisite of exports while the
rules governing exports will vary with commodity and importer countrys regulation, as a broad
frame work the most important Acts/Publications which must be consulted by an exporter in
connection with processing of an export order are :

Foreign trade(development and regulation) act, 1992


Customs act,1962


Carriage of goods by sea act, 1924


Foreign exchange regulations act, 1973 (now being replaced by FEMA and Money
Laundering Bills)



Schedule of charges of goods in respect of the port of shipment

B) Identifying Parties And Liasioning With Them

Exports involve coordinated effects of a large numbers of interdependent organizations. The
main parties which are involved in export process are :
The Exporter
The Foreign Buyer
The Negotiation Bank
The Reserve Bank of India
Director General of Foreign Trade
The Collector of Customs
The Port Commissioner
Clearing & Forwarding Agents.

Besides these, other parties may also be associated depending on the nature of commodity
and rules guiding the export of the same. Examples of these bodies can be Inspection Agencies,
Export Promotion Council, Concor, Ministry of Agriculture etc.


C) Registration
For stepping in the field of an export business, it is compulsory for a company to get registered
with Export Promotion Council related to the main product line with which they are dealing.


The main function of EPC is to promote and develop the export of the related product
line for enhancing the export. They organize Trade Fairs with in India and Abroad. They
encourage the members registered with them to participate in Trade Fairs and advertise their
products in whole world. The main role of the EPC is to Project Indias image abroad as a
reliable supplier of high quality goods. The EPC keeps abreast of the trends and opportunities in
the foreign markets and circulate important information among its members.


Application form cum Membership form worth Rs.10
A copy of PAN No. issued by income tax authorities duly
Import Export Code Number
Sales Tax Copy
Bank draft of Rs.6000.

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D) Importer/Exporter Code Number

Every person / firm / company engaged in export business in India is required to obtain ImportExport Code(IEC) No. from the Regional Licensing Authority concerned (Director General of
Foreign Trade). Custom authorities shall not allow clearance of goods to an importer or exporter
who does not posses IEC No. It is compulsory quote this Code Number in the relevant Bill of
Entry / Shipping Bill.

Applications and supporting Documents Required to Get IEC Number:

Application form
Commercial Bank Account Number(Current or Cash-Credit Account)
Demand draft for payment of Rs.1000
Certificate from the banker of the applicant in the format given in the application form.
Two copies of passport size photograph of applicant duly attested by the banker of
Permanent Account No (PAN).

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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.


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:

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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.

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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 LUCKY EXPORTS 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

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Invoice Number
Product Name
Product Specifications ( colour , size, weight etc)
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.


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

2) Labeling
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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:
Shippers 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

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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)
LUCKY EXPORTS makes use of container of 20 & 40 ft. il.(according to the goods to be

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
Description of goods & Specifications
FOB value of goods
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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.


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.


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

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before the shipping documents, and in the ports of destination where theft and pilferage of
the imported goods is rampant.


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

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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:

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SBRE-777 January 26, 2001

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

Dear Sirs:
We have been requested by The Sun Bank, Sunlight City, Import-Country
to advise that they have opened with us their irrevocable
documentary credit
number SB-87654
for account of DEF Imports, 7 Sunshine Street, Sunlight City, Import-Country
in your favor for the amount of not exceeding Twenty Five Thousand U.S. Dollars

available by your draft(s) drawn on

invoice value



accompanied by the following documents:

1. Signed commercial invoice in five (5) copies indicating the buyer's
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Purchase 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

Moonbeam Port, Export-Country

Partial shipment Prohibited


Shipment from

Sunny Port, Import-

Special conditions:
1. All documents indicating the Import License No. IP/123456 dated January 18,
2. All charges outside the Import-Country are on beneficiary's account.

Documents must be presented for payment within

Draft(s) drawn under this credit must be marked


days after the date of

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
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conformity with the

terms of this credit will be duly honored upon delivery of documents as specified, if
presented at
this 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
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.

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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
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

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:

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"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.


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

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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
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


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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.

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.

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
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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
" 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
" 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, ExportCountry" as the origin and "Sunny Port, Import-Country" as the destination in the
" 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
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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).


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
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.
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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.)
Gross Weight (G.W.)
Measurement (Meas.)


20 kgs. (44.1 lbs.)

23 kgs. (50.7 lbs.)
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 Sets
2 Sets/Ctn.
100 Sets
2 Sets @ Ctn.
or the like in the field. The / and @ used here stands for per or each.

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" Weight "

It shows the total weight within a stated range of the package number and the weight of
1,150 Kgs.
23 Kgs./Ctn.
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 CBM
0.113 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 CBM
0.113 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 "
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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. 43-50
- 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:
boxes400 boxes
- 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
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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


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
Invoice number and date
Amount of rebate claimed under rule 18.

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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

Bill of Exchange:

A bill of exchange is also known as draft, which contains an order

from the exporter LUCKY EXPORTS 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 (LUCKY EXPORTS).
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 (LUCKY EXPORTS) 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

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In the sample L/C the draft is drawn on the confirming bank, which is The Moon Bank.
The UVW Exports may issue a draft drawn on The Moon Bank as follows:
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
In contrast, normally one draft (sola bill) 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

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
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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

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.

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

Collecting Bank (Presenting Bank)

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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

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Sample Form: Form A

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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

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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

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.

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Ocean (Marine) Bills of Lading

The 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
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

Sample Document:
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Ocean Bill of Lading

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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.

Brokers 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

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.

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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 (Parparganj, Babarpur etc.)
7) P & O, APL, Contship (Vessel Owners)

The above documents along with cargo are sent to ICD by road. The ICD used by may be
Parparganj, tuglakabad or any other, depending on the contract with the importer.

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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 (LUCKY EXPORT) 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

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Each shipping bill set consist of following copiesi) Original

Retained by customs

ii) Duplicate

Exporters 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
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). Such type of shipping bill is not used in LUCKY EXPORTS,
because the company has no dealing with EOUs.
iv) Bond (Pink in colour): Used where the exported goods are manufactured in bond
(EOU goods). Such type of shipping bill is not used in LUCKY EXPORTS, because
the company has no dealing with EOUs.

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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.

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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
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 importers warehouse in a foreign

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 & ships time at ports.

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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 Kgs

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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
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

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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-

52 | P a g e

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

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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 importers
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, Om Policies, importers 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) Exporters knowledge of the buyer.
ii) Buyers financial position.
iii) Security of payment and risk factors.

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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.

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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.
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Duly Exemption Scheme






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


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.

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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.

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Period from the date of

Proportion of total export

Issuance of license


1) Block of 1st & 2nd year


2) Block of 3rd & 4th year


3) Block of 5th & 6th year


4) Block of 7th & 8th year


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


1) Block of 1st & 5th year


2) Block of 6th & 8th year


3) Block of 9th & 10th year


4) Block of 11th & 12th year


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.

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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.


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

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Materials, labor and overhead

Custom packagings

Inspection fees

Licensing fees


Buying agent's commissions

Trader's markups

Bank charges and commissions

Overseas agent's commissions

Freight forwarder's charges

Documentation charges

Insurance premiums

Export license fees

Certification fees

Consular fees


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Road freight (cartage, drayage) and/or rail freight

Routing costs (canal and inland waterway links)

Uninsured damages

Theft and pilferages

Handling charges


Brokerage fees

Export levies

Insurance premiums

Air freight

Theft and pilferages

Overtime charges

Handling charges


Loading fees



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Insurance premiums

Ocean freight


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


Lighter age

Theft and pilferages

Quarantine charges

Overtime charges

Handling charges

Unloading fees



Wharf age

Import duties and taxes

Bank charges and commissions




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Import license fees

Brokerage fees

Road freight (cartage, drayage) and/or rail freight

Routing costs (canal and inland waterway links)

Theft and pilferages

Uninsured damages

Handling charges



Interest charges




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Ex Works


Free Alongside Ship


Free Carrier


Free On Board


Cost and Freight

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


Cost, Insurance and Freight


Carriage and Insurance Paid To


Carriage Paid To


Delivered At Frontier


Delivered Duty Paid


Delivered Duty Unpaid


Delivered Ex Quay


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

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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)
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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.

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For a given term, "Yes" indicates that the seller has the responsibility to provide the service
included in the price. "No" indicates it is the buyer's responsibility. If insurance is not included
in the term (for example, CFR) then insurance for transport is the responsibility of the buyer or
the seller depending on who owns the cargo at time of transport. In the case of CFR terms, it
would be the buyer while in the case of DDU or DDP terms, it would be the seller.

Entry Loa Export Transp from ng
Transp g
Incoter d to - duty ort to truck charge ort to charges
to Insuran
truc payme exporte at the s
at importe at
destinati ce
s and
k nt
r's port origin origin' r's port importe
s port
r's port
rs' port
No No
FCA Yes Yes Yes
No No
Yes Yes Yes
Yes No
FOB Yes Yes Yes
Yes Yes No
CFR Yes Yes Yes
Yes Yes Yes
Yes Yes Yes
Yes Yes Yes
Yes Yes Yes
Yes Yes Yes
Yes Yes Yes
Yes Yes Yes
DAF Yes Yes Yes
Yes Yes Yes
DES Yes Yes Yes
Yes Yes Yes
DEQ Yes Yes Yes
Yes Yes Yes
DDU Yes Yes Yes
Yes Yes Yes
DDP Yes Yes Yes
Yes Yes Yes

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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 todays 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.

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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.

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