SE

o m

U
. c

50 HO
r t ing
80 N
26 IO
a ad
m
y e Re
91 UT

u d lin ks
98 L

n oo
t
SO

O b
s r -
.e fo E
U

b d
we u an
O

H
N

w Th
IG

WWW.IGNOUASSIGNMENTS.IN
1
 ASSIGNMENT SOLUTIONS GUIDE (2017-2018)
I.B.O.-4
Export-Import Procedures and
Documentation
Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the

m
Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Authors for the help and guidance

SE
of the student to get an idea of how he/she can answer the Questions in given in the Assignments. We do not claim 100%

c o
accuracy of these sample answers as these are based on the knowledge and capability of Private Teacher/Tutor. Sample
answers may be seen as the Guide/Help for the reference to prepare the answers of the Questions given in the Assignment.

U
.
As these Solutions And Answers are prepared by the Private Teacher/Tutor so the chances of error or mistake cannot be
denied. Any Omission or Error is highly regretted though every care has been taken while preparing these Sample

t
50 HO
Answers/Solutions. Please consult your own Teacher/Tutor before you prepare a Particular Answer and for up-to-date
g
university.

a r
and exact information, data and solution. Student should must read and refer the official study material provided by the

din
80 N a
Attempt all the questions.

m e
Q. 1. (a) Do you think that Electronic data Interchange (EDI) brings significant benefits to the
26 IO
Organization? Discuss with suitable examples.
R
Ans. Benefits of Electronic Data Interchange

y e
91 UT

d
EDI benefits can be classified as under:
(a) Strategic Benefits
lin ks
(b) Operational Benefits

t u
n oo
98 L

(c) Opportunity Benefits

O b
SO

s
(a) Strategic Benefits: The strategic benefits will effect the central operating function of the organisation in the
following areas of operations:
r -
.e fo E
(i) Faster Trading Cycle
(ii) Just-in-Time manufacturing
b d
U

(iii) Terms of trade affected by bargaining power

we u a n
(iv) Need to respond in highly competitive market entrants.
O

(v) Access to new markets.

H
w Th
N

(vi) Closer relationships with key business partners.

(b) Operational Benefits: The EDI will effect the daily operation of the company.
IG

w These benefits include:

(i) Reduced Costs of operation
(a) Paper and Postage bills reduced and cut
(b) Reduction in money tied up on stock
(c) Manual processing costs.
(ii) Improve Cash-Flows
(iii) Security and Error Reduction.
(c) Opportunity Benefits: These benefits may not be in present operation but can help as and when an
opportunity arises and include:
(i) Enhanced image

WWW.IGNOUASSIGNMENTS.IN 2
 (ii) Competitive edge
(iii) Improved corpoprate trading relationships.
International Trade involved long distance in different geographical locations served by different modes of transport,
where sending the proper documents involved long time uncertainities of the postal system and huge costs, whereas
as Electronic Data Interchange is instant delivery, paperless and low costs of operation does not involves papers and
their upkeep.
Speed is the essence of international trade earlier couriers, such as UPS/DHL and FEDEX provided fast services
by carrying papers and documents related to international trade but these services limited to selected few air connected
locations and very costly, hence the EDI become instant success in the area of international trade.
EDI still has certain unresolved legal issues like authentification of documents, which are neither signed nor
sealed, however of the facility of signature and message secure. EDI systems provided by introduction various
VANS have made EDI a necessity for international trade.

SE
o m
EDI is fast, exact and perfect and not proove to human errors and the messages are delivered on computer to
computer basis as per the accepted message system which has been made secure and any ambiguity can be clarified
by revesting the query electronically and get it clarified at an early time. EDI helps the international trade on all

U
c
spheres except the physical delivery of goods, even the payments can be made electronicallly through secured system

.
50 HO
of various banking channels.
(b) Explain various EDI standards.

r t g
Ans. EDI Standards: Standards in Electronic Data Interchange is a necessity due to the enmoerity of the use of

in
EDI systems by different group of people. Seeking different information at the same time. Some EDI Standards have

80 N
been established to meet sectoral and national require-ments.
a ad
Since there is more than on syntax upon which EDI messages are built, the syntax comprises rules that define
26 IO
m e
how a message is assembled for exchange. Three Syntax’s dominate the world of EDI.
● ANSI ASC X. 121 often called ANSI X 12
R
y e
91 UT

● UNTD 12

● EDIFACT 3

d
in ks
EDIFACT is the international Syntax since 1985 as merger between UNTD 1 and ANSI X 12. United Nation has
l
u
98 L

introduced a common standard called UN/EDIFACT.

n oo
t
SO

EDIFACT defines the Syntax rules for transmission of messages in international trade.
O b
s
EDIFACT covers standardisation in five main areas:
r -
(a) Data Elements: Data elements can consists of details relating to buyer, seller, goods description and value.

.e fo E
(b) Syntax Rules: It is the grainmet for writing messages in a structured manner.
U

d
(c) Message: A set of information stored in predefined format along with the precise function. Messages are
b
we u an
O

equivalent to documents.
(d) Segment: Segment is immediate unit of information in a message which equates to sentence in a passage.
H
N

w Th
(e) Codes: Codes are used as abbreviations. The EDIFACT codes are built on existing ISO codes.
EDIFACT is only International Syntax Standard used for interchange of electronic messages.
IG

EDIFACT-Electronic Data Interchange For Administration, Commerce and Transport was born in 1985, by

w
merging the best features of UNTDI and ANSI X 12
EDIFACT defines the Syntax rules for the transmission of message and can be used across global boundaries,
EDIFACT message standard are used for international trade and have been endorsed by the United Nations.
EDIFACT covers standardisation in the following areas:
– Data Elements
– Syntax Rules
– Message
– Segment
– Codes

WWW.IGNOUASSIGNMENTS.IN 3
 EDI Standards Comprises the:
– Syntax
– The message designed rules
– Directories
The messages and directories are designed by technical experts in consultation with the users. Maintenance
providers help in making out the directories for national or international use.
EDI standards cover data elements in unit of data for which the field specifications are defined.
Syntax rules: It is the grammer for writing messages.
Message–A set of information stored in a pre-defined format.
Segment: It is the immediate unit of information in a message.
Codes: Codes are with upon the ISO codes.

SE
Q. 2. What are the regulatory framework for Import finance? Explain various methods of import
finance available to Indian Importers.

c o
Ans. The Regulatory Framework: India has an Export-Import Policy which across at accelerating the country’s

U
.
transactions to an internationally oriented economy which has very free trade barriers and has tarrif levels with a

t
50 HO
view to derive maximum benefits from the expanding global markets. It is with this policy that India has an enjoyable

g
r
position in export of Computer Software technology and the resultant hardware import technology which has gone a

n
long way in establishing India in the World Computer technology trade. These objectives are achieved basically
i
through following legislations:

80 N
a d
1. Foreign Trade (Development & Regulation) Act, 1973, which is administered by the Director General of
a
Foreign Trade in association with the Reserve Bank of India which is the only monetary authority in India.

m e
26 IO
2. Foreign Exchange Management Act, 1999, which is administered by Department of Economic Affairs of the
R
y e
Ministry of Finance, while the Exchange Control is managed by the Reserve Bank of India.
91 UT

3. The Rules and the Operational Procedures relating to Imports into India are framed by the Foreign Exchange
Dealer Association (FEDAI).

l
u d
in ks
For the purpose of documentary Credit policies formulated by the International Chamber of Commerce Paris and

n oo
t
98 L

the practices of Uniform Customs and Practices for Development of Credit are followed.

O b
India’s import policy has been adopted within the framework of obligations of the membership of World Trade
SO

s r -
Organisation of which India is a leading member. Keeping in with WTO policies, India’s import policies are not

.e o
discriminatory in any manner, and whatever restrictions have been imposed they are within WTO allowed regime

f E
India has signed several preferential trading arrangements with some South Asian countries and provides preferential

d
treatment to imports from developing countries.
b
U

we n
Imports into India are physically controlled by the Director General of Foreign Trade and the exchange control is
u a
O

maintained by the Reserve Bank of India.

H
India allow almost free imports exception in case of certain articles which are on the Negative List. Import

w Th
N

licence for items included in the restricted or banned list may be issued by the Director General of Foreign Trade.
An Import licence is an authorisation which includes a customs clearance permit (CCP) indicating inter alia,
IG

w
quality description and value of the goods, actual user conditions, the minimum export value, if any, export obligation,
if any and value addition obligation of any. Import lincences which are issued on CIF basis is given in Duplicate viz
Customs copy for clearance from customs and Exchange Control copy for remittances.
Under the Export Promotion Capital Goods (EPCG) Scheme, Capital goods can be imported at a concessional
rate of custom duty subject to an export obligation to be fulfilled within a specified period of 5-8 years. Under the Duty
Exemption scheme import of raw material intermediates, components, consumables, spare parts accessories, packing
material and computer software required for direct use in the product to exported duty free.
Q. 3. State the stages of shipment of export cargo. Explain the Customs clearance of export cargo by
sea alongwith the documentation formalities.
Ans. Stages of Shipment: Shipment of export cargo passes through various stages and have to deal with the
following certifying elements to complete the documents:

WWW.IGNOUASSIGNMENTS.IN 4
 (a) Shipping Company
(b) Port authorities
(c) Customs Authorities.
Shipping Company: The Clearing and Forwarding Agents has to obtain permission of the Shipping company for
bringing the cargo into the Shipment shed according to the ‘loading plan’ of the ship.
Port Authorities: The Cargo is inspected by the port authorities which issue a ‘Let Ship’ endorsement, before
the cargo moves to the ship.
Customs Authority: It is the authority which actually ensures the export-worthiness of the cargo, collect customs
charges and on being satisfied, it issues a certificate and endorse the documents ‘Let Export’.
Following is the process of shipment:
1. Filing of documents with the customs authorities for checking the genuiness of the transaction and for

SE
m
obtaining examination order.
2. Payment of port charges.
3. Obtaining permission of the shipping company to bring cargo into the shipment shed.
o

U
c
4. Arranging for transport of cargo to move into the Shipment shed through port gate.

.
50 HO
5. Permission of the Gate Inspector to move the cargo into the port area.

7. Uploading of cargo in the shipment shed.

r t
6. Obtaining permission from the shed superintendant for bringing the cargo into the Shipment shed.

8. Examination of cargo by the Customs Authorities and obtaining “Let Export” order.
ing
80 N a
9. Obtaining “Let Ship” order from the customs preventive officer prior to loading.
10. Issuance of Mate Receipt by the Master of vessel.
26 IO
ad
m
11. Obtaining “Fact of Shipment” certificate from the customs preventive officer.

y e
12. Obtaining the Bill of Lading in Negotiable and Non-negotiable Copies.
Re
91 UT

13. Obtaining the duly certified copies of the Duty Draw-back performa with proper endorsement.
Customs Clearance Formalities

l
u d
in ks
The Law in India mandiates that no overseas carrier can load the cargo on an Indian port without the express
98 L

n oo
t
permission of the Customs Authorities under section 40 of the Indian Customs Act. The permission is granted to the
SO

O b
exporter or his Clearing and Forwarding Agent by following the procedures and formalities as required under the law.
Legal Framework
s r -
.e o
Section 50 of the Indian Customs Act requires the exporter to file a declaration in a prescribed form and submit
f E
supporting documents to enable the customs authorities to check declarations made by the exporter the objectives of
U

the customs control are:

b d
we u an
O

(i) To ensure that nothing goes out of the country against the laws of the land and that prohibetions and
restrictions regarding outward cargo are duly enforced by the customs authorities.
H
N

(ii) To ensure authenticity of the value of outward cargo according to the customs vauation rules to check over

w Th
and under invoicing.
IG

(iii) To assess and realise export duty/cess/charge according to the Customs Tarrif Act and other fiscal legislation.

w (iv) To check that all the relevant regulatory provisions enforced by various authorities in the country have been
duly complied within respect of export.
(v) To provide export data through the Customs returns.
Customs Clearance Stages
The following are the four stages of Customs clearance:
1. Processing of documents at Custom House i.e. main office. This stage involves the following:
(a) Checking up of documents to ensure that all relevant documents have been submitted.
(b) Verification of quantity and value of goods.
(c) Verification and determination of rate of duty and collection of the duty amount.

WWW.IGNOUASSIGNMENTS.IN 5
 (d) Direction for the customs officer in the docks for physical examination of goods.
(e) Physical examination of goods in the docks in accordance with the examination order given at the Customs
House.
(f) Supervision of loading by the customs preventive officer.
(g) Post-shipment endorsement by the Customs Preventive officer.
Documentary Requirements
Export is possible only with the help of documents for movement of goods by air or sea, the customs permission
for Shipment is given on a prescribed document know as Shipping Bill. In other cases like Rail/Road the document is
known as Bill of Export. There are four types of Shipping Bill as under:
1. Dutiable Shipping Bill / Bill of Export: This is for those goods which attract the payment of duty/cess for

m
exports.

SE
2. Drawback Shipping Bill/Bill of Export: It applies to those goods which are entitled to the Duty Drawback
Scheme.

o
3. Free Shipping Bill/Bill of Export: These are those goods which do not attract Export Duty and are not

U
.
eligible for Duty Drawback.

t
4. Ex-Bond Shipping Bill/Bill of Export: This applies to these goods which are shipped from the customs

50 HO
bonded warehouses.
g
a r in
The exporter or his CFA has to submit the following documents to the Customs Department for Customs clearance:
1. Shipping Bill in duplicate, triplicate, quadriplicate duly filled, in signed and stamped
d
80 N
2. Declaration regarding truth of statement made in the Shipping Bill.
a
m e
3. Invoice copy
26 IO
4. GR Form
R
5. Export Licence, if required
y e
91 UT

d
6. Quality Control Inspection Certificate

in ks
7. Original contract of export or correspondence leading to the contract
l
8. Contract registration certificate

t u
n oo
98 L

9. Letter of Credit, if applicable

O b
SO

10. Packing List

s r -
11. AR4/AR5 forms original and duplicate

.e fo E
12. Any other relevant documents
Procedural Formalities
b d
U

we u a n
(a) The Shipping Bill and the other documents are submitted to the custom house as soon as the Rotation
O

Number has been given to the carrier.

H
w Th
(b) As soon as the documents are filed in the Customs House the receiving clerk will stamp the shipping bills
N

with date and time and number them according to their category.
(c) The Shipping Bill involving Foreign Exchange will be sent to the Appraisment section, where they are
IG

w allotted to appraisers and examiners for scruting and giving examination order.
(d) While the Appraiser will examine the Dutiable and Drawback Shipping Bills.
(e) Free Shipping Bill will be examined by the Examiners.
(f) The verification of the Shipping Bill will be carried out with reference to value and quantity of goods export
licence/quota/permit compliance with statutory requirements, rate and amount of export duty etc.
(g) After verification of Shipping bill, the customs Appraiser/Examiner will give an “examination order” on the
Duplicate Shipping Bill. This order will enable the customs officer to carry out physical examination of
goods in the docks. The “examination order” will also be counter-endorsed by the principal Appraiser.
(h) After completion of formalities at the Appraisement Section, the documents are given to the GR form clerk
who puts the Shipping Bill Number on the GR form and detaches the original to be sent to RBI.

WWW.IGNOUASSIGNMENTS.IN 6
 (i) Further where export duty is to be paid, the documents are given to the exporter/CFA to pay it at the cash
and accounts department. After payment of duty, Shipping Bill (Original) is detached and the other documents
are given to the exporter/CFA. In other cases, Shipping Bill (original) is retained at Customs House and
other documents are given to the exporter/Agent for bringing the goods to the shipment shed and make
Shipment arrangement.
The second stage of Customs formalities is to carry-out physical examination of goods in the shed. The goods can
be brought into the shed only afttier completing port formalities once the goods have been brought in the exporter
CFA will present the Shipping bill to the custom shed Appraiser / Examiner along with the following documents:
(i) Invoice
(ii) Packing List
(iii) AR4/AR5 Forms

SE
(iv) Agmak Certificate, if applicable.

m
The shed Appraiser/Examiner would carryout physical examination according to the “examination order” given in
Shipping Bill (Duplicate).
o

U
c
Once this activity is over the Examiner will give “Let Export” order on the Shipping Bill (duplicate) which

.
50 HO
constitutes the physical examination report.

on the Shipping Bill (Duplicate) in the form of “Let Ship” order.

r t
After the physical examination report, the customs preventive officer at the docks gives permission for Shipment

ing
This copy is presented to the master of the carrier who then in consultation with the concerned customs preventive

80 N
officer, commences loading operations.
a ad
The master of the carrier, after receiving consignments on board issues “Mate’s Receipt” which is obtained by
26 IO
m
the exporter or his CFA through the shed Superintendent after paying port dues.

y e Re
The Mate’s Receipt provide the basis for certification of the “Fact of Shipment” on those documents, where it is
91 UT

needed for claim of export incentives. These documents are AR4/AR5 Form, Export Promotion Copy of Shipping
Bill, GR (Duplicate) and Commercial Invoice.
Q. 4. Comment on the following statements:

uld
in ks
98 L

n oo
t
(a) Deemed exports refer to those transactions in which the goods supplied leave the country.
SO

O b
Ans. Deemed Exports: When the goods do not leave the country but are supplied by the main or sub-contracter

s r
for exports but are manufactured in India. The following category of items are assumed as deemed exports:
-
.e o
(a) Supply of goods against advance licence/DFRC under the duty exemption/remission scheme.

f E
(b) Goods supplied to units located in Export Oriented Unit Area, Export Processing zones, Special Economic
U

d
zones, Software Technology Parks, Export Houses Technology Park.
b
we u an
O

(c) Supply of goods to holders of licence under Export Promotion Capital Goods Scheme.
(d) Goods supplied to projects financed by multilateral or bilateral agencies/funds, as notified by the Ministry of
H
N

Finance.

w Th
(e) Goods supplied to any of the power projects or refineries and Coal hydrocarbons, rail, road, port, civil aviation,
IG

bridges and other infrastructure projects with a minimum specific investment of Rs. One Hundred Crore or

w more.
(f) Supply of goods to a project or a purpose for which Ministry of Finance allows import of goods at Zero
Custom duty Coupled with the extension of benefits under this Chapter to domestic supplies.
(g) Goods supplied to projects funded by any United Nation organization agency.
(h) Domestic Freight Containers manufacturer who supply marine freight containers freight 100% Export oriented
units within six months or any period permitted by the Customs.
Deemed Exports shall be eligible for the following benefits:
(i) Advance Licence for intermediate supply / deemed exports.
(ii) Deemed export duty drawback.
(iii) Refund of terminal excise duty paid.

WWW.IGNOUASSIGNMENTS.IN 7
 (a) Deemed Exports: Deemed Exports are not physical exports out of India, however, such exports enjoy all
benefits of physical exports. These deemed exports are part of the Export-Import Policy and apply as under:
(i) When the goods are supplied against Advance Licence / DFRC under the duty exemption Scheme.
(ii) Any goods supplied to EOU’S / EPZ / SEZ / STP / EHTP.
(iii) Capital goods to holders of licence under EPCG Scheme.
(iv) Supply of goods to all projects or purpose in respect of which Ministry of Finance permits the import of such
goods at Zero Custom duty coupled with the extension of benefits under this chapter to domestic supplies.
(v) Goods supplied to power projects, refineries and coal hydrocarbons, rail, road, port, civil aviation, bridges
and other infrastructure projects provided these projects have a minimum specific investment of Rs. 100
Crores.
(vi) Goods supplied to all projects funded by UN agencies.

m
Deemed Exports are eligible for the following benefits:

SE
(a) Advance Licence for interrmediate supply / deemed export.
(b) Deemed exports duty drawback.
(c) Refund of terminal excise duty.

c o

U
.
(b) Foreign Trade (Development and Regulation) Act, 1992: Foreign Trade is very importaint for a nation
and its economy, as it helps in higher production, industrialisation and employment generation. But foreign Trade

t
50 HO
needs to be regulated and hence Foreign Trade (Development and Regulation) Act, 1992 and Foreign Trade (Regulations)
g
Rules, 1993.

a r in
The objective of this act is to promote and regulate the foreign trade to ensure a healthy Balance of Payments and

d
Balance of trade. Export and Import policy is issued in conformity with this act. The act has made Importer Exporter

80 N a
Code Number and Registration of Membership Certificate mandatory and its number has to be quoted in all export /

m e
import related documents. The Act also provide for Appeals, penal action for contravention of the Act.
26 IO
R
y e
(c) Duty Exemption Scheme: This scheme provides for certain exemptions in basic customs duty, surcharge,
additional customs duty, anti-dumping duty and safeguard duty. Imports under this scheme are duty free.
91 UT

l
u d
Under Duty Exemption Scheme advance licence for deemed exports, physical exports, intermediate supplies

in ks
imports without payment of custom or other related duties.
Under this scheme advance licence can be issued for deemed exports to a main contractor so as to help imports
n oo
t
98 L

of inputs required for the manufacture of goods to be supplied to the manufacturer exporter or a main contracter. The
O b
SO

s
scheme allows imports of inputs required for the manufacture of exportable goods without payment of customs and
other related duties.
r -
.e o E
(d) Duty Remission Scheme: Duty Remission Scheme provides for free replenishment certificate and duty
f
entitlement passbook scheme as detailed under:

b d
U

Duty Free Replenishment Certificate (DFRC)

we u a n
These certificates are issued to a merchant exporter or manufacture exporter for the import of inputs to be used
O

H
for the manufacture of exportable goods without payment of Custom duty, surcharge and special additional duty, but

w Th
payment of additional duty equal to excise duty at the time of import.
N

Duty Entitlement Passbook Scheme

IG

w
A passbook is issued under this scheme to exporters to naturalise the incidence of customs duty on the import
contents of the export products. The naturalisation shall be provided by way of grant of duty credit against the export
product. This is allowed as specified percentage of FOB value of exports. The benefits are valid only for a period of
12 months. The rates for duty credit are determined by Director General of Foreign Trade which operates this
scheme.
(b) From the exporter’s point of view, advance pament is not free from any kind of credit or transer
risks.
Ans. In export trade the terms of payment is one of the largest single factor which influence the trades being
placed with a particular exporter, everyone who buys wants to defer the payment, and everyone who sells prefer
payment on call. The law in India requires that the payments for all exported goods must be finalised within six months
from the date of shipment and hence terms of payment in any case cannot be more than 180 days.

WWW.IGNOUASSIGNMENTS.IN 8
 However, exporter want to be sure as to when they shall be able to realise the payments for the goods exported
and how safe is the transaction and what is the level of surety for receiving the payment and most of the times they
insist on opening of an irrevocable Letter of Credit in their favour with a bank of choice on confirmation of acceptance
of the export order.
Cash is most preferable but it rarely happens and credit is quite risky in an alien country. So, the safest is the letter
of credit or part advance payment and the balance of payment through the banking channels.
Advance Payment
It is most loveable option for an exporter who can get payment before even sending goods. This could be the
safest method, but it simply does not happen in the area of real export. However, in case of small purchase or sample
purchase or when the buyer has a local affiliate he may give advance payment. This can also happen when the goods
are in acute short supply or in the area of monopoly production.
Since export-import are distant trade spread over a considerable long time and franght with risks in transit and

SE
trans-shipment, no body is willing to undertake unwanted risk for advance payment or the payment at will.
(c) Open cover and open policy are the same.

o m
Ans. Type of marine insurance policy in which the insurer agrees to provide coverage for all cargo shipped during

U
c
the policy period. Open cover insurance is most commonly purchased by companies that make frequent shipments, as

.
the blanket coverage keeps them from having to purchase a new policy, each time a shipment is made.

50 HO
t
Open cover policies are commonly used in international trade, specifically by companies that are involved in high

g
volume trade over a long period of time. Companies purchase this type of coverage because it precludes them from

a r in
having to negotiate the terms of a new policy each time a shipment is made. Since the insured is agreeing to purchase
a longer-term contract, it may be able to realize lower premiums. This is because the insurer does not have to spend

80 N d
time on repetitive negotiations, and because the insurer benefits from a having a guaranteed premium over a longer
period of time.
a
26 IO
m Re
(d) There are no fianncial assistance scheme for agricultural, horticultural and meat exports.
Ans. To make the prices of Indian exportable goods more competitive in the international market the Government

y e
91 UT

of India has adopted a price support System which is made of the following two components:

d
(a) Fiscal Incentives
(b) Financial Incentives.
lin ks
u
98 L

(a) Fiscal Incentives

n oo
t
SO

To make Indian goods export to face the competition in the international export market the Government of India
O b
s
extends the following fiscal incentives:
(i) Duty Drawback Scheme
r -
.e fo E
(ii) Central Excise Rebate
U

(iii) Income Tax Exemption

(iv) Sales Tax Exemption.
b d
we u an
O

Duty Drawback Scheme: The exporter has to pay duty in various inputs for the processing of exportable goods,

H
N

he also pays certain duties on the finished goods. The exporters have been given a scheme under which they can get

w Th
back the duties paid by them by exporting the goods on claiming the duty drawback under the duty drawback scheme.
IG

Central Excise Rebate: The exportable goods are exempted from the payment of central excise but this rebate

w
is provided for eligible exports goods only. The rebate can also be claimed under the Bonded Warehouse Scheme.
Income Tax Exemption: All EPZ/EOU/SEZ/EHTP/STP are eligible for exemption from payment of Income
Tax on profit income from the export activity.
The major Tax exemptions are as under:
(i) Part of the profits derived from export of specified goods or merchandise is deducted from the computation
of income tax.
(ii) Specified amount of profits of companies engaged in the hospitality industry or tour and travel business.
(iii) Partial relief on computer softwares/TV softwares/TV news software/Telecast rights etc.
(iv) 50% profits from projects.
(v) 10 year tax Holiday for EPZ/SEZ/EOU/ EHTP/STP.

WWW.IGNOUASSIGNMENTS.IN 9
Sales Tax Exemption
Export goods are exempted from payment of sales tax and the purchase of imports for export goods is also sales
tax exempted.
Financial Incentives
Interest Subsidy
Interest subsidy is payable in the interest component of Working Capital Loans from commercial banks for pre-
shipment and post-shipment finance.
Financial Assistance Scheme.
It is available for the following exports through APEDA:
● Agriculture Produce
● Agriculture Procesed foods

SE
● Horticulture Products
● Meat Products.
These exports are provided financial assistance in:

c o

U
(i) Feasiblity studies, Surveys, Consultancy and data upgradation.

t .

50 HO
(ii) Development of Infrastructure.
g
(iii) Export Promotion and Market Development.
(iv) Packaging Development.
(v) Quality Control Certification.
a r din
80 N a
(vi) Upgradation of meat producing plants.

m e
26 IO
(vii) Organisation building and Human Resource Development.
R
y e
(viii) Air freight assistance for export Horticulture produce by air.
91 UT

Q. 5. Write short notes on the following:

(i) Legal framework for foreign trade

l
u d
in ks
Ans. An Overview of Legal Framework: There are four major acts which regulate the export and import.
n oo
t
98 L

Some of these acts are very old and have been amended from time to time to overcome the changing global environment

O b
of trade, competition and product or service standards.
SO

s r -
EXIM policy not only regulate the import and exports, it also aims at giving the idea about the strong economic

.e o
conditions prevailing in the country. Exports and Imports are very good indicators of the viability of the economic

f E
strength of the nation. Exports are indicator of the surplus production by a nation and imports indicate the level of

d
growth of the nation. Continued exports are possible only when a nation is able to maintain standards of quality of
b
U

we n
production and a nation’s capacity to meet the specific needs of the importing nation in respect of raw-materials,
u a
equipment, capital and availability of skilled workforce and congenial industrial and stable political environment.
O

H
The four acts which regulate the import and export are as under:

w Th
N

1. Foreign Trade (Development or Regulation) Act, 1992.

2. Foreign Exchange Management Act, 1999.
IG

w 3. The Customers Act, 1962.

4. Export (Quality Control and Inspection) Act, 1963.
The objective of these acts is to regulate import and export and to maintain a healthy balance of trade, balance of
payment and to meet various international conventions.
These regulations are also a neccessity to protect the interest of exporters and importers due to various different
laws in many countries. These laws have to be very pragmatic and have take into consideration various issues and
contentions of the participating regulatory agencies which deal with different aspects involved in export and import of
goods, its warehousing, storage, loading, unloading, transportation and insurance without a strong regulatory framework
the EXIM policy cannot work and it well tell upon the image of the country.

WWW.IGNOUASSIGNMENTS.IN 10
Foreign Trade (Development and Regulation) Act, 1992.
In the year 1992, the Government of India with a view to increase exports and improve balance of trade and the
balance of payment passed an Act which was named Foreign Trade (Development and Regulation) Act, 1992.
In the year 1993, Foreign Trade (Regulation) Rules 1993 and Foreign Trade (Exemptions from Application of
Rules in certain cases) Order 1993 was issued.
The idea behind the issueance of these rules and orders was to end the control on imports and exports which
were there through Imports and Exports (Control) Act, 1947 and the Import (Control) order 1955 and the Export
(Control) Order 1988.
These Acts of 1992 and 1993 were aimed at development and regulation of imports and exports and to deal
effectively with issues arising out of operation of these acts.
The Export and Import Policy of India was prepared keeping in view these acts and various amendments made

SE
to them.

o m
This Act provided permission for Export and Import by granting Importer-Exporter’s Code Number. This code
number could be cancelled or suspended in the event of an Act by an importer or exporter which either harm the

U
reputation of the goods exported or the country or any contravention of the international conventions or any other
offence within the perview of this Act.

. c

50 HO
Foreign Exchange Management Act, 1999

r t
A country earns foreign exchange by way of exports and this foreign exchange provide strength to the fiscal
g
economy of the country, hence, every effort is made to keep a check on inflow and outflow of foreign exchange.

in
a
To keep a regular watch on the flow of foreign exchange on September 3,1939 during the World War under its

80 N d
powers vested in it by the Defence of India Rules (DIR) exchange control was introduced in india. In the Year 1947,

a
Foreign Exchange Regulation Act, 1947 (FEAR) was enacted and it came into operation on March 25, 1947. This Act
26 IO
m Re
was amended many times to meet the demands of changing economy and a new Foreign Exchange Regulation Act,
1973–FERA was enacted which provided for partial convertability of rupee through policy of industrial licencing.

y e
91 UT

FEMA (Foreign Exchange Management Act, 1993 was enacted to provide for full convertability of rupee. The

d
act mainly deals with holding and transactions of foreign exchange, reapipation and repatriation of foreign exchange
through authorised channels of foreign exchange.
lin ks
u
98 L

The FEMA provides for free and liberal exports and services, penalties for various infringements of the law, the
n oo
t
SO

procedure to be followed for adjudication arbitration and appeals against the orders of directorate of enforcement.

O b
s
The Customs Act, 1962

r -
Export from India has been happening since 5th BC and various Acts mostly unwritten have been buying duties

.e o E
at the port of exit and entry. The first Custom Act is known as Sea Customs Act, 1878. Second Custom law was Land
f
U

Customs Act, 1924 and then come the Aircraft Act, 1934. These laws were specific to each mode of transport used
for import or exports.
b d
we u an
O

The Customs Act, 1962, was enacted with a view to regulate the genuine export and import trade transactions in

H
time with national economic and trade policies the Export and Import policy in force.
N

w Th
The Customs Act, 1962 deals mainly with the leviable custom duties on every item of import and export. The
IG

Custom Tariffs are clearly indicated in First and Second Schedule of the Customs Tariff Act, 1975 for both export and
import.

w The Customs Tariff Act, 1975 provides for itemwise details of leviable customs or import duty or export duty, its
deposit and refund and penalties for avoidance of duties, the process of appeals and representation regarding
modification of rates of tariffs.
The Customs Act provides for standard document and declarations to be raised in case of each consignment
passing through the custom port.
Export (Quality Control and Inspection) Act, 1963
For a nation, it is very important that the goods it is either exporting or importing should conform to certain
standards and these standards of quality of goods should be well established and should be verifiable.

WWW.IGNOUASSIGNMENTS.IN 11
 The Export (Quality Control and Inspection) Act, 1963 was enacted to ensure that the goods either being imported
or exported must be of good quality and the act established the Export Inspection Council (EIC) on January 1, 1964
for verifying and certifying the quality of goods being exported and issue export worthiness certificate for each
individual consigmnent as per the terms of Contract, requirement of the importer and national interets.
The act aims at improving the quality of goods and production standard, their packing and presentation so as to
compete in the global market for continued growth of the levels of export.
EIC acts as an advisory body to the government on matter of quality control and inspection and has established
various Export Inspection Agencies, which operates from all ports, including airports and dry inland ports. EIA issues
a certificate which the quality of goods as per the terms of contract. EIA charges a small fee for certification which
is born by the exporter.
Quality control of goods being exported is also necessery for payment realisation and avoidance of future conflicts.
(ii) Documments against Acceptance.
Ans. Documents against Payment

SE
o
Under this, the exporter draws a bill of exchange on the buyer payable at sight. The exporter hands over the bill
to his bank together with the documents of title of goods. These Bills are presented to the buyer for paymet through

c
his banker, the buyer makes the payment, gets the title documents and takes delivery of the goods. The biggest risk is

U
.
refusal by the buyer to make payment.

t
(iii) Bill of Entry

50 HO
g
Ans. Bill of Entry: The Bill of Entry has been standardised by the Central Board of Excise and Customs on the

a r n
basis of which the goods are cleared, when these are discharged from a vessel, from foreign or coastal ports. Four
i
copies are required to be submitted. Original and duplicate for Custom department, triplicate for owner and the fourth

d
copy is for purpose of obtaining foreign exchange and is submitted to the bank. These are three types of Bill of Entry

80 N a
as given below:

m e
(i) Bill of Entry for Home Consumption (White in Colour) when an importer wants to get his goods cleared
26 IO
in one lot, he has to present the bill of entry for home consumption.
R
y e
(ii) Bill of Entry for Warehousing (into bond Yellow in Colour) Where an importer wants transfer goods to a
91 UT

bonded wasehouse and thereafter gets his goods cleared in small lots, he has to present ‘INTO BOND’ bill
of entry.

l
u
(iv) Importance of Instittional Infrastructure.

n oo
d
in ks
t
Ans. Importance of Institutional Infrastructure: Infrastructure is the pre-requisite for the successful functioning
98 L

of any institutional set up backed with ample resources to propogate and discharge its awoed objectives. Keeping in
O b
SO

s
view the needs and aspirations of the exporter the Government of India has established various institutions and

r -
organisations which are fully equiped to import practical training and dependable information and consultative services

.e o E
for the promotion of exports. Ministry of Commerce is the apex body which have many functional organs providing
advice in critical areas, such as:
f
● Export Packing

b d
U

we
● Market Promotion and Publicity
u a n
O

● Quality Certification

H
w Th
● Risk Coverage
N

● Market Intelligence
IG

● Financial Support

w ● Export Marketing

● State Level Export Promotion Agencies

● Appointment of Authorised Foreign Exchange Dealers

● Approval of Clearing and Forwarding Agents

● Internal (Inland) Containre Depots (DCD)

● Contrainerised Freight Stations (CFS)

● Custom Houses

● Port Truts

● Bonded Warehouses

■■

WWW.IGNOUASSIGNMENTS.IN 12