Académique Documents
Professionnel Documents
Culture Documents
Project Report
On
“EXPORT PROCEDURE AND DOCUMENTATION”
Submitted
In The Partial Fulfillment Of The Requirement
For The Degree
Of
BACHELOR OF COMMERCE
By
Muzakkir Islam
VI Semester B.Com (H)
1027299
Department Of Commerce
Graphic Era Hill University
1
STUDENT DECLARATION
This project has been undertaken in partial fulfillment of the requirement for the award of
degree of Bachelors of Commerce (Honours).
This project was executed under the supervision of Mentor Dr. kamal Pant. Further, I
declared that this project is my original work. The analysis and findings are for academic
purpose only. This Project has not been presented in any seminar & publication or
submitted elsewhere for the award of any degree or diploma.
Signature: Signature:
2
ACKNOWLEGDEMENT
I would like to thank my Faculty Members for giving the opportunity to select and
complete my Project.
I put on record my sincere thanks to my college, Graphic Era Hill University, Dehradun
for
Giving me such a learning environment. I am extremely grateful to DR. ARVIND
MOHAN, for the encouragement, discussions and critical assessment of the project.
I express my gratitude towards my parents and almighty god, who have helped me in
completing the project.
3
CERTIFICATE
------------------------------------
------------------------------------
(Dr. Arvind Mohan) (Dr. Kamal Pant)
Place :
Date:
4
INDEX
SERIAL
CONTENT Page no.
NUMBER
1 Objectives 6
2 INTRODUCTION 7
5
The main objective of the research were :
6
INTRODUCTION
Exports can be of goods which can be moved physically from one country
to another or can be of service rendered. Detailed list of services are given in the Foreign
Trade Policy covering more than 160 items e.g. Insurance, Hospital, Postal and
Telecommunication etc.
7
The government may announce from time to time the types of supplies
that may be considered as deemed export. The Foreign Trade Policy gives the list of
supplies considered under the Deemed Export Category. The policies and procedures are
different for Physical Exports and Deemed Exports as also the benefits available. In a
nutshell, Deemed Exports do not enjoy all the benefits that are available under Physical
Export. The Foreign Trade defines exports as taking out of India any goods by land, sea,
air. Although the act does not term them as “Physical Exports”, we have to put phrase to
distinguish it from “Deemed Exports” which is sales in India but considered as exports
for limited purpose.
TYPES OF EXPORTERS:
8
HOW TO SET UP AN EXPORT ORGANISATION
The partnership firm can also be set up with ease and economy. Business
can take benefit of the varied experiences and expertise of the partners. The liability of
the partners though joint and several, is practically distributed amongst the various
partners, despite the fact that the personal liability of the partner is unlimited. The major
disadvantage of partnership firm of business organization is that conflict amongst the
partners is a potential threat to the business. It will not be out of place to mention here
that partnership firms are governed by the Indian Partnership Act, 1932 and, therefore
they should be formed within the parameters laid down by the Act. Company is another
form of business organization, which has the advantage of distinct legal identity and
limited liability to the share holders.
9
CHOOSING APPROPRIATE MODE OF OPERATIONS:
Merchant Exporter i.e. buying the goods from the market or from the
manufacturer and then selling it to foreign buyers.
Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the
seller and charging the Commission.
Buying Agent i.e. acting on behalf of the buyer and charging Commission.
10
STRUCTURE OF AN EXPORT ORGANISATION
11
The Customs Authorities will now allow the exporter to export or import goods into or
from India unless he holds a valid IEC number. Before applying for IEC number it is
necessary to open a bank account in the name of the company with any commercial bank
authorized to deal in foreign exchange. The duly signed application form should be
supported by the following documents.
Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. 1000/-
Certificate from the banker of the applicant firm as per Annexure 1 to the form
given.
One copy of PAN number issued by Income Tax Authorities duty attested by the
applicant.
One copy of Passport Size photographs of the applicant duly attested by the
banker to the applicant.
Declaration by the applicant that the proprietor/partners/directors as the case may
be of the applicant company, are not associated as proprietor/partners/directors in
any other firm, which has been caution, listed by the RBI. Where the applicant
declares that they are associated as proprietor/partners/directors in any other firm,
which has been caution, listed by the RBI, they will be allotted IEC No. but with
an additional condition that they can export only with RBI’s prior approval and
they should approach RBI for the purpose.
Each importer/exporter shall be required to file importer/exporter profile once
with the licensing authority shall enter the information furnished in Appendix 2 in
their database so as to dispense with changes in the information given in
Appendix-2, importer/exporter shall intimate the same to the licensing authority.
12
The following importer exporter is exempted from the requirement of IEC code number.
For obtaining IEC number apply in the prescribe form along with the documents listed
above to Regional Licensing Authority (Office of the Regional DGFT). The registered
office or the head office may apply for allotment of IEC No.
Whenever, there is a change in the name, address or constitution of the holder of IEC
No., such change should be intimated within 30 days to the concern authorities.
IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is also
endorsed to the concerned banker.
VALIDITY :
The IEC No allotted to a firm/company will be valid for all its branches/divisions
units/factories as indicated in the IEC No. Import/Export of any commodity by that
firm/company. There being no date of expiry, the IEC once allotted is valid till it is
revoked. But, if no import or export is effected in the previous financial year, the same
will be made inoperative. However, this can be made operative by a formal request to the
DGFT.
13
As it is not always possible for the top man or directors, promoters of the company to
visit DGFT frequently. There is a provision of issuance of identity cards to the
proprietors/partners/directors and their authorized representatives. An application of
Issuance of an identity card may be made in the form (Appendix-5) The document/
License/Certificate/Permissions may be delivered to the identity card holder and officials
of the Licensing Authority(DGFT)shall not be responsible for any loss etc. In case of loss
of an identity card a duplicate card may be issued on the basis of an FIR & affidavit. In
addition to obtaining the IEC No. the exporter is also required to obtain Business
Identification No(BIN). For this exporter is required to contact DGFT online on web site.
The licensing authority issues BIN in coordination with customs authorities. This BIN is
required to be mentioned on the shipping bills at the time of customs clearance of the
export cargo.
In order to enable the exporter to obtain benefits/concessions under the Foreign Trade
Policy, the exporter is required to register himself with an appropriate export promotion
agency by obtaining registration-cum-membership certificate. (RCMC). If the export
product is that it is not covered by any EPC, RCMC in respect thereof may be issued by
FIEO. An application for registration should be accompanied by a self certified copy of
the Importer-Exporter Code number issued by the regional licensing authority concerned
and bank certificate in support of the applicants financial soundness. The RCMC shall be
valid for 5 years ending 31st March of the licensing year.
14
Before entering into the venture of exports, one must look for the product to be exported
and the market where he intends to export.
Before selecting a product, one must simultaneously made a study and find out the
prospective market. For finding out the market for the selected product, the following
methods will help.
Get statistical information as to imports of the product by various countries
and their growth prospects in the respective countries
Approach the chamber of commerce for their guidance to find out the market.
Approach the Export Promotion Council dealing in the product of selection to
get more information.
The Preliminary
Once you are ready with the product you wish to export and have found the market for
the same, you are ready to proceed further. Following sequences can be followed:
Any one, who wishes to export, must first of all get an Importer Exporter
Code Number (IE Code).This can be obtained by making a formal
application to the office of the Regional Directorate General of Foreign
Trade (DGFT).
15
Get yourself registered with the related Export Promotion Council and
become a member. Also arrange to obtain Registration-Cum-Membership
Certificate (RCMC) from the council. This has twin objectives:
o Under the Foreign Trade Policy, it is mandatory that an exporter gets him
registered with the Export Promotion Council to avail of various export
facilities.
o Being a member, you will have access to all the information relating to the
product that could be made available by the council
o Many foreign buyers send their enquiries for the imports to the Export
Promotion Council. Hence you will have few customers interested in your
product.
If you are a manufacturer, find out the provisions under the EXIM Policy of
getting the raw materials duty free.
Get familiar with the excise formalities as goods meant for export can be cleared
without payment of C. Excise duty on the finished product subject to compliance
of certain formalities.
Understand the local government regulations in relations to the export of the
product.
Get information of the government’s regulations of the importing country as to
restrictions on the quantity, product specification, packing regulations, customs
regulations, requirement of specific documents/information etc.
Availability of Vessels/Airlines, the transport charges, frequency of operation etc.,
To look for a Custom House Agent (CHA) (also know as freight forwarders or
clearing agents) for handling the documents/cargo in the customs.
If the product is covered under any quota regulation, find out the agency/council
who are handling the quota distribution for the product and the availability of
quota for exports.
16
FINDING A CUSTOMS
Once you have selected the market, the next step is to find a prospective customer.
This you can get
From the directory of importers of the country
By writing to the Embassy of India in that country for assistance
By writing to the chamber of commerce of that country
By means of participation in a Fair/Exhibition abroad either directly or through
the Export Promotion Council
By participating in international fair if organized locally
Through the personal contacts in that country. By these processes one can only
have the list of customers. One has to dialogue or correspond with these
customers by sending samples, getting feedback from the customers etc. to
ultimately select the customer with whom to deal with. It is necessary to know the
financial standing of the company which can be obtained through the bank
channel or through the office of ECGC.
17
NEGOTIATING CONTRACT.
Once the prospective customer is found, the business deal has to be concluded. The
following aspects may be considered before entering into a final contract with the
buyer.
Credit Worthiness of the Customer.
Availability of the Steamer/Airlines and the frequency
The freight charges
The full product specification
The quantity, Price
Terms of Payment
Type of packing and markings on the packages
Mode of shipment & Shipment schedule
Tolerance of quantity to be shipped
Documentation requirement for the customer
Documentation requirement of the government of importing country
Compliance of the local governmental rules and regulations
18
EXPORT SALES & CONTRACT TERMS & CONDITIONS
Very often exporters do not enter into any formal contract and finalize the trade deal
through the exchange of letters, cable, telex etc. It is, however, expedient that the parties
(exporters & importers) incorporate all important terms & conditions of their trade deal in
a separate document or contract that will avoid disputes arising out of uncertainty or
ambiguity. Export contract may be sent in duplicate along with the Proforma Invoice to
the overseas buyer.
There are certain, peculiar characteristics of international trade contract which are not
present in those for sales of goods in the domestic market
Whereas the parties to a domestic trace contract normally needs only agree on the
elements which are necessary for their particular trade transactions like price, description,
quality and quantity of goods, delivery terms etc the situation will be quite different when
the buyer and the seller to sale/purchase contract belong to different countries. The
parties to all international trade contracts provide all their relative rights and obligations
in several ways
For example, they may agree to adopt either the Law of the country of the buyer or that
of the seller. The traders are normally reluctant to leave the determination of the rights
and obligations by implications under the legal system of either’s country. They prefer to
make explicit provisions regarding the rights and obligations by including a set of
detailed and precise terms and conditions in their contract.
19
EXPORT OF SAMPLES\GIFTS.
Exports of bonafide trade and technical samples of freely exportable items shall be
allowed without any limit. Goods including edible items of value not exceeding Rs.
100000/- in a licensing year, may be exported as a gift. However items mentioned as
restricted for exports in ITC(HS) shall not be exported as a gift without a
licence/certificate/permission, except in the case of edible items.
In order to avoid disputes, it is necessary to enter into an export contract with the
overseas buyer. For this purpose, export contract should be carefully drafted
incorporating comprehensive but in precise terms, all relevant and important conditions
of the trade deal.
20
There should not be any ambiguity regarding the exact specifications of goods and terms
of sale including export price, mode of payment, storage and distribution methods, type
of packaging, port of shipment, delivery schedule etc. The different aspects of an export
contract are enumerated as under:
It will not be out of place to mention here the importance of arbitration clause in an
export contract Court proceedings do not offer a satisfactory method for settlement of
21
commercial disputes, as they involve inevitable delays, costs and technicalities. On the
other hand, arbitration provides an economic, expeditious and informal remedy for
settlement of commercial disputes. Arbitration proceedings are conducted in privacy and
the awards are kept confidential. The Arbitrator is usually an expert in the subject matter
of the dispute. The dates for arbitration meetings are fixed with the convenience of all
concerned. Thus, arbitration is the most suitable way for settlements of commercial
disputes and it may invariably be used by businessmen in their commercial dealings.
22
TERMS OF SHIPMENTS – INCOTERMS
The purpose of Incoterms is to provide a set of international rules for the interpretation of
the most commonly used trade terms in foreign trade. Thus, the uncertainties of different
interpretations of such terms in different countries can be avoided or at least reduced to a
considerable degree. The scope of Incoterms is limited to matters relating to the rights
and obligations of the parties to the contract of sale with respect to the delivery of goods.
Incoterms deal with the number of identified obligations imposed on the parties and the
distribution of risk between the parties.
In international trade, it would be best for exporters to refrain, wherever possible, from
dealing in trade terms that would hold the seller responsible for the import customs
clearance and/or payment of import customs duties and taxes and/or other costs and risks
at the buyer’s end, for example the trade terms DEO (Delivery Ex Quay) and DDP
(Delivered Duty Paid)
Quite often, the charges and expenses at the buyer’s end may cost more to the seller than
anticipated. To overcome losses, hire a reliable customs broker or freight forwarder in the
importing country to handle the import routines.
23
Similarly, it would be best for importers not to deal in EXW (Ex Works) which would
hold the buyer responsible for the export customs clearance, payment of export customs
charges and taxes, and other costs and risks at the seller’s end
You should not be happy merely on receiving an export order. You should first
acknowledge the export order, and then proceed to examine carefully in respect of
24
Items
Specification
Pre-shipment inspection
Payment conditions
Special packaging
Marine insurance
If you are satisfied on these aspects, a formal confirmation should be sent to the buyer,
otherwise clarification should be sought from the buyer before confirming the order.
After confirmation of the export order immediate steps should be taken for
procurement/manufacture of the export goods. In the meanwhile, you should proceed to
enter into a formal export contract with the overseas buyer.
Before accepting any order necessary homework should have been done as to availability
of the production capacity, raw material e.t.c. It would be in the interest of the exporter to
look into entering into forward contract to safeguard against exchange rate fluctuations.
Ensure that the mode of payment is also agreed upon. In case of shipment against letter of
credit, the buyer should be advised to open the credit well in advance before effecting the
shipment.
25
FINANCIAL RISKS INVOLVED IN FOREIGN TRADE
As an exporter while selling goods abroad, you encounter various types of risks. The
major risks which you have to undergo are as follows:
Credit Risk
Currency Risk
Carriage Risk
Country Risk
You can protect yourself against the above risks by initiating appropriate steps.
Credit Risks :
You can cover your credit risk against the foreign buyer by insisting upon opening a letter
of credit in your favour. Alternatively one can avail of the facility offered by various
credit risk agencies. A specific insurance cover can also be obtained from ECGC (Exports
Credit & Guarantee Corporation) to cover your country risk besides covering credit risk.
26
Currency Risks:
As regards covering the currency risk, due to the exchange rate fluctuations, you can
request your banker to book a forward contract
Carriage Risk:
The carriage risk can be covered by taking an appropriate general insurance policy.
Country Risk:
ECGC provides cover to protect the exporter from country risks. A detailed procedure
how an exporter can get himself protected against the above risks are given in separate
chapters later.
27
EXPORT DOCUMENTS
Any export shipment involved various documents required by various authorities such as
customs, excise, RBI, Inspection and according depending upon the requirements, there
are categorized into 2 categories, namely commercial documents and regulatory
documents.
A. Commercial Documents. : - Commercial documents are required for effecting
physical transfer of goods and their title from the exporter to the importer and the
realisation of export sale proceeds. Out of the 16 commercial documents in the
export documentation framework as many as 14 have been standardised and
aligned to one another. These are proforma invoice, commercial invoice, packing
list, shipping instructions, intimation for inspection, certificate, of inspection of
quality control, insurance declaration, certificate' of insurance, mate's receipt, bill
of lading or combined transport document, application for certificate origin,
certificate of origin, shipment advice and letter to the bank for collection or
negotiation of documents. However, shipping order and bill of exchange could not be
brought within the fold of the Aligned Documentation System,
28
Contents of Commercial Invoice
29
2 Inspection Certificate: The certificate is issued by the inspection authority
such as the export inspection agency. This certificate states that the goods have been
inspected before shipment, and that they confirm to accepted quality standards.
30
4. Consular Invoice: Consular invoice is a document required mainly by the
Latin American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand,
Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This
invoice is the most important document, which needs to be submitted for
certification to the Embassy of the importing country concerned. The main purpose
of the consular invoice is to enable the authorities of the importing country to
collect accurate information about the volume, value, quality, grade, source, etc., of
the goods imported for the purpose of assessing import duties and also for statistical
purposes. In order to obtain consular invoice, the exporter is required to submit
three copies of invoice to the Consulate of the importing country concerned. The
Consulate of the importing country certifies them in return for fees. One copy of the
invoice is given to the exporter while the other two are dispatched to the customs
office of the importer's country for the calculation of the import duty. The exporter
negotiates a copy of the consular invoice to the importer along with other shipping
documents.
31
It facilitates quick clearance of goods from the customs at the port
destination and therefore, the importer gets quick delivery of goods.
The importer is assured that the goods imported are not banned for imported
in his country.
The goods produced in a particular country are subject to’ preferential tariff rates
in the foreign market at the time importation.
The goods produced in a particular country are banned for import in the foreign
market.
32
(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin
required for availing of concessions under Generalised System of Preferences
(GSP) extended by certain, countries such as France, Germany, Italy, BENELUX
countries, UK, Australia; Japan, USA, etc. This certificate can be obtained from
specialised agencies, namely;
33
Packing and container description.
Total number of containers and packages.
Description of goods in terms of quantity.
Signature and initials of the concerned officer of the issuing authority.
Seal of the issuing authority.
Sometimes, in order to ensures that goods bought from some other country have
not been reshipped by a seller, a certificate of origin IS required.
34
6. Bill of Lading: The bill of lading is a document issued by the shipping
company or its agent acknowledging the receipt of goods on board the vessel, and
undertaking to deliver the goods in the like order and condition as received, to the
consignee or his order, provided the freight and other charges as specified in the
bill have been duly paid. It is also a document of title to the goods and as such, is
freely transferable by endorsement and delivery.
35
Freight Paid Bill of Lading: - When freight is paid at the time of shipment or in
advance, the bill of landing is marked, freight paid. Such bill of lading is known
as freight bill of lading.
Freight Collect Bill of lading :- When the freight is not paid and is to be
collected from the consignee on the arrival of the goods, the bill of lading is
marked, freight collect and is known as freight collect bill of lading
36
Significance of Bill of Lading for Exporters
It is a contract between the shipper and the shipping company for carriage of the
goods to the port of destination.
It is an acknowledgement indicating that the goods mentioned in the document
have been received on board for the Purpose of shipment.
A clean bill of lading certifies that the goods received on board the ship are in
order and good condition.
It is useful for claiming incentives offered by the government to exporters
The exporter can claim damages from the shipping company if the goods are lost
or damaged after the issue of a clean bill of lading.
37
7. Airway Bill: An airway bill, also called an air consignment note, is a receipt
issued by an airline for the carriage of goods. As each shipping company has its own bill
of lading, so each airline has its own airway bill. Airway Bill or Air Consignment Note is
not treated as a document of title and is not issued in negotiable form.
38
7. Shipment Advice to Importer:- After the shipment of goods, the exporter
intimates the importer about the shipment of goods giving him details about the date
of shipment, the name of the vessel, the destination, etc. He should also send one
copy of non-negotiable bill of lading to the importer.
8. Packing List: The exporter prepares the packing list to facilitate the buyer to check
the shipment. It contains the detailed description of the goods packed in each case,
their gross and net weight, etc. The difference between a packing note and a
packing list is that the packing note contains the particulars of the contents of an
individual pack, while the packing list is a consolidated statement of the contents of
a number of cases or packs.
9. Bill of Exchange: The instrument is used in receiving payment from the importer.
The importer may prefer Bill of Exchange to LC as it does not involve blocking of
funds. A bill of exchange is drawn by the exporter on the importer, to make
payment on demand at sight or after a certain period of time.
B/E is a means to collect payment.
B/E is a means to demand payment.
B/E is a means to extent the credit.
B/E is a means to promise the payment.
B/E is an official acknowledgement of receipt of payment.
Financial documents perform the function of obtaining the finance
collection of payment etc.
2 sets. Each one bearing the exclusion clause making the other part of the
draft invalid.
39
Sight B/E.
Usance B/E.
It is known as draft.
Immediate payment – Sight draft.
There are two copies of draft. Each one bears reference to the other part
A&B. when any one of the draft is paid, the second draft becomes null and
void.
1. Proforma Invoice: The starting point of the export contract is in the form of offer
made by the exporter to the foreign customer. The offer made by the exporter is in
the form of a proforma invoice. It is a quotation given as a reply to an inquiry. It
normally forms the basis of all trade transactions.
40
2. Intimation for Inspection: Whenever the consignment requires the pre-
shipment inspection, necessary application is to be made to the concerned
inspection agency for conducting the inspection and issue of certificate thereof.
3. Declaration of Insurance: Where the contract terms require that the insurance
to be covered by the exporter, the shipper has to give details of the shipment to the
insurance company for necessary insurance cover. The detailed declaration will
cover:
41
6. Shipping order: it is issued by the Shipping/Conference Line intimating the
exporter about the reservation of space for shipment of cargo which the exporter
intends to ship. Details of the vessel, poet of the shipment, and the date on which
the goods are to be shipped are mentioned. This order enables the exporter to
make necessary arrangements for customs clearance and loading of the goods.
7. Shipping Instructions: at the pre-shipment stage, when the documents are to sent
to the CHA for customs clearance, necessary instructions are to be give with
relevance to
8. Bank letter for negotiation of documents: at the post shipment stage, the exporter
has to submit the documents to a bank for negotiation or discounting or collection
for forwarding the same to the customer and also for realization of export
proceeds. The bank letter is the set of instruction for the bank as to how to handle
the documents by them and by the bank at the buyer’s country which may include
42
If the proceeds are to adjusted against any pre-shipment packing
credit loan.
If the bill amount is to be adjusted against any forward
exchange cover.
In case of credit bill who has to bear the interest, either exporter
or if the same is to be collected from the buyer.
Instructions in case non-acceptance/non-payment by the buyer.
1. Shipping Bill: Shipping bill is the main customs document, required by the
customs authorities for granting permission for the shipment of goods. The
cargo is moved inside the dock area only after the shipping bill is duly
stamped, i.e. certified by the customs. Shipping bill is normally prepared in
five copies :-
Customs copy.
Drawback copy.
Export promotion copy.
Port trust copy.
Exporter's copy.
43
Types of Shipping Bill
Based on the incentives offered by the government, customs authorities have introduced
three types of shipping bills:-
Drawback Shipping Bill: - Drawback shipping bill is useful for claiming the
customs drawback against goods exported.
Dutiable Shipping Bill: - Dutiable shipping bill is required for goods which are
subject to export duty.
Duty-free Shipping Bill: - Duty-free shipping bill is useful for exporting goods
on which there is no export duty.
In order to facilitate easy recognition and quick processing, following colours have been
provided to different kinds of shipping bills :
44
Significance of Shipping Bill
2. A.R.E. 1 form (Central excise): this form ARE-1 is prescribed under Central
Excise rules for export of goods. In case goods meant for export are cleared
directly from the premises of a manufacturer, the exporter can avail the
facility of exemption from payment of terminal excise duty. The goods may be
cleared for export either under claim for rebate of duty paid or under bond
without payment of duty. In both the events the goods are to be cleared under
form A.R.E-1 which will show the details of the goods being exported, the
relevant duty involved and if the duty is paid or goods being cleared under
bond, details of goods being sealed either by the exporter or Central Excise
officials etc.
45
shipping bill in the customs, these forms have been dispensed with and a new
form SDF has to be submitted to the customs in the place of above forms.
5. Vehicle Ticket/Cart Ticket/Gate Pass etc.: before the goods are being taken
inside the port for loading, necessary permission has to be obtained for
moving the vehicle into the customs area. This permission is granted by the
Port Trust Authority. This document will contain the detail of the export cargo,
name and address of the shippers, lorry number, marks and number of the
packages, driver’s licence details etc.
6. Bank Certificate of Realisation: this is the form prescribed under the Foreign
Trade Policy, wherein the negotiating bank declares the fob value of exports
and for the date of realisation of the export proceeds. This certificate is
required fore obtaining the benefit under various schemes and this value of
fob is reckoned as fob value of exports.
46
D. Other Document:
Black List Certificate: it certifies that the ship/aircraft carrying the
cargo has not touched the particular country on its journey or that the
goods are not from the particular country. This is required by certain
nations who have strained political and economical relations with the
so called “Black Listed Countries”.
47
Combined Certificate of Origin and Value: this certificate is required
by the Commonwealth Countries. This certificate is printed in a special
way by the Commonwealth Countries. This certificate should contain
special details as to the origin and value of goods, which are useful for
determining import duty. All other details are generally the same as that
of Commercial Invoice, such as name of the exporter and the importer,
quality and quantity of the goods etc.
Pre-Shipment Documents:
Shipping bill.
Export order/Sales contract/Purchase order.
Letter of Credit
Commercial invoice.
Packing list.
Certificate of origin.
Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or SDF.
Certificate of Inspection.
Various declarations required as per custom procedure.
48
GR FORM: to be completed in duplicate for exports otherwise than by
post including export of software in physical form i.e. magnetic
tape/discs and paper media.
SDF FORM: to be completed in duplicate and appended to the
Shipping Bill for export declare to the customs offices notified by the
Central Government which have introduced EDI system for processing
Shipping Bill.
PP FORM: to be completed in duplicate for export by post.
SOFTX: to be completed in triplicate for export of software otherwise
than in the physical form i.e. magnetic tapes/discs and paper media.
Export declaration forms have utmost importance and are binding on the exporters. It is,
therefore, necessary that enough care is taken while declaring exports on these forms,
with special reference on the following points.
49
It should be clearly indicated in the form whether the export is on
‘outright sale basis’ or ‘on consignment basis’ and irrelevant clauses
must be stuck out
Under the term ‘analysis of full export value’ a break up of full export
value of goods under F.O.B value, freight and insurance should be
furnished in all cases, irrespective of the terms of contract.
All documents relating to the export of goods from India must pass
through the medium of an authorised dealer in foreign exchange in
India within 21 days of shipment.
The amount representing the full export value of goods must be
realized within six months from date of shipment.
50
QUALITY CONTROL AND PRE-SHIPMENT INSPECTION
Realizing the importance of the need for supplying quality goods as per international
standards, the Government of India has introduced Compulsory Quality Control and Pre-
Shipment Inspection of over 1050 items of export under Export (Quality Control and Pre-
Shipment Inspection) Act 1963.
At present, the export items that are subjected to compulsory inspection includes food
and agricultural products, chemicals, engineering, coir, jute and footwear.
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METHODS OF RECEIVING PAYMENT AGAINST EXPORTS
Before we proceed to understand the concept of Letter of Credit, let us understand the
various types of payment methods available against export.
METHODS OF PAYMENT
There are three methods of payment depending upon the terms of payment, and each
method of payment involves varying degrees of risks for the exporter. The methods are:
Payment in advance
Documentary Bills
Letter of Credit
Open Account
Counter Trade
A. PAYMENT IN ADVANCE
This method does not involve any risk of bad debts, provided entire amount has been
received in advance. At times, a certain per cent is paid in advance, say 50% and the rest
on delivery. This method of payment is desirable when:
The financial position of the buyer is weak or credit worthiness of the buyer is
not known.
The economic/ political conditions in the buyer’s country are unstable.
The seller is not willing to assume credit risk, as un the case of open account
method.
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However, this is the most unpopular methods as a foreign buyer would not be willing to
pay advance of shipment unless:
B. DOCUMENTARY BILLS:
Under this method, the exporter agrees to submit the documents to his bank along with
the bill of exchange. The minimum documents required are
Documents against payment (D/P): The documents are released to the importer against
payment. This method indicates that the payment is made against Sight Draft. Necessary
arrangements will have to be made to store the goods, if a delay in payment occurs.
The risk involved that the importer may refuse to accept the documents and to pay
against them. The reason for non-acceptance may be political or commercial ones. In
India, ECGC covers losses arising out of such risks. Under this system, as compared to
D/A, the exporter has certain advantages:
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The document remain in the hands of the bank and the exporter does not lose
possession or the ownership of goods till payment is made,
Other reason may include that the exporter may not be able to allow credit and
wait for payment.
Documents Against acceptance (D/A): The document are released against acceptance
of the Time Draft i.e. credit allowed for a certain period, say 90 days. However, the
exporter need not wait for payment till bill is met on due date, as he can discount the bill
with the negotiating bank and can avail of funds immediately after shipment of goods.
In case of D/A as compared to D/P bills, the risk involved is much grater, as the
importer has already taken possession of goods which may or may not be in his custody
on the maturity date of the bill. If the importer fails to pay on due date, the exporter, will
have to start civil proceedings to receive his payment, if all other alternatives fails. The
risk involved can be insured with ECGC.
This method of payment has become the most popular form in recent times, it is more
secured as company to other methods of payment (other than advance payment).
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