Chapter-1

INTRODUCTION

Before 1947 India was colonial and basically agricultural and the trade was
confined mainly to commonwealth countries and UK. After 1947 and one plan after
another, there is a remarkable increase in the volume and value of foreign trade from
traditional items to manufactured goods, capital goods. The direction of India’s
trade also diversified to developed countries such as USA Germany Canada, ex-
USSR, Japan etc. through trade bilateral agreements. India has a mission to capture
2% of the global share of trade by 2010, up from the present level of less than 1%.
Export is one of the lucrative business activities in India. The government also
provides various promotional schemes to the exporters for earning valuable foreign
exchange for the country and for meeting their requirements for importing modern
technology and essential inputs. Besides, the income from export business is also
exempted to the specified extent under the Income Tax Act, 1961, Refund of Central
Excise and Custom Duty on export is also made under the Duty Drawback Scheme
of the Government. There is no Sales Tax on products meant for exports. n the last
five years, our exports witnessed robust growth to reach a level of around US$ 185
billion in 2008–09 from US$ 63 billion in 2003–04. Our share of global merchandise
trade was 0.83% in 2003; it rose to 1.45% in 2008 as per WTO estimates. Our share
of global commercial services export was 1.4% in 2003; it rose to 2.8% in 2008.
India’s total share in goods and services trade was 0.92% in 2003; it increased to
1.64% in 2008. Despite the fact that India has not been affected to the same extent as
other economies of the world, yet our exports declined since October 2008
significantly due to less demand in the markets like US, Europe, Japan, etc. owing to
global economic slowdown and the reduced international prices of commodities. As
a result, India’s exports in dollar terms declined during 2008–09 with a growth rate
of 13.6% as compared to 29% during 2007–08. To counter the negative fall out of
the global slowdown on the Indian economy, the Government/RBI responded by
providing carefully designed and calibrated stimulus packages in the form of fiscal,
monitory and export promotion measures from time to time, to provide support,
particularly to employment intensive sectors.

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 HCL Infosystems is India’s premier information enabling company.
Leveraging its 3 decades of expertise in total technology solutions, HCL Infosystems
offers value-added services in key areas such as system integration, networking
consultancy and a wide range of support services. It is one or another way helping
India’s growth, Here we come to know about the procedure of export/import
business of HCL infosystem. HCL is mainly involve in importing the hardware
component from the various destination and doing assembly work in Indian centres.

India has a mission to capture 2% of the global share of trade by 20010, up

from the present level of less than 1%. Export is one of the lucrative business
activities in India. The government also provides various promotional schemes to the
exporters for earning valuable foreign exchange for the country and for meeting their
requirements for importing modern technology and essential inputs. Besides, the
income from export business is also exempted to the specified extent under the
Income Tax Act, 1961, Refund of Central Excise and Custom Duty on export is also
made under the Duty Drawback Scheme of the Government. There is no Sales Tax
on products meant for exports.

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.

Chapter-2

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2.1 COMPANY PROFILE

HCL Infosystems is India’s premier information enabling company.

Leveraging its 3 decades of expertise in total technology solutions, HCL Infosystems
offers value-added services in key areas such as system integration, networking
consultancy and a wide range of support services. HCL Infosystems is among the
leading players in all the segments comprising the domestic IT products, solutions
and related services, which include PCs, Servers, Imaging, Voice & video solutions,
Networking Products, TV and FM Broadcasting solutions, Communication
solutions, System Integration, ICT education & training, Digital lifestyle Solutions
and Peripherals.

HCL has a direct sales, channel sales and retail sales network pan India.
Continuously meeting the ever increasing customer expectations and applications, its
focus on integrated enterprise solutions has strengthened the HCL Infosystems’
capabilities in supporting installation types ranging from single to large, multi-
location, multi-vendor & multi-platform spread across India. HCL Infosystems,
today has a direct support force of over 3000+ members, is operational
at 360+ locations across the country and is the largest such human resource of its
kind in the IT business in India. HCL Infosystems has pan India presence across
metros and non-metros. HCL Infosystems' manufacturing facilities are ISO 9001 &
ISO 14001 certified and adhere to stringent quality standards and global processes.
With the largest installed PC base in the country, four indigenously developed and
manufactured PC brands - 'Infiniti', 'Busybee' 'Beanstalk' and ‘Ezeebee’ - and its
robust manufacturing facilities, HCL Infosystems aims to further leverage its
dominance in the PC market. It has been consistently rated as Top player in PC
industry by IDC. The 'Infiniti' line of business computing products is incorporated
with leading edge products from world leaders such as Intel. Constant innovation to
meet the customized requirements of its customers has enabled HCL to create the
trusted ICT infrastructure platforms, powerful value adds like HCL Embedded
Control & Continuity (HCL EC2) technology and the future generation of digital
lifestyle enablers.

The Channel Business of HCL Infosystems has an extensive network of

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over 3000+ resellers across 900 locations. It has actively promoted the penetration of
PCs in the home and the small office/home office (SOHO) segments. HCL Infinet
Ltd, 100% owned subsidiary of HCL Infosystems Ltd. is a class A ISP focusing on
providing the corporate networking services like Virtual Private Network,
Broadband Internet Access, Internet Telephony Hosting & Co-location services,
designing & deploying Disaster Recovery Solutions & Business Continuity solution,
Application Services, Managed Security Services & NOC Services over its state-of-
the-art IP / MPLS network and end-to-end contact center solutions.

Vision

A global corporation enriching lives and enabling business transformation for our
customers, with leadership in chosen technologies and markets. Be the first choice
for employees and partners, with commitment to sustainability.

Mission

Enable business transformation and enrichment of lives by delivering sustainable

world class technology Products, Solutions & Services in our chosen markets
thereby creating superior shareholder value.

Core Values

• Uphold the dignity of the individual

• Honor all commitments
• Committed to quality innovation and growth in every endeavor
• Responsible corporate citizens

2.1.1 Evolution of HCL Infosystems Ltd.

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 HCL Infosystems Ltd is one of the pioneers in the Indian IT market,
1976 with its origins in 1976. For over quarter of a century, we have
developed and implemented solutions for multiple market segments,
across a range of technologies in India. We have been in the forefront
in introducing new technologies and solutions.
Shiv Nadar is chairman and CEO of HCL Technologies, a subsidiary of
Hindustan Computers Limited (HCL), a firm he co-founded in August
1976 and which includes HCL Infosystems. Shiv Nadar was 22 when
he saw his first city. Now, as chairman and CEO of HCL Technologies,
he is worth some US$ 3 billion, according to a Forbes magazine
estimate last year.

This office was finally converted into a wholly owned subsidiary

1998 on July 1, 1998. Year after year we have been consistently rated
number one in India in UNIX systems revenue and unit market share
(IDC). Sun India has been growing at twice the industry average for the
last 5 years. Sun has adopted a business model of working in
partnership with key Indian partners to deliver all products and services
such as hardware platforms, services, certification training etc.

HCL Infosystems Ltd (HCL Insys), India's premier Information

2004 enabling company, today announced its un-audited results for the
quarter ended December 31, 2004.

2006 New Delhi, May 29, 2006 -- With an aim to make the most compelling
digital music phenomenon more accessible to Indian consumers across
the country, HCL Infosystems Ltd. - nation's premier information
enabling and integration company - and Apple today formed a strategic
alliance to develop a joint go to market and support strategy for Apple
iPods in India.

HCL Infosystems Limited announced that it has recommended 100%

2007 final dividend on the paid up share capital of the Company for the
financial year ended June 30, 2007. HCL Infosystems
Limited Announces Allotment Of Equity Shares Under ESOS.
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About HCL Securities Ltd HCL Security is a 100% subsidiary of HCL
2.1.2 OUR EXECUTIVE MANAGEMENT TEAM

AJAI CHOWDHRY An engineer by training, Ajai Chowdhry is one of

Chairman the six founder members of HCL and took over
the reins of HCL Infosystems, the flagship
company of the group, as President and CEO in
1994. He was appointed the Chairman of HCL
Infosystems in November 1999. In recognition of
his contribution in championing the cause of the
domestic Indian IT industry, Ajai has been
conferred the DATAQUEST ‘IT Man of the Year
2007’ Award amongst other awards.

HARSH CHITALE CEO Harsh Chitale joined HCL Infosystems as Chief

Executive Officer in 2010 and heads the overall
business strategy and operations of HCL
Infosystems. He brings a wealth of experience as
a senior business leader with rich business
management experience in both Indian and
global companies. Harsh is a recipient of the
Director’s Gold Medal at IIT Delhi, from where
he completed his Electrical Engineering.

J V RAMAMURTHY J V Ramamurthy is President and Chief

President and Chief Operating

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 Officer
Operating Officer, HCL Infosystems Ltd. He
brings 3 decades of diverse Industry experience
and leadership to the company. A technocrat and
a man of broad vision, he has spearheaded
company’s entry into number of new verticals
and partnerships.

SANDEEP KANWAR Sandeep Kanwar joined HCL in 1988 and in a

CFO & EVP span of eight years progressed to the position of
Chief Financial Officer at the young age of 35.
He is well respected amongst colleagues &
customers for his financial acumen and
management skills.

HARI BASKARAN Hari, a BE graduate and alumni of IIM -

EVP Bangalore, has been instrumental in building up
the largest retail network for digital life style
products in the country. He heads
the Distribution and Marketing Services and
Retail business division for HCL.

GEORGE PAUL George Paul, a graduate in Electronics &

EVP Telecommunications joined HCL in 1983.
He heads the Marketing Function along with
HCL R&D.

RAJEEV ASIJA Rajeev, an engineering graduate, joined HCL in

EVP 1983,. With two decades of industry experience,
he heads the Enterprise Solutions & services
of HCL.

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 M CHANDRASEKARAN
M Chandrasekaran joined HCL in 1984. With
Sr. VP
over two decades of industry experience in sales,
support and marketing, he heads the office
automation products business for HCL.

VIVEK PUNEKAR Vivek joined HCL in 1986. An engineer by

VP HR
l PRODUCTS l SERVICES l INVESTORS
profession with over two decades of industry
experience in various functions, he heads the HR
function for the company. Credited with
innovative HR initiatives that have made HCL
among the best companies to work for.

Relationship Programme

HCL strongly believes in the power of relationships and partnership

No matter the size of your business, partnering with HCL Infosystems will help you
succeed. Leveraging over three decades of experience in total technology solutions,
it’s our commitment to help you be as successful as possible. We provide you access
to HCL’s innovative technologies, marketing strategies and value added services. By
working on every aspect of the ICT industry, we have the experience to create world
class products and services to help you give the best to your customers.

2.2 Advantage HCL

• HCL's labs - Pioneers in design, development and building ICT products

• India's largest Hardware, System Integration, Networking Solutions &
Distribution Company
• 3 decades of expertise in technology solutions
• Partners with leading global players to provide the best of solutions to end
users
• The largest manufacturer of PCs and Laptops in India
• Largest direct sales, digital lifestyle product distribution and retail network

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 • Extensive service network that reach out to 4,000 towns

Benefits from a Proven Commitment from HCL Infosystems

At HCL Infosystems, partnerships are lifelong relationships that mutually

benefit each other. We can help to enhance your business and reap the rewards of
our mutual success. We offer differentiated technology and dedicated service
support infrastructure as per the needs and requirements of your customers. We
provide technology specializations that map to areas of significant business growth
for your business and your customers.

Reliable IT Backbone

In a world where the right technology infrastructure is a prerequisite, we offer

a reliable IT backbone to our partners. HCL combines technical innovation with
built-in reliability to keep your business running. We provide a one stop shop for
meeting end-to-end IT requirements, thus offering a smooth ICT
management. Additionally, we offer industry leading technology, designed to deliver
a price to performance advantage to help you provide increased benefits to your
customers. Our high-quality products and services give you means to work in a
smarter way and be more productive and competitive.

Differentiated Product Access

At HCL we understand that different customers have different needs. We

have constantly innovated to offer a range of products to cater to different
requirements of the customers. We have pioneered the home PC market of India -
we designed India’s first Multimedia-enabled Beanstalk Media Centre PC for home
users; we have developed Ezeebee and Busybee PCs and ME Laptops for personal
productivity. Whether gaming, enjoying music or movies or connecting to the
Internet, these systems offer ease of use that transcends to greater performance and
more satisfaction for the individual user be for work or home. We bring this exciting
range of Desktops and Laptops through our vast network of neighborhood partner

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outlets for buying convenience of the customers. Further these products are backed
by HCL’s 24X7 Consumer Support Helpline. Enterprises have unique needs for their
computing platforms and HCL’s range of business Desktops and Laptops come with
unique features that enhance productivity while reducing TCO. For our Enterprise &
SMB customers who buy directly from us, or through Enterprise Rate Contracts or
through our vast network of Strategic Business Partners we offer customized built to
order range of ME Business Laptops and Infiniti Desktops. Leveraging on three
decades of expertise in total technology solutions, HCL business Desktops and
Laptops offers increased security, ultra-efficient manageability and maximum
productivity for a smart business landscape.

HCL's manufacturing facilities are ISO 9001 - 2000 & ISO 14001 certified
and adhere to stringent quality standards and global processes. HCL Desktops and
Laptops are manufactured and marketed specially to withstand unique Indian terrain
and conditions. HCL commits to manufacture “Green” PCs and Laptops that are
RoHS compliant and adhere to stringent environment management standards. As
market leaders in ICT arena we offer our partners the best of options.

2.3 Alliance & Partnership

To provide world-class solutions and services to all our customers, we have

formed Alliances and Partnerships with leading IT companies worldwide. HCL
Infosystems has alliances with global technology leaders like Intel, AMD, Microsoft,
IBM, Bull, Toshiba, Nokia, Sun Microsystems, Ericsson, NVIDIA, SAP, Scansoft,
SCO, EMC, Veritas, Citrix, CISCO, Oracle, CA, RedHat, Infocus, Duplo, Samsung
and Novell. These alliances on one hand give us access to best technology &
products as well enhancing our understanding of the latest in technology. On the
other hand they enhance our product portfolio, and enable us to be one stop shop for
our customers.

Technology Leadership

HCL Infosystems is known to be the harbinger of technology in the country. Right

from our inception we have attempted to pioneer the technology introductions in the

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country either through our R&D or through partnerships with the world technology
leaders.

Using our own R&D we have:

• Created our own UNIX & RDBMS capability (in 80s).

• Developed firewalls for enterprise & personal system security.
• Launched our own range of enterprise storage products.
• Launched our own range of networking products.

We strive to understand the technology from the view of supporting it post

installation as well. This is one of the key ingredients that go into our strategic
advantage. HCL Infosystems has to its claim several technology pioneering
initiatives. Some of them are:

• Country's first DeskTop PC - BusyBee in 1985.

• Country's first branded home PC - Beanstalk in 1995.
• Country's first Pentium 4 based PC at sub 40k price point.
• Country's first Media Center PC.

Philosophy of Quality

"We shall deliver defect-free products, services and solutions to meet the
requirements of our external and internal customers, the first time, every time."

To exist as a market leader in a globally competitive marketplace, organizations

need to adopt and implement a continuous improvement-based quality policy.One of
the key elements to HCL's success is its never-ending pursuit of superior quality in
all its endeavors.

HCL INFOSYSTEMS believes in the Total Quality Management

philosophy as a means for continuous improvement, total employee participation in
quality improvement and customer satisfaction. Its concept of quality addresses
people, processes and products. Over the last 32 years, we have adapted to newer

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and better Quality standards that helped us effectively tie Quality with Business
Goals, leading to customer and employee satisfaction.
Manufacturing

HCL's computer hardware manufacturing plants include 4 facilities, 2 at Puducherry,

1 at Chennai & 1 at Uttranchal. The plant located in Puducherry are situated 165 kms
south of Chennai on the coast of the Bay of Bengal with proximity to Chennai
Air/Sea port, special policies for Industries of local Govt, , Inland Container Depots,
attractive power and labour rates - makes Puducherry an ideal place for business.

Started in 1996 - with only Unit 1 - it now has 4 Units with a built up area of
4,19,000 sq. ft The infrastructure is state of the art, one of the best & largest in
India.

All 3 factories are ISO 9001:2000 and ISO 14001, ISO 13485:2003, TS 16949-2002
TUV-Accredited certified. PMO was also Awarded MAIT Level 2 - by European
Foundation for Quality Management in the year 2001. HCL was also awarded
ELCINA's (Electronic Component Industries Association) Quality Award for the
year 2002- 2003. HCL Infosystems Ltd. Puducherry, Uttarakhand, and Noida
Manufacturing Units now ISO 9001:2008 Certified. State of the art IT systems in
MRP, ERP, Online configurations enables this latest unit of HCL (Rudrapur) to
leverage the power of IT in delivering optimum efficiency. The plant is networked &
online with HCL branch and head offices. The Pondicherry plant has its own Product
Engineering Group (PEG) and R&D teams constantly engaged in developing new
products and solutions. Driven by a strong manufacturing objective, HCL promises
to deliver defect free products, services and solutions to meet the requirements of its
external and internal customers, right from the commencement of the relationship.

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Driven by a strong Manufacturing Objective

"We shall deliver defect-free products, services and solutions to meet the
requirements of our external and internal customers, the first time, every time."

2.4 Our Products

Computing Products Offering an entire range of Computing

Products for Corporate, Businesses and
Small to Large Setups.

Display Products Introducing great display products that

you would love setting your eyes on.

Networking Products Enjoy fast data transfer with our

exclusive range of Networking Products.

Storage Solutions Offering an entire range of storage

solutions.

Software Licenses Enjoy benefits of genuine software

licenses through HCL Infosystems.

Offering an entire range of Digital

Lifestyle Products and Solutions for
Digital Lifestyle Products & Solutions
entertainment and business.

Office Automation Imaging & Printing Introducing world class imaging

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 products and solutions to meet business
Solutions
requirements.

Office Automation Telecom & AVSI Introducing world class telecom products

Solutions and AVSI solutions to meet business

requirements.

POS, KIOSK, Customer Service Offering an entire range of POS products

Counter Products and solutions.

Software Solutions Bringing to you world class software

solutions that you can depend on

Chapter-3
Exports Management

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“A management process which ensures the coordination and Integration of all
activities involved with export process. It is thus, concerned with securing export
orders and achieving their successful completion in time as per the requirement
specified by the foreign buyers.”

3.1 Export documentation

HCL Infosystems Ltd. mainly trades with China, Hong Kong, Taiwan, USA,
Thailand and Malaysia. As it is maintaining strong relationship with all its buyers,
the payment problems have been ruled out. So it mainly trades with terms of
Documents against goods or Documents against sight or Documents against
payment. So I have gone through all the procedures and documentation system
mainly what company is following. Many of the buyers of the company prefer
shipment through sea than air.

Some of the most used and most important documents of exports are as follows:

Bill of Exchange

The Documentary Letter of Credit will stipulate when payment is to be made and the
bill of exchange must be drawn up accordingly. The bill of exchange must conform
exactly to the terms of the Letter of Credit, with the sum specified not exceeding the
amount of the LC. Unless the Documentary Letter of Credit stipulates that Bills of
Exchange are required to be in duplicate, a single Bill of Exchange will be
acceptable. Bill of Exchange forms may be purchased from printers or stationers, or
they may be drawn on a company’s notepaper or even a blank sheet of paper. When
being presented for payment, the Bill of exchange must be correctly endorsed by the
payee. Defined by Bills of Exchange Act 1882, sec 1 as an unconditional order in
writing, addressed by one person (the drawer) to another (the drawee and afterwards
acceptor), signed by the person giving it, requiring the person to whom it is
addressed to pay on demand, or at a fixed or determined future time, a sum certain in
money to, or to the order of, a specified person or to bearer (payee).

Certificate of inspection

A document issued by a grading agency that assures the buyer that the shipment of
lumber has been examined by a qualified inspector and that the lumber in the

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shipment is of the grade indicated. Often used for selects and timbers where a grade
mark would not show, or where one would affect the use of the piece.

Commercial Invoice

A commercial invoice is a bill of goods from the seller to the buyer. Commercial
invoices are utilized by customs officials to determine the value of the goods in order
to assess customs duties and taxes.

In general there is no standard form for a commercial invoice although they tend to
contain many of the following features:

 Seller’s contact information

 Buyer’s contact information
 Consignee’s contact information (if it is different from the buyers)
 Invoice date
 A unique invoice number
 Sales terms (usually in incoterm format)
 Payment terms
 Currency of sale
 Full quantities and description of merchandise (Generally this includes
unit price and total price. Product descriptions should be consistent with
the buyer’s purchase order. Including the Harmonized System
commodity codes can be helpful, especially in countries that are WTO
members.)
 Certification that the invoice is correct (Standard language is “We certify
that this invoice is true and correct.”

Packing List

A Packing List gives details of the contents of all the packages making up the
consignments and is required by Custom’s authorities if the packing information is

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not shown on the invoice. The Packing List is usually attached to the invoice. Par
Value the official fixed exchange rate between two currencies or between a currency
and a specific weight of gold or a basket of currencies.

Certificate of origin

A certificate, which identifies the country of origin, is typically required for

international shipments. Certain countries may entirely bar shipments from certain
other countries. In select countries, a notarized certificate of the country of origin
may significantly lower the taxes levied.

Certificate of inspection

A document issued by a grading agency that assures the buyer that the shipment has
been examined by a qualified inspector, and that the goods in the shipment are of the
grade indicated.

Performa invoice

An invoice received before a sale is consummated, information the buyer of the

terms of sale. Pro forma invoices are often used in foreign trade as the buyer’s proof
of future sale when applying for import licenses and foreign exchange through
government agencies.

Certificate of insurance

A certificate issued by an insurance company or its agent. It verifies that a certain

insurance policy is in effect for stated amounts and coverage and names those
insured.

Combined Transport Document

When goods are transported using more than one mode of transport, the issuer of the
Collection takes responsibility for the whole of the journey through a combined
transport document.

Documentary Letters of Credit

A Documentary Letter of Credit (LC) is a written undertaking given by a bank on

behalf of an Importer to pay the Exporter a given sum of money within a specified

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time, providing that the Exporter presents documents, which comply with the terms
laid down in the Letter of Credit.

Letters of Credit can be for any amount, in any freely traded currency, and, subject
to the presentation of compliant documents, may be payable: at sight, which means
as soon as a compliant set of documents are presented to the paying bank; or, after a
specified term, e.g. at 30, 60, 90 or 180 days of sight or Bill of Lading date.

If the documents are not presented exactly as specified in the Letter of Credit,
payment will not be made unless the Importer gives their authority to waive or
amend the specified condition.

A fundamental principle of Letters of Credit is that banks deal with documents and
not with the goods to which the documents refer.

For example, if the Importer is not happy with the quality of the goods but the
documents comply with the terms and conditions of the letter of credit, the
Importer’s bank is obliged to pay the Exporter.

 Parties involved in a Letter of Credit transaction

 Types of Letter of Credit

Parties involved in a Letter of Credit transaction

In the process of a Letter of Credit transaction, there are essentially four parties
involved. These parties can be referred to by a number of terms, outlined below.

 Buyer meaning Importer, Applicant, Accountee or Accreditor.

 Seller meaning Exporter or Beneficiary
 The Issuing or Opening Bank (Importers Bank)
 The Advising/Confirming Bank – usually a bank in the Exporters country,
which may or may not be the Exporters Bank.

Documentary Collections

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A Documentary Collection would normally comprise a set of commercial documents
relating to the goods being exported, which are sent to the Importer’s bank along
with a Collection Schedule and usually a bill of exchange. A set of documents
containing a Bill of Lading would normally allow the holder to take possession of
the goods. A Collection takes one of the following forms:

Documents against Payment

The Collection documents are presented to the Importer and released in exchange for
immediate payment (payment ‘at sight’).

Documents against Acceptance

This applies with a Tenor Bill of Exchange and describes the situation where the
Collection documents are released after the Importer has ‘accepted’ them.
Acceptance is signified by the Importer’s signature on the bill of exchange or other
payment authority enclosed in the Collection. Payment will be made at a fixed or
determinable future date.

Bill of Lading

A Bill of Lading is a receipt given by the shipping company upon shipment of the
goods and is evidence of a contract of carriage. It is a document of title to the goods,
and as such is required to enable them to clear the goods at the port of destination.
Two or three signed sets of the original copies of the Bill of Lading are usually made
out. These are known as ‘negotiable copies’, any one of which can give title to the
goods. Unsigned, non-negotiable copies also exist, which are not documents of title,
but are used for record purposes.

The goods will only be released to Consignee. Normally Bills of Lading are made
out to order, unless the documents are made out to the Importer as the Consignee of
the goods.

Types of Bills of Lading:

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  ‘Shipped’ or ‘shipped on board’. (Indicates that the goods have been received
on ship).
 ‘Received for shipment’, (Signifies that the ship owner has taken delivery of
the goods, but they have not been placed on board the vessel).
 ‘Combined Transport’. (Issued to cover all stages of the journey if both
ocean and overland transport is used).
Insurance:

The Letter of Credit will indicate what insurance cover is required, and will state
whether an insurance policy or a certificate is needed. An insurance policy may only
be issued by the insurer and is usually in standard form covering the customary risks
for any method of transport (Lloyd’s MAR policy is normally used). Regular
Exporters can organize an open policy to cover all exports during a specific period.
Individual insurance certificates are issued for each shipment by either the insurers
and/or the Exporter. This certificate must contain the same details as the policy, with
a shortened version of the provisions of the policy under which it is issued.

Invoice

An invoice gives details of the goods involved in the transaction between the
Importer and the Exporter. Several copies of the document are produced as are
required by customs, excise authorities overseas etc. All details in the invoice need
to be exactly the same as specified in the LC or in other documents.

Freight Forwarders

An international freight forwarder is an agent for the exporter in moving cargo to an

overseas destination. These agents are familiar with the import rules and regulations
of foreign countries, the methods of shipping, and the documents related to foreign
trade. Export freight forwarders are licensed by the International Air Transport
Association (IATA) to handle air freight and the Federal Maritime Commission to
handle ocean freight.

Freight forwarders assist exporters in preparing price quotations by advising on

freight costs, port charges, consular fees, costs of special documentation, insurance
costs, and their handling fees. They recommend the packing methods that will

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protect the merchandise during transit or can arrange to have the merchandise
packed at the port or containerized. If the exporter prefers, freight forwarders can
reserve the necessary space on a vessel, aircraft, train, or truck.

Once the order is ready for shipment, freight forwarders should be reviewing all
documents to ensure that everything is in order. They may also prepare the bill of
lading and any special required documentation. After shipment, they can route the
documents to the seller, the buyer, or to a paying bank. Freight forwarders can also
make arrangements with customs brokers overseas to ensure that the goods comply
with customs export documentation regulations. A customs broker is an individual or
company that is licensed to transact customs business on behalf of others.

Incoterms – International Commercial Terms

These are the terms seller and buyer negotiate for cost, insurance, freight etc. these
terms decides who have to bear the risk or whom to transfer the risk.

a. Ex-Works: 'Ex-works' means that responsibility is to make goods available

to the buyer at works or factory. The full cost and risk involved in bringing
the goods from port of shipment to the desired destination will be borne by
the buyer. This term thus represents the minimum obligation for seller.

b. Free Alongside Ship (FAS): Once the goods have been placed alongside the
ship, seller obligations are fulfilled and the buyer notified. The buyer has to
contract with the sea carrier for the carriage of the goods to the destination
and pay the freight. The buyer has to bear all costs and risks of loss or
damage to the goods hereafter.

c. Free on Board (FOB): Exporters’ responsibility ends the moment the

contracted goods are placed on board the ship, free of cost to the buyer at a
port of shipment named in the sales contract. 'On board' means that a
'Received for Shipment' B/L (Bill of Lading) is not sufficient. Such B/L if
issued must be converted into 'Shipped on Board B/L' by using the stamp
'Shipped on Board' and must bear signature of the carrier or his authorized
representative together with date on which the goods were 'boarded'.

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d. Cost and Freight (C&F): sellers’ own risk and not as an agent of the buyer,
contract for the carriage of the goods to the port of destination named in the
sale contract and has to pay the freight. This being a shipment contract, the
point of delivery is fixed to the ship's rail and the risk of loss or of damage to
the goods is transferred from the seller to the buyer at that very point.

e. Cost Insurance Freight (CIF): The term is basically the same as C&F, but
with the addition that you have to obtain insurance at your cost against the
risks of loss or damage to the goods during the carriage.

f. Freight or Carriage Paid (DCP): While C&F is used for goods which are
to be carried by sea, the term "DCP" is used for land transport only, including
national and international transport by road, rail and inland waterways. Seller
have to contract for the carriage of the goods to the agreed destination named
in the contract of the sale and pay freight. Seller’s obligations are fulfilled
when the goods are delivered to the first carrier and not beyond. In case the
buyer desires to insure the goods till the destination, he would add 'including
insurance' before the word 'paid in Freight' or 'Carriage Paid to'.

g. EXS/EX-Ship: This is an arrival contract and means that make the goods
available to the buyer in the ship at the named port of destination as per sales
contract. Seller has to bear the full cost and risk involved in bringing the
goods there. Seller’s obligation is fulfilled before the customs border of the
foreign country and it is for the buyer to obtain necessary import license at
his own risk and expense.

h. EXQ/Ex-Quay: Ex-Quay means that make the goods available to the buyer
at a named quay. As in the term 'Ex-Ship' the points of division of costs and
risks coincide, but they have now been moved one step further -- from the
ship into the quay or wharf i.e. after crossing the customs border at
destination. Therefore, in addition to arranging for carriage and paying
freight and insurance seller have to bear the cost of unloading the goods from
the ship.

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 i. Delivered at Frontier (DAF): Exporter’s obligations are fulfilled when the
goods have arrived at the frontier, but before the 'Customs border' of the
country named in the sales contract.

j. Delivery Duty Paid (DDP): This term may be used irrespective of the type
of transport involved and denotes your maximum obligation as opposed to
'Ex-Works'. seller have not fulfilled his obligation till such time that the
goods are made available at his risk and cost to the buyer at his premises or
any other named destination. In the latter case necessary documents (e.g.
transport document or Warehouse Warrant) will have to be made available to
the buyer to enable him to take delivery of goods. The term 'duty' includes
taxes, fees and charges.

k. FAO/FOB Airport: 'FOB Airport' is based on the same main principle as

the ordinary FOB term. Seller fulfills his obligation by delivering the goods
to the air carrier at the airport of departure. Without the buyer's approval
delivery at a town terminal outside the airport is not sufficient, seller’s
obligations with respect to costs and risks do not extend to the arrival of the
goods at the destination.

l. Free Carrier (Named Point) FRC: The principle on which the term is
based is same as applicable to FOB except that the seller or the exporter
fulfils his obligations when he delivers the goods into the custody of the
carrier at the named point.

m. Freight Carriage and Insurance Paid (CIP): The term is similar to 'Freight
or Carriage Paid to'. However, in case of CIP seller have additionally to
procure transport insurance against the risk of loss or damage to the goods
during the carriage.
Duty Drawback Formalities

If the exporter intends to claim duty drawback on his exports, he has to follow
prescribed procedures and submit necessary papers. He has to make endorsement of
shipping bill that claim for duty drawback is being made. If he fails to do so due to

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genuine reasons, Commissioner of Customs can grant exemption from this
provision. [Proviso to rule 12(1) (a) of Duty Drawback Rules].

G R / SDF / SOFTEX Form under FEMA

Reserve Bank of India has prescribed GR / SDF form under FEMA. “G R” stands
for ‘Guaranteed Receipt’ form, while SDF stands for 'Statutory Declaration Form’.
SDF form is to be used where shipping bills are processed electronically in customs
house, while GR form is used when shipping bills are processed manually in
customs house.

3.2 Export Finance

Financial assistance to the exporters is generally provided by Commercial Banks,

before shipment as well as after shipment of the said goods. The assistance provided
before shipment of goods is known as pre-shipment finance or packing credit and
that provided after the shipment of goods is known as post-shipment finance. Pre-
shipment finance is given for working capital for purchase of raw-material,
processing, packing, transportation, ware-housing etc. of the goods meant for export.
Post-shipment finance is provided for bridging the gap between the shipment of
goods and realization of export proceeds. The later is done by the Banks by
purchasing or negotiating the export documents or by extending advance against
export bills accepted on collection basis. While doing so, the Banks adjust the pre-
shipment advance, if any, already granted to the exporter. MCC prefers largely Post
shipment credit and so I learnt the procedure and mechanism of it. Explanation for
post and pre – shipment finances are given below -

The following diagram depicts the export business cycle:

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Financing at two stages – initially, to process the order and then to bridge the gap
between the time you ship the goods to the time you actually receive the payment.
Export financing has been designed to take care of these needs.

Export finance can be broadly classified into two categories, depending upon the
stage of ‘export activity’ at which the finance is availed. The two types of export
financing are:

 Pre-Shipment Finance.
 Post-Shipment Finance.
I. Post Shipment Finance

Post-shipment finance is the finance provided against shipping documents. It is also

provided against duty drawback claims. It is provided in the following forms:

Purchase of Export Documents drawn under Export Order

Purchase or discount facilities in respect of export bills drawn under confirmed

export order are generally granted to the customers who are enjoying Bill
Purchase/Discounting limits from the Bank. As in case of purchase or discounting of
export documents drawn under export order, the security offered under L/C by way
of substitution of credit-worthiness of the buyer by the issuing bank is not available,
the bank financing is totally dependent upon the credit worthiness of the buyer, i.e.
the importer, as well as that of the exporter or the beneficiary. The documents dawn
on DP basis are parted with through foreign correspondent only when payment is
received while in case of DA bills documents (including that of title to the goods)
are passed on to the overseas importer against the acceptance of the draft to make
payment on maturity. DA bills are thus unsecured. The bank financing against export
bills is open to the risk of non-payment. Banks, in order to enhance security,
generally opt for ECGC policies and guarantees which are issued in favour of the
exporter/banks to protect their interest on percentage basis in case of non-payment or
delayed payment which is not on account of mischief, mistake or negligence on the
part of exporter. Within the total limit of policy issued to the customer, drawee-wise
limits are generally fixed for individual customers. At the time of purchasing the bill
bank has to ascertain that this drawee limit is not exceeded so as to make the bank
ineligible for claim in case of non-payment.

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Advances against Export Bills Sent on Collection

It may sometimes be possible to avail advance against export bills sent on collection.
In such cases the export bills are sent by the bank on collection basis as against their
purchase/discounting by the bank. Advance against such bills is granted by way of a
'separate loan' usually termed as 'post-shipment loan'. This facility is, in fact, another
form of post- shipment advance and is sanctioned by the bank on the same terms and
conditions as applicable to the facility of Negotiation/Purchase/Discount of export
bills. A margin of 10 to 25% is, however, stipulated in such cases. The rates of
interest etc., chargeable on this facility are also governed by the same rules. This
type of facility is, however, not very popular and most of the advances against export
bills are made by the bank by way of negotiation/purchase/discount.

Advance against Goods Sent on Consignment Basis

When the goods are exported on consignment basis at the risk of the exporter for
sale and eventual remittance of sale proceeds to him by the agent/consignee, bank
may finance against such transaction subject to the customer enjoying specific limit
to that effect. However, the bank should ensure while forwarding shipping
documents to its overseas branch/correspondent to instruct the latter to deliver the
document only against Trust Receipt/Undertaking to deliver the sale proceeds by
specified date, which should be within the prescribed date even if according to the
practice in certain trades a bill for part of the estimated value is drawn in advance
against the exports.

Advance against Undrawn Balance

In certain lines of export it is the trade practice that bills are not to be drawn for the
full invoice value of the goods but to leave small part undrawn for payment after
adjustment due to difference in rates, weight, quality etc. to be ascertained after
approval and inspection of the goods. Banks do finance against the undrawn balance
if undrawn balance is in conformity with the normal level of balance left undrawn in
the particular line of export subject to a maximum of 10% of the value of export and
an undertaking is obtained from the exporter that he will, within 6 months from due
date of payment or the date of shipment of the goods, whichever is earlier surrender

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balance proceeds of the shipment. Against the specific prior approval from Reserve
Bank of India the percentage of undrawn balance can be enhanced by the exporter
and the finance can be made available accordingly at higher rate. Since the actual
amount to be realized out of the undrawn balance, may be less than the undrawn
balance, it is necessary to keep a margin on such advance.

Advance against Retention Money

Banks also grant advances against retention money, which is payable within one
year from the date of shipment, at a concessional rate of interest up to 90 days. If
such advances extend beyond one year, they are treated as deferred payment
advances which are also eligible for concessional rate of interest.

Advances against Claims of Duty Drawback

Duty Drawback is permitted against exports of different categories of goods under

the 'Customs and Central Excise Duty Drawback Rules, 1995'. Drawback in relation
to goods manufactured in India and exported means a rebate of duties chargeable on
any imported materials or excisable materials used in manufacture of such goods in
India or rebate on excise duty chargeable under Central Excises Act, 1944 on certain
specified goods. The Duty Drawback Scheme is administered by Directorate of Duty
Drawback in the Ministry of Finance. The claims of duty drawback are settled by
Custom House at the rates determined and notified by the Directorate. As per the
present procedure, no separate claim of duty drawback is to be filed by the exporter.
A copy of the shipping bill presented by the exporter at the time of making shipment
of goods serves the purpose of claim of duty drawback as well. This claim is
provisionally accepted by the customs at the time of shipment and the shipping bill is
duly verified. The claim is settled by customs office later. As a further incentive to
exporters, Customs Houses at Delhi, Mumbai, Calcutta, Chennai, Chandigarh, and
Hyderabad have evolved a simplified procedure under which claims of duty
drawback are settled immediately after shipment and no funds of exporter are
blocked.

However, where settlement is not possible under the simplified procedure exporters
may obtain advances against claims of duty drawback as provisionally certified by
customs.

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Rates of Interest

The rate of interest depends on the nature of the Bills, i.e., whether it is a demand
bill or usance bill. Like pre-shipment, post-shipment finance is also available at
concessional rate of interest. Present Rates of interest are as under:

Demand Bills for transit period Not exceeding (as specified by FEDAI) 10% p.a.

Usance Bills (for total period comprising usance period of ex-port bills, transit
period as specified by FEDAI and grace period, wherever applicable:

a. Up to 90 days 10% p.a.

b. Beyond 90 days and up to six 12% p.a.months from the date of shipment.
c. Beyond six months from the 20% date of Shipment (Minimum)
Against duty drawback etc., receivable- Not receivable from Government covered by
adding 10%ECGC guarantees (up to 90 days) p.a. , Against undrawn balance (up to
90 days) and Against retention money payable within one year from the date of
shipment (upto90 days)

Normal Transit Period

Foreign Exchange Dealers Association of India (FEDAI) has fixed transit period for
export bills drawn on different countries in the world. The concept of this transit
period is that an export bill should normally be realized within that period. The
transit period so fixed by FEDAI is known as 'Normal Transit Period' and mainly
depends on geographical location of a particular country.

Direct and Indirect Bill

If the currency of the bill is the same as the currency of the country on which it is
drawn, it is termed as direct bill, e.g. an export bill in US $ drawn on a place in
U.S.A. However, if the currency of the bill in which it is drawn is different than the
currency of the country on which it is drawn, it is termed as indirect bill, e.g. an
export bill in US $ drawn on a place in Japan. The normal transit period fixed for
indirect bill is on higher side as compared to transit period fixed for direct bills.

Notional Due Date

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To determine the due date of an export bill we have to consider the following 3
components: (1) Normal transit period as fixed by FEDAI (2) Usance period of the
bill (3) Grace period if applicable in the country on which the bill is drawn. Grace
period is applicable only in the case of usance bills. The notional due date of an
export bill may thus be calculated after adding all the above 3 components. The
concessional rate of interest is chargeable up to the notional due date subject to a
maximum of 90 days.

II . Pre-Shipment Finance

An application for pre-shipment advance should be made by exporter to his banker

along with the following documents:

Confirmed export order/contract or L/C etc. in original. Where it is not available, an

undertaking to the effect that the same will be produced to the bank within a
reasonable time for verification and endorsement should be given. An undertaking
that the advance will be utilized for the specific purpose of
procuring/manufacturing/shipping etc., of the goods meant for export only, as stated
in the relative confirmed export order or the L/C. If you are a sub-supplier and want
to supply the goods to the Export/Trading/Star Trading House or Merchant Exporter,
an undertaking from the Merchant Exporter or Export/Trading/Star Trading House
stating that they have not/will not avail themselves of packing credit facility against
the same transaction for the same purpose till the original packing credit is
liquidated. Copies of Income Tax/Wealth Tax assessment Order for the last 2-3
years in the case of sole proprietary and partnership firm. Copy of Exporter's Code
Number (CNX). Copy of a valid RCMC (Registration-cum-Membership Certificate)
held by you and/or the Export/Trading/Star Trading House Certificate. Appropriate
policy/guarantee of the ECGC.

Any other document required by the Bank. For encouraging exports, R.B.I. has
instructed the banks to grant pre-shipment advance at a concessional rate of interest.
The present rate of interest is 10% p.a. for pre-shipment advance upto an initial
period of 180 days. Pre-shipment advance for a further period of 90 days is given at
the concessional rate of 13% p.a. Banks are free to determine the interest rate for
advances beyond 270 days and upto 360 days.

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III. EXIM Bank Finance

Besides commercial banks, export finance is also made available by the EXIM bank.
The EXIM bank provides financial assistance to promote Indian exports through
direct financial assistance, overseas investment finance, term finance for export
production and export development, pre-shipment credit, lines of credit, re-lending
facility, export bills re-discounting, refinance to commercial banks, finance for
computer software exports, finance for export marketing and bulk import finance to
commercial banks. The EXIM Bank also extends non-funded facility to Indian
exports in the form of guarantees. The diversified lending programme of the EXIM
Bank now covers various stages of exports, i.e. from the development export
markets to expansion of production capacity for exports, production for export and
post shipment financing. The EXIM Bank's focus is on export of manufactured
goods, project exports, exports of technology, services and export of computer
software.

IV. SIDBI Finance

The Small Industries Development Bank of India (established under Small Industries
Development Bank of India Act, 1989 (39 of 1989)) is offering the International
Finance schemes whose main objective is to enable small-scale industries to raise
finance at internationally competitive rates to fulfil their export commitments.

The financial assistance is being offered in USD and Euro currencies. Assistance in
Rupees is also considered, independent of foreign currency limits.

Post-Shipment Credit on Foreign Currency (EBF)/Rupee (PSCR)

Purpose To provide post-shipment credit in foreign currency at internationally

competitive rates of interest by discounting of usance export bills /
purchase of sight/demand export bills and negotiation of bills under LCs.

Eligible
Borrowers
All SSI units and Export / Trading houses sourcing their requirements
from SSIs with

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 a. profit making units with proven track record in exports for last
three years and sound financial position

b. requirement of export finance assistance of at least Rs.100 lakh

Need based limit, depending on the normal trade terms and credit period
given to overseas buyers by exporters not exceeding 180 days.
Assistance in rupees is also considered independent of FC limits.

Rate of interest-
Norms

For EBF - Not exceeding 0.75% over 6 Month LIBOR.

For PSCR - As per RBI guidelines and the score chart introduced by
SIDBI.

Pre-Shipment Credit in Foreign Currency (PCFC)/ Rupee (PCR)

Purpose To enable small scale industries to raise finance at internationally

competitive rates as per Reserve Bank of India guidelines to fulfil their
export commitments.

Eligible Industrial concerns in the small scale sector and Government recognized
Borrowers Export / Trading Houses sourcing their requirement for export from SSI
sector with

a. profit making units with proven track record in exports for last

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 three years and sound financial position

b. requirement of export finance assistance of at least Rs.100 lakh

Pre-shipment Credit in Foreign Currency (PCFC) is being extended in

USD & EURO Currencies. Assistance in Rupees is also considered
independent of FC limits.

Quantum - need based linked to working capital gap.

Period of Credit - linked to production cycle (Maximum -

180 days)

Norms Margin - minimum 10% and maximum 25%

Repayment - by discounting / negotiation of Export bills
within a maximum period of 180 days

Rate of interest -

For PCFC - Not exceeding 0.75% over 6 Month LIBOR.

For PCR - As per RBI guidelines and the score chart

introduced by SIDBI.

An additional benefit that an exporter can avail of relates to the ‘Exchange

Earners Foreign Currency Account’ (EEFC). This is a facility by which an
exporter can maintain an account, with a Bank in India, expressed in foreign
currency and titled EEFC account. Amounts that can be credited to this account
cannot exceed 50% of inward remittances from the export transactions (70% in the
case of 100-pct EOUs or units located in export processing zones). All these
measures were taken by Government of India and Reserve Bank of India to promote
exports and especially SSIs.

3.3 FINANCIAL RISKS INVOLVED IN FOREIGN TRADE

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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

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.
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.

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 Chapter-4
4.1 BASIC LEGAL REQUIREMENTS FOR IMPORTER

 IEC CODE – Importer Exporter Code Number

 PAN NUMBER- Permanent account number
 BANK A/C- Current account number
 AD CODE- Authorized dealer code
 Registration of company– Registration Under Companies Act
 Duty Drawback Account Number
 SALE TAX REGISTRATION

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  SERVICE TAX REGISTRATION

4.2 WHERE TO APPLY FOR THE LEGAL REQUIREMENT

 IEC- Office of the Joint Director General of Foreign Trade

 PAN- Office of the Income Tax
 Bank account – Any Nationalized / Private Banks
 AD CODE - Account Holding Bankers
 Registration – office of the companies Registration
 Duty Drawback account – Account Holding Bankers
 SALE TAX REGISTRATION-Sale Tax Department
 SERVICE TAX REGISTRATION- Service Tax Department

4.3 GLOBAL TENDERING

 Register as an importer/export with Global tendering

 Attending various enquires regarding requirements from global
sellers/buyers
 Getting samples from the Suppliers
 Testing Samples through – PEG Team
 Negotiation of Rates
 Finalizing the rates
 Order Placing

4.4 INCO TERMS CONDITONS / PAYMENTS

 FOB - FREE ON BOARD

 CIF - COST INSURANCE FREIGHT
 EX-WORKS - EX.FACTORY
 L/C - LETTER OF CREDIT

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  DA - DIRECT ACCEPTANCE
 SD - SIGHT DRAFT
 TT AD- ADVANCE TELEGRAPIC TRANSFER

4.4.1 RESPONSIBILITES AGAINST TERMS

 FOB – Freight Forwarder to be Fixed by the Importers

 CIF – Freight forwarder to be fixed by either supplier or the Buyer but the
freight cost to be paid by the supplier.

 EX-WORKS – Supplier will handover the consignment at their Factory, the

importer nominated Freight forwarder to pickup the consignment at supplier
factory upto Delivery Port the cost to be bear by the nominated Freight
forwarder .

4.4.2 RESPONSIBILITES OF FREIGHT FORWARDER

Pickup Of Consignments From The Suppliers End

 Arranging Container From The Shipping lines To Load The Consignment

 Booking Space For The Particular Vessel
 Executing House Bill Of Lading/House Airway bill
 Manifesting The Shipping Documents With Loading And Unloading Port
Customs Authorities
 Providing Sailing Schedule To The Supplier And Importer
 Issuing Cargo Arrival Notice And Shipment Status Report
 Delivery Order Releasing

4.4.3 RESPONSIBILITIES OF CUSTOM HOUSE AGENT

 Retrieving Documents From The Importers

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  Scrutinizing The Documents
 Checking The Vessel Arrival
 Preparing Checklist For Bill Of Entry And Getting Approval From The
Importers Before Filing Of Boe With Customs
 Intimating The Duty Amount And The Duty Interest
 Processing The Bill Of Entry With Customs (Assessment, Inspection And
Delivery)
 Transportation Of Consignment To Importers Factory

4.4.4 CUSTOMS PORT CFS

INDIAN CUSTOMS

Processing the Import and Export consignment BOE and shipping Bills

 Checking the Value of the Import and Export and Verifying the Notification
Benefit Claim Genuineness
 Collection of Custom Duty / Cess Duty payment against Import / Export
shipments
 Detailed Examination of Import / Export consignments at various customs
nominated Cfs / Port

4.5 TYPES OF BILL OF ENTRIES

 Bill of entry for warehouse

 Bill of entry for home consumption
 Provisional assessment bill of entry
 Final assessment bill of entry
 Exbond bill of entry
 Kachaa bill of entry

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4.6 SCHEMES OF IMPORT

 100% EOU
 EPCG
 DEPB
 DEEC
 DFRC
 PROJECT IMPORTS

4.7 The Importer/Customs Broker Relationship

 Select carefully; there is a difference ability, level of experience willingness

to train, product line experience

 Define the relationship -- in writing. Note: Under general agency/partnership

rules. Broker needs Power of Attorney
 Give information in writing
• - Minute detail
• - Contact for additional information
• - Contact if Customs Service calls
 Anticipate change.
- New products, new sources, new factories
 Establish procedures for ongoing audits and periodic review.
 Expect and plan for improvement in performance.
4.7.1 Responsibilities

 Diligent Supervision of Employees

 Record of Transactions
 Retention of Records
 Record Confidentiality (Other than to Customs)
 Subject to Audit
 Diligence in Correspondence &

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  Supervision of Money
 Must maintain copies of all Powers of Attorney – authorized appointment of
other brokers

4.8 Tariff Classification

 An item’s tariff classification is determined based on the Harmonized Tariff

Schedule of the United States, or HTSUS. The HTSUS is derived from the
Harmonized System, which is in use in more than 100 countries worldwide.

4.8.1 Harmonized Tariff Schedule

 Chapter: Examples include live animals, Organic chemicals, and Lead and
articles thereof.
 Heading: Examples include Potatoes, fresh or chilled; Newspapers, journals
and periodicals; and Printed circuits.
 Subheading: Examples include Rice wine or sake, Lavatory seats and
covers, and Slide projectors.

 Chapter - The first two digits, or 39 in the example.

 Heading - The first four digits, or 3923 in the example.
 Subheading - The first six digits, or 3923.50 in the example.
 Tariff item - Anything greater than six digits.
4.9 General Rules of Interpretation

Classification of goods in the tariff schedule shall be governed by the following

principles.

The table of contents, alphabetical index, and titles of sections, chapters and sub-
chapters are provided for ease of reference only; for legal purposes, classification
shall be determined according to the terms of the headings and any relative section

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or chapter notes and, provided such headings or notes do not otherwise require,
according to the following provisions.
2(a) Any reference in a heading to an article shall be taken to include a reference to
that article, incomplete or unfinished, provided that, as entered the incomplete or
unfinished article has the essential character of the complete or finished article. It
shall also include a reference to that article complete or finished (or falling to be
classified as complete or finished by virtue of this rule), entered unassembled or
disassembled

3. When, by application of rule 2(b) or for any other reason, goods are, prima facie,
classifiable under two or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be
preferred to headings providing a more general description. However, when
two or more headings each refer to part only of the materials or substances
contained in mixed or composite goods or to part only of the items in a set
put up for retail sale, those headings are to be regarded as equally specific in
relation to those goods, even if one of them gives a more complete or precise
description of the goods.

3(b) Mixtures, composite goods consisting of different materials or made up

of different components, and goods put up in sets for retail sale, which
cannot be classified by reference to 3(a), shall be classified as if they
consisted of the material or component which gives them their essential
character, insofar as this criterion is applicable.

3(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall
be classified under the heading which occurs last in numerical order among
those which equally merit consideration.

5. In addition to the foregoing provisions, the following rules shall apply in respect
of the goods referred to therein:

(a) Camera cases, musical instrument cases, gun cases, drawing instrument
cases, necklace cases and similar containers, specially shaped or fitted to
contain a specific article or set of articles, suitable for long-term use and
entered with the articles for which they are intended, shall be classified with

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 such articles when of a kind normally sold therewith. This rule does not,
however, apply to containers which give the whole its essential character;

5 (b) subject to the provisions of rule 5(a) above, packing materials and
packing containers entered with the goods therein shall be classified with the
goods if they are of a kind normally used for packing such goods. However,
this provision is not binding when such packing materials or packing
containers are clearly suitable for repetitive use.

6. For legal purposes, the classification of goods in the subheadings of a heading

shall be determined according to the terms of those subheadings and any related
subheading notes and, mutatis mutandis, to the above rules, on the understanding
that only subheadings at the same level are comparable. For the purposes of this rule,
the relative section, chapter and subchapter notes also apply, unless the context
otherwise requires.

Non-Sales

 Gifts, samples and promotional items

 Merchandise which is imported under consignment
 Goods imported under a hire or lease contract
 Goods supplied on loan which remain the property of the sender

Foreign Inland Freight

 If purchase on CIF/DDP terms and know actual freight costs, then must
deduct;
 If purchase on CIF/DDP terms but don't know actual freight costs but learn
before liquidation, then must enter at full value and notify of inclusion of
freight costs. To exercise reasonable care, must thereafter notify of actual
costs;
 If purchase on CIF/DDP terms and can't discern actual freight costs, but learn
before liquidation, then must enter at full value and notify of inclusion of

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 freight costs. To exercise reasonable care, must thereafter notify of actual
costs;
 If purchase on CIF/DDP terms and can't discern actual freight costs, then
must enter at full value and notify of inclusion of freight costs. To exercise
reasonable care, must provide statement of inability to discern actual costs;
and
 If recurring use of CIF/DDP terms, then may use reconciliation

Chapter-5
CONCLUSION

• It is very clear that the common channel with export market is through
agents; therefore the success of the export business heavily depends on the
credibility of the agent and his capability of dealing with export orders.
Therefore, company adopting the caution note should select credible who
have got the reputation in the market.

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 • Any company planning to explore the export market, it must first look into its
financial capabilities and should then expand the operation based on it.

• A hide bound approach must be selected in choosing the export orders

because the wrong selection of orders would be suicidal for the organization.

• The common mode of payment in export leading as evident from the survey
is the Letter of Credit, which is considered to be the safest mode.

• For many prospective entrants, it is recommended that the company must

operate on Letter of Credit accepted by Bank or a Document on payment.

• Document on Acceptance is not advisable for any new entrant due to the lack
of exposure in the export market.

BIBLIOGRAPHY AND WEBLIOGRAPHY

Bibliography
• Khurana P.K, “Export Management”, Prentice Hall of India Pvt. Ltd.,
New Delhi, 2006 .
• Jeevanandam C., “ Foreign Exchange”, Sultan Chand & Sons, New
Delhi, 2010.

Webliography

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1. www.hcl.in
2. www.hclinfosystems.in
3. www.export.gov
4. www.idrc.com
5. www.finance.indiamart.com/export_import
6. www.indiandata.com
7. www.indianindustry.com
8. www.dgft.gov.in
9. www.marketingpractice.blogspot.com
10. www.itcportal.com
11. www.ecgc.com
12. www.eximbankindia.com

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