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Unit-1

Export Procedure:
How To Export
Preliminaries for Starting Export
Registration
Register with Export Promotion Council
Dispatching Samples
Appointing Agents
Specimen Copy of Agreement
Acquire an Export License
Acquire Export Credit nsurance
Arranging Finance
Rates of nterest
Understand Foreign Exchange Rates & Protect Against Their Adverse Movement
Forward Contracts
Procuring/Manufacturing Goods for Export & Their nspection by Government
Authorities
Labeling, Packaging, Packing & Marking Goods
New Excise Procedure
Exporters PegIstratIon for StarIng Export usIness
Dnce all the research and analysIs Is done Its tIme to get regIstered wIth the varIous
government authorItIes.
PegIstratIon wIth Peserve ank of IndIa (PI)
PrIor to 1997, It was necessary for every fIrst tIme exporter to obtaIn EC number
from Feserve 8ank of ndIa (F8) before engagIng In any kInd of export operatIons. 8ut
now thIs job Is beIng done by 0CFT.
PegIstratIon wIth 0Irector CeneraI of ForeIgn Trade (0CFT)
For every fIrst tIme exporter, It Is necessary to get regIstered wIth the 0CFT
(0Irector Ceneral of ForeIgn Trade), |InIstry of Commerce, Covernment of
ndIa.
0CFT provIde exporter a unIque EC Number. EC Number Is a ten dIgIts code
requIred for the purpose of export as well as Import. No exporter Is allowed to
export hIs good abroad wIthout EC number.
However, If the goods are exported to Nepal, or to |yanmar through ndo
|yanmar boarder or to ChIna through CunjI, Namgaya, ShIpkIla or Nathula ports
then It Is not necessary to obtaIn EC number provIded the CF value of a sIngle
consIgnment does not exceed ndIan amount of Fs. 25, 000 /.
ApplIcatIon for EC number can be submItted to the nearest regIonal authorIty of
0CFT.

PegIstratIon wIth Export PromotIon CouncII
FegIstered under the ndIan Company Act, Export PromotIon CouncIls or EPC Is a
nonprofIt organIsatIon for the promotIon of varIous goods exported from ndIa In
InternatIonal market. EPC works In close assocIatIon wIth the |InIstry of
Commerce and ndustry, Covernment of ndIa and act as a platform for InteractIon
between the exportIng communIty and the government.
So, It becomes Important for an exporter to obtaIn a regIstratIon cum membershIp
certIfIcate (FC|C) from the EPC. An applIcatIon for regIstratIon should be
accompanIed by a self certIfIed copy of the EC number. |embershIp fee should be
paId In the form of cheque or draft after ascertaInIng the amount from the
concerned EPC.
The FC|C certIfIcate Is valId from 1st AprIl of the lIcensIng year In whIch It was
Issued and shall be valId for fIve years endIng J1st |arch of
the lIcensIng year, unless otherwIse specIfIed.
PegIstratIon wIth CommodIty oards
CommodIty 8oard Is regIstered agency desIgnated by the |InIstry of Commerce,
Covernment of ndIa for purposes of exportpromotIon and has offIces In ndIa and
abroad. At present, there are fIve statutory CommodIty 8oards under the
0epartment of Commerce. These 8oards are responsIble for productIon,
development and export of tea, coffee, rubber, spIces and tobacco.


PegIstratIon wIth Income Tax AuthorItIes
Coods exported out of the country are elIgIble for exemptIon from both 7alue
Added Tax and Central Sales Tax. So, to get the benefIt of tax exemptIon It Is
Important for an exporter to get regIstered wIth the Tax AuthorItIes.
Federation of Indian Export Urganizations {FIEU]
The Federation oI Indian Export Organizations represents the Indian entrepreneurs` spirit oI
enterprise in the global market. Known popularly as "FIEO", this apex body oI Indian export
promotion organizations was set up jointly by the Ministry oI Commerce, Government oI
India and private trade and industry in the year 1965. FIEO is thus a partner oI the
Government oI India in promoting India`s exports.
f the application for registration is granted, the EPC or FEO shall issue the
RCMC indicating the status of the applicant as merchant exporter or manufacturer
exporter. The RCMC shall be valid for five years ending 31st March of the licensing
year. The certificate shall be deemed to be valid from 1st April of the licensing year in
which it was issued.
1he exc|se duty ls Lhe Lax levled by Lhe governmenL on Lhe lLems produced wlLhln Lhe
counLry 1he manufacLurer of good ls llable Lo pay Lhe Laxes Lo Lhe governmenL when movlng
Lhe flnlshed producLs ouL from Lhe producLlon house lL ls also called as producLlon or
manufacLurlng Lax
ewExciseProcedure
All excisable goods exported out of ndia are exempt from payment of Central Excise
Duties, for which two different procedures have been approved
Rebate of Duty on Goods Export Procedure
Under the first procedure, known as 'Rebate of duty on Goods Export. The
manufacturer has first to pay the excise duty on goods meant for export and then claim
refund of the same after exportation of such goods to countries except Nepal and
Bhutan. This is done under Rule 12 of Central Excise Rules.
Procedure for exports under CentraI Excise SeaI
here the exporter desires the sealing of the goods by the Central Excise Officers so
that the export goods may not be examined by the Customs Officers at the Port/Airport
of shipment, he should present an AR4 application in sixtuplicate to the Superintendent
of Central Excise having jurisdiction over the factory/warehouse at least 24 hours before
the intended removal of the export goods from the factory/warehouse.
What Is Sales Tax?
ales Lax ls a Lax levled upon Lhe end cusLomer le consumer of Lhe producL usually Lhe M8 of a
producL consLlLuLes of Lwo parLs one ls Lhe prlce of Lhe producL and secondly Lax on Lhe producL
11erence Between Excse :ty & Sales Tax
% xclse duLy ls on producLlon of goods whereas sales Lax ls on sale of goods
% xclse duLy ls pald by Lhe manufacLurer whereas sales Lax ls born by Lhe end consumer
% xclse uuLy ls payable on removal of goods from facLory or godown whereas ales Lax ls payable
afLer Lhe sale Lakes place
% xclse duLy ls levled on accesslble value whereas ales Lax ls charged on sale prlce

Registration With SaIes Tax Authorities:
Goods which are to be shipped out of the country for export are eligible for exemption
from both Sales Tax and Central Sales Tax. For this purpose, you should get yourself
registered with the Sales Tax Authority of your state after following the procedure
prescribed under the Sales Tax Act applicable to your State.
Goods exported from ndia are exempt from central and state sales tax. However, for
getting exemption of such taxes or claming their refund, wherever permissible under
Foreign Trade Policy, the exporting unit should be registered with sales tax authorities.


DETAILS OF EXPORT PROMOTIO SCHEMES
Details of schemes in operation are:
Duty Exemption and Remission Schemes
Advance Licence Scheme to allow duty free import of inputs, which are
physically incorporated in the export product (making normal allowance for
wastage) with a specific export obligation in terms of value and quantity.
Export Promotion CapitaI Goods (EPCG) Scheme to allow import of capital
goods for pre-production, production and post-production (including CKD/SKD
thereof as well as computer software systems) at 5% customs duty subject to an
export obligation equivalent to 8 times of duty saved on capital goods imported
under the Scheme to be fulfilled over a period 8 years reckoned from the date of
issuance of licence. Relaxation in export obligation has been allowed for specific
categories such as Units pertaining to agro, SS, BFR etc.
Duty Free RepIenishment Certificate (DFRC) is issued for import of inputs
used in the manufacture of goods without payment of basic customs duty after
completion of exports.
Duty EntitIement Passbook (DEPB) Scheme to neutralise the incidence of
customs duty on the import content of the export product and the exporter is
entitled for a duty credit as a specified percentage of FOB value of exports, made
in freely convertible currency.
Schemes related to Gems & Jewellery sector such as Replenishment Licence,
Advance Licence, Diamond mprest Licence etc.
Deemed Export Duty Drawback and TerminaI Excise Duty Refund Scheme
for those transactions in which the goods supplied to specific categories of
beneficiary, do not leave the country and the payment for such supplies is
received either in ndian Rupees or in Free Foreign Exchange.
SpeciaI Economic Zone is a specificaIIy deIinked duty free encIave and are
deemed to be foreign territory for the purposes of Trade Operations and duties
and tariffs wherein these units can import/procure from the DTA all types of
goods and services without payment of duty.
Export Oriented Unit (EOU) Scheme, EIectronics Hardware TechnoIogy
Park (EHTP) Scheme, Software TechnoIogy Park Scheme or Bio-
TechnoIogy Park Scheme to operate under duty-free regime for
import/procurement of all types of goods including capital goods without payment
of duty for manufacture of goods for export.
Free Trade and Warehousing Zone (FTWZ) Scheme to create trade related
infrastructure to facilitate the import and export of goods and services with
freedom to carry out trade transaction in free currency.
Served from India Scheme to allow duty free import of capital goods including
spares, office equipment and professional equipment, office furniture and
consumables related to the main line of business against exports of services.
Target PIus Scheme for the status certificate holder to allow duty free credit
based on incremental exports to import any inputs, capital goods including
spares, office equipment, professional equipment and office furniture.
Vishesh Krishi Upaj Yojana Scheme to allow duty free import of inputs or
goods including capital goods (as notified) against export of certain agricultural
and their value added products.
Assistance to States for Infrastructure DeveIopment of Exports to
encourage the state government to participate in promoting exports from their
respective states for developing infrastructure etc.
The Market Access Initiative (MAI) Scheme to provide financial assistance for
a whole range of activities as a Medium Term Export Promotion efforts with a
sharp focus on a country and product.
The Marketing DeveIopment Assistance (MDA) Scheme to provide financial
assistance for a range of export promotion activities such as participation in trade
fairs and buyer seller needs abroad or in ndia, export promotion seminars etc
Other schemes to promote activities such as Brand Promotion and Quality
mprovement etc.
The Government of ndia has framed several schemes to promote exports and to obtain
foreign exchange. These schemes grants incentive and other benefits. The few
important export incentives, from the point of view of indirect taxes are briefed below:

Free Trade Zones (FTZ)
Several FTZs have been established at various places in ndia like Kandla, Noida,
Cochin, etc. No excise duties are payable on goods manufactured in these zones
provided they are made for export purpose. Goods being brought in these zones from
different parts of the country are brought without the payment of any excise duty.
Moreover, no customs duties are payable on imported raw material and components
used in the manufacture of such goods being exported. f entire production is not sold
outside the country, the unit has the provision of selling 25% of their production in ndia.
On such sale, the excise duty is payable at 50% of basic plus additional customs or
normal excise duty payable if the goods were produced elsewhere in ndia, whichever is
higher.
EIectronic Hardware TechnoIogy Park / Software TechnoIogy Parks
This scheme is just like FTZ scheme, but it is restricted to units in the electronics and
computer hardware and software sector.

Advance Licence / Duty Exemption EntitIement Scheme (DEEC)
n this scheme advance licence, either quantity based (Qbal) or value based (Vabal), is
given to an exporter against which the raw materials and other components may be
imported without payment of customs duty provided the manufactured goods are
exported. These licences are transferable in the open market at a price.

Export Promotion CapitaI Goods Scheme (EPCG)
According to this scheme, a domestic manufacturer can import machinery and plant
without paying customs duty or settling at a concessional rate of customs duty. But his
undertakings should be as mentioned below:
Customs Duty Rate Export ObIigation Time
10% 4 times exports (on FOB basis) of
CF value of machinery.
5 years
Nil in case CF value is Rs200mn or
more.
6 times exports (on FOB basis) of
CF value of machinery or 5 times
exports on (NFE) basis of CF
value of machinery.
8 years
Nil in case CF value is Rs50mn or
more for agriculture, aquaculture,
animal husbandry, floriculture,
horticulture, poultry and sericulture.
6 times exports (on FOB basis) of
CF value of machinery or 5 times
exports on (NFE) basis of CF
value of machinery.
8 years
ote:-
NFE stands for net foreign earnings.
CF stands for cost plus insurance plus freight cost of the machinery.
FOB stands for Free on Board i.e. export value excluding cost of freight and insurance.
Deemed Exports
The ndian suppliers are entitled for the following benefits in respect of deemed exports:
Refund of excise duty paid on final products
Duty drawback
mports under DEEC scheme
Special import licenses based on value of deemed exports
The following categories are treated as deemed exports for seller if the goods are
manufactured in ndia:
Supply of goods against duty free licences under DEEC scheme
Supply of goods to a 100 % EOU or a unit in a free trade zone or a unit in a software
technology park or a unit in a hardware technology park
Supply of goods to holders of licence under the EPCG scheme
Supply of goods to projects financed by multilateral or bilateral agencies or funds
notified by the Finance Ministry under international competitive bidding or under limited
tender systems in accordance with the procedures of those agencies or funds where
legal agreements provide for tender evaluation without including customs duty
Supply of capital goods and spares upto 10% of the FOR value to fertilizer plants under
international competitive bidding
Supply of goods to any project or purpose in respect of which the Ministry of Finance
permits by notification the import of goods at zero customs duty along with benefits of
deemed exports to domestic supplies
Supply of goods to power, oil and gas sectors in respect of which the Ministry of
Finance permits by notification benefits of deemed exports to domestic supplies
Manufacture under Bond
This scheme furnishes a bond with the manufacturer of adequate amount to undertake
the export of his production. Against this the manufacturer is allowed to import goods
without paying any customs duty, even if he obtain it from the domestic market without
excise duty. The production is made under the supervision of customs or excise
authority.

Duty Drawback
t means the rebate of duty chargeable on imported material or excisable material used
in the manufacturing of goods in and is exported. The exporter may claim drawback or
refund of excise and customs duties being paid by his suppliers. The final exporter can
claim the drawback on material used for the manufacture of export products. n case of
re-import of goods the drawback can be claimed.

The following are Drawbacks:
Customs paid on imported inputs plus excise duty paid on indigenous imports.
Duty paid on packing material.
Drawback is not allowed on inputs obtained without payment of customs or excise duty.
n part payment of customs and excise duty, rebate or refund can be claimed only on
the paid part.

n case of re-export of goods, it should be done within 2 years from the date of payment
of duty when they were imported. 98% of the duty is allowable as drawback, only after
inspection. f the goods imported are used before its re-export, the drawback will be
allowed as at reduced per cent.
Export Incent;es

The Government of India provides various incentives &
facilities to the exporter. These export incentives and
facilities are as follow.
* Duty Drawback (DBK)
* Duty Entitlement Passbook Scheme (DEPB)
* Focus Market Scheme (FMS)
* Focus Product Scheme (FPS).
* Duty Exemption Scheme
* Vishesh Krishi and Gram Udyog Yojna (VKGUY)
* Marketing Development Assistance (MDA)
* Export Promotion Capital Goods Scheme
* Served from India Scheme
* Exchange earner Foreign Currency Account (EEFC
A/C)
etter oI Credit(c) Introduction
etter oI Credit c also known as Documentary Credit is a widely
used term to make payment secure in domestic and international
trade.
The document is issued by a Iinancial organization at the buyer
request. Buyer also provide the necessary instructions in preparing
the document.
The International Chamber oI Commerce (ICC) in the UniIorm
Custom and Practice Ior Documentary Credit (UCPDC) deIines C
as:"An arrangement, however named or described, whereby a bank
(the Issuing bank) acting at the request and on the instructions oI a
customer (the Applicant) or on its own behalI :1. Is to make a
payment to or to the order third party ( the beneIiciary ) or is to
accept bills oI exchange (draIts) drawn by the beneIiciary
.2. Authorized another bank to eIIect such payments or to accept and
pay such bills oI exchange (draIt).
3. Authorized another bank to negotiate against stipulated documents
provided that the terms are complied with .A key principle
underlying letter oI credit (C) is that banks deal only in documents
and not in goods.
The decision to pay under a letter oI credit will be based entirely on
whether the documents presented to the bank appear on their Iace to
be in accordance with the terms and conditions oI the letter oI credit.
Parties to etters oI Credit

Applicant (Opener):
Applicant which is also reIerred to as account party is normally a
buyer or customer oI the goods, who has to make payment to
beneIiciary. C is initiated and issued at his request and on the basis
oI his instructions.

Issuing Bank (Opening Bank) :
The issuing bank is the one which create a letter oI credit and takes
the responsibility to make the payments on receipt oI the documents
Irom the beneIiciary or through their banker. The payments has to be
made to the beneIiciary within seven working days Irom the date oI
receipt oI documents at their end, provide the documents are in
accordance with the terms and conditions oI the letter oI credit. II the
documents are discrepant one, the rejection thereoI to be
communicated within sevenworking days Irom the date oI oI receipt
oI documents at their end.
BeneIiciary :
BeneIiciary is normally stands Ior a seller oI the goods, who has to
receivepayment Irom the applicant. A credit is issued in his Iavour to
enable him or his agent toobtain payment on surrender oI stipulated
document and comply with the term andconditions oI the c.
II c is a transIerable one and he transIers the credit to another
party, then he is reIerredto as the Iirst or original beneIiciary.

Advising Bank :
An Advising Bank provides advice to the beneIiciary and takes
theresponsibility Ior sending the documents to the issuing bank and
is normally located inthe country oI the beneIiciary.

ConIirming Bank :
ConIirming bank adds its guarantee to the credit opened by
another bank, thereby undertaking the responsibility oI
paymentnegotiation acceptance under thecredit, in additional to that
oI the issuing bank. ConIirming bank play an important rolewhere
the exporter is not satisIied with the undertaking oI only the issuing
bank.

Negotiating Bank:
The Negotiating Bank is the bank who negotiates the
documentssubmitted to them by the beneIiciary under the credit
either advised through them or restricted to them Ior negotiation. On
negotiation oI the documents they will claim thereimbursement
under the credit and makes the payment to the beneIiciary provided
thedocuments submitted are in accordance with the terms and
conditions oI the letters oI credit.

Reimbursing Bank :
Reimbursing Bank is the bank authorized to honor thereimbursement
claim in settlement oI negotiationacceptancepayment lodged with it
bythe negotiating bank. It is normally the bank with which issuing
bank has an accountIrom which payment has to be made.

Second BeneIiciary :
Second BeneIiciary is the person who represent the Iirst or
originalBeneIiciary oI credit in his absence. In this case, the credits
belonging to the originalbeneIiciary is transIerable. The rights oI the
transIeree are subject to terms oI transIer.
Types oI etter oI Credit
1. Revocable etter oI Credit c
A revocable letter oI credit may be revoked or modiIied Ior any
reason, at any time by theissuing bank without notiIication. It is
rarely used in international trade and not consideredsatisIactory Ior
the exporters but has an advantage over that oI the importers and the
issuingbank.There is no provision Ior conIirming revocable credits as
per terms oI UCPDC, Hence theycannot be conIirmed. It should be
indicated in C that the credit is revocable. iI there is no
suchindication the credit will be deemed as irrevocable.
2. Irrevocable etter oI Creditc
In this case it is not possible to revoked or amended a credit without
the agreement oI the issuingbank, the conIirming bank, and the
beneIiciary. Form an exporters point oI view it is believed tobe more
beneIicial. An irrevocable letter oI credit Irom the issuing bank
insures the beneIiciarythat iI the required documents are presented
and the terms and conditions are complied with,payment will be
made.
ConIirmed etter oI Credit c
ConIirmed etter oI Credit is a special type oI c in which another
bank apart Irom the issuingbank has added its guarantee. Although,
the cost oI conIirming by two banks makes it costlier,this type oI c
is more beneIicial Ior the beneIiciary as it doubles the guarantee.
4. Sight Credit and Usance Credit c
Sight credit states that the payments would be made by the issuing
bank at sight, on demand or on presentation. In case oI usance credit,
draIt are drawn on the issuing bank or thecorrespondent bank at
speciIied usance period. The credit will indicate whether the usance
draItare to be drawn on the issuing bank or in the case oI conIirmed
credit on the conIirming bank.
5. Back to Back etter oI Credit c
Back to Back etter oI Credit is also termed as Countervailing
Credit. A credit is known asbacktoback credit when a c is opened
with security oI another c.A backtoback credit which can also be
reIerred as credit and countercredit is actually a methodoI Iinancing
both sides oI a transaction in which a middleman buys goods Irom
one customer andsells them to another.The parties to a BacktoBack
etter oI Credit are:1. The buyer and his bank as the issuer oI the
original etter oI Credit.2. The sellermanuIacturer and his bank,3.
The manuIacturer's subcontractor and his bank.The practical use oI
this Credit is seen when c is opened by the ultimate buyer in Iavour
oI aparticular beneIiciary, who may not be the actual supplier
manuIacturer oIIering the main creditwith near identical terms in
Iavour as security and will be able to obtain reimbursement
bypresenting the documents received under back to back credit under
the main c.The need Ior such credits arise mainly when :1. The
ultimate buyer not ready Ior a transIerable credit2. The BeneIiciary
do not want to disclose the source oI supply to the openers.3. The
manuIacturer demands on payment against documents Ior goods but
the beneIiciaryoI credit is short oI the Iunds
6. TransIerable etter oI Credit c
A transIerable documentary credit is a type oI credit under which the
Iirst beneIiciary which isusually a middleman may request the
nominated bank to transIer credit in whole or in part to thesecond
beneIiciary.The c does state clearly mentions the margins oI the
Iirst beneIiciary and unless it is speciIiedthe c cannot be treated as
transIerable. It can only be used when the company is selling the
product oI a third party and the proper care has to be taken about the
exit policy Ior the moneytransactions that take place.This type oI c
is used in the companies that act as a middle man during the
transaction butdon`t have large limit. In the transIerable c there is a
right to substitute the invoice and thewhole value can be transIerred
to a second beneIiciary.The Iirst beneIiciary or middleman has rights
to change the Iollowing terms and conditions oI theletter oI credit:1.
Reduce the amount oI the credit.2. Reduce unit price iI it is
stated3. Make shorter the expiry date oI the letter oI credit.4. Make
shorter the last date Ior presentation oI documents.5. Make shorter
the period Ior shipment oI goods.6. Increase the amount oI the cover
or percentage Ior which insurance cover must beeIIected.7.
Substitute the name oI the applicant (the middleman) Ior that oI the
Iirst beneIiciary (thebuyer).
Standby etter oI Credit c
Initially used by the banks in the United States, the standby letter oI
credit is very much similar in nature to a bank guarantee. The main
objective oI issuing such a credit is to secure bank loans. Standby
credits are usually issued by the applicant`s bank in the applicant`s
country andadvised to the beneIiciary by a bank in the beneIiciary`s
country.Unlike a traditional letter oI credit where the beneIiciary
obtains payment against documentsevidencing perIormance, the
standby letter oI credit allow a beneIiciary to obtains payment Iroma
bank even when the applicant Ior the credit has Iailed to perIorm as
per bond.A standby letter oI credit is subject to "UniIorm Customs
and Practice Ior Documentary Credit"(UCP), International Chamber
oI Commerce Publication No 500, 1993 Revision, or "International
Standby Practices" (ISP), International Chamber oI Commerce
Publication No590, 1998.

Import Operations Under c
The Import etter oI Credit guarantees an exporter payment Ior goods or services, provided
theterms oI the letter oI credit have been met.A bank issue an import letter oI credit on the behalI
oI an importer or buyer under the IollowingCircumstances:

When a importer is importing goods within its own country.

When a trader is buying good Irom his own country and sell it to the another country Ior the
purpose oI merchandizing trade.
When an Indian exporter who is executing a contract outside his own country requiresimporting
goods Irom a third country to the country where he is executing the contract.The Iirst category oI
the most common in the day to day banking
Fees And Reimbursements
The diIIerent chargesIees payable under import c is brieIly as Iollows1. The issuing bank
charges the applicant Iees Ior opening the letter oI credit. The Iee chargeddepends on the credit
oI the applicant, and primarily comprises oI :
(a) Opening Charges
This would comprise commitment charges and usance charged to becharged upIront Ior the
period oI the c.The Iee charged by the c opening bank during the commitment period is
reIerred to ascommitment Iees. Commitment period is the period Irom the opening oI the letter
oI credit untilthe last date oI negotiation oI documents under the c or the expiry oI the c,
whichever islater.Usance is the credit period agreed between the buyer and the seller under the
letter oI credit. Thismay vary Irom 7 days usance (sight) to 90180 days. The Iee charged by
bank Ior the usanceperiod is reIerred to as usance charges
(b)Retirement Charges
1. This would be payable at the time oI retirement oI Cs. C opening bank scrutinizes the
billsunder the Cs according to UCPDC guidelines , and levies charges based on value oI goods.
2. The advising bank charges an advising Iee to the beneIiciary unless stated otherwise The
Ieescould vary depending on the country oI the beneIiciary. The advising bank charges may
beeventually borne by the issuing bank or reimbursed Irom the applicant.
3. The applicant is bounded and liable to indemniIy banks against all obligations
andresponsibilities imposed by Ioreign laws and usage.
4. The conIirming bank's Iee depends on the credit oI the issuing bank and would be borne by
thebeneIiciary or the issuing bank (applicant eventually) depending on the terms oI contract.
5. The reimbursing bank charges are to the account oI the issuing bank.
Risk Associated with Opening Imports cs
The basic risk associated with an issuing bank while opening an iThe Iinancial standing oI the importer
As the bank is responsible to pay the money on the behalI oI the importer, thereby thebank
should make sure that it has the proper Iunds to pay.2.
The goods
Bankers need to do a detail analysis against the risks associated with perishability oI thegoods,
possible obsolescence, import regulations packing and storage, etc. Price risk isthe another
crucial Iactor associated with all modes oI international trade.3.
Exporter Risk
There is always the risk oI exporting inIerior quality goods. Banks need to be protectiveby
Iinding out as much possible about the exporter using status report and other conIidential
inIormation.4.
Country Risk
These types oI risks are mainly associated with the political and economic scenario oI acountry.
To solve this issue, most banks have specialized unit which control the level oI exposure that that
the bank will assumes Ior each country.5.
Foreign exchange risk
Foreign exchange risk is another most sensitive risk associated with the banks. As thetransaction
is done in Ioreign currency, the traders depend a lot on exchange rateIluctuations.
Regulatory Requirements
Opening oI imports Cs in India involve compliance oI the Iollowing main regulation:
Trade Control Requirements
The movement oI good in India is guided by a predeIined se oI rules and regulation. So,
thebanker needs to assure that make certain is whether the goods concerned can be
physicallybrought in to India or not as per the current EXIM policy.
Exchange Control Requirements
The main objective oI a bank to open an Import C is to eIIect settlement oI payment due by
theIndian importer to the overseas supplier, so opening oI C automatically comes under
thepolicies oI exchange control regulations.






Export Operations Under c
Export etter oI Credit is issued in Ior a trader Ior his native country Ior the purchase oI
goodsand services. Such letters oI credit may be received Ior Iollowing purpose:
1. For physical export oI goods and services Irom India to a Foreign Country.
2. For execution oI projects outside India by Indian exporters by supply oI goods and services
Irom Indian or partly Irom India and partly Irom outside India.
3. Towards deemed exports where there is no physical movements oI goods Irom outside India
But the supplies are being made to a project Iinanced in Ioreign exchange by multilateral
agencies, organization or project being executed in India with the aid oI external agencies.
4. For sale oI goods by Indian exporters with total procurement and supply Irom outside India.
In all the above cases there would be earning oI Foreign Exchange or conservation oI Foreign
Exchange Banks in India associated themselves with the export letters oI credit in various
capacities such as advising bank, conIirming bank, transIerring bank and reimbursing bank.
In every cases the bank will be rendering services not only to the Issuing Bank as its agent
correspondent bank but also to the exporter in advising and Iinancing his export activity.

1.Advising an Export c

The basic responsibility oI an advising bank is to advise the credit received Irom itsoverseas
branch aIter checking the apparent genuineness oI the credit recognized by theissuing baIt is also
necessary Ior the advising bank to go through the letter oI credit, try tounderstand the underlying
transaction, terms and conditions oI the credit and advice thebeneIiciary in the matter.The main
Ieatures oI advising export Cs are:1. There are no credit risks as the bank receives a onetime
commission Ior the advisingservice.2. There are no capital adequacy needs Ior the advising
Iunction.
2.Advising oI Amendments to Cs
Amendment oI Cs is done Ior various reasons and it is necessary to Iallow all thenecessary the
procedures outlined Ior advising. In the process oI advising theamendments the Issuing bank
serializes the amendment number and also ensures that noprevious amendment is missing Irom
the list. Only on receipt oI satisIactory inIormationclariIication the amendment may be advised.

3.ConIirmation oI Export etters oI Credit
It constitutes a deIinite undertaking oI the conIirming bank, in addition to that oI theissuing
bank, which undertakes the sight payment, deIerred payment, acceptance or negotiation.Banks in
India have the Iacility oI covering the credit conIirmation risks with ECGCunder their 'TransIer
Guarantee scheme and include both the commercial and politicalrisk involved.

4.DiscountingNegotiation oI Export Cs
When the exporter requires Iunds beIore due date then he can discount or negotiate theCs with
the negotiating bank. Once the issuing bank nominates the negotiating bank, itcan take the credit
risk on the issuing bank or conIirming bank.However, in such a situation, the negotiating bank
bears the risk associated with thedocument that sometimes arises when the issuing bank discover
discrepancies in thedocuments and reIuses to honor its commitment on the due date.

5.Reimbursement oI Export Cs
Sometimes reimbursing bank, on the recommendation oI issuing bank allows thenegotiating
bank to collect the money Irom the reimbursing bank once the goods havebeen shipped. It is
quite similar to a cheque Iacility provided by a bank.In return, the reimbursement bank earns a
commission per transaction and enjoys Iloatincome without getting involve in the checking the
transaction documents.reimbursement bank play an important role in payment on the due date (
Ior usance Cs)or the days on which the negotiating bank demands the same (Ior sight Cs)
Export negotiation
Definition
Export negotiation is a service offering by which the exporter's corresponding bank receives and authenticates the full
set of export documents submitted by the exporter, before paying for the bills and documents.
!resentaton o1 export doc:2ents 1or negotaton/
!:rchase:
AIter shipment, exporter submits the Iollowing documents Ior negotiation.
Bll o1 Exchange
Bll o1 Ladng
Ins:rance !olcy/ Cert1cate
Cert1cate o1 Orgn
Inspecton Cert1cate
Cons:lar In;oce
!ackng Lst
Export doc:2ents 1or negotaton
The settlement oI local bills is done in the Iollowing ways:
The customer submits the L/C to N.B. along with the documents to negotiate

N.B. oIIicial scrutinizes the documents to ensure the conIormity with the terms and conditions.

The documents are then Iorwarded to the L/C opening bank. The L/C issuing bank gives the
acceptance and Iorwards an acceptance letter.

Payment is given to the customer on either by collection basis or by purchasing the documents.
Export coIIection
Definition
Export collection is a service offering whereby the exporter's bank is instructed by the exporter to notify the branch of
the exporter's local bank, accounting bank and agency bank for payment collection from the importer.
A collection is a traditional Iorm oI payment used in Ioreign trade in which the seller Iorwards
commercial documents through its bank to the buyer's bank Ior collection.
The buyer's bank will only release the documents over to the buyer against payment or
acceptance oI a bill oI exchange.
Banks monitor the release oI documents and payment in accordance with international rules on
collections, but do not commit themselves to payment.
A collection is a suitable Iorm oI payment in situations in which the buyer's solvency is not
inquestion but the seller requires additional security Ior payment.
On the other hand, the buyer wishes to ensure that it will not pay the invoice beIore being
presented with documents proving that the goods have been shipped.
n exporL collecLlon ls a form of paymenL ln forelgn Lrade ln whlch Lhe exporLer afLer shlpmenL of Lhe
goods sends Lhe commerclal documenLs Lo lLs bank and requesLs Lhe bank Lo collecL paymenL from Lhe
buyer Lhrough a forelgn bank

% 1he securlLy of a collecLlon lLem ls based on Lhe facL LhaL Lhe buyer cannoL geL Lhe goods wlLhouL
collecLlng a blll of ladlng enLlLllng Lo Lhe goods from Lhe bank
% collecLlon lLem ls a sulLable form of paymenL for exporLs shlpped by sea
% xporL collecLlon lLems are mosL common ln Lradlng wlLh MedlLerranean counLrles
% ulrecL collecLlon ls a form of exporL collecLlon ln whlch Lhe exporLer sends Lhe documenLs dlrecL Lo Lhe
collecLlng bank wlLh ampo 8anks reference number CLherwlse Lhe collecLlon ls handled normally
!re-shp2ent doc:2entaton
Bll o1 Exchange
Bll o1 Ladng
Ins:rance !olcy/ Cert1cate
Cert1cate o1 Orgn
Inspecton Cert1cate
Cons:lar In;oce
!ackng Lst
Inland Container Depot (ICD):
The present trend in the international trade is containerization oI cargo.
The Iull beneIits oI containerization can be derived only when the containers are, permitted to be
moved to points in close proximity to important industrial station so that the importers can get
clearance oI the imported goods at the nearest point to their Iactorypremise.
The Iacility is helpIul to the exporters as they can export the goods Irom the nearest point oI their
Iactorypremise.
To start with, the Government oI India issued a notiIication under Section 7 oI the Customs Act
1962 appointing a suitable place as inland container Depot Ior the unloading oI the import goods
and the loading oI export goods or any class oI such goods.
"Container Freight Station"(CFS)
For the purpose oI examination, assessment oI the containerized cargo, both import and export
container Ireight Station (CFS) are set up .
They are appointed as custodians oI the imported goods by the Commissioner oI Customs, under
Section 45 oI the Customs Act, 1962.
The imported goods shall remain in the custody oI such person as approved by the
Commissioner oI Customs until they are cleared Ior home consumption or are warehoused or are
transshipped.
The procedure to clear the imported goods Ior home consumption or warehousing or export
goods is the same as discussed.

Procedure to Export Goods through ICDCFS:
The exporters may take the goods to the ICDCFS and Iile the Shipping Bill and other
documents.
The goods are examined by the Customs OIIicers and they are stuIIed into the containers and
thereaIter the containers are sealed.
Such containers are transported to the Seaports (gate way ports) by the Container Corporation oI
India or any other authorised agency, either by rail or road, when the containers are loaded into
the vessels (ships) Ior delivery oI the same at the speciIied Ioreign port.
In the case oI export through ICD, the exporters are requested to Iile two additional copies oI
Shipping Bills known as "TransIerence Copies" along with other documents as discussed. The
rest oI iI the procedure is the same as in the case oI exports through Customs PortAirport.
Processing of Shipping Bill
In case of export by sea or air, the exporter must submit the 'Shipping Bill',
and in case of export by road he must submit 'Bill of Export' in the
prescribed form containing the prescribed details such as the name of the
exporter, consignee, invoice number, details of packing, description of
goods, quantity, FOB value, etc. Along with the Shipping Bill, other
documents such as copy of packing list, invoices, export contract, letter of
credit, etc. are also to be submitted.

%here are 5 types of shipping bills :-
- Shipping Bill for export of duty free goods. This shipping bill is
white colored.

- Shipping bill for export of goods under claim for duty
drawback. This shipping bill is green colored.

- Shipping bill for export of duty free goods ex-bond i.e. from
bonded warehouse. This shipping bill is pink colored.

- Shipping Bill for export of dutiable goods. This shipping bill is
yellow colored.

- Shipping bill for export under DEPB scheme. This shipping bill is blue in
colour.
W Procedure Ior exporting goods through post?

W Postal articles intended Ior any permissible Ioreign destinations may be booked at
any oI the post oIIice in India with speciIic declaration as to the contest land
value PP Iorm or No objection certiIicate Irom the Reserve Bank oI India is
required to be enclosed to the parcel depending upon the value oI the goods being
exported.
W No PP IormRBINo objection certiIicate is required iI the value does not exceed
Rs.30, 000. All such parcels are routed through the Ioreign post oIIices` located
in major cities like Delhi, Bombay, Calcutta, Madras, Cochin, and Bangalore.
Customs oIIicers are posted in such Ioreign post oIIices`.
W The postal authorities present the parcels meant to Ioreign destinations to the
Customs oIIicers who may examine the parcels and allow clearance iI there is
nothing objectionable.
W ThereaIter, the postal authorities dispatch the parcels to the respective destinations
either by airsea, depending upon how the parcel is booked by the sender.

Export 0ocuments for Post ParceI
n case of Post Parcel, no ShIppIng 8Ill Is requIred. The relevant documents are
mentIoned below:
- Customs 0ecIaratIon Form t Is prescrIbed by the UnIversal Postal UnIon (UPU) and
InternatIonal apex body coordInatIng actIvItIes of natIonal postal admInIstratIon. t Is
known by the code number CP2/ CPJ and to be prepared In quadruplIcate, sIgned by
the sender.
- 0Ispatch Note t Is fIlled by the exporter to specIfy the actIon to be taken by the
postal department at the destInatIon In case the address Is nontraceable or the
parcel Is refused to be accepted.
- CommercIaI InvoIce ssued by the exporter for the full realIzable amount of goods
as per trade term.
- ConsuIar InvoIce |aInly needed for the countrIes lIke Kenya, Uganda, TanzanIa,
|aurItIus, New Zealand, 8urma, raq, AustralIa, FIjI, Cyprus, NIgerIa, Chana,
ZanzIbar etc. t Is prepared In the prescrIbed format and Is sIgned/ certIfIed by the
counsel of the ImportIng country located In the country of export.
- Customs InvoIce |aInly needed for the countrIes lIke USA, Canada, etc. t Is
prepared on a specIal form beIng presented by the Customs authorItIes of the
ImportIng country. t facIlItates entry of goods In the ImportIng country at
preferentIal tarIff rate.
- egaIIzed l VIsaed InvoIce ThIs shows the seller's genuIneness before the
approprIate consulate or chamber or commerce/ embassy.
- CertIfIed InvoIce t Is requIred when the exporter needs to certIfy on the InvoIce
that the goods are of a partIcular orIgIn or manufactured/ packed at a partIcular
place and In accordance wIth specIfIc contract. SIght 0raft and Usance 0raft are
avaIlable for thIs. SIght 0raft Is requIred when the exporter expects ImmedIate
payment and Usance 0raft Is requIred for credIt delIvery.
- PackIng Ist t shows the detaIls of goods contaIned In each parcel / shIpment.
- CertIfIcate of InspectIon t Is a type of document descrIbIng the condItIon of goods
and confIrmIng that they have been Inspected.
- Iack Ist CertIfIcate t Is requIred for countrIes whIch have straIned polItIcal
relatIon. t certIfIes that the shIp or the aIrcraft carryIng the goods has not touched
those country(s).
- anufacturer's CertIfIcate t Is requIred In addItIon to the CertIfIcate of DrIgIn for
few countrIes to show that the goods shIpped have actually been manufactured and
Is avaIlable.
- CertIfIcate of ChemIcaI AnaIysIs t Is requIred to ensure the qualIty and grade of
certaIn Items such as metallIc ores, pIgments, etc.
- CertIfIcate of ShIpment t sIgnIfIes that a certaIn lot of goods have been shIpped.
- eaIthl VeterInaryl SanItary CertIfIcatIon FequIred for export of foodstuffs,
marIne products, hIdes, lIvestock etc.
- CertIfIcate of CondItIonIng t Is Issued by the competent offIce to certIfy
complIance of humIdIty factor, dry weIght, etc.
- AntIquIty easurement t Is Issued by ArchaeologIcal Survey of ndIa In case of
antIques.
- ShIppIng Drder ssued by the ShIppIng (Conference) LIne whIch IntImates the
exporter about the reservatIon of space of shIpment of cargo through the specIfIc
vessel from a specIfIed port and on a specIfIed date.
- Cartl orry TIcket t Is prepared for admIttance of the cargo through the port gate
and Includes the shIpper's name, cart/ lorry No., marks on packages, quantIty, etc.
- Shut Dut AdvIce t Is a statement of packages whIch are shut out by a shIp and Is
prepared by the concerned shed and Is sent to the exporter.
- Short ShIpment Form t Is an applIcatIon to the customs authorItIes at port whIch
advIses short shIpment of goods and requIred for claImIng the return.

Export through Courier
Exports through courier mode have registered a healthy rate of growth in recent years.
For regulating such imports and exports, the Government has framed the Courier mports and Exports
(Clearance) Regulations, 1998.
At present, the facility of courier clearance is available at Customs airports in Mumbai, Delhi, Chennai,
Calcutta, Bangalore, Hyderabad, Ahmedabad, Jaipur, and Land Customs Stations at Petrapole and
Gojadanga.
As in the case of imports, all goods are allowed to be exported though courier except for certain
excluded categories.
The goods not allowed to be exported through courier mode are those which attract any duty on exports
or those exported under export promotion schemes, such as Drawback, DEPB, DEEC, EPCG etc.
Other exclusions include goods where the value of the consignment is above Rs.25,000/- and transaction
in foreign exchange is involved.
The limit of Rs.25,000/- does not apply where the G.R. waiver or specific permission has been obtained
from the Reserve Bank of ndia.
Exports through courier mode is allowed to only to those courier companies which are registered by the
Customs. These courier companies are called "Authorized Couriers".
The courier parcels are normally carried by passenger/cargo aircrafts. n the case of clearance through
Land Customs Stations, other mode of transport is used.
ProceduraI FormaIities for CIearance of Export Goods:
n case of export goods, the Authorised Courier files Courier Shipping Bills with the proper officer of
Customs at the airport or Land Customs Station before departure of flight or other mode of transport, as
the case may be.
Different Forms have been prescribed for export of documents and other goods. The Authorised Courier
is required to present the export goods to the proper officer for inspection, examination and assessment.
However, for certain categories of export goods, a regular Shipping Bill prescribed in the Shipping Bill
and Bill of Export (Form) Regulations 1991 is required to be filed.
Such Shipping Bills are processed at the Air Cargo Complex or the EOUs or EPZs or STP or EHTP and
thereafter with the permission of Customs, the goods are handed over to a courier agency for onward
dispatch.
The goods to which the above procedure applies are those (a) originating from EOUs, units in
FTZs/STPs/EHTP; (b) proposed to be exported under DEPB, DEEC, EPCG and Drawback Schemes and
(c) which require a licence for export under the Foreign Trade (Development and Regulation) Act, 1992.
Registration of Authorised Courier:
A person desirous of operating as an Authorised Courier is required to get himself registered with the
jurisdictional Commissioner of Customs.
The registration is valid for 3 years and it can be renewed for another 3 years if performance of courier is
satisfactory.
An Authorised Courier is allowed to have registration at more than one airport or Land Customs Station.
xport by sea or Air
henever a new Airline, Shipping Line, Steamer Agent, port or airport
comes into operation, they are required to be registered into the
Customs System.
Processing of Shipping Bill
In case of export by sea or air, the exporter must submit the 'Shipping Bill',
and in case of export by road he must submit 'Bill of Export' in the
prescribed form containing the prescribed details such as the name of the
exporter, consignee, invoice number, details of packing, description of
goods, quantity, FOB value, etc. Along with the Shipping Bill, other
documents such as copy of packing list, invoices, export contract, letter of
credit, etc. are also to be submitted.

%here are 5 types of shipping bills :-
- Shipping Bill for export of duty free goods. This shipping bill is
white colored.

- Shipping bill for export of goods under claim for duty
drawback. This shipping bill is green colored.

- Shipping bill for export of duty free goods ex-bond i.e. from
bonded warehouse. This shipping bill is pink colored.

- Shipping Bill for export of dutiable goods. This shipping bill is
yellow colored.

- Shipping bill for export under DEPB scheme. This shipping bill is blue in
colour.
%he Bills of xport are:-
- Bill of export for goods under claim for duty drawback

- Bill of export for dutiable goods

- Bill of export for duty free goods

- Bill of export for duty free goods ex-bond





Unt-2
Export Credt:
Loan, finance, or guarantee provided by a government or a financial institution enabling
companies to export goods and services in situations where payment for them may be
delayed or subject to risk.
As per UCPDC 500, 1993 revision there are Iour types oI credit. These are as Iollows:
Sght !ay2ent Credt: In a Sight Payment Credit, the bank pays the stipulated sum
immediately against the exporter`s presentation oI the documents.
e1erred !ay2ent Credt: In deIerred payment, the bank agrees to pay on a speciIied Iuture
date or event, aIter presentation oI the export doc:2ents. No bill oI Exchange is involved.
Payment is given to the party at the rate oI D.A 60-90-120-180 as the case may be. But the Head
OIIice is paid at T.T clean rate. The diIIerence between the two rates is the exchange tradng Ior
the branch.
Acceptance Credt: In acceptance credit, the exporter presents a bill oI exchange payable to
him and drawn at the agreed tenor (that is, on a speciIied Iuture date oI event) on the bank that is
to except it. The bank signs its acceptance on the bill and returns it to the exporter. The exporter
can then represent it Ior payment on maturity. Alternatively he can discount it in order to obtain
immediate payment.
Negotaton Credt: In Negotaton Credit, the exporter has to present a bill oI exchange
payable to him in addition to other documents that the bank negotates.
etbods of payment in export
There are several basic methods of receiving payment for products sold abroad. As with
domestic sales, a major factor that determines the method of payment is the amount of
trust in the buyer's ability and willingness to pay. The basic methods of payment are:
% cash in advance,
% letter of credit,
% documentary collection or draft,
% open account, and
% other payment mechanisms, such as consignment sales
3 standard ways oI payment methods in the export import trade international trademarket:1.
Cl e a n Pa yme nt 2. Collect ion oI Bills3. etters oI Credit c
3 standard ways oI payment methods in the export import trade international trademarket:1.
Cl e a n Pa yme nt 2. Collect ion oI Bills3. etters oI Credit c

Export Pre Shipment
Pre Shipment Finance is issued by a Iinancial institution when the seller want the payment oI
thegoods beIore shipment. The main objectives behind preshipment Iinance or pre export Iinance
isto enable exporter to:

Procure raw materials.

Carry out manuIacturing process.

Provide a secure warehouse Ior goods and raw materials.

Process and pack the goods.

Ship the goods to the buyers.

Meet other Iinancial cost oI the business.
Types oI Pre Shipment Finance

Packing Credit

Advance against ChequesDraIt etc. representing Advance Payments.Preshipment Iinance is
extended in the Iollowing Iorms :

Packing Credit in Indian Rupee

Packing Credit in Foreign Currency (PCFC)
Requirment Ior Getting Packing Credit
This Iacility is provided to an exporter who satisIies the Iollowing criteria

A ten digit importerexporter code number allotted by DGFT.

Exporter should not be in the caution list oI RBI.

W Formal application Ior release the packing credit with undertaking to the
eIIect that theexporter would be ship the goods within stipulated due date
and submit the relevantshipping documents to the banks within prescribed
time limit
W .2. Firm order or irrevocable C or original cable Iax telex message
exchange betweenthe exporter and the buyer.
W 3. icence issued by DGFT iI the goods to be exported Iall under the
restricted or canalizedcategory. II the item Ialls under quota system,
proper quota allotment prooI needs to besubmitted.
The conIirmed order received Irom the overseas buyer should reveal the inIormation about
theIull name and address oI the overseas buyer, description quantity and value oI goods (FOB
or CIF), destination port and the last date oI payment.

Eligibility
Pre shipment credit is only issued to that exporter who has the export order in his own
name.However, as an exception, Iinancial institution can also grant credit to a third party
manuIacturer or supplier oI goods who does not have export orders in their own name.In this
case some oI the responsibilities oI meeting the export requirements have been outsourced to
them by the main exporter. In other cases where the export order is divided betweentwo more
than two exporters, pre shipment credit can be shared between them
Quantum oI Finance
The Quantum oI Finance is granted to an exporter against the C or an expected order. The
onlyguideline principle is the concept oI NeedBased Finance. Banks determine the percentage
oI margin, depending on Iactors such as:

The nature oI Order.

The nature oI the commodity.

The capability oI exporter to bring in the requisite contribution.
DiIIerent Stages oI Pre Shipment
FinanceAppraisal and Sanction oI imits
1. 1. The exporter is a regular customer, a bona Iide exporter and has a goods standing in
themarket.
2. Whether the exporter has the necessary license and quota permit (as mentioned earlier) or not.
3. Whether the country with which the exporter wants to deal is under the list oI RestrictedCover
Countries(RCC) or not.
Disbursement oI Packing Credit Advance
"1. Na me o I buyer 2. Commodit y to be exported3. Quant it y4. Value (eit her CIF
or FOB)5. ast date oI shipment negot iat ion.6.
Follow up oI Packing Credit Advance
Exporter needs to submit stock statement giving all the necessary inIormation about thestocks. It
is then used by the banks as a guarantee Ior securing the packing credit in advance.Bank also
decides the rate oI submission oI this stocks.Apart Irom this, authorized dealers (banks) also
physically inspect the stock at regular intervals.
iquidation oI Packing Credit Advance
4. Packing Credit Advance needs be liquidated out oI as the export proceeds oI the
relevantshipment, thereby converting preshipment credit into postshipment credit.This
liquidation can also be done by the payment receivable Irom the Government oI India and
includes the duty drawback, payment Irom the Market Development Fund (MDF) oI the
CentralGovernment or Irom any other relevant source.
Overdue Packing
. Bank considers a packing credit as an overdue, iI the borrower Iails to liquidate the
packingcredit on the due date. And, iI the condition persists then the bank takes the necessary
step torecover its dues as per normal recovery procedure.
Special Cases
Packing Credit to Sub Supplier
Running Account Iacility
Preshipment Credit in Foreign Currency (PCFC)
Packing Credit Facilities to Deemed Exports
Packing Credit Iacilities Ior Consulting Services
Advance against ChequeDraIts received as advance payment

Export Post Shipment Finance.
Introduction
Post Shipment Finance is a kind oI loan provided by a Iinancial institution to an exporter
or seller against a shipment that has already been made. This type oI export Iinance is granted
Irom the date oI extending the credit aIter shipment oI the goods to the realization date oI the
exporter proceeds. Exporters don`t wait Ior the importer to deposit the Iunds.
Basic Features
The Ieatures oI postshipment Iinance are:

Purpose oI Finance
Post shipment Iinance is meant to Iinance export sales receivable aIter the date oI shipment oI
goods to the date oI realization oI exports proceeds. In cases oI deemedexports, it is extended to
Iinance receivable against supplies made to designated agencies.

Basis oI Finance
Post shipment Iinances is provided against evidence oI shipment oI goods or suppliesmade to the
importer or seller or any other designated agency.

Types oI Finance
Postshipment Iinance can be secured or unsecured. In that case it involves advance against
undrawn balance, andis usually unsecured in nature.Further, the Iinance is mostly a Iunded
advance. In Iew cases, such as Iinancing oI projectexports, the issue oI guarantee (retention
money guarantees) is involved and the Iinancingis not Iunded in nature.

Quantum oI Finance
As a quantum oI Iinance, postshipment Iinance can be extended up to 100 oI theinvoice value
oI goods. In special cases, where the domestic value oI the goods increasesthe value oI the
exporter order, Iinance Ior a price diIIerence can also be extended and theprice diIIerence is
covered by the government. This type oI Iinance is not extended incase oI preshipment stage.
Banks can also Iinance undrawn balance. In such cases banks are Iree to stipulate
marginrequirements as per their usual lending norm.

Period oI Finance
Postshipment Iinance can be oII short terms or long term, depending on the paymentterms
oIIered by the exporter to the overseas importer. In case oI cash exports, themaximum period
allowed Ior realization oI exports proceeds is six months Irom the dateoI shipment. Concessive
rate oI interest is available Ior a highest period oI 180 days,opening Irom the date oI surrender oI
documents. Usually, the documents need to besubmitted within 21days Irom the date oI
shipment.
Financing For Various Types oI Export Buyer's Credit
Postshipment Iinance can be provided Ior three types oI export :

Physical exports:
Finance is provided to the actual exporter or to the exporter in whosename the trade documents
are transIerred.

Deemed export:
Finance is provided to the supplier oI the goods which are supplied tothe designated agencies.

Capital goods and project exports:
Finance is sometimes extended in the name oI overseas buyer. The disbursal oI money is directly
made to the domestic exporter.
Supplier's Credit
Buyer's Credit is a special type oI loan that a bank oIIers to the buyers Ior large scale
purchasingunder a contract. Once the bank approved loans to the buyer, the seller shoulders all
or part oI theinterests incurred.
Types oI Post Shipment Finance
The post shipment Iinance can be classiIied as :1. Export Bills purchaseddiscounted.2.
Export Bills negotiated3. Advance against export bills sent on collection basis.4. Advance
against export on consignment basis5. Advance against undrawn balance on
exports6. Advance against claims oI Dut y Drawback.
1. Export Bills Purchased Discounted.(DP & DA Bills)
Export bills (Non C Bills) is used in terms oI sale contract order may be discounted
or purchased by the banks. It is used in indisputable international trade transactions and the
proper limit has to be sanctioned to the exporter Ior purchase oI export bill Iacility.
2. Export Bills Negotiated (Bill under C)
The risk oI payment is less under the C, as the issuing bank makes sure the payment. The risk
isIurther reduced, iI a bank guarantees the payments by conIirming the C. Because oI the
inbornsecurity available in this method, banks oIten become ready to extend the Iinance against
billsunder C.However, this arises two major risk Iactors Ior the banks:1. The risk oI
nonperIormance by the exporter, when he is unable to meet his terms andconditions. In this case,
the issuing banks do not honor the letter oI credit.2. The bank also Iaces the documentary risk
where the issuing bank reIuses to honour itscommitment. So, it is important Ior the Ior the
negotiating bank, and the lending bank toproperly check all the necessary documents beIore
submission.

Advance Against Export Bills Sent on Collection Basis
Bills can only be sent on collection basis, iI the bills drawn under C have some
discrepancies.Sometimes exporter requests the bill to be sent on the collection basis, anticipating
thestrengthening oI Ioreign currency.Banks may allow advance against these collection bills to
an exporter with a concessional ratesoI interest depending upon the transit period in case oI DP
Bills and transit period plus usanceperiod in case oI usance bill.The transit period is Irom the
date oI acceptance oI the export documents at the banks branch Ior collection and not Irom the
date oI advance.
4. Advance Against Export on Consignments Basis
Bank may choose to Iinance when the goods are exported on consignment basis at the risk oI
theexporter Ior sale and eventual payment oI sale proceeds to him by the consignee.However, in
this case bank instructs the overseas bank to deliver the document only against trustreceipt
undertaking to deliver the sale proceeds by speciIied date, which should be within theprescribed
date even iI according to the practice in certain trades a bill Ior part oI the estimatedvalue is
drawn in advance against the exports.In case oI export through approved Indian owned
warehouses abroad the times limit Ior realization is 15 months.
5. Advance against Undrawn Balance
It is a very common practice in export to leave small part undrawn Ior payment aIter
adjustmentdue to diIIerence in rates, weight, quality etc. Banks do Iinance against the undrawn
balance, iI undrawn balance is in conIormity with the normal level oI balance leIt undrawn in the
particular line oI export, subject to a maximum oI 10 percent oI the export value. An undertaking
is alsoobtained Irom the exporter that he will, within 6 months Irom due date oI payment or the
date oI shipment oI the goods, whichever is earlier surrender balance proceeds oI the shipment.
6. Advance Against Claims oI Duty Drawback
Duty Drawback is a type oI discount given to the exporter in his own country. This discount
isgiven only, iI the inhouse cost oI production is higher in relation to international price. This
typeoI Iinancial support helps the exporter to Iight successIully in the international markets.In
such a situation, banks grants advances to exporters at lower rate oI interest Ior a
maximumperiod oI 90 days. These are granted only iI other types oI export Iinance are also
extended to theexporter by the same bank.AIter the shipment, the exporters lodge their claims,
supported by the relevant documents to therelevant government authorities. These claims are
processed and eligible amount is disbursedaIter making sure that the bank is authorized to
receive the claim amount directly Irom theconcerned government authorities.
Crystallization oI Overdue Export Bills
Exporter Ioreign exchange is converted into Rupee liability, iI the export bill purchase
negotiated discounted is not realize on due date. This conversion occurs on the 30th day
aIter expiry oI the NTP in case oI unpaid DP bills and on 30th day aIter national due date in case
oI DA bills, at prevailing TT selling rate ruling on the day oI crystallization, or the original
billbuying rate, whichever is higher.

uCuC Culdellnes
unlform CusLoms and racLlce for uocumenLary CredlL (uCuC) ls a seL of predeflned rules
esLabllshed by Lhe lnLernaLlonal Chamber of Commerce (lCC) on LeLLers of CredlL 1he uCuC ls
used by bankers and commerclal parLles ln more Lhan 200 counLrles lncludlng lndla Lo faclllLaLe
Lrade and paymenL Lhrough LC

uCuC was flrsL publlshed ln 1933 and subsequenLly updaLlng lL LhroughouL Lhe years ln 1994
uCuC 300 was released wlLh only 7 chapLers conLalnlng ln all 49 arLlcles

1he laLesL revlslon was approved by Lhe 8anklng Commlsslon of Lhe lCC aL lLs meeLlng ln arls
on 23 CcLober 2006 1hls laLesL verslon called Lhe uCuC600 formally commenced on 1 !uly
2007 lL conLaln a LoLal of abouL 39 arLlcles coverlng Lhe followlng areas whlch can be classlfled
as 8 secLlons accordlng Lo Lhelr funcLlons and operaLlonal procedures
erlal no rLlcle rea ConslsLlng
1 1 Lo 3 Ceneral
ppllcaLlon ueflnlLlon and
lnLerpreLaLlons
2 4 Lo 12 CbllgaLlons
CredlL vs ConLracLs uocumenLs
vs Coods
3 13 Lo 16
LlablllLles and
responslblllLles
8elmbursemenL xamlnaLlon of
uocumenLs Complylng
resenLaLlon Pandllng
ulscrepanL uocumenLs
4 17 Lo 28 uocumenLs
8lll of Ladlng ChapLer arLy 8lll of
Ladlng lr uocumenLs 8oad 8all
eLc uocumenLs Courler osLal eLc
8ecelpL Cn board hlppers counL
Clean uocumenLs lnsurance documenLs
3 29 Lo 33
Mlscellaneous
rovlslons
xLenslon of daLes 1olerance ln
CredlLs arLlal hlpmenL and
urawlngs Pouse of resenLaLlon
6 34 Lo 37 ulsclalmer
ffecLlveness of uocumenL
1ransmlsslon and 1ranslaLlon
lorce Ma[eure
cLs of an lnsLrucLed arLy
7 38 39 CLhers
1ransferable CredlLs
sslgnmenL of roceeds
EstablIshed In 1958, FE0A (ForeIgn Exchange 0ealers' AssocIatIon of ndIa) Is a group
of banks that deals In foreIgn exchange In ndIa as a self regulatory body under the
SectIon 25 of the ndIan Company Act (1956).
The role and responsIbIlItIes of FE0A are as follows:
- FormulatIons of FE0A guIdelInes and FE0A rules for Forex busIness.
- TraInIng of bank personnel In the areas of ForeIgn Exchange 8usIness.
- AccredItatIon of Forex 8rokers.
- AdvIsIng/AssIstIng member banks In settlIng Issues/matters In theIr dealIngs.
- Fepresent member banks on Covernment/Feserve 8ank of ndIa and other
bodIes.
- Fules of FE0A also Include announcement of daIly and perIodIcal rates to Its
member banks.
FE0A guIdelInes play an Important role In the functIonIng of the markets and work In
close coordInatIon wIth Feserve 8ank of ndIa (F8), other organIzatIons lIke FIxed
ncome |oney |arket and 0erIvatIves AssocIatIon (F||0A), the Forex AssocIatIon of
ndIa and varIous other market partIcIpants.


DptIons for exporters

0efInItIon of ForfeItIng
The terms forfeItIng Is orIgInated from a old French word 'forfaIt', whIch means to
surrender ones rIght on somethIng to someone else. n InternatIonal trade, forfeItIng
may be defIned as the purchasIng of an exporter's receIvables at a dIscount prIce by
payIng cash. 8y buyIng these receIvables, the forfeIter frees the exporter from credIt
and the rIsk of not receIvIng the payment from the Importer.
ow forfeItIng Works In InternatIonaI Trade
The exporter and Importer negotIate accordIng to the proposed export sales contract.
Then the exporter approaches the forfeIter to ascertaIn the terms of forfeItIng. After
collectIng the detaIls about the Importer, and other necessary documents, forfeIter
estImates rIsk Involved In It and then quotes the dIscount rate.
The exporter then quotes a contract prIce to the overseas buyer by loadIng the
dIscount rate and commItment fee on the sales prIce of the goods to be exported and
sIgn a contract wIth the forfeIter. Export takes place agaInst documents guaranteed
by the Importer's bank and dIscounts the bIll wIth the forfeIter and presents the same
to the Importer for payment on due date.
0ocumentary PequIrements
n case of ndIan exporters avaIlIng forfeItIng facIlIty, the forfeItIng transactIon Is to
be reflected In the followIng documents assocIated wIth an export transactIon In the
manner suggested below:
- InvoIce : ForfeItIng dIscount, commItment fees, etc. needs not be shown
separately Instead, these could be buIlt Into the FD8 prIce, stated on the
InvoIce.
- ShIppIng III and CP form : 0etaIls of the forfeItIng costs are to be Included
along wIth the other detaIls, such FD8 prIce, commIssIon Insurance, normally
Included In the AnalysIs of Export 7alue on the shIppIng bIll. The claIm for
duty drawback, If any Is to be certIfIed only wIth reference to the FD8 value of
the exports stated on the shIppIng bIll.
ForfeItIng
The forfeItIng typIcally Involves the followIng cost elements:
1. CommItment fee, payable by the exporter to the forfeIter 'for latter's'
commItment to execute a specIfIc forfeItIng transactIon at a fIrm dIscount rate wIth
In a specIfIed tIme.
2. 0Iscount fee, Interest payable by the exporter for the entIre perIod of credIt
Involved and deducted by the forfaIter from the amount paId to the exporter agaInst
the avaIlIsed promIssory notes or bIlls of exchange.

enefIts to Exporter
- per cent fInancIng : Ithout recourse and not occupyIng exporter's credIt
lIne That Is to say once the exporter obtaIns the fInanced fund, he wIll be
exempted from the responsIbIlIty to repay the debt.
- Improved cash fIow : FeceIvables become current cash In flow and Its Is
benefIcIal to the exporters to Improve fInancIal status and lIquIdatIon abIlIty so
as to heIghten further the funds raIsIng capabIlIty.
- Peduced admInIstratIon cost : 8y usIng forfeItIng , the exporter wIll spare
from the management of the receIvables. The relatIve costs, as a result, are
reduced greatly.
- Advance tax refund: Through forfeItIng the exporter can make the verIfIcatIon
of export and get tax refund In advance just after fInancIng.
- PIsk reductIon : forfeItIng busIness enables the exporter to transfer varIous
rIsk resulted from deferred payments, such as Interest rate rIsk, currency rIsk,
credIt rIsk, and polItIcal rIsk to the forfeItIng bank.
- Increased trade opportunIty : Ith forfeItIng, the export Is able to grant
credIt to hIs buyers freely, and thus, be more competItIve In the market.
enefIts to anks
ForfeItIng provIdes the banks followIng benefIts:
- 8anks can offer a novel product range to clIents, whIch enable the clIent to
gaIn 100 fInance, as agaInst 8085 In case of other dIscountIng products.
- 8ank gaIn fee based Income.
- Lower credIt admInIstratIon and credIt follow up.
0efInItIon of FactorIng
0efInItIon of factorIng Is very sImple and can be defIned as the conversIon of credIt
sales Into cash. Here, a fInancIal InstItutIon whIch Is usually a bank buys the accounts
receIvable of a company usually a clIent and then pays up to 80 of the amount
ImmedIately on agreement. The remaInIng amount Is paId to the clIent when the
customer pays the debt. Examples Includes factorIng agaInst goods purchased,
factorIng agaInst medIcal Insurance, factorIng for constructIon servIces etc.
CharacterIstIcs of FactorIng
1. The normal perIod of factorIng Is 90150 days and rarely exceeds more than 150
days.
2. t Is costly.
J. FactorIng Is not possIble In case of bad debts.
4. CredIt ratIng Is not mandatory.
5. t Is a method of offbalance sheet fInancIng.
6. Cost of factorIng Is always equal to fInance cost plus operatIng cost.
0Ifferent Types of FactorIng
1. 0Isclosed
2. UndIsclosed
0IscIosed FactorIng
n dIsclosed factorIng, clIent's customers are aware of the factorIng agreement.
0Isclosed factorIng Is of two types:
#0.4:7801,.9473: The clIent collects the money from the customer but In case
customer don't pay the amount on maturIty then the clIent Is responsIble to pay the
amount to the factor. t Is offered at a low rate of Interest and Is In very common use.
4370.4:7801,.9473: n nonrecourse factorIng, factor undertakes to collect the
debts from the customer. 8alance amount Is paId to clIent at the end of the credIt
perIod or when the customer pays the factor whIchever comes fIrst. The advantage of
nonrecourse factorIng Is that contInuous factorIng wIll elImInate the need for credIt
and collectIon departments In the organIzatIon.
UndIscIosed
n undIsclosed factorIng, clIent's customers are not notIfIed of the factorIng
arrangement. n thIs case, ClIent has to pay the amount to the factor IrrespectIve of
whether customer has paId or not.
ew Scheme
Export Enterprise Finance Guarantee Scheme (EXEFG)
What is it?
ExEFG is a new Government Guarantee scheme, which supports export
transactions that are not covered by the existing EFG scheme. It is aimed
specificaIIy at smaII and medium sized exporters who are viabIe and require an
export finance faciIity, but have insufficient security avaiIabIe to secure the
borrowing faciIity (under the Lender's normaI credit criteria).
This is a new variant of the Enterprise Finance Guarantee (EFG) scheme and will
provide a government guarantee to lenders to facilitate the provision of shortterm
export finance lines to exporting small and medium sized companies.
ExEFG provides a 60% governmentbacked guarantee on any supported facility.
ExEFG covers traditional trade instruments and facilities such as:
Lines of trade credit, including pre and post finance
Bonds and guarantees
nvoice financing
These are offered by the Department for Business to assist exporters obtain working
capital finance, in order to win or perform specific export contracts.
What are the benefits?
Eligibility will be very simple to establish (criteria being agreed currently)
Provides an alternative source of funding for businesses without the necessary security
for a commercial loan.
hat is

Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by
the Government of India to strengthen the export promotion drive by covering the risk of
exporting on credit.

Being essentially an export promotion organization, it functions under the administrative
control of the Ministry of Commerce & Industry, Department of Commerce, Government of
India. It is managed by a Board of Directors comprising representatives of the Government,
Reserve Bank of India, banking, insurance and exporting community.

ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of
the company is Rs.800 crores and authorized capital Rs.1000 crores.


hat does do


Provides a range of credit risk insurance covers to exporters against loss in export of goods and services


Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them


Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of
equity or loan



ow does help exporters




Offers insurance protection to exporters against payment risks


Provides guidance in export-related activities


Makes available information on different countries with its own credit ratings


Makes it easy to obtain export finance from banks/financial institutions


Assists exporters in recovering bad debts


Provides information on credit-worthiness of overseas buyers


eed for export credit insurance

Payments for exports are open to risks even at the best of times. The risks have assumed large proportions today due
to the far-reaching political and economic changes that are sweeping the world. An outbreak of war or civil war may
block or delay payment for goods exported. A coup or an insurrection may also bring about the same result. Economic
difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods
or on transfer of payments for goods imported. In addition, the exporters have to face commercial risks of insolvency or
protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are
aggravated due to the political and economic uncertainties. Export credit insurance is designed to protect exporters
from the consequences of the payment risks, both political and commercial, and to enable them to expand their
overseas business without fear of loss.
1be fottorivg are tbe bevefit. for eorter. vvaer tbe .cbeve :
Option to gie easier credit terms to customers better protection than an ILC, without
the need to insist on establishing one.
More riendly deliery terms oered, like direct deliery to the customer ,as against
DP,DA, without any risk.
Reduced oreign bank handling charges on documents.
Substantial cost saings and complete reedom in monitoring and ollow up ,telephones,
axes, ollow-up isits, o receiables, oerdue bank interest on delayed collections and
recoery expenses relating to bad debts.
Increase in export sales, thanks to more competitie terms oered to customers.
Better security than letters o credit.
Llimination o uncertainties relating to realization o accounts receiables resulting in
better cash management to meet working capital requirements.
lull attention to procurement,production, marketing and sales and growth o business,
due to reedom rom chasing receiables.
lor banks, it would be a win-win situation all the way. Adances gien against LCGC-
actored export receiables could become the most preerred export adance portolio or a
bank, een better than the adances granted under an ILC. 1here is 100 per cent credit
protection, ree o cost.
1be otber bevefit. for bav/. are :
Prompt and immediate payment by LCGC o the ull amount outstanding on the
receiables to the bank, within three days o crystallization o the dues, in the eent o non-
realisation o actored receiables on the due date, without any protracted processing or
scrutiny and without raising any queries.
Saings on post-shipment guarantee premium to be paid to LCGC, i any.
No pre-disbursal risk assessment or post-disbursal monitoring required o the bank. lull
risk is on LCGC, with regard to repayment o the amount due ,in rupees,.
Opportunity to build zero-risk assets, since the bank would not run any risk on the
borrower, the country or on the buyer.
Banks could earn interest on a priority sector lending, without any o the attendant risks or
hassles.
Opportunity to satisy additional working capital needs o the customer by sanctioning
additional limits without enlarging the exposure risks.
% lul Culdellnes
% lorelgn xchange uealers ssoclaLlon of lndla (lul) was esLabllshed ln 1938 under
Lhe ecLlon 23 of Lhe Companles cL (1936) lL ls an assoclaLlon of banks LhaL deals ln
lndlan forelgn exchange and work ln coordlnaLlon wlLh Lhe 8eserve 8ank of lndla oLher
organlzaLlons llke llMMu Lhe lorex ssoclaLlon of lndla and varlous markeL
parLlclpanLs
lul has lssued rules for lmporL LCs whlch ls one of Lhe lmporLanL area of forelgn
currency exchanges lL has an advanLage over LhaL of Lhe auLhorlzed dealers who are
now allowed by Lhe 88l Lo lssue sLand by leLLer of credlLs Lowards lmporL of goods

s Lhe lssuance of sLand by of leLLer of CredlL lncludlng lmporLs of goods ls suscepLlble
Lo some rlsk ln Lhe absence of evldence of shlpmenL Lherefore Lhe lmporLer should be
advlsed LhaL documenLary credlL under uC 300/600 should be Lhe preferred rouLe for
lmporLers of goods

8elow menLlon are some of Lhe necessary precauLlon LhaL should be Laken by
auLhorlsed dealers Whlle lssulng a sLands by leLLer of credlLs
% 1he faclllLy of lssulng Commerclal Landby shall be exLended on a selecLlve basls and Lo
Lhe followlng caLegory of lmporLers
% Where such sLandby are requlred by appllcanL who are lndependenL power
producers/lmporLers of crude oll and peLroleum producLs
% peclal caLegory of lmporLers namely exporL houses Lradlng houses sLar Lradlng
houses super sLar Lradlng houses or 100 xporL CrlenLed unlLs
% aLlsfacLory credlL reporL on Lhe overseas suppller should be obLalned by Lhe lssulng
banks before lssulng Lands by LeLLer of CredlL
% lnvocaLlon of Lhe Commerclal sLandby by Lhe beneflclary ls Lo be supporLed by proper
evldence 1he beneflclary of Lhe CredlL should furnlsh a declaraLlon Lo Lhe effecL LhaL
Lhe clalm ls made on accounL of fallure of Lhe lmporLers Lo ablde by hls conLracLual
obllgaLlon along wlLh Lhe followlng documenLs
% copy of lnvolce
% nonnegoLlable seL of documenLs lncludlng a copy of non negoLlable blll of
ladlng/LransporL documenL
% copy of Lloyds /C lnspecLlon cerLlflcaLe wherever provlded for as per Lhe underlylng
conLracL
% lncorporaLlon of a sulLable clauses Lo Lhe effecL LhaL ln Lhe evenL of such lnvolce
/shlpplng documenLs has been pald by Lhe auLhorlsed dealers earller rovlslons Lo
dlshonor Lhe clalm quoLlng Lhe daLe / manner of earller paymenLs of such documenLs
may be consldered
% 1he appllcanL of a commerclal sLand by leLLer of credlL shall underLake Lo provlde
evldence of lmporLs ln respecL of all paymenLs made under sLandby (8lll of nLry)
% llxlng llmlLs for Commerclal Land by LeLLer of CredlL L/c
% 8anks musL assess Lhe credlL rlsk ln relaLlon Lo sLand by leLLer of credlL and explaln Lo
Lhe lmporLer abouL Lhe lnherenL rlsk ln sLand by coverlng lmporL of goods
% ulscreLlonary powers for sancLlonlng sLandby leLLer of credlL for lmporL of goods should
be delegaLed Lo conLrolllng offlce or zonal offlce only
% separaLe llmlL for esLabllshlng sLand by leLLer of credlL ls deslrable raLher Lhan
permlLLlng lL under Lhe regular documenLary llmlL
% uue dlllgence of Lhe lmporLer as well as on Lhe beneflclary ls essenLlal
% unllke documenLary credlL banks do noL hold orlglnal negoLlable documenLs of LlLles Lo
gods Pence whlle assesslng and flxlng credlL llmlLs for sLandby leLLer of credlLs banks
shall LreaL such llmlLs as clean for Lhe purpose of dlscreLlonary lendlng powers and
compllance wlLh varlous 8eserve 8ank of lndlas regulaLlons
% ppllcaLlon cum guaranLee for sLand by leLLer of credlL should be obLalned from Lhe
appllcanL
% 8anks can conslder obLalnlng a sulLable lndemnlLy/underLaklng from Lhe lmporLer LhaL
all remlLLances Lowards Lhelr lmporL of goods as per Lhe underlylng conLracLs for whlch
sLand by leLLer of credlL ls lssued wlll be made only Lhrough Lhe same branch whlch has
lssued Lhe credlL
% 1he lmporLer should glve an underLaklng LhaL he shall noL ralse any dlspuLe regardlng
Lhe paymenLs made by Lhe bank ln sLandby leLLer of credlL aL any polnL of Llme
howsoever and wlll be llable Lo Lhe bank for all Lhe amounL pald Lhereln Pe lmporLer
should also lndemnlfy Lhe bank from any loss clalm counLer clalms damages eLc
whlch Lhe bank may lncur on accounL of maklng paymenL under Lhe sLand by leLLer of
credlL
% resenLly when Lhe documenLary leLLer of credlL ls esLabllshed Lhrough swlfL lL ls
assumed LhaL Lhe documenLary leLLer of credlL ls sub[ecL Lo Lhe provlslons of uCuC
300/600 ccordlngly whenever sLandby leLLer of credlL under l 98 ls esLabllshed
Lhrough Wll1 a speclflc clause musL appear LhaL sLandby leLLer of credlL ls sub[ecL Lo
Lhe provlslon of l 98
% lL should be ensured LhaL Lhe lssulng bank advlslng bank nomlnaLed bank eLc have all
subscrlbed Lo 98 ln case sLand by leLLer of credlL ls lssued under l 98
% When paymenL under a sLand by leLLer of credlL ls effecLed Lhe lssulng bank Lo reporL
such lnvocaLlon / paymenL Lo 8eserve 8ank of lndla

W EXPORT BIS ARE RE-DISCOUNTED FACIITY (EBRD)
W This is an additional window available to exporters, along with the existingIinancing
scheme at post-shipment stage. The Iacility is available in allconvertible currencies. The
scheme covers export bills up to 180 daysIrom the date oI shipment (inclusive oI
normal transit period and graceperiod, iI any applicable).Under the scheme oI Ads
rediscount the export bills in overseas marketby arranging with an overseas
agencybank by way oI line oI credit or
W bankers acceptance Iacility or any other similar Iacility at rates linked to
W 6 month IBOR rates. Spread between borrowing and lending is leIt to thediscretion oI
the bank concerned. Ultimately, the cost to the exportershould not exceed 0.75 above
6 month IBOREURIIBOREURIBOR,excluding withholding tax.In case oI re-
discounting oI export bills on without.
W recourse basis, thecredit limits oI the exporter are restored immediately. ADs have
beenpermitted to utilize the on-shore Ioreign exchange Iunds available with
W them by way oI balances in Exchange Earners Foreign Currency account
W (EEFC), Resident Foreign Currency Account and Foreign Currency (non-resident)
account schemes. Exporters can also directly arrange Iorrediscounting Iacilities abroad
without prior permission Irom the RBI,subject to compliance oI guidelines prescribed
by the Reserve Bank.
RbI Guide lines

The RBI has issued some general guidelines Ior bankers to Iollow whiledoing the guarantee
business. The Authorized DealerEXIM Bank havebeen authorize to Iurnish (without prior
permission oI Reserve Bank), bidbondstender guarantees and advance
paymentperIormance guaranteesin cases where the RBI has been authorized to approve
proposals oI exporters.As per the recent guidelines, the Authorized DealersEXIM
BankWorkingGroup may consider and approve project export proposalservicecontracts
abroad. These may involve all types oI guarantees to beIurnished in connection with
execution oI projectscontract abroad. Inorder to get the latest updates on these guidelines,
one should reIer to
W relevant circulars oI RBI, available at RBIs website:
W While issuing guarantees on behalI oI customers, the Iollowing saIeguardsare
observed:
W
W
W In the case oI Financial Guarantees, banks should ensure that thecustomer would be in a
position to reimburse the amount in casethe bank is required to make the payment under
the guarantee.
W In the case oI PerIormance Guarantees, banks should exercise duecaution and should
know the customer suIIiciently well, to satisIythemselves that he has the necessary
experience, capacity andmeans to perIorm the obligations under the contract and is
notlikely to commit any deIault.
W
W
W Banks should normally reIrain Irom issuing guarantees on behalI oI customers who do
not enjoy credit Iacilities with them.
W
W Banks should ideally guarantee shorter maturities, and leave longermaturities to be
guaranteed by other institutions. A Bank Guaranteeshould ideally not have tenure Ior
more than 10 years.
W
W
W A Bank should ensure that 20 oI its outstanding unsecuredguarantees plus the total oI
its unsecured outstanding unsecuredadvances should not exceed 15 oI its total
outstanding advances.
%rade Acceptance Discounting is an unsecured working capital
tool that encourages exporters to offer importers extended
payment terms. Siemens First apital assures immediate,
non-recourse payment to exporters once the importer
confirms its obligation to pay for goods and services supplied.
Trade Acceptance Financing
xporters seeking to:
- Improve cash flow by discounting accounts receivable (A/R)
- Use importers creditworthiness and market conditions to improve cost of
export A/R finance
- Obtain 100% guarantee against importer bankruptcy
- Increase competitiveness by offering credit terms to importers
- Improve leverage through unsecured export financing
- Avoid unauthorized chargebacks, discounts and allowances associated with
open account payment terms
- Maintain ownership of goods until payment is assured
mporters seek to:
- Improve cash flow by obtaining extended, unsecured payment terms from
exporters in lieu of L/Cs or up-front cash payment
- Gain price discounts from exporters for providing early funding of payables
through First Capital
- Improve leverage through use of unsecured trade credit facilities

Description
Trade Acceptance Discounting is an unsecured working capital tool that encourages
exporters to offer importers extended payment terms. First Capital assures
immediate, non-recourse payment to exporters once the importer confirms its
obligation to pay for goods and services supplied. hen necessary, Trade Acceptance
Discounting can be used to ensure that title to goods is not transferred until payment
is assured.
Importers evidence their irrevocable payment obligation by signing a Trade Draft, an
international payment instrument, which First Capital immediately discounts to the
exporter. First Capital collects funds from the Importer on the maturity date of the
Trade Draft.

Structure / Process
- Importer purchases goods/services from the exporter
- Exporter ships goods and invoices the importer for the goods/services
- Importer approves the exporters invoices and shipping documents and signs
a Trade Draft, committing to pay for approved invoices on the agreed due
date. hen necessary, original shipping documents are released to the
importer only upon acceptance of the Trade Draft
- Exporter requests First Capital to discount the Trade Draft
- First Capital purchases the Trade Draft and pays the exporter the discounted
amount within 48 hours
- On the maturity date, the importer pays the face amount of the Trade Draft
to First Capital












Unit-3


Finance for software exports

fdwfe]Softwfe
% 1o glve a boosL Lo elecLronlc hardware lndusLry supplles of all 217
l11 lLems from P1 unlLs Lo u1 shall quallfy for fulflllmenL of
exporL obllgaLlon
% 1o promoLe growLh of exporLs ln embedded sofLware hardware shall
be admlsslble for duLy free lmporL for LesLlng and developmenL
purposes Pardware upLo a value of u 10000 shall be allowed Lo
be dlsposed off sub[ecL Lo 1l cerLlflcaLlon
% 100 depreclaLlon Lo be avallable over a perlod of 3 years Lo
compuLer and compuLer perlpherals for unlLs ln Cu/P1/1/






Ship types
Bulk arrier
Bulk Carriers are ships designed for carriage of solid bulk cargoes.
ombination arrier
Combination Carriers include ships intended for separate carriage of oil and dry cargoes in bulk, ships
intended for separate carriage of oil and ore in bulk and combination of the two above.
ontainer Ship
Container Ships are ships exclusively intended for the carriage of containers.
as arrier
Gas carriers are ships intended for transportation of compressed or liquefied gas.
eneral argo arrier and Ro/Ro
General Cargo Carriers are ships arranged for lift on/lift off cargo handling and intended for carriage of
general dry cargoes.
Ore arrier
Ore Carriers are ships designed for carriage of ore cargoes in centre holds.
Passenger Ship
Passenger Ships are primarely ships designed for carriage of passengers and Car and Train Ferries designed
for regular transport of passengers and vehicles.
%anker for hemicals
Tankers for Chemicals are ships intended for transportation of all types of liquid chemicals.
%anker for Oil
Oil carriers are ships intended for transport of oil in bulk, whereas oil product carriers are ships intended for
transport of all types of oil products except crude oil.
Types o1 contaners:
Standard containers


High-cube containers


Flatracks


PlatIorms (plats)


Bulk containers




Contf|ne|zft|on


Tank containers
Contf|ne|zft|on (8rlLlshcontf|ne|sft|on) ls a sysLem of frelghL LransporL
based on a range of sLeel lnLermodal conLalners (also shlpplng conLalners
lC conLalners eLc) ConLalners are bullL Lo sLandardlsed dlmenslons and
can be loaded and unloaded sLacked LransporLed efflclenLly over long
dlsLances and Lransferred from one mode of LransporL Lo anoLher
conLalner shlps rall and semlLraller LruckswlLhouL belng opened 1he
sysLem was developed afLer World War ll led Lo greaLly reduced LransporL
cosLs and supporLed a vasL lncrease ln lnLernaLlonal Lrade
Iss:es
Addtonal 1:el costs
Hazards
E2pty containers
Loss at sea
Trades :non challenges
Other :ses 1or contaners
Shipping container architecture is the use oI containers as the basis Ior
housing and other Iunctional buildings Ior people, either as temporary
or permanent housing, and either as a main building or as a cabin or
workshop. Containers can also be used as sheds or storage areas in
industry and commerce.
Containers are also beginning to be used to house computer data
centers, although these are normally specialized containers.
General n1or2aton on shppng
Shppng has multiple meanings. It can be a physical process oI
transporting commodities and merchandise goods and cargo, by land,
air, and sea. It also can describe the movement oI objects by ship.
and or "ground" shipping can be by train or by truck. In air and sea
shipments, ground transportation is required to take the cargo Irom its
place oI origin to the airport or seaport and then to its destination

because it is not always possible to establish a production Iacility near
ports due to limited coastlines oI countries. Ground transportation is
typically more aIIordable than air shipments, but more expensive than
shipping by sea especially in developing countries like India, where
Inland inIrastructure is not eIIicient.
Shipment oI cargo by trucks, directly Irom the shipper's place to the
destination, is known as a door to door shipment and more commonly
multimodal transport system. Trucks and trains make deliveries to sea
ports and air ports where cargo is moved in bulk.
Common trading terms used in shipping goods internationally include:
% lrelghL on board or free on board (lC8) Lhe exporLer dellvers Lhe
goods aL Lhe speclfled locaLlon (and on board Lhe vessel) CosLs pald by
Lhe exporLer lnclude load lash secure and sLow Lhe cargo lncludlng
securlng cargo noL Lo move ln Lhe shlps hold proLecLlng Lhe cargo from
conLacL wlLh Lhe double boLLom Lo prevenL sllpplng and proLecLlon
agalnsL damage from condensaLlon lor example lC8 !n1 means
LhaL Lhe exporLer dellvers Lhe goods Lo Lhe !awahar lal nehru orL
lndla and pays for Lhe cargo Lo be loaded and secured on Lhe shlp 1hls
Lerm also declares LhaL where Lhe responslblllLy of shlpper ends and
LhaL of buyer sLarLs 1he exporLer ls bound Lo dellver Lhe goods aL hls
cosL and expense ln Lhls case Lhe frelghL and oLher expenses for
ouLbound Lrafflc are borne by Lhe lmporLer
% CosL and frelghL (Cl Cl8 Cnl) lnsurance ls payable by Lhe lmporLer
and Lhe exporLer pays all expenses lncurred ln LransporLlng Lhe cargo
from lLs place of orlgln Lo Lhe porL/alrporL and ocean frelghL/alr frelghL
Lo Lhe porL/alrporL of desLlnaLlon lor example Cl Los ngeles (Lhe
exporLer pays Lhe ocean shlpplng/alr frelghL cosLs Lo Los ngeles) mosL
of Lhe governmenLs ask Lhelr exporLers Lo Lrade on Lhese Lerms Lo
promoLe Lhelr exporLs worldwlde such as lndla and Chlna Many of Lhe
shlpplng carrlers (such as u uPL ledx) offer guaranLees on Lhelr
dellvery Llmes 1hese are known as C8 guaranLees or guaranLeed
servlce refunds lf Lhe parcels are noL dellvered on Llme Lhe cusLomer
ls enLlLled Lo a refund
% CosL lnsurance and frelghL (Cll) lnsurance and frelghL are all pald by
Lhe exporLer Lo Lhe speclfled locaLlon lor example aL Cll Los ngeles
Lhe exporLer pays Lhe ocean shlpplng/alr frelghL cosLs Lo Los ngeles
lncludlng Lhe lnsurance of cargo 1hls also sLaLes LhaL responslblllLy of
Lhe shlpper ends aL Lhe Los ngeles porL
% 1he Lerm est wfy generally lmplles LhaL Lhe shlpper wlll choose Lhe
carrler who offers Lhe lowesL raLe (Lo Lhe shlpper) for Lhe shlpmenL ln
some cases however oLher facLors such as beLLer lnsurance or fasLer
LranslL Llme wlll cause Lhe shlpper Lo choose an opLlon oLher Lhan Lhe
lowesL bldder
%