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Bill of Exchange
BOE is a direction from the exporter (drawer) to the importer (drawee) to pay the value of the goods through whom he sends the documents. A bill of exchange is a negotiable instrument and is governed by the Negotiable Instruments Act in India. As per NIA Bill of Exchange is an instrument in writing containing unconditional order, signed by the maker directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of instrument.
Bill of Exchange
The bill under a letter of credit may be drawn on the issuing bank or another drawee bank but not on importer. If the L/C calls for a bill on the applicant such bills will be considered as additional documents as per Article 9(a) iv and (b) iv) of UCPDC 600.
Stamp Duty
A bill of exchange issued in India will bear stamp duty according to the rates prescribed in the Indian Stamp Act. Sight bills and usance bills upto 90 days are exempt from stamp duty. Usance bills for periods beyond 90 days are to be stamped at the rate of Rs.1.25per Rs.1000/per quarter. When a usance foreign bill is received in India appropriate stamp duty has to be affixed as per the Indian stamp Act irrespective of the duty paid abroad.
Marine Losses
The basic risks covered by any marine insurance policy are (i) Perils of sea which include damage to the vessel or cargo by forces of waves, storms, stranding of the vessel, sinking of the vessel, and collision with other vessel (ii) Fire which includes damage directly due to fire or efforts to extinguish the fire. (iii) Jettison which means voluntary throwing overboard of some cargo to save the ship and the rest of the cargo.
Marine Losses
(iv) barratry which means loss due to fraudulent or wrongful actsof the captain of the vessel or its crew. Types of Losses the loss of goods insured may be a total loss or partial loss. Total loss A total loss may be either an actual total loss or a constructive total loss. When the goods insured are destroyed or so damaged as to cease to be a thing of the kind insured there is an actual loss. The loss is a constructive total loss appearing to be unavoidable or because it could not be preserved from actual total loss without an expenditure which would would exceed their value when the expenditure had been incurred.
Marine Losses
Partial Loss is defined as a loss other than total loss. Partial loss may include particular average loss or general average loss. General average loss cargo jettisoned in an effort to refloat the vessel. Goods damaged by water used to extinguish a fire provided the goods themselves have not been on fire
Marine Losses
Expenses of entering and leaving a port of refuge Expenses of discharging, storing, reloading, of the cargo if that is necessary for safety. Particular average Loss A particular average loss is a partial loss of the goods insured caused by a peril insured against.
Risks Covered
Risks can be covered by incorporating standard cargo clauses as they have been evolved by the Institute of London. The principal cargo clauses are Clause c, Clause b, Clause A. Affording greater protection in the same order. Risks not covered Loss, damage or expenses attributable to willful misconduct of the insured Ordinary leakage, ordinary loss in weight or volume or ordinary wear and tear of the goods insured Loss, damage or expense caused by delay and inherent vice or nature of the subject matter
Marine Losses
Insufficiency or unsuitability of packaging Deliberate damage to or deliberate destruction of goods Loss, damage or expense arising from insolvency or financial default of the owners, managers, charterers or operators of the vessel Loss, damage or expense arising from the use of atomic weapons or nuclear fission and/or other like reaction or radioactive force
CLAIM - PROCEDURE
In the event of loss or damage to the goods arising a claim under the policy the assured should do the following Give a notice of loss to the insurance company immediately Take all steps to minimize the loss, preserve all rights against third parties Arrange survey by ship surveyors if the packages show any outward sign of damage or loss. Arrange for insurance survey by the insurance co. in other cases
CLAIM - PROCEDURE
(i) (ii) (iii) (iv) (v) (vi)
Prefer claims with shipping companies and other parties where required The following documents should be submitted to the insurance company while lodging a claim
Original insurance policy Original Invoice and Packing List Copy of Bill of Lading Survey report/short/non delivery/landed but missing certificate Copies of correspondence exchanged with carriers and Claim bill
INVOICES
Commercial Invoice A commercial invoice is a statement containing full details of the goods shipped containing
Names and addresses of the seller and buyer Details of goods shipped quantity, quality, description Packing details and packing marks Price and amount payable by the buyer Terms of trade FOB, CFr, or CIF Details of freight charges, insurance premia and other charges Reference to the sale contract in fulfillment of which the shipment is made (viii) Name of the vessel (ix) Import Licence no. if applicable an invoice is not a document of title of goods but is only a description of goods verifying that the goods shipped and price charged are as per the contract.
INVOICES
Consular invoice is a special type of invoice in a prescribed form describing the details of the goods shipped and sworn as being correct in all respects by the exporter. Consul of the importing country then certifies the invoice . This may also contain a declaration about the place of origin of the goods. Any false information in the invoice attracts heavy penalty
INVOICES
Legalised/visaed Invoice the purpose of such an invoice is similar to that of consular invoice. The only difference is that instead of a prescribed format the ordinary commercial invoice is presented to the embassy or consular for certification.
INVOICES
Certified Invoice - A commercial invoice becomes a certified invoice when it contains certain certification by the exporter like
(i) (ii)
The origin of goods is of a particular country The goods are in conformity with certain specific contract (iii) Any other stipulation of the importer has been fulfilled
INVOICES
Proforma Invoice a proforma invoice does not evidence a sale & is required in the following cases
(i)
It may be the basis on which the contract of sale is concluded later (ii) When goods are sent on consignment basis a proforma invoice may be used since the goods are sent only to an agent of seller and serves as the guide to the price at which the agent should sell the goods (iii) It may be used to support a tender for sale contract
CERTIFICATES
Certificate of origin issued by the chamber of commerce Weight note certificate indicating the weight of individual items shipped issued by an independent agency giving satisfaction to the importer that goods of proper weight have been shipped Quality Inspection Certificate issued by the supplier or an independent agency confirming that the goods were examined and found to be as required under the contract. Others
TRANSPORT DOCUMENTS
Bill of lading is defined as a document which evidences a contract of carriage by sea and the taking over of loading of goods by the carrier by which the carrier undertakes to deliver the goods against surrender of the document. It renders the following three functions
It is an evidence of contract of carriage It is a receipt for the goods received by the carrier It is a document of title of goods
i) ii) iii)
EXPORT MANAGEMENT
Confirmation of Order
Once the negotiations are completed and the terms and conditions are acceptable to the buyer and seller the proforma invoice in triplicate is forwarded to the buyer. The buyer signs two copies and returns back . The exporter also signs on one copy and sends back to the importer. The exporter may sometimes insist on a documentary letter of credit .
Confirmation of Order
The confirmation of order then forms a detailed contract containing all the terms and conditions agreed to both the parties.the contract must contain the following details Details of goods Quantity & quality Price and period of delivery Shipping and packing marks Licenses, insurance , documentary requirements etc.
Export licence
The export of some items are banned and of some items controlled by means of licences. Though most of the items are freely exportable/ importable but the exporter should ensure that the item sought to be exported is not one which falls in the banned list . If any item requires licence, it is necessary to obtain it before finalizing the contract.
Finance
If the exporter wants to avail the finance facility against export order he must made arrangements for the same . Production/procurement of Goods once the order is confirmed the exporter should take necessary steps to ensure for timely availability of the goods of the specifications required. Any resource or production constraints should be prioritized as per the requirements of the export department.
Financing Exports
There are two sources of export finance. *Pre shipment or Packing Credit Finance *Post Shipment Finance Pre shipment finance or Packing credit is a loan given to an exporter for financing the purchase, processing, manufacturing and packing of goods meant for exports.
Financing Exports
Eligibility pre shipment credit can be granted bona fide exporters generally on the strength of letter of credit established by banks of standing abroad in favour of exporters. If there is no letter of credit the credit can be granted on the basis of confirm order . The letter of credit/ firm order is kept with the bank
Financing Exports
Type of account normally packing credit is extended in the form of a separate account being maintained for each export order. The request from the party should be supported by lodgment of letter of credit or confirmed order . Packing credit can also be extended n the form of a running account i.e. a cash credit account subject to fulfillment of following conditions i) The exporter is able to justify the need of a running account ii) Exporter has a good track record iii) Letter of credit is submitted iv) A separate packing credit account is maintained
Financing Exports
Period of loan and interest the period of loan depends upon the time required for procuring, manufacturing or processing and shipping cycle of the goods to be exported. However the maximum period allowed is 180 days however can be extended upto 360 days under special cases with the permission of RBI. The banks are free to decide their rates within the band specified by RBI from time to time. Presently the rate of interest chargeable is 2.5% below PLR upto 180 days and PLR plus .5% beyond that
Financing Exports
If the packing credit is adjusted from export proceeds within 360 days the normal rate of interest is charged till due date and penal interest is charged after that. IF PCL is not adjusted within 360 days Normal rate of interest applicable to domestic loans plus penalty is to be charged.
Financing Exports
Quantum of advances normally the advance as pre shipment finance should not exceed the FOB value or the domestic cost of production whichever is lesser. Margin may also be stipulated depending upon the partys worth and the commodity to be exported. If the LC value is on CIF/ CFr basis the value should be reduced to FOB value and eligible finance should be calculated on that date.
Financing Exports
Sources of repayment the packing credit should be repaid out of the proceeds of foreign bills of exchange drawn under the export contract. It may also be repaid out of export incentives like duty drawback or advance payment received against exports.
Financing Exports
Substitution of contracts In case the exporter is unable to export against the original contract due to reasons beyond his control, the packing credit may be adjusted. The packing credit may be adjusted by purchasing/discounting export bills relating to another contract wthin a reasonable time.
Financing Exports
In respect of exporters with good track records the banks may Permit liquidation of packing credit by exporting some other commodity where it becomes necessary and unavoidable. Mark off the existing packing credit with export proceeds of documents against which no packing credit has been drawn by the exporter.
Financing Exports
Packing credit is to be adjusted out of the proceeds of export bills tendered by the borrower on shipment of goods. Therefore the packing credit limit should be considered along with limit of purchase/discount of foreign bills. The normal credit appraisal norms used by the bank are applied to sanction the limits to the exporter.
Financing Exports
Appraisal -The banker decides on the basis of the borrowers character, capital, capacity etc. besides the experience he has in the field of exports. The bank should take necessary precautions i.e. a) The applicant has IEC code no or not b)The exporters name is not in the caution list of RBI c) The goods to be exported are not banned for exports d) The L/C or confirmed order provides all essential details e) There is sufficient time allowed in L/C / order to enable the exporter to manufacture the goods and export them f) The country to which the exports are o be made is not under political or economic stress g) If the L/C is restricted to some other bank undertaking from the exporter that the documents will be routed through the bank making advance
Financing Exports
Special cases packing credit can also be granted to manufacturer supplier who do not have L/C or confirmed orders but are routing their exports through State Trading Corporation/MMTC or other export houses subject to adopting the following procedure . The export house should issue a letter setting out the details of the export order and the portion thereof to be executed by the manufacturer supplier and also certifying that the export house has not obtained and will not ask for PCL in respect of such portion of the order to be executed by the manufacturer The manufacturer should give an undertaking that the advance payment if any received from the export house against the export order will be credited to packing credit account. The export house should open an Inland Letter of Credit in favour of the supplier giving relevant particulars of the export letter of credit/confirmed order and the outstanding in the PC account should be adjusted by negotiation of bills under such an inland letter of credit.
Financing Exports
Sub suppliers packing credit can also be granted to sub suppliers of raw materials, components of exported goods on the basis of the Inland letter of credit opened in favour of the supplier by the exporter concerned .This scheme is applicable only in case of manufacturer supplier. Deemed exports packing credit can be extended to the parties against orders for supplies to projects financed by ADB,IBRD etc. which is recognized as deemed exports
Financing Exports
Pre Shipment Credit in foreign currency under PCFC exporters are allowed to avail preshipment credit in a convertible currency at interest rates not exceeding .75% over six months LIBOR plus withholding tax. The credit will be self liquidating in nature and will be adjusted by discounting of the relative export bill designated in foreign currency. PCFC is advantageous as compared to the brupee packing credit due to low interest and avoidance of conversion cost.
Financing Exports
i) ii) iii) iv) Post Shipment Finance Purchasing export bills Discounting export bills Negotiate bills under L/C Advance against export bills sent on collection basis v) Advance against bills sent on consignment basis
Financing of Exports
Eligibility Post shipment credit is granted to
the actual exporter or to an exporter in whose name the export documents are transferred. All finance extended to exporter is called suppliers credit. In case of export of capital goods and project exports finance is extended in the name of overseas buyer (importer of the goods/services) but the disbursal of money is made directly to Indian exporter. Such finance is referred to as Buyers Credit
Financing of Exports
Basis of post shipment Finance Post
Shipment finance is always extended against evidence of shipment of export of goods.
Financing of Exports
Form of finance post shipment finance is normally
secured . Since the finance is extended against the evidence of export shipments and banks obtain documents of title to goods, the finance is normally self liquidating . Quantum of finance post shipment finance can be extended upto 100% of invoice value. Period of finance post shipment finance is a working capital finance depending upon payment terms between the exporter and the overseas buyer. In case of cash exports the maximum period allowed for realization is 6 months with concessional interest upto 90 days.
Financing of Exports
Rates of Interest The rate of interest
applicable are announced by RBI periodically on slab basis ,
Declaration of Exports in prescribed forms every exporter who exports goods by whatever mode must in the prescribed form declare to the customs authority full export value of the goods and affirm that the full value has been or will be received within the prescribed period in the prescribed manner. At present there are four types of export declaration forms in use .
computer software in non physical form. Check list for scrutiny of forms when duplicate copy of GR/PP are received from the exporter alongwith relative bills and export documents, authorized dealers should verify 1. Original sale contract or inn absence of sale contract any of the following Order of overseas buyer with exporters confirmation Proforma invoice countersigned by overseas buyer Indent/order from overseas buyer or his agent. 2.Essential particulars like description, quantity, value of goods country of destination etc. declared in GR/PP form
Trade Discounts all trade discounts offered on exports must be declared on relative GR form by the exporter. Such discounts mentioned in GR form are acceptable to the ADs as the same has been accepted by customs.
Post shipment
Credit extended to finance export receivables after date of shipment to date of realization of export proceeds. Form of finance is mostly fund based finance Concessional rate is available according to the period of credit