Foreign trade (development & regulation) act, 1992

An Act to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India and for matters connected therewith or incidental thereto.

Power of Central Government to make Orders and Announce Export and Import Policy
Powers to make provisions relating to imports and exports: (1) The Central Government may make provision for the development and regulation of foreign trade by facilitating imports and increasing exports. (2) The Central Government may also make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the Order the import or export of goods. (3) All goods to which any Order under sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of that Act shall have effect accordingly. Export and Import Policy: The Central Government may, from time to time, formulate and announce by notification in the Official Gazette, the Export and Import Policy and may also, in like manner, amend that policy.

Contd
Appointment of Director General and his functions:

(1) The Central Government may appoint any person to be the Director General of Foreign Trade for the purposes of this Act.
(2) The Director General shall advise the Central Government in the formulation of the Export and Import Policy and shall be responsible for carrying out that policy. (3) The Central Government may direct that any power exercisable by it under this Act may also be exercised by the Director General or such other officer subordinate to the Director General, as may be specified in the Order.

Importer-Exporter Code Number and Licence

Importer-Exporter Code Number: No person shall make any import or export except under an Importer-Exporter Code Number granted by the Director General or the officer authorised by the Director General in this behalf, in accordance with the procedure specified in this behalf by the Director General. Suspension and Cancellation of Importer-Exporter Code Number : (1) Where:

(a) any person has contravened any law relating to Central Excise or Customs or Foreign Exchange or has committed any other economic offence under any other law for the time being in force as may be specified by the Central Government by notification in the Official Gazette, or
(b) the Director General has reason to believe that any person has made an export or import in a manner gravely prejudicial to the trade relations of India with any foreign country or to the interests of other persons engaged in imports or exports or has brought disrepute to the credit or the goods of the country.

Issue ,suspension and cancellation of Licence

(1)The Central Government may levy fees in respect of such person or class of persons making an application for a licence or in respect of any licence granted or renewed in such manner as may be prescribed. (2) The Director General or an officer authorised by him may grant or renew or refuse to grant or renew a licence to import or export (3) A licence granted or renewed under this section shall(a) be in such form as may be prescribed; (b) be valid for such period as may be specified therein; and (c) be subject to such terms, conditions and restrictions as may be prescribed or as specified in the licence with reference to the terms, conditions and restrictions so prescribed. 4) The Director General or the officer may in writing suspend or cancel any licence granted under this Act: Provided that no such suspension or cancellation shall be made except after giving the holder of the licence a reasonable opportunity of being heard.

 FOREIGN EXCHANGE MANAGEMENT ACT, 1999

Objectives To facilitate external trade and payments To promote the orderly development and maintenance of foreign exchange market

FERA & FEMA

Introduction: Foreign exchange transactions were regulated by Foreign exchange regulation act (FERA), 1973 Following the liberalization ushered in 1991 some amendments were made to FERA. In 1993 there was demand to bring major changes in FERA in the light of economic changes Consequently a new act was formed to replace FERA, known as Foreign exchange management act (FEMA), 1999

Section 3 of FEMA
It talks about dealings in foreign exchange and foreign securities and payments to and receipts from any person outside India. The general or special permission of the Reserve Bank of India is required in the following matters (a)Dealing in any foreign exchange or foreign security with any person other than the authorized person (b) Payment to or for the credit of any person resident outside India in any manner (C) Receiving of any payment by order or on behalf of any person resident outside India in any manner otherwise through an authorized person (d) Enter in to any financial transaction in India as a consideration for or in. association with requisition or creation or transfer of a right to acquire any asset outside India by any person

Contd
Holding of Foreign Exchange:No person resident in India shall acquire, hold, own, possess or transfer any foreign exchange/foreign security or any immovable property situated outside India Current account Transactions:-Act permits dealing in foreign exchange through authorized persons for current account transactions. -Central Government can impose reasonable restrictions in public interest with this regard

Contd
Capital Account Transactions: Any person may sell or draw foreign exchange to or from an authorized person for a capital account transaction permitted by RBI in consultation with central Government . RBI prohibits, restricts or regulate the following, (a) Transfer or issue of any foreign security by a person resident in India (b) Transfer or issue of any foreign security by a person resident outside India (C) Transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India (d) Any borrowing or lending in foreign exchange in whatever form or by whatever name called

(e) Any borrowing or lending in rupees in whatever form or whatever name called between a person resident in India and a person resident outside India; (f) Deposits between persons resident in India and a person resident outside India (g) Export, Import or holding of currency or currency notes (h) Transfer of immovable property outside India other than a lease not exceeding five years by a person resident outside India (i) Acquisition or transfer of immovable property in India other than a lease not exceeding five years by a person resident outside India (j) Giving of guarantee or surety in respect of any debt obligation or the liability 1. By a person resident in India and owed to a person resident outside India, or 2. By a person resident outside India

Every exporter of goods shall famish to the RBI or to such other authority the following (a)A declaration specified 1. True and correct material particulars 2. Amount representing the value of full export of goods 3. The time of the export 4. The value which exporter having regard to the prevailing market conditions expects to receive on the sale of the goods in a market outside India (b) Other information -That may be required by RBI for the purpose of ensuring the realization of the export proceeds by such exporter - Every exporter of the services shall furnish to the RBI or to such other authorities a declaration as specified, containing the true and correct material particulars in relation to the payment for such services

Export of goods and services

Realization and Repatriation of foreign exchange:Any person in this concern shall have to follow the reasonable steps to realize and repatriate it to India with or with in the time in the manner prescribed by the act
Contravention and penal ties: For any kind of contravention under this act defaulter is liable to pay up to thrice the amount involved where it is quantifiable Up to Rs. 2 lakhs Where not quantifiable If such contravention is continued further penalty which may extend to Rs. 5,000 for every day after the first day

Administration of the Act

- The rules regulations and norms pertaining to many sections are laid down by RBI in consultation with central Government.

- The Act requires central Government to appoint, Adjudicating Authorities for holding enquires related to the contravention of the Act one or more Special Directors (appeals) to hear appeals against the order of the Adjudicating authorities
- Central Government shall have to establish 1. An Appellate Tribunal for foreign Exchange to hear appeals against the order of the Adjudicating Authorities and the Special Directors 2. A Director of Enforcement with a Director and such officers or class of officers as it thinks fit for taking up for investigation the contravention under this Act

FERA V/s FEMA:1. In FEMA only the specified acts related to foreign exchange are regulated while in FERA anything and everything that has to do with foreign exchange was controlled
2. The objective of FEMA is to facilitate trade while that of FERA is to prevent misuse

1. FEMA is a much smaller enactment only 49 sections against 81 sections of FERA

CUSTOMS ACT, 1962

LEVY OF CUSTOMS DUTY The act provides for levy of duty on imports as well as on exports TYPES OF DUTIES i. Basic duty At the standard rate or in the case of import from some countries, at the preferential rate. ii. Additional customs duty Equal to the Central Excise duty leviable on the product manufactured in India and if the said product is not manufactured in India then on like product manufactured in India. iii. Additional duty of customs in lieu of sales tax Leviable in order to provide a level playing field to indigenous goods, which have to bear sales tax, local tax and other charges. iv. Antidumping/safeguard duty Leviable with a view to protecting domestic manufacturer of certain goods from unfair injury out of international competitive rates. v. Education Cess Leviable at the rate of 2% on aggregate of basic customs duty and additional customs duty.

PROCEDURE OF IMPORT-EXPORT
Goods may be imported in or exported from India through sea, air, land, by post or as a baggage with passengers. Import Manifest An Import Manifest or Import Report limit: should be delivered as per the following time

In the case of a vessel or an aircraft prior to arrival of the vessel or the aircraft and
In the case of a vehicle within 12 hours after its arrival in the customs station. In case of default, a penalty up to rupees fifty thousand can be levied

Procedures for Import The importer is required to submit the description of the product, name of the supplier, invoice number, bill of lading number, quantity of goods, classification, rate per unit etc. in order to get the bill of entries prepared under EDI. In case of custom house, where manual bills of entries are processed, the importer is required to submit the bill of entry along with the documents mentioned above. The following steps are normally taken for the clearance of goods: 1. Filling of Bill of Entry for home consumption or warehouse or EDI system 2. Appraisement of Bill of Entry In case of first appraisement, inspection is done first then duty is assessed. In case of second appraisement, assessment is done first and duty is assessed. 3. Payment of duty The duty assessed has to be paid. 4. Inspection of cargo is done where second appraisement method is followed. 5. The cargo is then delivered. In case of exports instead of Bill of Entry the exporter has to submit Shipping Bill or submit the data, like description of export product, FOB value, quantity unit, invoice No., Bill of Lading, etc, to enable authorities to prepare shipping bill in EDI system. Warehousing

VALUATION OF GOODS Tariff value 1. The value that is fixed by Central Government for any class of imported goods or exported goods. 2. Government takes into consideration trends of value of such or like goods while fixing tariff value. 3. Once so fixed, duty is payable as percentage of this value. Customs value As per section 14(1) value for the purpose of customs duty is the 1. Price at which such or like goods are ordinarily sold or offered for sale and the 2. Price is for delivery at the time and place of importation and such 3. Price is in course of international trade, where neither seller nor buyer has interest in the business of the other or one of them has no interest in the business of the other and, 4. Price is the sole consideration for sale or offer for sale.

RATE OF DUTY LEVY/INCIDENCE

AND

VALUATION

AND

TIME

OF

The rate of duty and tariff valuation shall be as applicable on 1. In the case of goods directly cleared for home consumption the date of the presentation of the bill of entry. 2. In case of goods cleared from warehouse, the date when bill of entry is presented for home clearance of such goods from the warehouse. 3. In case, bill of entry is submitted prior to arrival of the vessel or the aircraft, the date would be the date of submission of the bill of entry and the grant of entry inward to the vessel.

ASSESSMENT OF CUSTOMS DUTY Two systems for assessment of duty 1. First appraisement: In case of First appraisement the assessment of goods is done only after the goods are examined first. 2. Second appraisement: This type of system is normally followed practically. Second appraisement means making the assessment on the basis of the declaration and submission made by the importer DEMAND, RECOVERY AND REFUND OF DUTY A demand for duty arises in cases where 1. duty on goods has not been levied though such goods are leviable to duty or 2. duty has been short levied or 3. refunded erroneously The notice must be issued within six months from relevant date, except in cases of import by an individual for personal use or by government or by any educational, charitable, research institution or hospital, where the time limit for such an issue is one year. The above period of limitation is extended to five years in case the short levy or non-levy or refund was due to collusion, misstatement, suppression of facts or fraud by the Importer/ Exporter.

Refunds The refund of duty is subject to the principle of no unjust enrichment. CUSTOMS DUTY DRAWBACKS The drawback is in respect of duties paid on: 1. Imported goods which are exported as such (without use) 2. Imported goods which are exported after use 3. Imported materials used in the manufacture of goods exported. PENALTIES 1. Where no express penalty is provided, the maximum penalty for contravention of any provision of the ACT is Rupees one lakh (earlier ten thousand). 2. Similarly maximum penalty of Rupees fifty thousand (earlier five thousand) is prescribed for contravention of any of the RULES. 3. Also maximum penalty of Rupees Two Thousand (earlier two hundred) has been prescribed for contravention of a REGULATION.

Indias Foreign Trade Policy (2009-14)

The Policy Thrust: The Key Goals The short-term objective is to arrest and reverse the declining trend of exports and to provide additional support to sectors hit badly by recession in the developed world To achieve an annual export growth of 15% To achieve a high export growth path of around 25% per annum, and double exports of goods and service by 2014 The long term policy objective is to double Indias share in global trade by 2020, which stood at 1.64% in 2008

 Support for market & product diversification Incentive schemes under Chapter 3 have been expanded by way of addition of new products and markets. Twenty six new markets have been added under Focus Market Scheme. These include 16 new markets in Latin America and 10 in Asia-Oceania under Focus Market Scheme (FMS) exporters are entitled for Duty Credit Scrip equivalent to 3% of FOB value of exports under Focus Product Scheme (FPS) exporters are entitled for Duty Credit Scrip equivalent to 2% of FOB value of exports Large number of products included for benefits under FPS, MLFPS has been expanded to products in pharmaceuticals, synthetic fabrics, value added rubber and plastic, textile made-up, knitted and crocheted fabrics, glass products, iron and steel products, aluminium.

Technological up gradation, EPCG relaxation, DEPB

EPCG Scheme at Zero Duty for engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, and leather. To increase the life of existing plant and machinery, export obligation on import of spares, moulds under the EPCG Scheme has been reduced to 50% of the normal specific export obligation. To accelerate exports, additional Duty Credit scrips shall be given to status holders @ 1% of the FOB value of past exports.

 Stability/continuity of the Foreign Trade Policy To impart stability to the policy regime, the Duty Entitlement Passbook (DEPB) Scheme is being extended by a year till December 31, 2010. The interest subvention of 2% for pre-shipment credit for 7 sectors extended till March 31, 2010 in Budget 2009. Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of IT Act has been extended for the financial year 2010-11 in Budget 2009-10. The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover at 95% to the adversely affected sectors is continued till March 2010.

 Thrust for Value-Added Manufacturing To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorisation Scheme has been prescribed. Project Exports and a large number of manufactured goods brought under FPS and MLFPS. Flexibility provided to exporters Payment of customs duty for export obligation has been allowed by way of debit of Duty Credit scrips. Import of restricted items, as replenishment, will be allowed against transferred DFIAs. Time limit of 60 days for re-import of exported gems and jewellery items for participation in exhibitions has been extended to 90 days in case of USA.

 Simplification of procedures, reduction in transaction costs To facilitate duty-free import of samples by exporters, number of samples/pieces has been increased from the existing 15 to 50. Customs clearance of such samples shall be based on declarations given by the importers for value and quantity of samples. No fee shall now be charged for grant of incentives

 Marine sector Fisheries are included in the sectors which are exempted from maintenance of average export obligations under the EPCG. Gems & Jewellery sector To neutralise duty incidence on gold jewellery exports, the policy allows duty drawback. To make India a diamond international trading hub, it is planned to establish Diamond Bourses,. A new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading/ certification purposes has been introduced. To participate in overseas exhibitions, exporters may carry merchandise worth $5 million against $2 million. The limit of personal carriage, as samples, for export promotion tours, has also been increased to $1 million. Leather sector Leather sector will be allowed re-export of unsold imported raw hides and skins and semi-finished leather from public bonded warehouses, subject to payment of 50% of export duty. Enhancement of FPS rate to 2% would also benefit the sector.

 Tea & Agriculture Minimum value addition under advance authorisation scheme for export of tea has been reduced from the existing 100% to 50%. To reduce transaction and handling costs in agriculture, a singlewindow system to facilitate export of perishable agricultural produce has been introduced. Export-Oriented Units EOUs have been allowed to sell products manufactured by them up to a limit of 90% instead of existing 75%, without changing the criteria of similar goods, within the overall entitlement of 50% for sale EOUs will be allowed to procure finished goods for consolidation, subject to certain safeguards. Board of Approvals (BOA) will consider extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs.

EXPORT LICENSING
Application for an Export License: An application for grant of export license may be given to the DGFT and shall be accompanied by the documents prescribed therein. The Export Licensing Committee under the Chairmanship of Export Commissioner consider such applications For issue of export licenses special High Powered Licensing Committee under the Chairmanship of DGFT consider applications for export of dual purpose chemicals and for special materials, equipment and technologies Export of Canalised Items: An application for export of canalised items may be made to the DGFT

 Trade Fairs/Exhibitions: Any Indian wishing to organise any Trade Fair/Exhibition in India or abroad, would be required to obtain a certificate from an officer of the rank not below that of an Under Secretary to the GOI, in the Ministry of Commerce, or an Officer of ITPO, duly authorised by its chairman Such exhibition, fair or similar show or display, should be approved or sponsored by the GOI in the Ministry of Commerce or the ITPO and the same is being held in public interest. Gifts/Spares/Replacement Goods: For export of gifts, indigenous/imported spares and replacement goods in excess of the prescribed ceiling/period, an application may be made to the DGFT. Export through Courier Service: Import/Exports through a registered courier service is permitted as per the Notification issued by the Department of Revenue.

Export Documentation in India

Export documentation is used to keep shipment and delivery on schedule to describe cargo for customs clearance to indicate the ownership of goods for collection purposes or in the event of dispute to obtain payment.

 Incoterms are standard, internationally recognized trade terms used in sales contracts to help traders in different countries understand one another. Export documentation requirements often depends on the Incoterms used.

There are a number of documents, which have to be prepared by the exporter in order to arrange export of his consignments.

EXPORT DOCUMENTATION

Export Documents
Commercial Documents Principal(8) Auxiliary(7) Regulatory Documents(7)

RATIONALE FOR DOCUMENTATION

THE DOCUMENTS ARE IMPORTANT FOR TWO REASONS AS AN EVIDENCE OF SHIPMENT AND TITLE OF GOODS FOR OBTAINING PAYMENTS THE DOCUMENTS ARE CLASSIFIED INTO TWO CATEGORIES COMMERCIAL DOCUMENTS: REQUIRED FOR AFFECTING THE PHYSICAL TRANSFER OF GOODS FROM IMPORTER TO EXPORTER. EXAMPLE: PROFORMA INVOICE, COMMERCIAL INVOICE, PACKING LIST, SHIPING INSTRUCTION, INTIMATION FOR INSPECTION, BILL OF LADING, COMBINED TRANSPORT DOCUMENT, CERTIFICATE OF INSPECTION / QUALITY CONTROL, INSURANCE CERTIFICATE / POLICY, CERTIFICATE OF ORIGIN, BILL OF EXCHANGE AND SHIPMENT ADVICE. REGULATORY DOCUMENTS: PRESCRIBED BY DIFFERENT GOVT DEPTTS./ BODIES IN COMPLIANCE OF THE REQUIREMENTS OF VARIOUS RULES AND REGULATIONS. PRESCRIBED BY CENTRAL AUTHORITIES. EG: GATE PASS 1/ GATE PASS 2, AR4, AR4A FORM PRESCRIBED BY CUSTOMS AUTHORITIES: EG: SHIPPING BILL / BILL OF EXPORT PRESCRIBED BY PORT TRUST: EXPORT APPLICATION / DOCK CHALLAN, RECEIPT OF PAYMENT OF PORT CHARGES, VEHICLE TICKET PRESCRIBED BY RBI. EG: EXCHANGE CONTROL DECLARATION/GR/PP FORM, FREIGHT PAYMENT CERTIFICATE, INSURANCE PREMIUM PAYMENT CERTIFICATE

STANDARDIZED PRESHIPMENT EXPORT DOCUMENTS

THE GOI HAS MADE MANDATORY FOR EVERY EXPORTER TO USE SPED W.E.F SEP 1, 1991 POPULARLY KNOWN AS ALIGNED DOCUMENTATION SYSTEM (ADS) BASED ON UN LAYOUT KEY INVOLVES PREPARATION OF DOCUMENTS ON STD. A4 SIZE PAPER THE DOCUMENS ARE SO ALIGNED THAT COMMON ITEMS OF INFORMATION ARE GIVEN IN SAME RELATIVE SLOTS IN EACH DOCUMENTS INCLUDED IN THE SYSTEM

ADVANTAGES DISPENSES WITH CONVENTIONAL DOCUMENTATION PRACTICES BRINGS UNIFORMITY IN DOCUMENTATION ENSURES ECONOMY, SPEED, ACCURACY IN THE SYSTEM FACILITATES EXPEDITIOUS CHECKING & PROCESSING OF DOCUMENTS AT DIFFERENT STAGES GENRATES AS MANY COPIES OF REGULATORY & COMMERCIAL DOCUMENT THROUGH THEIR RESPECTIVE MASTER COPIES

1. The Commercial Invoice,

2. Packing List 3. Bill of Lading/Air Waybill

4. Certificate of Inspection/Quality control

5. Certificate of origin 6. Bill of Exchange and

7. Shipment Advice
8. Insurance Certificate

1. Proforma Invoice

2. Intimation for inspection

3. Shipping instructions 4. Insurance Declaration 5. Application for certificate of origin. 6. Mate's Receipt

7. Letter to bank of
collection/negotiation of documents

1. ARE Form ( for Central Excise) 2. Shipping Bill/Bill of Export(for Customs) - For export of goods Ex. Bond - For export of duty free goods - For export of dutiable goods - For export of goods under claim of drawback -For export of goods under claim of DEPB 3. Port Trust Copy of Shipping Bill/ Export Application/Dock Challan-Port

4. Vehicle ticket

-Port

5. Exchange Control Declaration/GR/PP forms-RBI 6. Freight Payment Certificate-Steamer Agents 7. Insurance Premium Payment Certificate- Insurance Co.

IMPORTANT DOCUMENTS
PROFORMA INVOICE:
STARTING POINT OF EXPORT CONTRACT IN THE FORM OF OFFER MADE BY THE EXPORTER TO THE FOREIGN CUSTOMER NORMALLY FORMS BASIS FOR ALL TRANSACTIONS USEFUL FOR IMPORTER IN OBTAINING IMPORT LICENSE OR FOREIGN EXCHANGE

COMMERCIAL INVOICE:

ALSO CALLED DOCUMENTS OF CONTENT (CONTAINS ALL INFORMATION REQUIRED FOR PREPARATION OF OTHER DOCUMENTS) IT IS ACTUALLY SELLERS BILL OF MERCHANDISE PREPARED BY EXPORTER AFTER EXECUTION OF EXPORT ORDER GIVING DETAILS ABOUT THE GOODS SHIPPED

PACKING LIST:

MAY BE SHOWN ON INVOICE OR SEPARATELY CONTAINS ITEM BY ITEM, THE CONTENTS OF CASES OR CONTAINERS OR SHIPMENT WITH WEIGHT & DESCRIPTION

MATES RECEIPT ISSUED BY COMMANDING OFFICER OF THE SHIP WHEN CARGO IS LOADED ON THE SHIP MATES RECEIPT IS FREELY TRANSFERABLE MUST BE HANDED OVER TO THE SHIPPING COMPANY TO GET BILL OF LADING TYPES OF MATE RECEIPT: (I) CLEAN MATES RECEIPT:WHEN COMMANDING OFFICER IS SATISFIED THAT GOODS ARE PACKED PROPERLY AND THERE IS NO DEFECT IN PACKING (II) QUALIFIED MATE RECEIPT: GOODS ARE NOT PACKED PREPERLY & SHIPPING COMPANY DOES NOT TAKE RESPONSIBILITY OF DAMAGE BILL OF LADING: IT IS THE DOCUMENT OF TITLE ISSUED BY SHIPPING COMPANY ACKNOWLEDGING THE RECEIPT OF GOODS UNDERTAKING TO DELIVER THE GOODS IN LIKE ORDER & CONDITION TO THE CONSIGNEE PROVIDED THE FREIGHT & CHARGES AS SPECIFIED IN THE BILLS HAVE BEEN PAID TYPES OF BILL OF LADING: (I) CLEAN BILL OF LADING: ACKNOWLEDGING RECEIPT OF GOOD IN GOD ORDER AND CONDITION (II) CLAUSED BILL OF LADING:QUALIFIED WITH CERTAIN ADVERSE REMARKS (III) THROUGH BILL OF LADING: FIRST CARRIER HAS THE RESPONSIBILITY AS THE PRINCIPAL CARRIER FOR ALL STAGES OF JOURNEY (IV)TRANS-SHIPMENT B/L:FIRST CARRIER ACT ONLY AS AN AGENT FOR EFFECTING TRANS-SHIPMENT OF CARGO (V) STALE B/L: THAT HAS BEEN HELD TOO LONG BEFORE ITS BEEN PASSED OVER TO THE BANK OR CONSIGNEE (VI) FREIGHT PAID B/L: FREIGHT IS PAID AT THE TIME OF SHIPMENT OR IN ADVANCE (VII) FREIGHT COLLECT B/L: FREIGHT IS NOT PAID & IS TO BE COLLECTED FROM THE CONSIGNEE ON THE ARRIVAL OF GOODS

CERTIFICATE OF ORIGIN: THE GOODS EXPORTED ARE ORIGINALLY MANUFACTURED IN THE COUNTRY WHOSE NAME IS MENTIONED IN THE CERTIFICATE. IT IS REQUIRED WHEN GOODS PRODUCED IN A PARTICULAR COUNTRY ARE SUBJECT TO PREFERRENTIAL TARIFF RATES IN THE FOREIGN MARKET AT THE TIME OF IMPORTATION THE GOODS PRODUCED IN A PARTICULAR COUNTRY ARE BANNED FOR IMPORT IN THE FOREIGN MARKET TYPES OF CERTIFICATE OF ORIGIN (I) NON PREFERRENTIAL CERTIFICATE OF ORIGIN: NO PRFERENTIAL TARIFF IS GIVEN. IT IS ISSUED BY a) THE AUTHORIZED CHAMBER OF COMMERCE OF THE EXPORTING COUNTRY b) TRADE ASSOCIATION OF THE EXPORTING COUNTRY (II) CERTIFICATE OF FOR AVAILING CONCESSION UNDER GSP (III) CERTIFICATE FOR AVAILING CONCESSION UNDER COMMONWEALTH PREFERENCE (IV) CERTIFICATE FOR AVAILING CONCESSON UNDER OTHER SYSTEM OF PREFERENCES SHIPPING BILL MAIN CUSTOM DOCUMENT, CARGO IS MOVED INSIDE THE DOCK AREA ONLY AFTER THE SHIPPING BILL IS DULY STAMPED TYPES OF SHIPPING BILL (I) DRAWBACK SHIPPING BILL: USEFUL FOR CLAIMING CUSTOMS DRAWBACK AGAINST GOODS EXPORTED (II) DUTIABLE SHIPPING BILL: REQUIRED FOR GOODS SUBJECTED TO EXPORT DUTY (III) DUTY-FREE SHIPPING BILL: GOODS IN WHICH NO EXPORT DUTY IS APPLICABLE

AFTER SHIPMENT, SUBMIT DOCUMENTS TO BANK FOR REALISING EXPORT PROCEEDS

PRESENTATION OF DOCUMENTS TO THE BANK

PRESENT ALL THE DOCUMENTS ENUMERATED IN THE L/C, IN EXACTLY THE SAME NUMBER AS INDICATED IN THE L/C WITHOUT DELAY WITHIN EXPIRY DATE WITHIN SPECIFIED PERIOD AFTER SHIPMENT DOCUMENTS SHOULD BE COMPLETE, IN CONFORMITY WITH THE TERMS OF L/C AND CONSISTENT WITH EACH OTHER THERE SHOULD BE NO DISCREPANCIES IN THE DOCUMENTS

PRESENTATION OF DOCUMENTS TO THE BANK

1. DOCUMENTARY COLLECTION GOODS ARE ONLY HANDED OVER TO THE BUYER WHEN THE AMOUNT SHOWN ON BILL OF EXCHANGE IS PAID OR WHEN CUSTOMER ACCEPTS THE BILL AS A CONTRACT TO PAY BY A SPECIFIED DATE IN D/C, BANK ACTS ON INSTRUCTION OF EXPORTER, & THE EXCHANGE OF DOCUMENTS TO TITLE, TAKES PLACE AT CUSTOMER PLACE OF BUSINESS ONCE THE EXPORTER DISPATCH GOODS TO CUSTOMER, EXPORTER COLLECTS SHIPPING DOCUMENTS, HE DRAWS BILL OF EXCHANGE ON THE BUYER THIS IS MADE OUT TO BE PAYABLE EITHER ON SIGHT (DEMAND) OR WITHIN A SPECIFIED TIME (90 DAYS) THE EXPORTER SENDS THE B/E & SHIPPING DOCUMENTS TO HIS BANK, WHICH FORWARDS THEM AN ADVISING BANK IN THE CUSTOMERS COUNTRY THIS BANK TAKES THE DOCUMENTS TO THE CUSTMER IF SIGHT BILL: CUSTOMERS PAYS THE AMOUNT DIRECTLY (D/P) IF TIME/USANCE BILL: PAYMENT WITHIN A SPECIFIED TIME(D/A)

CONTD
2. DOCUMENTARY CREDIT
THE DOCUMENTARY CREDIT IS MERE;Y A CREDIT OPENED WITH THE BANK IN THE EXPORTERS FAVOUR (OFTEN CALLED AS LETTER OF CREDIT {L/C}) THE INSTRUCTIONS COME FROM CUSTOMER AND THE EXCHANGE OF DOCUMENTS & PAYMENT TAKES PLACE AT THE EXPORTERS PLACE OF BUSINESS THE CUSTOMER OPENS THE CREDIT A/C AT HIS BANK FOR A CERTAIN SUM OF MONEY THE IS ONLY PAID UNDER CERTAIN CONDITIONS: THE GOODS WILL BE AS SPECIFIED ON THE ORDER THE PRICE OF GOODS WILL BE AS SPECIFIED THE DELIVERY OR DISPATCH WILL BE BY A CERTAIN DATE CHARGES FOR FREIGHT, INSURANCE, ETC. WILL BE AS SPECIFIED TWO BAKS ARE INVOLVED IN DOCUMENTAY CREDIT PROCESS: THE CUSTOMERS BANK WHICH OPENS THE CREDIT, IS KNOWN AS OPENING OR ISSUING BANK THE MONEY IS ACTUALLY PAID TO EXPORTER BY ANOTHER BANK, LOCATED IN HIS OWN COUNTRY KNOWN AS ADVISING OR CORRESPONDING

X LTD. CONFIRMS ACCEPTANCE OF ORDER & TERMS OF PAYMENT

Y LTD. ARRANGES CREDIT IN FAVOUR OF X LTD.

ADVISING BANK ADVISES X LTD.OF DOCUMENTARY CREDIT

OPENING BANK SENDS L/C TO ADVISING BANK IN XS COUNTRY

X LTD. SHIPS GOODS & COLLECTS SHIPING DOCUMENTS FROM SHIPPING LINE ADVISING BANK RECEIVES SHIPPING DOCUMENTS &PAYS X LTD. FORWARDS SHIPPING DOCUMENTS TO OPENING BANK OPENING BANK RECEIVES SHIPPING DOCUMENTSAND HANDS TO Y LTD. Y LTD. COLLECTS THE GOODS

CHECKLIST FOR PRESENTATION OF DOCUMENTS TO THE BANK

PRESENT ALL THE DOCUMENTS ENUMERATED IN THE L/C, IN EXACTLY THE SAME NUMBER AS INDICATED IN THE L/C WITHOUT DELAY WITHIN EXPIRY DATE WITHIN SPECIFIED PERIOD AFTER SHIPMENT DOCUMENTS SHOULD BE COMPLETE, IN CONFORMITY WITH THE TERMS OF L/C AND CONSISTENT WITH EACH OTHER THERE SHOULD BE NO DISCREPANCIES IN THE DOCUMENTS

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Financing and methods of payment

FOREIGN EXCHANGE REGULATIONS IN INDIA

Repatriation of investment capital and profits earned in India (i) All foreign investments are freely repatriable, subject to sectoral policies and except for cases where NRI choose to invest specifically under non-repatriable schemes. (ii) Non-residents can sell shares on stock exchange without prior approval of RBI and repatriate through a bank the sale proceeds if they hold the shares on repatriation basis and if they have necessary NOC/ tax clearance certificate issued by Income Tax authorities. (iii) For sale of shares through private arrangements, Regional offices of RBI grant permission for recognized units of foreign equity in Indian company. (iv) Profits, dividends, etc. (which are remittances classified as current account transactions) can be freely repatriated.

Acquisition of Immovable Property by Non-resident A person resident outside India, who has been permitted by Reserve Bank of India to establish a branch, or office, or place of business in India (excluding a Liaison Office), has general permission of Reserve Bank of India to acquire immovable property in India, which is necessary for, or incidental to, the activity. However, in such cases a declaration, in prescribed form (IPI), is required to be filed with the Reserve Bank, within 90 days of the acquisition of immovable property. Foreign nationals of non-Indian origin who have acquired immovable property in India with the specific approval of the Reserve Bank of India cannot transfer such property without prior permission from the Reserve Bank of India. Please refer to the Foreign Exchange Management (Acquisition and transfer of Immovable Property in India) Regulations 2000 (Notification No. FEMA.21/ 2000-RB dated May 3, 2000). Acquisition of Immovable Property by NRI An Indian citizen resident outside India (NRI) can acquire by way of purchase any immovable property in India other than agricultural/ plantation /farm house. He may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a Person of Indian Origin resident outside India or a person resident in India.

QUALITY CONTROL AND PRESHIPMENT INSPECTION

Under the Export (Quality Control and Inspection) Act, 1963, about 1000 commodities under the major group of: Food and Agriculture, Fishery, Minerals, Organic Chemicals, Rubber Products, Refractories, Ceramic Products, Pesticides, Light Engineering Steel Product, Jute Products, Coir and Coir Products, Footwear and Footwear Products/Components are subject to compulsory pre-shipment inspection. Products having ISI Certification mark or Agmark are not required to be inspected by any agency. PROCEDURE: Consignment to consignment inspection-under this scheme the application (in duplicate) for inspection for goods has to be submitted well in advance. Inspection of the consignment is generally carried out either at the premises of the exporter, or at the port of shipment. The inspection agency issues, generally within four days of receipt of intimation for inspection, the necessary certificate of inspection to the exporter in the prescribed proforma in five copies. Three copies for exporter, original copy for customs use, the second copy for the use of the foreign buyer and the third copy for the exporter's use, Fourth copy for Data Bank, Export Inspection Council, New Delhi and Fifth copy is retained with the agency for their own office record.

 In-process quality control and self-certification scheme IN-PROCESS QUALITY CONTROL: Certain products like chemicals or engineering goods are subject to this control. The inspection is done at various stages of production. The exporter has to get his unit registered as "Export worthy" and keep record of processing and production. Export is allowed on the basis of adequacy of IPQC and inspection measures exercised by the manufacturing units themselves. Units approved under this system may themselves issue the certificate of inspection, but only for the products for which they have been granted IPQC facilities. SELF-CERTIFICATION SCHEME: The industrial units having proven reputation and adequate testing facilities have to apply to the Director (Inspection and Quality Control), Export Inspection Council of India, 11th floor, Pragati Tower, 26 Rajendra Place, New Delhi-110 008. It grants a certificate valid for a period of one year. The approval of an industrial unit under this scheme is notified in the Gazette of India and the exporter has to pay a lump sum fee to the export inspection agencies depending upon his export turnover.

 Documents required for quality control

There are certain forms and documents that are necessary for quality control and pre-shipment inspection. The following documents need to be submitted along with the application:
(i) Particulars of the consignment intended to be exported (ii) A crossed cheque/draft for the amount of requisite inspection fees or an Indian Postal Order. (iii) Copy of commercial invoice (iv) Copy of Letter of Credit (v) Details of packing specifications (vi) Copy of the export order/contract, indicating inter alia the buyers requirement that goods are strictly according to the prescribed specifications or as per samples

 Every person has an insurable interest who is interested in a marine adventure

Marine Insurance Act, 1963

Legal and equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he is
benefited by its safe arrival or prejudiced by its loss or damage Incur liability as a result of such loss, damage or detention

Insurable interest
Insurable interest must be there at the time of loss or damage. The goods may change many hands during transit. At inception the insured should have reasonable expectation of acquiring such interest The loss to subject goods may be recovered even if the loss took place even before the insurance was concluded provided the insured is not aware of it. Lost or not lost makes the cover retrospective provided good faith has been observed. If insured has no interest at the time of the loss, he cannot acquire it later after he is aware of the loss. Assignment: Before or after the loss A Marine insurance policy/certificate is freely assignable When interest passes due to trade requirement Unless prohibited in the policy The Insurer has the same defense against the assignee as he had against the assignor.

Measure of insurable value.

(1) In insurance on ship, the insurable value is the value, at the commencement of the risk, of the ship, including her outfit, provisions, and stores for the officers and crew, money advanced for seamen's wages, and other disbursements (if any) incurred to make the ship fit for the voyage or adventure contemplated by the policy, plus the charges of insurance upon the whole 2) In insurance on freight, whether paid in advance or otherwise, the insurable value is the gross amount of the freight at the risk of the assured, plus the charges of insurance (3) In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the expenses of and incidental to shipping and the charges of insurance upon the whole

INCOTERMS
FOB C&F CIF Ex-works FCA FAS CPT CIP DAF Free on Board Cost and Freight Cost Insurance and Freight From seller premises Free to Carrier Free Alongside of ship Carriage Paid To (freight) Carriage & Insurance paid Delivery at Front (at border of nations) Delivery Ex Ship Delivery Ex. Quay Delivery Duty Unpaid (final port) Delivery Duty Paid (duty paid at final Port)

DES DEQ DDU DDP

EXPORT PROCEDURE

CUSTOM CLEARANCE

CENTRAL EXCISE CLEARANCE

DOCUMENTS FOR CLAIMING INCENTIVES

DUTY DRAWBACK SCHEME: CUSTOM DUTIES AND CENTRAL EXCISE DUTIES ON RAW MATERIALS, COMPONENTS AND PACKING MATERIALS USED IN EXPORT PRODUCTS ARE REFUNDED BACK TO THE EXPORTER. DRAWBACK RATES: TWO TYPES ALL INDUSTRY RATES: PUBLISHED IN THE FORM OF NOTIFICATION BY THE GOVT. EVERY YEAR & IS NORMALLY VALID FOR ONE YEAR BRAND RATES OR SPECIAL BRAND RATES: FIXED ON INDIVIDUAL REQUEST OF EXPORTER/ MANUFACTURER PROCEDURE FOR CLAIMING DUTY DRAWBACK EXPORTERS FILE THE DRAWBACK COPY OF SHIPPING BILL IN TRIPLICATE / QUADRUPLICATE, IF ANY EXPORT ASSISTANCE IS APPLICABLE DBK SHIPPING BILL MUST CONTAIN DBK SCHEDULE NO. OF THE EXPORT PRODUCT, PRODUCT DESCRIPTION, DRAWBACK RATE & TOTAL AMOUNT OF CLAIM DECLARATION THAT EXPORTS ARE BEING MADE UNDER CLAIM OF DBK & CUSTOM AND CENTRAL EXCISE HAVE BEEN PAID SHIPPING BILLS & OTHER DOCUMENTS ARE SCRUTINIZED BY CUSTOM OFFICER THE CUSTOM OFFICER GIVES EXAMINATION REPORT ON BOTH COPIES OF SHIPPING BILLS, RETAINS ORIGINAL & RETURN DUPLICATE, TRIPLICATE COPY THE EXPORTER PRESENTS COPY OF SHIPPING BILL TO THE DOCK APPRAISING OFFICER ALONGWITH THE EXPORT GOODS IF OFFICER FINDS IN ORDER, HE ENDORSES LET EXPORT ORDER ON COPIES OF SHIPPING BILLS THE AMOUNT IS CREDITED IN THE LEDGER ACCOUNT OF EXPORTER MAINTAINED

 1. 2. 3. 4. 5. 6. 7. 8. 9.

DOCUMENTS: CLAIM FOR DBK IS FILED ALONGWITH FOLLOWING DOCUMENTS COPY OF EXPORT CONTRACT/ LETTER OF CREDIT COPY OF PACKING LIST COPY OF AR4 FORM, WHEREVER APPLICABLE INSURANCE CERTIFICATE, IF NECESSARY COPY OF COMMUNICATION REGARDING RATE OF DRAWBACK COPY OF TEST REPORT, IF REQUIRED DECLARATIONS, IF REQUIRED DECLARATIONS REGARDING NOT AVAILING MODVAT CERTIFICATE FROM THE JURISDICTIONAL EXCISE SUPERINTENDENT, IF APPLICABLE 10.ANY OTHER DOCUMENT

CLEARING & FORWARDING AGENT

"Clearing and Forwarding Agent" means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent, [Section 65(25)].

IMPORT PROCEDURE

EXPORT CREDIT GUARANTEE CORPORATION

ECGC of India Limited, was established in the year 1957 by the GoI to strengthen the export promotion drive by covering the risk of exporting on credit. ECGC 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, RBI, banking, insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. What does ECGC 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 How does ECGC help exporters? ECGC 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 creditworthiness of overseas buyers

Electronic Data Interchange (EDI)

Introduction to EDI
What is EDI?
Electronic Data Interchange is the computer-to-computer exchange of business data and documents between companies using standard formats recognized both nationally and internationally. The information used in EDI is organized according to a specified format set by both companies participating in the data exchange.

Electronic Data Interchange

Benefits of EDI

77

Electronic Data Interchange

Suppliers, manufacturers, and retailers cooperate in some of the most successful 78 applications of EDI.

Advantages of EDI
Lower operating costs Saves time and money Less Errors = More Accuracy No data entry, so less human error Increased Productivity More efficient personnel and faster throughput Faster trading cycle Streamlined processes for improved trading relationships

Disadvantages
High Dependence on the participation of trading partners Costly for smaller companies Difficult to agree on standard to be used

Electronic Data Exchange

How does EDI work?
Suppliers proposal sent electronically to purchasing organization. Electronic contract approved over network. Supplier manufactures and packages goods, attaching shipping data recorded on a bar code. Quantities shipped and prices entered in system and flowed to invoicing program; invoices transmitted to purchasing organization
81

Electronic Data Exchange

Manufacturer ships order. Shipment notice EDI transaction sent (not shown) Purchasing organization receives packages, scans bar code, and compares data to invoices actual items received. Payment approval transferred electronically. Bank transfers funds from purchaser to suppliers account using electronic fund transfer (EFT).

Electronic Data Interchange

Figure

83

Value-Added Network (VAN)

communications networks supplied and managed by third-party companies that facilitate electronic data interchange, Web services and transaction delivery by providing extra networking services

VAN Model
Retailer A Wholesaler A

Retailer B Value-added Network Retailer C

Wholesaler B

Wholesaler C

Retailer D

Wholesaler D