how to set up an export ion

8/3/2019 How to Set Up an Export ion

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HOW TO SET UP AN EXPORT ORGANISATION

The proper selection of organization depends upon

Ability to raise finance. Capacity to bear the risk. Desire to exercise control over the business. Nature of regulatory framework applicable to anyone

If the size of the business is small, it would be advantageous to form a sole

proprietary business organization. It can be set up easily without much expenses and legal

formalities. It is subjected to only few governmental regulations. However, the biggest

disadvantage of sole proprietorship business is limited ability to raise funds which restricts

the growth. Besides the owner has unlimited personal liabilities. In order to avoid this

disadvantage, it is advisable to form a partnership firm.

The partnership firm can also be set up with ease and economy. Business can

take benefit of the varied experiences and expertise of the partners. The liability of the

partners though joint and several, is practically distributed amongst the various partners,

despite the fact that the personal liability of the partner is unlimited. The major disadvantage

of partnership firm of business organization is that conflict amongst the partners is a potential

threat to the business. It will not be out of place to mention here that partnership firms are

governed by the Indian Partnership Act, 1932 and, therefore they should be formed within the

parameters laid down by the Act. Company is another form of business organization, which

has the advantage of distinct legal identity and limited liability to the share holders.

It can be a private limited company or a public limited company. A private

limited can be formed by just two persons subscribing to its share capital. However, the

number of its shareholders cannot exceed 50, public cannot be invited to subscribe to its

capital and the members right to transfer their share is restricted. On the other hand, a pubic

limited company has a minimum of seven members. There is no limit on the maximum

number of its members. It can invite the public to subscribe to its capital and permit the

transfer of share. A public limited company offers enormous potential for growth because of

access to substantial funds. The liquidity of investment is high because of easiness of transferof shares. However its formation can be recommended only when the size of the business is


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large. For small business, a sole proprietary concern or a partnership firm will be the most

suitable form of business organization. In case it is decided to incorporate a private limited

company, the same is to be registered with the Registrar of Companies.

CHOOSING APPROPRIATE MODE OF OPERATIONS:

You can choose any of the following modes of operations

Merchant Exporter i.e. buying the goods from the market or from the manufacturerand then selling it to foreign buyers.

Manufacturer Exporter i.e. manufacturing the goods yourself for export. Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the seller

and charging the Commission.

Buying Agent i.e. acting on behalf of the buyer and charging Commission. Service provider i.e. providing service from India to another country.

NAMING THE BUSINESS

Whatever form of business organization has been finally decided, naming the

business is an essential task for every exporter. The name and style should be soft, attractive,

short and meaningful. Open a current account in the name of the organisation in whose name

you intend to export. It is advisable to open the account with a bank which is authorised to

deal in Foreign Exchange.

STRUCTURE OF AN EXPORT ORGANISATION

marketing manager for generating sales Commercial manager for looking activities of the execution of the orders. staff personnel for carrying out the day-to-day activities namely

o Preparation of pre - shipment documents.


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o Co-ordinating with clearing agents on the progress of the shipment to bemade.

o Co-ordinating with the ware house\C. excise department regarding packingand clearance of the goods for export.

o Preparation of post shipment documents foe banks.o Follow-up with the bank on dispatch of documents, receipt of payment,

availment of bank loans etc.

To look into the requirement of licenses, claiming of export benefits fiiling ofdocuments with the Government Authorities in Discharge of Export Obligations, if

any, filing of returns to the various Government Agencies which are mandatory,

prepare and keep an information bank of various transaction of the company, their

domestic as well as international competitors.

An office boy for doing leg work. A clearing and forwarding agent to handle the documents and the goods in the

customs premises\ in the ports of lading.

Depending upon the size of the business the numbers of personnel under each

category may increase. For example if a company is transacting substantial volume ofbusiness in more than one product. Then it is necessary to have marketing manager for each

product so that the person can concentrate on a particular trade to enhance the business.

REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING

IMPORTER EXPORTER CODE (IEC) NUMBER.

The Customs Authorities will now allow the exporter to export or import goods into or from

India unless he holds a valid IEC number. Before applying for IEC number it is necessary to

open a bank account in the name of the company with any commercial bank authorized to

deal in foreign exchange. The duly signed application form should be supported by the

following documents.

Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. 1000/- Certificate from the banker of the applicant firm as per Annexure 1 to the form given.


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One copy of PAN number issued by Income Tax Authorities duty attested by theapplicant.

One copy of Passport Size photographs of the applicant duly attested by the banker tothe applicant.

Declaration by the applicant that the proprietor/partners/directors as the case may beof the applicant company, are not associated as proprietor/partners/directors in any

other firm, which has been caution, listed by the RBI. Where the applicant declares

that they are associated as proprietor/partners/directors in any other firm, which has

been caution, listed by the RBI, they will be allotted IEC No. but with an additional

condition that they can export only with RBIs prior approval and they should

approach RBI for the purpose.

Each importer/exporter shall be required to file importer/exporter profile once withthe licensing authority shall enter the information furnished in Appendix 2 in their

database so as to dispense with changes in the information given in Appendix-2,

importer/exporter shall intimate the same to the licensing authority.

IEC EXEMPT CATEGORIES.

The following importer exporter is exempted from the requirement of IEC code number.

Ministries \ Department of Central or State Government. Person importing or exporting goods for their personal use not connected with trade

or manufacture or agriculture.

Persons importing\exporting goods from\to Nepal & Myanmar provided the CIF valueof single consignment does exceed Indian Rs. 25000\-.

APPLICATION FOR OBTAINING AN IEC NUMBER

For obtaining IEC number apply in the prescribe form along with the documents listed above

to Regional Licensing Authority (Office of the Regional DGFT). The registered office or the

head office may apply for allotment of IEC No.

Whenever, there is a change in the name, address or constitution of the holder of IEC No.,

such change should be intimated within 30 days to the concern authorities.


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IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is also

endorsed to the concerned banker.

VALIDITY:

The IEC No allotted to a firm/company will be valid for all its branches/divisions

units/factories as indicated in the IEC No. Import/Export of any commodity by that

firm/company. There being no date of expiry, the IEC once allotted is valid till it is revoked.

But, if no import or export is effected in the previous financial year, the same will be made

inoperative. However, this can be made operative by a formal request to the DGFT.

IDENTITY CARD (For conducting transactions with the office of DGFT):

As it is not always possible for the top man or directors, promoters of the company to visit

DGFT frequently. There is a provision of issuance of identity cards to the

proprietors/partners/directors and their authorized representatives. An application of Issuance

of an identity card may be made in the form (Appendix-5) The document/

License/Certificate/Permissions may be delivered to the identity card holder and officials of

the Licensing Authority(DGFT)shall not be responsible for any loss etc. In case of loss of an

identity card a duplicate card may be issued on the basis of an FIR & affidavit. In addition to

obtaining the IEC No. the exporter is also required to obtain Business Identification No(BIN).

For this exporter is required to contact DGFT online on web site. The licensing authority

issues BIN in coordination with customs authorities. This BIN is required to be mentioned on

the shipping bills at the time of customs clearance of the export cargo.

RCMC (Registration-Cum-Membership Certificate) REGISTRATION WITH EXPORT

PROMOTION COUNCILS

In order to enable the exporter to obtain benefits/concessions under the Foreign Trade Policy,

the exporter is required to register himself with an appropriate export promotion agency by

obtaining registration-cum-membership certificate. (RCMC). If the export product is that it is

not covered by any EPC, RCMC in respect thereof may be issued by FIEO. An application

for registration should be accompanied by a self certified copy of the Importer-Exporter Code

number issued by the regional licensing authority concerned and bank certificate in support


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of the applicants financial soundness. The RCMC shall be valid for 5 years ending 31st

March of the licensing year.

REGISTRATION WITH SALES TAX AUTHORITIES:

Goods that are to be shipped out of the country for export are eligible for exemptions from

both Sales Tax and Central Sales Tax. For this purpose, exporter should get himself

registered with the Sale Tax Authority of is state after following the procedures prescribed

under the Sales Tax Act applicable to his state.

HOW ONE BEGINS TO DO EXPORT

Before entering into the venture of exports, one must look for the product to be exported and

the market where he intends to export.

In case of a manufacturer, obviously he would like to export the product he manufactures as

is or with possible modification as may be required by the market. However, in case of a

merchant exporter or a trader, one has to identity the product to export. If the exporter is

already in the trade in the domestic market and is familiar with the product it would be an

advantage to export the said product of which he has reasonable knowledge.

Before selecting a product, one must simultaneously made a study and find out the

prospective market. For finding out the market for the selected product, the following

methods will help.

Get statistical information as to imports of the product by various countries andtheir growth prospects in the respective countries

Approach the chamber of commerce for their guidance to find out the market. Approach the Export Promotion Council dealing in the product of selection to get

more information.

The Preliminary

Once you are ready with the product you wish to export and have found the market for the

same, you are ready to proceed further. Following sequences can be followed:


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Any one, who wishes to export, must first of all get an Importer Exporter CodeNumber (IE Code).This can be obtained by making a formal application to the

office of the Regional Directorate General of Foreign Trade (DGFT).

Get yourself registered with the related Export Promotion Council andbecome a member. Also arrange to obtain Registration-Cum-Membership

Certificate (RCMC) from the council. This has twin objectives:

o Under the Foreign Trade Policy, it is mandatory that an exporter gets himregistered with the Export Promotion Council to avail of various export

facilities.

o Being a member, you will have access to all the information relating to theproduct that could be made available by the council

o Many foreign buyers send their enquiries for the imports to the ExportPromotion Council. Hence you will have few customers interested in your

product.

If you are a manufacturer, find out the provisions under the EXIM Policy of gettingthe raw materials duty free.

Get familiar with the excise formalities as goods meant for export can be clearedwithout payment of C. Excise duty on the finished product subject to compliance of

certain formalities.

Understand the local government regulations in relations to the export of the product. Get information of the governments regulations of the importing country as to

restrictions on the quantity, product specification, packing regulations, customs

regulations, requirement of specific documents/information etc.

Availability of Vessels/Airlines, the transport charges, frequency of operation etc., To look for a Custom House Agent (CHA) (also know as freight forwarders or

clearing agents) for handling the documents/cargo in the customs.

If the product is covered under any quota regulation, find out the agency/council whoare handling the quota distribution for the product and the availability of quota for

exports.

FINDING A CUSTOMS

Once you have selected the market, the next step is to find a prospective customer. This

you can get


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From the directory of importers of the country By writing to the Embassy of India in that country for assistance By writing to the chamber of commerce of that country

By means of participation in a Fair/Exhibition abroad either directly or through theExport Promotion Council

By participating in international fair if organized locally Through the personal contacts in that country. By these processes one can only have

the list of customers. One has to dialogue or correspond with these customers by

sending samples, getting feedback from the customers etc. to ultimately select the

customer with whom to deal with. It is necessary to know the financial standing of the

company which can be obtained through the bank channel or through the office ofECGC.

NEGOTIATING CONTRACT.

Once the prospective customer is found, the business deal has to be concluded. The

following aspects may be considered before entering into a final contract with the buyer.

Credit Worthiness of the Customer. Availability of the Steamer/Airlines and the frequency The freight charges The full product specification The quantity, Price Terms of Payment Type of packing and markings on the packages Mode of shipment & Shipment schedule

Tolerance of quantity to be shipped Documentation requirement for the customer Documentation requirement of the government of importing country Compliance of the local governmental rules and regulations

Before entering into contract one should take note of the above factors. While these are

indicative, the requirements will vary from country to country, product to product and buyer

to buyer.


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EXPORT SALES & CONTRACT TERMS & CONDITIONS

Very often exporters do not enter into any formal contract and finalize the trade deal through

the exchange of letters, cable, telex etc. It is, however, expedient that the parties (exporters &

importers) incorporate all important terms & conditions of their trade deal in a separate

document or contract that will avoid disputes arising out of uncertainty or ambiguity. Export

contract may be sent in duplicate along with the Proforma Invoice to the overseas buyer.

NATURE OF INTERNATIONAL TRADE COUNTRACTS.

There are certain, peculiar characteristics of international trade contract which are not present

in those for sales of goods in the domestic market

Whereas the parties to a domestic trace contract normally needs only agree on the elements

which are necessary for their particular trade transactions like price, description, quality and

quantity of goods, delivery terms etc the situation will be quite different when the buyer and

the seller to sale/purchase contract belong to different countries. The parties to all

international trade contracts provide all their relative rights and obligations in several ways

For example, they may agree to adopt either the Law of the country of the buyer or that of the

seller. The traders are normally reluctant to leave the determination of the rights and

obligations by implications under the legal system of eithers country. They prefer to make

explicit provisions regarding the rights and obligations by including a set of detailed and

precise terms and conditions in their contract.

EXPORT OF SAMPLES\GIFTS.

Exports of bonafide trade and technical samples of freely exportable items shall be allowed

without any limit. Goods including edible items of value not exceeding Rs. 100000/- in a

licensing year, may be exported as a gift. However items mentioned as restricted for exports

in ITC(HS) shall not be exported as a gift without a licence/certificate/permission, except in

the case of edible items.


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STANDARD CONTRACT FOMS:

Notwithstanding the efforts made by various national/international organizations like the

United Nations Commission on the International Trade Law, there is still no perfection or a

device which would give the parties an accurate and complete idea of each others

understanding of various trade terms, the commercial practices and the rights and the

obligations vis--vis each other so that the misunderstandings are practically eliminated.

Nevertheless, the Indian Council of Arbitration published in 1966 a booklet on Standard

Contract Forms and Model Arbitration Clause for use in Foreign Trade Contracts. It was

revised and reprinted in 1969 and 1977. It can be referred to by exporter for various clause to

be incorporated in the Export Contract.

ENTERING INTO AN EXPORT CONTRACT

In order to avoid disputes, it is necessary to enter into an export contract with the overseas

buyer. For this purpose, export contract should be carefully drafted incorporating

comprehensive but in precise terms, all relevant and important conditions of the trade deal.

There should not be any ambiguity regarding the exact specifications of goods and terms of

sale including export price, mode of payment, storage and distribution methods, type of

packaging, port of shipment, delivery schedule etc. The different aspects of an export contract

are enumerated as under:

Product, Standards and Specifications Quantity Inspection Total Value of Contract Terms of Delivery Taxes, Duties and Charges Period of Delivery/Shipment Packing, Labeling and Marking Terms of Payment-- Amount/Mode & Currency Discounts and Commissions Licenses and Permits


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Insurance Documentary Requirements Guarantee Force Majeure of Excuse for Non-performance of contract Remedies Arbitration clause

It will not be out of place to mention here the importance of arbitration clause in an export

contract Court proceedings do not offer a satisfactory method for settlement of commercial

disputes, as they involve inevitable delays, costs and technicalities. On the other hand,

arbitration provides an economic, expeditious and informal remedy for settlement of

commercial disputes. Arbitration proceedings are conducted in privacy and the awards are

kept confidential. The Arbitrator is usually an expert in the subject matter of the dispute. The

dates for arbitration meetings are fixed with the convenience of all concerned. Thus,

arbitration is the most suitable way for settlements of commercial disputes and it may

invariably be used by businessmen in their commercial dealings.

ARBITRATION:

Arbitration clause recommended by the Indian Council of Arbitration:All disputes or

differences whatsoever arising between the parties out of / relating to the meaning,

construction and operation or effect of this contract or the breach thereof shall be settled by

arbitration in accordance with the rules of Arbitration of the Indian Council of Arbitration

and the award made in pursuance thereof shall be binding on the parties (or any other

arbitration clause that may be agreed upon between the parties).

TERMS OF SHIPMENTS

INCOTERMS

The INCOTERMS (International Commercial Terms) is a universally recognized set of

definition of international trade terms, such as FOB, CFR & CIF, developed by the

International Chamber of Commerce(ICC) in Paris, France. It defines the trade contract

responsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving

tool. The exporter and the importer need not undergo a lengthy negotiation about the

conditions of each transaction. Once they have agreed on a commercial terms like FOB, they


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can sell and buy at FOB without discussing who will be responsible for the freight, cargo

insurance and other costs and risks.

The INCOTERMS was first published in 1936 --- INCOTERMS 1936 --- and it is revised

periodically to keep with changes in the international trade needs. The complete definition of

each term is available from the current publication --- INCOTERMS 2000. Under

INCOTERMS 2000, the international commercial terms are grouped into E, F, C and D,

designated by the first letter of the term, relating to the final letter of the term. E.g. EXW

exworks comes under grouped E.

The purpose of Incoterms is to provide a set of international rules for the interpretation of the

most commonly used trade terms in foreign trade. Thus, the uncertainties of differentinterpretations of such terms in different countries can be avoided or at least reduced to a

considerable degree. The scope of Incoterms is limited to matters relating to the rights and

obligations of the parties to the contract of sale with respect to the delivery of goods.

Incoterms deal with the number of identified obligations imposed on the parties and the

distribution of risk between the parties.

In international trade, it would be best for exporters to refrain, wherever possible, from

dealing in trade terms that would hold the seller responsible for the import customs clearance

and/or payment of import customs duties and taxes and/or other costs and risks at the buyers

end, for example the trade terms DEO (Delivery Ex Quay) and DDP (Delivered Duty Paid)

Quite often, the charges and expenses at the buyers end may cost more to the seller than

anticipated. To overcome losses, hire a reliable customs broker or freight forwarder in the

importing country to handle the import routines.

Similarly, it would be best for importers not to deal in EXW (Ex Works) which would hold

the buyer responsible for the export customs clearance, payment of export customs charges

and taxes, and other costs and risks at the sellers end

MORE CLARIFICATION ON INCOTERMS

EXW {+the named place}


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Ex Works: Ex means from. Works means factory, mill or warehouse, which are the sellers

premises. EXW applies to goods available only at the sellers premises. Buyer is responsible

for loading the goods on truck or container at the sellers premises and for the subsequent

costs and risks. In practice, it is not uncommon that the seller loads sthe goods on truck or

container at the sellers pre4mises without charging loading fee. N the quotation, indicate the

named place (sellers premises) after the acronym EXW for example EXW Kobe and EXW

San Antonio.

The term EXW is commonly used between the manufacturer (seller) and export-

trader(buyer), and the export-trader resells on other trade terms to the foreign buyers. Some

manufacturers may use the term Ex Factory, which means the same as Ex Works.

FCA {+the named point of departure}

Free Carrier: The delivery of goods on truck, rail car or container at the specified

point(depot) of departure, which is usually the sellers premises, or a named railroad station or

a named cargo terminal or into the custody of the carrier, at sellers expense. The point(depot)

at origin may or may not be a customs clearance centre. Buyer is responsible for the main

carriage/freight, cargo insurance and other costs and risks.

In the air shipment, technically speaking, goods placed in the custody of an air carrier are

considered as delivery on board the plane. In practice, many importers and exporters still use

the term FOB in the air shipment. The term FCA is also used in the RO/RO (roll on/roll off)

services

In the export quotation, indicate the point of departure (loading) after the acronym FCA, for

example FCA Hong Kong and FCA Seattle. Some manufacturers may use the former terms

FOT (Free on Trucks) and FOR (Free on Rail) in selling to export-traders.

FAS {+the named port of origin}

Free Alongside Ship: Goods are placed in the dock shed or at the side of the ship, on the

dock or lighter, within reach of its loading equipment so that they can be loaded aboard the

ship, at sellers expense. Buyer is responsible for the loading fee, main carriage/freight, cargo

insurance, and other costs and risks In the export quotation, indicate the port of

origin(loading)after the acronym FAS, for example FAS New York and FAS Bremen. The


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FAS term is popular in the break-bulk shipments and with the importing countries using their

own vessels.

FOB {+the named port of origin)

Free on Board: The delivery of goods on the board the vessel at the named port of origin

(Loading) at sellers expense. Buyer is responsible for the main carriage/freight, cargo

insurance and other costs and risks. In the export quotation, indicate the port of origin

(loading) after the acronym FOB, for example FOB Vancouver and FOB Shanghai.

Under the rules of the INCOTERMS 1990, the term FOB is used for ocean freight only.

However, in practice, many importers and exporters still use the term FOB in the air freight.

In North America, the term FOB has other applications. Many buyers and sellers in Canada

and the USA dealing on the open account and consignment basis are accustomed to using the

shipping terms FOB Origin and FOB destination.

FOB Origin means the buyer is responsible for the freight and other costs and risks. FOB

Destination means the seller is responsible for the freight and other costs and risks until the

goods are delivered to the buyers premises which may include the import custom clearance

and payment of import customs duties and taxes at the buyers country, depending on the

agreement between the buyer and seller. In international trade, avoid using the shipping terms

FOB Origin and FOB Destination, which are not part of the INCOTERMS (International

Commercial Terms).

CFR {+the named port of destination}

Cost and Freight: The delivery of goods to the named port of destination (discharge) at the

sellers expenses. Buyer is responsible for the cargo insurance and other costs and risks. The

term CFR was formerly written as C&F. Many importers and exporters worldwide still use

the term C&F.

In the export quotation, indicate the port of destination (discharge) after the acronym CFR,

for example CFR Karachi and CFR Alexandria. Under the rules of the INCOTERMS 1990,

the term Cost and Freight is used for ocean freight only. However, in practice, the term Cost

and Freight (C&F) is still commonly used in the air freight.


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CIF {+named port of destination}

Cost, Insurance and Freight: The cargo insurance and delivery of goods to the named port

of destination (discharge) at the sellers expense. Buyer is responsible for the import customs

clearance and other costs and risks.

In the export quotation, indicate the port of destination (discharge) after the acronym CIF, for

example CIF Pusan and CIF Singapore. Under the rules of the INCOTERMS 1990, the term

CIFI is used for ocean freight only. However, in practice, many importers and exporters still

use the term CIF in the air freight.

CPT {+the named place of destination}

Carriage Paid To: The delivery of goods to the named port of destination (discharge) at the

sellers expenses. Buyer assumes the cargo insurance, import custom clearance, payment of

custom duties and taxes, and other costs and risks. In the export quotation, indicate the port of

destination (discharge) after the acronym CPT, for example CPT Los Angeles and CPT

Osaka.

CIP {+ the named place of destination)

Carriage and Insurance Paid To: The delivery of goods and the cargo insurance to the

named place of destination (discharge) at sellers expense. Buyer assumes the importer

customs clearance, payment of customs duties and texes, and other costs and risks.

In the export quotation, indicate the place of destination (discharge) after the acronym CIP,

for example CIP Paris and CIP Athens.

DAF {+ the names point at frontier}

Delivered At Frontier: The delivery of goods to the specified point at the frontier at sellers

expense. Buyer is responsible for the import custom clearance, payment of custom duties and

taxes, and other costs and risks.

In the export quotation, indicate the point at frontier (discharge) after the acronym DAF, for

example DAF Buffalo and DAF Welland.


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DES {+named port of destination}

Delivered Ex Ship: The delivery of goods on board the vessel at the named port of

destination (discharge) at sellers expense. Buyer assumes the unloading free, import customs

clearance, payment of customs duties and taxes, cargo insurance, and other costs and risks.

In the export quotation, indicate the Port of destination (discharge) after the acronym DES,

for example DES Helsinki and DES Stockholm.

DEQ {+ the named port of destination

Delivered Ex Quay: The delivery of goods to the Quay (the port) at the destination at buyers

expense. Seller is responsible for the importer customs clearance, payment of customs duties

and taxes, at the buyers end. Buyer assumes the cargo insurance and other costs and risks. In

the export quotation, indicate the Port of destination (discharge) after the acronym DEQ, for

example DEQ Libreville and DEQ Maputo.

DDU {+ the named point of destination}

Delivered Duty Unpaid: The delivery of goods and the cargo insurance to the final point at

destination, which is often the project site or buyers premises at sellers expense. Buyer

assumes the import customs clearance, payment of customs duties and taxes. The seller may

opt not to insure the goods at his/her own risks.

In the export quotation, indicate the point of destination (discharge) after the acronym DDU

for example DDU La Paz and DDU Ndjamena.

DDP {+ the named point of destination)

Delivered Duty Paid: The seller is responsible for most of the expenses which include the

cargo insurance, import custom clearance, and payment of custom duties, and taxes at the

buyers end, and the delivery of goods to the final point of destination, which is often the

project site or buyers premise. The seller may opt not to insure the goods at his/her own risk.

In the export quotation, indicate the point of destination (discharge) after the acronym DDP,

for example DDP Bujumbura and DDP Mbabane.


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E-term,F-term, C-term &D-term: Incoterms 2000, like its immediate

predecessor, groups the term in four categories denoted by the first letter in the three-letter

abbreviation.

Under the E-TERM (EXW), the seller only makes the goods available to the buyerat the sellers own premises. It is the only one of that category.

Under the F-TERM (FCA, FAS, &FOB), the seller is called upon to deliver thegoods to a carrier appointed by the buyer.

Under the C-TERM (CFR, CIF, CPT, & CIP), the seller has to contract forcarriage, but without assuming the risk of loss or damage to the goods or additional

cost due to events occurring after shipment or discharge.

Under the D-TERM (DAF, DEQ, DES, DDU & DDP), the seller has to bear allcosts and risks needed to bring the goods to the place of destination.

All terms list the sellers and buyers obligations. The respective obligations of both parties

have been grouped under up to 10 headings where each heading on the sellers side mirrors

the equivalent position of the buyer. Examples are Delivery, Transfer of risks, and Division

of costs. This layout helps the user to compare the parties respective obligations under each

Incoterms.

PROCESSING AN EXPORT ORDER

You should not be happy merely on receiving an export order. You should first acknowledge

the export order, and then proceed to examine carefully in respect of

Items Specification Pre-shipment inspection Payment conditions Special packaging Labeling and marketing requirements Shipment and delivery date Marine insurance Documentation requirement etc.


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If you are satisfied on these aspects, a formal confirmation should be sent to the buyer,

otherwise clarification should be sought from the buyer before confirming the order. After

confirmation of the export order immediate steps should be taken for

procurement/manufacture of the export goods. In the meanwhile, you should proceed to enter

into a formal export contract with the overseas buyer.

Before accepting any order necessary homework should have been done as to availability of

the production capacity, raw material e.t.c. It would be in the interest of the exporter to look

into entering into forward contract to safeguard against exchange rate fluctuations. Ensure

that the mode of payment is also agreed upon. In case of shipment against letter of credit, the

buyer should be advised to open the credit well in advance before effecting the shipment.

FINANCIAL RISKS INVOLVED IN FOREIGN TRADE

As an exporter while selling goods abroad, you encounter various types of risks. The major

risks which you have to undergo are as follows:

Credit Risk Currency Risk Carriage Risk Country Risk

You can protect yourself against the above risks by initiating appropriate steps.

Credit Risks :

You can cover your credit risk against the foreign buyer by insisting upon opening a letter of

credit in your favour. Alternatively one can avail of the facility offered by various credit risk

agencies. A specific insurance cover can also be obtained from ECGC (Exports Credit &

Guarantee Corporation) to cover your country risk besides covering credit risk.

Currency Risks:

As regards covering the currency risk, due to the exchange rate fluctuations, you can request

your banker to book a forward contract.


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Carriage Risk:

The carriage risk can be covered by taking an appropriate general insurance policy.

Country Risk:

ECGC provides cover to protect the exporter from country risks. A detailed procedure how

an exporter can get himself protected against the above risks are given in separate chapters

later.

EXPORT DOCUMENTS

Any export shipment involved various documents required by various authorities such as

customs, excise, RBI, Inspection and according depending upon the requirements, there are

categorized into 2 categories, namely commercial documents and regulatory documents.

A. Commercial Documents. : - Commercial documents are required for effectingphysical transfer of goods and their title from the exporter to the importer and the

realisation of export sale proceeds. Out of the 16 commercial documents in the export

documentation framework as many as 14 have been standardised and aligned to one

another. These are proforma invoice, commercial invoice, packing list, shipping

instructions, intimation for inspection, certificate, of inspection of quality control,

insurance declaration, certificate' of insurance, mate's receipt, bill of lading or

combined transport document, application for certificate origin, certificate of origin,

shipment advice and letter to the bank for collection or negotiation of documents.

However, shipping order and bill of exchange could not be brought within the fold ofthe Aligned Documentation System,

1. Commercial Invoice: Commercial invoice is an important and basic exportdocument. It is also known as a 'Document of Contents' as it contains all the

information required for the preparation of other documents. It is actually a seller's bill

of merchandise. It is prepared by the exporter after the execution of export order giving

details about the goods shipped. It is essential that the invoice is prepared in the name

of the buyer or the consignee mentioned in the letter of credit. It is a prima facie


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evidence of the contract of sale or purchase and therefore, must be prepared strictly in

accordance with the contract of sale.

Contents of Commercial Invoice

Name and address of the exporter. Name and address of the consignee. Name and the number of Vessel or Flight. Name of the port of loading. Name of the port of discharge and final destination. Invoice number and date. Exporter's reference number. Buyer's reference number and date. Name of the country of origin of goods. Name of the country of final destination. Terms of delivery and payment. Marks and container number. Number and packing description. Description of goods giving details of quantity, rate and total amount in terms of

internationally accepted price quotation.

Signature of the exporter with date.Significance of Commercial Invoice

It is the basic document useful in preparation of various other shipping documents. It is used in various export formalities such as quality and pre-Shipment inspection

excise and customs procedures etc.

It is also useful in negotiation of documents for collection and claim of incentives. It is useful for accounting purposes to both exporters as well as importers.

2 Inspection Certificate: The certificate is issued by the inspection authority such as theexport inspection agency. This certificate states that the goods have been inspected

before shipment, and that they confirm to accepted quality standards.


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3 Marine insurance policy: Goods in transit are subject to risk of loss of goods arisingdue to fire on ship, perils of sea, theft etc. marine insurance protects losses incidental to

voyages and in land transportation. Marine insurance policy is one of the most

important document used as collateral security because it protects the interest of all

those who have insurable interest at the time of loss. The exporter is bound to insure the

goods in case of CIF quotation, but he can also insure the goods in case of FOB

contract, at the request of the importer, but the premium payment will be made by the

exporter. There are different types of policies such as

SPECIFIC POLICY: This policy is taken to cover different risks for a singleshipment. For a regular exporter, this policy is not advisable as he will have to

take a separate policy every time a shipment is made, so this policy is taken

when exports are in frequent.

Floating Policy: This is taken to cover all shipments for some months. Thereis no time limit, but there is a limit on the value of goods and once this value is

crossed by several shipments, then it has to be renewed.

Open Policy: This policy remains in force until cancelled by either party i.e.insurance company or the exporter.

Open Cover Policy: This policy is generally issued for 12 months period, forall shipments to one or more destinations. The open cover may specify the

maximum value of consignment that may be sent per ship and if the value

exceeded, the insurance company must be informed by the exporter.

Insurance Premium: Differs upon product to product and a number of suchother factors, such as, distance of voyage, type and condition of packing, etc.

Premium for air consignments are lowered as compared to consignments by

sea.

4. Consular Invoice: Consular invoice is a document required mainly by the Latin

American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Myanmar,

Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This invoice is the

most important document, which needs to be submitted for certification to the Embassy

of the importing country concerned. The main purpose of the consular invoice is to

enable the authorities of the importing country to collect accurate information about the

volume, value, quality, grade, source, etc., of the goods imported for the purpose of


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assessing import duties and also for statistical purposes. In order to obtain consular

invoice, the exporter is required to submit three copies of invoice to the Consulate of

the importing country concerned. The Consulate of the importing country certifies them

in return for fees. One copy of the invoice is given to the exporter while the other two

are dispatched to the customs office of the importer's country for the calculation of the

import duty. The exporter negotiates a copy of the consular invoice to the importer

along with other shipping documents.

Significance of Consular Invoice for the Exporter

It facilitates quick clearance of goods from the customs in exporter's as well asimporter's country.

Certification' of goods by the Consulate of the importing country indicarer thatthe importer has fulfilled all procedural and licensing formalities for import of

goods.

It also assures the exporter of the payment from the importing country.Significance of Consular Invoice for the Importer

It facilitates quick clearance of goods from the customs at the port destinationand therefore, the importer gets quick delivery of goods.

The importer is assured that the goods imported are not banned for imported inhis country.

Significance of Consular Invoice for the Customs Office

It makes the task of the customs authorities easy. It facilitates quick calculation of duties as the value of goods as determine by the

Consulate is considered for the purpose.

5. Certificate of Origin: The importers in several countries require a certificate oforigin without which clearance to import is refused. The certificate of origin states that

the goods exported are originally manufactured in the country whose name is

mentioned in the certificate. Certificate of origin is required when:-


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The goods produced in a particular country are subject to preferential tariff rates in theforeign market at the time importation.

The goods produced in a particular country are banned for import in the foreign market.Types of the Certificate of Origin

(a) Non-preferential Certificate, of Origin: - Non-preferential certificate of origin is

required in general by all countries for clearance of goods by the importer, on which no

preferential tariff is given. It is issued by:

The authorised Chamber of Commerce of the exporting country. Trade Association. Of the exporting country.

(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin

required for availing of concessions under Generalised System of Preferences (GSP)

extended by certain, countries such as France, Germany, Italy, BENELUX countries,

UK, Australia; Japan, USA, etc. This certificate can be obtained from specialised

agencies, namely;

Export Inspection Agencies. Jt. Director General of Foreign Trade.. Commodity Boards and their regional offices. Development Commissioner, Handicrafts. Textile Committees for textile products. Marine Products Export Development Authority for marine products. Development Commissioners of EPZs

(c) Certificate for availing Concessions under Commonwealth Preferences (CWP):

Certificate of origin for the purpose of Commonwealth Preference is also known as

'Combined Certificate of Origin and Value'. It is required by two member countries, i.e.

Canada and New Zealand of the Commonwealth. For concession under Commonwealth

preferences, the certificates or origin have to be submitted in special forms obtainable,

from the High Commission of the country concerned.


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(d) Certificate for availing Concessions under other Systems of Preference:- Certificate

of origin is also required for tariff concessions. under the Global System of Trade

Preferences (GSTP), Bangkok Agreement(BA) and SAARC Preferential Trading

Arrangement (SAPTA) under which India grants and receives tariff concessions On

imports and exports. Export Inspection Council (EIC) is the sole authority to print blank

Certificates of Origin under BA, SAARC and SAPTA which can be issued by such

agencies as EPCs, DCs of EPZs, EIC, APEDA, MPEDA, FIEO, etc...

Contents of Certificate of Origin

Name and logo of chamber of commerce. Name and address of the exporter. Name and address of the consignee. Name and the number of Vessel of Flight Name of the port of loading. Name of the port of discharge and place of delivery. Marks and container number. Packing and container description. Total number of containers and packages. Description of goods in terms of quantity. Signature and initials of the concerned officer of the issuing authority. Seal of the issuing authority.Significance of the Certificate of Origin

Certificate of origin is required for availing of concessions under Generalised Systemof Preferences (GSP) as well as under Commonwealth Preferences (CWP).

It is to be submitted to the customs for the assessment of duty clearance of goods withconcessional duty.

It is required when the goods produced in a particular country are banned for importin the foreign market.

It helps the buyer in adhering to the import regulations of the country. Sometimes, in order to ensures that goods bought from some other country have not

been reshipped by a seller, a certificate of origin IS required.


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6. Bill of Lading: The bill of lading is a document issued by the shipping company or

its agent acknowledging the receipt of goods on board the vessel, and undertaking to

deliver the goods in the like order and condition as received, to the consignee or his

order, provided the freight and other charges as specified in the bill have been duly

paid. It is also a document of title to the goods and as such, is freely transferable by

endorsement and delivery.

Bill of Lading serves three main purposes:

As a document of title to the goods; As a receipt from the shipping company; and As a contract for the transportation of goods.

Types of Bill of Lading

Clean Bill of Lading: - A bill of lading acknowledging receipt of the goodsapparently in good order and condition and without any qualification is termed as a

clean bill of lading.

Claused Bill of Lading: - A bill of lading qualified with certain adversere marks suchas, "goods insufficiently packed in accordance with the Carriage of Goods by Sea

Act," is termed as a claused bill of lading.

Transhipment or Through Bill of Lading: - When the carrier uses other transportfacilities, such as rail, road, or another steamship company in addition to his own, the

carrier issues a through or transhipment bill of lading.

Stale Bill of Lading: - A bill of lading that has been held too long before it is passedon to a bank for negotiation or to the consignee is called a stale bill of lading.

Freight Paid Bill of Lading: - When freight is paid at the time of shipment or inadvance, the bill of landing is marked, freight paid. Such bill of lading is known as

freight bill of lading.

Freight Collect Bill of lading :- When the freight is not paid and is to be collectedfrom the consignee on the arrival of the goods, the bill of lading is marked, freight

collect and is known as freight collect bill of lading


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Contents of Bill of Lading

Name and logo of the shipping line. Name and address of the shipper. Name and the number of vessel. Name of the port of loading. Name of the port of discharge and place of delivery. Marks and container number. Packing and container description. Total number of containers and packages, Description of goods in terms of quantity. Container status and seal number. Gross weight in kg. and volume in terms of cubic meters. Amount of freight paid or payable. Shipping bill number and date. Signature and initials of the Chief Officer. .

Significance of Bill of Lading for Exporters

It is a contract between the shipper and the shipping company for carriage of thegoods to the port of destination.

It is an acknowledgement indicating that the goods mentioned in the document havebeen received on board for the Purpose of shipment.

A clean bill of lading certifies that the goods received on board the ship are in orderand good condition.

It is useful for claiming incentives offered by the government to exporters The exporter can claim damages from the shipping company if the goods are lost or

damaged after the issue of a clean bill of lading.

Significance of Bill of Lading for Importers

It acts as a document of title to goods, which is transferable endorsement and delivery. The exporter sends the bill of lading to the bank of the importer so as to enable him to

take the delivery of goods.


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The exporter can give an advance intimation to the foreign buyer about the shipmentof goods by sending him a non-negotiable copy of bill of lading

Significance of Bill of Lading for Shipping Company

It is useful to the shipping company for collection of transport charges from theimporter, if not collected from the exporter.

7. Airway Bill: An airway bill, also called an air consignment note, is a receipt issued

by an airline for the carriage of goods. As each shipping company has its own bill of lading,

so each airline has its own airway bill.Airway Bill or Air Consignment Note is not treated as

a document of title and is not issued in negotiable form.

Contents of Airway Bill

Name of the airport of departure and destination. The names and addresses of the consignor, consignee and the first carrier. Marks and container number. Packing and container description. Total number of containers and packages. Description of goods in terms of quantity. Container status and seal number. Amount of freight paid or payable. Signature and initials of the issuing carrier or his agent.

Importance of Airway Bill: It is a contract between the airlines or his agent to carry

goods to the destination. It is the document of instructions for the airline handling staff.

It acts as a customs declaration form. Since, it contains details about freight it also

represents freight bill.

7. Shipment Advice to Importer:- After the shipment of goods, the exporter intimatesthe importer about the shipment of goods giving him details about the date of shipment,

the name of the vessel, the destination, etc. He should also send one copy of non-

negotiable bill of lading to the importer.


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8. Packing List: The exporter prepares the packing list to facilitate the buyer to check theshipment. It contains the detailed description of the goods packed in each case, their

gross and net weight, etc. The difference between a packing note and a packing list is

that the packing note contains the particulars of the contents of an individual pack,

while the packing list is a consolidated statement of the contents of a number of cases or

packs.

9. Bill of Exchange: The instrument is used in receiving payment from the importer. Theimporter may prefer Bill of Exchange to LC as it does not involve blocking of funds. A

bill of exchange is drawn by the exporter on the importer, to make payment on demand

at sight or after a certain period of time.

B/E is a means to collect payment. B/E is a means to demand payment. B/E is a means to extent the credit. B/E is a means to promise the payment. B/E is an official acknowledgement of receipt of payment. Financial documents perform the function of obtaining the finance collection

of payment etc.

2 sets. Each one bearing the exclusion clause making the other part of the draftinvalid.

Sight B/E. Usance B/E. It is known as draft. Immediate paymentSight draft. There are two copies of draft. Each one bears reference to the other part A&B.

when any one of the draft is paid, the second draft becomes null and void.

Parties to bill of exchange.

1. The drawer: The exporter / person who draws the bill.2. The drawee: The importer / person on whom the bill is drawn for payment.3. The payee: The person to whom payment is made, generally, the exporter /

supplier of the goods.

B

Auxiliary Documents: These documents generally form the basic documents based onwhich the commercial and or regulatory documents are prepared. These documents also do


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not have any fixed formats and the number of such documents will wary according to

individual requirements.

1. Proforma Invoice: The starting point of the export contract is in the form of offermade by the exporter to the foreign customer. The offer made by the exporter is in the

form of a proforma invoice. It is a quotation given as a reply to an inquiry. It normally

forms the basis of all trade transactions.

Contents of Proforma Invoice

Name and address of the exporter. Name and address of the importer. Mode of transportation, such as Sea or Air or Multimodal transport. Name of the port of loading. Name of the port of discharge and final destination. Provisional invoice number and date. Exporter's reference number. Buyer's reference number and date. Name of the country of origin of goods. Name of the country of final destination. Marks and container number. . Number and packing description. Description of goods giving details of quantity, rate and total amount in terms

of internationally accepted price quotation.

Signature of the exporter with date.Importance of Proforma Invoice

It forms the basis of all trade transactions. It may be useful for the importer in obtaining import licence or foreign

exchange.

2. Intimation for Inspection: Whenever the consignment requires the pre-shipment

inspection, necessary application is to be made to the concerned inspection agency for

conducting the inspection and issue of certificate thereof.


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3. Declaration of Insurance: Where the contract terms require that the insurance to be

covered by the exporter, the shipper has to give details of the shipment to the

insurance company for necessary insurance cover. The detailed declaration will cover:

Name of the shipper \ exporter. Name & address of buyer. Details of goods such as packages, quantity, value in foreign

currency as well as in Indian Rs. Etc.

Name of the Vessel \ Aircraft. Value for which insurance to be covered.

4. Application of the Certificate Origin: In case the exporter has to obtain Certificate ofOrigin from the concerned authorities, an application has to be made to the concerned

authority with required documents. While the simple invoice copy will do for getting

C\O from the chamber of commerce, in respect of obtained the same from the office

of the Textile Committee or Export Promotion Council, the documents requirement

are different.

5. Mate's Receipt: Mate's receipt is a receipt issued by the Commanding Officer of theship when the cargo is loaded on the ship. The mate's receipt is a prima facie evidencethat goods are loaded in the vessel. The mate's receipt is first handed over to the Port

Trust Authorities. After making payment of all port dues, the exporter or his agent

collects the mate's receipt from the Port Trust Authorities. The mate's receipt is freely

transferable. It must be handed over to the shipping company in order to get the bill of

lading. Bill of lading is prepared on the basis of the mate's receipt.

Types of Mate's Receipts

Clean Mate's Receipt: - The Commanding Officer of the ship issues a cleanmate's receipt, if he is satisfied that the goods are packed properly and there is no

defect in the packing of the cargo or package.

Qualified Mate's Receipt: - The Commanding Officer of the ship issues qualifiedmate's receipt, when the goods are not packed properly and the shipping company

does not take any responsibility of damage. to the goods during transit.


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Contents of Mate's Receipt

Name and logo of the shipping line. Name and address of the shipper. Name and the number of vessel. Name of the port of loading. Name of the port of discharge and place of delivery. Marks and container number. Packing and container description. Total number of containers and packages. Description of goods in terms of quantity. Container status and seal number. Gross weight in kg. and volume in terms of cubic meters. Shipping bill number and date. Signature and initials of the Chief Officer.Significance of Mate's Receipt

It is an acknowledgement of goods received for export on board the ship. It is a transferable document. It must be handed over to the shipping company in

order to get the bill of lading.

Bill of lading, which is the title of goods, is prepared on the basis of the mate'sreceipt.

It enables the exporter to clear port trust dues to the Port Trust Authorities.Obtaining Mate's Receipt

The goods are then loaded on board the ship for which the Mate or the Captain of

the ship issues Mate's Receipt to the Port Superintendent.

6. Shipping order: it is issued by the Shipping/Conference Line intimating the exporterabout the reservation of space for shipment of cargo which the exporter intends to

ship. Details of the vessel, poet of the shipment, and the date on which the goods are

to be shipped are mentioned. This order enables the exporter to make necessary

arrangements for customs clearance and loading of the goods.


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7. Shipping Instructions: at the pre-shipment stage, when the documents are to sent tothe CHA for customs clearance, necessary instructions are to be give with relevance

to

The export promotion scheme under which goods are to beexported.

Name of the specific vessel on which the goods are to be loaded. If goods are to be FCL or LCL. If freight amount are to be paid / collected. If shipment are covered under A.R.E.-1 procedure. Instructions for obtaining Bill of Lading etc.

8. Bank letter for negotiation of documents: at the post shipment stage, the exporter hasto submit the documents to a bank for negotiation or discounting or collection for

forwarding the same to the customer and also for realization of export proceeds. The

bank letter is the set of instruction for the bank as to how to handle the documents by

them and by the bank at the buyers country which may include

Name and address of the buyer. Details of various documents being sent and the number of the

copies thereof.

Name and address of the buyers bank if available. If the documents are sent L/C or on open terms. If the proceeds are to adjusted against any pre-shipment packing

credit loan.

If the bill amount is to be adjusted against any forward exchangecover.

In case of credit bill who has to bear the interest, either exporter orif the same is to be collected from the buyer.

Instructions in case non-acceptance/non-payment by the buyer.C. Regulatory Document: Regulatory pre-shipment export documents are prescribed by the

different government departments and bodies in order to comply with various rules and

regulations under the relevant laws governing export trade such as export inspection,


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foreign exchange regulation, ex port trade control, customs, etc. Out of 9 regulatory

documents four have been standardised and aligned. These are shipping bill or bill of

export, exchange control declaration (GR from), export application dock challan or port

trust copy of shipping bill and receipt for payment of port charges.

1. Shipping Bill: Shipping bill is the main customs document, required by thecustoms authorities for granting permission for the shipment of goods. The cargo

is moved inside the dock area only after the shipping bill is duly stamped, i.e.

certified by the customs. Shipping bill is normally prepared in five copies :-

Customs copy. Drawback copy. Export promotion copy. Port trust copy. Exporter's copy.

Types of Shipping Bill

Based on the incentives offered by the government, customs authorities have introduced three

types of shipping bills:-

Drawback Shipping Bill: - Drawback shipping bill is useful for claiming thecustoms drawback against goods exported.

Dutiable Shipping Bill: - Dutiable shipping bill is required for goods which aresubject to export duty.

Duty-free Shipping Bill: - Duty-free shipping bill is useful for exporting goods onwhich there is no export duty.

In order to facilitate easy recognition and quick processing, following colours have been

provided to different kinds of shipping bills :

Types of goods By Sea By Air

Drawback shipping bill Green Green

Dutiable shipping bill Yellow Pink

Duty-Free shipping bill White Pink


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Contents of Shipping Bill

Name and address of the exporter. Name and address of the importer. Name of the vessel, master or agents and flag. Name of the port at which goods are to be discharged. Country of final destination. Details about packages, description of goods, marks and numbers, quantity and details

of each case.

FOB price and real value of goods as defined in the Sea Customs Act. Whether Indian or foreign merchandise to be re-exported Total number of packages with total weight and value.

Significance of Shipping Bill

a) Shipping bill is the main customs document, required by the customsauthorities for granting permission for the shipment of goods.

b) The cargo is moved inside the dock area only after the shipping bill is dulystamped, i.e. certified by the customs.

c) Duly endorsed shipping bill is also necessary for the collection of exportincentives offered by the government.

d) It is useful to the Customs Appraiser while determining the actual value ofgoods exported.

2. A.R.E. 1 form (Central excise): this form ARE-1 is prescribed under CentralExcise rules for export of goods. In case goods meant for export are cleared

directly from the premises of a manufacturer, the exporter can avail the facility of

exemption from payment of terminal excise duty. The goods may be cleared for

export either under claim for rebate of duty paid or under bond without payment

of duty. In both the events the goods are to be cleared under form A.R.E-1 which

will show the details of the goods being exported, the relevant duty involved and

if the duty is paid or goods being cleared under bond, details of goods being

sealed either by the exporter or Central Excise officials etc.


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3. Exchange Control declaration Form (GR/PP/SOFTEX): under the exchangecontrol regulations all exporters must declare the details of shipment for

monitoring by the Reserve Bank of India. For this purpose, RBI has prescribed

different forms for different types of shipments like GRI, PP forms etc. These

declaration forms must be presented to the customs officials at the time of passing

of export documentation. Under the EDI processing of shipping bill in the

customs, these forms have been dispensed with and a new form SDF has to be

submitted to the customs in the place of above forms.

4. Export Application: this is the application to be made to the customs officialsbefore shipment of goods. The prescribed form of the application is the Shipping

Bill/Bill of Export. Different types are required for shipment like ex-bond, duty

free goods, and dutiable goods and for export under different export promotion

schemes such as claims for duty drawback etc.

5. Vehicle Ticket/Cart Ticket/Gate Pass etc.: before the goods are being taken insidethe port for loading, necessary permission has to be obtained for moving the

vehicle into the customs area. This permission is granted by the Port Trust

Authority. This document will contain the detail of the export cargo, name and

address of the shippers, lorry number, marks and number of the packages, drivers

licence details etc.

6. Bank Certificate of Realisation: this is the form prescribed under the ForeignTrade Policy, wherein the negotiating bank declares the fob value of exports and

for the date of realisation of the export proceeds. This certificate is required fore

obtaining the benefit under various schemes and this value of fob is reckoned as

fob value of exports.

D. Other Document:

Black List Certificate: it certifies that the ship/aircraft carrying the cargohas not touched the particular country on its journey or that the goods are

not from the particular country. This is required by certain nations who

have strained political and economical relations with the so called Black

Listed Countries.

Language Certificate: Importers in the European Community require alanguage certificate along with the GSP certificate in respect of handloom


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cotton fabrics classifiable under NAMEX code 55.09. Generally four

copies of language certificate are prepared by the concerned authority who

issues GSP certificate. Three copies are handed over to the exporter. A

copy is sent along with the other documents for realisation of export

proceeds.

Freight Payment Certificate: in most of the cases, the B/L or AWB willmention the transportation and other related charges. However if the

exporter does not want these details to be disclosed to the buyer, the

shipping company may issue a separate certificate for payment of the

freight charges instead of declaring on the main transport documents. This

document showing the freight payment is called the freight certificate.

Insurance Premium Certificate: this is the certificate issued by theInsurance Company as acknowledgement of the amount of premium paid

for the insurance cover. This certificate is required by the bank for arriving

at the fob value of the goods to be declared in the bank certificate of

realisation.

Combined Certificate of Origin and Value: this certificate is required bythe Commonwealth Countries. This certificate is printed in a special way

by the Commonwealth Countries. This certificate should contain special

details as to the origin and value of goods, which are useful for determining

import duty. All other details are generally the same as that of Commercial

Invoice, such as name of the exporter and the importer, quality and quantity

of the goods etc.

Customs Invoice: this is required by the countries like Canada, USA forimposing preferential tariff rates.

Legalized Invoice: this is required by the certain Latin American Countrieslike Mexico. It is just like consular invoice, which requires certification

from Consulate or authorised mission, stationed in the exporters country.

Special Provision under Uniform Customs and practice for Documentary Credit UCP-

500, for Commercial Invoice.


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Article-37: Commercial Invoiceo Must appear on their face to be issued by the beneficiary named in

the credit.

o Must be made out in the name of the applicant.o Need not be signed

Banks may refuse Commercial Invoice issued for amounts in excess of theamount permitted by the credit except otherwise stated.

The description of the goods in the commercial invoice must correspondwith the description of the credit. In all other documents the goods may be

described in the General in general terms not inconsistent with description

in the credit. In all documents goods may be described in general terms not

inconsistent with the Description of the goods in the credit.

Pre-Shipment Documents:

Shipping bill. Export order/Sales contract/Purchase order. Letter of Credit Commercial invoice. Packing list. Certificate of origin. Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or SDF. Certificate of Inspection. Various declarations required as per custom procedure.

Exchange Control Declaration Form: all exports to which the requirement of declaration

apply must be declared on appropriate forms as indicated below unless the consignment is of

samples and of No Commercial Value

GR FORM: to be completed in duplicate for exports otherwise than bypost including export of software in physical form i.e. magnetic tape/discs

and paper media.


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SDF FORM: to be completed in duplicate and appended to the ShippingBill for export declare to the customs offices notified by the Central

Government which have introduced EDI system for processing Shipping

Bill.

PP FORM: to be completed in duplicate for export by post. SOFTX: to be completed in triplicate for export of software otherwise than

in the physical form i.e. magnetic tapes/discs and paper media.

These forms are available for sale in Reserve Bank of India

Export declaration forms have utmost importance and are binding on the exporters. It is,

therefore, necessary that enough care is taken while declaring exports on these forms, with

special reference on the following points.

Name and address of the authorised dealer through whom proceeds ofexports have been or will be realized should be specified in the relevant

column of the form.

Details of commission and discount due to foreign agent or buyer shouldbe correctly declared otherwise difficulties may arise at the time of

remittance of such commission.

It should be clearly indicated in the form whether the export is on outrightsalebasis or on consignment basis and irrelevant clauses must be stuck

out

Under the term analysis of full export value a break up of full exportvalue of goods under F.O.B value, freight and insurance should be

furnished in all cases, irrespective of the terms of contract.

All documents relating to the export of goods from India must pass throughthe medium of an authorised dealer in foreign exchange in India within 21

days of shipment.

The amount representing the full export value of goods must be realizedwithin six months from date of shipment.


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Disposal of Copies of Export Documentation Form

GR forms covering export of goods other than jewellery should becompleted by the exporter in duplicate and both the copies should be

submitted to customs at the port of Shipment. Customs will give their

running serial number on both the copies of the GR forms after verifying

the particulars and admitting the corresponding shipping bill. The value

declared by the exporter will also be verified by the customs and they will

also record the assessed value. Duplicate copy will be returned to the

exporter and the original will be remained by the customs for onward

submission to the Reserve Bank. Duplicate form of the GR form will again

be presented to the customs at the time of actual shipment. After

examination of goods and certifying the quantity passed for shipment the

duplicate copy will again be returned to exporter for submission to an

authorised dealer. However, an exception to submission of GR forms to the

Customs authorities have been made in case of deep sea fishing.

(a) PP forms are to be first presented to an authorised dealer forcountersignature. The form will be countersigned by the authorised dealer

only if the post parcel is addressed to his branch or correspondent bank in

the country or import. The concerned overseas branch or correspondent is

to be instructed to deliver the post parcel against payment or acceptance of

relevant bill, as the case may be.

(b)For post parcel addressed directly to the consignee, the authoriseddealer will countersign the form, provided

(i) an irrevocable letter of credit for the full value of export has beenopened in favour of exporter and has been advised through

authorised dealer concerned; or

(ii)the full value of shipment has been received in advance by theexporter through an authorised dealer; or

(iii)On receipt of full value of shipment declared on this form the

authorised dealer will forward to RBI the duplicate copy along with

the certified copy of shippers invoice.


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(iv)The authorised is satisfied on the basis of standing and trackrecord of the exporter and arrangements made for realisation of the

export proceed that he cold do so. If the authorised dealer is not

satisfied about standing etc. of the exporter, the application is

rejected. No reference is entertained by the Reserve Bank in such

cases.

(c)The original PP form countersignature will be returned to the exporterby the authorised dealer and the duplicate will be retained by him.

Original PP form should then be submitted to the post office along

with the parcel. The post office through the goods have been

dispatched will forward the original to RBI.

The export of computer software may be undertaken in physical form i.e. software prepared

on magnetic tape and paper media as well as in non-physical form by direct data transmission

through dedicated earth stations/satellite links. The export of computer software in physical

form is subject to normal declaration on GR/PP form and regulations applicable there to will

also be applicable to such exports. However, export of non-physical form should be declared

on SOFTEX Form. Besides computer software, export of video / T.V. Software and all other

types of software products / packages should also be declared on the SOFTEX forms. Since

export of software is fraught with many risks and special guidelines have been framed for

handling such exports.

OCTROI

Octroi is the local tax levied by the civic body on goods entering into thecity.

There are three procedures for clearing goods which are meant for export.Procedure1, Export on payment of octroi duty and refund thereof after export.

Pay the Octroi Duty and apply for refund of payment made.


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At Octroi Naka form B is issued with cash receipt for the payment ofOctroi Duty.

Cargo is moved to the docks.

At Docks Octroi officer prepares formC & endorses Shipping BillNumber & Steamers Name.

After shipment exporter prepares claim for refund by submitting followingdocuments:

Covering Letter for refund of Octroi Duty. Original receipt of Octroi paid. Original Form B.

Original Form C. Invoice under which material was bought to the city. Export invoice issued by the Exporter to the importer. Export Promotion Copy of Shipping BillPhoto Copy. Bill of Lading or Airway Bill Copy.

Procedure

2, Export without payment of Octroi Duty.

N Form Procedure.

Prepares form N in 3 copies. Checking of documents Shipping Bill, Carting order, Export Invoice by Octroi

officer.

Under taking that the goods will be cleared for export within 7 days of clearancethrough the octroi post.

Octroi officer at Docks will endorse the Shipping Bill number & shipment details onN form.

Proof of export... N form with above endorsement to be submitted to the Head Officealong with copies of Shipping Bill, Bill of Lading, Export Invoice etc.

Procedure3

E.P (Export Promotion) Form.


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Registration form + IEC / RCMC + CA Certificate. Number will be allotted. Fees Rs. 500/-

Documents Checked

Factory Challan cum Invoice. ARE1. EP forms 3 copies. Export order. Shipping Bill.

Consignment Removed to Docks and Proof of Export to be given to Octroi authorities.

Companys Letter. EP form. EPC. Bill of Lading. Shipping Bill6.25% Service charge.

Bar Coding

It is the endeavor of the Central Government to enhance export competitiveness of theIndian products and to promote substantially.

Compliance with prevalent international best practices. National task force has recommended adoption of Bar-coding for all Indian products

within five years. Bar coding, using International Symbologies / Numbering, systems would enable

timely and accurate capture of product information and its communication across the

supply chain ahead of physical product flow.

With the ultimate objective of facilitating adoption of Bar-coding for all productsusing international Symbologies numbering systems all exports of finished and

packaged items meant for retail sale shall incorporate barcodes from a date to be

notified by DGFT.


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MARINE INSURANCE POLICY

Goods in transit are subject to risks of loss of goods arising due to fire on the ship, perils of

sea, thefts etc. Marine insurance protects losses incidental to voyages and in land

transportation.

Marine Insurance Policy is one of the most important document used as collateral security

because it protects the interest of all those who have insurable interest at the time of loss. The

exporter is bound to insure the goods in case of CIF quotation, but he can also insure the

goods in case of FOB contract, at the request of the importer, but the premium payment will

be made by the exporter.

There are different types of policies such as

Specific Policy: This policy is taken to cover different risks for a single shipment. For a

regular exporter, this policy is not advisable as he will have to take a separate policy every

time the shipment is made, so this policy is taken when exports are infrequent.

Floating Policy:This policy is taken to cover all shipments for same months. There is no

time limit, but there is a limit on the value of goods and once this value is crossed by several

shipments, then it has to be renewed.

Open Policy: This policy remains in force until cancelled by either party, i.e. insurance

company or the exporter.

Open Cover Policy:This policy is generally issued for 12 months period, for all shipments to

one or all destinations. The open cover may specify the maximum value of consignment that

may be sent pre ship and if the value exceeded, the insurance company must be informed bythe exporter.

Insurance Premium: Differs upon from product to product and a number of other such

factors, such as, distance of voyage, type and condition of packing etc. Premium for air

consignments are lower as compared to consignments by sea.

The Insurance Policy Normally Contains:

The name and address of the insurance company.


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The name of the assured & description of the risk covered. A description of the consignment. The sum insured & the date of issue.

The place where claims are payable together with details of the agent to whom claimsmay be directed & Any other details, as applicable.

QUALITY CONTROL AND PRE-SHIPMENT INSPECTION

Realizing the importance of the need for supplying quality goods as per international

standards, the Government of India has introduced Compulsory Quality Control and Pre-

Shipment Inspection of over 1050 items of export under Export (Quality Control and Pre-

Shipment Inspection) Act 1963.

At present, the export items that are subjected to compulsory inspection includes food and

agricultural products, chemicals, engineering, coir, jute and footwear.

Compulsory Pre-shipment Inspection:

Foods and Agriculture & Fishery Mineral & Ore Organic & Inorganic Chemicals Refectories & Rubber Products Foot wear & Foot wear components Ceramic Products & Pesticides Light Eng. Products Steel ;Products Jute Products Coir & Coir Products

Exemption from compulsory Pre-shipment Inspection:

Status Houses Certification by Units IPQCapproved by EIA

EUO/EPZ/SEZ Firm Letter from the overseas buyer


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Specified products such as Eng/Fishery average level of Rs.1.5 Cr.for the last threeyears no compliant.

For monitoring pre-shipment inspection, Govt. of India has set up Export Inspection

Council (EIO) The EIC has set up 5 Export Inspection Agencies (EIA). The EIAs are

located one each at Mumbai, Calcutta, Cochin, Delhi and Chennai. The EIAs has a

network of nearly 60 offices throughout India. Each EIA is given certain jurisdiction for

inspection purpose. For instance, EIA of Mumbai has jurisdiction over Maharashtra,

Gujarat and Goa.

Systems of Quality Control:

For the purpose of pre-shipment inspection, EIC has recognized three systems of

inspection namely:

Self-Certification In-Process Quality Control Consignment Wise Inspection

Self-Certification:

Under this system, complete authority is given to the manufacturing units to certify their

own products and issue certificates for export. The manufacturing units which have been

recognized under this scheme have to pay a nominal yearly fee at the rate of 0.1% of FOB

price subject to minimum of Rs.2,500/- and maximum of Rs.1 lakh in a year to the

concerned EIA

In-Process Quality Control (IPQC):

In this system, companies/units adjusted as having adequate level of quality control right

from raw material stage to the finished product stage including packaging are eligible to get

the inspection certificate on a formal request by the exporter. Over 800 units all over India

are operating under this system.


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Constant vigil and surveillance are kept on units approved under IPQC and self-certification

system. Units approved under the above two systems are often known as Export worth

Units, because of their consistent standards of quality.

Consignment wise Inspection:

Under this system, each and every consignment is subject to compulsory inspection. The

exporter has to follow a certain procedure such as:

He has to make an application to Export Inspection Agency with certain documents. The EIA deputes inspector to inspect the goods After the inspection, the goods are repacked with EIA seal The inspector then makes a report to Deputy Director of EIA The Dy. Director of EIA then issues Inspection Certificate in triplicate if the

inspection report is favorable

If the inspection report is not favorable, a rejection note is issued.o It is to be noted that goods marked with ISI/AGMARK/BIS14000/ISO 9000

are not required to be inspected by any agency

o Overseas buyer may depute his own inspection team to inspect the goodso Inspection of textile goods is conducted by Textile Committee in respect of

those exporters who are registered with the textile committee.

Norms:

Adequate Testing Facility Raw Material Testing & Process Control After Sales Services & Maintaining Product Quality Control on bought out components Meteorological Control & PKG. Independent Quality Audit & Houses.Fumigation: For ensuring that no insects or bacteria are carried with the export certain

types of export products are fumigated before shipment. The fumigation is carried out in

the port of shipment.


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SHIPPING AND CUSTOMS FORMALITIES

(As per the Prevailing Law i.e., ICA 62)

The shipment of export