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Export pro, fin & doc Export pro, fin & doc Presentation Transcript

  • Major Initiatives:- 1. Focus Markets Scheme – 26 new markets added in Latin America and Asia – Oceania region, at present 83 countries in Africa, Central America, C I S and Eastern Europe. Incentive in the form of Duty Free Scripts has been raised from 2.5% to 3%. 2. EPCG scheme at Zero Duty introduced 3. DEPB scheme extended till 31-12-2010. 4. Market Linked Focus Product Scheme introduced for Export of identified products to 13 identified markets and incentive raised from 1.25% to 2%.
  • Major Initiatives:- 5. EOU’s allowed to sell DTA upto 90% 6. 2% Interest Subvention upto 31-10-2010. 7. Rs. 5000 Crores refinance facility to EXIM Bank. 8. Special refinance facility to Banks. 9. Made in India Show at least in Six Countries. 10.Premier Trading House – Rs. 7500 Crores (Cr.10,000) 11.Grant of 1% Status Holders Incentive Scripts for Import of Capital Goods
  • 180000 168704 162983.9160000140000 126262.67120000 103090.54100000 80000 60000 51545 Exports in ($ Million) 40000 35432 Growth (in %) 20000 23.41% 22.48% 29.08% 3.40% 22.30% 0 -31.20%-20000
  • Targets:- 1. Annual Growth of 15%, with an annual Export target of $ 200 bn by March, 2011 2. 2011-2014 Export growth 25% Per Annum, Double Exports of Goods and Services by 2014 3. Double India’s share in Global Trade by 2020
  • 1. Business Structure2. Raising Capital3. Choosing Partners4. Realty Issues5. Sector Approvals6. Tax Compliance7. Forex Laws8. Protecting IPR9. Labour Laws10. Product Liability
  • BuyerStudy
  • Execution of an Export Order Successful execution of an Export Order at least in the context of SME’s in our Country it is mostly a verbal or a very sketchy, often even an e-mail order.
  • It neither contains fulldetails normallydesirable for anExporter, nor the basison which this order isreceived.
  • I am referring to an exportOrder conforming to theelements of an Exportcontract. If not it may leadto Trade Disputes in future,which often result innon-payment delay inpayment by the buyer.
  • So friends in thechanged scenario, i.e.when we have very littleknowledge about thecharacter and creditworthiness of buyer,
  • It is imperative to haveat least an confirmedorder which should bebased on properlynegotiated terms andconditions under which
  • We will Export. Theleast we can do is toknow about1. Product - Full Details, Specification, Size, Number i.e. Quantity
  • 2. Pre-Shipment Inspection3. INCO-Terms like FCA, FAS, CPT, CIP, FOB, CIF, DDP4. Taxes, Charges etc.5. Period of Delivery - Mode of Transport
  • 6. Currency – Rate of exchange – Fluctuations – Mode of Payment7. Discount, Commissions, Packing, Licences Requirments
  • EXW - EX WORKS (named place)*FCA - FREE CARRIER (named place)FAS - FREE ALONGSIDE SHIP (named port of shipment)*FOB - FREE ON BOARD (named port of shipment)CFR - COST AND FREIGHT (named port of destination)
  • CIF - COST, INSURANCE AND FREIGHT (named port of destination)*CPT - CARRIAGE PAID TO (named place of destination)CIP - CARRIAGE AND INSURANCE PAID TO (named place of destination)*DAF - DELIVERED AT FRONTIER (named place)*
  • DES - DELIVERED EX SHIP (named port of destination)DEQ - DELIVERED EX QUAY (named port of destination)*DDU - DELIVERED DUTY UNPAID (named place of destination)*DDP - DELIVERED DUTY PAID (named place of destination)*
  • ICC recommends that"Incoterms 2000" be referred tospecifically whenever the terms areused, together with a location. Forexample, the term "Delivered atFrontier" (DAF) should always beaccompanied by a reference to anexact place and the frontier to whichdelivery is to be made.
  • Here are three examples of correct use of Incoterms:FCA Kuala Lumpur Incoterms 2000FOB Liverpool Incoterms 2000DDU Frankfurt Schmidt GmbH Warehouse 4 Incoterms 2000
  • 1. Advance Payments2. Documents against Payments3. Documents against Acceptance (a) Provision of Credit without Acceptance4. Letter of Credit
  • A documentary credit is a signedinstrument embodying anundertaking by the banker of a buyerto pay his seller a certain sum ofmoney on presentation of documentsevidencing shipment of specifiedgoods and subject to compliance withthe stipulated terms and conditions.
  • Buyer Seller IssuanceIssuing Bank Advising Bank
  • Buyer Seller UtilizationIssuing Bank Advising Bank
  • Bill of Exchange1. Date 2. Signature3. Endorsement4. Letter of Credit Number5. Term-Sight or Usance Dates6. Amount and Currency7. Words and Figures tally8. Drawn on correct Party
  • Invoice1. Invoice heading in your company’s name, expressed and spelled as in Letter of Credit.2. Made out in name of buyer, expressed and spelled exactly as in the Letter of Credit.3. Description of goods – including import licence or proforma details price and terms of delivery – worded and spelled exactly as set out in the Letter of Credit.4. Value not more then the Letter of Credit and the Bills of Exchange5. Authenticated as required under the credit.
  • Transport Document1. Type of transport Documents2. Consignor – can be different from beneficiary3. Consignee’s name and spelling4. Places and Ports5. Clauses6. On-Deck shipment
  • Insurance Documents1. Type e.g. a Certificate2. Correct amount e.g. CIF or CIP plus per cent3. Same currency as the Letter of Credit unless otherwise stipulated in the Letter of Credit4. Risks covered5. Date – not later then date of issue of the transport document.6. Endorsed if necessary7. The insurance document must indicate the risks are covered at least between the place of taking in charge or shipment and the place of discharge or final destination as stated in credit.
  • Once the discrepant documents aretendered to the negotiating bank. Theelement of delay is introduced in thetransaction and if the discrepancies arebeyond correction, the security affordedby the documentary credit is lost and theseller is solely at the mercy of the buyer.
  • The buyer has the following options available to him The buyer take up the documents despite discrepancies The buyer may use discrepant document as a means to delay the payments One of the virtues of LC is “insurance against renegotiation” The buyer might like to wriggle out or transaction
  • Following penalties on the exporter- beneficiary of LC Interest loss on account of delays at various stages Cost of indemnity Demurrage and warehousing charges at destination
  • Cost ofFunds
  • Cost of discount either offered or foregone
  •  Discount % / (100-discount%) X 365 / (final date – discount period) For example if terms are 3/10 net 30 (i.e. 3% discount if paid within 10 days, otherwise full amount paid within 30 days) 3/97 X 365/20 = 0.309 X 18.25 = 56%
  • Working CapitalManagement
  • Management of Receivables
  • InventoryManagement
  • ECGCThe corporation has classifiedalmost 220 countries into its seven-fold classification for country riskassessment purposes and fordetermining its premium ratesunder the short, medium and longterm insurance covers issued by it.
  •  A1 Insignificant A2 Low B1 Moderately Low B2 Moderate C1 Moderately High C2 High D Very High
  •  Apply for the credit limit on the buyer well in time At the time of making shipment check that the ECGC Policy is in force Send your monthly declarations of shipment regularly along with premium amount Make sure that the outstanding bills against the buyerpolicy at any time do not exceed the maximum liability Obtain special endorsement for covering export under LC Your overseas buyer should have no knowledge of your insurance policy Inform defaults at the earliest to the ECGC Do not pay premium after default by the buyer Do not make compromise with your buyer without the prior approval of the ECGC Do not extend tenure of the bills without approval of ECGC For calling back the goods take prior approval of the ECGC
  • Covering the Foreign Exchangerisk is termed as hedging therisk. If the company dose notwant to hedge, it means it istaking a view that the futuremovements of exchange rate willmove in its favour.
  • Banks offer forward exchange contracts bothfor sale and purchase transactions tocustomers with a maturity date for a fixedamount at a determined rate of exchange atthe outset. Normally contracts are entered inIndia for a period where the maturity periodof the hedge dose not exceed the maturity ofthe underlying transaction. The customer hasthe option to choose the currency of hedgeand tenor.
  • An Exporter may need finance for execution of anExport Order from the date of receipt of an Export-Order till the date of realization of the Exportproceeds at any stage. Financial assistanceextended to the Exporter from the date of receiptof Export Order till the date of shipment is knownas pre-shipment credit. This finance is extended toan exporter for the purpose of procuring rawmaterials processing, packing transporting,warehousing of goods meant for exports. Creditfacility extended to an Exporter from the date ofshipment of goods till the realization of the Exportproceeds is known as post-shipment credit.
  • Export Financing by Banks Pre- Post- Shipment Shipment ImportPacking Export Bill Letters of Credit Finance Credit