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Export project var Export project var Document Transcript

  • 2 Objective of StudyThe objective of study is to find answer of the some questions, which are important to clearlyunderstand the importance, procedure and role of export documentation for Aluminium & Aluminiumproducts in smooth Export working.The main objectives of doing this project are as follows:- • To study the Export Documentation Process. • To understand the global aluminium industry trends in the major demand and supply center of the world. • To understand the global marketing of Hindalco products. • To understand the Export Market Plan. • To study the Export Process from Order Booking to Shipment. • To understand the overall process involved in the Export Management System of the Hindalco Industries Ltd. • To understand the overall process used by the Hindalco to establish the Export Documentation Process. • To understand the benefits and incentives given by the government to the exporter for boosting up the Indian Export.
  • 3 ContentsPrefaceAcknowledgementsObjective of Study Section 1: Introduction……………………………………………………………...  About Aditya Birla Group………………………………………..……..9  Group Companies ………………………………………………..…....14  Aditya Birla Management Corporation …………………………..……19  At A Glance ……………………………………………………..……..19  Financial Foot Prints……………………………………………..……..20  Hindalco At A Glance……………………………………………..……21  Highlights Of Hindalco Industries limited………………………..……23  Hindalco Overview ………………………………………………..……24  Company Profile…………………………………………………..…….41  Industry At A Glance…………………………………….………..…….42  Aluminium ………………………………………………..……….……42  Copper …………………………………………………...……….……..43  Production Process……………………………………..……….……….45  Extracdion Of Alumina From Bauxite………………………………….46  Extraction Of aluminium From Alumina………………………………..47  Product Profile…………………………………………………………...48  Product Overview ……………………………………………………….49  Aluminium ………………………………………………………………49  Copper……………………………………………………………………49  Primary Aluminium Product……………………………………………..49  Integrated Operation Of Hindalco ……………………….………………51  Production Capacity…………………………………………………….. 52  Organizational Profile of Hindalco Industry Ltd………………...……....54  Product and Brands of Hindalco………………………...………...……..57  Hindalco Product Range………………………………...……...………..65 Section 2: About Flat Rolled Product…………………………………………...….66  Flat Rolled Products (FRPs)…………………………………………........66  Types of FRPs (Export)……………………………………………….......67 Section 3: About International Marketing………………………………………....68  What is International Marketing?................................................................68  What is Global Marketing?..........................................................................69  Advantages and Disadvantages of Global Marketing……………………..69 Section 4: About Export……………………………………………………………..70  What is Export?............................................................................................70  Types of Export……………………………………………………………70
  • 4  Benefits of Export…………………………………………………………70  Risk from Export…………………………………………………………..72  Why we should Export?...............................................................................74  How to Export?............................................................................................75  Advantages of Export……………………………………………………..76  Process of Export Management…………………………………………...77  Export Cycle………………………………………………………………78 Section 5: Export Marketing………………………………………………………..80  Export Marketing Plan…………………………………………………….80  Practical Suggestion for Export Marketing Plan………………………….80  Tips for Export Marketing………………………………………………...81  Market Entry Strategies: Location of Importers…………………………..82 Section 6: Developing an Export Strategy…………………….…………………....86  Determining Product’s Export Potential………………….……………….90  Assessing Company’s Export Readiness………………….………………90  Developing an Export Plan……………………………….……………….90 Section 7: Developing a Market Plan…………………………..…………………..92  Marketing Strategy Benefits………………………..…………………….92  Market Research………………………………….………………………92  Method of Market Research…………………….………………………..93  Step-by-Step Approach to Market Research….………………………….94 Section 8: Methods/Channel of Exporting…………..…………………………….96  Approaches of Exporting…………………..……………………………..96  Distribution Consideration………………..………………………………97  Indirect Exporting………………………..……………………………….98  Direct Exporting……………………….………………………………....98 Section 9: Preparing Product for Export………………………………………...100  Questions to Consider…………………………………………………...100  Product Adaptation……………………………………………………...101  Engineering and Redesign……...……………………………………….102  Branding, Labeling and Packaging...…………………………………....102  Installation ……………………………………………………………….103  Warranties……………………...………………………………………..103  Servicing…………………...……………………………………………103 Section 10: Export Order…………………………………………………………......105  Processing of an Export Order………………………………………….....105  Terms and Conditions of an Export Order………………………………...107  Planning for Execution of the Export Order………………………………108 Section 11: Export Pricing, Quotation and Incoterms……………………………...109  Pricing Consideration………………………………………………….…..109
  • 5  Quotations and Proforma Invoice………………………………………....112  Difference between Proforma Invoice and a Quotation…………………..114  Use of a Proforma Invoice………………………………………………...114  Commercial Invoice……………………………………………………….115  Customs and Consular Invoice……………………………………………116  From the Proforma Invoice to the Commercial Invoice…………………..116  Incoterms or Terms of Sale………………………………………………..119 Section 12: Export Process…………………………………………………………...123  Procedure for Export……………………………………………………...124 Section 13: Logistics Process………………………………………………………....127  Brief Description of the Flow of Logistics………………………………..128  Flow of Logistics Process Implemented by Hindalco…………………….130 Section 14: Export Documentation…………………………………………………..132  Importance of Export Documentation…………………………………….132  Set of Documents Required for Exports…………………………………..133  Major Export Documents……………………………………………….…133  Need for Export Documents……………………………………………....136  Significance of Some Export Documents………………………...……….136  Common Defects in Documentation……………………………...……….143  Process of Getting Custom Clearance……………………………...……...144 Section 15: Government Policies for Export………………………………………145  EXIM Policy…………………………………………………………….145  Main Objectives of EXIM Policy……………………………………….145 Section 16: Export Incentives………………………………………………………146  Process Involved in Getting Export Incentives………………………....149  Export Finance………………………………………………………….152  Hindalco’s Export Data (From Renukoot Plant)………………………..157 Section 17: SWOT Analysis of Hindalco……………………………………………158 Section 18: Findings and Recommendations…………………………………….....159 Section 19: Bibliography………………………………………………………….....161 Section 20: Annexure…………………………………………………………...…...162  Specimen of Proforma Invoice…………………………………………..162  Specimen of Packing List………………………………………………..162  Specimen of Certificate of Origin………………………………………..163  Specimen of Bill of Lading……………………………………………...163  Specimen of Export Quotation Worksheet………………………………164  Specimen of Commercial Invoice……………………………………….164  Sample of Insurance Certificate…………………………………………164
  • 7 ABOUT ADITYA BIRLA GROUP The ADITYA BIRLA GROUP is India’s 1st tryly multinational corporation(MNC) whose over 30% of revenues flow frpm its operations across tehe world. The group is anchored by an extra-ordinary force of 72000 employees belonging to over 20 different nationalities the world over. The ADITYA BIRLA GROUP reaches out to the core sector in India –in industries integral to the nation’s growth-cement,aluminium,fertilizers,viscose stable fibre, textile,power,telecommunications,industrial chemicals and financial services. The ADITYA BIRLA GROUP is a dominated player in all the sectors in which it operates, such as viscoses stable fibre, non ferrous metal, cement viscoss, telecommunication and financial service. Group Overviews
  • 8 Aditya Birla group traces it’s origin back to the Tiny village of Pilani in theRAJASTAN desert, where late Shri Seth Shiv Narajan Birla started carton tradingoperation in 1857. Then one visionary the late Shri G.D. Birla set up Indian’s firstintegrated aluminium manufacturing unit at Renukoot 1962 backed by captive powerplant at Renusagar in 1967. It further evolved under the dynamic leadership of the late Shri Aditya VikramBirla a prominent figure in the Indian industries, under whose stewardship HINDALCOattained its leadership position in aluminium. Today our group chairman Dr. KumarManglam Birla has put together the building block to make Indian business a globalforce.Group Today The Aditya Birla Group is India’s first truly multinational corporation (MNC),whose over 60% of revenues flow from its operations across the world. Over 75 units in India and overseas as well (in Thailand, Indonesia, Malaysia,Philippines, Egypt and Canada) and international trading operations spanning severalcountries including Singapore, Dubai, Russia, Vietnam, Myanmar and China make itIndia’s first truly multinational conglomerate.THE ADITYA BIRLA GROUP HAS THE FOLLOWING ACHIVEMENTS TOITS CREDITS:- • The words no 1 in viscose fiber. • The word’s largest single location palm oil producer. • Asia’s largest integrated aluminum producer. • The forth largest producer of insulator. • The forth largest producer of carbon black. • The eleven largest cement producers. • Among the best energy efficient fertilizer plant. • Among the word’s top 15 largest BPO company.
  • 9 IN INDIA , A FRONTRUNNER POSITION ARE:- • A premier branded garments players. • The second largest player in viscose filament yard. • Among the top three BPO companies. • India’s leading copper producer. • The second largest in the chlor alkali sector. • Among the top five mobile telephony players. • A leading player in life insurance & asset management.Group vision “To become a premium conglomerate with clear business focus at eachcorporate level.” Group mission“To deliver value for our customer, shareholders, employees and society at large.”Group Philosophy Reset on four pillars  Customize  People-size  Strategize  InstitutionalizeGroup values  Integrity  Speed  Seamlessness  Passion
  • 10 CHAIRMAN: Shri Kumar Mangalam Birla “The winning organization will be those who regularly out perform competition They have a stable consistent strategy. A stable strategy does not means a static strategy, rather it means following a broad philosophy and continuous improvement in how strategy is manifested, incorporating the expected market requirement and the customer needs.” Kumar Mangalam Birla COMPANIES Group companies:  Grassim Industries Ltd.  Hindalco Industries Ltd.  Aditya Birla Nuvo Ltd.  Ultra Tech Cement Ltd.
  • 11 Indian companies:  PSI Data systems  Aditya Birla Minacs Worldwide Ltd.  Essel Mining & Industries Ltd.  Shree Digvijay Cement Ltd.  Idea Cellular Ltd.  Aditya Birla Insulators.  Aditya Birla Retail Limited  Bihar Caustic and Chemicals Ltd. International companies: Thailand:  Thai Rayon  Indo Thai Synthetics  Thai Acrylic Fibre  Thai Carbon Black  Aditya Birla Chemicals(Thailand) Ltd.  Thai Peroxide. Philippines:  Indo Phil Textile Mills.  Indo Phil Cotton Mills.  Indo Phil Acrylic Mfg.  Pan Century Surfactants Inc. Indonesia:  PT Indo Bharat Rayon.
  • 12  PT Elegant Textile Industry.  PT Sunrise Bumi Textiles.  PT Indo Liberty Textiles.  PT Indo Raya Kimia. Egypt:  Alexandria Fiber Company S.A.E.  Alexandria Carbon Black Company S.A.E. China:  Liaoning Birla Carbon.  Birla Jingwei Fibres Company Ltd.  Aditya Birla Grasun Chemicals(Fangchenggang) Ltd. Canada:  AV Cell Inc.  AV Nackawic Inc. Australia:  Aditya Birla Minerals Ltd. Laos:  Birla Laos Pulp and Paper Plantation Company Ltd. North and South America, Europe and Asia:  Novelis Inc.Globally• A metals powerhouse, among the worlds most cost-efficient Aluminium and Copper producers. Hindalco-Novelis from its fold is a Fortune 500 company. It is the largest Aluminium rolling company
  • 13• It ranks as No. 1 in Viscous Staple Fibre• The largest single location palm oil producer• The third largest producer of insulators• The third largest producer of carbon black• The eleventh largest producer of cement and the largest in a single geography• The largest single location copper smelter• Among the worlds top 15 BPO companies and among Indias top three• Among the best energy efficient fertilizer plantsIn Asia• The largest integrated Aluminium producerIn India• A premier branded garments player• The second largest in the chlor-alkali sector• Among the top five mobile telephony companies• Among the top three supermarket chains in the retail business• Second largest player in viscous filament yarn• Second largest private sector insurance company and a leading assets management company.
  • 14 JOINT VENTURES  Birla Sun Life Insurance  Birla Sun Life Asset Management Company Ltd.  Birla Sun Life Distribution Company Ltd.  Tanfac Industries Ltd
  • 15 ADITYA BIRLA MANAGEMENT CORPORATION BOARD OF DIRECTOR Mr. Kumar Mangalam Birla (chairman) Mr. S.Aga Mr. D.bhattacharya,managing director Mr. S.K.jain Mr. Santrupt misra Dr. Bharat singh Mr.S.K. mitra Mr. Di mittalFINANCIAL FOOT PRINT: A us $28 billian corporation with a market cap of US $31.5 billian and in theleaque of fotune 500.the A.B. group is anchored by an extra ordinary sale of 100000employee belonging to 25 different nationalties. In India the group has been adjustedthe best employees in India and among the top 20 in asia by the Hewitt- economictimes and wall streetjournal study2007over50% of its revenues flow from overesoperations. The groupoperation in 20 country: Indiathiland,indonasia,Egypt,china,Canada,Australia,U.S.A.germany,brazil,italy,Switzerland,andmalasia.Renukoot: A general overview Lying in the foothills of the vindhya range, renukoot is about 160kms from varanasi and 154 kms from mirzapur.
  • 16 There is a direct daily train named muri expressed between jammu tawl to tatanagar and rachi via renukoot. A part from above renukoot is also connected with kolkatta through direct train named shaktipunj express.Location:-Renukoot- zonal office:-  Kolkatta  Mumbai  Bangalore  delhiDivisional office:-  Power division  Foil divisionGuest house:-  Delhi  Mirzapur  Lucknow  Allahabad
  • 17 Renukoot Renusagar (CPP) Silavasa Bauxite (Foils & Wheels) Mines (Jharkhand & Chattisgarh)
  • 19HIGHLIGHTS OF HINDALCO INDUSTRIES LIMITED India ‘s largest aluminium producer. Market share of 50 percent. World’s cost producer of aluminium. Fully integrated production facilities from bauxite mines to value added aluminium products. Fully integrated aluminium plant at renukoot,U.P. Aluminium wheels and foils plant at silvassa, in Dadra& NagarHaveli. First Indian Aluminium producer which was accorded ISO 9002 and 14001 certified. Significant economies of small scale from large scale production. Strong market presence and wide distribution network.HINDALCO OVERVIEW:- “Hindalco” was set up in collaboration with Kaiser Aluminum & ChemicalsCorporation U.S.A, in a record time of 18 months. The plant started functioning in theyear 1962 with a capacity of 20,000 tons per annum. The company has growth manifold and is managed by Board of Directors, withShri Kumar Mangalam Birla as the chairman of the Board of Directors. Day to dayaffairs of the company are managed by Professional Executives headed by Shri RatanK Shah as the chief operation officer-Aluminium & Power. Hindalco is one of India’s largest producers of Aluminium. The company was incorporated on December 15, 1958 and commenced production in 1962 with an initialsmelting capacity of 20,000 TPA.
  • 20 Hindalco’s integrated operation and operational efficiency have enabled thecompany to be one of the world’s lowest cost producers of Aluminium.Hindalco Today Aluminium has turned out to be the wonder metal of the industrialised world. Noother single metal can do so many jobs, so well, and so economically. Aluminium’s growth rate is the highest amongst the major basic metals today.Hindalco ranks as the largest Aluminium producer in India, whose more than 58%sales is in value added product and has more than 40% in total market share.Hindalco’s integrated operations and operational efficiency have enabled the companyto be one of the world’s lowest cost producers of Aluminium. Hindalco also owns a large captive thermal power plant at Renusagar that meetsthe power requirement of the company very effectively. Hindalco currently has primaryAluminium capacity of 3, 75,000 MTPA. Hindalco is a leading domestic player in two metals business segments -aluminium and copper. The aluminium divisions product range includes aluminachemicals, primary aluminium ingots, billets, wire rods, rolled products, extrusions, foilsand alloy wheels. The company has a significant market share in all the segments in which itoperates. It enjoys a domestic market share of 42 per cent in primary aluminium, 63per cent in rolled products, 20 per cent in extrusions, 44 per cent in foils and 31 percent in wheels. As a step towards expanding the market for value-added products and services,Hindalco has launched several brands in recent years, which include Aura for alloywheels, Freshwrapp for kitchen foil and Everlast for roofing sheets. Our exclusiveshowroom, The Aluminium Gallery, seeks to promote Hindalco products to its
  • 21 customers. It is a platform for the company to showcase quality products to aquality audience in an appropriate ambience. The exhibits include products like windows, doors, furniture, ladder, roofingsheets and ceiling and cladding panels. Hindalcos products are well received not only in the domestic market, but also inthe international market. The companys metal is accepted for delivery under the highgrade aluminium contract on the London Metal Exchange (LME). The company exportsabout 17 percent of its total sales volume of aluminium. The companys alumina chemical business is a leader in manufacturing andmarketing of speciality alumina and alumina hydrate products in the country. It has amajor market share in the country. These speciality products find wide usage indiversified industries including water treatment chemicals, refractories, ceramics,cryolite, glass, fillers and plastics, conveyor belts and cables, among others. Thecompany also exports these alumina chemicals to over 30 countries covering NorthAmerica, Western Europe and the Asian region. Birla Copper, Hindalcos copper division at Dahej in Gujarat, enjoys a leadershipposition in India, having built over 40 per cent of the domesticmarket share within three years of its commissioning. It has also madesuccessful forays into the export markets of the Middle East,Southeast Asia, China, Korea and Taiwan. The copper plant produces world-class copper cathodes,continuous cast copper rods and precious metals. Sulphuric acid, phosphoric acid, di-ammonium phosphate, other phosphatic fertilizers and phospho-gypsum are alsoproduced at this plant.
  • 22Hindalco Vision “To strength our position as a premium Aluminum company, sustaining, domesticleadership and global competitiveness through innovation quality and value addedgrowth.”
  • 23Hindalco Mission “To pursue the creation of value for our customers, shareholders, employees andsociety at large.”Hindalco Values INTEGRETY: Honesty in every action. COMMITMENT: Doing whatever it takes to deliver, as promised. PASSION: Missionary zeal arising out of an emotional engagement with work. SEAMLESSNESS: Thinking and working together across functional silos,hierarchy levels, business and geographies. SPEED: Responding to stockholders with a sense of urgency. Hindalco Strategy EFFICIENCY FOCUS: To be one of the lowest cost producers globally. EFFECTIVENESS FOCUS: To continue to remain the market leader domestically. GROWTH FOCUS: To pursue value adding growth opportunities.HINDALCO’S MARKETING VISION “To be a premium marketing organization sustaining domestic market leadershipand establishing global presence in each product category.”HINDALCO’S MARKETING MISSION “To create value for our customers and profitable markets for Aluminium,ensuring rapid and sustained long-term growth.”HINDALCO POLICYQUALITY POLICY
  • 24 We, at Hindalco, shall aim to achieve and sustain excellence in all our activity. We are committed to total customer satisfaction by providing products and services, which meet or exceed the customer, expectations. Modernization of the manufacturing facilities stress on technological innovation and training of employee at all level shall be a continuous process of Hindalco. A motivated workforce with a sense of pride in the organization shall us towards total quality.SAFETY POLICY We at Hindalco value as our most importance resource and hence committed toachieve health and safety. Excellence by providing healthy and safe workingenvironment our objective therefore, will be Use appropriate technology and other resources to upgrade safety standards. To continuously improve the working condition leading to prevention of accidents. Not only continue to comply with all the applicable laws and regulation but also strive to achieve beyond and set new standards. To continuously monitor and control work places hazard and project employees and community from them. To creation awareness and concern for safety amongst employees through active involvement participation continuous training etc.ENVIRONMENT POLICY We at Hindalco Industries Ltd. are committed to resources conservation andcontrol of environmental aspect of our activities internally relating to production of
  • 25Alumina. Aluminium fabricated product and power generation at Renukoot in order toserve the cause of sustainable development our objective therefore will be to Innovate and improve our process equipment operations maintenance and other practices continuously for population prevention. Adopt cleaner technologies wherever techno-Economically viable. Conserve key input resources such as bauxite caustic soda coal, power, water furnance oil and other oil. Keep exploring the flexibility of recycling and utilization of inevitable waste especially of water tube oil red mud fly ash. We shall make this policy available to all employee and public.TPM-WCM POLICY Weat hindalco shall continuosly TPM-WCM practices as a key to optimization ofresource, and recognition as a world class company constantly aspiring to exceed theezception of all atakeholder. We shall: Involve all our people in the pursuit of efficient production system. Target zero accident, Zero breakdown, and Zero defect. Work vigorously for elimination of losses and wastage of resource. Promote process capability through innovation. Conserve energy and ensure healthy a green environment through pollution prevention and control. Be flexible, so as to meet the challenge of change through association assimilation and improvisation.
  • 26 Be a solutions provider-delivering optimum valve to our customers.BOARD OF DIRECTORNon Executive Directors Mr. Kumar Mangalam Birla (chairman) Mrs. Rajashree Birla Mr. A. K. Agarwala Mr. E. B. Desai Mr. S.S. Kothari Mr. C. M. Maniar Mr. M. M. Bhagat Mr. K. N. Bhandari Mr. N. J. JhaveriExecutive Director Mr.D.Bhattacharya Managing DirectorRENUKOOT UNIT Mr. D. K. Kohly, Chief Operating Officer Mr. Ashok Machher, Joint President(F& C) Mr. G.M.Pandey,Joint President (Renusagar Power)
  • 27Chief financial officer Mr. S.talukdar (Group executive president &CFO)Corporate- Mr.R.Ram, Senior president (project corporate) Mr. Pratik roy. (Chief people officer)Advisors Mr.R.K. Kasiwal Mr.Amit Basu.Key executives- (aluminium business) Mr.Shashi k. maudgal (chief marketing officer) Mr.R.S.Dhulkhed president Mr shanker roy president Mr S.M. Bhatia, presidentCopper business Mr Dilip gaur(group executive president copper) Mr N.M. pathaik, Mr j.p.paliwal,( commercial president) Mr B.M. sharma (chief marketing officer copper)
  • 28 Joint venture companies of Hindalco 1. Indo-gulf Fertilizers & chemicals Corpn Ltd. 2. Bihar Caustic & Chemicals Ltd. 3. Tanfac Industries Ltd. 4. Mangalore Refinery & Protochemicals Ltd. 5. Birla AT & T Communication Ltd. 6. Bina Power Supply Co. Ltd. 7. Birla Global Finance Ltd. 8. Birla Capital International AMC Ltd. 9. Century Enka.Recent Awards won by Hindalco in Different fields. National Safety Award 2003: ByMinister of Labor and Employment. Rajiv Gandhi National Quality Award 2003: Joint awardwinner of R.G.N.Q.A. 2003 in large –scale manufacturing category. The award isinstituted by Bureau of Indian Standard, Ministry of Consumer Affairs, Government ofIndia. CIOL Dataquest Award: For best performance in the pioneer category for 2004-05 by CIOL, an IT portal along with Dataquest Magazine. Green Tech Gold Award 2003-04: By Greentech Foundation, New Delhi for organizational Health & Safety. Qualtech Award 2004: ForQuality Management by Quimpro college, Mumbai. CII National Award:
  • 29 For Excellence in Energy Management-2004. Prime Minister’s Shram Award 2004: Shram Veeraward to Mr. Ram Kailash of Aluminium plant won the Excellence Case StudyPresentation Award at NCQC, Mumbai in December 2004. National Energy Conservation Award 2004: In aluminium sector – Government of India, Ministry of Power. Aditya Birla Planet Award 2004: Jt. Winner of Aditya Birla Planet Award 2004 for community initiative & Rural Development Works. Our Mines Division has been reorganized by Indian Bureau of Mines, Government of India for A forestation; Plantation, waste Dump Management, Topsoil Management, Reclamation and Rehabilitation, Dust suppression Arrangement, Publicity & propaganda and overall Performance. Training & Development (HR) Practices 2004: Renusager Power has declared winner of Innovation Training & Development (HR) Practices 2004. Award given by Indian Society for Training & Development, New Delhi. Annual Greentech Safety Gold Award: Hindalco own the 4th Annual Greentech Safety Gold award for the year 2004-05 in Metallurgy Sector. The award will be presented on 11th May 2005 at Hyderabad. National Award for Excellence in Energy Management 2005:
  • 30 Belure Sheet Plant received the National Award for Excellence in Energy Management 2005 (Energy Efficient Unite) from CII –Sohrabji Godrej Green Business Center. National Safety Award 2004: Owned by Renukoot Plant, given by the Ministry of Labor and Employment, Government of India. Vishkarma Rashtriya Puraskar: Awarded to Five workmen of our smelter, Mr. Rajesh Pal, Mr. A.K. Gupta, Mr. R.K. Singh, Mr. H.N. Singh, & Mr. S.K. Singh, given by the Ministry of Labor and Employment, Government of India. National Energy Conservation 2005: Renukoot plant won the 1st Prize in Aluminium sector, given by Ministry of power, Government of India. ICWAI National Award for Excellence in Cost Management-2005: Hindalco was awarded by Institute of Cost and Works Accountants of India. “National Energy Conservation Award-2006” Hindalco was awarded by Ministry of Power, Government of India National Award for Excellence in Water Management 2006 Hindalco, Renukoot has won the National Award for Excellence in Water Management 2006 organised by CII Quality Circle Forum of India Award
  • 31 The quality circle teams at Hindalco, Renukoot were adjudged winners in the live quiz competition organised by the Quality Circle Forum of India. Rajiv Gandhi National Quality Award 2007 Renukoot was selected for the Rajiv Gandhi National Quality Award 2007 – Silver Trophy, presented by the Bureau of Indian Standards, in the large scale manufacturing (metallurgy) category National Award for Excellence in Water Management 2007". Hindalco awarded the CII-Sorabji Green Business Centre "National Award for Excellence in Water Management 2007". “D.L. Shah National Award for Economics of Quality” Hindalco won the prestigious “D.L. Shah National Award for Economics of Quality” given by quality council of India. Chief manufacturing officer, Mr. R. P. Shah and Mr. Arun Kumar received the award from the President of India, H.E. Dr. A.P.J. Abdul Kalam on 9 February 2007 at New Delhi IT Competition 2008 Award By CII: Hindalco Hirakud Systems ranked runners up at the state level IT Competition 2008 organised by CII in association with the department of informational technology, Government of Orissa. Greentech Safety Gold Award 2008: Greentech Safety Gold Award 2008 for outstanding achievement in safety management in coal based power sector
  • 33 Aluminium production started.capacity40,000TPA1964 properzi wire rod mill commissioned.1965 Aluminium production capacity expanded to 40,000TPA. Renusagar pawar plant commissioned with 65.7mw capacity. Aluminium production capacity expanded to 60,000TPA. Properi mll no.2,extrusion press 2&3.1969 Aluminium production capacity expanded to. 80000TPA1972 Aluminium production capacity expanded to 95,000TPA.1981 Aluminium production capacity expanded to 120,000TPA. Third generater at renusagar commissioned.1886 Alumina production capacity expanded to 300,000.1988 Conferm extrusion press commissioned.1990 Continuous caster installed.1991 Aluminiumproduction capacity expanded to 150,000TPA.1993 Dave cold rolling mill commissioned.1994 Aluminium production capacity expanded to 350,000TPA.1996 Continuos ingot casting machine installed. Aluminiumproduction capacity expanded to 210,000TPA Wag stuff slab casing machne installed.1997 Bliss hot & cold mill revamped. Co-generation power plant of 37 mu commissioned. Wag stuff billet casing machine commissioned.
  • 34 6th generator commissioned At Renusagar.1998 Aluminium production capacity expanded to 242,000TPA. Aluminiumproduction capacity expanded to 450,000TPA. Aluminium fil production commenced at silvassa.1996 wheel plant commissioned at silvassa.20011997 under brown field expansion of smelter, pot line 9 commisioned and aluminium production capacity expanded to 275, 000TPA2002 brown field expansion of capitive power plant completed power production capacity enhanced by 160 mu .2002 brown field expansion of alumina refinery completed.2004 co generation power plant of 40 mu commissioned.2005 HIndalco received the ICWAI national award for excellence in cast management.2006 In may the company singed a mow wih the government of Madhya Pradesh for setting up a green field aluminium smelter and a captive power plant.2007 In may novelis become a Hindalco subsidery with the completion of the acquisition process.ACHIVEMENTS:-Recent awards won by Hindalco of labour and employment:- National safety award 2003 by ministry of labour and employment. Joint award winner of Rajive Gandhi national quality award 2003 in large scale manufacturing category. The award I sinstotuted by bureau of Indian standerds ministry of consumer affairs, govt. of India.
  • 35 CIOL Dataquest award for best performance in the pioneer category for 2004-2005 by CIOL an IT portal along with dataquestr magazine. Green tech gold awad 2003-2004 by greentech foundation new delhi for organization health and safety. Qualtech award 2004 for quality management bu quimpro college. CLL national award for excellence in energy management 2004. Prime minister’s shram awards 2004 sharam veer award to mr.Ram kailash of alumina plant and Sharam shree award to Mr. Suresh Prasad of alumina plant. Quality circle shakti of reduction plan won the excellence case study presentation award at NCQC Mumbai in December 2004. National energy congervation award 2004 in aluminium sector government of India, ministry of power. Jt.winner of Aditya Birla planed award 2004 for commity initiative & rural development works. Our mines division has been recognized by Indian bureau of mines, govt of India for afforestation, plantation management publicityn and propaganda and overall performance. Renusagar power has declared winner of innovation training and development practice 2004 award givin by Indian society for training & development new delhi. Hindalco won the 4th annual greentech safety gold award for the year 2004-2005 in metallurgy sector. The award will be presented on the 11th may 2005 at hydarabad.
  • 37 COMPANY PROFILEINDUSTRY AT GLANCE Hindalco industry limited, a flagship company of ADITYA BIRLA group, with aturnover of Rs.192,010.00 crore in 2007-08, ranks M vmd ndnvkl among India’s top 10 companies in terms of capital marketcapitalization a non ferrous metal powerhouse Hindalco’s operations are organized intotwo strategic business units –Aluminium and Copper. The company is an industryleader in both these business.ALUMINIUM Hindalco is Asia’s largest integrated primary producer of aluminium and amongthe most cost efficient producers globally. In India, Hindalco enjoys a leadershipposition for aluminium and downstream products. Synergies of operations with it’s wholly – owned subsidiary Indian aluminiumcompany Ltd. (Indal), have enhanced the company share in value addition segments,in which the Hindalco – Indal combine has a market share of over 50 %. As a step towards expanding the market for value –added products and services,Hindalco has launched several brands in past year –“Aura”, “Freshwrapp”, Everlast”,and, “Al plant”. The company’s product range includes primary aluminium ingots, billets, wire rods, rolled products, extrusions, and foils andalloy wheels. To enhance its capacities, the company had under taken Brownfield expansions,leading to smelting capacity of 1,46,000 tpa, an alumina refining capacity of 4,50, 0000tones, and captive power generation of 167.5MW. The company further enhanced the smelter capacity of 4, 29,140MT and aluminarefinery to 7, 00,000 tones, by streamlining to eliminate bottlenecks and
  • 38 installation of balancing equipment, including another co- generation plant. Thishas facilitated optimization of expand facilities and, more importantly, has beenachieved within the original budget. Besides being a dominant player in the Indian aluminium market, Hindalco’sproducts are well accepted in international markets. The company’s metal is acceptedfor delivery under the high grade aluminium contract on the LME (London MetalExchange). The company’s export efforts have led to its reorganization as a “StarTrading House”. Hindalco is an ISO 9001 company, and has been awarded the ISO14001certification for its entire operations at Renukoot and Silvassa, including itspower plant and mines. It has received several awards from the export promotioncouncil as well as the government of India. With the completition of on goingBrownfield expansion, Hindalco will further consolidate its domestic market leadership,and reach out to international markets in larger measure.COPPER Birla copper enjoys leadership position in India, having built up-------percentdomestic market share with in three years of commissioning. It has also madesuccessful forays into the export markets of the Middle East, South East Asia, chinaKorea and Taiwan. Birla copper has a mega green field copper smelting and refining complex atdahej in the bharuch district of Gujarat, India. With an investment of Rs 1,850. Crore, itis largest of its kind in India. The plant produces world- class copper cathodes,continues cast copper rods and precious metals. Sulphuric acids, phosphoric acid, di-
  • 39 ammonium phosphate, other phosphatic fertilizers and phospho- gypsum arealso produced at this plant . Birla copper aspires to be among the world’s foremost cost competitiveproducers of cooper. To reach this goal, it had under taken a brown field expansionraising its smelter capacity from 65,000 tones per annum to 146000 tones per annum.The copper division is evaluating a further expansion as well, so as to rank among thetop 10percent of cost competitive producer globally. To make birla copper an integrated producer of copper, the company believesthat upstream expansion through ownership in mines is important for a smelter of itssize. As a first step in this direction, birla copper acquired the nifty copper mines inAustralia. Nifty currently has a capacity of 25000 tones per year of copper cathodes,with a large underdeveloped copper sulphide. PRODUCTION PROFILE PRODUCTION PROCESS EXTRACTION OF ALUMINA FROM BAUXITE EXTRACTION ALUMINIUM FROM ALUMINA
  • 40
  • 41 PRODUCTION PROCESS The aluminum production process can be categorized into up stream and downstream activities. The upstream process involves meaning and refining bauxite toalumina while the downstream process involves smelting and casting and fabricating. Hindalco refines bauxite primarily obtained from captive mines, to extractalumina, which is smelted into alumina ingots or billets. Hindalco smelts its entireproduction of alumina into aluminum and does not engage in alumina trade.Production of aluminum can be categories in two stages, namely • From bauxite to alumina • From alumina to aluminum EXTRACTION OF ALUMINA FROM BAUXITE Alumina is manufactured by conventional bayers process i.e. treating bauxitewith caustic soda. Bauxite is brought to the site from mines by means of railwayswagon tippler. Primary crushing is done in cone crusher where bauxite size is reducedform 8”- 12” to 3” - 4” and then stockpiled. Secondary crushing is done by means ofhammer mills where process liquor known as a spent liquor and 600 psig. Seam ismixed together. This solution of alumina from bauxite into caustic solution in the formof sodium aluminates is carried out of digesters at 240 degrees centigrade temperatureand 36-kg/sq.cm pressures. The digested slurry is placed flashed and brought toatmosphere pressure; flashed vapors are utilized for pre heating the spent liquor andcondensed returned to boiler hose for generation of steam. Digested flashed slurry ispumped to clarification area for removal of solid Impurities (red mud). Red mud isseparated out, in solid liquid hydrocyclon and stellar. Separated mud slurry is washedin counter current and washing Circuit without using water. Washed mud slurry iscauterized by treating with lime slurry to recover soda. Cauterized mud slurry is filteredon drum filters. Filtrate liquor is taken back into the system and red mud cake is
  • 42disposed off by means of dumpers Settler overflow pregnant liquor is filtered in Kellypresses to remove fine mud particles. Clear pregnant liquor is pumped to precipitatorsthrough plate heat exchanges after exchanging heat with the spent liquor where it isseeded with alumina trihydrate. Alumina trihydrate is separated out in thickness andpan filter. Alumina trihydrate cake thus obtained is fed into the gas suspension calcinerwhere furnace oil is burnt for calcining alumina. The reduction grade alumina thusproduced is transported to smelter plant. Spent liquor generated and separated from precipitation circuit is fed to theevaporation unit for increasing caustic concentration to the desired level andrecirculated to digesters through heaters for further processing of bauxite and thus theprocess goes on. EXTRACTION OF ALUMINUM FROM ALUMINA Alumina from alumina plant is conveyed to the reduction plant. The reductionplant has 11 prebaked pot – lines which have 1278 pot cells. Each pot has 24/26carbon anodes and it is lined with carbon cathode. Alumina is converted to metallicaluminum is these pot cells by the standard “hall heroult” process. The pot cells work atan average 4.3-volt D. C. current of 5800/6300 amperes. Electrolysis of the aluminatakes place in molten bath of cryolte at a temperature of 955 to 960 degreescentigrade. The molten aluminum that collects at the cathodes is siphoned intocrucibles periodically. The entire process is controlled by microprocessor system.
  • 44 PRODUCT OVERVIEW Hindalco operations are organized into two strategic business units- aluminumand copper. The company is an industry leader in both these businesses.ALUMINUM Hindalco’s Aluminum business comprises primary aluminum, extrusions, rolledproducts, foils and alloy wheels. In the value-added segment, hindalco, along with itssubsidiary Indal, has a 50 percent market share. In the past year, hindalco haslaunched several brands – “Aura”, Freshwrapp”, “Everlast”, “Permashield”, and, AlPlanet”.COPPER BIRLA copper, with an over 45 per cent market share, is India leading copperproducer in private sector. Its plant at dahej in Gujarat, produces world class coppercathodes, continuous cast copper rods and precious metals. A part form copper products, euphoric acid, phosphoric acid, di-ammoniumphosphate, other phosphates fertilizers and phosphor –gypsum are also produced atthis plant.PRIMARY ALUMINIUM PRODUCTS INGOTS: Is an LME (London Metal Exchange) registered brand. These are also known as virgin metal. These are used as raw material for making aluminium product. ROUND BILLETS: These are use for making extrusion. CAST SLABS: Slabs are used input in Hot Rolling Mill, which is converted intothinner sheets, plates or coils.
  • 45SEMI FABRICATED PRODUCTS: Hindalco produces 900 different rolled product items of which 40 are standard. HOT ROLLED PRODUCTS: These are the product which are used after the process of hot rollingaccording to their specification and requirements, these products are as follows: 1. Hot rolled plates electrical application 2. Hot rolled wire. COLD ROLLED PRODUCT. (plane sheets) (Cold rolled coil) 3. Circle 4. checkered sheet 5. alkaloid sheets.EXTRUSIONS Hindalco extrusions offer an enormous range of shapes,wide range of alloys for decorative, structural and functionalapplication. The present die catalogue included over one thousanddie for various sections and we are fuy equipped to design and makenew die as per exclusive requirement. Some of the common shapes are as follows:  ROD, BAR-Flat, Square, Hexagonal  STRUCTURAL SHAPES-Angles, Channels, Tee, I-beans, H sections etc.  TUBES-Round, Oval, Square, Rectangular, Triangular  MOUDINGS FOIL  Cable Rape stock  Light Gauge Foil  Bare & Coated Fine stock
  • 49 Organizational Profile of Hindalco Industries LimitedHindalco Industries Limited, a Non-ferrous Metal powerhouse, is the flagship company of the AdityaBirla Group.Hindalco is one of India’s producers of Aluminium. The company was incorporated on December 15,1958 and commenced production in 1962 with an initial smelting capacity of 20,000 TPA. Thecompany has sales and distribution network that covers all of India and includes five sales officeslocated in Mumbai, New Delhi, Bangalore, Chennai and Renukoot.In India Hindalco enjoys a leadership position in Aluminium and Copper. All of the Hindalco’s unitsare ISO 9001:2000, ISO 14001:2004 and several have attained the OHSAS 18001— theoccupational health and safety certification. On the export front, the company has been accorded aTrading House status by the Indian government.Both in Aluminium and Copper, Hindalco is the largest Company in India. The company’s Aluminiumproduct range includes Primary Aluminium Ingots, Billets, Rolling Slabs, Redraw Roads, Alloy WireRods, Flat Rolled Products, Extruded Profiles, Foils and Alloy Wheels.Hindalco is the largest manufacturer of the entire range of flat rolled products in India. Hindalco’sdomestic market share in Flat Rolled Products is nearly 60% and its rolled products are widely usedin various segments such as packaging, transportation, building and construction, electrical, defenseand general engineering applications. Hindalco is registered as a star Trading House. About 35% ofFlat Rolled Products are exported to more than 50 countries.
  • 50The companys commitment to quality and service along with its extensive infrastructure has madeHindalco a prime source for best-selling brands. Continuous improvements in manufacturing,processes, practices and systems ensure that customers needs and expectations are fully met.Efficiency and product quality are ensured by using state-of-the-art equipment and a strong researchand development set-up, supported by dedicated and motivated employees and the Oracle ERPsystem.Wag staff Air Slip™ slab casting technology is used to ensure consistent quality and surface finish ofstock feed, which in turn ensures quality, finished products. The companys capacity in flat rolledproducts at present is 2,30,000 tonne per annum and new plans are being implemented to increasethe manufacturing capacity Of the total production of Hindalcos flat rolled products, around 40 percent is exported and customers in more than 50 countries are using the products.Ever last, a Hindalco brand for aluminium-roofing sheets, offers ideal and economical solutions for allroofing and cladding needs. Hindalco also offers colour-coated and tiled roofing profiles.Hindalco is one of Asias largest producers of primary aluminium and one of the most cost-efficientproducers globally. In India, Hindalco enjoys a leadership position in specialty alumina, primaryaluminium and downstream productsThe companys integrated complex at Renukoot houses an alumina refinery, aluminium smelter andfacilities for production of semi-fabricated products. Power is sourced from the companys captivepower plant at Renusagar, located at a distance of about 45 km from Renukoot. It has a captivecapacity of 820.2 mw.Besides the integrated complex at Renukoot, Hindalcos other manufacturing facilities are situated atlocations across the country. While the captive bauxite mines are located in western and easternIndia, the alumina refineries are located in Belgaum in southern India and Muri in eastern India.Smelters are located at Hirakud, Orissa, with a captive power plant and coal mines, and at Alupuram,Kerala. Rolled product manufacturing facilities are located at Belur and Taloja, and an extrusion plant
  • 51is situated at Alupuram. Foil plants are based in the Union Territory of Silvassa and in Kalwa,Maharashtra. The foil plant at Kollur, Andhra Pradesh is the only remaining entity with the erstwhileIndal after the merger of Indal with Hindalco. The wheel plant of Hindalco is also located at Silvassa.The company has two R&D centres: the Belgaum Research and Development Centre in Belgaum,Karnataka and Taloja Research and Development Centre in Taloja, Maharashtra. They have beenrecognized by the Government of Indias Department of Scientific and Industrial Research (DSIR).Hindalco is a leading domestic player in two non-ferrous metals business segments- Aluminium andCopper.The Aluminium divisions product range includes alumina chemicals, primary Aluminium ingots andbillets, wire rods, rolled products, extrusions, foils and alloy wheels.The company has a significant market share in all the segments in which it operates. It enjoys adomestic market share of 42 per cent in primary aluminium, 63 per cent in rolled products, 20 percent in extrusions, 44 per cent in foils and 31 per cent in wheels.As a step towards expanding the market for value-added products and services, Hindalco haslaunched several brands in recent years, which include Aura for alloy wheels, Freshwrapp for kitchenfoil and Ever last for roofing sheets. Our exclusive showroom, The Aluminium Gallery, seeks topromote Hindalco products to its customers. It is a platform for the company to showcase qualityproducts to a quality audience in an appropriate ambience. The exhibits include products likewindows, doors, furniture, ladder, roofing sheets and ceiling and cladding panels.Hindalcos products are well received not only in the domestic market, but also in the internationalmarket. The companys metal is accepted for delivery under the high-grade aluminium contract on theLondon Metal Exchange (LME). The company exports about 17% of its total sales volume ofAluminium.The companys alumina chemical business is a leader in manufacturing and marketing of specialityalumina and alumina hydrate products in the country. It has a market share of 90 per cent in the
  • 52country. These speciality products find wide usage in diversified industries including water treatmentchemicals, refractories, ceramics, cryolite, glass, fillers and plastics, conveyor belts and cables,among others. The company also exports these alumina chemicals to over 30 countries coveringNorth America, Western Europe and the Asian region.Birla Copper, Hindalcos copper division at Dahej in Gujarat, enjoys a leadership position in India,having built over 40 per cent of the domestic market share within three years of its commissioning. Ithas also made successful forays into the export markets of the Middle East, Southeast Asia, China,Korea and Taiwan.The copper plant produces world-class copper cathodes, continuous cast copper rods and preciousmetals. Sulphuric acid, phosphoric acid, di-ammonium phosphate, other phosphatic fertilizers andphospho-gypsum are also produced at this plant. Products and Brands of HINDALCO Key Products and Locations Capacities Country Brands Hindalco Industries Ltd. Alumina Chemicals Renukoot (Uttar Pradesh), 1,160,000 tpa India Muri (Jharkhand), Belgaum (Karnataka) Primary Aluminium Renukoot, Hirakud (Orissa), 489,000 tpa Taloja Extrusions Renukoot, Alupuram 27,700 tpa Rolled Products Belur (West Bengal), Taloja 200,000 tpa (Maharashtra), Renukoot, Mauda (Maharashtra) Wire Rods Renukoot, Alupuram (Kerala) 64,400 tpa
  • 53 Aluminium Foil Silvassa (Dadra & Nagar Haveli), 11,000 tpa Kalwa (Maharashtra) Aluminium Wheels Silvassa (Dadra & Nagar Haveli) 300,000 pcs For Taloja recycling plant Indal (subsidiary of Hindalco) Foil Rolling Kollur (Andhra Pradesh) 4,000 tpa Key Products and Brands Locations Capacities Country Birla Copper (Hindalco Industries Ltd.) Copper Cathodes Dahej (Gujarat) 500,000 tpa India Continuous Cast Copper Rods 97,200 tpa Sulphuric Acid 1,670,000 tpa Phosphoric Acid 180,000 tpa Gold (Birla Gold) 15 mt Silver (Birla Silver) 150 mt Power 135 mw DAP and Complexes (Birla 400,000 tpa Balwan) Hindalco Industries Ltd. (Aditya Birla Minerals Resources Pty. Ltd.) Copper Cathodes Nifty mines 25,000 tpa Australia Copper in concentrate Mt. Gordon mines 40,000 tpa Australia Power Mt. Gordon mines 28 mw Australia Key Products and Brands Capacities Country Aditya Birla Nuvo Ltd (Hi-Tech Carbon) Carbon Black Birla Carbon 2,30,000 mtpa India
  • 54 Thai Carbon Black Co. Ltd. Carbon Black Birla Carbon 220,000 mtpa Thailand Alexandria Carbon Co. S.A.E Carbon Black Birla Carbon 285,000 mtpa Egypt Liaoning Birla Carbon Co. Ltd. Carbon Black Birla Carbon 55,000 mtpa China Key Products and Brands Capacities Country Grasim Industries Ltd. White Cement Birla White 475,000 tpa India Grey Cement UltraTech 13.12 mn tpa Cement (formerly Birla Plus), Birla Super Shree Digvijay Grey Cement Kamal 1.08 mn tpa UltraTech Cement Ltd. Ordinary Portland Cement, 17 mn tpa Portland Blast Furnace Slag Cement, Portland Pozzolana Cement and Grey Portland Cement Key Products and Brands Capacities Country Indo Gulf Fertilizers Ltd. Urea Birla Shaktiman 864,600 mt India Birla Copper (Hindalco Industries Ltd.) DAP/NPK Birla Balwan 400,000 tpa India Complexes
  • 55 Key Products and Brands Capacities Country Aditya Birla Insulators Insulators 38,800 tpa India Key Products and Brands Capacities Country Pulp Grasim Industries Ltd. Rayon Grade Pulp 70,000 tpa India AV Cell Inc. Softwood / Hardwood Pulp 122,500 tpa Canada AV Nackawic Inc. Dissolving Pulp 189,000 tpa Canada Fibre Grasim Industries Ltd. Viscose Staple Fibre Birla Viscose 270,100 tpa India (VSF) Thai Rayon Public Company Ltd. VSF Birla Viscose 110,000 tpa Thailand PT Indo Bharat Rayon VSF Birla Viscose 155,000 tpa Indonesia Thai Acrylic Fibre Acrylic Fibre Texlan 100,000 tpa Thailand Alexandria Fiber Company, S.A.E Acrylic Fibre 18,000 tpa Egypt Yarn Aditya Birla Nuvo Ltd. Viscose Filament Yarn Ray One 16,400 tpa India Aditya Birla Nuvo Ltd. (Jaya Shree Textiles) Flax Yarns 15,340 spindles India Worsted Yarns 25,548 spindles PT Indo Liberty Textiles Rayon Yarn, Polyester, 45,120 ring spindles Indonesia Blended Yarn PT Elegant Textile Industry Rayon, Polyester, 168,088 spindles Indonesia Rayon-Polyester Blended Spun Yarn PT Sunrise Bumi Textiles Viscose Rayon, Polyester Viscose, Spun Polyester, 89,376 spindles Indonesia Polyester Combed Cotton, Anti Pill Yarn, Sewing Thread, High Twist Yarn, Reverse Twist Yarn,
  • 56 Flame Retardant Yarn, Rayon Cotton Blended Yarn, Micro Denier Polyester Rayon Yarn, Rayon Silk Yarn, Slub Yarn, Lycra Core Spun Yarn Indo Phil Acrylic Manufacturing Corporation High Bulk Acrylic Dyed Yarn, Non-bulk Acrylic Dyed 3,700 mtpa Philippines Yarn Indo Phil Textiles Mills Inc Poly Viscose Blended Yarn, Poly Cotton Blended 13,500 mtpa Philippines Yarn, Polyester Yarn Indo Phil Cotton Mills Inc Cotton Yarn 10,000 mtpa Philippines Indo Thai Synthetics Co. Ltd. Synthetic Yarns 98,568 spindles Thailand Fabrics Grasim Industries Ltd. Fabric -Polyester, Viscose, Silk and Wool Blends 146 looms India Uncrushables, Ice Touch, Purista, and Clean Fab 18 million meters Aditya Birla Nuvo Ltd. Pure Linen and Linen Linen Club 107 looms India Blends Flame Retardent Fabrics Pyroguard Branded apparel Aditya Birla Nuvo Ltd. (Madura Garments) Ready-to-wear Louis Philippe, India Garments Allen Solly Van Heusen, Peter England Key Products and Brands Capacities Country Grasim Industries Ltd. (Vikram Ispat) Sponge Iron (HBI & DRI) 900,000 tpa India Key Products and Brands Capacities Country
  • 57 Essel Mining & Industries Ltd Iron and Manganese ore 15 million tons India Key Products and Brands Capacities Country Grasim Industries Ltd. Caustic Soda 258,000 tpa India Aditya Birla Nuvo Ltd. Caustic Soda 82,125 tpa India Liquid Chlorine 50,340 tpa Hydrochloric Acid 5,475 tpa Tanfac Industries Ltd. Aluminium Fluoride 17,000 tpa India Hydrofluoric Acid 17,000 tpa Bihar Caustic and Chemicals Ltd. Caustic Soda Lye 92,750 mt India Liquid Chlorine 65,785 mt Hydrochloric Acid 29,040 mt Sodium Hypochlorite 1,800 mt Compressed Hydrogen 17,42,400 nm3 Aluminium Chloride 12000 tpa Captive Power Plant 30 mw Aditya Birla Chemicals (Thailand) Ltd. Sodium Triployphosphates, Polyphos Thailand Tetrasodium Pyrophosphate, Epotec sodium Hexametaphosphate, Birlasulf-SS, Sodium Acid Pyrophosphate, Birlasulf-SM, Monosodium Phosphate, Birlasol 35 Disodium Phosphate, Trisodium Phosphate, Speciality Phosphates Epoxy Resins (bis-a and bis- f), Diluents, Curing Agents and Allied Products Sodium Sulphite, Sodium Metabisulphite, Sodium Bisulphite Epichlorohydrin Caustic Soda Chlorine Thai Peroxide Co. Ltd. Hydrogen Peroxide, Peracetic Encare, Ecare, 15,000 mtpa Thailand Acid, Calcium Peroxide Aqua-x, Birlox 5, Birlox
  • 58 12, Ocare PT. Indo Raya Kimia Carbon Disulfide 50,000 tpa Indonesia Key Products and Brands Capacities Country Pan Century Surfactants Inc. Fatty Acids 55000 mtpa Philippines Fatty Alcohol 30000 mtpa Glycerin 6500 mtpa Key Products and Brands Capacities Country PSI Data Systems Ltd. (subsidiary of Aditya Birla Nuvo Ltd.) IT Solutions (Banking, Finance and Insurance) India Key Products and Brands Capacities Country Aditya Birla Minacs Worldwide Limited (subsidiary of Aditya Birla Nuvo Ltd.) BPO / ITES 9,089 seats India
  • 59 Key Products and Brands Capacities Country Birla Global Finance Company Ltd. Financial Services India Birla Sun Life Insurance Company Ltd. Insurance Solutions India Birla Sun Life Asset Management Company Ltd. Mutual Funds India Birla Sun Life Distribution Company Ltd. Investment Planning Services India Birla Insurance Advisory Services Ltd. Non-life Insurance Advisory Services India Key Products and Brands Capacities Country Idea Cellular Cellular Services Idea 21 million subscriber base India Key Products and Brands Capacities Country Aditya Birla Retail Limited Multi-format Stores More 170 retail outlets India Sources: Through the website www.hindalco.com/www.adityabirla.com
  • 60 Hindalco Product Range 1) - 2) - 3) - 4) - 5) -Primary Aluminium Alloy ingots Billets Slab Aluminium sheet Ingots 6) - 7) - 8) -9) - 10) - Wire rods sheet Circle Alloy Wheel Watch Blister Pack 11) - 12) - 13) - 14)- Ladder Door Handle Can
  • 61 Hindalco Products• Everlast aluminium roofing sheets• Freshwrapp aluminium foil• Freshpakk semi-rigid containers• Permashield waterproofing• Aluminium foil• Aura alloy wheels• Hindalco extrusions FLAT ROLLED PRODUCTS (FRPs) Of HINDALCOHindalco is the worlds largest aluminium rolling company with the acquisition of Novelis, the globalleader in value-added high-end aluminium flat rolled products andaluminium can recycling. The combined volume of sales of flat rolledproducts in the world market is about 3 million tonnes and the market Hindalco is now world share is more than 20 percent. No.1 in aluminium flat rolled productsHindalco is the largest manufacturer of the entire range of flat rolledproducts in India. It enjoys nearly 60 per cent of market share and its rolledproducts are widely used in various segments such as packaging, transportation, building andconstruction, electrical, defence and general engineering applications.The companys commitment to quality and service along with its extensive infrastructure has madeHindalco a prime source for best-selling brands. Continuous improvements in manufacturing,processes, practices and systems ensure that customers needs and expectations are fully met.Efficiency and product quality are ensured by using state-of-the-art equipment and a strong researchand development set-up, supported by dedicated and motivated employees and the Oracle ERPsystem. Wagstaff Air Slip™ slab casting technology is used to ensure consistent quality and surface
  • 62finish of stock feed which in turn ensures quality finished products. The companys capacity in flatrolled products at present is 2, 00,000 tonnes per annum and new plans are being implemented toincrease the manufacturing capacity.Of the total production of Hindalcos flat rolled products, around 40 per cent is exported andcustomers in more than 50 countries are using the products.Everlast, a Hindalco brand for aluminium roofing sheets, offers ideal and economical solutions for allroofing and cladding needs. Colour-coated and tiled roofing profiles are also offered by Hindalco. Types of Flat Rolled Products (Export)Basically, there are three kinds of Flat Rolled Products (FRPs) which is being exported by Hindalcoi.e. 1. Cold rolled Coils 2. Cold rolled Sheets 3. CirclesCold Rolled CoilsHindalcos cold rolled coils are precision-finished to match internationalstandards. They have good shape, high tolerance, versatility andblemish-free surfaces. They are used in commercial and generalengineering applications such as bus bodies, cladding and fan blades.The company meets the demands of its ever-growing clientele withcontinuous upgrades and process improvement.Cold Rolled Sheets
  • 63 Hindalcos cold rolled sheets are precision-finished to match international standards for tight thickness, tolerance, flatness and dimensional accuracy. Sound metallurgical properties for further fabrication, anodizing characteristics and a blemish-free surface make it useful in both commercial and general engineering applications. Circles Hindalco offers circles, also known as flat circular sheets, in a variety of diameters and thickness to meet specific needs. Extensively used in the manufacture of pressure cookers, non-stick cookware, coated cookware, cans, etc they have earned the trust of many leading brands. Continuous upgrades and improvement of processes enable the company to keep pace with the demands of its ever-growing clientele.• Major Aluminium Producer Industries in India. Company Ownership Location Capacity Hindalco AB Group Renukoot 345,000
  • 64 Alpuram 14,000 Hirakud 65,000 Belgaum 31,000 NALCO Public Sect. Angul 345,000 BALCO Sterlight Korba 350,000 MALCO Sterlight Mettur 40,000• EXTRUSIONS CAPACITY, PRODUCTION & DEMAND 1991-2020(MT) Particulars 91-92 99-00 03-04 2010 2020 Capacity 122000 190000 202000 202000 400000 Production 61000 109000 132000 188000 370000 Domestic 60000 105000 117000 166000 325000 Demand Export Nil 4000 15000 22000 45000 Excess 62000 81000 70000 14000 30000 Capacity • Product segment of Hindalco
  • 65• World Consumption & Consumption growth%What is International Marketing?International marketing is simply the application of marketing principles to more than one country. However,there is a crossover between what is commonly expressed as international marketing and global marketing,
  • 66which is a similar term. For the purposes of this lesson on international marketing and those that follow it,international marketing and global marketing are interchangeable.The intersection is the result of the process of internationalisation. Many American and European authors seeinternational marketing as a simple extension of exporting, whereby the marketing mix is simply adapted insome way to take into account differences in consumers and segments. It then follows that global marketingtakes a more standardized approach to world markets and focuses upon sameness, in other words the similaritiesin consumers and segments.“At its simplest level, international marketing involves the firm in making one or more marketing mix decisionsacross national boundaries. At its most complex level, it involves the firm in establishing manufacturingfacilities overseas and coordinating marketing strategies across the globe.” Doole and Lowe (2001)International Marketing is the performance of business activities that direct the flow of a companys goods andservices to consumers or users in more than one nation for a profit. International marketing is the application ofmarketing orientation and marketing capabilities to international business.If the exporting departments are becoming successful but the costs of doing business from headquarters plustime differences, language barriers, and cultural ignorance are hindering the company’s competitiveness in theforeign market, then offices could be built in the foreign countries. Sometimes companies buy firms in theforeign countries to take advantage of relationships, storefronts, factories, and personnel already in place. Theseoffices still report to headquarters in the home market but most of the marketing mix decisions are made in theindividual countries since that staff is the most knowledgeable about the target markets. Local productdevelopment is based on the needs of local customers. These marketers are considered polycentric because theyacknowledge that each market/country has different needs.What is Global Marketing?Global marketing refers to marketing activities coordinated and integrated across multiple country markets. Johansson (2000)Global/transnational marketing focuses upon leveraging a companys assets, experience and products globallyand upon adapting to what is truly unique and different in each country.
  • 67The Oxford University Press defines global marketing as “marketing on a worldwide scale reconciling or takingcommercial advantage of global operational differences, similarities and opportunities in order to meet globalobjectives.”When a company becomes a global marketer, it views the world as one market and creates products that willonly require weeks to fit into any regional marketplace. Marketing decisions are made by consulting withmarketers in all the countries that will be affected. The goal is to sell the same thing the same way everywhere. Global marketing: Advantages and DisadvantagesAdvantages• Economies of scale in production and distribution• Lower marketing costs• Power and scope• Consistency in brand image• Ability to leverage good ideas quickly and efficiently• Uniformity of marketing practices• Helps to establish relationships outside of the "political arena"• Helps to encourage ancillary industries to be set up to cater for the needs of the global playerDisadvantages• Differences in consumer needs, wants, and usage patterns for products• Differences in consumer response to marketing mix elements• Differences in brand and product development and the competitive environment• Differences in the legal environment, some of which may conflict with those of the home market• Differences in the institutions available, some of which may call for the creation• Differences in the institutions available, some of which may call for the creation of entirely new ones• Differences in administrative procedures• Differences in product placement.What is Export?Export is the provision of goods, services or knowledge across national and international boundaries.Australia offers a wide range of goods and services to the worlds markets. Export products includemanufactures, computer software, business consultancies, education services and technology transfer.Exporting of goods from Australia is controlled by laws and government policies. Goods may not be exportedunless all the necessary export permits have been obtained from the relevant agency. The federal, state and
  • 68territory governments provide a wide range of services to new exporters including advice and information aboutgetting into exporting and assistance on the ground in foreign markets. Types of ExportExport is divided into two main types: direct and indirect exportsDirect exportsDirect exports are transactions where exporters enter into direct relationships with importers overseas andnegotiate a contract for the sale of goods and services. Alternatively, exporters may use a commission agent inthe overseas market to solicit orders and generally represent the exporters interests. The agent is paid by meansof a commission on the value of orders obtained.Indirect exportsIndirect exports are transactions arranged in Australia through local merchants or the Australian-based branchof an overseas company. Sales are negotiated with a trader in the exporters country with payment made in localcurrency from the traders office.For example, a Japanese trading house in Victoria arranges the contract for the supply of a particular product forthe Japanese market. In such cases, payment will probably be made in Australian dollars. The Benefits of ExportThe benefits of exporting products and/or services include:Development of Additional SalesFor most companies, exporting is a logical way of expanding sales when the domestic market has been fullydeveloped.Optimizing PricesWe may be able to achieve a much higher price for exported goods than is possible on the domestic market.Maximizing ResourcesExpansion into overseas markets can be an excellent way of increasing production with correspondingeconomies of scale in plant utilization and raw material purchases.Levelling Seasonal Demand
  • 69Marketing internationally, especially in both northern and southern hemispheres, can achieve an overalllevelling of seasonal demand for products like summer and winter clothing, sports equipment, heating andcooling equipment etc.Distribution of Market RiskA company can protect itself from the risk of a downturn in any one particular market by operating in a numberof different markets, both domestic and overseas.Increased Competitive AdvantageAn improvement in product and service will usually flow from exposure to international competition. This inturn will lead to an increased competitive advantage in both the international and domestic areas.Improved MoraleBeing part of an internationally successful company will boost staff morale, particularly if the contribution ofall staff members is recognized as an integral part of the companys international success.Capitalization of A Unique Product or TechnologyA unique product, service or technology thats difficult to sell on the domestic market may be easier to selloverseas.A Proactive Measure to Combat Foreign CompetitionIts possible to neutralize overseas competitors in the domestic market by exporting to the overseas competitorsmarket. The Risks From ExportIt is not possible to eliminate risk from export transactions. The development of export markets must beregarded as a long-term investment and companies should not expect an immediate return on the time andcapital they invest. Banks, accountants, export consultants and government agencies can advise on ways ofminimizing financial risks and exporters are encouraged to use external advice to supplement their own skillbase.A risk management strategy developed as part of exporter export business plan will help identify risks to yourexport business and provide a strategy to minimise and handle those risks should they occur.
  • 70There are a number of different types of risks that exporter should consider, including: • Financial • Intellectual property • Increased insurance claims • Inadequate resources Financial risksA. Failure to PayBe aware that theres a series of international payment terms ranging from totally secure (exporter paid beforegoods are dispatched) to minimum security (exporter send the goods and wait for payment). Which particularterm is used is negotiable between the buyer and seller when entering into a contract.B. Cash FlowExport will have a significant effect on the cash flow cycle of exporter business. Its not always possible tonegotiate payment in advance of or immediately after shipment. This may lead to a considerable delay inreceiving payment for goods and result in a cash flow problem. Alternatively, if favourable terms are available,export can have a very positive effect on the cash flow cycle.C. Foreign Currency RiskIf export contracts are written in foreign currencies, fluctuations in rates of exchange can result in financial loss.This risk can be avoided by quoting in Australian dollars or, if this isnt acceptable to the overseas buyer, bytaking forward exchange cover with the bank.D. Inadequate Working CapitalExporters may need additional working capital to purchase the raw materials and other components they requireto produce goods for export. Access to adequate pre-shipment finance is crucial to export success. There arerisks involved in over-borrowing and firms must ensure that they can fully service the additional borrowingsexport may entail.
  • 71 Intellectual PropertyInexperienced exporters are vulnerable to the risk of losing intellectual property. The legal systems in somecountries do not afford the same level of protection for intellectual property rights, as does the Australiansystem.The cost of patenting a product or registering a trademark internationally can be substantial, as can the defenceof patents or trademarks if they are infringed.Exporters should also ensure that their product does not infringe the intellectual property rights of othercompanies already operating in the marketplace. Increased Insurance ClaimsTransport over long distances with repeated handling can increase the risk of cargo damage. Freight forwarderscan advise on the best methods of packing and transport to prevent damage and reduce the risk of claims.Unethical trading partners may use spurious claims to achieve a discount on price. In such circumstances it isadvisable to obtain inspection certificates from cargo surveyors to prove quality standards at the point ofloading.Given the increasing trend toward litigation, exporters are now more vulnerable to product liability claims in theoverseas market. Exporters must consider the difficulty of obtaining adequate product liability insurance and thecost of such cover.It is also important to consider the warranty, continuing technical update of products, spare parts supplies,servicing of equipment etc that may be required to support export sales. All these factors will affect the ongoingmarket acceptance of the product or service and its price in the market place. Inadequate ResourcesA business seeking to enter the international marketplace must ensure that it has adequate resources, includingraw materials, components and human and financial resources to meet the export requirement. If these resourcesarent available and part of the export work needs to be subcontracted, the business runs the risk of losingcontrol of quality or of spending time and money on constant supervision.
  • 72Why we should Export?There are many reasons for a country to export, some of these are: • It provides valuable foreign exchange to country. • It is one of the measures of country’s economic growth. • To control over balance of payments. • For employment generation. • For poverty alleviation. • It provides shield against demand fluctuations in domestic market. • For import of capital goods at 0% duty. • Prepares ourselves for duty free regime. • For capacity utilization. • To get the working capital loan at low rate of interest. • In line with company’s & country’s image.How to Export?Golden Rule: In order to be successful in exporting one must fully research its markets. No one shouldever try to tackle every market at once. Many enthusiastic persons bitten by the export bug fail because they biteoff more than they can chew. Overseas design and product requirements must be carefully considered.Always sell as close to the market as possible. The fewer intermediaries one has the better, because everyintermediary needs some percentage for his share in his business, which means less profit for the exporter andhigher prices for the customer. All goods for export must be efficiently produced. They must be produced withdue regard to the needs of export markets. It is no use trying to sell windows which open outwards in a countrywhere, traditionally, windows open inwards.Sell Experience: If a person cannot easily export his goods, may be he can sell his experience.Alternatively, he can concentrate on supplying goods and materials to exporters who already have established
  • 73an export trade. He can concentrate on making what are termed own brand products, much demanded bybuyers in overseas markets which have the manufacturing know-how or facilities.Selling in Export: In todays competitive world, everyone has to be sold. The customer always has achoice of suppliers. Selling is an honorable profession, and you have to be an expert salesman.On-Time Deliveries: Late deliveries are not always an exporters fault. Dock strikes, go-slows, etc.occur almost everywhere in the world. If one enters into export for the first time, he must ensure of fast andefficient delivery of the promised consignment.Communication: Communication internal and external must be comprehensive and immediate. Goodcommunication is vital in export. When you are in doubt, pick up the phone or email for immediateclarification.Testing Product: The risk of failure in export markets can be minimized by intelligent use of research.Before committing to a large-scale operation overseas, try out on a small scale. Use the sample test, and anymistakes can then be corrected without much harm having been done. While the test campaign may appear tocost more initially, remember that some of the cost will be repaid by sales, so that test marketing often turns outto be cheaper.Approach: If possible some indication of the attitudes towards the product should be established, like anysales operation. Even if the product is successful, to obtain reactions from the customer. Advantages of Export • The income from export business is exempted to the specified extent under the Income Tax Act, 1961. • Refund of central excise and custom duty on export is also made under the Duty Drawback Scheme of the Government.
  • 74 • There is no sales tax on products meant for exports. • Duty free import of raw materials is allowed under various schemes of Ministry of Commerce. • Foreign exchange regulations have been substantially liberalized for exporters. • Liberal release of foreign exchange is made available for travel abroad. • Norms for establishing offices abroad by the exporters have been eased. • Export credit is also available to the exporters at confessional rates of interest. • Transport subsidy is given for export by air as well as rail. • Import policy has also been liberalized substantially for export oriented importers. Process of Export ManagementThe process of export management is essentially the process of planning, scheduling and controlling thecomplex of non-routine activities that must be completed to secure the export orders and to ensure the timelyshipment of goods. The managerial process involved in export management relates to the following threeactivities: 1. Planning 2. Scheduling, and 3. Controlling PLANNIN SCHEDULING G CONTROLLING Fig 1: Process of Export Management
  • 751. Planning Planning refers to taking various decisions involved in export business. This relates to procurement ofexport orders and their timely and successful execution. Planning for export order would involve makingconcerted efforts supported by proper market entry strategies to get the export order.2. Scheduling Scheduling refers to deciding the logistics for execution of export order. This is primarily concernedwith implementation and monitoring of export order. This involves defining in detail the various jobs/activities,the nature of those jobs/activities (parallel or sequential), expected time frame for completion of thosejobs/activities and fixing responsibility for completion.3. Controlling It seeks to ensure whether the activities planned have been completed on time or not and whether the ffoll Posstt ol o - low -e x ow e Pvarious schedules drawn up for execution of those orders have been followed or not. A system of reporting --u p xpor up por a tt acttii cshould be developed and implemented in every export organization to ensure proper control of various activities on oninvolved in execution of export orders. EXPORT CYCLEThe various activities/stages involved in planning and execution of an export order are performed in a or d Co - or Co diin - nsequential manner. Therefore, the activities/stages are viewed as different links in the chain of a cycle called attii a onon Pllaexport cycle. The export cycle is divided into three phases: Ex P Ex M o mplle a M mp po nn p nn on e m or II n iing rtts ii m ng ttor en t a. Planning for exports s or d g off on & or g o i on or ent de E iin e r Ex & n atti r b. Implementation and monitoring of an export order ffor or a xpo po c. Post exports follow up action. rtt r
  • 76 Fig. 2: Export CycleA. Planning for ExportsPlanning for exports involves the following activities namely, 1. Understanding the international trade environment 2. Setting up an export firm/organization structure 3. Identification of export opportunities 4. Procurement of export order, negotiation and confirmation.B. Implementation and Monitoring of Export OrderThis represents the second phase in the export cycle and involves the following activities: 1. Development of logistics for execution of export order 2. Export financing arranging pre-shipment finance 3. Procurement of goods/supplies-domestic procurement and imports 4. Labeling, packaging, packing and marking 5. Pre-shipment inspection 6. Export risks-identification, quantification and management 7. Pre-shipment documentation 8. Shipment of good-central excise and customs clearance and transportation
  • 77 9. Compliance with exchange control regulationsC. Post Export Follow-up ActionOnce the shipment of goods has been sent, export manager should take the necessary follow-up action. Thiswould involve the following steps: 1. Negotiation of documents with the bank to realize payment against the port shipment, 2. Arranging post shipment finance 3. Claiming incentives/facilities 4. Maintaining liaison with the importer 5. Settlement of disputes, if any. Export Marketing PlanAn export marketing plan is step-by-step guide to strategy implementation. It addresses strategic issues andoutlines the corresponding operational action to be taken. It specifies targets for each step. The plan shouldanswer all questions on how the export firm’s strategy is to be implemented and direct the enterprise in attainingthe strategic objective.A typical export marketing plan focuses on the following aspects: • Marketing objectives • Market segmentation and positioning, • Market research, • Characteristics of the product line, • Export pricing, • Distribution channels, and • Promotional strategies.Some Practical Suggestion • The exporters should innovate new product designs, strategies and promotional policies to improve the level of exports. This helps them to make ‘value rich offers’ that are better than the best. • The exporter should aim at a Market Niche rather than at the mass market. • Exporters should know the key buyers in the target market. • Exporters should choose their markets carefully. The choice of market can make the difference between success and failure in exporting.
  • 78 • Exporters should clarify their motives for exporting and set their objectives at the outset. They should know why they want to export and set their goals. • Exporters should consider export market development a long-term investment. Sustained efforts are essential in export marketing. • Planning and strategy development are essential for success in the long run in export trade. • The export firm should have the requisite technical expertise, in addition to careful planning and suitable products. • No enterprise should seek entry an export market until it is ready. Any attempt at exporting without experience in domestic marketing is bound to fail. • The responsibility for the export effort should be assigned to a key staff member, usually known as export manager. Tips For Export Marketing 1. Select the product and the target market on the basis of desk research even before considering exporting. 2. Once a market has been decided upon, the entrepreneur should carry out in-depth study of the target market. 3. The aim of the first visit to foreign market should not be to do business or looking for orders. Rather, the visit should be used to improve the preparation for entering the market. 4. Evaluate all the information collected and then formulate a marketing strategy and develop a marketing plan. 5. Gaining foothold in foreign markets can only be effective on a long term basis. Thus, the entrepreneur should have the strong financial base. 6. The foreign buyers can’t afford to loose face and credibility by deterioration in quality or alternatives to price and/or late deliveries. It is important to understand the requirement of the foreign buyers before marketing commitments. 7. In exports, consumers are quality and price conscious in a market which enjoys large and varied supplies. Success or failure in business will depend upon understanding this sensitivity of the foreign buyer. The entrepreneur should adopt a consumer oriented approach to manufacturing and selling.
  • 79 8. International markets are trend sensitive. Designs frequently change and products may not remain in demand. It is therefore, necessary to be aware of this trend and efforts should be made to keep up-to-date with the market trends. 9. Foreign markets, particularly in the developed countries, are often highly segmented into different age and income groups. The exporter should select the right market segment and accordingly position the product in the market. Market Entry Strategies: Location of ImportersThe main thrust of the market entry strategy should be to ensure long-term presence in the chosen exportmarket. This would be possible only if long-term approach is followed to export marketing as this is the basiccondition for success in the export business.There are four alternative strategies to penetrate the foreign market with a view to locating the importers for theexport product(s). These strategies are as follows: 1. Regular trade fair participation. 2. Business promotion visits to foreign markets. 3. Doing business through agents. 4. Opening overseas offices. 1. Regular Trade Fair Participation Participation in foreign trade fairs is one of the oldest forms of promotion of exports. Trade fairs provide an opportunity to the exporter to display their products to large number of buyers or their representatives who visit the fair. It offers tremendous facilities to bring across the message to a large number of buyers than perhaps any other trade promotional tool. (See Annexure) The objectives of trade fair participation are as follows: ♦ To introduce the concept of the products i.e., the basic theme of the products.
  • 80 ♦ To introduce the export firm in the foreign market. ♦ To introduce the brand of the product or increase the popularity of the existing brand. ♦ To conduct consumer research on the new product and test it in the market. ♦ To ensure customer loyalty. ♦ To look for prospective buyers.2. Business Promotion Visits to Foreign Markets The exporter should plan for to foreign market in order to build relationships and understandings withthe foreign buyers. The planning for the business promotion trip can be divided into three stages:(i) Before the trip,(ii) During the trip, and(iii) After the trip(i)- Planning Before the TripAn exporter should identify the valid reasons to justify his visit to the foreign country. There could be numberof reasons to visit the foreign market. Some of these are as follows: ♦ To study the latest trends in the market to explore the possibilities for new business opportunities. ♦ To find new buyers. ♦ To find and negotiate with market agents. ♦ To hold negotiations with the buyers to conclude the business deals. ♦ To locate new buyers. ♦ To launch a new product. ♦ To attend to the queries of the foreign buyers and solve their problems in the use of the product. ♦ To develop understanding the riles and regulations as regards tariff, fumigation, inspection, labeling, packaging, safety, public health and quality of the products. (ii)- During the Business Promotion Visit The exporter should observe the following guidelines on his arrival in the foreign country: ♦ He should inform the buyers regarding his arrival and reconfirm the appointments. ♦ The exporter should be on time for his meeting with the prospective buyer. It is important to remember that the punctuality is at a premium in all the developed countries. ♦ The exporter should take his notes during discussion with the importer.
  • 81 ♦ The exporter should find time to visit the market/chamber of commerce and the economic section of the Embassy of India to gain first hand information about the foreign market and the business practices.(iii)- After the Business Promotion VisitOnce the visit is over, the exporter should take up promptly the follow up action on the various points agreedwith the buyers during the business meetings, this may relate to providing clarification, giving additionalinformation, sending modified samples or any other point mentioned by the importer which needs clarifications.Time is the essence of follow up action to ensure successful conclusion of the business visit. The exportershould also submit the bank certificate for repatriation of export proceeds and evidence regarding bringinggoods.3. Business through Agents Many buyers prefer to make imports through import agents (also known as commercial agents/salesrepresentatives etc.) based in their own countries. It is also common among some of the large importers to makedirect imports through the intermediation of a representative firm in the exporting country. The representativefirm is known as buying house or buying agent in exporting country or indenting agent in the importingcountry. The importer depends upon the buying agent for selection of the exporter to arrange for timelysupplies. Thus, the exporter can approach either of the two or both of them to promote his exports business.These agents are classified as:a) Import Agent or Overseas Agentb) Buying Agent.a) Import Agent (or Overseas Agent) The exporter should prefer an import agent in the following situations: • When communication is a major problem, particularly in the case of traditional exporters. • In certain countries like Spain, Scandinavia etc. exporters can penetrate only through agents. These agents ensure prompt payment. The possibilities of default or delay in payments can also be minimized. Functions of import agents are Marketing, Quality Control, Ensuring Payments, and Warehousing etc.b) Buying Agents Buying agents are the firms in exporting countries to represent foreign buyers. Generally, foreign buyers who regularly import from certain countries face the difficulty in locating the reliable exporters to supply the goods of the desired quality. In order to overcome this problem, the large importers may appoint local business firms in the countries of exports to act as their indenting agents. Such firms of indenting agents are usually referred to as buying agents or the buying houses in the exporting countries. The main function of a
  • 82 buying agent is to arrange foe supplies of goods desired by the foreign buyers i.e. their principals. The various functions performed by buying agents are merchandising, product development, and quality control, placing order, payment arrangements and documentation.4. Opening Overseas Offices Another strategy to enter a foreign market is to open the office in the market itself. The implication ofthis strategy is that the exporter and the importer will be the same party. The exporter can utilize this route toensure his effective presence in the foreign market. As a consequence, the chain of distribution shall be asfollows: ExporterImporter (Exporter) WholesalerRetailerConsumerIn this case, the exporter with the help of his overseas office shall be in a position to effectively penetrate theforeign market. He would have first hand information of the foreign market and the market inputs so collectedwould help him plan his marketing strategy. He can secure business from the wholesalers or the salesrepresentative or the sales / commercial agents or the distributors. The distinctive feature of this strategy is that the exporter can gain the confidence of the foreign buyersby referring to his office both in India and the foreign market. The presence of the exporter in the foreignmarket will give confidence to the buyers that they are dealing with the reliable party. The exporter on his partcan provide better after sale service to the importers or attend to their queries promptly. This arrangement alsoenables the exporter to ensure that there are no defaults in making payments. Better payment terms can also beoffered to the foreign buyers. As far as exporter is concerned, he would be receiving orders from his own outletin the foreign market. The order can be placed on D/A (Document against Acceptance) terms of payment withthe exporter by the importer which represents the Indian exporter in the foreign country. This will reduce therisk of non payment and also obviate the need for obtaining letter of credit. One of the fundamental advantages of this strategy is that the exporter can increase his profitability bybeing more competitive in the foreign market. The other advantage is that the exporter can bypass the traditional
  • 83channel used for distribution of the product and offer the product at lower prices directly to the retailers. Thiswould help the exporter to not only increase his sales volume but also his profits. Developing an Export StrategyDetermining Products Export PotentialThere are several ways to evaluate the export potential of our products and services in overseas markets. Themost common approach is to examine the success of our products domestically. If our company succeeds atselling in the U.S. market, there is a good chance that it will also be successful in markets abroad, at least thosewhere similar needs and conditions exist.Another means to assess our companys potential in exporting is by examining the unique or important featuresof our product. If those features are hard to duplicate abroad, then it is likely that we will be successfuloverseas. A unique product may have little competition and demand for it might be quite high.Finally, our product may have export potential even if there are declining sales in the U.S. market.Assessing Companys Export ReadinessBy answering these general questions about how exporting will enhance into our companys short, medium andlong-term goals will help determine our companys readiness to export: • What does the company want to gain from exporting? • Is exporting consistent with other company goals? • What demands will exporting place on the companys key resources, management and personnel, production capacity, and finance and how will these demands be met? • Are the expected benefits worth the costs, or would company resources be better used for developing new domestic business?Developing an Export PlanOnce we decided to sell our products abroad, it is time to develop an export plan. A crucial first step in planningis to develop broad consensus among key management on the companys goals, objectives, capabilities, and
  • 84constraints. In addition, all aspects of an export plan should be agreed upon by the personnel involved in theexporting process, as they will ultimately execute the export plan.The purposes of the export plan are (a) to assemble facts, constraints, and goals and (b) to create an actionstatement that takes all of these into account.At least the following ten questions should ultimately be addressed:1. Which products are selected for export development? What modifications, if any, must be made to adapt them for overseas markets?2. Which countries are targeted for sales development?3. In each country, what is the basic customer profile? What marketing and distribution channels should be used to reach customers?4. What special challenges pertain to each market (competition, cultural differences, import controls, etc.), and what strategy will be used to address them?5. How will the products export sale price be determined?6. What specific operational steps must be taken and when?7. What will be the time frame for implementing each element of the plan?8. What personnel and company resources will be dedicated to exporting?9. What will be the cost in time and money for each element?10. How will results be evaluated and used to modify the plan?The first time an export plan is developed, it should be kept simple. It need be only a few pages long, sinceimportant market data and planning elements may not yet be available. The initial planning effort itselfgradually generates more information and insight. As the planners learn more about exporting and ourcompanys competitive position, the export plan will become more detailed and complete. A detailed plan isrecommended for companies that intend to export directly. Companies choosing indirect export methods mayrequire much simpler plans.
  • 85 Developing A Marketing PlanOnce you have decided that your company is able and committed to exporting, the next step is to develop amarketing plan.Marketing Strategy BenefitsA clearly written marketing strategy offers six immediate benefits:1. Because written plans display strengths and weaknesses more readily, they are a great help in formulating and polishing an export strategy.2. Written plans are not easily forgotten, overlooked, or ignored by those charged with executing them. If deviation from the original plan occurs, it is likely to be due to a deliberate and thoughtful choice.3. Written plans are easier to communicate to others and are less likely to be misunderstood.4. Written plans allocate responsibilities and provide for an evaluation of results.5. Written plans are helpful when seeking financial assistance. They indicate to lenders that you have a serious approach to the export venture.6. Written plans give management a clear understanding of what will be required of them and thus help to ensure a commitment to exporting. Actually, a written plan signals that the decision to export has already been made.Building an international business takes time. It usually takes months, sometimes even several years, before anexporting company begins to see a return on its investment of time and money. By committing to the specificsof a written plan, top management can make sure that the firm will finish what it begins and that the hopes thatprompted its export efforts will be fulfilled. Market ResearchTo successfully export our product, we should examine foreign markets through research. The purpose is toidentify marketing opportunities and constraints abroad, as well as to identify prospective buyers andcustomers.
  • 86Market research encompasses all methods that a company can use to determine which foreign markets have thebest potential for its products. Results of this research inform the firm of: the largest markets for its product, thefastest growing markets, market trends and outlook, market conditions and practices, and competitive firms andproducts.Firm may begin to export without conducting any market research if it receives unsolicited orders from abroad.A firm may research a market by using either primary or secondary data resources. In conducting primarymarket research, a company collects data directly from the foreign marketplace through interviews, surveys, andother direct contact with representatives and potential buyers. Primary market research has the advantage ofbeing tailored to the companys needs and provides answers to specific questions, but the collection of such datais time-consuming and expensive.When conducting secondary market research, a company collects data from various sources, such as tradestatistics for a country or a product. Working with secondary sources is less expensive and helps the companyfocus its marketing efforts. Although secondary data sources are critical to market research, they do havelimitations. Yet, even with these limitations, secondary research is a valuable and relatively easy first step for acompany to take. It may be the only step needed if the company decides to export indirectly, since theintermediary firm may have advanced research capabilities. Methods of Market ResearchBecause of the expense of primary market research, most firms rely on secondary data sources. The threefollowing recommendations will help us obtain useful secondary information:1. Keep abreast of world events that influence the international marketplace, watch for announcements of specific projects, or simply visiting likely markets. For example, a thawing of political hostilities often leads to the opening of economic channels between countries.2. Analyze trade and economic statistics. Trade statistics are generally compiled by product category and by country. These statistics provide the U.S. firm with information concerning shipments of products over specified periods of time. Demographic and general economic statistics, such as population size and
  • 87 makeup, per capita income, and production levels by industry can be important indicators of the market potential for a companys products.3. Obtain advice from experts. There are several ways of obtaining this advice: • Contact experts at the U.S. Department of Commerce and other government agencies. • Attend seminars, workshops, and international trade shows. • Hire an international trade and marketing consultant. • Talk with successful exporters of similar products. • Contact trade and industry association staff. A Step-by-Step Approach to Market ResearchIt involves screening potential markets, assessing the targeted markets, and drawing conclusions.A. Screen Potential Markets• Step 1:- Obtain export statistics that indicate product exports to various countries. Published export statistics provide a reliable indicator of where U.S. exports are currently being shipped. The U.S. Census Bureau provides these statistics in a published format. Trade statistics also can be obtained using the National Trade Data Bank (NTDB).• Step 2:- Identify five to ten large and fast-growing markets for the firms product. Look at them over the past three to five years. Has market growth been consistent year to year? Did import growth occur even during periods of economic recession? If not, did growth resume with economic recovery?• Step 3:- Identify some smaller but fast-emerging markets that may provide ground-floor opportunities. If the market is just beginning to open up, there may be fewer competitors than in established markets. Growth rates should be substantially higher in these countries to qualify as up-and-coming markets, given the lower starting point.• Step 4:- Target three to five of the most statistically promising markets for further assessment. Consult with a Department of Commerce Export Assistance Center, business associates, freight forwarders, and others to further evaluate targeted markets.B. Assess Targeted Markets
  • 88• Step 1:- Examine trends for company products as well as related products, that could influence demand. Calculate overall consumption of the product and the amount accounted for by imports. The National Trade Data Bank (NTDB) and the National Technical Information Service (NTIS) offer Industry Sector Analyses (ISAs), Country Commercial Guides (CCGs), and other reports that give economic backgrounds and market trends for each country. Demographic information (such as population and age) can be obtained from World Population (Census) and Statistical Yearbook (United Nations).• Step 2:- Ascertain the sources of competition, including the extent of domestic industry production and the major foreign countries the firm is competing against in each targeted market by using ISAs and competitive assessments. This information is available from the NTDB and the NTIS. Look at each competitors U.S. market share.• Step 3:- Analyze factors affecting marketing and use of the product in each market, such as end-user sectors, channels of distribution, cultural idiosyncrasies, and business practices. Again, the ISAs and Customized Market Analyses (CMAs) offered by the Department of Commerce are useful.• Step 4:- Identify any foreign barriers (tariff or nontariff) for the product being imported into the country. Identify any U.S. barriers (such as export controls) that affect exports to the country.• Step 5:- Identify any U.S. or foreign government incentives that promote exporting of your particular product or service.C. Draw ConclusionsAfter analyzing the data, the company may conclude that its marketing resources would be applied moreeffectively to a few countries. Exporting to one or two countries will allow the company to focus its resourceswithout jeopardizing its domestic sales efforts. The companys internal resources should determine its level ofeffort. Methods/Channels of ExportingThe most common methods of exporting are indirect selling and direct selling. In indirect selling, an exportintermediary such as an export management company (EMC) or an export trading company (ETC) normally
  • 89assumes responsibility for finding overseas buyers, shipping products, and getting paid. In direct selling, theU.S. producer deals directly with a foreign buyer. The paramount consideration in determining whether tomarket indirectly or directly is the level of resources a company is willing to devote to its internationalmarketing effort. Other factors to consider when deciding whether to market indirectly or directly include: • The size of firm; • The nature of products; • Previous export experience and expertise; • Business conditions in the selected overseas markets. Approaches to ExportingThe way your company chooses to export its products can have a significant effect on its export plan andspecific marketing strategies. The basic distinction among approaches to exporting relates to the companyslevel of involvement in the export process. There are at least four approaches, which may be used alone or incombination:1. Passively filling orders from domestic buyers who then export the product: - These sales are indistinguishable from other domestic sales as far as the original seller is concerned. Someone else has decided that the product in question meets foreign demand. That party takes all the risk and handles all of the exporting details, in some cases without even the awareness of the original seller.2. Seeking out domestic buyers who represent foreign end users or customers: - Many U.S. and foreign corporations, general contractors, foreign trading companies, foreign government agencies, foreign distributors and retailers, and others in the United States purchase for export. These buyers are a large market for a wide variety of goods and services. In this case a company may know its product is being exported, but it is still the buyer who assumes the risk and handles the details of exporting.3. Exporting indirectly through intermediaries: - With this approach, a company engages the services of an intermediary firm capable of finding foreign markets and buyers for its products. EMCs, ETCs, international trade consultants, and other intermediaries can give the exporter access to well- established expertise and trade contacts. Yet, the exporter can still retain considerable control over the
  • 90 process and can realize some of the other benefits of exporting, such as learning more about foreign competitors, new technologies, and other market opportunities.4. Exporting directly: - This approach is the most ambitious and difficult, since the exporter personally handles every aspect of the exporting process from market research and planning to foreign distribution and collections. Consequently, a significant commitment of management time and attention is required to achieve good results. However, this approach may also be the best way to achieve maximum profits and long-term growth. With appropriate help and guidance from the Department of Commerce, state trade offices, freight forwarders, international banks, and other service groups, even small or medium-sized firms can export directly if they are able to commit enough staff time to the effort. For those who cannot make that commitment, the services of an EMC, ETC, trade consultant, or other qualified intermediary are indispensable.Distribution Considerations• Which channels of distribution should the firm use to market its products abroad?• Where should the firm produce its products and how should it distribute them in the foreign market?• What types of representatives, brokers, wholesalers, dealers, distributors, or end-use customers, and so forth should the firm use?• What are the characteristics and capabilities of the available intermediaries?• Should the assistance of an EMC or ETC be obtained? Indirect ExportingThe principal advantage of indirect marketing for a smaller U.S. company is that it provides a way to penetrateforeign markets without the complexities and risks of direct exporting. Several kinds of intermediary firmsprovide a range of export services. Direct ExportingThe advantages of direct exporting for a U.S. company include more control over the export process, potentiallyhigher profits, and a closer relationship to the overseas buyer and marketplace.
  • 91When a company chooses to export directly to foreign markets, it usually makes internal organizational changesto support more complex functions. A direct exporter normally selects the markets it wishes to penetrate,chooses the best channels of distribution for each market, and then makes specific foreign business connectionsin order to sell its product.Once the company is organized to handle exporting, a proper channel of distribution needs to be carefullychosen for each market. These channels include sales representatives, agents, distributors, retailers, and endusers.Sales RepresentativesOverseas, a sales representative is the equivalent of a manufacturers representative in the United States. Therepresentative uses the companys product literature and samples to present the product to potential buyers. Arepresentative usually handles many complementary lines that do not conflict. The sales representative usuallyworks on a commission basis, assumes no risk or responsibility, and is under contract for a definite period oftime. The contract defines territory, terms of sale, method of compensation, reasons and procedures forterminating the agreement, and other details. The sales representative may operate on either an exclusive or anonexclusive basis.AgentsThe widely misunderstood term "agent" means a representative who normally has authority, perhaps even apower of attorney, to make commitments on behalf of the firm he or she represents. Firms in the United Statesand other developed countries have stopped using the term and instead rely on the term "representative," sinceagent can imply more than intended. It is important that any contract state whether the representative or agentdoes or does not have legal authority to obligate the firm.DistributorsThe foreign distributor is a merchant who purchases goods from a U.S. exporter (often at a substantial discount)and resells it for a profit. The foreign distributor generally provides support and service for the product, thusrelieving the U.S. company of these responsibilities. The distributor usually carries an inventory of products anda sufficient supply of spare parts and also maintains adequate facilities and personnel for normal servicingoperations. Distributors typically handle a range of non-conflicting but complementary products. End users donot usually buy from a distributor; they buy from retailers or dealers.Foreign RetailersA company may also sell directly to foreign retailers, although in such transactions, products are generally limitedto consumer lines. The growth of major retail chains in markets such as Canada and Japan has created new
  • 92opportunities for this type of direct sale. This method relies mainly on traveling sales representatives who directlycontact foreign retailers, although results might also be achieved by mailing catalogs, brochures, or otherliterature. The direct mail approach has the benefits of eliminating commissions, reducing traveling expenses, andreaching a broader audience. For optimal results, a firm that uses direct mail to reach foreign retailers shouldsupport it with other marketing activities.American manufacturers with ties to major domestic retailers may also be able to use them to sell abroad. Manylarge American retailers maintain overseas buying offices and use these offices to sell abroad when practical.Direct Sales to End UsersA U.S. business may sell its products or services directly to end users in foreign countries. These buyers can beforeign governments; institutions such as hospitals, banks, and schools; or businesses. Buyers can be identifiedat trade shows, through international publications, or through Commerces Export Contact List Service.The U.S. Company should be aware that if a product is sold in such a direct fashion, the company is responsible for shipping, payment collection, and product servicing unless other arrangements are made. Unless the cost of providing these services is built into the export price, a company could have a narrower profit than originally intended. Preparing Product for ExportSelecting and preparing product for export requires not only product knowledge but also knowledge of theunique characteristics of each market being targeted. Market research conducted and foreign representativescontacts should give the U.S. company an idea of what products can be sold and where. However, before thesale can occur, the company may need to modify a particular product to satisfy buyer tastes or needs in foreignmarkets.The extent to which the company will modify products sold in export markets is a key policy issue to beaddressed by management. Some exporters believe the domestic product can be exported without significantchanges. Others seek to consciously develop uniform products that are acceptable in all markets.If the company manufactures more than one product or offers many models of a single product, it should startwith the one best suited to the targeted market. Ideally, the firm chooses one or two products that fit the marketwithout major design or engineering modifications. Doing so works best when the U.S. company:
  • 93• Deals with international customers that have the same demographic characteristics or the same specifications for manufactured goods;• Supplies parts for U.S. goods that are exported to foreign countries without modifications;• Produces a unique product that is sold on the basis of its status or foreign appeal; or produces a product that has few or no distinguishing features and that is sold almost exclusively on a commodity or price basis. Questions to Consider• What foreign needs does the product satisfy?• What product should the firm offer abroad?• Should the firm modify its domestic-market product for sale abroad? Should it develop a new product for the foreign market?• What specific features, such as design, color, size, packaging, brand and warranty should the product have?• What specific services are necessary abroad at the pre-sale and post-sale stages?• Are the firm’s services and repair facilities adequate? Product AdaptationTo enter a foreign market successfully, a U.S. company may have to modify its product to conform togovernment regulations, geographic and climatic conditions, buyer preferences, or standards of living. Thecompany may also need to modify its product to facilitate shipment or to compensate for possible differences inengineering and design standards.Foreign government product regulations are common in international trade and are expected to expand in thefuture. These regulations can take the form of high tariffs or nontariff barriers, such as regulations or productspecifications. Governments impose these regulations to:• Protect domestic industries from foreign competition;• Protect the health of their citizens;• Force importers to comply with environmental controls;• Ensure that importers meet local requirements for electrical or measurement systems;• Restrict the flow of goods originating in or having components from certain countries; and• Protect their citizens from cultural influences deemed inappropriate.It is often necessary for a company to adapt its product to account for geographic and climatic conditions as well
  • 94as for the availability of resources. Factors such as topography, humidity, and energy costs can affect theperformance of a product or even define its use. For example, the cost of petroleum products and the state of acountrys infrastructure may indicate the demand for energy-consuming products.Market potential must be large enough to justify the direct and indirect costs involved in product adaptation. Thefirm should assess the costs to be incurred and though it may be difficult, determine the increased revenuesexpected from adaptation. The decision to adapt a product is based partly on the degree of commitment to thespecific foreign market; a firm with short-term goals will probably have a different perspective than a firm withlong-term goals. Engineering and RedesignThe exporter should be aware that even fundamental aspects of its products may require changing. For example,electrical standards in many foreign countries differ from U.S. electrical standards. It is not unusual to findphases, cycles, or voltages (for both residential and commercial use) that would damage or impair the operatingefficiency of equipment designed for use in the United States. These electrical standards sometimes vary even inthe same country. Knowing this requirement, the manufacturer can determine whether a special motor must besubstituted or arrange for a different drive ratio to achieve the desired operating revolutions per minute.Similarly, many kinds of equipment must be engineered in the metric system for integration with other pieces ofequipment or for compliance with the standards of a given country. The United States is virtually alone in itsadherence to a non-metric system, and U.S. firms that compete successfully in the global market realize thatconversion to metric measurement is an important detail in selling to overseas customers. Even instruction ormaintenance manuals should take care to give dimensions in centimeters, weights in grams or kilos, andtemperatures in Celsius degrees. Branding, Labeling, and PackagingConsumers are concerned with both the product itself and the products supplementary features, such aspackaging, warranties, and service. Branding and labeling products in foreign markets raise new considerationsfor the U.S. company such as:• Are international brand names important to promote and distinguish a product? Conversely, should local brands or private labels be employed to heighten local interest?• Are the colors used on labels and packages offensive or attractive to the foreign buyer? For example, in some countries certain colors are associated with death.
  • 95• Can labels be produced in official or customary languages if required by law or practice?• Does information on product content and country of origin have to be provided?• Are weights and measures stated in the local unit?• Must each item be labeled individually?• Are local tastes and knowledge considered? A dry cereal box picturing a U.S. athlete may not be as attractive to overseas consumers as the picture of a local sports hero.A company may find that building international recognition for a brand is expensive. Protection for brand namesvaries from one country to another. To protect its products and brand names, a company must comply with locallaws on patents, copyrights, and trademarks. InstallationAnother element of product preparation that a company should consider is the ease of installing that productoverseas. If technicians or engineers are needed overseas to assist in installation, the company should minimizetheir time in the field if possible. To do so, the company may wish to preassemble or pretest the product beforeshipping.Disassembling the product for shipment and reassembling abroad may be considered by the company. Thismethod can save the firm shipping costs, but it may add to delay in payment if the sale is contingent on anassembled product. The company should be careful to provide all product information, such as training manuals,installation instructions, and parts lists - all in the local language - even relatively simple instructions. WarrantiesThe company should include a warranty on the product since the buyer expects a specific level of performanceand a guarantee that it will be achieved. Levels of expectation for a warranty vary by country depending upon itslevel of development, competitive practices, the activism of consumer groups, local standards of productionquality, and other factors. Product service guarantees are important since customers overseas typically haveservice expectations as high as or greater than in the United States.A company may use warranties for advertising purposes to distinguish its product from the competition. Strongwarranties may be required to break into a new market, especially if the company is an unknown supplier. Insome cases, warranties may be instrumental in making the sale and become a major element in negotiations. ServicingService after the sale is critical for some products. Generally, the more complex the products technology, thegreater the demand for pre-sale and post-sale service. Therefore, there is pressure in some firms to offer simpler,more robust products overseas thereby reducing the need for maintenance and repairs. U.S. suppliers who rely
  • 96on foreign distributors or agents to provide service backup must take steps to ensure an adequate level of service.These steps include training, periodically checking service quality, and monitoring inventories of spare parts. PROCESSING OF AN EXPORT ORDERExport Order is a document communicating decision of the foreign buyer to purchase certain item(s) from theexporter. It specifies the description of the item(s), their quantity and quality specifications, unit price, deliveryterms, shipping marks, insurance requirements, requirements as regards labeling, packing and packaging,payment terms, pre-shipment inspection requirements, documents required and so on. The Export Orderrepresents an ‘offer to sell’ made by the exporter and its ‘acceptance’ by the foreign buyer.Process of Securing Export OrderGenerally, the process of obtaining the export order follows the sequence of the steps given below:Step 1:- The exporter locates a trade enquiry i.e., he/she comes across the details of a foreign buyer who iswilling to import the item(s). The exporter may get these details through any of the following ways:a) Websites of the import firms.b) Visit to the exporter’s website by an interested foreign buyer.c) Participation in a trade fair/visit to a trade fair by the exporter.d) Business promotion visit to a foreign country.e) Contact with the overseas marketing agent.f) Contact with a buying agent in the exporter’s country.g) Exporter’s own retail outlet in the foreign country.h) Circulation of the trade enquiry by the trade promotion body in the exporter‘s country.Step 2:- On receipt of the trade enquiry, the exporter sends his/her company profile, product profile and thepromotional literature of his/her product range to know the interest of the buyer.Step 3:- The buyer may like to have the details of certain product of his/her choice from the exporter.
  • 97Step 4:- The exporter sends the quotation in respect of the product of interest to the buyer. This quotationcontains the basic details like its FOB price, mode of payment, photograph of the item along with itsspecifications and the likely delivery time.Step 5:- On receipt of this basic information, the foreign buyer puts forward his/her requirements as regardsthe design, size, finish or other specifications of the product in view. Once the product has been identified, thenthe process of negotiations of the other terms and conditions begins. It is very likely that these terms andconditions would be negotiated only as a result of personal meeting between the exporter and the foreign buyerparticularly if the exporter happens to be a new exporter.Step 6:- The exporter sends the proforma invoice to the foreign buyer setting out in detail the terms andconditions negotiated between the two parties. This proforma invoice represents the ‘offer to sell’ made by theexporter.Step 7:- The importer conveys his/her ‘acceptance’ of the exporter on the proforma invoice originally sent bythe exporter. It is however, not essential for the offer and acceptance to be on the proforma invoice. These couldbe in the form of exchange of letters as well. Terms and Conditions of an Export OrderThe following are the standard clauses of an export order:1. Product and its description2. Product specifications as regards its quality3. Price: FOB/CFR/CIF etc., as per INCOTERMS 20004. Quantity5. Payment Terms: D/A, D/P, Letter of Credit, Advance Payment etc.6. Delivery Schedule: Time Period; Partial/complete dispatch7. Mode of Shipment: Air/Sea/Road8. Type of Shipment: Direct/Transhipment9. Inspection10. Labeling, Packaging, Packing and Marking requirements11. Insurance: By exporter/importer
  • 98 12. Documents required 13. Escalation clause: Sharing of increase in cost 14. Force Majeure clause: Clause providing for excuse of non-performance due to acts of God. 15. Arbitration Clause: Clause foe settlement of dispute 16. Fines/Penalties 17. Applicability of Law The exporter and importer hold negotiations with regard to the above points to conclude the business deal. Planning for Execution of the Export Order Planning for the execution of the export order involves the following steps: Step 1:- Acknowledgement of the Export Order First of all, the exporter should send a letter of thanks to the foreign buyer for placing the order. Step 2:- Constitution of Team of Executives The exporter should treat each export order as a separate project and constitute a team of executives drawn from the marketing, production, finance and accounts, shipping, quality control departments etc. to implement the order. One of the executives should be made the Team Leader to coordinate with all the departments and external agencies involved in the execution of the order. Step 3:- Scrutiny of the Export Order The careful scrutiny of the order in respect of its following aspects by the team of executive appointed to observe the implementation: i. The order has been received for the product for which quotation/offer was sent and the exporter is still in a position to supply the product.ii. Sizes and specifications should be same as per the offer and quotation.iii. Pre-shipment inspection by Export Inspection Agency is required; the buyer should be informed about the inspection scheme.
  • 99 iv. Payment terms are the same as stipulated/negotiated. If the payment is by means of an irrevocable Letter of Credit, it should be ensured that such an irrevocable letter of credit (L/C) has been opened and its terms & conditions have been clearly understood by the exporter and are also acceptable to him/her. v. Special packaging, labeling and marketing requirements, if any, should be noted for compliance. vi. Shipment and delivery date is in conformity with the exporter’s production plan and whether: a. Part shipment is allowed. b. Transhipment is permissible. c. Port of shipment/destination is same.vii. Whether insurance is to be done by the exporter or the buyer, and conditions (terms) of insurance.viii. Documents required by the buyer. It should be examined as to whether the exporter can arrange for the documents required by the buyer. Step 4:- Confirmation of the Export Order The buyer requires the exporter to confirm the order to him/her. Based on this confirmation he/she can draw his/her own schedules for supply of goods to his/her customers or plan for production schedules. Step 5:- Developing Logistics for Execution of the Order Logistics refers to the formulation of a detailed plan of action for the implementation of the export order. This involves identification of the minutest possible activities/jobs that need to be performed to ensure the successful execution of the order as per its terms and conditions. This listing of various jobs/ activities should be done as a result of the brain storming sessions amongst the members of the export team. The team should thus, prepare an Activity Profile for the order. The Activity Profile should state the following: a. Name of job/activity. b. Nature of the activity/job whether it is to be performed sequentially or parallel to some other activity. c. Likely time required for the completion. It should be specified as to what would be earliest start/finish time; the latest start/finish time of the activity and the total time duration for its completion. This information can
  • 100 used to draw a network diagram to control the likely delay in the execution of the order and as consequence control the likely cost escalations.d. The executive/agency responsible for its completion.Step 6:- Contents of the Activity ProfileThe contents of the Activity Profile are as follows: 1. Determination of materials/supplies required 2. Making arrangement for the procurement of the materials/supplies 3. Arrangements of funds to send the shipment i.e., packing credit from the bank 4. Labeling, packaging, packing and marking of the export consignments 5. Arrangements for ensuring pre-shipment inspection of goods for quality 6. Compliance with the statutory requirements as regards inspection/authentication of export products 7. Managing the risks involved in the export shipment 8. Appointment of the clearing and forwarding agent 9. Preparing the pre-shipment documents for obtaining central excise and custom clearance of the export shipment. 10. Compliance with the exchange control requirements 11. Shipment of goods 12. Negotiation of documents 13. Arranging post shipment finance from the bankStep 7:- Reservation of Shipping SpaceThe exporter should plan for reservation of the shipping space much in advance in the ship. The reason is thatthere is a shortage of shipping space and their frequency is also limited. It is quite possible that exporter maynot be able to obtain the reservation for the timely shipment of the goods. As far as shipment by sea isconcerned, there is not much difficulty in booking the cargo with the airlines. The reservation can be arrangedthrough the clearing and forwarding agent. Thus, the exporter should appoint a clearing and forwarding agent atthe initial stages if the shipment is to be sent by sea.
  • 101 EXPORT PRICING, QUOTATIONS AND INCOTERMSProper pricing, complete and accurate quotations, choosing the terms of the sale, and selecting the paymentmethod are four critical elements in selling a product or service overseas. Of the four, pricing can be the mostproblematic, even for an experienced exporter. Pricing ConsiderationsThe price considerations listed below will help an exporter determine the best price for the product overseas: • At what price should the firm sell its product in the foreign market? • What type of market positioning (customer perception) does the company want to convey from its pricing structure? • Does the export price reflect the products quality? • Is the price competitive? • Should the firm pursue market penetration or market-skimming pricing objectives abroad? • What type of discount (trade, cash, quantity) and allowances (advertising, trade-off) should the firm offer its foreign customers? • Should prices differ by market segment? • What should the firm do about product line pricing? • What pricing options are available if the firms costs increase or decrease? Is the demand in the foreign market elastic or inelastic? • Are the prices going to be viewed by the foreign government as reasonable or exploitative? • Do the foreign countrys antidumping laws pose a problem?As in the domestic market, the price at which a product or service is sold directly determines a firms revenues.It is essential that a firms market research include an evaluation of all of the variables that may affect the pricerange for the product or service. If a firms price is too high, the product or service will not sell. If the price istoo low, export activities may not be sufficiently profitable or may actually create a net loss.It is very important that the exporter take into account additional costs that are typically borne by the importer.They include tariffs, customs fees, currency fluctuation transaction costs and value-added taxes (VATs). Theseadditional costs can add substantially to the final price paid by the importer.Foreign Market Objectives
  • 102An important aspect of a companys pricing analysis is determining market objectives. For example, is thecompany attempting to penetrate a new market, looking for long-term market growth, or looking for an outletfor surplus production or outmoded products? Many firms view the foreign market as a secondary market andconsequently have lower expectations regarding market share and sales volume. This naturally affects pricingdecisions.Marketing and pricing objectives may be general or tailored to particular foreign markets. For example,marketing objectives for sales to a developing nation where per capita income may be one tenth of that in theUnited States are necessarily different from the objectives for Europe or Japan.CostsThe computation of the actual cost of producing a product and bringing it to market is the core element indetermining if exporting is financially viable. Many new exporters calculate their export price by the cost-plusmethod. In the cost-plus method of calculation, the exporter starts with the domestic manufacturing cost andadds administration, research and development, overhead, freight forwarding, distributor margins, customscharges, and profit.Marginal cost pricing is a more competitive method of pricing a product for market entry. This methodconsiders the direct, out-of-pocket expenses of producing and selling products for export as a floor beneathwhich prices cannot be set without incurring a loss. For example, additional costs may occur due to productmodification for the export market that accommodates different sizes, electrical systems, or labels. On the otherhand, costs may decrease if the export products are stripped-down versions or made without increasing the fixedcosts of domestic production.Other costs should be assessed for domestic and export products according to how much benefit each productreceives from such expenditures. Additional costs often associated with export sales include: • Market research and credit checks; • Business travel; • International postage, cable, and telephone rates; • Translation costs; • Commissions, training charges, and other costs involving foreign representatives;
  • 103 • Consultants and freight forwarders; and • Product modification and special packaging.After the actual cost of the export product has been calculated, the exporter should formulate an approximateconsumer price for the foreign market. Factory price $7.50 $7.50 Domestic freight .70 .70 Final consumer price $14.15 $20.30 Table 1: Calculation of Final Consumer PriceMarket DemandFor most consumer goods, per capita income is a good gauge of a markets ability to pay. Some products maycreate such a strong demand such as popular goods like Levis, that even low per capita income will not affecttheir selling price. The firm must also keep in mind that currency fluctuations may alter the affordability of itsgoods. Thus, pricing should try to accommodate wild changes in the U.S. and/or foreign currency. The firmshould anticipate the type of potential customers. If the firms primary customers in a developing country areexpatriates or belong to the upper class, a higher price might be feasible even if the average per capita income islow.
  • 104CompetitionIn the domestic market, few companies are free to set prices without carefully evaluating their competitorspricing policies. This situation is true in exporting, and is further complicated by the need to evaluate thecompetitions prices in each potential export market.If there are many competitors within the foreign market, the exporter may have little choice but to match themarket price or even under price the product or service in order to establish a market share. On the other hand,if the product or service is new to a particular foreign market, it may actually be possible to set a higher pricethan in the domestic market.Pricing SummaryThe key points to remember during determining products price are: • Determine the objective in the foreign market. • Compute the actual cost of the export product. • Compute the final consumer price. • Evaluate market demand and competition. • Consider modifying the product to reduce the export price. • Include "nonmarket" costs, such as tariffs and customs fees. • Exclude cost elements that provide no benefit to the export function, such as domestic advertising. Quotation and Proforma InvoiceQuotationsMany export transactions, particularly initial export transactions, begin with the receipt of an inquiry fromabroad that is followed by a request for a quotation. The preferred method for export is a pro forma invoice,which a quotation is prepared in invoice format.A quotation describes the product, states a price for it, sets the time of shipment, and specifies the terms of thesale and terms of the payment. Since the foreign buyer may not be familiar with the product, the description ofit in an overseas quotation usually must be more detailed than in a domestic quotation. The description shouldinclude the following 15 points: 1. Sellers and buyers names and addresses.
  • 105 2. Buyers reference number and date of inquiry. 3. Listing of requested products and brief description. 4. Price of each item (it is advisable to indicate whether items are new or used and to quote in U.S. dollars to reduce foreign-exchange risk). 5. Appropriate gross and net shipping weight (in metric units where appropriate). 6. Appropriate total cubic volume and dimensions packed for export(in metric units where appropriate). 7. Trade discount (if applicable). 8. Delivery point. 9. Terms of sale. 10. Terms of payment. 11. Insurance and shipping costs. 12. Validity period for quotation. 13. Total charges to be paid by customer. 14. Estimated shipping date from U.S. port or airport. 15. Currency of sale.The Proforma InvoiceA proforma invoice (sometimes written as pro forma invoice) is little more than a preadvice or indication ofwhat will stand in the commercial invoice once negotiations have been completed. Indeed, the proforma invoiceand the commercial invoice often look exactly the same, except that it should state clearly "proforma invoice"on this document, whereas the commercial invoice will state "invoice" or "commercial invoice". The proformainvoice serves as a negotiating instrument. The initial proforma invoice often sets the stage for the first round ofnegotiations if the exporter and importer have not yet had any real discussions. Difference Between a Proforma Invoice and a QuotationIn reality, there is very little difference in function between the two and the proforma invoice is really aquotation in invoice form; in other words. The difference really comes about in terms of the structure and layoutof the proforma invoice/quotation. A typical quotation appears more like a business letter describing a writtenoffer, while a proforma invoice appears exactly the same as a invoice (except with the words "proformainvoice" written on the document). The proforma invoice essentially serves as a quotation that sets the road tofurther negotiations. Some exporters choose to prepare an official quotation, while others prefer to use the
  • 106proforma invoice as their quotation. In fact, the quotation can contain the same information as a proformainvoice. Sometimes a firm may send out a written quotation and the importer may ask for a proforma invoice. Itis important to note that there is no standard format for the proforma invoice and one proforma invoice maydiffer redically in layout from the next (although there is common agreement on the information that should beincluded in the coument). It is a document prepared by the exporter and so will take the format/layout decidedon by the exporter. Use of a Proforma InvoiceIn summary, the proforma invoice is a popular document in exporting because: • It is a widely accepted form of sales offer in the global export community. • It clearly outlines all of the relevant information required to enable an export purchase decision to be made by the importer • It is a legal document, which if accepted by the importer is considered the basis of a binding agreement • Banks and other financial institutions will commonly accept proforma invoices in order to establish a Letter of Credit on behalf of the importer • The commercial invoice is almost identical to the proforma invoice (except for the title) and is thus easy to prepare, thus minimising the possibility of errors.Details Pertinent to the Proforma InvoiceThe following details are pertinent to the setting up of the proforma invoice and need careful attention: • The document title should clearly state "Proforma Invoice" • The name of the exporter (referred to as the shipper) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address • The name of the importer (referred to as the consignee, meaning the person or firm to whom the goods are to be sent) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address (In the case of transshipment, there may be an intermediate consignee and their contact details and address should then also be included on the invoice.)
  • 107 • If the person or firm buying the goods (the importer) is not the same as the person or firm to whom the goods are being sent, then you should include both their contact details and addresses in the proforma invoice • The name of the person and company to notify once shipment has taken place and their contact details and physical address (here the contact details such as telephone, fax and cell number and e-mail address are more important than the physical address) • A proforma invoice reference number • An order number or similar reference to correspondence between the supplier and importer • The date of issue of the proforma invoice (the quotation date) - quite important • A complete, detailed and clear description of the goods in question, incorporating the appropriate HS codes and brandmarks if applicable (here the importer may ask you to remove these codes as they may not be the same in the importing country and may thus incur additional or higher duties to the importers detriment because of their inadvertent misuse) • The quantity of goods in question, including the number of units/items • The packing details, including their external dimensions, cubic capacity, weight, numbers and contents of each package shipped, and kinds of packaging involved (pallets, boxes, bags, etc.) • The grand total price of the goods for the whole consignment • Where applicable, the unit prices should be indicated - the unit price multiplied by the number of units/items should be reflected in the line total. The various line totals (in the case where different items are included in the same commercial invoice, or where additional services are itemised in the invoice), should add up to the total price for the whole consignment (also referred to as the Grand Total) • The currency in which the goods will be sold (e.g. US dollars or rands) • The type and amount of any discount given, where applicable • The likely delivery schedule and delivery terms • The payment methods (for example cash in advance, documentary collection, L/C, etc.) • The payment terms (for example 30 days on sight) • The Incoterms to be used (Incoterms 2000 - FAS, CIF, CFR, DDP, etc.) • Who is responsible for the banking fees and other related costs (insurance and freight costs are covered by the incoterms in question)
  • 108 • What the freight and insurance charges are • The exporters banking details • A declaration of the country of origin of the goods • The expected country of final destination • Any freight details such as the port of loading and discharge • Any additional exporter-provided services that should be added to the invoice to come to the grand total • Any transhipment requirements • The validity of the proforma invoice - that is, when does the offer expire (leaving it open-ended could be very risky) • Any other information relevant to the order • Make sure the proforma invoice is signed, together with the signatures name written underneath, with initials, title and positionPro forma invoices are not used for payment purposes. A pro forma invoice should include two statements. Onethat certifies the pro forma invoice is true and correct and another that gives the country of origin of the goods.The invoice should also be clearly marked "pro forma invoice."Pro forma invoices are models that the buyer uses when applying for an import license, opening a letter of creditor arranging for funds. In fact, it is a good practice to include a pro forma invoice with any internationalquotation, regardless of whether it has been requested or not. When final commercial invoices are beingprepared prior to shipment, it is advisable to check with the U.S. Department of Commerce or another reliablesource for any special invoicing requirements that may be required by the importing country. The Commercial InvoiceAfter the pro-forma invoice is accepted by the importer, the exporter must prepare a commercial invoice. Thecommercial invoice is required by both the exporter (to obtain the necessary export documents to enable theconsignment to be exported, to prove ownership and to enable payment) and importer (who requires thecommercial invoice to facilitate the import of the goods into the country in question). In exporting, the
  • 109commercial invoice is considered a very important document as it serves as the starting or initiating documentthat underpins the rest of the export transaction.The commercial invoice is essentially a bill (i.e. invoice) from the seller (the exporter) to the buyer (theimporter) describing the parties to the agreement, the goods to be sold, and the terms involved, as agreedbetween the exporter and importer. As such, the commercial invoice is the final bill exchanged between theseller and the buyer. The commercial invoice will normally be presented on the exporters letterhead and will beaddressed to the importer. It should contain full details of the consignment, including price and other relatedcosts, in order to facilitate customs clearance. It must also be signed and dated. Freight and insurance, whenincluded in the selling price, should be itemised separately as these charges are not subject to duty in certaincountries. It is important that the commercial invoice clearly differentiates between the dutiable component ofthe order (the market value of the order), any other typically non-dutiable charges such as freight and insurance,and the total invoice value of the order. The commercial invoice is used by Customs authorities throughout theworld for assessing Customs duties, inspection purposes, and for the keeping of statistics.Custom’s and Consular InvoicesSome countries, however, may require the commercial invoice to be completed on their own specified forms -such commercial invoices are known as "Customs invoices" and may be provided in lieu of or in addition to thestandard commercial invoices referred to above. In addition, a "consular invoice" is required by certaincountries. The consular invoice must be prepared in the language of the destination country and can be obtainedfrom the countrys consulate, and often must be "consularised" (i.e. stamped by an authorised Consul official inthe exporting country).From the Proforma to the Commercial InvoiceThere is usually very little, if any, difference between the final proforma invoice accepted by the importer andthe commercial invoice, except that the one is titled "Proforma Invoice", while the other is titled "CommercialInvoice". Although the proforma invoice comes before the commercial invoice, the proforma invoice reallyonly serves as a means of negotiating the actual contract. The proforma invoice is the offer put to the importer
  • 110by the exporter. The importer may accept the terms specified in the proforma invoice, but a more likely scenariois that the importer will negotiate some of these terms with the exporter. There may be some backward andforward communication between the exporter and importer before the importer finally agrees to the transaction.Once the importer indicates that he/she is happy with the terms of the contract as outlined in the proformainvoice, the exporter will then be requested to provide the importer with a commercial invoice. The commercialinvoice should reflect the final (agreed-upon) profroma invoice exactly - any deviances will result in problemsexecuting the transaction and/or receiving payment.Based on the terms specified in this commercial invoice, the importer will instruct his/her bank (referred to asthe issuing bank) to issue a letter of credit (L/C). This L/C (or the documentation associated with any other formof payment) will also need to reflect the terms specified in the commercial invoice exactly, while all subsequentdocumentation must reflect the terms of the L/C; there can be no exceptions. From this explanation, it is clearthat the commercial invoice plays a central role in an export transaction.What should appear in the Commercial Invoice?The following details should appear in the commercial invoice: • The document title should clearly state "Commercial Invoice" • The name of the exporter (referred to as the shipper) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address • The name of the importer (referred to as the consignee, meaning the person or firm to whom the goods are to be sent) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address (In the case of transshipment, there may be an intermediate consignee and their contact details and address should then also be included on the invoice.) • If the person or firm buying the goods (the importer) is not the same as the person or firm to whom the goods are being sent, then you should include both their contact details and addresses in the commercial invoice • The name of the person and company to notify once shipment has taken place and their contact details and physical address (here the contact details such as telephone, fax and cell number and e-mail address are more important than the physical address) • A commercial invoice reference number • A purchase order number or similar reference to correspondence between the supplier and importer • The date of issue of the commercial invoice
  • 111 • A complete, detailed and clear description of the goods in question, incorporating the appropriate HS codes and brandmarks if applicable (here the importer may ask you to remove these codes as they may not be the same in the importing country and may thus incur additional or higher duties to the importers detriment because of their inadvertent misuse) • The quantity of goods in question, including the number of units/items • The packing details unless provided in a separate packing list, including their external dimensions, cubic capacity, weight, numbers and contents of each package shipped, and kinds of packaging involved (pallets, boxes, bags, etc.) - if a separate packing list is used, reference should be made in the commercial invoice to the packing list • The grand total price of the goods for the whole consignment • Where applicable, the unit prices should be indicated - the unit price multipled by the number of units/items should be reflected in the line total. The various line totals (in the case where different items are included in the same commercial invoice, or where additional services are itemised in the invoice), should add up to the total price for the whole consignment (also referred to as the Grand Total) • The currency in which the goods will be sold (e.g. US dollars or rands) • The type and amount of any discount given, where applicable • The likely delivery schedule and delivery terms • The payment methods (for example cash in advance, documentary collection, L/C, etc.) • The payment terms (for example 30 days on sight) • The Incoterm to be used (Incoterms 2000 - FAS, CIF, CFR, DDP, etc.) • Who is responsible for the banking fees and other related costs (insurance and freight costs are covered by the incoterm in question) • What the freight and insurance charges are • The exporters banking details • A declaration of the country of origin of the goods • The expected country of final destination • Any freight details such as the port of loading and discharge • Any additional exporter-provided services that should be added to the invoice to come to the grand total • Any transhipment requirements • The validity of the commercial invoice - that is, when does the offer expire (leaving it open-ended could be very risky) • Any other information relevant to the order • Make sure the commercial invoice is signed, together with the signatures name written underneath, with initials, title and position
  • 112Commercial Invoices are the Basis for Assessing Duties and StatisticsCommercial invoices are often used by governments to determine the true value of goods when assessingcustoms duties and recording trade statistics. Governments that use the commercial invoice to control importswill often specify its form, content, and number of copies, language to be used, and other characteristics.Examples of commercial invoice• Unzco commercial invoice• Meridian commercial invoice• BellAir commercial invoice Incoterms or Terms of SaleIn any sales agreement, it is important that there is a common understanding of the delivery terms sinceconfusion over their meaning can result in a lost sale or a loss on a sale. The terms in international businesstransactions often sound similar to those used in domestic business, but they frequently have very differentmeanings. For this reason, the exporter must know the terms before preparing a quotation or a pro formainvoice.There are a number of common sale or trade terms used in International Trade to express the sale price andcorresponding rights and responsibilities of the seller and the buyer. The International Chamber of Commerceregulates these terms. Then the exporter and the importer agree on the terms of delivery, they legally bind themselves the fourlegal aspects of the transactions, which are:• Which cost does the exporter and which are to be paid by the importer pay?• Which costs the exporter will obtain and at whose expense?• When the title of the goods and responsibility for them passes from the exporter to the importer?• Where and when the goods are delivered?The following are a few of the more frequently used terms in international trade:EXW-Export WorksThe seller’s obligation to the deliver the goods under this term is complete when he passes the goods at thedisposal of the buyer at his own premises and other places named therein, i.e. works, factory, warehouse etc. notcleared for export and not loaded on any collecting vehicle. This term thus enjoys the minimum for the seller.
  • 113The buyer has to bear all the cost and risks. This term should therefore not be used if buyer cannot carry out theexport formality himself.FCA-Free CarrierHere the seller’s obligation to deliver the goods is complete when he delivers to the carrier nominated by thebuyer at the named place cleared for export. If the chosen place is the exporter’s premises then the seller isresponsible for loading. If it occurs at any other place, the seller is not responsible for unloading.FAS-Free Alongside ShipUnder this term the seller delivers the goods by placing them alongside the vessel at the named port ofshipment. The buyer bears all the cost and risk of loss of or damage to the goods from that moment. This termcan be used only of sea or inland waterway transport.FOB-Free on BoardUnder this term, the seller fulfills his obligation of delivery when goods pass the ship’s rail at the named port ofshipment. Form that point onwards buyer bears all costs and risks. The seller clears the goods for export. If theintention is not to deliver the goods across the ship’s rail, FCA terms should be used.CFR-Cost and FreightIn CFR also, obligation of delivery is fulfilled when the goods pass the ship’s rail at the port of shipment. Theonly addition is that the seller also pays the freight necessary to bring the goods to the named port of destinationbut the risk of loss of or damage to the goods and also additional costs occurring after the time of delivery aretransferred from seller to the buyer. Under this term the seller clears the goods for export. This term can be usedonly for the sea or inland waterway transport. If the parties do not intend to deliver the goods across the ship’srail, the term should be used.CIF-Cost, Insurance and FreightHere again the delivery point is the goods passing the ship’s rail in the port of shipment. The seller howeverpaid the cost and freight necessary to the named port of destination and contracts for insurance and pays theinsurance and pays the insurance premium and the risk of loss of or damage to the goods and additional costsoccurring after the time of delivery at transferred from the seller to the buyer. The seller obtains the insuranceonly for the minimum cover. If the buyer whishes to have a greater cover, he would either need to agree withthe seller expressly or to make his own extra insurance arrangements. Clearance of goods for export is the
  • 114responsibility of the seller under this term as well. It can be used for sea and inland waterway transport. If theparties do not intend to deliver the goods across the ship’s rail, the CIP terms should be used.CPT-Carriage Paid ToIt denotes that seller delivers to the carrier nominated by him. If subsequent carriers are used, the risks passwhen the goods have been delivered to the first carrier. The must in addition pay the cost of carriage to bring thegoods to the named destination. The buyer bears all the risks and any cost occurring after the goods have beenso delivered. Here too, obtaining the export clearance is the responsibility of the seller. It can be used for anymode of transport including multi-modal transport.FAO/FOB AirportFOB Airport is based on the same main principle as the ordinary FOB term. You fulfill your obligation bydelivering the goods to the air carrier at the airport of departure. Without the buyers approval delivery at a townterminal outside the airport is not sufficient, your obligations with respect to costs and risks do not extend to thearrival of the goods at the destination.CIP-Carriage and Insurance Paid ToThe term corresponds to CPT except that under CIP the seller also to procure insurance against risk of loss ofor damage to the goods during the carriage. The seller therefore has to obtain the insurance and pay theinsurance premium for a minimum cover. For any additional cover, the buyer needs to either have expressarrangements with the seller or make his own arrangement. Here again if subsequent carriers are used, the riskspasses when the goods have been delivered to the first carrier and clearance of goods for export is theresponsibility of the seller. The term can be used for any mode of transport including multi-modal transport.DAF-Delivered At FrontierUnder this term the seller delivers the goods by placing them at disposal of the buyer on arriving means oftransport not unloaded, cleared for export but not cleared for imports at the named point/place at the frontier butbefore the custom border at the adjoining country. Since the term frontier includes the frontiers of the country ofexport naming the point and the place in the term is of vital importance. For making the seller responsible forthe unloading of the goods and to bear the risk and cost therefore explicit working to this effect need to beincluded in the contract. The term can be used for any mode of transport when goods are to be delivered at theland frontier. When the delivery is to take place in the port of destination on board, a vessel or on the quay, theDES or DEQ terms should be used.DES-Delivered Ex Ship
  • 115This term applies that the seller delivers the goods by placing them at the disposal of the buyer on the board, theship not cleared for import at the named port of destination. The seller bears all the cost and the risk involved inbringing the goods to the named port of destination before their discharge. If the parties intend the seller to bearthe cost and risk of discharging goods then the DEQ term should be used. This term can be used for sea orinland waterways or multimode transport on a vessel in the port of destination.DEQ-Delivered Export QuayThe point of delivery at this term moves to the quay not cleared for export at the named port of destination. Theseller bears the cost of discharging the goods in quay in addition to the cost of risk involved as per the termDES. The term DEQ has been modified in the incoterms 2000 and is a total reversal from the previousincoterms version. Under the modified DEQ term the buyer clears the goods for imports and pays allformalities, duties, taxes and other charges. If the buyer still wants the seller to undertake import clearance, itshould be made clear by adding an explicit warning. This term can be used only when the goods are to bedelivered by sea or inland waterways or multimode transport on discharging from a vessel onto the port ofdestination. If the parties intend to include in the seller’s obligation the risk and cost of handling of the goodsfrom the quay to another place (warehouse, terminal transportation station) in or outside the port, the DDU orDDP should be used.DDU-Delivered Duty UnpaidThis term can be used irrespective of the mode of transport, but when the delivery is to take place in the port ofdestination on board, the vessel or on the quay, the DES or DEQ terms should be used. Under DDU, the sellerdelivers the goods to the buyer not cleared for import, not unloaded from any arriving means of transport at thenamed place of destination. The seller bears the cost and the risk involved in bringing goods there to other than,where applicable, any duty of import in the country of destination. The term duty includes the responsibility forand the risk in the carrying out the customs formalities, the payment of such formalities, custom duties, taxesand other charges. Such duty has to be borne by the buyer, so also any costs and risks caused by his failure toclear the goods for import in time. If the intention is to make the seller carry out customs formalities and bearsthe risks resulting there from as well as some of the costs payable upon import of goods. This should be madeclear by adding explicit wording to this effect in the contract of sale. The responsibility, risks and costs forunloading or reloading of the buyer or the seller.DDP-Delivered Duty PaidUnder the term the seller delivers the goods to the buyer cleared for imports but not unloaded from any arrivingmeans of transport at the named place of destination. Thus all cost and risk involved in bringing the goods thereto including, wherever applicable, any duty for import in the country of destination. Thus the term representsminimum obligation to the buyer and maximum obligation to the seller. It should, therefore not be used if the
  • 116seller is unable to obtain the import clearance. It the parties wish the buyer to bear all risks and costs of importthe DDU term should be used. EXPORT PROCESS Enquiry Quotation Order confirmation Letter of Credit Production planning Production of material Dispatch Preparation of Pre-shipment documents Arrival at port Shipment Preparation of Post-shipment documents Document negotiation with bank Payment realization
  • 117 Fig. 3: Export Process PROCEDURE FOR EXPORTThere are various steps involved for the proper procedure of export of a product. These are as follows:• RECEIPT OF AN ENQUIRY.• CHECK ON RESTRICTIONS ON FOREIGN EXCHANGE AND IMPORT IN THE IMPORTER’S COUNTRY.• SCRUITINISE THE ORDER.• ACKNOWLEDGEMENT OF THE ORDER.• ARRANGING FOR GOODS.• EXPORT LICENCE.• CENTRAL EXCISE CLEARANCE.• APPLY TO EXPORT INSPECTION COUNCIL OF INSPECTION.• APPLY FOR MARINE INSURANCE POLICY, IF IT IS A C.I.F. QUOTATION.• ISSUE INSTRUCTIONS TO THE CLEARING AND FORWARDING AGENT.• CLEARING AND FORWARDING AGENTS ROLE FOR SHIPPING AND CUSTOMS AT PORT.• DOCUMENTS RETURNED BY THE FORWARDING AGENTS.• SHIPPING ADVICE TO IMPORTER.• PRESENTATION OF DOCUMENTS BY THE BANK.• CENTRAL EXCISE REBATE.• DUTY ENTITLEMENT PASSBOOK SCHEMESTEP 1:- Receipt of an EnquiryIt is not possible to attend personally to all of these enquiries, as it would not be economical to do so. The bestway to do this is to ask the enquirers themselves to supply information about their business.If the enquirer is well established, he will be glad to give the information asked for, but if he refuses to do sothan it is fair evidence that his intensions are not good.The exporter after having satisfied himself that the enquirer abroad is a fit person and is capable of meeting hisobligations should give him the details of his business.STEP 2:- Check on Restrictions on Foreign Exchange and Import in the Importer’sCountryWhen the order is received its first decision is based upon the approval of credit. For example: War or any otherdisturbances in the buyer’s country could lead to the restriction of transaction.Therefore if the exporter is dealing with a well experienced importer, the latter will furnish full information withreference to foreign exchange restrictions and import Licenses while placing the initial order.STEP 3:- Scruitinise the Order
  • 118The exporter should carefully scrutinize and check the contents of an export before its confirmation. If shouldbe broadly in accordance with the ‘elements of contract’ which might have been conveyed to the overseasbuyer, received along with the duplicate copy duly signed of export contract. The export should be scrutinizedon the following aspects: • Terms of payment • Documents • Delivery scheduleSTEP 4:- Acknowledgement of OrderIn this step the order is to be acknowledged. The order must be acknowledged before the exporter states thatwhether he would be able to fill it or not.The acknowledgement should contain the essential features concerning the shipment which the exporter shouldknow.STEP 5:- Arranging the GoodsAs soon as the export order has been confirmed or finalized, preparations are made for the production orprocurement of goods to be exported.STEP 6:- Export LicenseIf the item being exported requires an export License, the same should be procured by the exporter from theLicensing authority, i.e., chief Controller of imports and Exports.STEP 7:- Central Excise ClearanceThe excisable goods can be exported outside India either under claim for rebate of excise duty or under bond.STEP 8:- Apply to Export Inspection Council for InspectionExporter should apply to EIC for pre-shipment inspection. Under the EIC an inspector will carry out the qualitycontrol and inspection for exportable products.After carrying out inspection the consignment is found to confirm to the prescribed specification.STEP 9:- Apply for Marine Insurance Policy, if it is A C.I.F. QuotationAs soon as the goods are ready for export, the exporter has to apply to insurance company for an insurancecover/policy as the case may be. The policy would be for C.I.F. value plus 10% to cover expenses.STEP 10:- Issue Instruction to the Clearing and Forwarding AgentA detailed note is prepared for the clearing and forwarding agent, giving instructions regarding the shipment ofthe consignment.STEP 11:- Clearing & Forwarding Agents Role ForShipping & Customs at the PortThe clearing and forwarding agent then prepares the shipping bill and presents them along with the abovedocuments to the export department of the customs house.STEP 12:- Documents Returned by the Forwarding AgentThe master document is returned by the clearing and forwarding agent to the exporter along with: • Shipping bill
  • 119 • Original L/C • AR-4/AR-4A form in duplicate • Full set of clean-on-board of lading together with required number of non-negotiable copies.STEP 13: Shipment Advice to ImporterIntimation is sent to the imports, indicating the date of dispatch of goods and the name of ship by which theyhave been sent.STEP 14:- Presentation of Documents by the Exporter of the BankThe following documents are presented by the exporter for negotiation/collection. • Master Document • GR-1 form • Full set of clean-on-board bill of lading • Original L/C • Bank certificate in prescribed form • Marine Insurance Policy • Export Contract/Order • Bill of ExchangeSTEP 15:- Processing of Documents by the BankBank examines the documents with reference to the terms and conditions of the original order and also of theletter of credit. The exporter’s bank screens the above documents and sends a set of the following documents tothe importer’s bank: • Master Document • Marine Insurance Policy • Negotiable Bill of Lading • Bill of ExchangeSTEP 16:- Central Excise RebateA claim is filled by the exporter with the concerned maritime collector of Central excise for rebate on centralexcise duty.STEP 17:- Duty Entitlement Passbook SchemeThe exporter should file an application to the Licensing authority for an advance License/special License inaccordance with export/import policy of the country at point of time. LOGISTICS PROCESS
  • 120Logistics is the management of the flow of goods, information and other resources, including energy andpeople, between the point of origin and the point of consumption in order to meet the requirements ofconsumers (frequently, and originally, military organizations). Logistics involve the integration of information,transportation and inventory, warehousing, material-handling, and packaging.Logistics ManagementLogistics management is that part of the supply chain which plans, implements and controls the efficient,effective forward and reverse flow and storage of goods, services and related information between the point oforigin and the point of consumption in order to meet customers requirements. A professional working in thefield of logistics management is called a logistician.Logistics Management SoftwareSoftware is used for logistics automation which helps the supply chain industry in automating the work flow aswell as management of the system. There is very few generalized software available in the new market in thesaid topology. This is because there is no rule to generalize the system as well as work flow even though thepractice is more or less the same. Most of the commercial companies do use one or the other custom solution.But there are various software that is being used within the departments of logistics. Few departments inLogistics are namely, Conventional Department, Container department, Warehouse, Marine Engineering,Heavy haulage, Etc. ImporterThe software that is used in these departments are:  Conventional Department: CVT software / CTMS software  Container Trucking: CTMS software Planning Dept.  Warehouse: WMS Expor tNote: In Hindalco, all the departments are interconnected with computer network system and the Office Exportsoftware on which these department works is on the Oracle 11i platform. This software is connected with ControlInternet and the working in any department in any region of Hindalco will make effect in all over India. Head A Brief Description of the Flow of Logistics Process Production Finished Goods Production Warehouse Process Packaging
  • 121 Fig. 4: Flow of Logistics Process in BriefFirst of all Customer or Importer place their order to the company. This is done in the following two ways: 1. Through Export Office 2. Directly to Planning Office1. Through Export OfficeFor placing their order, Customer or Importer contacts to their respective Export Office. There must be oneExport Control Head who can deal with that order. Export Control Head sends the information about the orderto the Planning department. Planning dept. can make a plan to execute that order and sends the informationabout the amount of production to the Production Plant. After production, the product is being sent forpackaging. There packaging should be done according to the demand of the customer. When the product isbeing packed, it is being sent to the Finished Goods Warehouse for storage. When the finished product reachesto the warehouse, it can be informed to the Export Control Head that the product is ready for the delivery to thecustomer. From warehouse the product reaches to the Export office and from there it reaches to the respectiveImporter’s destination.2. Directly to Planning Office
  • 122The second option for the customer to place their order is that they can place their order directly to the planningoffice of the company. Rest all the process after planning till warehousing is same as through Export officeprocess. In this process the product is being delivered to the importer from the Finished Goods Warehousedirectly. Confirmation of the Export Order Logistics Container Indenting Process Warehouse Inland Transportation Sea Transportation Arrange empty Containers at ICD, Kanpur/Kolkata port based on Export Order Storage of Stuffing of By Sea By Air in advance based on Production Schedule Indent Container Finished Goods Finished Goods Inform Finished Goods Warehouse for segregating of material as per container load By Roadways By Railways Inform Finished Goods Warehouse with details of the Order Fig. 5: Diagram Shows the Sub-Division of Export Logistics Process Pre-shipment Export Documentation & stuffing of materials in containers Flow of Export Logistics Process Implemented by Hindalco Excise Clearance (Filling ARE-1 form & Excise Invoice, Verification of exporting consignment by Excise Clearance Authority) Arrival of consignment at Dry Port Custom Clearance Shipment Post-shipment Documentation Document Negotiation Payment Realization
  • 123 Fig. 6: Flow of Export Logistics in HindalcoStep 1:- First of all, order is being confirmed.Step 2:- Container Indenting Process • Order for the container is given to the Shipping Line according to the Production schedule. • Container comes via ICD, Kanpur in case of Mumbai Shipment and directly via roadways or railways in case of Kolkata Shipment. • A particular number is being allotted in the ICD or Kolkata port before sending it to the factory. • Information is being sent to the warehouse about the availability of containers for the stuffing of containers.Step 3:- According to the information, materials is being segregated as per container load in the Warehouse.Step 4:- Stuffing of material in the containers is being done as well as Pre-shipment documents is being madein this step.
  • 124Step 5:- After the stuffing of material, Excise Clearance office is being informed to do the Excise clearanceprocess. In this stage ARE-1 form and Excise Invoice is being filled by the exporter.Step 6:- After the completion of Excise clearance process, stuffed containers is being sent to the respectiveport according to their destination.Step 7:- After the arrival of export consignment at the port, Custom Clearance process is being done by theCustom clearing authority.Step 8:- Shipment is being done after the Custom process is cleared.Step 9:- Post-Shipment documents is being made by the exporter after the shipment of the consignments.Step 10:- When the post-shipment documents are made, these documents are being sent to the bank for thenegotiation.Step 11:- After negotiation, the documents are cleared for making payments which exporter receives. Thisstage is called Payment Realization stage. EXPORT DOCUMENTATIONAny export shipment involves a number of documents required mainly by the customs or port authorities.According to the Customs Act, the person Incharge of a conveyance-vessel, vehicle aircraft etc. cannot permitloading of export cargo at the customs stations unless & until the formal permission given by proper customsoffice is presented.An improved system of documentation for exports announced by the government of India on 31st March, 1991is fine and should be adopted by the exporters as far as possible. Export documentation work constitute heavyon our export activity. It’s complex, cumbersome and costly. Some of the procedures that must be followedwhen an exporter has marketed his goods and received an order. These procedures often involve a good deal ofdocumentation. This documentation is one of the major differences between trading in the home country as wellas in foreign country. The document materials to an export sales contract are not many in number.The documents used differed in size and layout, despite the fact that most of the information requirements arecommon to a number of them. Therefore they have to be completed individually.
  • 125 Importance of Export DocumentationOnce the goods are ready, an exporter has to prepare and execute various documents at different stages ofsending the shipment of goods to the importer. These documents are important for two reasons: • As an evidence of shipment and title of goods • For obtaining paymentThe various documents are therefore of vital interest to the exporter and the bank which is the usual media ofpayment. The documentary requirements are both regulatory and operational in nature and have to comply withthe rules and regulations of the Indian Government as well as the importing country for different type ofproducts. These requirements are different for different type of products.Accuracy and completeness are a prime necessity in documents covering export shipments. Any alteration oraddition made by an Authority issuing the documents must be endorsed properly, with the signature of personissuing the signature of person issuing the documents only. If the documents are not the correct ones, theimporter may not be able to get the goods when the ship arrives.One of the major purposes of documentation is to provide a specific and complete description of the goods, sothat they can be correctly assessed for import duty. But documentation also plays an important role in transportarrangements, in payment and credit procedures and in relation to cargo insurance and claims. Set of Documents Required For ExportsThe following documents are generally required for export of products:1. Invoice-in 4 copies plus 10 copies for certification.2. Packing List in4 copies.3. Mill’s Certificate in 3 copies.4. Insurance Certificate in duplicate.5. Certificate of Origin in 3 copies.6. Bill of Exchange-in duplicate.
  • 1267. B/L-full set plus 2 non-negotiable copies.8. Material Safety Data Sheets/Analysis Report in 3 copies.9. SDF Form & Custom certified Invoice both in original.10. Above mentioned L/C in original. The Major DocumentsExport documentation plays a vital role in international marketing as it facilitates the smooth flow of physicalgoods and payments thereof across national frontiers. Export documentation is however complex as the numberconcerned authorities to whom the relevant documents are to be submitted.On the basis of the function to be performed export documents can be classified under four categories:A. Trade Documents/Commercial DocumentsThe commercial documents are those by which customs of trade are required for effecting physical transfer ofgoods and their title from the exporter to the importer. On an average there are 16 commercial documents. Thefollowing 16 commercial documents are involved in the pre-shipment stage:  Pro-forma invoice  Commercial invoice  Packing list  Shipping instruction  Intimation inspection  Certificate of inspection  Insurance declaration  Certificate of insurance  Shipping order  Mate’s receipt
  • 127  Bill of lading  Application for certificate of origin  Certificate of origin  Bill of exchange  Shipping Advice  Letter to the bank for collectionOut of 16 documents 14 have been standardized and aligned to one another. Two documents viz; ShippingOrder and Bill of Exchange could not be standardized.B. Regulatory DocumentsThese are the documents which are required for complying with the rules and regulations governing exporttrade transactions such as foreign exchange regulations, customs formalities, export inspection etc. Theregulatory documents associated with the pre-shipment stage of an export transaction are as follows:  Gate Pass-1/gate Pass-2  AR-4 form  Shipping bill/bill of export  Export application/dock Challan/Port trust copy of shipping bill  Receipt for payment of port charges  Vehicle chit  Exchange Control declaration (GR/PP) Forms  Freight Payment Certificate  Insurance premium payment certificateOut of the above 9 regulatory documents, 4 have been standardized.C. Export assistance documents
  • 128These are the documents which are required for claiming assistance under the various export assistancemeasures or may be in operation from time to time. Presently these refer to import replenishment licenses, cashcompensatory support scheme drawback of central excise & custom duties & packing credit facilities.D. Foreign documentationThese are the documents which are required by the importer in order to satisfy the requirements of hisgovernments. These include:  Certificate of origin  Consular invoice  Quality control certificate etc.Export documents can be classified into two categories depending upon the specific requirements: • Regulatory • Operational Need for Export DocumentsExport documents have to be prepared for various purposes: • Declaration of exports as per exchange control regulation of the country. • Transport of the goods. • Customs clearance of the goods • Other purposes. Significance of Some Export DocumentsSome of the principal documents are discussed as follows: • Letter of credit • Export invoice • Packing list • Certificate of origin
  • 129 • Bill of lading • Shipping order/mate’s receipt • Shipping bill • Marine insurance policy Letter of CreditLetter of credit is an undertaking by the importer’s bank that if the exporter exports the goods and producesdocuments as stipulated in the letter, the bank would make payment to the exporter. “Letter of credit” is themost important single document in international trade. It forms the basis of very large volume of world trade.Letter of credit provides great security to the exporter. “It is an arrangement by means of which (issuing bank)acting at the request of a customer (Applicant), undertakes to pay to a third party (Beneficiary) a predeterminedamount by a given date according agreed stipulation and against presentation of stipulated documents.”• Salient Features♦ It is an undertaking by the bank.♦ It is an undertaking to make payment.♦ It is an undertaking to make on behalf of the person.♦ It is an undertaking given to the third party.♦ It is an undertaking given to the third person. (A person other than the one on whose behalf it is given)♦ It is a conditional undertaking, payment being subjected to compliance with some conditions.• Parties to A Letter of CreditA documentary credit has got four parties, namely:• APPLICANT (opener)• ISSUING BANK• BENIFICIARY
  • 130• ADVISING BANK• Mechanism of L/C• Is to make payment to the order of a third party (the beneficiary), or is to accept and pay bills of exchange drawn by the beneficiary; or• Authorizes another bank to effect such payment or to accept and pay such bill of exchange; or• Authorizes another bank to negotiate, against stipulated documents, provided that the terms and conditions of the credit are complied with.• Types of a Letter of Credit• Revocable Letter of Credit: - It is a credit which can be revoked. A revocable L/C is the one which can be cancelled or amended by the issuing bank at any time without prior notice to the beneficiary. Revocable credits indicate the nature by a specific clause addressed to the advising bank.• Irrevocable Letter of Credit: - It is a firm undertaking on the part of issuing bank and cannot be cancelled or amended without the consent of the parties to L/C, particularly the beneficiary. An irrevocable credit constitutes a definite undertaking of the issuing bank to accept or pay bills drawn on another bank or make payment.• Payment Credit: - It is a credit which will be paid at sight basis against presentation of requisite documents to the designated paying bank. In a payment credit, beneficiary may or may not be called upon to draw a draft.• Deferred Payment Credit: - It is a usance credit where payment will be made by designated bank, on respective due dates.• Acceptance Credit: - It is similarly to defer payment credit except for the fact that in this credit drawing of a usance draft is a must. Under this credit, drafts must. Under this credit, drafts must be drawn on the specified bank.
  • 131• With recourse without recourse credit• Revolving letter of credit• Confirmed letter of credit• Transferable credit• Revolving credit• Transit credit• Bank to back credit• The sight credit• Usance credit• The deferred payment credit. Export Invoice• Commercial InvoiceIt is one of the most important documents issued by the seller in the standardized format. The invoice is usuallymade out of the full realizable amount of the Trader term. The invoice should be strictly as per the contract ofsale and must be signed by the seller or the person on his behalf.• Consular InvoiceA consular invoice is required to be prepared in a prescribed format and it should be signed/certified by thecouncil of the importing country located in the country of export. The main purpose of consular invoice is toenable the importer’s country to collect accurate and authenticated information about the value, volume, quality,source etc of the import for assessing Import duties and for other statistical purposes. It helps the importer toget cleared the goods through the customs without any undue delay. This document is required mainly by theLatin American countries like Kenya, Tanzania, Nigeria, Mauritius, New Zealand etc. Packing ListPacking list may be shown on invoice or separately and should contain item by item, the contents of cases orcontainers or of a shipment with its weight and description set forth in such a manner as to permit checks of thecontents by the customs on arrival at the port of destination. The packing list is a relatively simpler document and the whole of the information can be reproducedfrom the master by masking information not desired on the packing list. Special information, if any can be
  • 132given in the blank space in the lower third position of the document. It is a list showing the details of goodscontained in each Parcel shipment. Packing list has to be prepared in the Aligned document from. Bill of LadingA Bill of lading is a document issued by the sipping company or its agent, acknowledging the receipt of goodsfor carriage which are deliverable to the consignee or his assignee in the same condition as they were received.A bill of lading serves the following purposes: • It is a receipt of goods received by the shipment company. • A Contract with the carrier: it contains the terms of contract between the shipper and the shipping company, between stated points at a specific charge. • Evidence of title: It is a certificate of ownership or title to the goods.• Contents of Bill of ladingThe usual form of a bill of lading includes the following information: • Name of the shipping company. • Name of the shipper. • Name and address of the importer. • Name and address of the party to be notified on the arrival of shipment. • Name of the carrying vessel. • Name of the ports of loading and discharge. • Whether freight is payable or whether freight has been paid. • Number of originals in the set of bill of lading documents. • Marks and number identifying goods. • Brief description of the goods (including weights and dimensions). • Number of packages. • Signature of ship’s master or his agent. • Date on which goods were received for shipment. • Signature of the exporter (or his agent) and his designation applicable.• Importance of Bill of Lading • It is a contract between the shipper and the shipping company for the carriage of goods to the port of destination. • It is an acknowledgement indicating that the goods mentioned in the document have been received on the board for the purpose of shipment.
  • 133 • It issue for claiming incentives offered by the government to exporters. Marine Insurance PolicyThe safe conduct of the goods from the time it leaves the exporter’s godowns and till it reaches the warehouseof the importer is what all the parties in the transaction pray for. It depends upon the safety of the goods duringthe voyage and safety of the vessel that carries the goods. Marine insurance Policy offers the desired coveragainst the loss or damage of the goods during the transit. It allows a free flow of international trade. In IndiaMarine insurance is governed by the marine Insurance act’ 1963. Section 3 of the act defines a contract ofmarine insurance as “as agreement in which the insurer undertakes to indemnify the assured in the manner andto the extent thereby agreed”.• Nature of Marine Cargo Insurance • Parties • Insurable interest • Utmost good faith • Indemnity • Assignment Certificate of OriginThis certificate certifies the place of origin of the merchandise’ Besides the federation of Indian Chamber ofCommerce and Industry, EPC’s and various other trade associations have been authorized government of Indiato issue certificate of origin. These certificates are important in case of shipments to countries which havepreferential rates of tariff for Indian goods.Certificates of origin are issued by Chamber of commerce on their own printed forms differing in sizes andlayout. The standard documents in respect of certificate of origin are included in the series of aligneddocuments.A Certificate of origin declares the place of actual manufacture or growth of the goods. A country may placerestrictions on imports from certain countries.
  • 134 Shipping Order/Mate’s ReceiptWhen a cargo is loaded on the ship the commanding officer of the ship will issue a receipt called the mate’sreceipt for the goods. The mate receipt is first handed over the port trust authorities so that all the port dues arepaid by the exporter to the port trust.The bill of lading is prepared by the shipping agent only after the male receipt has been obtained.The aligned shipping order and the mate’s receipt have been prepared after examining the forms of the twodocuments issued by the different shipping companies. The information required in these documents can bereproduced with great ease from the master. The issuance of these documents in the standard from will alsofacilitate the processing of documents at various stages. Shipping BillShipping bill is required by the customs. It is only after the shipping bill is stamped by the customs that cargo isallowed to be carted to the docks. The aligned shipping bill has been prepared after taking into considerationthe requirement of custom’s public notice no. 39 which suggests a uniform shipping bill for different categoriesof exports. Basically shipping bill is of four types: • Export duty/cess • Free of duty/cess • Entitlement to duty drawback • Re-export of imported goods.The format presented for shipping bill is as under: • White shipping bill. • Green shipping bill. • Yellow shipping bill. • Pink shipping bill.Where goods are to be cleared by the Land customs, Bill of export is prepared instead of shipping bill. Bill of ExchangeA bill of exchange is an instruction by the exporter (drawer) to the (importer) or the importer’s bank to makepayment of the amount mentioned in it. A bill of exchange is a negotiable instrument and is governed by the
  • 135Negotiable Instruments Act in India and by similar enactments in other countries. The Negotiable InstrumentsAct defines a bill of exchange as “an instrument in writing containing an unconditional order, signed by themaker directing a certain person to pay a certain sum of money only to or order of a certain person or to thebearer of instrument”. A bill of exchange is also called as draft contains an order from the credit to the debtor topay a specified amount to a person mentioned therein.There are three parties to B/E. • The Drawer (exporter):- The person who executes the B/E. • The Drawee (importer):- The person on whom the B/E is drawn and who is required to meet the terms of the document. • The Payee (the exporter’s bank):- The party to receive the payment.• Types of Bill of Exchange • Sight and usance bills. • D/A and D/P bills. • Inland and foreign bill. GR FormThe RBI to ensure that the foreign exchange receipts in respect of exports are repatriated to India has prescribedthis form. This has to be prepared in duplicate. The original copy has to be submitted to the customs authoritiesat the port of shipment. This is sent to the RBI directly by the customs authorities. The duplicate copy issubmitted to the negotiating bank along with the other documents after shipment of goods. The negotiating banksends the duplicate copy to the RBI. Common Defects in DocumentationThe bank making payment on behalf of its foreign correspondent must verify that all documents & draftsconform precisely to the terms & conditions of the L/C. to avoid payment delays, the beneficiary should prepare& examine all documents carefully before presenting them to the paying bank. Paying banks find that thefollowing discrepancies between the documents & the letter of credit occur most frequently: i. Drafts are presented after L/C has expired or after time for shipment has expired. ii. Invoice value or draft exceeds amount available under L/C.
  • 136 iii. Charges included in the invoice are not authorized in the L/C. iv. Amount of insurance coverage is inadequate or coverage does not include risks required by the L/C. v. Insurance document is not endorsed and/or countersigned. vi. Date of insurance policy or certificate is later than the date on bill of lading. vii. Bills of lading are not “clean” that is, they bear notations that qualify good order & condition of merchandise of its packing. viii. Bills of lading are not marked “On Board” when so required by L/C. ix. “On Board” endorsement or charges on bills of lading are not signed by carrier or its agent or initialed by party who signed bills of lading. x. “On Board” endorsement is not dated. xi. Bills of lading are not endorsed. xii. Bills of lading are made out “to order” (Shipper’s order, Blank endorsed) where L/C stipulates “Straight” (direct to consignee bills of lading or vice versa. xiii. Bills of lading do not indicate, “Freight prepaid” as stipulated in the L/C. xiv. B/L are not marked “Freight prepaid” when freight charges are included in invoice. xv. Descriptions, marks & nos. of merchandise are not same on all documents presented or are not as required by L/C. xvi. Not all documents required by L/C are presented.xvii. Invoice states “used”, “Second hand” or “rebuilt” merchandise when L/C does not authorize such condition.xviii. Invoice does not specify shipment terms (C & F, CIF, FOB, etc) as stated in L/C. xix. Invoice is not signed as L/C requires. Process of Getting Custom Clearance
  • 137 Fig. 7: Process of Getting Custom Clearance GOVERNMENT POLICIES FOR EXPORTEXIM PolicyThe EXIM Policy was announced by the government on 1st April, 1992 which is effective for a period of 5years upto March, 1997 co-terminus with the 8th Five year Plan. This is the first time that an EXIM Policy for aFive Year Plan was announced against earlier policies for 3 years or one year duration. This was done inresponse to the appeal made by the trade that frequent and radical changes in the EXIM policy had adverselyaffected country’s export efforts and the credibility of the Indian exporters abroad.The changes in the present EXIM Policy announced on 31st March, 1995 are a result of the intense interactionbetween trade and industry. One of the highlights of revised policy is the widening of the scope of the ExportPromotion Capital Goods (EPCG) scheme to provide for zero duty import of capital goods of a value of at leastRs. 20 crores.Exports and imports in India are governed by the EXIM policy published by the Director General of Foreigntrade (DGFT).
  • 138The EXIM policy allows imports and exports from/to any country in the world except Fiji, Iraq, Yugoslavia(Serbia and Montenegro). Main Objectives of EXIM Policy • Globalization of India’s foreign trade. • Augmenting exports by facilitating access to imported inputs. • Promoting efficient and internationally competitive import substitution. • Encouraging high and internationally accepted standards of quality. • Transparency in the export-import policies, minimization of quantitative restriction/licensing and other discretionary controls. • Strengthening and stimulating the country’s research and development capabilities. • Simplifying and streamlining procedures governing imports and exports. EXPORT INCENTIVESThe Government of India has framed several schemes to promote exports and to obtain foreign exchange. Theseschemes grants incentive and other benefits. The few important export incentives, from the point of view ofindirect taxes are briefed below:Free Trade Zones (FTZ)Several FTZs have been established at various places in India like Kandla, Noida, Cochin, etc. No excise dutiesare payable on goods manufactured in these zones provided they are made for export purpose. Goods beingbrought in these zones from different parts of the country are brought without the payment of any excise duty.Moreover, no customs duties are payable on imported raw material and components used in the manufacture ofsuch goods being exported. If entire production is not sold outside the country, the unit has the provision ofselling 25% of their production in India. On such sale, the excise duty is payable at 50% of basic plus additionalcustoms or normal excise duty payable if the goods were produced elsewhere in India, whichever is higher.Electronic Hardware Technology Park / Software Technology Parks
  • 139This scheme is just like FTZ scheme, but it is restricted to units in the electronics and computer hardware and software sector.Advance License/ Duty Exemption Entitlement Scheme (DEEC)In this scheme advance license, either quantity based (Qbal) or value based (Vabal), is given to an exporteragainst which the raw materials and other components may be imported without payment of customs dutyprovided the manufactured goods are exported. These licenses are transferable in the open market at a price.Export Promotion Capital Goods Scheme (EPCG)According to this scheme, a domestic manufacturer can import machinery and plant without paying customsduty or settling at a concessional rate of customs duty. But his undertakings should be as mentioned below: Customs Duty Rate Export Obligation Time 10% 4 times exports (on FOB basis) of CIF 5 years value of machinery. Nil in case CIF value is Rs200mn or more. 6 times exports (on FOB basis) of CIF 8 years value of machinery or 5 times exports on (NFE) basis of CIF value of machinery. Nil in case CIF value is Rs50mn or more for 6 times exports (on FOB basis) of CIF 8 years agriculture, aquaculture, animal husbandry, value of machinery or 5 times exports on floriculture, horticulture, poultry and (NFE) basis of CIF value of machinery. sericulture. Table 2: Undertaking of EPCGNote:- • NFE stands for net foreign earnings. • CIF stands for cost plus insurance plus freight cost of the machinery. • FOB stands for Free on Board i.e. export value excluding cost of freight and insurance.Deemed ExportsThe Indian suppliers are entitled for the following benefits in respect of deemed exports: • Refund of excise duty paid on final products
  • 140 • Duty drawback • Imports under DEEC scheme • Special import licenses based on value of deemed exportsThe following categories are treated as deemed exports for seller if the goods are manufactured in India: • Supply of goods against duty free licenses under DEEC scheme • Supply of goods to a 100 % EOU or a unit in a free trade zone or a unit in a software technology park or a unit in a hardware technology park • Supply of goods to holders of license under the EPCG scheme • Supply of goods to projects financed by multilateral or bilateral agencies or funds notified by the Finance Ministry under international competitive bidding or under limited tender systems in accordance with the procedures of those agencies or funds where legal agreements provide for tender evaluation without including customs duty • Supply of capital goods and spares upto 10% of the FOR value to fertilizer plants under international competitive bidding • Supply of goods to any project or purpose in respect of which the Ministry of Finance permits by notification the import of goods at zero customs duty along with benefits of deemed exports to domestic supplies • Supply of goods to power, oil and gas sectors in respect of which the Ministry of Finance permits by notification benefits of deemed exports to domestic suppliesManufacture under BondThis scheme furnishes a bond with the manufacturer of adequate amount to undertake the export of hisproduction. Against this the manufacturer is allowed to import goods without paying any customs duty, even ifhe obtains it from the domestic market without excise duty. The production is made under the supervision of customs or excise authority.Duty DrawbackIt means the rebate of duty chargeable on imported material or excisable material used in the manufacturing ofgoods in and is exported. The exporter may claim drawback or refund of excise and customs duties being paidby his suppliers. The final exporter can claim the drawback on material used for the manufacture of exportproducts. In case of re-import of goods the drawback can be claimed.
  • 141The following are Drawbacks: • Customs paid on imported inputs plus excise duty paid on indigenous imports. • Duty paid on packing material.Drawback is not allowed on inputs obtained without payment of customs or excise duty. In part payment ofcustoms and excise duty, rebate or refund can be claimed only on the paid part.In case of re-export of goods, it should be done within 2 years from the date of payment of duty when they wereimported. 98% of the duty is allowable as drawback, only after inspection. If the goods imported are usedbefore its re-export, the drawback will be allowed as at reduced per cent.
  • 142 Process Involved in Getting Export Incentives Shipping Bill for Export of Goods under claim for DEPB Scheme is made after shipment BRC is prepared for claiming the export incentives A bunch of 20-25 Shipping Bills and their respective BRCs has been made for one application Various data regarding export made are feeded in the Excel system for the purpose of online feeding on the DGFT Site Necessary application fee in the form of EFT is made through system The application is digitally signed and submitted to Jt. DGFT, Varanasi through the Internet Site Hard copy of Application form along with E.P. copy of Shipping Bills & original BRCs has been sent to Jt. DGFT, Varanasi for issuing DEPB License After receipt of DEPB license, this license along with respective DEPB copy of shipping bills & duplicate copy of BRCs & a statement showing comprehensive details of claims has been sent to respective customs house through the clearing agents for verification Fig. 8: Process of Getting Export Incentives
  • 143Step 1: – First of all, Shipping Bill has been made for claiming the Export Incentives. It is made as SHIPPINGBILL FOR EXPORT OF GOODS UNDER CLAIM FOR DUTY ENTITLEMENT PASS BOOK (DEPB)SCHEME. Under this the main things which have been covered are:-- 1. Invoice No. & Date 2. Custom House agent’s Description 3. Nature of Contract 4. Exchange Rate 5. Currency of Invoice 6. Statistical Code & Description of Goods & Exim Scheme code where applicable. 7. Analysis of Export Value 8. Amount 9. DEPB Rate 10. Rate List Sr. No. 11. Product Group 12. DEPB No. 13. LET Export date Passed for ShipmentThere are two copies of this document. 1st one is export promotion copy & the 2nd one is DEPB copy. Thesedocument having the stamp of Custom & Excise and the signature & seal of Custom Inspector.Step 2: – When Shipping Bill has been prepared, after that Bank Realization Certificate (BRC) has been madefor negotiation process in claiming the Export Incentives. This document has two parts; the 1st part contains 17columns named Invoice no. & date, Shipping Bill no. & date, Description of goods, Bill of Ladings’ no. & date,Destination, Bill amount, Freight amount, Insurance amount Commission Paid, FOB value, Date of realizationof export proceeds and No., date & category of applicable Licence which has been filled by the exporter. Underthese columns Place, Date, Seal & Signature of the exporter have been mentioned. The 2nd part of this documentcontains Bank’s Certificate which has to be filled by the Banker with their authorization seal & signature.When the exporter gets this BRC, it means that exporter had got the exported amount in his bank account.Step 3: – After getting the BRC from the bank, one application have been prepared for a bunch of 20-25Shipping bills and their respective BRCs. This application is in favor of the Jt. Director General of ForeignTrade (DGFT). Description of application for issue of DEPB license, description of EFT towards theapplication fee, description of Export Promotion Copy of Shipping Bills & the description of self-addressedenvelop with a relevant amount of stamp fixed on it have been mentioned in this application.
  • 144Step 4: – On the DGFT site, there is application software for filling the data regarding export made. For thispurpose various data regarding export made are feeded in the Excel system.Step 5: – After filling the necessary information regarding export made in the DGFT site, relevant applicationfee in the EFT form is made through system.Step 6: – After that application is digitally signed & submitted to DGFT through the Internet.Step 7: – A hard copy of application form has been made and along with Export Promotion Copy of ShippingBills & original BRCs, it has been sent to Jt. DGFT, Varanasi for issuing DEPB License.Step 8: – After getting the DEPB license from DGFT, this license along with respective DEPB copy ofshipping bills & original BRCs & a statement showing comprehensive details of claims, it has been sent torespective customs house through the clearing agents for verification.The DEPB license from DGFT which an exporter receives after the verification of application regarding exportmade under DEPB scheme contains the following: 1. Authorization Forwarding Letter 2. DEPB License 3. Details of the exported items 4. Application Submission Details 5. DEPB E-Commerce Version, under this- ♦ IEC Details ♦ Application Firm Details ♦ Nature of Concern ♦ Type of Exporter ♦ Industrial Registration Details ♦ Service Tax Registration Details ♦ RCMC Registration Details ♦ Status House Details ♦ Excise Details ♦ VAT Details ♦ Past Turnover (Rs. Lakhs) ♦ Name & Address of the exporter ♦ Payment Details ♦ FOB value of Exports
  • 145 ♦ DEPB Claimed ♦ DEPB Applied for ♦ DEPB Entitlement for 100% ♦ DEPB Entitlement after cut ♦ Shipping Bills Details ♦ Declaration/Undertaking ♦ Signature & Description of the applicant ♦ Sign of DGFTis being covered. EXPORT FINANCEFinancial assistance to the exporters are generally provided by Commercial Banks, before shipment as well asafter shipment of the said goods. The assistance provided before shipment of goods is known as per-shipmentfinance and that provided after the shipment of goods is known as post-shipment finance. Pre-shipment financeis given for working capital for purchase of raw-material, processing, packing, transportation, ware-housing etc.of the goods meant for export. Post-shipment finance is provided for bridging the gap between the shipment ofgoods and realization of export proceeds. The later is done by the Banks by purchasing or negotiating the exportdocuments or by extending advance against export bills accepted on collection basis. While doing so, the Banksadjust the pre-shipment advance, if any, already granted to the exporter. Pre-Shipment FinanceAn application for pre-shipment advance should be made by you to your banker along with the followingdocuments: • Confirmed export order/contract or L/C etc. in original. Where it is not available, an undertaking to the effect that the same will be produced to the bank within a reasonable time for verification and endorsement should be given. An undertaking that the advance will be utilised for the specific purpose of procuring/manufacturing/shipping etc., of the goods meant for export only, as stated in the relative confirmed export order or the L/C. If you are a sub-supplier and want to supply the goods to the Export/Trading/Star Trading House or Merchant Exporter, an undertaking from the Merchant.
  • 146 • Exporter or Export/Trading/Star Trading House stating that they have not/will p 7 3 not avail themselves of packing credit facility against the same transaction for the same purpose till the original packing credit is liquidated. Copies of Income Tax/Wealth Tax assessment Order for the last 2-3 years in the case of sole proprietary and partnership firm. Copy of Exporters Code Number (CNX). Copy of a valid RCMC (Registration-cum-Membership Certificate) held by you and/or the Export/Trading/Star Trading House Certificate. Appropriate policy/guarantee of the ECGC. • Any other document required by the Bank. For encouraging exports, R.B.I. has instructed the banks to grant pre-shipment advance at a concessional rate of interest. The present rate of interest is 10% p.a. for pre-shipment advance upto an initial period of 180 days. Pre-shipment advance for a further period of 90 days is given at the concessional rate of 13% p.a. Banks are free to determine the interest rate for advances beyond 270 days and upto 360 days.Following special schemes are also available in respect of pre-shipment finance: • Exim Banks scheme for grant of foreign currency pre-shipment credit to exporters for financing cost of imported inputs for manufacture of export products. • Scheme of export packing credit to sub-suppliers from export order. • Packing credit for deemed exports. • Pre-shipment Credit in Foreign Currency (PCFC). For further details refer to Nabhis "How to Borrow from Financial and Banking Institutions". Post Shipment FinancePost-shipment finance is the finance provided against shipping documents. It is also provided against dutydrawback claims. It is provided in the following forms:  Purchase of Export Documents drawn under Export Order: - Purchase or discount facilities in respect of export bills drawn under confirmed export order are generally granted to the customers who are enjoying Bill Purchase/Discounting limits from the Bank. As in case of purchase or discounting of export documents drawn under export order, the security offered under L/C by way of substitution of credit-worthiness of the buyer by the issuing bank is not available, the bank financing is totally dependent upon the credit worthiness of the buyer, i.e. the importer, as well as that of the exporter or the beneficiary. The documents dawn on DP basis are parted with through foreign correspondent only when payment is received while in case of DA bills documents (including that of title to the goods) are passed on to the overseas importer against the acceptance of the draft to make payment on maturity. DA bills are thus unsecured. The bank financing against export bills is open to the risk of non-payment. Banks, in order to enhance security, generally opt for ECGC policies and guarantees which are issued in
  • 147 favor of the exporter/banks to protect their interest on percentage basis in case of non-payment or delayed payment which is not on account of mischief, mistake or negligence on the part of exporter. Within the total limit of policy issued to the customer, Drawee-wise limits are generally fixed for individual customers. At the time of purchasing the bill bank has to ascertain that this Drawee limit is not exceeded so as to make the bank ineligible for claim in case of non-payment.  Advances against Export Bills Sent on Collection: - It may sometimes be possible to avail advance against export bills sent on collection. In such cases the export bills are sent by the bank on collection basis as against their purchase/discounting by the bank. Advance against such bills is granted by way of a separate loan usually termed as post-shipment loan. This facility is, in fact, another form of post- shipment advance and is sanctioned by the bank on the same terms and conditions as applicable to the facility of Negotiation/Purchase/Discount of export bills. A margin of 10 to 25% is, however, stipulated in such cases. The rates of interest etc., chargeable on this facility are also governed by the same rules. This type of facility is, however, not very popular and most of the advances against export bills are made by the bank by way of negotiation/purchase/discount.  Advance against Goods Sent on Consignment Basis: - When the goods are exported on consignment basis at the risk of the exporter for sale and eventual remittance of sale proceeds to him by the agent/consignee, bank may finance against such transaction subject to the customer enjoying specific limit to that effect. However, the bank should ensure while forwarding shipping documents to its overseas branch/correspondent to instruct the latter to deliver the document only against Trust Receipt/Undertaking to deliver the sale proceeds by specified date, which should be within the prescribed date even if according to the practice in certain trades a bill for part of the estimated value is drawn in advance against the exports.  Advance against Undrawn Balance: - In certain lines of export it is the trade practice that bills are not to be drawn for the full invoice value of the goods but to leave small part undrawn for payment after adjustment due to difference in rates, weight, quality etc. to be ascertained after approval and inspection of the goods. Banks do finance against the undrawn balance if undrawn balance is in conformity with the normal level of balance left undrawn in the particular line of export subject to a maximum of 10% of the value of export and an undertaking is obtained from the exporter that he will, within 6 months from due date of payment or the date of shipment of the goods, whichever is earlier surrender balance proceeds of the shipment. Against the specific prior approval from Reserve Bank of India the percentage of undrawn balance can be enhanced by the exporter and the finance can be made available accordingly at higher rate. Since the actual amount to be realised out of the undrawn balance, may be less than the undrawn balance, it is necessary to keep a margin on such advance.
  • 148  Advance against Retention Money: - Banks also grant advances against retention money, which is payable within one year from the date of shipment, at a concessional rate of interest up to 90 days. If such advances extend beyond one year, they are treated as deferred payment advances which are also eligible for concessional rate of interest.  Advances against Claims of Duty Drawback: - Duty Drawback is permitted against exports of different categories of goods under the Customs and Central Excise Duty Drawback Rules, 1995. Drawback in relation to goods manufactured in India and exported means a rebate of duties chargeable on any imported materials or excisable materials used in manufacture of such goods in India or rebate on excise duty chargeable under Central Excises Act, 1944 on certain specified goods. The Duty Drawback Scheme is administered by Directorate of Duty Drawback in the Ministry of Finance. The claims of duty drawback are settled by Custom House at the rates determined and notified by the Directorate. As per the present procedure, no separate claim of duty drawback is to be filed by the exporter. A copy of the shipping bill presented by the exporter at the time of making shipment of goods serves the purpose of claim of duty drawback as well. This claim is provisionally accepted by the customs at the time of shipment and the shipping bill is duly verified. The claim is settled by customs office later. As a further incentive to exporters, Customs Houses at Delhi, Mumbai, Calcutta, Chennai, Chandigarh, and Hyderabad have evolved a simplified procedure under which claims of duty drawback are settled immediately after shipment and no funds of exporter are blocked. However, where settlement is not possible under the simplified procedure exporters may obtain advances against claims of duty drawback as provisionally certified by customs.  Negotiation of Export documents Drawn under L/C: - This aspect has been discussed in the chapter on Special Care for negotiation of Export Documents under Letter of Credit.  Rates of Interest: -The rate of interest depends on the nature of the Bills, i.e., whether it is a demand bill or usance bill. Like pre-shipment, post-shipment finance is also available at concessional rate of interest. The Present Rates of interest are as under: • Demand Bills for transit period Not exceeding (as specified by FEDAI) 10% p.a. • Usance Bills (for total period comprising usance period of ex-port bills, transit period as specified by FED AI and grace period, wherever applicable: • Upto 90 days 10% p.a. • Beyond 90 days and upto six 12% p.a. months from the date of shipment. • Beyond six months from the 20% date of Shipment (Minimum)
  • 149  Normal Transit Period: - Foreign Exchange Dealers Association of India (FEDAI) has fixed transit period for export bills drawn on different countries in the world. The concept of this transit period is that an export bill should normally be realised within that period. The transit period so fixed by FEDAI is known as Normal Transit Period and mainly depends on geographical location of a particular country.  Direct and Indirect Bill: - If the currency of the bill is the same as the currency of the country on which it is drawn, it is termed as direct bill, e.g. an export bill in US $ drawn on a place in U.S.A. However, if the currency of the bill in which it is drawn is different than the currency of the country on which it is drawn, it is termed as indirect bill, e.g. an export bill in US $ drawn on a place in Japan. The normal transit period fixed for indirect bill is on higher side as compared to transit period fixed for direct bills.  Notional Due Date: - To determine the due date of an export bill we have to consider the following 3 components: - (1) Normal transit period as fixed by FEDAI, (2) Usance period of the bill and (3) Grace period if applicable in the country on which the bill is drawn. Grace period is applicable only in the case of Usance bills. The notional due date of an export bill may thus be calculated after adding all the above 3 components the concessional rate of interest is chargeable upto the notional due date subject to a maximum of 90 days.  Forfeiting Finance by Authorised Dealers: - Reserve Bank has now permitted the authorised dealers (Banks) to arrange forfeiting of medium term export receivables p 7 3 on the same lines as per the scheme of EXIM Bank and many International forfeiting agencies have now become active in Indian market. Forfeiting may be usefully employed as an additional window of export finance particularly for exports to those countries for which normal exports credit is not intended by the commercial banks. It must be noted that charges of forfeiting are eventually to be passed on to the ultimate buyer and should, therefore, be so declared on relative export declaration forms.  External Commercial Borrowings: - Proposals for raising foreign currency loans/credits viz., Buyers Credits, Suppliers Credits or Lines of Credits by firms/companies/lending institutions, banks, etc. for financing cost of import of goods, technology or for any other purposes, other than short-term loans/credits maturing within one year should first be submitted to government of India, Ministry of Finance (Department Economic Affairs), ECB Division, New Delhi for necessary clearance. The proposals are considered by the government on merits of each case and in the light of prevailing Government policy.  EXIM Bank Finance: - Besides commercial banks, export finance is also made available by the EXIM bank. The EXIM bank provides financial assistance to promote Indian exports through direct
  • 150 financial assistance, overseas investment finance, term finance for export production and export development, pre-shipment credit, lines of credit, re-lending facility, export bills re-discounting, refinance to commercial banks, finance for computer software exports, finance for export marketing and bulk import finance to commercial banks. The EXIM Bank also extends non-funded facility to Indian exports in the form of guarantees. The diversified lending programmed of the EXIM Bank now covers various stages of exports, i.e. from the development export markets to expansion of production capacity for exports, production for export and post shipment financing. The EXIM Banks focus is on export of manufactured goods, project exports, exports of technology, services and export of computer software.Hindalco Export Data (From Renukoot Plant)Although, EXIM bank is assisting finance to the exporters but Hindalco is not availing this facility provided bythe EXIM bank. HINDALCO’S EXPORTS (From Renukoot Plant) YEAR QTY. (MT) 2003-04 20393 2004-05 32828 2005-06 36559 2006-07 35477 2007-08 39317 2008-09 34282 Table 3: Hindalco’s Export in terms of Quantity (MT)
  • 151 SWOT ANALYSIS OF HINDALCO STRENGTH • A global leader in value-added high-end aluminium flat rolled products and aluminium can recycle. • It is the largest manufacturer of the entire range of flat rolled products in India & enjoys nearly 60 per cent of market share. • The company exports about 17 per cent of its total sales volume of aluminium. • The company has been accorded the Five Star Trading House status in India. • The companys metal is accepted for delivery under the high grade aluminium contract on the London Metal Exchange (LME). WEAKNESS Since I had done my project in Renukoot plant then the only weakness which I found here in Renukoot plant is that Marketing process is very difficult from here due to its remote location and it is also very far from ports. OPPORTUITIES • Takeover of Indal is taking Hindalco to the way of increased production to meet the Importer’s requirements without any delay in time and it also giving the opportunities to export marketing department to secure as much export order due to increased capacity of production. • Acquisition of Novelis giving the opportunities to the Hindalco to expand more its global market, since, Novelis has the unrivaled capability to provide its customers with a regional supply of technologically sophisticated rolled aluminium products throughout Asia, Europe, North America and South America. THREATS Due to high International Inflation rate, price of the Aluminium is increasing in the International Metal Market. As a result, the Aluminium, which was said as the product of poor peoples, now it has been gone far from the hands of a middle class people. Now, it becomes a product of high class society. So, poor and middle class peoples are searching and getting the alternatives of the Aluminium metal i.e. Iron and Steel which is low in cost as comparison to Aluminium now-a-days.
  • 152 FINDINGS & RECOMMENDATIONS Findings • Hindalco is the leading exporter of Aluminium Semi-Finished products in India. • FIEO (Federation of Indian Export Organisation) has awarded Hindalco as a Five Star Trading Houses on their export achievements. • Hindalco is following all the norms as per Central Excise & Customs and other government rules & regulations in the export process. • Hindalco is following positive and proactive approach towards export. • Hindalco is exporting from Kolkata and Mumbai port both. • Hindalco is exporting all over the world, from underdeveloped countries to advance countries. RecommendationsHindalco is a reputed Aluminium industry in the world and its products are well accepted in the market but aswe know that there is always a scope of improvement.Following are the recommendations in all the three areas i.e. Export Process, Export Documentations andExport Logistics: • Sometimes 3-4% execution of export order has been delayed due to rejection of partial quantity of the product due to quality problems and manufacturing defects. So, it is recommended that Hindalco should have to keep advance stock or backup products in their warehouse to overcome this problem and to execute the order on time. • Some of the Caster product order is being delayed due to limited capacity of the Caster Plant. So, it is recommended that Hindalco should have to increase the capacity of their Caster Plant.
  • 153 • Hindalco is using Oracle 11i & IVL software system for making export documents. The working of this software is from Order management to Shipment. This process is time taking due to partly adoption of the software system. So, it is recommended that this software should have been start from Enquiry management to Shipment. It would ease in making documents in faster way manual interruption will be minimized. • Sometimes there is unavailability of containers for any particular destination occurs. This problem have been overcome by helding a meeting and making a successful negotiation process from the shipping line companies for the arrangement of empty containers. • Unavailability of tailors due to non-uniformity of production occurs. This problem should have been solved by the proper working collaboration of the Marketing & Production department. • Movement of export consignment tailors disturbs due to creation of problems by the Naxalieds in Jharkhand and Bihar. This problem will be overcome by the Indian Government only, company have not any solution of this problem.Some other recommendations are: • Company should focus on small-scale industries. • Improved and advanced technologies should be used for better Quality and more Quantity. • Company should focus on CRM (Customers Relationship Management).
  • 154 BIBLIOGRAPHYBooks:  Khurana P. K., Export Management, 4th Edition, Galgotia Publication Company.  Philip R. Cateora and John L. Graham, International Marketing, 11th Edition, Tata McGraw-Hill Publication Company Limited.  Francis Cherunilam, International Trade and Export Management, 15th Edition, Himalaya Publication House.  Rothor B.S. & J.S. Rathor, Export Management, 6th Edition, Himalaya Publication House.Magazines:  Aluminium International Today  Aluminium Times  APT – Aluminium Process and Product Technology  Induction ManualInternet:  http://www.unzco.com/basicguide  http://www.fieo.org  http://www.wikipedia.com/trade_policy/export_procedures  http://www.google.co.in  http://www.altavista.com  http://www.hindalco.com  http://www.novelis.com  http://www.adityabirla.com  http://www.bxa.doc.gov
  • 155 SPECIMEN OF PROFORMA INVOICE Exporter Invoice no. Exporter’s Ref & date Buyer’s order no. & date Other references Consignee Buyer Country of origin of Country of goods Final destination Terms of delivery and payment Pre-carriage by Place of Receipt by Pre- carrier Vessel/Flight Port of lading No. Port of Final destination discharge Marks and no. No. and Description Quality Rate Amount of containers kind of of goods Pkgs. Signature & date
  • 156 SPECIMEN OF PACKING LIST Exporter Invoice No. Date Buyer’s order no. & date Other reference(s) Consignee Buyer Country of origin of Country of goods Final destination Pre-carriage by Place of Receipt by Pre-carrier Vessel/Flight Port of lading No. Port of discharge Place of delivery Marks & No.s/ No. and kind of Pkgs. Description Quality Remarks containers no. of goods Signature & date
  • 157 SPECIMEN OF CERTIFICATE OF ORIGIN Exporter NAME OF THE CHAMBER OF COMMERCE Consignee Pre-carriage by Place of receipt of Pre- Carrier Vessel Port of loading Port of discharge Final destination No. and kind of packages : Gross weight (kg) Description of goods Measurement Certification : Declaration by Exporter : It is hereby certified that this declaration was made before We hereby declared that the above mentioned goods were me and that to the best of my knowledge and believe the produced in the Indian Union and are shipped to above mentioned goods are of Indian origin. Name of the authorized Signatory Place and date of issue Place & date of issue Signature Secretary Signature
  • 158 SPECIMEN OF BILL OF LADING Shipper B/L NO. Consignee NAME AND LOGO OF SHIPPING LINE Notify Party Local Vessel From Ocean Vessel Port of Lading Port of Discharge Final Destination (if on carriage) Marks & Numbers No. & Kind of Packages; Gross weight(kg) Measurement Description of goods Freight details, charges, etc Shipped on board in apparent good order…………… Freight Payable at Place & date of time No. of Original B/L Signature Applicable only when document used as through Bill of Lading
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