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  • 1. Seminar on “Export Procedure and Documentation” Seminar on “EXPORT PROCEDURE AND DOCUMENTATION” KOHIMA, NOVEMBER 08, 2006The Seminar was conducted by the Eximius Centre, Exim Bankin association with the Government of Nagaland and UnitedBank of India (UBI) at Kohima on November 08, 2006. Theobjective of the programme was to develop the knowledge andskill of existing and potential entrepreneurs in propercompliance with the procedure and documentation forexports, and thereby to enhance the prospect of theirexport efforts. 60 participants representing small, mediumand large enterprises from both private and public sectorsattended the Seminar.FACULTY 1. Mr. Z. Khuma, Jt. Director General of Foreign Trade (DGFT), Kolkata; 2. Mr. K.P. John Kutty, Deputy General Manager, Reserve Bank of India (RBI); 3. Mr. P.P. Singh, Senior Manager, UBI; 4. Mr. P.P. Taneja, Asst. Commissioner of Customs, Dimapur; 5. Mr. N.C. Das, Manager, Export Credit Guarantee Corporation of India Ltd; and 6. Mr. Sunil Kumar, OSD, CAPEXIL.TOPICS COVERED 1. Foreign Trade Policy; 2. Foreign Exchange Regulations; 3. Introduction to exports procedures; 4. Customs formalities; 5. Export Factoring & Forfaiting; 6. Export Credit Risk Insurance.Eximius Centre, Export-Import Bank of India 1
  • 2. Seminar on “Export Procedure and Documentation” GIST OF MAJOR TOPICS 1. Foreign Trade PolicyIndia’s Foreign Trade Policy (FTP) originally introduced toregulate and control trade, particularly imports, in orderto preserve the country’s foreign exchange, is now designedto serve as a trade promotion mechanism. The objective ofFTP is to accelerate India’s global merchandise trade- todouble our percentage share in 5 years- and to act as aneffective instrument of economic growth. The process ofliberalisation of FTP started in April 1992, and become anongoing process towards removal of restrictions andachieving simplification. As an export promotion tool, FTPprovides for various incentive schemes for exports: duty-free import of raw materials required for exportproduction, import, on concessional duty, of capital goodsand plant & machinery required for export production, andspecial schemes for EOU, SEZ and areas having potential forexport of agri/horticultural products. A specialAgriculture & Village Industries Scheme (Vishesh KrishiGram Udyog Yojana) has been introduced under the FTP tofacilitate export of fruits, vegetables, flowers, minorforest produce, dairy, poultry, value added products andGram Udyog products.DGFT, functioning under the Ministry of Commerce andIndustries, Government of India, regulates the country’sexport-import trade, and formulates the related policiesand procedures. In its role as facilitator of foreigntrade, the office of DGFT has simplified a number ofprocedures such as the procedure for registration of IECcode. Online access, through internet, has been introducedfor activities such as viewing IEC status and submission ofdocuments (electronic filing). Schemes such as DutyDrawback, Duty Entitled Pass Book, and Standard InputOutput Norms for availing incentives, have been simplifiedto make them more user-friendly. DGFT website(www.dgft.gov.in) incorporates regular updates on exportincentives and other aspects of FTP. *****Eximius Centre, Export-Import Bank of India 2
  • 3. Seminar on “Export Procedure and Documentation” 2. Foreign Exchange RegulationsReserve Bank of India (RBI) is vested inter alia with thetask of monitoring India’s foreign exchange inflow andoutflow. Prior to the economic liberalisation process whichcommenced in the 1990’s, foreign exchange was a scarcecommodity and its release was governed by the ForeignExchange Regulation Act (FERA). With liberalisation of theFTP, RBI’s role has evolved into that of a facilitator.FERA has been replaced by the Foreign Exchange ManagementAct (FEMA) with the objective of facilitating externaltrade and payments, and for orderly development andmaintenance of foreign exchange market in India. Commercialbanks through notified Authorised Dealers (ADs) andfinancial institutions have been given greater flexibilityin meeting the foreign exchange requirements of exporters.Based on the FTP, ADs have been given increased autonomy toextend facilities to exporters, and need to seek RBI’sprior permission in very select cases. ADs are authorisedto receive advance payment for exports, change of buyer,reduction in value, write-off of unrealised export billsand permit Exchange Earners’ Foreign Currency Account(EEFC), in which prescribed percentage of export earningscan be credited. Reflecting the liberalised environment andthe comfortable position of India’s foreign exchangereserves, RBI’s Exchange Control Department has beenrenamed as Foreign Exchange Department. ADs now handle theexport transactions in conformity with the FTP announced byDGFT and the directions issued by RBI from time to time.RBI website (www.rbi.org.in) incorporates these under themaster circulars link in the website. ***** 3. Export Procedure & DocumentationSetting up an export business requires basic documentationsuch as a Permanent Account Number (PAN card), ImporterExporter Code (IEC) from DGFT office and opening a bankaccount. Other key factors include knowledge of tradingsystems, FTP and Industrial Policy, access to marketEximius Centre, Export-Import Bank of India 3
  • 4. Seminar on “Export Procedure and Documentation”information (for which internet is a good source), ensuringproduct quality and compliance with export procedures &documentation.The Ministry of Commerce, through the Director General ofForeign Trade (DGFT), controls the Foreign Trade Policy(FTP), while the Ministry of Finance, through the ReserveBank of India (RBI) and the Indian Customs, controls thephysical movement of goods and services and thetransactions of foreign exchange (both inflow & outflow)from the country. Receipts of proceeds of exports by way offoreign exchange and payment for imports to foreignsuppliers by way of foreign exchange are to be routedthrough normal banking channels only.Some Common Terms used in International Trade • EXW (Ex Works) at a named point of origin (e.g., ex- factory, ex-mill, ex-warehouse). Price quoted applies only at the point of origin. All other charges are for the account of the buyer. • FCA (Free Carrier) to a named place. Price envisages sellers responsibility for cost of loading goods at the named shipping point. • FAS (Free alongside ship) at a named domestic port of export. Price includes charges for delivery of the goods alongside a vessel at the port. The seller handles the costs of unloading and wharfage; all other costs viz. loading, ocean transportation, and insurance are left to the buyer. • FOB (Free on Board) at a named port of export. Price covers all costs up to and including delivery of goods aboard an overseas vessel. • CIF (Cost, Insurance, Freight) to a named overseas port of import. Price of goods includes insurance, all transportation and miscellaneous charges upto the point of debarkation from the vessel (used for ocean shipments only). • CFR (Cost and Freight) to a named overseas port of import. Price of goods includes costs as above except insurance (used for ocean shipments only).Eximius Centre, Export-Import Bank of India 4
  • 5. Seminar on “Export Procedure and Documentation” • CPT (carriage paid to) and CIP (carriage and insurance paid) to a named place of destination. Used in place of CIF and CFR respectively, (used for shipment by modes other than water). • Payment Terms: The common payment terms in export are: Advance payment (Payment by Buyer before shipment of goods); Documents against payment (Delivery of shipping documents to Buyer against payment); Documents against acceptance (Delivery of shipping documents to Buyer against acceptance by Buyer/its bankers to effect payment on the agreed date); Letter of Credit (an arrangement whereby a bank {the Issuing Bank} acting on the instructions of a customer {the buyer} is to make a payment to the beneficiary {the seller} or is to accept bills of exchange (drafts) drawn by the Beneficiary {the seller}. It is, in short, an undertaking or a guarantee by a bank of payment to the beneficiary should certain conditions be met). • Insurance: Export shipments are usually insured against loss, damage and delay in transit, by cargo insurance. For international shipments, the carriers liability is frequently limited by international agreements. Cargo insurance may be made by either the buyer or the seller, depending on the terms of sale.DocumentationRisks are inherent in both domestic trade and internationaltrade, but the degree of risk is higher in internationaltrade. Hence, proper documentation mitigates the risk ininternational trade. Documentation must be precise. Slightdiscrepancies or omissions may prevent merchandise frombeing exported, result in exporting firms not getting paid,or even result in the seizure of the exporters goods bylocal or foreign government customs. Collection documentsare subject to precise time limits and may not be honouredby a bank, if out of date. Much of the documentation isroutine for the freight forwarders or customs brokersacting on the firms behalf, but the exporter is ultimatelyresponsible for the accuracy of the documentation. It isEximius Centre, Export-Import Bank of India 5
  • 6. Seminar on “Export Procedure and Documentation”said that “International Trade is a sale of documents”. Itis very important to clearly understand the documentsinvolved in the transaction to avoid the risk factors andadhere to the legal obligations.The entire documentation in export trade can be basicallydivided into two categories: Export Documents Pre-shipment Documents Post-shipment DocumentsPre-shipment documents are those that an exporter has togenerate, authenticate and submit to the concernedauthorities and departments to get the necessaryclearances, prior to the actual shipment of the cargo, sothat the cargo can be shipped out with valid documents.The pre-shipment documents are generally prepared when theproduct is ready for export and prior to shipment.The standard pre-shipment documents include:• Customs Invoice• Packing List• G R Form (original and duplicate)• ARE-1 Form (original and duplicate)• Copy Of Export order• Letter Of Credit• Shipping Bill (entire set)• Export Licence(for notified items)• Certificate Of Origin• Certificate Of Inspection• Any Other Documents (as required in L/C or by Customs)The post-shipment documents comprise the certified copiesof some of the main pre-shipment documents and certainadditional documents to be generated and compiled by theexporter so that the proof of shipments can be properlypresented to the negotiating bank for collecting theEximius Centre, Export-Import Bank of India 6
  • 7. Seminar on “Export Procedure and Documentation”payments through L/C or for presentation to the foreignbuyer for collection of payment through the nominated bank.The standard pre-shipment documents include• Custom attested invoice• Custom attested packing list• Copy of Export Order / Copy Of LC• Commercial Invoice• Consular Invoice (If Specified)• Bill of Lading / Air Way Bill• Certificate of Origin• Certificate of Inspection (If Specified)• Bill of Exchange (Draft)• G R Form (Duplicate)• Any other document specified in Export Order / LC ****** 4. Customs FormalitiesCentral Board of Excise and Customs (CBEC) is assigned anumber of tasks, some of which are:a) Collection of customs duties on imports and exports asper basic Customs laws (Customs Act, 1962 and CustomsTariff Act, 1975);b) Enforcement of the various provisions of the CustomsAct governing imports and exports of cargo, baggage, postalarticles and arrival & departure of vessels, air craftsetc.;c) Discharge of various agency functions and enforcingvarious prohibitions and restrictions on imports andexports under the Customs Act and other allied enactments;d) Prevention of smuggling including introduction ofnarcotics drug trafficking; ande) International passenger processing.CBEC Mission is to achieve excellence in the formulationand implementation of Customs and Excise initiatives aimedat:Eximius Centre, Export-Import Bank of India 7
  • 8. Seminar on “Export Procedure and Documentation” • realising the revenues in a fair, equitable and efficient manner; • administering the Governments economic, tariff and trade policies with a practical and pragmatic approach; • facilitating trade and industry by streamlining and simplifying Customs and Excise processes and helping Indian business to enhance its competitiveness; • creating a climate for voluntary compliance by providing guidance and building mutual trust; • combating revenue evasion, commercial frauds and social menace in an effective manner.Some of the important documents, procedures and termsare briefly described below:Customs Invoice: is a regulatory document for export, to beprepared in prescribed format.Customs Packing List: is also a regulatory document forexport, to be prepared in prescribed format.G R Forms: Wherever manual-shipping bill is in force, GRform in the prescribed format is a mandatory document.These forms are available from RBI or Authorised Dealers ofCommercial Banks. Under the EDI scheme, the foreignexchange copy of the shipping bill performs the role of GRforms. In addition, a self declaration form has to besubmitted by the exporter to the bank. Both these documentsperform the function of GR Form.ARE-1 Form: It is a very important regulatory documentprescribed by CBEC for the Exemption/ Draw back of exciseduty. Exporters are exempted from the payment of exciseduty, and the exemption can be availed by two methods.Exporter can pay the excise duty, export the cargo and drawback the duty paid earlier. Alternatively, the exportercan export the cargo under Bond i.e. without payment ofExcise duty. In either case, the ARE-1 form formalitieshave to be completed by the exporter as a pre-shipmentDocument. ARE-1 is to be filled in and submitted to theExcise department at least 24 hrs in advance along withrequest for inspection, sealing and certification by thedepartment. If the export is done by paying duty, then thespecified copies of ARE-1 can be used for Draw Back. Incase of EPCG, it is used for completing the exportEximius Centre, Export-Import Bank of India 8
  • 9. Seminar on “Export Procedure and Documentation”obligation given under Bond to the Government, and fordischarging the Bond on such completion.Custodian: The goods imported into India and exported outof India are allowed through designated Sea Ports/ LandCustom Stations/ Airports. The goods so imported/ exportedare initially deposited in the custody of Custodian suchas: • Port authorities for goods imported through sea; • Custodians for goods imported by air- Airport Authority of India Air India or STC etc • For places other than points of landing- Inland Container Depot (ICD) Container Freight Station (CFS)Export Promotion SchemesUnder the FTP, the following are some of the ExportPromotion Schemes: Duty Exemption/Remission Schemes:- • Advance Authorisation Scheme (DEEC/Adv. Licence) • Duty Free Replenishment Scheme • DEPB Scheme • Duty Free Import Authorisation Export promotion capital goods scheme(EPCG) EOU/STP/EHTP/Biotechnology parks Special Economic Zones (separate act & rules framed) Free Trade And Warehousing Zones Deemed Exports Special schemes under export promotion • Vishesh Krishi and Gram Udyog Yojana • Focus market schemes (export to specified countries) • Focus product schemes (export of specified commodities)Details on Customs formalities and circulars are availableon the website www.cbec.gov.in ******Eximius Centre, Export-Import Bank of India 9
  • 10. Seminar on “Export Procedure and Documentation”5. Export Factoring and ForfaitingGlobal Trade Finance Private Limited (GTF), a JointVenture, promoted by Exim with WestLB, Germany (sincereplaced by FIM Bank, Malta and Bank of Maharashtra) andIFC (World Bank), commenced business in September 2001.GTFs objective is to promote market driven export-financing solutions for small and medium sized Indianexporters operating in an increasingly competitive worldtrade environment. GTF offers, for the first time in India,structured foreign trade financing products such asforfaiting and factoring.Factoring is a continuous arrangement between a factoringconcern and the seller of goods and services (on credit)whereby the factor purchases the accounts receivable forimmediate cash and also provides other services such assales ledger maintenance, collection and credit protection.GTF offers various products such as:DOMESTIC 1. Domestic Factoring 2. Reverse Factoring 3. Channel FinancingEXPORTS 1. Export Factoring with credit protection with insurance cover with recourse 2. ForfaitingIMPORTS 1. Import FactoringGTF has launched a new initiative to enable online sanctionof Factoring facilities for registered SSI export orientedunits. Details can be obtained from the websitewww.gtfindia.com *****Eximius Centre, Export-Import Bank of India 10
  • 11. Seminar on “Export Procedure and Documentation” 6. Export Credit InsuranceRisks such as non-payment, country, geographical, loss intransit and war are inherent in foreign trade. ExportCredit Guarantee Corporation of India Ltd (ECGC) offerspolicies to protect exporters from non-payment risks ofbuyer/country and guarantees to banks against non-paymentby the borrower. Export credit insurance assesses the buyerand the country risks, enabling it to devise variousinsurance schemes.ECGC offers different policies tailored to the specificneeds of the exporter against various risks which include: 1. Standard Policy 2. Export Turnover Policy 3. Specific Shipments Policy 4. Exports (specific buyer) Policy 5. Buyer Exposure Policy 6. Consignment Exports Policy 7. Software Projects/ IT-enabled Services Policy 8. Small Exporters PolicyDetails of ECGC policies are available on its websitewww.ecgc.in *****Eximius Centre, Export-Import Bank of India 11

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