On October 23rd, 2014, we updated our
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Project on-:Export import and shipping operations of varioussteel industries in IndiaSubmitted by -: faculty guide-:Suraj kumar mr. amit kumarFt-ib-10-854
Table of Content 1) Introduction 2) Steel industry in India 3) Steel production process 4) Steel producers in India 5) Type of steels 6) Major companies & their capacity 7) Review of previous year 8) Growth chart 9) International trade of steel 10) Export procedure 11) Aligned documentation system 12) Documentation related to shipment 13) Documentation related to payment14) Document relating to inspection
15) Document related to goods16) Document related to foreignexchange17) Elements in export contract18) Methods of receiving payment19) Inco terms20) Project outcome21) Objective22) Methodology23) Significance of the project24) Recommendation25) Bibliography
1. Introduction-:India‟s economic growth is contingent upon the growth of Indian steel industry.Consumption of steel is taken to be an indicator of economic development. Whilesteel continues to have a stronghold in traditional sectors such as construction,housing and ground transportations, special steels are increasingly used inengineering industries such as power generation, petrochemicals, and fertilizers.India occupies a central position on the global steel map, with the establishment ofnew state-of-the art steel mills, acquisition of global scale capacities by players,continuous modernization and up gradation of older plants. Improvingly energyefficiency and backward integration into global raw material sources.Steel production in India has increased by a compounded annual growth rate(CAGR) of 8 percent over the period 2002-03 to 2006-07. Going forward, growthin India is projected to be higher than the world average, as the per capitaconsumption of steel in India, at around 46kg , is well below the worldsaverage(150kg) and that of developed countries “(400kg). Indian demand isprojected to rise to 200 million tonnes by 2015. Given the strong demand scenario,most global steel players are into a massive capacity expansion mode, eitherthrough brownfield or Greenfield route. By 2013, steel production capacity in Indiais expected to touch 124 million tones and 275 million tones by 2020. WhileGreenfield projects are slated to add 28.7 million tones, brownfield expansions areestimated to 40.5 million tones to the existing capacity of 55 million tones .Steel is manufactured as globally tradable product with no major trade barriersacross national boundaries to be seen currently. There is also no inherent resourcerelated constraints which may significantly affect production of the same or its
capacity creation to respond to demand increases in the global market. Even thegovernment policy restrictions have been negligible worldwide and even if thereare any to same to respond to specific condition in the market and have alwaysbeen temporary. Therefore the industry in general and at a global level is unlikelyto throw up substantive competition issues in any national policy framework.Further, there are no natural monopoly characteristics in steel. Therefore, one maynot expect complex competition issues in any national policy framework. Furtherthere are no natural monopoly characteristics in steel. Therefore , one may notexpect complex competition issues as those witnessed in industries like telecom,electricity, natural gas, oil etc.This however does not mean that there is no relevant or serious competition issuein the steel industry. The growing consolidation in the steel industry worldwidethrough merger and acquisition has already thrown up several significant concerns.The fact that internationally steel has always been an oligopolistic industry,sometimes has raised concerns about the anti-competitive behavious of large firmthat dominates this industry on the other hand the set of large firms thatcharacterize the industry have been changing over time.Trade and other government policies have significant bearing on competitive issue.Matter of subsidies, non tariff barriers to trade, discriminatory customs duty(on export and import) etc. may bring in significant distortions in the domesticmarket and in the process alter the competitive positioning of individual players inthe market. The specific role of the state in creating market distortion and therebythe competitive conditions in the market a well-known issue in this country.
2. Steel Industry in India:Overview, performance and structure.Background-:The establishment of Tata Iron and Steel Company (TISCO) in 1907 was startingpoint of modern Indian steel industry. Afterwards a few more steel companieswhere established namely Mysore Iron and Steel Company, (later renamedvivesvararya Iron & steel Ltd.) in 1923; Steel corporation of Bengal (later renamedMartin Burn Ltd and Indian Iron and Steel Ltd.) in 1939. All these companies werein private sector.KEY EVENTS1907*: Tata iron and Steel Company set up.1913: Production of steel begins in India.1918: The Indian Iron And Steel Co. set up by burn &co. to complete theTATA Iron and Steel co.1923*: Mysore Iron and Steel Company set up.1939*: Steel Corporation of Bengal set up.1948: A new industrial policy statement states that new venture in the ironand steel industry are to be undertaken only by the central government.1954: Hindustan steel is created to oversee the Rourkela plant.
1959: Hindustan steel is responsible for two more plants in Bhilai andDurgapur.1964: Bokaro steel Ltd. Created.1973: The steel Authority of India Ltd.(SAIL) is created as a holding companyto oversee most of India’s Iron and Steel production.1989: SAIL acquired Vivesvata Iron and Steel Ltd.1993: India set plans in motion to partially privatize SAIL.SOURCE:* Government of India, Joint Plant Committee Report 2007.At the time of independence, India had a small Iron and Steel industry withproduction of about a million tones (mt). In due course, the government wasmainly focusing on developing basic steel industry, where crude steel constituted amajor part of the total steel production. Many public sector units were establishedand thus public sector has a dominant share in the steel production till early 1990s.Most private players were in downstream production, which was mainly producingfinished steel using crude steel products. Capacity ceiling measure was introduced.Basically, the steel industries were developing under a controlled regime, whichestablished more public sector steel companies in various segments.Till Early 1990s when economic liberalization reforms were introduced, the steelindustry continued to be under controlled regime, which largely constitutedregulation such as large plant capacities were reserved only for public sector undercapacity control measure; price regulation; for additional capacity creationproducers had to take license from the government; foreign investment wasrestricted; and there were restrictions on import as well as exports.Undoubtedly there has been significant government bias towards public sectorundertakings. But not all government action has been beneficial for the public
sector companies. Freight equalization policies of the past were one example. Thecurrent governmental „moral- suasion‟ to limit steel price increases is another.However after liberalization- when a large number of controls were abolishedsome immediately and other gradually-the steel industry has been experiencingnew era of development. Major developments that occurred at the time ofliberalization were-:1. Large plant that were reserved for public sector were removed;2. Export restrictions were eliminated;3. Import tariffs were reduced from 100% to 5%;4. Decontrol of domestic steel prices;5. Foreign investment was encouraged, and the steel industries was part of the highpriority industries for foreign investment and implying automatic approval forforeign equity participation up to 100%; and6. System of freight ceiling was introduced in place of freight equalizationschemes.As a result, the domestic steel industry has since then, become market oriented andintegrated with the global steel industry. This has help private player to expandtheir operation and bring in new cost effective technology to improvecompetitiveness not only domestic but also in the global market. Private sectorscontribution in the total output has since been increasing in India. Development pfprivate sector has high growth in all steel industry that is capacity, production,export and imports. During the last decade more than 12 mt of capacity has beenadded in steel industry is receiving significant foreign investment such as POSCO-South Korean steel producer – and Arcelor-Mittal Goup-UK/Europe based steelproducer- Announcing plans for establishing about 12mt production unit each inIndia.
The Indian steel industry, with a production of about 1mt at the time ofindependence, has come long way to reach production of about 57mt in 2006-07.Moreover, the steel industry is showing promising future growth as major playersin the industry have announced their plans for establishing about 12mt productionunits each in India.Impressive development of the steel industry with active participation of privatesector and integration of India steel industry with the global steel industry has alsobeen introduced the government to come up with National steel policy in 2005.The national steel policy 2005 was drafted with the aim of establishing roadmapand framework of development of the steel industry. The policy envisages steelproduction to reach at 110mt by 2019-20 with annual growth rate of 7.3%. As latersections will show this expectations are not exclusively high.With increasing need for large investments in the industry‟s private sectors rolewould be crucial in the development of the steel industry. The future, it appearswill continue to be dominated by few large players and other industry will remainoligopolistic- as it is internationally.
Steel production process-:Blast furnace/basic oxygen furnace (bf/bof):BF basically converts iron ore into liquid form of iron. Iron produced by BFcontains high amount of carbon and other impurities, this iron is called pig iron.Pig iron due to its high carbon content has limited end use application such ascover of mainholes. To make steel products out of pig iron is known as BOF whereits carbon contains and impurities are burnt and remove through slag separation.Producer that use this technology includes SAIL,RINL,TSL AND JSWL.Electric arc furnace(EAF):Basic purpose of EAF is remelting sponge iron, melting scrap, its main inputs, toproduced finished steels. It uses electricity as much as 400-500kwh/ton. ISPATESSAR, and the Jindal group are example of producers, which use this technology.Induction Arc furnace (IAF):It is one of the most advance process of making steel. Like EAF it uses electricityas main fuel. IAF is most environment friendly and efficient way of producingsteel. However its lack of refining capacity requires clean products as its inputs.Large numbers of small steel companies use this technology.
The high weight of the product significantly pushes up the transportation andmovement cost. Therefore large integrated plants are the norms for cost efficientproduction.
STEEL PRODUCER S IN INDIA -:Top 10 Steel Companies in India:1. Rashtriya Ispat Nigam Limited.2. Steel Authority of India Limited.3. Tata Steel.4. Visveswarayya Steels.5. Bokaro Steel Plant.6. Bhilai Steels7. Essar Steels Limited.8. Jindal Steel & Power.9. KVS Ispat10. Jindal Steels Limited.
Some of the details regarding these top players in steel industry-:1. Rashtriya Ispat Nigam Limited:The foundation stone of the Rashtriya Ispat Nigam Limited was laid in the year1971 and this organization is the corporate body of Vishkhapatnam steel plant.They have three different mines under their control being the blast furnace gradelimestone mine, manganese mine and dolomite mine. They are specialized in theproduction of the following products: Rounds Beams Wire rods Squares Billets Channels Blooms Reabars or reinforcement bars.
2. Steel Authority of India Limited:Steel Authority of India shortly called SAIL is one of the top steel maker in publicsector steel-makers in India and they produce steel products both for export and fordomestic consumption as well. SAIL holds the pride of being one among the fourMaharatnas in the central public sectors enterprise in India. They are the majormanufacturers and seller of the following steel products: Alloy steel Stainless Steel Rods and bars Railway products Structurals Electrical Sheets Galavanized steel Cold and hot coils and rolled sheets
Tata steel:Tata steel is a part of the India‟ popular Tata group and they are one of the globalsteel service and manufacturing companies in India. They have a balance presencein the continent of Europe and developed countries in the continent of Europe andthey have manufacturing units in 26 different countries all over the world.Visveswarayya Steels:Visveswarayya Steel is actually a unit of the Steel Authority of India. And they aredealing in the production of pig iron and alloy steels. The company began as aseparate entity in the year 1923 and it has now come under the SAIL.Bokaro Steel Plant:Bokaro steel plant began its journey as a limited company in the year 1964 and thecompany is situated in the Bokaro District of the state Jharkhand. The plant holdsthe pride of being the country‟s first Swadeshi Steel Plant. Even though, thecompany began its journey as a separate entity, it is now merged with the SteelAuthority of India.
Bhilai Steels:Bhilai steels are one of the leading suppliers, stockiest, exporter and importer ofhast alloy, inconel, monel, brass, copper, alloy steel, carbon steel and stainlesssteel. They are also leader in a wide range of pipe fittings like compression type ofpope with ferrules, forges, screwed, SW and BW pipes. The steel product of thiscompany are being used in the different industries like cement, power, textile,pharmaceuticals, sugar mills, petrochemicals, fertilizer and chemicals.Essar Steel Limited:Essar steels are one of the most versatile producers of steel based products andtailor – made products and these products are the best known for their quality.Their 24-carat steel is a product that got worldwide acceptance. They haveinternational centers in different countries like Indonesia, Vietnam, Canada and theUSA. Some of the products manufactured by them are: Cold Rolled Products Hot Briquetted Sponge Iron Hot rolled products Galvanized products Iron ore pallets
Jindal Steel & Power:Jindal steel & power is leading player in different industries like infrastructure, gasand oil, coal to liquid, mining, power and steel. They are continuously creatingnew opportunities by leveraging their core capabilities to venture into newbusiness, diversifying investment and by increasing production capacity.KVS Ispat:KVS Ispat is flagship of KVS group of companies and the company enjoys alegacy in the industry of steel for the past 22 years. This company is known for itsexcellence right from its inception and they are consistently making greatcontribution towards the development of society. They are dealing with differenttypes of steel products like: Rounds & Squares Channels Flats Angels Light Structural Steel TMT Bars
Jindal Steels Limited:Jindal steels are also making good contribution towards the development ofIndia and they are ranked sixth among the top business houses with respectto their asset holding. They are one among the multi billionaire corporationin India. Their main aim is to become a world player in the industry of steelproduction and they are committed to maintain world-class quality in theirproduction, to offer products at a competitive price and to do their excellentafter sale service to their customers.Thus like any other industry steel industry in India is also offering widerange of employment opportunities to deserving candidates therebyacquiring the required talents for their organization and by offering the rightjob to the right candidate.
Types of Steels:
Major companies and their Capacities:The World Steel (World Steel Association) ranked top 80 steel producers in 2008,by mmt (million metric tons of crude steel output). The Top 10 are listed likebelow. Ranking Metric tonne Company Country1st 103.3 mmt ArcelorMittal Luxembourg2nd 37.5 mmt Nippon Steel Japan3rd 35.4 mmt Baosteel Group China4th 34.7 mmt POSCO South Korea5th 33.3 mmt Hebei Steel China6th 33.0 mmt JFE Holdings Japan7th 27.7 mmt Wuhan Iron & Steel Group(Wisco) China8th 24.4 mmt Tata Steel India9th 23.3 mmt Jiangsu Shagang Group Jiangsu, China10th 23.2mmt U.S. Steel United StatesReview of pervious year:
World crude steel production reached 1,414 million metric tons (mmt) forthe year of 2010. This is an increase of 15% compared to 2009 and is a newrecord for global crude steel production.All the major steel-producing countries and regions showed double-digitgrowth in 2010. The EU and North America had higher growth rates due tothe lower base effect from 2009 while Asia and the CIS recorded relativelylower growth.In December 2010, world crude steel production for the 66 countriesreporting to the World Steel Association (world steel) was 116.2 mmt, anincrease of 7.8% compared to December 2009. The crude steel capacityutilization ratio of the 66 countries in December 2010 declined slightly to73.8% compared to 75.2% in November 2010. Compared to December2009, the utilization ratio in December 2010 is 1.1 percentage points higher.
Share of world crude Steel production March 2001:
International Trade of Steel:International trade is done in two ways- 1. Enquiry 2. TenderEnquiryThe intended buyer enquires about the rate and stocks through email/ letter or anyother means.The ITD department then enquires about the availability of the stocks fromdifferent plants and then replies to the enquiry regarding the various details.TenderThe intended buyer visits the company‟s website, where the auctions are made forthe available goods for export. Then the regular procedure is applied to carry outthe export.
Export procedure:The Export and Import was covered in step by step process.EXPORTStep 1: A contract is prepared by the INTERNATIONAL TRADE DIVISION andduly finalized with the buyer.Step 2: The ITD then places a work order to the plantStep 3: The plant then prepares the goods as per the specifications in the contractStep 4: The TRANSPORT and SHIPPING Department checks the Letter Of Creditand amends it.Step 5: The plant then sends the goods to the delivery point which may be stockyards, plants or the port.Step 6: The goods are then inspected by the customs officer and then they are takento the port to be loaded on the vessel.Step 7: The shipping agent then issues a Bill Of Lading
Step 8: The Customs officer then gives “LET EXPORT” orderStep 9: Then the exporter negotiates the L/C with its bank and realizes the amountStep 10: The original copy of the shipping bill and the bank realization certificateis send to the DGFT‟s office to obtain the DEPB license.Step 11: After obtaining the DEPB license it has to be registered with the customsand the port as well as the importing port from where the goods are dispatched.The customs officer registers the license in its system and the benefit is availedwhen the import is done.Step 12: The importers bank releases the payment to the negotiating bank.Step 13: The negotiating bank informs the RBI that foreign exchange has beenearnedIMPORTS: The same procedure is followed for imports. The plant finalizes thecontract and the documents are received through the banking channel. Thedocuments are sent to B.T.S.O to clear the goods from the port and to pay thecustoms duty. The importer has to fixes the vessel from the shipping company.Once the vessel arrives the B.T.S.O is informed about it. The duty is then paid andthe documents are sent to the doc for clearance of the goods. The goods are thensent to the respective plants.
Aligned Documentation System:The standardisation of the pre-shipment export documents is done on the basis ofthe system, popularly known as Aligned Documentation System (ADS).For the purpose of Documents Aligned System, documents have been classifiedinto two categories as under:1. Commercial Documents2. Regulatory Documents 1. COMMERCIAL DOCUMENTS: They are divided into two parts. a. Principal Export Documents b. Auxiliary Export DocumentsPrincipal Export Documents. Commercial invoice Packing list Certification of inspection/quality control (where required) Bill of lading/Combined Transportation Documentation Shipping Advice Certificate of origin Insurance Certificate/Policy (In case of CIF export sales contract) Bill of Exchange.Auxiliary Documentation System
Performa invoice Intimation for Inspection Shipping Instructions Insurance Declaration Shipping Orders Mate‟s Receipt Application for Certificate of Origin and Letter to the Bank for Collection/Negotiation of Documents.Regulatory Documents: Gate Pass-I/Gate Pass II: The Central Excise Authorities prescribe them. ARE-1: These are Central Excise forms. Earlier, AR4 and AR5 Forms have been used. In their place, ARE 1 form, now, is used. Shipping Bill/Bill of Export: They are standardized and prescribed by the Central Excise Authorities. For export of goods. For export of duty free goods. For export of dutiable goods. For export of goods under claim for duty drawback. Export Application/Dock Challan: Standardized and prescribed by the Port Trust Authorities. Receipt for Payment of Port Charges: Standardized. Vehicle Ticket. Exchange Control Declaration Forms: GR/PP forms are standardized and prescribed by RBI. Freight Payment Certificate. Insurance Premium Payment Certificate.
Classification of Commercial and Regulatory DocumentsThe different commercial and regulatory documents may be classified intodocumentsrelated to goods, documents related to shipment, documents related to payment,documentsrelated to inspection, documents related to excisable goods and documents relatedto foreign exchange regulations.Document Related to Goods: Proforma InvoiceSignificance of Proforma Invoice are Two Fold a. It forms basis of all trade transactions and further negotiation or contract is made on this basis. b. It helps the importer to obtain the import licence, where required, and obtain foreign exchange for completion of the contract.Commercial Invoice
Significance of Commercial Invoice a. It is prima facie evidence of the contract of sale and purchase of goods. On the basis b. of the invoice, all the other documents, in the context of export, are prepared as it is the basic document. c. Invoice constitutes the main document for various export formalities such as preshipment inspection, quality, excise and customs procedures. d. It is useful for accounting purposes, both by the exporter and importer. e. This document is required in collection/negotiation of documents through the bank. f. For claiming incentives, this document is essential. Consular InvoiceSignificance of Consular Invoice can be SummarizedImportance to the Exporter a. Once the invoice is signed by the consulate of the importing country, the exporter is reasonably assured that there are no import restrictions in the importer‟s country for the goods and that there would be no problem in realization of export proceedsor foreign exchange. b. It enables prompt clearance from the customs of exporter‟s country for shipping the goods.Importance to the Importer
a. In the importer‟s country, the customs do not normally open the packages. It helps the importer to get speedy delivery of goods. b. Lot of unnecessary hardship which importer faces once the packages are opened is avoided.Importance to the Customs a. The customs of the exporting country can easily clear the goods. b. The customs of the importing country need not open the packages for checking and can easily calculate the import duties. Legalized InvoiceCertain Latin American countries like Mexico require this. It is just like consularinvoice, which requires certification from consulate or authorized mission,stationed in the exporter‟s country. Customs InvoiceWhen the commercial invoice is prepared on the format prescribed by the customsauthorities of the importing country, it is called “Customs Invoice”. This is therequirement of U.S.A, Canada and Australia. Packing Note and Packing ListThere is a difference between packing note and packing list. Packing note refers tothe
particulars of contents of an individual pack while packing list is a consolidatedstatementof the contents of the total number of cases or packs.A packing note contains the following details:(a) Date of packing,(b) Number of packing note,(c) Number of case to which it relates to,(d) Contents of case in terms of quantity and weight,(e) Marking numbers,(f) Name of exporter,(g) Name of importer,(h) Importer‟s order number,(i) Number and date of bill of lading and(j) Name of vessel/flight.Packing note is kept in each concerned case/pack. Packing note and packing listaresent to the importer along with other documents. If any case contains any shortfall,importer can communicate to the exporter in which case there is shortage of goodsfor making good. Certificate of Origin
As the very name indicates, certificate of origin is a certificate that specifies thenameOf the country where goods are produced. This is absolutely necessary where theimportingCountry has banned the entry of goods of certain countries to ensure that the goodsfromThose countries are not allowed to enter in. At the time of arrival of the goods intheimporter‟s country, this certificate is necessary for the customs to permitpreferential tariff.Certain countries offer preferential tariff to goods produced and imported fromIndia. Insuch a case, this is a must to the importer to claim preferential tariff and importerinsistson this document from the exporter. This enables the importer‟s country to regulatetheconcessional tariff only to select countries and deny to the rest of the countries.A certificate of origin can be obtained from Chamber of Commerce, ExportPromotionCouncil and various trade associations which have been authorized by Governmentof India to issue.
DOCUMENTS RELATED TO SHIPMENT Shipping BillThe shipping bill is the main document on the basis of which the customspermissionis given. Under manual processing of export documents, the exporter is required tofile theappropriate type of shipping bill to seek the order for customs clearance of theexportshipment. Under computerized processing, the exporter does not prepare theshipping bill;instead it is computer generated. The customs order is called “LET EXPORTOrder”. Afterthe shipping bill is stamped by the customs, then only the goods are allowed to becartedto the docks.
The shipping bill contains the following particulars: a. Nature of goods exported, b. Name of vessel, master or agents, c. Flag, d. Country of destination, the port at which the goods are to be discharged, e. Exporter‟s address, f. Importer‟s address, g. Details of the packages, such as numbers and marks, h. Quantity details of each case, total number of cases and aggregate weight, i. F.O.B. prices and real value as defined in the Sea Customs Act and j. Whether the merchandise is Indian or foreign origin which is re-exported.The shipping bill is prepared in five copies:1. Customs copy2. Drawback copy3. Export Promotion copy4. Port Trust copy and5. Exporters copyTypes of Shipping Bills a. Free Shipping Bill b. Dutiable Shipping Bill c. Drawback Shipping Bill
d. Shipping bill for Shipment Ex-Bond e. Coastal Shipping Bill (ii) Mate’s ReceiptA mate‟s receipt is issued by the mate (assistant to the captain of the ship) after thecargo is loaded into the ship. It is an acknowledgment that the goods have beenreceived on board the ship.Contents of Mate’s ReceiptMate‟ receipt contains the details about1. Name of the vessel,2. Date of shipment,3. Berth,4. Marks,5. Numbers,6. Description and condition of goods at the time they are shipped, port of loading,7. Name and address of the shipper,8. Name and address of the importer(consignee) and9. Other required details.
Types of Mate’s ReceiptsMate’s receipt can be clean or qualified. a. Clean Mate‟s Receipt b. Qualified Mate‟s ReceiptSignificance of Mate’s Receipt 1. Mate‟s receipt is an acknowledgment of goods. It is not a document of title. 2. It is issued to enable the exporter or his agent to secure bill of lading from the shipping company. 3. Bill of Lading, which is the title to the goods, is prepared on the basis of Mate‟s receipt so it should be obtained without any adverse remarks. 4. Port Trust Authorities are enabled to collect their dues as it is routed through them. Cart TicketA cart ticket is also known as cart chit. This is prepared by the exporter, whichcontains the details of the vehicle number, description of goods, quantity, name ofthe shipper, shipping bill number and port of destination. The driver of the vehiclecarries the cart ticket. At the time of entry into Port, the cart ticket is verified by thePort Authorities to satisfy that the vehicle is carrying only those goods, which arementioned in the cart ticket. After being satisfied, the gatekeeper/warden/inspector
issues the gate pass to the driver and allows entry of the vehicle into the premisesof the port. Certificate of MeasurementFreight is charged either on the basis of weight or measurement. When weight isthe basis of measurement, the shipping company for the purpose of calculation offreight may accept the weight declared by the exporter. However, whenmeasurement is the basis for calculation of freight, the shipping company mayinsist on a certificate issued by Chamber of Commerce or other approvedorganization in respect of goods. The certificate of measurement contains thedetails in respect of description of goods, quantity, length, breadth and depth of thepackages, name of the vessel and port of destination of the cargo etc., Bill of LadingBill of Lading is a document issued by the shipping company or his agentacknowledging the receipt of cargo on board. This is an undertaking to deliver thegoods in the same order and condition as received to the consignee or his agent onreceipt of freight, the shipping company is entitled to. It is a very importantdocument to the exporter as it constitutes document of title to the goods.Main PurposesIt serves three main purposes.(A) As a document of title to the goods(B) As a receipt from the shipping company and(C) As a contract of affreightment (transportation) of goods.
Types of Bill of Lading a. Received for Shipment B/L: A shipping company issues it when goods have been given to the custody of the shipping company, but they have not been placed on board. b. On Board Shipped B/L: The shipping company certifies that the cargo has been received on board the ship. c. Clean B/L: It indicates a clean receipt. In other words, it implies that there has been no defect in the apparent order or condition of goods at the time of receipt or shipment of goods by the shipping company. d. Claused or Dirty B/L: It shows that the B/L is qualified which expressly declares a defective condition of goods. The clause may state “bale number 5 hook-damaged” or “package number 10 broken”. By superimposing this type of clause, the shipping company is limiting its responsibility at the time of delivery of goods, at the destination. e. Transshipment or Through B/L: When the journey covers several modes of transport from the place of starting to the place of destination, this type of B/L is taken. It indicates that transshipment would be en route. For example, part of the journey is by ship and the rest of journey may be by road, rail and air.
f. Stale B/L: According to international commercial practice, B/L along with other documents must be presented to the bank not later than twenty one days of the date of shipment as given in the B/L. In some cases, the importer may indicate the number of days within which the documents are to be presented from the date of shipment. Exporter has to comply with the stipulation indicated. Otherwise, the B/L becomes stale and is not accepted by the bank for payment. A stale bill is one which is tendered to the presenting bank so late a date that it is impossible for the bank to dispatch to the consignee‟s place, in time, before the goods arrive at the destination port. In other words, bank finds it impossible to see the documents reach before the ship reaches the destination.g. To Order B/L: In this case, the B/L is issued to the order of a specified person.h. Charter Party B/L: It covers shipment on a chartered ship.i. Freight paid B/L: When the shipper pays the freight, then this type of B/L is issued with the words “Freight paid”.j. Freight Collect B/L: When the freight on the B/L is not paid and to be collected at the point of destination, it is marked “Freight Collect” and this B/L is known as “Freight Collect B/L”. Generally, the importer insists on the “clean on-board shipped” bill of lading with the prohibition of transshipment of goods as goods can suffer damage during transshipment. If transshipment is allowed, even period of journey may take longer
Contents of B/L Name and address of the shipper. Name and address of the vessel. Name of port of loading. Date of loading of goods. Name of port of discharge and place of delivery. Quantity, quality, marks and other description. Number of packages. Freight paid or payable. Number of originals issued. Name of the shipping company. Voyage number and date. Signature of the issuing authority.SIGNIFICANCE OF BILL OF LADINGImportance to the Exporter a. It is an acknowledgment from the shipping company that the goods have been received for the purpose of shipment. b. After receipt of B/L, it helps him to send the shipping advice to the importer. c. If any damage occurs to the cargo during transit, he can hold the shipping company responsible, if he has received clean bill of lading. d. A copy of bill of lading is required to be attached to the application form to claim the incentives e. It is a contract of carriage between the exporter (shipper) and the shipping company.
Importance to the Importer a. It is a document of title to the goods, which enables him to transfer the tittle by endorsement and delivery. b. The exporter can send a non-negotiable copy of B/L as advance intimation of shipment to the importer. c. It enables him to pay the freight amount as the B/L contains freight details.Importance to the Shipping Company a. It helps the shipping company to collect the freight amount from the exporter (CIF contract) or importer (FOB contract). b. Shipping company can protect itself from the wrongful claims of exporter/importer by incorporating condition of goods/packaging, at the time of receipt. In case the shipping company, inadvertantly, omits to mention the advesrse conditon, at the time of receipt, advantage can be claimed by exporter/importer, by submitting wrongful claim. Airway BillAirway Bill is also called Air consignment Note. It is a receipt issued by an airlinefor the carriage of goods. As each shipping company has its own Bill of Lading, soeach airline has its own airway bill. Airway Bill or Air consignment note is nottreated as a document of title to goods and is not issued in negotiable form.Delivery of the goods is made to the consignee without the production of airwaybill.
Importance of Airway Bill: a. It is a contract of carriage of goods between the consignor and airlines or his agent. b. It acts as a customs declaration form. c. It contains details of freight and so works as a freight bill. Bill of Entry:Bill of Entry is a declaration form made by the importer or his clearing agent in theprescribed form under Bill of Entry Regulations, 1971 on the strength of whichclearance of imported goods can be made. When goods are imported into acountry, customs duty has to be paid by the importer. For this purpose, importerprepares the Bill of Entry declaring the value of goods, quantity and description.This is prepared in triplicate. Customs authorities may ask the importer to producethe invoice of the exporter, broker‟s note and insurance policy to satisfy about thecorrectness of value of goods declared.Contents of Bill of Entry: a. Name and address of importer. b. Name and address of exporter. c. Import licence number. d. Name of port where goods are to be cleared. e. Description of goods. f. Value of goods. g. Rate and value of import duty payable.
DOCUMENTS RELATED TO PAYMENT: Letter of Credit:A letter of credit is a document-containing guarantee of a bank to make payment totheexporter, under certain conditions and up to a certain amount, provided theconditionscontained in the letter of credit are complied with. Bill of Exchange:The Negotiable Instruments Act, 1881 defines a Bill of Exchange as “ aninstrument in writing containing an unconditional undertaking, signed by themaker, directing a certainperson to pay a certain sum of money only to, or to the order of, a certain person orto thebearer of the instrument”.There are five important parties to a Bill of Exchange:The Drawer: The drawer is the person who has issued the bill. In an exporttransaction, exporter draws the bill as money is owed to him.The Drawee: The drawee is the person on whom the bill is drawn. Exporter drawsthe bill on the importer who is the drawee. Drawee is the debtor who owes moneyto the exporter (creditor).
The Payee: The payee is the person to whom the money is payable. The bill can bedrawn by the exporter payable to the drawer (himself) or his banker.The Endorser: The endorser is the person who has placed his signature on theback of the bill signifying that he has obtained the title for the bill on his ownaccount or on account of the original payee.The Endorsee: The endorsee is the person to whom the bill is endorsed. Theendorsee can obtain the payment from the drawer.Types of Bills of Exchange: a. Sight Bill of Exchange: In this Bill of Exchange, also known as demand Bill of Exchange, the drawee has to make the payment, on presentation. b. Usance Bill of Exchange: In case of Usance or Time Bill of Exchange, payment is to be made on the maturity date, after a certain period, known as tenor. When the calculation of period is made with reference to the sight of bill, the bill is known as „after sight usance bill‟. Sometimes, the maturity date is calculated with reference to the date of bill of exchange, it is known as „after date usance bill‟. c. Clean Bill of Exchange: A clean Bill of Exchange is one when the relative shipping documents do not accompany with it. In this case, the relative shipping documents i.e. Bill of Lading is sent directly to the importer to enable him to take delivery of the cargo. d. Documentary Bill of Exchange: A documentary Bill of Exchange is one where the relative shipping documents such as Bill of Lading, marine insurance policy, invoice and other documents are sent along with the Bill of Exchange.
Trust Receipt: In case of D/P bill, the importer has to make the payment to take delivery of goods. If the importer is unable to make the payment, on arrival of the shipment, and take possession of goods, he executes a Trust Receipt to take delivery of goods. Importer will have the right to sell the goods and would be acting as agent of the bank. Importer will be depositing the sale proceeds with the bank, as and when sales are made. Till the importer makes the final settlement, bank retains ownership for the merchandise and the role of the importer is not that of owner but that of agent to the bank. Bank Certificate of Payment: It is a certificate issued by the negotiating bank to the exporter that the bill covering the shipment has been negotiated through it and export proceeds have been received from the importer. The certificate indicates the details of the merchandise exported.DOCUMENTS RELATING TO INSPECTION:Certificate of InspectionIt is a certificate issued by the Export Inspection Agency certifying that theconsignment has been inspected under the Export (Quality Control and Inspection)Act, 1963 and found that the requirements relating to quality control and inspectionhave been complied with, as applicable, and the goods are export worthy.
DOCUMENTS RELATED TO EXCISABLE GOODS: 1. GP Forms GP stands for Gate Pass. A GP form, gate pass, is issued for the removal of excisable goods from the factory or warehouse. Form GP1 is issued for the removal of excisable goods on payment of duty. GP2 is issued for the removal of excisable goods without payment of duty. 2. Form C It is not to be confused with C form. Form C is used for applying for rebate of duty on excisable goods (other than vegetable, non-essential oils and tea) exported by sea. It is to be submitted, in triplicate, to the Collector of Central Excise. 3. Forms AR4/AR4A These forms are meant for removal of excisable goods for export by sea/post. Now, in their place, ARE-1 form is used.
DOCUMENTS RELATED TO FOREIGN EXCHANGEREGULATIONS-LEGAL REGULATED DOCUMENTS:Foreign Exchange Regulations require that all exports other than exports to NepalandBhutan shall be declared on the following forms:1. GR Form:GR is an exchange control document required by Reserve Bank of India. It isrequired to be filled, in duplicate, for all exports in physical form other than bypost. An exporter has to realize the export proceeds within a period of 180 daysfrom the date of shipment, in India. To ensure control on realization, RBI hasintroduced this procedure. GR form, in duplicate, is to be submitted by the exporterto the customs along with the Shipping Bill. Customs will give their running serialnumber on both the copies. After admitting the customs shipping bill, customs willcertify the value of goods declared by the exporter in the space earmarked and alsorecord their assessment of value. Customs retains he original copy and return theduplicate to the exporter. Customs sends the original GR form to RBI, which willbe an indication of the goods, which are to be exported. Exporter has to submit theduplicate of GR form to the authorized dealer, named in GR form, along with othershipping documents within a period of 21 days of shipment for the purpose ofnegotiation. After the negotiation of bill, the authorized dealer will report thetransaction of negotiation to RBI. On receipt of the original, RBI is apprised of thedevelopments in respect of the export transaction. Once the export proceeds arereceived from the importer, the authorized dealer has to forward the duplicate copyof GR form together with the copy of invoice to RBI. RBI recognizes that theexport transaction has been concluded and export proceeds have been fullyrealized. At certain customs offices, shipping bills are processed electronically. So,at those offices, GR form has been replaced by SDF (Statutory Declaration Form).
2. PP Form:It is required to be filled in for all export transactions, in duplicate, for all countriesto be made by post parcel, except when made on “value payable” or “cash ondelivery basis”.3. VP/COD Form:It is required to be filled for all export transactions to all countries by post wherethe export proceeds are realized on “value payable” or “cash on delivery basis”.3. SOFTEX Form:It is required to be prepared, in triplicate, for export of computer software innonphysical form.All the above documents serve the purpose of monitoring the realization of exportProceeds in the stipulated manner.
ELEMENTS IN EXPORT CONTRACTS:Meaning and Significance:The term “Elements” is a bit confusing that refers to the general conditions incontracts. Export contracts invariably refer to the subject matter of the contract. Inaddition to the subject matter, it is advisable for both the paties to incorporateseveral general conditions in the contract, in particular, rights of the parties in caseof failure of performance or other contractual obligations. The goods may be lost,stolen or damaged during transit. Who would bear the risk in such a situation? Ifthe contract specifies the position clearly, lot of litigation and approaching thecourt can be avoided. Physical movement of goods involves cost. Who has to bearthe costs and up to what point? These issues are resolved by incorporating theelements (general conditions) in export contracts. Most exporters have developedstandard general contracts. It simplifies the day to day operations and also reducesthe possibility of missing certain items. The complexity of the conditions dependson what is exported. If the items exported are common items such as handicrafts,garments or normally used consumption items, standard general conditionscontract is sufficient. However, if the goods exported are complex item such aspetrochemicals, the export contract has to be drafted with a great deal of care,which may turn to be voluminous running into hundreds of pages. For a majorityof products being exported from India, the following elements have to beincorporated in the export contracts:1. Names of the Parties2. Description of the Products3. Quality4. Price per unit5. Total value6. Currency7. Tax and Charges
8. Packing9. Marking and Labelling10. Mode of Transport11. Delivery: Place and schedule12. Insurance13. Inspection14. Documentation15. Mode of Payment16. Credit period, if any17. Warranties18. Passing of risk19. Passing of property20. Availability/non-availability of export-import licence21. Force Majeure (Factors beyond the control of the parties that makes theperformance of the contractual obligations impossible e.g. Wars, floods, fire, civilwar. Once this specific clause is incorporated, parties are relieved of their mutualobligations, on the happening of the event. Contract comes to an end and no partyis liable for damages)22. Settlement of Disputes23. Proper Law of the Contract24. Jurisdiction.The Ministry of Commerce, Government of India, has set up Indian Council ofArbitration.
It has developed a model set of Contracts for the benefit of exporters. These modelcontracts are suitable, in case of most small and medium enterprises.Methods of Receiving Payment:Payment in Advance:This is most favoured method of payment from the viewpoint of the exporter. Thismode does not have any credit or transfer risk to the exporter in executing thecontract, whatsoever. When the conditions in the importer‟s country are unstableand there is no guarantee of receipt of payment, even after successful execution ofthe contract, advance payment is always insisted by the exporter. Exporter receivespayment from the importer, in advance, before execution of the order. Receipt ofpayment can be at the time of receiving the order, initially, or later, in installments,but before final execution of the order. Payment may be received by means ofdemand draft, mail transfer or telegraphic transfer in the currency specified in thecontract of saleDocumentary Bills:When the exporter is unable to get the advance payment from the importer, thenext best alternative mode of payment is „Documentary Bills‟. The exporter isunwilling to part with the documents of title till he receives the payment and theimporter is not prepared to part with payment and assume the risk until he is sureof receiving the goods. Under those circumstances, „Documentary Bills‟ is abridge, as documents are routed through the bank. It provides the required solutionas it satisfies the claims of both the parties. In this system of payment, banks act asa media to reconcile the conflicting requirements of the exporter as well asimporter.
Forms of Documentary BillsDocumentary Bills can be in the form of a. Sight Bill and b. Acceptance Bill.Documents against Payment:Under this method, exporter draws a sight bill on the importer and hands over therelative documents specified in the contract to his banker with the instructions todeliver the documents only on payment. The documents are sent to thecorrespondent‟s bank, where the importer is located, with the instructions given bythe exporter. When the importer makes the payment, he can get title to the goodsand possession.Documents against Acceptance :Under this method, exporter draws usance bill on the importer. Usance period maybe 30 to 180 days. Usance period cannot exceed 180 Terms of Payment 51 days asthe export proceeds are to be collected within a maximum period of 180 days asper Exchange Control restrictions. The essence of the transaction is the exporter isnot only willing to ship the goods but also prepared to part with the title andpossession of goods, before payment is received and even extending the agreedperiod of credit.
Collection of Bill: In this case, either D/P bill or D/A bill is sent to the correspondent‟s bank forcollection of proceeds from the importer. In case of D/P bill, importer has to makepayment to get the documents. In case of D/A Bill, on receipt of advice from thebank, importer accepts the usance bill by writing the words „Accepted‟ with hissignature on the usance draft. Then only, importer gets documents of title to goodsfrom the bank. He can get possession of goods and even sells the goods to get thenecessary funds to make payment on the due date. In this case, the exporter isextending credit to the exporter, apart from assuming the commercial risk ofdefault in payment as the importer may not pay on the due date, after takingdelivery of goods. Soon after the payment is received from the correspondent bank,exporter‟s account will be credited when the bill is sent on collection basis.Purchase/Discounting of Bill:When the exporter is in need of funds, at the time of handing over the documents,he can request the banker to purchase/discount the bill and allow the proceeds to becredited to his account. If it is a sight bill, bank purchases and if it is usance bill,bank discounts the bill. In both the cases, payment is made to the exporter, onpresentation of documents Documentary Credit under Letters of CreditMain Attraction: This method of payment has become highly popular in recenttimes. The greatest attraction to the exporter is elimination of credit and paymentrisks. Exporter is not concerned with the credit +worthiness of the borrower whileentering into the contract. In other words, the credit of the banker is substituted forthat of the importer. There is no payment risk as negotiating bank makes thepayment to him, once the stipulated conditions are complied with. Above all, animportant advantage from the viewpoint of the exporter, he can obtain the paymentfrom a bank, at his own centre. The documentary bills finance a large part ofoverseas trade.
Definition: According to Article 3 of Uniform Customs and Practices relating to Documentarycredits, Documentary Letter of Credit has been defined as “any arrangementwhereby a bank acting at the request and in accordance with the instructions of acustomer (the importer) undertakes to make payment to or to the order of a thirdparty (the exporter) against stipulated documents and compliance with stipulatedterms and conditions”.Method:At the request of the importer, bank makes a commitment to the exporter to makepayment, under certain circumstances and up to a limit, provided the stipulateddocuments in the letter of credit, requested by the importer, are presented andfound to be in order. Exporter may draw the draft on the importer or importer‟sbank. The documents usually required are full set of bill of lading, invoice andmarine insurance policy.Parties in Documentary Credits:In a documentary credit, there should be at least four parties, applicant,beneficiary, the issuing bank and the advising bank. The advising bank, confirmingbank and paying bank may be rolled into one.
Different Types of Letter of CreditThere are different types of letter of credit. They are: Documentary Letter of Credit: This letter of credit specifies the various documents that are required to be submitted by the exporter to the importer. That is the reason why it is called documentary letter of credit.Following documents are usually specified in the letter of credit. a. Sight or Usance Bill of Exchange b. Commercial Invoice/Customs Invoice c. Consular invoice d. Packing List e. Full set clean-on-board Bill of lading/Airway Bill/Combined Transport Document f. Inspection Certificate g. Marine insurance policy/certificate h. Certificate of origin i. Any other document as required by the buyer, mentioned in letter of credit Revocable and Irrevocable Credit: Under revocable letter of credit, the opening bank reserves the right to cancel or modify the credit, at any time, without the consent of the beneficiary. In case of irrevocable letter of credit, the opening bank has no right to change the terms of credit, without the consent of the beneficiary. The opening bank is irrevocably committed itself to make the payment, if
the documents are in conformity to credit terms specified in the letter of credit.According to UCP, the letter of credit should state whether it is revocable orirrevocable credit. In the absence of any specific mention, it is deemed that thecredit is irrevocable credit effective from 1st January ‟94. With Recourse or Without Recourse Letter of Credit: Under „With Recourse” letter of credit, the negotiating bank can make the exporter liable, in case of default in payment by the opening bank or importer. For this, Negotiating bank has to obtain suitable undertaking from the exporter for refund of amount paid, in the event of not getting reimbursement from the issuing bank. Under “Without Recourse” letter of credit, the negotiating bank has no recourse to the exporter. But, if the confirming bank happens to be the negotiating bank, it cannot have recourse to the exporter. Confirmed and Unconfirmed Letter of Credit: Exporter and importer remain in different countries. Exporter may not be aware of the standing of the issuing bank. In such cases, exporter may insist that the local bank should add confirmation to the credit opened. Once confirmation is added, the confirming bank, which is normally the correspondent bank of the opening bank, adds a clause to the effect that:“The above credit is confirmed by us and we hereby irrevocably undertake tohonour the drafts drawn under this credit on presentation, provided that all theterms and conditions of the credit are duly satisfied”.When the credit is irrevocable but not confirmed, the issuing bank asks thecorrespondent bank to advise the credit and in such a case, the correspondentbank will advise the credit with a clause stating that:
“This credit is irrevocable on the part of the issuing bank but is not confirmed by us and therefore it does not involve any undertaking on our part.”Transferable and Non-Transferable Letter of Credit:Under transferable letterof credit, exporter can transfer the credit fully or partly to one or more parties. Incases, when the product is to be fabricated by a third party, fully or partly, aportion of the credit is made transferable to the third party.When the credit is not transferable, it is non transferable credit. Fixed and Revolving Letter of Credit: A fixed letter of credit is for a fixed period and amount. Letter of credit expires if the credit is exhausted or period is over, whichever is earlier. In case of revolving letter of credit, the letter of credit would be revived automatically for the same amount and period, once it is exhausted. Freely Negotiable and Restricted Letter of Credit: When the letter of credit does not put any condition for the negotiation of documents, it is a freely negotiable letter of credit. This letter of credit can be negotiated through any willing bank. In case, the credit names a specific bank for negotiation, then the letter of credit is a restricted credit. In case, the bank that has been named for negotiation refuses to negotiate, then it is the responsibility of the opening bank to pay as per the terms of credit.
Red Clause and Green Clause Letter of Credit: A red clause letter of credit is one that authorises the exporter to avail pre- shipment finance on the strength of the credit. In this letter of credit, the clause is printed or typed in red ink. Hence, such letter of credit is known as red clause letter of credit.In a green clause letter of credit, in addition to pre-shipment finance, storagefacilities are allowed at the port of shipment to the exporter by opening bank.Such type of clause is typed or printed in green ink. So, this letter of credit isknown as “green clause letter of credit‟. Back-to-Back Letter of Credit: This letter of credit provides pre-shipment finance to the beneficiary. When the beneficiary wants to purchase raw materials from a third party for the purpose of executing export order, or is only a middleman and not the actual supplier of goods, he can ask the bank to open a new letter of credit, on the strength of this credit, in favour of a third party. In this case, a new letter of credit has to be opened while in the case of transferable credit; the existing credit is only transferred. Assignable and Non Assignable Letter of Credit: An assignable letter of credit can be assigned to a third party by the beneficiary of the credit. When the buyer is not able to find the real exporter, in the meantime, he opens the credit in favour of his agent or representative. When the agent is able to find an exporter who is willing to supply the goods on the terms of the buyer, he assigns the letter of credit to the supplier of goods.A non-assignable letter of credit is one that cannot be further assigned and so opened only in favour of the real exporter of goods after the exporter confirms the order.
Deferred period of Credit: In this period of credit, the supplier provides credit to the buyer after supply of goods Stand by Credit: This is similar to a performance bond or guarantee, but in the nature of letter of credit. The credit assures the beneficiary that in the event of non- performance or non-payment of any obligation, the beneficiary may request the issuing bank to make the payment. The beneficiary has to draw the claim by drawing a bill on the issuing bank, accompanied with documentary evidence in support of non-performance of contract. When the exporter receives the advance payment from importer, importer may insist on exporter to open „Stand by credit‟ in favour of the importer to protect the latter‟s interests.Central Board of Excise and CustomsCentral Board of Excise and Customs (CBEC) is a part of the Department ofRevenue under the Ministry of Finance, Government of India. It deals with thetasks of formulation of policy concerning levy and collection of Customs andCentral Excise duties, prevention of smuggling and administration of mattersrelating to Customs, Central Excise and Narcotics to the extent under CBECspurview. The Board is the administrative authority for its subordinate
organizations, including Custom Houses, Central Excise Commissionerates and theCentral Revenues Control Laboratory.Incoterms:IntroductionOn 1 January 2011, the ICC‟s Incoterms 2010 came into force. These are theeighth revision of the Incoterm Rules, with the last revision dating back to 2000.The new Rules have been revised to take into account developments ininternational trade over the past ten years as the volume and complexity of globalsales has increased, to address security issues arising in recent times and to providefor the ongoing changes in electronic communication. The new Rules alsorecognise the growth of customs free areas.One of the principal concerns with regard to the Incoterms has been that often thewrong term is selected for use by the parties. The introduction to the new 2010Rules stresses the need to use the term appropriate to the goods, to the chosenmeans of transport and to whether or not the parties intend to impose additionalobligations on the seller or buyer. In addition, there are Guidance Notes (and adiagram) at the front of each Incoterms Rule containing information to assist inmaking a choice on which Rule to use.Summarised below are the principal changes to the 2000 version.
Reclassification of Rules:The new Rules have been separated into two classes: i. Rules for use in relation to any mode or modes of transport, which can be used where there is no maritime transport at all or where maritime transport is used for only part of the carriage and ii. Rules for sea and inland waterway transport, where the point of delivery and the place to which the goods are carried to the buyer are both ports.FAS, FOB, CFR and CIF belong to the second class of Rules. In respect of FOB,CFR and CIF, reference to the “ship‟s rail” has now been deleted and this has beenreplaced with the goods being delivered when they are “on board” the vessel.Rules apply to domestic as well as international tradeThe Incoterms have traditionally been used for international sale contracts eventhough some trade blocs, such as the European Union, have minimised thesignificance of border formalities. The new Rules now recognise that they can alsobe used for domestic sale contracts and reference is made in a number of the Rulesthat export and import formalities will only need to be complied with whereapplicable. It is anticipated that this change may encourage greater use of the Rulesin the USA in place of the former US Uniform Commercial Code.Two new terms replace four current termsIncoterms 2000 contained 13 Rules, which have been reduced to 11 terms inIncoterms 2010. This has been achieved by introducing two new Rules to replacefour current Rules. The two new Rules may be used irrespective of the mode of
transport selected and under both new Rules, delivery takes place at a nameddestination. In essence, the “D” (Delivered) terms under the 2000 Rules have beenconsolidated to reduce the number of terms that were considered to have little realdifference between them.DAT (Delivered at Terminal) replaces DEQ (Delivered ex Quay). DAT may beused irrespective of the mode of transport selected and may also be used wheremore than one mode of transport is employed. “Delivered at Terminal” means thatthe seller delivers when the goods, having been unloaded from the arriving meansof transport, are placed at the buyer‟s disposal at a named terminal at the namedport or place of destination. DAT requires the seller to clear the goods for exportwhere applicable but the seller has no obligation to clear the goods for import, payany import duty or carry out any import customs formalities. It was considered thatDAT would prove more useful than DEQ in the case of containers that might beunloaded and then loaded into a container stack at the terminal, awaiting shipment.There was previously no term clearly dealing with containers that were not at thebuyer‟s premises.DAP (Delivered at Place) replaces DAF, DES and DDU. The arriving “vehicle”under DAP could be a ship and the named place of destination could be a port.Consequently, the ICC considered that DAP could safely be used instead of DESand that it would make the Rules more “user-friendly” if they abolished terms thatwere fundamentally the same. Again, a seller under DAP bears all the costs (otherthan any import clearance costs) and risks involved in bringing the goods to thenamed destination.
Incoterms via Picture:
A. GENERAL TERMS AND CONDITIONS FOR EXPORT (FOB)1.0 Trade Terms 1. To interpret all commercial terms and abbreviations used herein and which have not been otherwise defined, the rules of „INCOTERMS 2000 shall apply. 1. Prices 2. Price(s) as agreed between the Seller and the Buyer are inclusive of the labour charges involved in the work of dunnaging/ stowing/ lashing/ shoring and securing of the materials supplied by the Buyer. 3. The Buyer shall arrange at his own costs and expenses to provide to the Master of the vessel at the LOAD PORT all the materials including materials for dunnage required for stowing, dunnaging, lashing, shoring and securing of the materials inside the hatches/ holds of the vessel.
4. The Seller shall under no circumstances be liable for any costs, charges, liabilities of whatsoever nature arising subsequent to the delivery / loading of the materials on board the vessel on the basis of FOB (Stowed) Load Port, such as ocean freight, insurance charges, port dues, taxes including income tax, customs duties, unloading and handling charges, levies and fees, if any, of whatsoever nature and kind, payable or leviable at the time of or by reason of importation of the materials in the country of import.3.0 Test Certificate and Inspection3.1 The materials shall be covered by Works Test Certificate issued by Steel Plant(s) of the Seller. The Works TestCertificate shall be furnished showing Heat / Cast Number, material, chemistry as per Ladle Sample Analysis,mechanical properties as may be required in the specification mutually agreed to.3.2 The materials will be inspected at the load port prior to loading by a Pre-shipment Inspection Agency, mutuallyacceptable to the Seller and the Buyer. The Inspection Certificate shall certify (a) that the materials were inspected atthe load port prior to loading and the markings (except for pig iron) were as per the requirements of the Agreementbetween the Seller and the Buyer (b) total number of pieces / bundles/ packets/ coils (except for pig iron) and weightin Metric tonne (MT) and (c) that the materials loaded on board the vessel are without apparent damage, properlylashed and secured (except for pig iron) inside the hatches/ holds of the vessel. The cost of such Pre-shipmentInspection at the load port shall be borne and paid for by the Seller.3.3 Remarks such as „materials partly rust stained/ rusty edges/ wet before shipment/ rust stained/ some rusty edges‟and/or „stored in open area prior to loading‟ and/or „unprotected cargo‟ appearing in the Pre-Shipment InspectionCertificate shall be acceptable to the Buyer. i. Delivery/ Shipment4.1 The shipment schedule will be subject to the condition that the Seller is in possession of the Letter of Creditsatisfactory in all respects to the Seller, within the time schedule.4.2 Subject to acceptance by the Seller of vessel(s) nominated by the Buyer and subject to the arrival of suchvessel(s) at the load port within the agreed lay can with such extensions as may be mutually agreed upon in writing(in which event the validity of the Letter of Credit for shipment and negotiation shall be promptly extended by theBuyer), the Seller shall deliver the materials on FOB [(SLSD) stowed, lashed, secured and dunnaged} load portterms.
ii. Risk and Title5.1 With respect to each shipment, the risk shall pass from the Seller to the Buyer as soon as the materials cross theship‟s rails at the LOAD PORT.5.2 The title to the materials shall pass from the Seller to the Buyer only after the Seller has negotiated thedocuments and has received payment of the full invoice value of the materials.5.3 The clauses 5.1 & 5.2 shall be applicable in case of all overseas shipments.5.4 Clause 5.2 shall also apply to documents under the Clause 9 hereunder, if such an eventuality has arisen. iii. Right of Transfer 1. Neither the Buyer nor the Seller shall be entitled to assign or transfer contract resulting from this Agreement except to its successor or permitted assignee(s) and in the case of any such assignment or transfer, the contract shall be binding upon such successor or transferee. iv. Modification of the Contract7.1 This Agreement cancels all previous negotiations/ agreements between the parties hereto. There are nounderstanding(s) or agreement between the Buyer and the Seller which are not fully expressed herein and nostatement or agreement, oral or written, made prior to or at the signing hereof shall affect or modify the terms hereofor otherwise be binding on the parties hereto. No change in respect of the contract covered by this Agreement shallbe valid unless the same is agreed to in writing by both the parties hereto specifically stating the same to be anamendment to this Agreement.
v. Waiver8.1 Failure to enforce any condition herein contained shall not operate as a waiver to the condition itself or anysubsequent breach thereof. vi. Red Clause9.1 In the event of:(a) The failure of the Buyer to nominate a suitable vessel within the specified laydays, as mentioned in the Seller‟sNotice of Readiness (NOR) or(b) The vessel nominated by the Buyer and accepted by the Seller failing to arrive at the designated load port withinthe agreed laycan for reasons other than Force Majeure, as defined under Clause 10 herein below: or(c) The vessel (nominated by the Buyer and accepted by the Seller) being found unsuitable after its arrival at thedesignated loadport, as certified by independent marine surveyor(s),the seller shall be entitled to negotiate their Commercial Invoice against the L/C opened by the Buyer and realise100% of the value of the materials ready for shipment on the basis of certificate issued by the Pre- shipmentInspection agency certifying that the contracted materials and quantity are ready for shipment and also that thematerials are in good condition.Remarks such as “materials partly rust stained/rusty edges/wet before shipment/rust stained/ some rusty edges‟and/or “stored in open area prior to loading” and/or “unprotected cargo” appearing in the Pre-Shipment InspectionCertificate are acceptable.9.2 The title having already passed on to the buyer, the materials will thereafter be held in custody by the seller atthe risk and responsibility of the buyer at the storage yard of the seller. The materials will be covered by tarpaulin atthe buyer‟s request and cost at the storage yard of the seller.The cost of holding materials shall be as follows till the date of acceptance of vessel‟s NOR, when the vessel finallycalls at the loadport : US $ PMT
i] For the first 15 days from the date of expiry of Seller‟s NOR Laycan Nilii] For any subsequent week(s) (7 days) or part thereof 1Buyer to ensure that payment towards Ground Rent and/or Tarpaulin cost is remitted and remittance instruction dulyforwarded by SWIFT message, before actual shipment, against the debit invoice.9.3 The Buyer shall however nominate [another] suitable vessel within reasonable time from the date of realisationof payment, as mentioned above, for taking delivery of the cargo and subject to such vessel arriving at thedesignated loadport, the seller shall at his cost deliver the materials FOB [SLSD] in terms of Contract.9.4 The Letter of Credit * established by the buyer in favour of the seller shall make specific and unconditionalprovision to the above [9.1 to 9.3] effect.* L/C to be opened with First Class International Bank having Correspondent relationship with State Bank Of India. Name of theBanks can be obtained by the buyer from SAILvii. Force Majeure 1. If the Seller and/ or the Buyer be prevented from discharging its or their obligation under this Agreement by reason of arrests or restraints of Princes or Rulers , Government of People , War, Blockade, Revolution, Insurrection, Mobilization, Strikes, Riots, Civil Commotion, Lock Outs , Accidents, Acts of God, Plague or other epidemics, destruction of the materials by fire or flood or other natural calamity or on account of any other cause beyond the Seller‟s or the Buyer‟s control and interfering with the production and/or delivery of the materials as herein above contemplated, the time for delivery shall be postponed by the time or times during which production and/or delivery is prevented by any such causes as herein above mentioned, provided that in the event of such delay exceeding ninety days , the party other than the party which invokes the force majeure may at their option, cancel this Agreement by Notice in writing to the other party in respect of the undelivered quantity of the materials without , however, any right against or being responsible to the other party for such cancellation. The party invoking force majeure shall within 15 days of the occurrence of force majeure causes, put the other party on notice, supported by certificate from the Chamber of Commerce or concerned governmental authority and shall likewise intimate the cessation of such causes. If the force majeure condition continues beyond a period of six months, the Seller or the Buyer may at his option cancel this Agreement by notice in writing to the other party in respect of the undelivered quantity of the materials without, however, any right against or being responsible to the other party for such cancellation.11.0 Legal Interpretation
1. This contract shall be governed and construed in accordance with the Laws of India for the time being in force.12.0 Settlement of Disputes12.1 All disputes or differences whatsoever between the parties hereto arising out of or relating to the construction, meaning or operation or effect of this contract or the breach thereof shall unless amicably settled between the parties hereto, be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration (ICA) ,New Delhi, India by a sole Arbitrator appointed by the Arbitration Committee of the Indian Council of Arbitration, New Delhi, India and the Award made in pursuance thereof shall be binding on both the parties. The venue for the arbitration proceedings shall be New Delhi, India.
13.0 Import/ Export License: It shall be the responsibility of the Seller to arrange export license(s), if any, requiredand it shall be the responsibility of the Buyer to arrange for the import license(s) , if required, in the country intowhich the materials are intended to be imported.14.0 General Clause14.1 It is expressly understood and agreed by and between the Buyer and the Seller that the Seller is entering into this Agreement solely on its own behalf and not on behalf of any other person or entity. In particular, it is expressly understood and agreed that the Government of India is not a party to this Agreement and has no liabilities, obligations or rights hereunder. It is expressly understood and agreed that the Seller is an independent legal entity with power and authority to enter this contract solely in its own behalf under the applicable laws of India and general principles of Contract Law. The Buyer expressly agrees, acknowledges and understands that the Seller is not an agent, representative or delegate of the Government of India. It is further understood and agreed that the Government of India is not and shall not be liable for any acts, omission(s), commission(s), breaches or other wrong(s) arising out of the contract. Accordingly, the Buyer hereby expressly waives, releases and foregoes any and all actions or claims including cross claims, impleader claims or counter claims against the Government of India arising out of this contract and covenants not to sue the Government of India as to any manner, claim, and cause of action or thing whatsoever arising out of or under this Agreement.15.0 Changes in Destination15.1 The contracted cargo has to be taken to the designated station only. Any change in destination shall be madethrough a formal agreement to this Agreement and on the mutually agreed terms and conditions.FOR AND ON BEHALF OF FOR AND ON BEHALF OF THE SELLER THE BUYER STEELAUTHORITY OF INDIA LTD.M/S ------------------------------Hindustan Times House, 13th Floor, - -----------------------------------18-20 Kasturba Gandhi Marg, ------------------------------------New Delhi - 110001 INDIA ------------------------------------SIGNATURE : SIGNATURE
NAME : NAMEDESIGNATION : DESIGNATIONCOMPANY : SAIL COMPANYPLACE : NEW DELHI PLACEDATE : DATEB. GENERAL TERMS AND CONDITIONS FOR EXPORT (CFR)1.0 Trade Terms1.1 To interpret all commercial terms and abbreviations used herein and which have not been otherwisedefined, the rules of INCOTERMS 2000 shall be applied.
1. Prices2.1 The Seller shall under no circumstances be liable for any costs, charges, liabilities of whatsoevernature arising subsequent to the delivery /loading of the materials on board the vessel on the basis ofCFR (FO/LT) Port, such as insurance charges, port dues, taxes including income tax, customs duties,unloading and handling charges, levies and fees, if any, of whatsoever nature and kind payable orleviable at the time of or by reason of importation of the materials in the country of import.3.0 Test Certificate and Inspection3.1 The materials shall be covered by Works Test Certificate issued by Steel Plant of the Seller. TheWorks Test Certificate shall be furnished showing Heat/ Cast Number, material, chemistry as per LadleSample Analysis, mechanical properties as required in the specification.3.2 The materials will be inspected at the load port prior to loading by a Pre-shipment Inspection Agency,mutually acceptable to the Seller and the Buyer. The Inspection Certificate shall certify (a) that thematerials were inspected at the load port prior to loading and the markings ( except for pig iron) were asper the requirements of the Agreement between the Seller and the Buyer (b) total number of pieces/bundles/ packets/ coils (except for pig iron) and weight in MT and (c) that the materials loaded on boardthe vessel are without apparent damage, properly lashed and secured (except for pig iron) inside thehatches/ holds of the vessel. The cost of such Pre-shipment Inspection at the load port shall be borne andpaid for by the Seller.3.3 Remarks such as ‘materials partly rust stained/ rusty edges/ wet before shipment/rust stained/ somerusty edges’ and/or stored in open area prior to loading and/or ‘unprotected cargo appearing in the Pre-Shipment Inspection Certificate and Bills of Lading shall be acceptable to the Buyer.4.0 Delivery/Shipment4.1 The shipment schedule will be subject to the condition that the Seller is in possession of the Letter ofCredit, within the time schedule, satisfactory in all respects to the Seller.5.O Risk and Title
5.1 With respect to each shipment, the risk shall pass from the Seller to the Buyer as soon as thematerials cross the ships rails at the port of loading and the title to the materials shall pass from the Sellerto the Buyer only after the Seller has negotiated the documents and has received payment of the fullinvoice value of the materials shipped.6.0 Right of Transfer6.1 Neither the Buyer nor the Seller shall be entitled to assign or transfer contract resulting from thisAgreement except to its successor or permitted assignee/ s and in the case of any such assignment ortransfer, the contract shall be binding upon such successor or transferee.7.0 Modification of the Contract7.1 This Agreement cancels/ supersedes all previous negotiations/ agreements between the partieshereto. There are no understandings or agreement between the Buyer and the Seller which are not fullyexpressed herein and no statement or agreement, oral or written, made prior to or at the signing hereofshall affect or modify the terms hereof or otherwise be binding on the parties hereto. No change inrespect of the contract covered by this Agreement shall be valid unless the same is agreed to in writing byboth the parties hereto specifically stating the same to be an amendment to this Agreement.8.0 Waiver8.1 Failure to enforce any condition herein contained shall not operate as a waiver of the condition itselfor any subsequent breach thereof.9.0 Force Majeure9.1 If the Seller and/or the Buyer be prevented from discharging its or their obligation under thisAgreement by reason of arrests or restraints of Princes or Rulers, Government of People , War, Blockade,Revolution Insurrection, Mobilization, Strikes, Riots, Civil Commotion, Lock Outs, Accidents, Acts of God,Plague or other epidemics, destruction of the materials by fire or flood or other natural calamity or onaccount of any other cause beyond the Sellers or the Buyers control and interfering with the productionand/or delivery of the materials as herein above contemplated, the time for delivery shall be postponed bythe time or times during which production and/or delivery is prevented by any such causes as hereinabove mentioned, provided that in the event of such delay exceeding ninety days, the party other than the
party which invokes the force majeure may at their option, cancel this Agreement by Notice in writing tothe other party in respect of the undelivered quantity of the materials without, however, any right againstor being responsible to the other party for such cancellation. The party invoking force majeure shall within15 days of the occurrence of force majeure causes, put the other party on notice, supported by certificatefrom the Chamber of Commerce or concerned governmental authority and shall likewise intimate thecessation of such causes. If the force majeure condition continues beyond a period of six months, theSeller or the Buyer may at his option cancel this Agreement by notice in writing to the other party inrespect of the undelivered quantity of the materials without, however, any right against or beingresponsible to the other party for such cancellation.10.0 Legal Interpretation10.l This contract shall be governed and construed in accordance with the Laws of India for the timebeing in force.viii. Settlement of Disputes11.1 All disputes or differences whatsoever between the parties hereto arising out of or relating to theconstruction, meaning or operation or effect of this contract or the breach thereof shall unless amicablysettled between the parties hereto, be settled by arbitration in accordance with the Rules of Arbitration ofthe Indian Council of Arbitration (lCA) ,New Delhi, India by a sole Arbitrator appointed by the ArbitrationCommittee of the Indian Council of Arbitration, New Delhi, India and the Award made in pursuancethereof shall be binding on both the parties. The venue for the arbitration proceedings shall be New Delhi,India. ix. Import/ Export Licence12.1 It shall be the responsibility of the Seller to arrange export licence(s), if any, required and it shall bethe responsibility of the Buyer to arrange for the import licence(s), if required, in the country into which thematerials are intended to be imported. x. General Clause13.1 It is expressly understood and agreed by and between the Buyer and the Seller that the Seller isentering into this Agreement solely on its own behalf and not on behalf of any other person or entity. Inparticular, it is expressly understood and agreed that the Government of India is not a party to thisAgreement and has no liabilities, obligations or rights hereunder. It is expressly understood and agreedthat the Seller is an independent legal entity with power and authority to enter this contract solely in itsown behalf under the applicable laws of India and general principles of Contract Law. The Buyerexpressly agrees, acknowledges and understands that the Seller is not an agent, representative ordelegate of the
Government of India. It is further understood and agreed that the Government of India is not and shall notbe liable for any acts, omissions, commissions, breaches or other wrongs arising out of the contract.Accordingly, the Buyer hereby expressly waives, releases and foregoes any and all actions or claimsincluding cross claims, impleader claims or counter claims against the Government of India arising out ofthis contract and covenants not to sue the Government of India as to any manner, claim, cause of actionor thing whatsoever arising out of or under this Agreement.FOR AND ON BEHALF OF FOR AND ON BEHALF OF THE SELLER THE BUYER STEELAUTHORITY OF INDIA LTD. M/S ------------------------------Hindustan Times House, 13th Floor, - -----------------------------------18-20 Kasturba Gandhi Marg, ------------------------------------New Delhi - 110121 INDIA ------------------------------------SIGNATURE : SIGNATURENAME : NAMEDESIGNATION : DESIGNATIONCOMPANY : COMPANYPLACE : PLACEDATE : DATE
REFLECTIONS ON WHAT HAS BEEN LEARNED DURING THE PROJECTDetailed study of export and import procedures. Physical import and export ofmaterials, customs procedures and port formalities, import financing and exportnegotiation. The export formalities required for exporting steel material to Nepaland Bangladesh.EXPORT Contract Letter of Credit Materials as per contract Documents related to material Export documentation ( bill of export for land export, shipping bill for sea export and airway bill for export by air ) A.R.E / Nepal Invoice for Nepal Test certificate of materials Transport document Physical movement of goods across border.EXPORT NEGOTIATION Negotiation at bank Bank Realization Certificate (B.R.C)
POST EXPORT BENEFITS B.R.C and other related documents for D.E.P.B ( Duty Entitlement Passbook Scheme) Registration of D.E.P.B license with Customs Utilization of D.E.P.B licenseIMPORT Import contract Letter of credit Receipt of documents a. Bill of lading b. Packing list c. Test certificate d. Certificate of origin Processing of Bill Of Entry Port formalities Customs examination of goods ( restricted items , green channel items ) Customs Pass out
Objectives:- 1. To study the current export scenario of steel industry which is used to import and export of steel in India. 2. To study the shipping operations during Export-Import. 3. To study the Documentation and its process. 4. To explore the future perspective which help the company to increase their Exports?METHODOLOGY:-I will use the secondary data that is available, and will look to focus on those data and will do atime series analysis to predict the future growth of the steel industries. I will use the currentgrowth statistics to predict the future growth. I will also try to look in to the aspects about howthe Industry is working to save their money & risk during exports of the steel.SIGNIFICANCE OF THE PROJECT:- Explore the steel industry. To know the current condition of the sector To know all the procedures of documentation which is required during the export of steel? To know how the shipping operations is being made. Ways to improve the relation of the exporter with the importer.
RECCOMENDATIONSThe full value of exports should be realized after negotiation that is no delayshould be made at the time of receiving paymentsNo clearance charges should be there at the time of discharging the containerfrom the port. It should be rent freePrivatization should be adopted
BIBLIOGRAPHY ANNUAL REPORTS OF MINISTRY OF STEEL WIKIPIDEA EXPORT IMPORT PROCEDURESDocuments and logistics--- by C. RAMA GOPAL