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Export procedure-and-documentation-project-report-on

  1. 1. EXPORT PROCEDURE AND DOCUMENTATION PROJECT REPORT ON EXPORT PROCEDURE & DOCUMENTATION PREPARED BY DIVYA THINGALAYA UNDER THE GUIDANCE OF Prof. MONA SUBMITTED TO UNIVERSITY OF MUMBAI INPARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF BACHELOR OF MANAGEMENT STUDIES ACADEMIC YEAR 2006 - 2007 1
  2. 2. EXPORT PROCEDURE AND DOCUMENTATION DECLARATIONI Miss. DIVYA THINGALAYA OF VIVEK COLLEGE OF COMMERCE OFT.Y.B.M.S. (SEMESTER VI) HEREBY DECLARE THAT I HAVE COMPLETEDTHIS PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THEACADEMIC YEAR2006 – 2007. THE INFORMATION SUBMITTED IS TRUE ANDORIGINAL TO THE BEST OF MY KNOWLEDGE.DATE:PLACE: (SIGNATURE OF THE STUDENT) 2
  3. 3. EXPORT PROCEDURE AND DOCUMENTATION CERTIFICATEI Prof. MONA HERBY CERTIFY THAT Miss. DIVYA THINGALAYA OF VIVEKCOLLEGE OF COMMERCE OF T.Y.B.M.S. (SEMESTER VI) HAS COMPLETEDTHE PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THEACADEMIC YEAR 2006 – 2007. THE INFORMATION SUBMITTED IS TRUE,ORIGINAL AND AUTHENTIC TO THE BEST OF MY KNOWLEDGE.SIGNATURE OF PRINCIPLE SIGNATURE OF PROJECTGUIDE(Prof. SUNIL .B. MANTRI) (Prof. MONA) 3
  4. 4. EXPORT PROCEDURE AND DOCUMENTATION ACKNOWLEDGEMENT IT IS THE MATTER OF GREAT PLEASURE AND PRIVILEGE TO BEABLE TO PRESENT THIS PROJECT REPORT ON EXPORT PROCEDURE ANDDOCUMENTATION. THE COMPILATION OF THE PROJECT IS A MILESTONE IN THE LIFEOF THE MANAGEMENT STUDENT AND ITS EXECUTION IS INEVITABLEWITH THE CO-OPERATION OF THE PROJECT GUIDE. I WISH TO RECORD ADEEP SENSE OF RESPECT AND GRATITUDE TO MY PROJECT GUIDE, PROF.MONA FOR HER ENCOURAGEMENT TO COURSE OF MY WORK. IT IS DUETO THE ENDURING EFFORT AND GUIDANCE OF MY GUIDE THATULTIMATELY MADE IT SUCCESS. I ALSO TAKE THIS OPPORTUNITY TO EXPRESS MY DEEP REGARDSAND GRATITUDE TO THE PRINCIPLE SUNIL MANTRI AND WOULD LIKE TOTHANK THE HEAD OF B.M.S. DEPARTMENT PROF. MONA WHO GAVE USGUIDANCE TO TAKE UP AND PURSUE THE PROJECT I CANNOT JUST CONDONE THE VALUABLE OPPORTUNITY GIVE TOME BY THE UNIVERSITY OF MUMBAI FOR COMPILING AND SUBMITTINGTHE PROJECT, WHICH I FEEL IS AN OPPORTUNITY TO EXPRESS MY VIEWSABOUT EXPORT PROCEDURE AND DOCUMENTATION. I ACKNOWLEDGE MY INDEBTNESS TO VARIOUS AUTHORS FORMAKING USE OF VALUABLE INFORMATION LIBERALLY. IT IS MY PROUD PRIVILEGE TO EXPRESS MY DEEP SENSE OFAPPRECIATION AND GRATITUDE TO MY PARENTS AND FRIENDS FORTHEIR SUPPORT AND CO-OPERATION IN THE COURSE OF THE PROJECTEITHER DIRECTLY OR INDIRECTLY INVOLVED IN TIME WITH THEIRVALUABLE CONTRIBUTION. 4
  5. 5. EXPORT PROCEDURE AND DOCUMENTATION INDEXSERIAL CONTENT PAGENUMBER NUMBE R 1 INTRODUCTION 6 2 HOW TO SET UP AN EXPORT ORGANISATION 8 3 HOW ONE BEGINS TO DO EXPORT 14 4 EXPORT SALES & CONTRACT TERMS & 17 CONGITIONS 5 TERMS OF SHIPMENT – INCOTERMS. 20 6 PROCESSING AN EXPORT ORDER 27 7 FINANCIAL RISK INVOLVED IN FOREIGN 28 TRADE 8 EXPORT DOCUMENTS 29 9 OCTROI 53 10 QUALITY CONTROL & PRE-SHIPMENT 57 INSPECTION 11 SHIPPING ANG CUSTOMS FORMALITIES 60 12 SALES TAXES EXEMPTION PROCEDURE 66 13 METHODS OF RECEIVING PAYMENTS 68 AGAINST EXPORTS 14 THE LETTER OF CREDIT 71 15 PREPARATION AND SUBMISSION OF 88 DOCUMENTS FOR BANK NEGOTIATIONOR PURCHASE 16 SHIPMENT THROUGH COURIERS 91 17 CUSTOM PROCEDURE FOR EXPORT UNDER 92 EDI SYSTEM 18 THE ECGC COVER. 112 INTRODUCTION India has a mission to capture 2% of the global share of trade by 20010, upfrom the present level of less than 1%. Export is one of the lucrative business activities inIndia. The government also provides various promotional schemes to the exporters for 5
  6. 6. EXPORT PROCEDURE AND DOCUMENTATIONearning valuable foreign exchange for the country and for meeting their requirements forimporting modern technology and essential inputs. Besides, the income from exportbusiness is also exempted to the specified extent under the Income Tax Act, 1961,Refund of Central Excise and Custom Duty on export is also made under the DutyDrawback Scheme of the Government. There is no Sales Tax on products meant forexports. Exports can be of goods which can be moved physically from one countryto another or can be of service rendered. Detailed list of services are given in the ForeignTrade Policy covering more than 160 items e.g. Insurance, Hospital, Postal andTelecommunication etc.TWO CLASSES OF EXPORTS: Physical Exports: If the goods physically go out of the country or servicesare rendered outside the country then it is called as physical export. Deemed Exports:Where the goods do not go out of the country physically they can be termed as deemedexports. This will be subject to certain conditions as prescribed by the DGFT. UnderDeemed Exports, the goods may be supplied to the manufacturer exporter who ultimatelyexport a finished product of which this supply forms a part and ultimately go out of thecountry. E.g. Supply of fabrics to the garment exporter who exports the garments madeout of the said fabric. The government may announce from time to time the types of suppliesthat may be considered as deemed export. The Foreign Trade Policy gives the list ofsupplies considered under the Deemed Export Category. The policies and procedures aredifferent for Physical Exports and Deemed Exports as also the benefits available. In anutshell, Deemed Exports do not enjoy all the benefits that are available under PhysicalExport. The Foreign Trade defines exports as taking out of India any goods by land, sea,air. Although the act does not term them as “Physical Exports”, we have to put phrase todistinguish it from “Deemed Exports” which is sales in India but considered as exportsfor limited purpose. 6
  7. 7. EXPORT PROCEDURE AND DOCUMENTATIONTYPES OF EXPORTERS: Exporters can be basically classified into two groups • Manufacturer Exporter: As the exporter has the facility to manufacturer the product he intends to export and hence he exports the products manufactured by him. • Merchant Exporter: An exporter who does not have the facility to manufacture an item. But, he procures the same from other manufacturers or from the market and exports the same. An exporter can be both a manufacturer exporter as well as a merchantexporter, he can export product manufactured by him or he can export items bought fromthe market. Once it is decided to export, it is mandatory on your part to follow certainprocedures, rules and regulations as prescribed by various regulatory authorities such asDGFT, RBI, and Customs. These procedures, rules and regulations are laid down in theExim Policy 2004-09, Exchange Control Manual, Customs Act etc. Accordingly Exportdocuments are required to be prepared keeping in view of the requirement of the foreignbuyers and our regulatory authorities. HOW TO SET UP AN EXPORT ORGANISATIONThe proper selection of organization depends upon • Ability to raise finance. • Capacity to bear the risk. 7
  8. 8. EXPORT PROCEDURE AND DOCUMENTATION • Desire to exercise control over the business. • Nature of regulatory framework applicable to anyone If the size of the business is small, it would be advantageous to form a soleproprietary business organization. It can be set up easily without much expenses and legalformalities. It is subjected to only few governmental regulations. However, the biggestdisadvantage of sole proprietorship business is limited ability to raise funds whichrestricts the growth. Besides the owner has unlimited personal liabilities. In order toavoid this disadvantage, it is advisable to form a partnership firm. The partnership firm can also be set up with ease and economy. Businesscan take benefit of the varied experiences and expertise of the partners. The liability ofthe partners though joint and several, is practically distributed amongst the variouspartners, despite the fact that the personal liability of the partner is unlimited. The majordisadvantage of partnership firm of business organization is that conflict amongst thepartners is a potential threat to the business. It will not be out of place to mention herethat partnership firms are governed by the Indian Partnership Act, 1932 and, thereforethey should be formed within the parameters laid down by the Act. Company is anotherform of business organization, which has the advantage of distinct legal identity andlimited liability to the share holders. It can be a private limited company or a public limited company. A privatelimited can be formed by just two persons subscribing to its share capital. However, thenumber of its shareholders cannot exceed 50, public cannot be invited to subscribe to itscapital and the members right to transfer their share is restricted. On the other hand, apubic limited company has a minimum of seven members. There is no limit on themaximum number of its members. It can invite the public to subscribe to its capital andpermit the transfer of share. A public limited company offers enormous potential forgrowth because of access to substantial funds. The liquidity of investment is high becauseof easiness of transfer of shares. However its formation can be recommended only whenthe size of the business is large. For small business, a sole proprietary concern or apartnership firm will be the most suitable form of business organization. In case it is 8
  9. 9. EXPORT PROCEDURE AND DOCUMENTATIONdecided to incorporate a private limited company, the same is to be registered with theRegistrar of Companies.CHOOSING APPROPRIATE MODE OF OPERATIONS:You can choose any of the following modes of operations • Merchant Exporter i.e. buying the goods from the market or from the manufacturer and then selling it to foreign buyers. • Manufacturer Exporter i.e. manufacturing the goods yourself for export. • Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the seller and charging the Commission. • Buying Agent i.e. acting on behalf of the buyer and charging Commission. • Service provider i.e. providing service from India to another country.NAMING THE BUSINESS Whatever form of business organization has been finally decided, namingthe business is an essential task for every exporter. The name and style should be soft,attractive, short and meaningful. Open a current account in the name of the organisationin whose name you intend to export. It is advisable to open the account with a bankwhich is authorised to deal in Foreign Exchange.STRUCTURE OF AN EXPORT ORGANISATION • marketing manager for generating sales • Commercial manager for looking activities of the execution of the orders. • staff personnel for carrying out the day-to-day activities namely 9
  10. 10. EXPORT PROCEDURE AND DOCUMENTATION o Preparation of pre - shipment documents. o Co-ordinating with clearing agents on the progress of the shipment to be made. o Co-ordinating with the ware houseC. excise department regarding packing and clearance of the goods for export. o Preparation of post shipment documents foe banks. o Follow-up with the bank on dispatch of documents, receipt of payment, availment of bank loans etc. • To look into the requirement of licenses, claiming of export benefits fiiling of documents with the Government Authorities in Discharge of Export Obligations, if any, filing of returns to the various Government Agencies which are mandatory, prepare and keep an information bank of various transaction of the company, their domestic as well as international competitors. • An office boy for doing leg work. • A clearing and forwarding agent to handle the documents and the goods in the customs premises in the ports of lading. Depending upon the size of the business the numbers of personnel undereach category may increase. For example if a company is transacting substantial volumeof business in more than one product. Then it is necessary to have marketing manager foreach product so that the person can concentrate on a particular trade to enhance thebusiness.REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAININGIMPORTER EXPORTER CODE (IEC) NUMBER.The Customs Authorities will now allow the exporter to export or import goods into orfrom India unless he holds a valid IEC number. Before applying for IEC number it is 10
  11. 11. EXPORT PROCEDURE AND DOCUMENTATIONnecessary to open a bank account in the name of the company with any commercial bankauthorized to deal in foreign exchange. The duly signed application form should besupported by the following documents. • Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. 1000/- • Certificate from the banker of the applicant firm as per Annexure 1 to the form given. • One copy of PAN number issued by Income Tax Authorities duty attested by the applicant. • One copy of Passport Size photographs of the applicant duly attested by the banker to the applicant. • Declaration by the applicant that the proprietor/partners/directors as the case may be of the applicant company, are not associated as proprietor/partners/directors in any other firm, which has been caution, listed by the RBI. Where the applicant declares that they are associated as proprietor/partners/directors in any other firm, which has been caution, listed by the RBI, they will be allotted IEC No. but with an additional condition that they can export only with RBI’s prior approval and they should approach RBI for the purpose. • Each importer/exporter shall be required to file importer/exporter profile once with the licensing authority shall enter the information furnished in Appendix 2 in their database so as to dispense with changes in the information given in Appendix-2, importer/exporter shall intimate the same to the licensing authority.IEC EXEMPT CATEGORIES.The following importer exporter is exempted from the requirement of IEC code number. • Ministries Department of Central or State Government. 11
  12. 12. EXPORT PROCEDURE AND DOCUMENTATION • Person importing or exporting goods for their personal use not connected with trade or manufacture or agriculture. • Persons importingexporting goods fromto Nepal & Myanmar provided the CIF value of single consignment does exceed Indian Rs. 25000-.APPLICATION FOR OBTAINING AN IEC NUMBERFor obtaining IEC number apply in the prescribe form along with the documents listedabove to Regional Licensing Authority (Office of the Regional DGFT). The registeredoffice or the head office may apply for allotment of IEC No.Whenever, there is a change in the name, address or constitution of the holder of IECNo., such change should be intimated within 30 days to the concern authorities.IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is alsoendorsed to the concerned banker.VALIDITY :The IEC No allotted to a firm/company will be valid for all its branches/divisionsunits/factories as indicated in the IEC No. Import/Export of any commodity by thatfirm/company. There being no date of expiry, the IEC once allotted is valid till it isrevoked. But, if no import or export is effected in the previous financial year, the samewill be made inoperative. However, this can be made operative by a formal request to theDGFT.IDENTITY CARD (For conducting transactions with the office of DGFT):As it is not always possible for the top man or directors, promoters of the company tovisit DGFT frequently. There is a provision of issuance of identity cards to the 12
  13. 13. EXPORT PROCEDURE AND DOCUMENTATIONproprietors/partners/directors and their authorized representatives. An application ofIssuance of an identity card may be made in the form (Appendix-5) The document/License/Certificate/Permissions may be delivered to the identity card holder and officialsof the Licensing Authority(DGFT)shall not be responsible for any loss etc. In case of lossof an identity card a duplicate card may be issued on the basis of an FIR & affidavit. Inaddition to obtaining the IEC No. the exporter is also required to obtain BusinessIdentification No(BIN). For this exporter is required to contact DGFT online on web site.The licensing authority issues BIN in coordination with customs authorities. This BIN isrequired to be mentioned on the shipping bills at the time of customs clearance of theexport cargo.RCMC (Registration-Cum-Membership Certificate) – REGISTRATION WITHEXPORT PROMOTION COUNCILS –In order to enable the exporter to obtain benefits/concessions under the Foreign TradePolicy, the exporter is required to register himself with an appropriate export promotionagency by obtaining registration-cum-membership certificate. (RCMC). If the exportproduct is that it is not covered by any EPC, RCMC in respect thereof may be issued byFIEO. An application for registration should be accompanied by a self certified copy ofthe Importer-Exporter Code number issued by the regional licensing authority concernedand bank certificate in support of the applicants financial soundness. The RCMC shall bevalid for 5 years ending 31st March of the licensing year.REGISTRATION WITH SALES TAX AUTHORITIES:Goods that are to be shipped out of the country for export are eligible for exemptionsfrom both Sales Tax and Central Sales Tax. For this purpose, exporter should get himselfregistered with the Sale Tax Authority of is state after following the proceduresprescribed under the Sales Tax Act applicable to his state. HOW ONE BEGINS TO DO EXPORTBefore entering into the venture of exports, one must look for the product to be exportedand the market where he intends to export. 13
  14. 14. EXPORT PROCEDURE AND DOCUMENTATIONIn case of a manufacturer, obviously he would like to export the product he manufacturesas is or with possible modification as may be required by the market. However, in case ofa merchant exporter or a trader, one has to identity the product to export. If the exporter isalready in the trade in the domestic market and is familiar with the product it would be anadvantage to export the said product of which he has reasonable knowledge.Before selecting a product, one must simultaneously made a study and find out theprospective market. For finding out the market for the selected product, the followingmethods will help. • Get statistical information as to imports of the product by various countries and their growth prospects in the respective countries • Approach the chamber of commerce for their guidance to find out the market. • Approach the Export Promotion Council dealing in the product of selection to get more information.The PreliminaryOnce you are ready with the product you wish to export and have found the market forthe same, you are ready to proceed further. Following sequences can be followed: • Any one, who wishes to export, must first of all get an Importer Exporter Code Number (IE Code).This can be obtained by making a formal application to the office of the Regional Directorate General of Foreign Trade (DGFT). • Get yourself registered with the related Export Promotion Council and become a member. Also arrange to obtain Registration-Cum-Membership Certificate (RCMC) from the council. This has twin objectives: o Under the Foreign Trade Policy, it is mandatory that an exporter gets him registered with the Export Promotion Council to avail of various export facilities. o Being a member, you will have access to all the information relating to the product that could be made available by the council 14
  15. 15. EXPORT PROCEDURE AND DOCUMENTATION o Many foreign buyers send their enquiries for the imports to the Export Promotion Council. Hence you will have few customers interested in your product. • If you are a manufacturer, find out the provisions under the EXIM Policy of getting the raw materials duty free. • Get familiar with the excise formalities as goods meant for export can be cleared without payment of C. Excise duty on the finished product subject to compliance of certain formalities. • Understand the local government regulations in relations to the export of the product. • Get information of the government’s regulations of the importing country as to restrictions on the quantity, product specification, packing regulations, customs regulations, requirement of specific documents/information etc. • Availability of Vessels/Airlines, the transport charges, frequency of operation etc., • To look for a Custom House Agent (CHA) (also know as freight forwarders or clearing agents) for handling the documents/cargo in the customs. • If the product is covered under any quota regulation, find out the agency/council who are handling the quota distribution for the product and the availability of quota for exports.FINDING A CUSTOMS Once you have selected the market, the next step is to find a prospective customer. This you can get • From the directory of importers of the country • By writing to the Embassy of India in that country for assistance • By writing to the chamber of commerce of that country • By means of participation in a Fair/Exhibition abroad either directly or through the Export Promotion Council • By participating in international fair if organized locally 15
  16. 16. EXPORT PROCEDURE AND DOCUMENTATION • Through the personal contacts in that country. By these processes one can only have the list of customers. One has to dialogue or correspond with these customers by sending samples, getting feedback from the customers etc. to ultimately select the customer with whom to deal with. It is necessary to know the financial standing of the company which can be obtained through the bank channel or through the office of ECGC.NEGOTIATING CONTRACT. Once the prospective customer is found, the business deal has to be concluded. The following aspects may be considered before entering into a final contract with the buyer. • Credit Worthiness of the Customer. • Availability of the Steamer/Airlines and the frequency • The freight charges • The full product specification • The quantity, Price • Terms of Payment • Type of packing and markings on the packages • Mode of shipment & Shipment schedule • Tolerance of quantity to be shipped • Documentation requirement for the customer • Documentation requirement of the government of importing country • Compliance of the local governmental rules and regulationsBefore entering into contract one should take note of the above factors. While these areindicative, the requirements will vary from country to country, product to product andbuyer to buyer. 16
  17. 17. EXPORT PROCEDURE AND DOCUMENTATION EXPORT SALES & CONTRACT TERMS & CONDITIONSVery often exporters do not enter into any formal contract and finalize the trade dealthrough the exchange of letters, cable, telex etc. It is, however, expedient that the parties(exporters & importers) incorporate all important terms & conditions of their trade deal ina separate document or contract that will avoid disputes arising out of uncertainty orambiguity. Export contract may be sent in duplicate along with the Proforma Invoice tothe overseas buyer.NATURE OF INTERNATIONAL TRADE COUNTRACTS.There are certain, peculiar characteristics of international trade contract which are notpresent in those for sales of goods in the domestic marketWhereas the parties to a domestic trace contract normally needs only agree on theelements which are necessary for their particular trade transactions like price, description,quality and quantity of goods, delivery terms etc the situation will be quite different whenthe buyer and the seller to sale/purchase contract belong to different countries. Theparties to all international trade contracts provide all their relative rights and obligationsin several waysFor example, they may agree to adopt either the Law of the country of the buyer or thatof the seller. The traders are normally reluctant to leave the determination of the rightsand obligations by implications under the legal system of either’s country. They prefer tomake explicit provisions regarding the rights and obligations by including a set ofdetailed and precise terms and conditions in their contract.EXPORT OF SAMPLESGIFTS.Exports of bonafide trade and technical samples of freely exportable items shall beallowed without any limit. Goods including edible items of value not exceeding Rs.100000/- in a licensing year, may be exported as a gift. However items mentioned as 17
  18. 18. EXPORT PROCEDURE AND DOCUMENTATIONrestricted for exports in ITC(HS) shall not be exported as a gift without alicence/certificate/permission, except in the case of edible items.STANDARD CONTRACT FOMS:Notwithstanding the efforts made by various national/international organizations like theUnited Nations Commission on the International Trade Law, there is still no perfection ora device which would give the parties an accurate and complete idea of each othersunderstanding of various trade terms, the commercial practices and the rights and theobligations vis-à-vis each other so that the misunderstandings are practically eliminated.Nevertheless, the Indian Council of Arbitration published in 1966 a booklet on “StandardContract Forms and Model Arbitration Clause for use in Foreign Trade Contracts”. It wasrevised and reprinted in 1969 and 1977. It can be referred to by exporter for variousclause to be incorporated in the Export Contract.ENTERING INTO AN EXPORT CONTRACTIn order to avoid disputes, it is necessary to enter into an export contract with theoverseas buyer. For this purpose, export contract should be carefully draftedincorporating comprehensive but in precise terms, all relevant and important conditionsof the trade deal.There should not be any ambiguity regarding the exact specifications of goods and termsof sale including export price, mode of payment, storage and distribution methods, typeof packaging, port of shipment, delivery schedule etc. The different aspects of an exportcontract are enumerated as under: • Product, Standards and Specifications • Quantity • Inspection • Total Value of Contract • Terms of Delivery 18
  19. 19. EXPORT PROCEDURE AND DOCUMENTATION • Taxes, Duties and Charges • Period of Delivery/Shipment • Packing, Labeling and Marking • Terms of Payment-- Amount/Mode & Currency • Discounts and Commissions • Licenses and Permits • Insurance • Documentary Requirements • Guarantee • Force Majeure of Excuse for Non-performance of contract • Remedies • Arbitration clauseIt will not be out of place to mention here the importance of arbitration clause in anexport contract Court proceedings do not offer a satisfactory method for settlement ofcommercial disputes, as they involve inevitable delays, costs and technicalities. On theother hand, arbitration provides an economic, expeditious and informal remedy forsettlement of commercial disputes. Arbitration proceedings are conducted in privacy andthe awards are kept confidential. The Arbitrator is usually an expert in the subject matterof the dispute. The dates for arbitration meetings are fixed with the convenience of allconcerned. Thus, arbitration is the most suitable way for settlements of commercialdisputes and it may invariably be used by businessmen in their commercial dealings.ARBITRATION:Arbitration clause recommended by the Indian Council of Arbitration:”All disputesor differences whatsoever arising between the parties out of / relating to the meaning,construction and operation or effect of this contract or the breach thereof shall be settledby arbitration in accordance with the rules of Arbitration of the Indian Council ofArbitration and the award made in pursuance thereof shall be binding on the parties” (orany other arbitration clause that may be agreed upon between the parties). 19
  20. 20. EXPORT PROCEDURE AND DOCUMENTATION TERMS OF SHIPMENTS – INCOTERMSThe INCOTERMS (International Commercial Terms) is a universally recognized set ofdefinition of international trade terms, such as FOB, CFR & CIF, developed by theInternational Chamber of Commerce(ICC) in Paris, France. It defines the trade contractresponsibilities and liabilities between buyer and seller. It is invaluable and a cost-savingtool. The exporter and the importer need not undergo a lengthy negotiation about theconditions of each transaction. Once they have agreed on a commercial terms like FOB,they can sell and buy at FOB without discussing who will be responsible for the freight,cargo insurance and other costs and risks.The INCOTERMS was first published in 1936 --- INCOTERMS 1936 --- and it is revisedperiodically to keep with changes in the international trade needs. The completedefinition of each term is available from the current publication --- INCOTERMS 2000.Under INCOTERMS 2000, the international commercial terms are grouped into E, F, Cand D, designated by the first letter of the term, relating to the final letter of the term. E.g.EXW—exworks comes under grouped ‘E’.The purpose of Incoterms is to provide a set of international rules for the interpretation ofthe most commonly used trade terms in foreign trade. Thus, the uncertainties of differentinterpretations of such terms in different countries can be avoided or at least reduced to aconsiderable degree. The scope of Incoterms is limited to matters relating to the rightsand obligations of the parties to the contract of sale with respect to the delivery of goods.Incoterms deal with the number of identified obligations imposed on the parties and thedistribution of risk between the parties.In international trade, it would be best for exporters to refrain, wherever possible, fromdealing in trade terms that would hold the seller responsible for the import customsclearance and/or payment of import customs duties and taxes and/or other costs and risksat the buyer’s end, for example the trade terms DEO (Delivery Ex Quay) and DDP(Delivered Duty Paid) 20
  21. 21. EXPORT PROCEDURE AND DOCUMENTATIONQuite often, the charges and expenses at the buyer’s end may cost more to the seller thananticipated. To overcome losses, hire a reliable customs broker or freight forwarder in theimporting country to handle the import routines.Similarly, it would be best for importers not to deal in EXW (Ex Works) which wouldhold the buyer responsible for the export customs clearance, payment of export customscharges and taxes, and other costs and risks at the seller’s endMORE CLARIFICATION ON INCOTERMSEXW {+the named place}Ex Works: Ex means from. Works means factory, mill or warehouse, which are theseller’s premises. EXW applies to goods available only at the seller’s premises. Buyer isresponsible for loading the goods on truck or container at the sellers premises and for thesubsequent costs and risks. In practice, it is not uncommon that the seller loads sthegoods on truck or container at the sellers pre4mises without charging loading fee. N thequotation, indicate the named place (sellers premises) after the acronym EXW forexample EXW Kobe and EXW San Antonio.The term EXW is commonly used between the manufacturer (seller) and export-trader(buyer), and the export-trader resells on other trade terms to the foreign buyers.Some manufacturers may use the term Ex Factory, which means the same as Ex Works.FCA {+the named point of departure}Free Carrier: The delivery of goods on truck, rail car or container at the specifiedpoint(depot) of departure, which is usually the sellers premises, or a named railroadstation or a named cargo terminal or into the custody of the carrier, at sellers expense.The point(depot) at origin may or may not be a customs clearance centre. Buyer isresponsible for the main carriage/freight, cargo insurance and other costs and risks.In the air shipment, technically speaking, goods placed in the custody of an air carrier areconsidered as delivery on board the plane. In practice, many importers and exporters still 21
  22. 22. EXPORT PROCEDURE AND DOCUMENTATIONuse the term FOB in the air shipment. The term FCA is also used in the RO/RO (rollon/roll off) servicesIn the export quotation, indicate the point of departure (loading) after the acronym FCA,for example FCA Hong Kong and FCA Seattle. Some manufacturers may use the formerterms FOT (Free on Trucks) and FOR (Free on Rail) in selling to export-traders.FAS {+the named port of origin}Free Alongside Ship: Goods are placed in the dock shed or at the side of the ship, on thedock or lighter, within reach of its loading equipment so that they can be loaded aboardthe ship, at seller’s expense. Buyer is responsible for the loading fee, maincarriage/freight, cargo insurance, and other costs and risks In the export quotation,indicate the port of origin(loading)after the acronym FAS, for example FAS New Yorkand FAS Bremen. The FAS term is popular in the break-bulk shipments and with theimporting countries using their own vessels.FOB {+the named port of origin)Free on Board: The delivery of goods on the board the vessel at the named port of origin(Loading) at seller’s expense. Buyer is responsible for the main carriage/freight, cargoinsurance and other costs and risks. In the export quotation, indicate the port of origin(loading) after the acronym FOB, for example FOB Vancouver and FOB Shanghai.Under the rules of the INCOTERMS 1990, the term FOB is used for ocean freight only.However, in practice, many importers and exporters still use the term FOB in the airfreight. In North America, the term FOB has other applications. Many buyers and sellersin Canada and the USA dealing on the open account and consignment basis areaccustomed to using the shipping terms FOB Origin and FOB destination.FOB Origin means the buyer is responsible for the freight and other costs and risks. FOBDestination means the seller is responsible for the freight and other costs and risks untilthe goods are delivered to the buyer’s premises which may include the import custom 22
  23. 23. EXPORT PROCEDURE AND DOCUMENTATIONclearance and payment of import customs duties and taxes at the buyer’s country,depending on the agreement between the buyer and seller. In international trade, avoidusing the shipping terms FOB Origin and FOB Destination, which are not part of theINCOTERMS (International Commercial Terms).CFR {+the named port of destination}Cost and Freight: The delivery of goods to the named port of destination (discharge) atthe sellers expenses. Buyer is responsible for the cargo insurance and other costs andrisks. The term CFR was formerly written as C&F. Many importers and exportersworldwide still use the term C&F.In the export quotation, indicate the port of destination (discharge) after the acronymCFR, for example CFR Karachi and CFR Alexandria. Under the rules of theINCOTERMS 1990, the term Cost and Freight is used for ocean freight only. However,in practice, the term Cost and Freight (C&F) is still commonly used in the air freight.CIF {+named port of destination}Cost, Insurance and Freight: The cargo insurance and delivery of goods to the namedport of destination (discharge) at the seller’s expense. Buyer is responsible for the importcustoms clearance and other costs and risks.In the export quotation, indicate the port of destination (discharge) after the acronym CIF,for example CIF Pusan and CIF Singapore. Under the rules of the INCOTERMS 1990,the term CIFI is used for ocean freight only. However, in practice, many importers andexporters still use the term CIF in the air freight. 23
  24. 24. EXPORT PROCEDURE AND DOCUMENTATIONCPT {+the named place of destination}Carriage Paid To: The delivery of goods to the named port of destination (discharge) atthe sellers expenses. Buyer assumes the cargo insurance, import custom clearance,payment of custom duties and taxes, and other costs and risks. In the export quotation,indicate the port of destination (discharge) after the acronym CPT, for example CPT LosAngeles and CPT Osaka.CIP {+ the named place of destination)Carriage and Insurance Paid To: The delivery of goods and the cargo insurance to thenamed place of destination (discharge) at seller’s expense. Buyer assumes the importercustoms clearance, payment of customs duties and texes, and other costs and risks.In the export quotation, indicate the place of destination (discharge) after the acronymCIP, for example CIP Paris and CIP Athens.DAF {+ the names point at frontier}Delivered At Frontier: The delivery of goods to the specified point at the frontier atsellers expense. Buyer is responsible for the import custom clearance, payment of customduties and taxes, and other costs and risks.In the export quotation, indicate the point at frontier (discharge) after the acronym DAF,for example DAF Buffalo and DAF Welland.DES {+named port of destination}Delivered Ex Ship: The delivery of goods on board the vessel at the named port ofdestination (discharge) at sellers expense. Buyer assumes the unloading free, importcustoms clearance, payment of customs duties and taxes, cargo insurance, and other costsand risks. 24
  25. 25. EXPORT PROCEDURE AND DOCUMENTATIONIn the export quotation, indicate the Port of destination (discharge) after the acronymDES, for example DES Helsinki and DES Stockholm.DEQ {+ the named port of destinationDelivered Ex Quay: The delivery of goods to the Quay (the port) at the destination atbuyers expense. Seller is responsible for the importer customs clearance, payment ofcustoms duties and taxes, at the buyers end. Buyer assumes the cargo insurance and othercosts and risks. In the export quotation, indicate the Port of destination (discharge) afterthe acronym DEQ, for example DEQ Libreville and DEQ Maputo.DDU {+ the named point of destination}Delivered Duty Unpaid: The delivery of goods and the cargo insurance to the final pointat destination, which is often the project site or buyers premises at sellers expense. Buyerassumes the import customs clearance, payment of customs duties and taxes. The sellermay opt not to insure the goods at his/her own risks.In the export quotation, indicate the point of destination (discharge) after the acronymDDU for example DDU La Paz and DDU N’djamena.DDP {+ the named point of destination)Delivered Duty Paid: The seller is responsible for most of the expenses which includethe cargo insurance, import custom clearance, and payment of custom duties, and taxes atthe buyers end, and the delivery of goods to the final point of destination, which is oftenthe project site or buyers premise. The seller may opt not to insure the goods at his/herown risk. In the export quotation, indicate the point of destination (discharge) after theacronym DDP, for example DDP Bujumbura and DDP Mbabane. 25
  26. 26. EXPORT PROCEDURE AND DOCUMENTATION“E”-term,”F”-term, “C”-term &”D”-term: Incoterms 2000, like its immediatepredecessor, groups the term in four categories denoted by the first letter in the three-letter abbreviation. • Under the “E”-TERM (EXW), the seller only makes the goods available to the buyer at the seller’s own premises. It is the only one of that category. • Under the “F”-TERM (FCA, FAS, &FOB), the seller is called upon to deliver the goods to a carrier appointed by the buyer. • Under the “C”-TERM (CFR, CIF, CPT, & CIP), the seller has to contract for carriage, but without assuming the risk of loss or damage to the goods or additional cost due to events occurring after shipment or discharge. • Under the “D”-TERM (DAF, DEQ, DES, DDU & DDP), the seller has to bear all costs and risks needed to bring the goods to the place of destination.All terms list the seller’s and buyer’s obligations. The respective obligations of bothparties have been grouped under up to 10 headings where each heading on the seller’sside “mirrors” the equivalent position of the buyer. Examples are Delivery, Transfer ofrisks, and Division of costs. This layout helps the user to compare the parties respectiveobligations under each Incoterms. 26
  27. 27. EXPORT PROCEDURE AND DOCUMENTATION PROCESSING AN EXPORT ORDERYou should not be happy merely on receiving an export order. You should firstacknowledge the export order, and then proceed to examine carefully in respect of • Items • Specification • Pre-shipment inspection • Payment conditions • Special packaging • Labeling and marketing requirements • Shipment and delivery date • Marine insurance • Documentation requirement etc.If you are satisfied on these aspects, a formal confirmation should be sent to the buyer,otherwise clarification should be sought from the buyer before confirming the order.After confirmation of the export order immediate steps should be taken for procurement/manufacture of the export goods. In the meanwhile, you should proceed to enter into aformal export contract with the overseas buyer.Before accepting any order necessary homework should have been done as to availabilityof the production capacity, raw material e.t.c. It would be in the interest of the exporter tolook into entering into forward contract to safeguard against exchange rate fluctuations.Ensure that the mode of payment is also agreed upon. In case of shipment against letter ofcredit, the buyer should be advised to open the credit well in advance before effecting theshipment. 27
  28. 28. EXPORT PROCEDURE AND DOCUMENTATION FINANCIAL RISKS INVOLVED IN FOREIGN TRADEAs an exporter while selling goods abroad, you encounter various types of risks. Themajor risks which you have to undergo are as follows: • Credit Risk • Currency Risk • Carriage Risk • Country RiskYou can protect yourself against the above risks by initiating appropriate steps.Credit Risks :You can cover your credit risk against the foreign buyer by insisting upon opening aletter of credit in your favour. Alternatively one can avail of the facility offered byvarious credit risk agencies. A specific insurance cover can also be obtained from ECGC(Exports Credit & Guarantee Corporation) to cover your country risk besides coveringcredit risk.Currency Risks:As regards covering the currency risk, due to the exchange rate fluctuations, you canrequest your banker to book a forward contract.Carriage Risk:The carriage risk can be covered by taking an appropriate general insurance policy.Country Risk: 28
  29. 29. EXPORT PROCEDURE AND DOCUMENTATIONECGC provides cover to protect the exporter from country risks. A detailed procedurehow an exporter can get himself protected against the above risks are given in separatechapters later. EXPORT DOCUMENTSAny export shipment involved various documents required by various authorities such ascustoms, excise, RBI, Inspection and according depending upon the requirements, thereare categorized into 2 categories, namely commercial documents and regulatorydocuments. A. Commercial Documents. : - Commercial documents are required for effecting physical transfer of goods and their title from the exporter to the importer and the realisation of export sale proceeds. Out of the 16 commercial documents in the export documentation framework as many as 14 have been standardised and aligned to one another. These are proforma invoice, commercial invoice, packing list, shipping instructions, intimation for inspection, certificate, of inspection of quality control, insurance declaration, certificate of insurance, mates receipt, bill of lading or combined transport document, application for certificate origin, certificate of origin, shipment advice and letter to the bank for collection or negotiation of documents. However, shipping order and bill of exchange could not be brought within the fold of the Aligned Documentation System,1. Commercial Invoice: Commercial invoice is an important and basic export document. It is also known as a Document of Contents as it contains all the information required for the preparation of other documents. It is actually a sellers bill of merchandise. It is prepared by the exporter after the execution of export order giving details about the goods shipped. It is essential that the invoice is prepared in the name of the buyer or the consignee mentioned in the letter of credit. It is a prima facie evidence of the contract of sale or purchase and therefore, must be prepared strictly in accordance with the contract of sale. 29
  30. 30. EXPORT PROCEDURE AND DOCUMENTATION Contents of Commercial Invoice • Name and address of the exporter. • Name and address of the consignee. • Name and the number of Vessel or Flight. • Name of the port of loading. • Name of the port of discharge and final destination. • Invoice number and date. • Exporters reference number. • Buyers reference number and date. • Name of the country of origin of goods. • Name of the country of final destination. • Terms of delivery and payment. • Marks and container number. • Number and packing description. • Description of goods giving details of quantity, rate and total amount in terms of internationally accepted price quotation. • Signature of the exporter with date. Significance of Commercial Invoice • It is the basic document useful in preparation of various other shipping documents. • It is used in various export formalities such as quality and pre-Shipment inspection excise and customs procedures etc. • It is also useful in negotiation of documents for collection and claim of incentives. • It is useful for accounting purposes to both exporters as well as importers.2 Inspection Certificate: The certificate is issued by the inspection authority such as the export inspection agency. This certificate states that the goods have been inspected before shipment, and that they confirm to accepted quality standards. 30
  31. 31. EXPORT PROCEDURE AND DOCUMENTATION3 Marine insurance policy: Goods in transit are subject to risk of loss of goods arising due to fire on ship, perils of sea, theft etc. marine insurance protects losses incidental to voyages and in land transportation. Marine insurance policy is one of the most important document used as collateral security because it protects the interest of all those who have insurable interest at the time of loss. The exporter is bound to insure the goods in case of CIF quotation, but he can also insure the goods in case of FOB contract, at the request of the importer, but the premium payment will be made by the exporter. There are different types of policies such as • SPECIFIC POLICY: This policy is taken to cover different risks for a single shipment. For a regular exporter, this policy is not advisable as he will have to take a separate policy every time a shipment is made, so this policy is taken when exports are in frequent. • Floating Policy: This is taken to cover all shipments for some months. There is no time limit, but there is a limit on the value of goods and once this value is crossed by several shipments, then it has to be renewed. • Open Policy: This policy remains in force until cancelled by either party i.e. insurance company or the exporter. • Open Cover Policy: This policy is generally issued for 12 months period, for all shipments to one or more destinations. The open cover may specify the maximum value of consignment that may be sent per ship and if the value exceeded, the insurance company must be informed by the exporter. • Insurance Premium: Differs upon product to product and a number of such other factors, such as, distance of voyage, type and condition of packing, etc. Premium for air consignments are lowered as compared to consignments by sea.4. Consular Invoice: Consular invoice is a document required mainly by the Latin American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This invoice is the most important document, which needs to be submitted for certification to the Embassy of the importing country concerned. The main purpose 31
  32. 32. EXPORT PROCEDURE AND DOCUMENTATIONof the consular invoice is to enable the authorities of the importing country tocollect accurate information about the volume, value, quality, grade, source, etc., ofthe goods imported for the purpose of assessing import duties and also for statisticalpurposes. In order to obtain consular invoice, the exporter is required to submitthree copies of invoice to the Consulate of the importing country concerned. TheConsulate of the importing country certifies them in return for fees. One copy of theinvoice is given to the exporter while the other two are dispatched to the customsoffice of the importers country for the calculation of the import duty. The exporternegotiates a copy of the consular invoice to the importer along with other shippingdocuments.Significance of Consular Invoice for the Exporter • It facilitates quick clearance of goods from the customs in exporters as well as importers country. • Certification of goods by the Consulate of the importing country indicarer that the importer has fulfilled all procedural and licensing formalities for import of goods. • It also assures the exporter of the payment from the importing country.Significance of Consular Invoice for the Importer • It facilitates quick clearance of goods from the customs at the port destination and therefore, the importer gets quick delivery of goods. • The importer is assured that the goods imported are not banned for imported in his country.Significance of Consular Invoice for the Customs Office • It makes the task of the customs authorities easy. • It facilitates quick calculation of duties as the value of goods as determine by the Consulate is considered for the purpose. 32
  33. 33. EXPORT PROCEDURE AND DOCUMENTATION5. Certificate of Origin: The importers in several countries require a certificate of origin without which clearance to import is refused. The certificate of origin states that the goods exported are originally manufactured in the country whose name is mentioned in the certificate. Certificate of origin is required when:- • The goods produced in a particular country are subject to’ preferential tariff rates in the foreign market at the time importation. • The goods produced in a particular country are banned for import in the foreign market.Types of the Certificate of Origin(a) Non-preferential Certificate, of Origin: - Non-preferential certificate of origin is required in general by all countries for clearance of goods by the importer, on which no preferential tariff is given. It is issued by: ¬ • The authorised Chamber of Commerce of the exporting country. • Trade Association. Of the exporting country.(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin required for availing of concessions under Generalised System of Preferences (GSP) extended by certain, countries such as France, Germany, Italy, BENELUX countries, UK, Australia; Japan, USA, etc. This certificate can be obtained from specialised agencies, namely; • Export Inspection Agencies. • Jt. Director General of Foreign Trade.. • Commodity Boards and their regional offices. • Development Commissioner, Handicrafts. • Textile Committees for textile products. • Marine Products Export Development Authority for marine products. • Development Commissioners of EPZs 33
  34. 34. EXPORT PROCEDURE AND DOCUMENTATION(c) Certificate for availing Concessions under Commonwealth Preferences (CWP): Certificate of origin for the purpose of Commonwealth Preference is also known as Combined Certificate of Origin and Value. It is required by two member countries, i.e. Canada and New Zealand of the Commonwealth. For concession under Commonwealth preferences, the certificates or origin have to be submitted in special forms obtainable, from the High Commission of the country concerned.(d) Certificate for availing Concessions under other Systems of Preference:- Certificate of origin is also required for tariff concessions. under the Global System of Trade Preferences (GSTP), Bangkok Agreement(BA) and SAARC Preferential Trading Arrangement (SAPTA) under which India grants and receives tariff concessions On imports and exports. Export Inspection Council (EIC) is the sole authority to print blank Certificates of Origin under BA, SAARC and SAPTA which can be issued by such agencies as EPCs, DCs of EPZs, EIC, APEDA, MPEDA, FIEO, etc...Contents of Certificate of Origin• Name and logo of chamber of commerce.• Name and address of the exporter.• Name and address of the consignee.• Name and the number of Vessel of Flight• Name of the port of loading.• Name of the port of discharge and place of delivery.• Marks and container number.• Packing and container description.• Total number of containers and packages.• Description of goods in terms of quantity.• Signature and initials of the concerned officer of the issuing authority.• Seal of the issuing authority.Significance of the Certificate of Origin 34
  35. 35. EXPORT PROCEDURE AND DOCUMENTATION • Certificate of origin is required for availing of concessions under Generalised System of Preferences (GSP) as well as under Commonwealth Preferences (CWP). • It is to be submitted to the customs for the assessment of duty clearance of goods with concessional duty. • It is required when the goods produced in a particular country are banned for import in the foreign market. • It helps the buyer in adhering to the import regulations of the country. • Sometimes, in order to ensures that goods bought from some other country have not been reshipped by a seller, a certificate of origin IS required.6. Bill of Lading: The bill of lading is a document issued by the shipping company or its agent acknowledging the receipt of goods on board the vessel, and undertaking to deliver the goods in the like order and condition as received, to the consignee or his order, provided the freight and other charges as specified in the bill have been duly paid. It is also a document of title to the goods and as such, is freely transferable by endorsement and delivery.Bill of Lading serves three main purposes: • As a document of title to the goods; • As a receipt from the shipping company; and • As a contract for the transportation of goods.Types of Bill of Lading • Clean Bill of Lading: - A bill of lading acknowledging receipt of the goods apparently in good order and condition and without any qualification is termed as a clean bill of lading. • Claused Bill of Lading: - A bill of lading qualified with certain adversere marks such as, "goods insufficiently packed in accordance with the Carriage of Goods by Sea Act," is termed as a claused bill of lading. 35
  36. 36. EXPORT PROCEDURE AND DOCUMENTATION • Transhipment or Through Bill of Lading: - When the carrier uses other transport facilities, such as rail, road, or another steamship company in addition to his own, the carrier issues a through or transhipment bill of lading. • Stale Bill of Lading: - A bill of lading that has been held too long before it is passed on to a bank for negotiation or to the consignee is called a stale bill of lading. • Freight Paid Bill of Lading: - When freight is paid at the time of shipment or in advance, the bill of landing is marked, freight paid. Such bill of lading is known as freight bill of lading. • Freight Collect Bill of lading :- When the freight is not paid and is to be collected from the consignee on the arrival of the goods, the bill of lading is marked, freight collect and is known as freight collect bill of ladingContents of Bill of Lading • Name and logo of the shipping line. • Name and address of the shipper. • Name and the number of vessel. • Name of the port of loading. • Name of the port of discharge and place of delivery. • Marks and container number. • Packing and container description. • Total number of containers and packages, • Description of goods in terms of quantity. • Container status and seal number. • Gross weight in kg. and volume in terms of cubic meters. • Amount of freight paid or payable. • Shipping bill number and date. • Signature and initials of the Chief Officer. .Significance of Bill of Lading for Exporters 36
  37. 37. EXPORT PROCEDURE AND DOCUMENTATION • It is a contract between the shipper and the shipping company for carriage of the goods to the port of destination. • It is an acknowledgement indicating that the goods mentioned in the document have been received on board for the Purpose of shipment. • A clean bill of lading certifies that the goods received on board the ship are in order and good condition. • It is useful for claiming incentives offered by the government to exporters • The exporter can claim damages from the shipping company if the goods are lost or damaged after the issue of a clean bill of lading.Significance of Bill of Lading for Importers • It acts as a document of title to goods, which is transferable endorsement and delivery. • The exporter sends the bill of lading to the bank of the importer so as to enable him to take the delivery of goods. • The exporter can give an advance intimation to the foreign buyer about the shipment of goods by sending him a non-negotiable copy of bill of ladingSignificance of Bill of Lading for Shipping Company • It is useful to the shipping company for collection of transport charges from the importer, if not collected from the exporter.7. Airway Bill: An airway bill, also called an air consignment note, is a receiptissued by an airline for the carriage of goods. As each shipping company has its own billof lading, so each airline has its own airway bill. Airway Bill or Air Consignment Note isnot treated as a document of title and is not issued in negotiable form. Contents of Airway Bill • Name of the airport of departure and destination. • The names and addresses of the consignor, consignee and the first carrier. 37
  38. 38. EXPORT PROCEDURE AND DOCUMENTATION • Marks and container number. • Packing and container description. • Total number of containers and packages. • Description of goods in terms of quantity. • Container status and seal number. • Amount of freight paid or payable. • Signature and initials of the issuing carrier or his agent. Importance of Airway Bill: It is a contract between the airlines or his agent to carry goods to the destination. It is the document of instructions for the airline handling staff. It acts as a customs declaration form. Since, it contains details about freight it also represents freight bill.7. Shipment Advice to Importer:- After the shipment of goods, the exporter intimates the importer about the shipment of goods giving him details about the date of shipment, the name of the vessel, the destination, etc. He should also send one copy of non-negotiable bill of lading to the importer.8. Packing List: The exporter prepares the packing list to facilitate the buyer to check the shipment. It contains the detailed description of the goods packed in each case, their gross and net weight, etc. The difference between a packing note and a packing list is that the packing note contains the particulars of the contents of an individual pack, while the packing list is a consolidated statement of the contents of a number of cases or packs.9. Bill of Exchange: The instrument is used in receiving payment from the importer. The importer may prefer Bill of Exchange to LC as it does not involve blocking of funds. A bill of exchange is drawn by the exporter on the importer, to make payment on demand at sight or after a certain period of time. • B/E is a means to collect payment. • B/E is a means to demand payment. • B/E is a means to extent the credit. • B/E is a means to promise the payment. 38
  39. 39. EXPORT PROCEDURE AND DOCUMENTATION • B/E is an official acknowledgement of receipt of payment. • Financial documents perform the function of obtaining the finance collection of payment etc. • 2 sets. Each one bearing the exclusion clause making the other part of the draft invalid. • Sight B/E. • Usance B/E. • It is known as draft. • Immediate payment – Sight draft. • There are two copies of draft. Each one bears reference to the other part A&B. when any one of the draft is paid, the second draft becomes null and void.Parties to bill of exchange. 1. The drawer: The exporter / person who draws the bill. 2. The drawee: The importer / person on whom the bill is drawn for payment. 3. The payee: The person to whom payment is made, generally, the exporter / supplier of the goods.B Auxiliary Documents: These documents generally form the basic documents based on which the commercial and or regulatory documents are prepared. These documents also do not have any fixed formats and the number of such documents will wary according to individual requirements. 1. Proforma Invoice: The starting point of the export contract is in the form of offer made by the exporter to the foreign customer. The offer made by the exporter is in the form of a proforma invoice. It is a quotation given as a reply to an inquiry. It normally forms the basis of all trade transactions. Contents of Proforma Invoice • Name and address of the exporter. 39
  40. 40. EXPORT PROCEDURE AND DOCUMENTATION • Name and address of the importer. • Mode of transportation, such as Sea or Air or Multimodal transport. • Name of the port of loading. • Name of the port of discharge and final destination. • Provisional invoice number and date. • Exporters reference number. • Buyers reference number and date. • Name of the country of origin of goods. • Name of the country of final destination. • Marks and container number. . • Number and packing description. • Description of goods giving details of quantity, rate and total amount in terms of internationally accepted price quotation. • Signature of the exporter with date. Importance of Proforma Invoice • It forms the basis of all trade transactions. • It may be useful for the importer in obtaining import licence or foreign exchange.2. Intimation for Inspection: Whenever the consignment requires the pre- shipment inspection, necessary application is to be made to the concerned inspection agency for conducting the inspection and issue of certificate thereof.3. Declaration of Insurance: Where the contract terms require that the insurance to be covered by the exporter, the shipper has to give details of the shipment to the insurance company for necessary insurance cover. The detailed declaration will cover: • Name of the shipper exporter. • Name & address of buyer. 40
  41. 41. EXPORT PROCEDURE AND DOCUMENTATION • Details of goods such as packages, quantity, value in foreign currency as well as in Indian Rs. Etc. • Name of the Vessel Aircraft. • Value for which insurance to be covered. 4. Application of the Certificate Origin: In case the exporter has to obtain Certificate of Origin from the concerned authorities, an application has to be made to the concerned authority with required documents. While the simple invoice copy will do for getting CO from the chamber of commerce, in respect of obtained the same from the office of the Textile Committee or Export Promotion Council, the documents requirement are different. 5. Mates Receipt: Mates receipt is a receipt issued by the Commanding Officer of the ship when the cargo is loaded on the ship. The mates receipt is a prima facie evidence that goods are loaded in the vessel. The mates receipt is first handed over to the Port Trust Authorities. After making payment of all port dues, the exporter or his agent collects the mates receipt from the Port Trust Authorities. The mates receipt is freely transferable. It must be handed over to the shipping company in order to get the bill of lading. Bill of lading is prepared on the basis of the mates receipt.Types of Mates Receipts • Clean Mates Receipt: - The Commanding Officer of the ship issues a clean mates receipt, if he is satisfied that the goods are packed properly and there is no defect in the packing of the cargo or package. • Qualified Mates Receipt: - The Commanding Officer of the ship issues qualified mates receipt, when the goods are not packed properly and the shipping company does not take any responsibility of damage. to the goods during transit.Contents of Mates Receipt 41
  42. 42. EXPORT PROCEDURE AND DOCUMENTATION • Name and logo of the shipping line. • Name and address of the shipper. • Name and the number of vessel. • Name of the port of loading. • Name of the port of discharge and place of delivery. • Marks and container number. • Packing and container description. • Total number of containers and packages. • Description of goods in terms of quantity. • Container status and seal number. • Gross weight in kg. and volume in terms of cubic meters. • Shipping bill number and date. • Signature and initials of the Chief Officer. Significance of Mates Receipt • It is an acknowledgement of goods received for export on board the ship. • It is a transferable document. It must be handed over to the shipping company in order to get the bill of lading. • Bill of lading, which is the title of goods, is prepared on the basis of the mates receipt. • It enables the exporter to clear port trust dues to the Port Trust Authorities. Obtaining Mates Receipt The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mates Receipt to the Port Superintendent.6. Shipping order: it is issued by the Shipping/Conference Line intimating the exporter about the reservation of space for shipment of cargo which the exporter intends to ship. Details of the vessel, poet of the shipment, and the date on which 42
  43. 43. EXPORT PROCEDURE AND DOCUMENTATION the goods are to be shipped are mentioned. This order enables the exporter to make necessary arrangements for customs clearance and loading of the goods.7. Shipping Instructions: at the pre-shipment stage, when the documents are to sent to the CHA for customs clearance, necessary instructions are to be give with relevance to • The export promotion scheme under which goods are to be exported. • Name of the specific vessel on which the goods are to be loaded. • If goods are to be FCL or LCL. • If freight amount are to be paid / collected. • If shipment are covered under A.R.E.-1 procedure. • Instructions for obtaining Bill of Lading etc.8. Bank letter for negotiation of documents: at the post shipment stage, the exporter has to submit the documents to a bank for negotiation or discounting or collection for forwarding the same to the customer and also for realization of export proceeds. The bank letter is the set of instruction for the bank as to how to handle the documents by them and by the bank at the buyer’s country which may include • Name and address of the buyer. • Details of various documents being sent and the number of the copies thereof. • Name and address of the buyer’s bank if available. • If the documents are sent L/C or on open terms. • If the proceeds are to adjusted against any pre-shipment packing credit loan. • If the bill amount is to be adjusted against any forward exchange cover. 43
  44. 44. EXPORT PROCEDURE AND DOCUMENTATION • In case of credit bill who has to bear the interest, either exporter or if the same is to be collected from the buyer. • Instructions in case non-acceptance/non-payment by the buyer.C. Regulatory Document: Regulatory pre-shipment export documents are prescribed by the different government departments and bodies in order to comply with various rules and regulations under the relevant laws governing export trade such as export inspection, foreign exchange regulation, ex port trade control, customs, etc. Out of 9 regulatory documents four have been standardised and aligned. These are shipping bill or bill of export, exchange control declaration (GR from), export application dock challan or port trust copy of shipping bill and receipt for payment of port charges. 1. Shipping Bill: Shipping bill is the main customs document, required by the customs authorities for granting permission for the shipment of goods. The cargo is moved inside the dock area only after the shipping bill is duly stamped, i.e. certified by the customs. Shipping bill is normally prepared in five copies :- • Customs copy. • Drawback copy. • Export promotion copy. • Port trust copy. • Exporters copy.Types of Shipping BillBased on the incentives offered by the government, customs authorities have introducedthree types of shipping bills:- • Drawback Shipping Bill: - Drawback shipping bill is useful for claiming the customs drawback against goods exported. • Dutiable Shipping Bill: - Dutiable shipping bill is required for goods which are subject to export duty. 44
  45. 45. EXPORT PROCEDURE AND DOCUMENTATION • Duty-free Shipping Bill: - Duty-free shipping bill is useful for exporting goods on which there is no export duty.In order to facilitate easy recognition and quick processing, following colours have beenprovided to different kinds of shipping bills :Types of goods By Sea By AirDrawback shipping bill Green GreenDutiable shipping bill Yellow PinkDuty-Free shipping bill White PinkContents of Shipping Bill • Name and address of the exporter. • Name and address of the importer. • Name of the vessel, master or agents and flag. • Name of the port at which goods are to be discharged. • Country of final destination. • Details about packages, description of goods, marks and numbers, quantity and details of each case. • FOB price and real value of goods as defined in the Sea Customs Act. • Whether Indian or foreign merchandise to be re-exported • Total number of packages with total weight and value.Significance of Shipping Bill a) Shipping bill is the main customs document, required by the customs authorities for granting permission for the shipment of goods. b) The cargo is moved inside the dock area only after the shipping bill is duly stamped, i.e. certified by the customs. c) Duly endorsed shipping bill is also necessary for the collection of export incentives offered by the government. d) It is useful to the Customs Appraiser while determining the actual value of goods exported. 45
  46. 46. EXPORT PROCEDURE AND DOCUMENTATION2. A.R.E. 1 form (Central excise): this form ARE-1 is prescribed under Central Excise rules for export of goods. In case goods meant for export are cleared directly from the premises of a manufacturer, the exporter can avail the facility of exemption from payment of terminal excise duty. The goods may be cleared for export either under claim for rebate of duty paid or under bond without payment of duty. In both the events the goods are to be cleared under form A.R.E-1 which will show the details of the goods being exported, the relevant duty involved and if the duty is paid or goods being cleared under bond, details of goods being sealed either by the exporter or Central Excise officials etc.3. Exchange Control declaration Form (GR/PP/SOFTEX): under the exchange control regulations all exporters must declare the details of shipment for monitoring by the Reserve Bank of India. For this purpose, RBI has prescribed different forms for different types of shipments like GRI, PP forms etc. These declaration forms must be presented to the customs officials at the time of passing of export documentation. Under the EDI processing of shipping bill in the customs, these forms have been dispensed with and a new form SDF has to be submitted to the customs in the place of above forms.4. Export Application: this is the application to be made to the customs officials before shipment of goods. The prescribed form of the application is the Shipping Bill/Bill of Export. Different types are required for shipment like ex- bond, duty free goods, and dutiable goods and for export under different export promotion schemes such as claims for duty drawback etc.5. Vehicle Ticket/Cart Ticket/Gate Pass etc.: before the goods are being taken inside the port for loading, necessary permission has to be obtained for moving the vehicle into the customs area. This permission is granted by the Port Trust Authority. This document will contain the detail of the export cargo, name and address of the shippers, lorry number, marks and number of the packages, driver’s licence details etc.6. Bank Certificate of Realisation: this is the form prescribed under the Foreign Trade Policy, wherein the negotiating bank declares the fob value of exports 46
  47. 47. EXPORT PROCEDURE AND DOCUMENTATION and for the date of realisation of the export proceeds. This certificate is required fore obtaining the benefit under various schemes and this value of fob is reckoned as fob value of exports.D. Other Document: • Black List Certificate: it certifies that the ship/aircraft carrying the cargo has not touched the particular country on its journey or that the goods are not from the particular country. This is required by certain nations who have strained political and economical relations with the so called “Black Listed Countries”. • Language Certificate: Importers in the European Community require a language certificate along with the GSP certificate in respect of handloom cotton fabrics classifiable under NAMEX code 55.09. Generally four copies of language certificate are prepared by the concerned authority who issues GSP certificate. Three copies are handed over to the exporter. A copy is sent along with the other documents for realisation of export proceeds. • Freight Payment Certificate: in most of the cases, the B/L or AWB will mention the transportation and other related charges. However if the exporter does not want these details to be disclosed to the buyer, the shipping company may issue a separate certificate for payment of the freight charges instead of declaring on the main transport documents. This document showing the freight payment is called the freight certificate. • Insurance Premium Certificate: this is the certificate issued by the Insurance Company as acknowledgement of the amount of premium paid for the insurance cover. This certificate is required by the bank for arriving at the fob value of the goods to be declared in the bank certificate of realisation. 47
  48. 48. EXPORT PROCEDURE AND DOCUMENTATION • Combined Certificate of Origin and Value: this certificate is required by the Commonwealth Countries. This certificate is printed in a special way by the Commonwealth Countries. This certificate should contain special details as to the origin and value of goods, which are useful for determining import duty. All other details are generally the same as that of Commercial Invoice, such as name of the exporter and the importer, quality and quantity of the goods etc. • Customs Invoice: this is required by the countries like Canada, USA for imposing preferential tariff rates. • Legalized Invoice: this is required by the certain Latin American Countries like Mexico. It is just like consular invoice, which requires certification from Consulate or authorised mission, stationed in the exporter’s country.Special Provision under Uniform Customs and practice for Documentary CreditUCP-500, for Commercial Invoice. • Article-37: Commercial Invoice o Must appear on their face to be issued by the beneficiary named in the credit. o Must be made out in the name of the applicant. o Need not be signed • Banks may refuse Commercial Invoice issued for amounts in excess of the amount permitted by the credit except otherwise stated. • The description of the goods in the commercial invoice must correspond with the description of the credit. In all other documents the goods may be described in the General in general terms not inconsistent with description in the credit. In all documents goods may 48
  49. 49. EXPORT PROCEDURE AND DOCUMENTATION be described in general terms not inconsistent with the Description of the goods in the credit.Pre-Shipment Documents: • Shipping bill. • Export order/Sales contract/Purchase order. • Letter of Credit • Commercial invoice. • Packing list. • Certificate of origin. • Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or SDF. • Certificate of Inspection. • Various declarations required as per custom procedure.Exchange Control Declaration Form: all exports to which the requirement ofdeclaration apply must be declared on appropriate forms as indicated below unless theconsignment is of samples and of ‘No Commercial Value’ • GR FORM: to be completed in duplicate for exports otherwise than by post including export of software in physical form i.e. magnetic tape/discs and paper media. • SDF FORM: to be completed in duplicate and appended to the Shipping Bill for export declare to the customs offices notified by the Central Government which have introduced EDI system for processing Shipping Bill. • PP FORM: to be completed in duplicate for export by post. • SOFTX: to be completed in triplicate for export of software otherwise than in the physical form i.e. magnetic tapes/discs and paper media.These forms are available for sale in Reserve Bank of India 49
  50. 50. EXPORT PROCEDURE AND DOCUMENTATIONExport declaration forms have utmost importance and are binding on the exporters. It is,therefore, necessary that enough care is taken while declaring exports on these forms,with special reference on the following points. • Name and address of the authorised dealer through whom proceeds of exports have been or will be realized should be specified in the relevant column of the form. • Details of commission and discount due to foreign agent or buyer should be correctly declared otherwise difficulties may arise at the time of remittance of such commission. • It should be clearly indicated in the form whether the export is on ‘outright sale basis’ or ‘on consignment basis’ and irrelevant clauses must be stuck out • Under the term ‘analysis of full export value’ a break up of full export value of goods under F.O.B value, freight and insurance should be furnished in all cases, irrespective of the terms of contract. • All documents relating to the export of goods from India must pass through the medium of an authorised dealer in foreign exchange in India within 21 days of shipment. • The amount representing the full export value of goods must be realized within six months from date of shipment.Disposal of Copies of Export Documentation Form • GR forms covering export of goods other than jewellery should be completed by the exporter in duplicate and both the copies should be submitted to customs at the port of Shipment. Customs will give their running serial number on both the copies of the GR forms after verifying the particulars and admitting the corresponding shipping bill. The value declared by the exporter will also be verified by the customs and they will also record the assessed value. Duplicate copy will be returned to the exporter and the original will be remained by the 50
  51. 51. EXPORT PROCEDURE AND DOCUMENTATION customs for onward submission to the Reserve Bank. Duplicate form of the GR form will again be presented to the customs at the time of actual shipment. After examination of goods and certifying the quantity passed for shipment the duplicate copy will again be returned to exporter for submission to an authorised dealer. However, an exception to submission of GR forms to the Customs authorities have been made in case of deep sea fishing.• (a) PP forms are to be first presented to an authorised dealer for countersignature. The form will be countersigned by the authorised dealer only if the post parcel is addressed to his branch or correspondent bank in the country or import. The concerned overseas branch or correspondent is to be instructed to deliver the post parcel against payment or acceptance of relevant bill, as the case may be. (b) For post parcel addressed directly to the consignee, the authorised dealer will countersign the form, provided — (i) an irrevocable letter of credit for the full value of export has been opened in favour of exporter and has been advised through authorised dealer concerned; or (ii) the full value of shipment has been received in advance by the exporter through an authorised dealer; or (iii) On receipt of full value of shipment declared on this form the authorised dealer will forward to RBI the duplicate copy along with the certified copy of shipper’s invoice. (iv) The authorised is satisfied on the basis of standing and track record of the exporter and arrangements made for realisation of the export proceed that he cold do so. If the authorised dealer is not satisfied about standing etc. of the exporter, the application is rejected. No reference is entertained by the Reserve Bank in such cases. 51
  52. 52. EXPORT PROCEDURE AND DOCUMENTATION (c) The original PP form countersignature will be returned to the exporter by the authorised dealer and the duplicate will be retained by him. Original PP form should then be submitted to the post office along with the parcel. The post office through the goods have been dispatched will forward the original to RBI. The export of computer software may be undertaken in physical form i.e. softwareprepared on magnetic tape and paper media as well as in non-physical form by direct datatransmission through dedicated earth stations/satellite links. The export of computersoftware in physical form is subject to normal declaration on GR/PP form and regulationsapplicable there to will also be applicable to such exports. However, export of non-physical form should be declared on SOFTEX Form. Besides computer software, exportof video / T.V. Software and all other types of software products / packages should alsobe declared on the SOFTEX forms. Since export of software is fraught with many risksand special guidelines have been framed for handling such exports. 52
  53. 53. EXPORT PROCEDURE AND DOCUMENTATION OCTROI • Octroi is the local tax levied by the civic body on goods entering into the city. • There are three procedures for clearing goods which are meant for export.Procedure – 1, Export on payment of octroi duty and refund thereof after export.Pay the Octroi Duty and apply for refund of payment made. • At Octroi Naka form B is issued with cash receipt for the payment of Octroi Duty. • Cargo is moved to the docks. • At Docks Octroi officer prepares form”C” & endorses Shipping Bill Number & Steamers Name. • After shipment exporter prepares claim for refund by submitting following documents: • Covering Letter for refund of Octroi Duty. • Original receipt of Octroi paid. • Original Form B. • Original Form C. • Invoice under which material was bought to the city. • Export invoice issued by the Exporter to the importer. • Export Promotion Copy of Shipping Bill – Photo Copy. • Bill of Lading or Airway Bill Copy. 53
  54. 54. EXPORT PROCEDURE AND DOCUMENTATIONProcedure – 2, Export without payment of Octroi Duty.N Form Procedure. • Prepares form N in 3 copies. • Checking of documents Shipping Bill, Carting order, Export Invoice by Octroi officer. • Under taking that the goods will be cleared for export within 7 days of clearance through the octroi post. • Octroi officer at Docks will endorse the Shipping Bill number & shipment details on N form. • Proof of export... N form with above endorsement to be submitted to the Head Office along with copies of Shipping Bill, Bill of Lading, Export Invoice etc.Procedure – 3E.P (Export Promotion) Form. • Registration form + IEC / RCMC + CA Certificate. • Number will be allotted. • Fees Rs. 500/-Documents Checked • Factory Challan cum Invoice. • ARE –1. • EP forms 3 copies. • Export order. • Shipping Bill. 54

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