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 IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF BACHELOR OF MANAGEMENT STUDIES

ACADEMIC YEAR 2 !"2 #

EXPORT PROCEDURE AND DOCUMENTATION

DECLARATION

I M$%%. DIVYA THINGALAYA OF VIVE& COLLEGE OF COMMERCE OF T.Y.B.M.S. 'SEMESTER VI( HEREBY DECLARE THAT I HAVE COMPLETED THIS PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THE ACADEMIC YEAR2 !)2 #. THE INFORMATION SUBMITTED IS TRUE AND

ORIGINAL TO THE BEST OF MY &NOWLEDGE.

DATE* PLACE* 'SIGNATURE OF THE STUDENT(

EXPORT PROCEDURE AND DOCUMENTATION

CERTIFICATE

I Prof. MONA HERBY CERTIFY THAT M$%%. DIVYA THINGALAYA OF VIVE& COLLEGE OF COMMERCE OF T.Y.B.M.S. 'SEMESTER VI( HAS COMPLETED THE PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THE ACADEMIC YEAR 2 ! ) 2 #. THE INFORMATION SUBMITTED IS TRUE+

ORIGINAL AND AUTHENTIC TO THE BEST OF MY &NOWLEDGE.

SIGNATURE OF PRINCIPLE GUIDE 'Prof. SUNIL .B. MANTRI(

SIGNATURE OF PROJECT

'Prof. MONA(

EXPORT PROCEDURE AND DOCUMENTATION

AC&NOWLEDGEMENT
IT IS THE MATTER OF GREAT PLEASURE AND PRIVILEGE TO BE ABLE TO PRESENT THIS PROJECT REPORT ON EXPORT PROCEDURE AND DOCUMENTATION. THE COMPILATION OF THE PROJECT IS A MILESTONE IN THE LIFE OF THE MANAGEMENT STUDENT AND ITS EXECUTION IS INEVITABLE WITH THE CO"OPERATION OF THE PROJECT GUIDE. I WISH TO RECORD A DEEP SENSE OF RESPECT AND GRATITUDE TO MY PROJECT GUIDE+ PROF. MONA FOR HER ENCOURAGEMENT TO COURSE OF MY WOR&. IT IS DUE TO THE ENDURING EFFORT AND GUIDANCE OF MY GUIDE THAT ULTIMATELY MADE IT SUCCESS. I ALSO TA&E THIS OPPORTUNITY TO EXPRESS MY DEEP REGARDS AND GRATITUDE TO THE PRINCIPLE SUNIL MANTRI AND WOULD LI&E TO THAN& THE HEAD OF B.M.S. DEPARTMENT PROF. MONA WHO GAVE US GUIDANCE TO TA&E UP AND PURSUE THE PROJECT I CANNOT JUST CONDONE THE VALUABLE OPPORTUNITY GIVE TO ME BY THE UNIVERSITY OF MUMBAI FOR COMPILING AND SUBMITTING THE PROJECT+ WHICH I FEEL IS AN OPPORTUNITY TO EXPRESS MY VIEWS ABOUT EXPORT PROCEDURE AND DOCUMENTATION. I AC&NOWLEDGE MY INDEBTNESS TO VARIOUS AUTHORS FOR MA&ING USE OF VALUABLE INFORMATION LIBERALLY. IT IS MY PROUD PRIVILEGE TO EXPRESS MY DEEP SENSE OF APPRECIATION AND GRATITUDE TO MY PARENTS AND FRIENDS FOR THEIR SUPPORT AND CO"OPERATION IN THE COURSE OF THE PROJECT EITHER DIRECTLY OR INDIRECTLY INVOLVED IN TIME WITH THEIR VALUABLE CONTRIBUTION. 4

EXPORT PROCEDURE AND DOCUMENTATION

INDEX
SERIAL NUMBER , 2 . / 0 ! # 1 , ,, ,2 ,. ,/ ,0 CONTENT INTRODUCTION HOW TO SET UP AN EXPORT ORGANISATION HOW ONE BEGINS TO DO EXPORT EXPORT SALES & CONTRACT TERMS & CONGITIONS TERMS OF SHIPMENT ) INCOTERMS. PROCESSING AN EXPORT ORDER FINANCIAL RIS& INVOLVED IN FOREIGN TRADE EXPORT DOCUMENTS OCTROI QUALITY CONTROL PAGE NUMBE R ! ,/ ,# 2 2# 221 0. 0# ! !! !#, --

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PRE"SHIPMENT

INSPECTION SHIPPING ANG CUSTOMS FORMALITIES SALES TAXES EXEMPTION PROCEDURE METHODS OF RECEIVING PAYMENTS AGAINST EXPORTS THE LETTER OF CREDIT PREPARATION AND

SUBMISSION

OF

DOCUMENTS FOR BAN& NEGOTIATIONOR ,! ,# ,PURCHASE SHIPMENT THROUGH COURIERS CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM THE ECGC COVER. 1, 12 ,,2

INTRODUCTION
India has a mission to capture 2% of the global share of trade by 20010, up from the present level of less than 1%. E port is one of the lucrative business activities in India. !he government also provides various promotional schemes to the e porters for "

EXPORT PROCEDURE AND DOCUMENTATION earning valuable foreign e change for the country and for meeting their re#uirements for importing modern technology and essential inputs. $esides, the income from e port business is also e empted to the specified e tent under the Income !a %ct, 1&'1, (efund of )entral E cise and )ustom *uty on e port is also made under the *uty *ra+bac, -cheme of the .overnment. !here is no -ales !a on products meant for e ports. E ports can be of goods +hich can be moved physically from one country to another or can be of service rendered. *etailed list of services are given in the /oreign !rade 0olicy covering more than 1'0 items e.g. Insurance, 1ospital, 0ostal and !elecommunication etc. TWO CLASSES OF EXPORTS* 0hysical E ports2 If the goods physically go out of the country or services are rendered outside the country then it is called as physical e port. *eemed E ports2 3here the goods do not go out of the country physically they can be termed as deemed e ports. !his +ill be sub4ect to certain conditions as prescribed by the *./!. 5nder *eemed E ports, the goods may be supplied to the manufacturer e porter +ho ultimately e port a finished product of +hich this supply forms a part and ultimately go out of the country. E.g. -upply of fabrics to the garment e porter +ho e ports the garments made out of the said fabric. !he government may announce from time to time the types of supplies that may be considered as deemed e port. !he /oreign !rade 0olicy gives the list of supplies considered under the *eemed E port )ategory. !he policies and procedures are different for 0hysical E ports and *eemed E ports as also the benefits available. In a nutshell, *eemed E ports do not en4oy all the benefits that are available under 0hysical E port. !he /oreign !rade defines e ports as ta,ing out of India any goods by land, sea, air. %lthough the act does not term them as 60hysical E ports7, +e have to put phrase to distinguish it from 6*eemed E ports7 +hich is sales in India but considered as e ports for limited purpose.

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EXPORT PROCEDURE AND DOCUMENTATION TYPES OF EXPORTERS2 E porters can be basically classified into t+o groups Manufacturer Exporter: %s the e porter has the facility to manufacturer the product he intends to e port and hence he e ports the products manufactured by him. Merchant Exporter: %n e porter +ho does not have the facility to manufacture an item. $ut, he procures the same from other manufacturers or from the mar,et and e ports the same. %n e porter can be both a manufacturer e porter as +ell as a merchant e porter, he can e port product manufactured by him or he can e port items bought from the mar,et. 8nce it is decided to e port, it is mandatory on your part to follo+ certain procedures, rules and regulations as prescribed by various regulatory authorities such as *./!, ($I, and )ustoms. !hese procedures, rules and regulations are laid do+n in the E im 0olicy 200490&, E change )ontrol :anual, )ustoms %ct etc. %ccordingly E port documents are re#uired to be prepared ,eeping in vie+ of the re#uirement of the foreign buyers and our regulatory authorities.

HOW TO SET UP AN EXPORT ORGANISATION

!he proper selection of organi;ation depends upon %bility to raise finance. )apacity to bear the ris,. <

EXPORT PROCEDURE AND DOCUMENTATION *esire to e ercise control over the business. =ature of regulatory frame+or, applicable to anyone If the si;e of the business is small, it +ould be advantageous to form a sole proprietary business organi;ation. It can be set up easily +ithout much e penses and legal formalities. It is sub4ected to only fe+ governmental regulations. 1o+ever, the biggest disadvantage of sole proprietorship business is limited ability to raise funds +hich restricts the gro+th. $esides the o+ner has unlimited personal liabilities. In order to avoid this disadvantage, it is advisable to form a partnership firm. !he partnership firm can also be set up +ith ease and economy. $usiness can ta,e benefit of the varied e periences and e pertise of the partners. !he liability of the partners though 4oint and several, is practically distributed amongst the various partners, despite the fact that the personal liability of the partner is unlimited. !he ma4or disadvantage of partnership firm of business organi;ation is that conflict amongst the partners is a potential threat to the business. It +ill not be out of place to mention here that partnership firms are governed by the Indian 0artnership %ct, 1&32 and, therefore they should be formed +ithin the parameters laid do+n by the %ct. )ompany is another form of business organi;ation, +hich has the advantage of distinct legal identity and limited liability to the share holders. It can be a private limited company or a public limited company. % private limited can be formed by 4ust t+o persons subscribing to its share capital. 1o+ever, the number of its shareholders cannot e ceed "0, public cannot be invited to subscribe to its capital and the members right to transfer their share is restricted. 8n the other hand, a pubic limited company has a minimum of seven members. !here is no limit on the ma imum number of its members. It can invite the public to subscribe to its capital and permit the transfer of share. % public limited company offers enormous potential for gro+th because of access to substantial funds. !he li#uidity of investment is high because of easiness of transfer of shares. 1o+ever its formation can be recommended only +hen the si;e of the business is large. /or small business, a sole proprietary concern or a partnership firm +ill be the most suitable form of business organi;ation. In case it is >

EXPORT PROCEDURE AND DOCUMENTATION decided to incorporate a private limited company, the same is to be registered +ith the (egistrar of )ompanies. CHOOSING APPROPRIATE MODE OF OPERATIONS* ?ou can choose any of the follo+ing modes of operations :erchant E porter i.e. buying the goods from the mar,et or from the manufacturer and then selling it to foreign buyers. :anufacturer E porter i.e. manufacturing the goods yourself for e port. -ales %gent @ )ommission %gent @ Indenting %gent i.e. acting on behalf of the seller and charging the )ommission. $uying %gent i.e. acting on behalf of the buyer and charging )ommission. -ervice provider i.e. providing service from India to another country.

NAMING THE BUSINESS 3hatever form of business organi;ation has been finally decided, naming the business is an essential tas, for every e porter. !he name and style should be soft, attractive, short and meaningful. 8pen a current account in the name of the organisation in +hose name you intend to e port. It is advisable to open the account +ith a ban, +hich is authorised to deal in /oreign E change.

STRUCTURE OF AN EXPORT ORGANISATION mar,eting manager for generating sales )ommercial manager for loo,ing activities of the e ecution of the orders. staff personnel for carrying out the day9to9day activities namely

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EXPORT PROCEDURE AND DOCUMENTATION o 0reparation of pre 9 shipment documents. o )o9ordinating +ith clearing agents on the progress of the shipment to be made. o )o9ordinating +ith the +are houseA). e cise department regarding pac,ing and clearance of the goods for e port. o 0reparation of post shipment documents foe ban,s. o /ollo+9up +ith the ban, on dispatch of documents, receipt of payment, availment of ban, loans etc. !o loo, into the re#uirement of licenses, claiming of e port benefits fiiling of documents +ith the .overnment %uthorities in *ischarge of E port 8bligations, if any, filing of returns to the various .overnment %gencies +hich are mandatory, prepare and ,eep an information ban, of various transaction of the company, their domestic as +ell as international competitors. %n office boy for doing leg +or,. % clearing and for+arding agent to handle the documents and the goods in the customs premisesA in the ports of lading. *epending upon the si;e of the business the numbers of personnel under each category may increase. /or e ample if a company is transacting substantial volume of business in more than one product. !hen it is necessary to have mar,eting manager for each product so that the person can concentrate on a particular trade to enhance the business.

REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING IMPORTER EXPORTER CODE 'IEC( NUMBER.

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EXPORT PROCEDURE AND DOCUMENTATION !he )ustoms %uthorities +ill no+ allo+ the e porter to e port or import goods into or from India unless he holds a valid IE) number. $efore applying for IE) number it is necessary to open a ban, account in the name of the company +ith any commercial ban, authori;ed to deal in foreign e change. !he duly signed application form should be supported by the follo+ing documents. $an, receipt B in duplicate C @ *emand *raft for payment of the fees of (s. 1000@9 )ertificate from the ban,er of the applicant firm as per %nne ure 1 to the form given. 8ne copy of 0%= number issued by Income !a %uthorities duty attested by the applicant. 8ne copy of 0assport -i;e photographs of the applicant duly attested by the ban,er to the applicant. *eclaration by the applicant that the proprietor@partners@directors as the case may be of the applicant company, are not associated as proprietor@partners@directors in any other firm, +hich has been caution, listed by the ($I. 3here the applicant declares that they are associated as proprietor@partners@directors in any other firm, +hich has been caution, listed by the ($I, they +ill be allotted IE) =o. but +ith an additional condition that they can e port only +ith ($IDs prior approval and they should approach ($I for the purpose. Each importer@e porter shall be re#uired to file importer@e porter profile once +ith the licensing authority shall enter the information furnished in %ppendi 2 in their database so as to dispense +ith changes in the information given in %ppendi 92, importer@e porter shall intimate the same to the licensing authority.

IEC EXEMPT CATEGORIES.

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EXPORT PROCEDURE AND DOCUMENTATION !he follo+ing importer e porter is e empted from the re#uirement of IE) code number. :inistries A *epartment of )entral or -tate .overnment. 0erson importing or e porting goods for their personal use not connected +ith trade or manufacture or agriculture. 0ersons importingAe porting goods fromAto =epal E :yanmar provided the )I/ value of single consignment does e ceed Indian (s. 2"000A9. APPLICATION FOR OBTAINING AN IEC NUMBER /or obtaining IE) number apply in the prescribe form along +ith the documents listed above to (egional Ficensing %uthority B8ffice of the (egional *./!C. !he registered office or the head office may apply for allotment of IE) =o. 3henever, there is a change in the name, address or constitution of the holder of IE) =o., such change should be intimated +ithin 30 days to the concern authorities. IE) certificate +ill be issued in the form Bcopy enclosedC. % copy of IE) =o. is also endorsed to the concerned ban,er. VALIDITY 2 !he IE) =o allotted to a firm@company +ill be valid for all its branches@divisions units@factories as indicated in the IE) =o. Import@E port of any commodity by that firm@company. !here being no date of e piry, the IE) once allotted is valid till it is revo,ed. $ut, if no import or e port is effected in the previous financial year, the same +ill be made inoperative. 1o+ever, this can be made operative by a formal re#uest to the *./!.

IDENTITY CARD 'For 2o34526$37 6r83%826$o3% 9$6: 6:; off$2; of DGFT(*

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EXPORT PROCEDURE AND DOCUMENTATION %s it is not al+ays possible for the top man or directors, promoters of the company to visit *./! fre#uently. !here is a provision of issuance of identity cards to the proprietors@partners@directors and their authori;ed representatives. %n application of Issuance of an identity card may be made in the form B%ppendi 9"C !he document@ Ficense@)ertificate@0ermissions may be delivered to the identity card holder and officials of the Ficensing %uthorityB*./!Cshall not be responsible for any loss etc. In case of loss of an identity card a duplicate card may be issued on the basis of an /I( E affidavit. In addition to obtaining the IE) =o. the e porter is also re#uired to obtain $usiness Identification =oB$I=C. /or this e porter is re#uired to contact *./! online on +eb site. !he licensing authority issues $I= in coordination +ith customs authorities. !his $I= is re#uired to be mentioned on the shipping bills at the time of customs clearance of the e port cargo. RCMC 'R;7$%6r86$o3"C5<"M;<=;r%:$> C;r6$f$286;( ) REGISTRATION WITH EXPORT PROMOTION COUNCILS ) In order to enable the e porter to obtain benefits@concessions under the /oreign !rade 0olicy, the e porter is re#uired to register himself +ith an appropriate e port promotion agency by obtaining registration9cum9membership certificate. B():)C. If the e port product is that it is not covered by any E0), ():) in respect thereof may be issued by /IE8. %n application for registration should be accompanied by a self certified copy of the Importer9E porter )ode number issued by the regional licensing authority concerned and ban, certificate in support of the applicants financial soundness. !he ():) shall be valid for " years ending 31st :arch of the licensing year. REGISTRATION WITH SALES TAX AUTHORITIES* .oods that are to be shipped out of the country for e port are eligible for e emptions from both -ales !a and )entral -ales !a . /or this purpose, e porter should get himself registered +ith the -ale !a %uthority of is state after follo+ing the procedures prescribed under the -ales !a %ct applicable to his state.

HOW ONE BEGINS TO DO EXPORT

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EXPORT PROCEDURE AND DOCUMENTATION $efore entering into the venture of e ports, one must loo, for the product to be e ported and the mar,et +here he intends to e port. In case of a manufacturer, obviously he +ould li,e to e port the product he manufactures as is or +ith possible modification as may be re#uired by the mar,et. 1o+ever, in case of a merchant e porter or a trader, one has to identity the product to e port. If the e porter is already in the trade in the domestic mar,et and is familiar +ith the product it +ould be an advantage to e port the said product of +hich he has reasonable ,no+ledge. $efore selecting a product, one must simultaneously made a study and find out the prospective mar,et. /or finding out the mar,et for the selected product, the follo+ing methods +ill help. .et statistical information as to imports of the product by various countries and their gro+th prospects in the respective countries %pproach the chamber of commerce for their guidance to find out the mar,et. %pproach the E port 0romotion )ouncil dealing in the product of selection to get more information. The Preliminary 8nce you are ready +ith the product you +ish to e port and have found the mar,et for the same, you are ready to proceed further. /ollo+ing se#uences can be follo+ed2 %ny one, +ho +ishes to e port, must first of all get an Importer Exporter Code Number (IE Code).!his can be obtained by ma,ing a formal application to the office of the Re ional !irectorate "eneral of #orei n Trade (!"#T). "et your$elf re i$tered %ith the related Export Promotion Council and become a member. &l$o arran e to obtain Re i$tration'Cum'Member$hip Certificate (RCMC) from the council. !his has t+in ob4ectives2 o 5nder the /oreign !rade 0olicy, it is mandatory that an e porter gets him registered +ith the E port 0romotion )ouncil to avail of various e port facilities.

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EXPORT PROCEDURE AND DOCUMENTATION o $eing a member, you +ill have access to all the information relating to the product that could be made available by the council o :any foreign buyers send their en#uiries for the imports to the E port 0romotion )ouncil. 1ence you +ill have fe+ customers interested in your product. If you are a manufacturer, find out the provisions under the EGI: 0olicy of getting the ra+ materials duty free. .et familiar +ith the e cise formalities as goods meant for e port can be cleared +ithout payment of ). E cise duty on the finished product sub4ect to compliance of certain formalities. 5nderstand the local government regulations in relations to the e port of the product. .et information of the governmentDs regulations of the importing country as to restrictions on the #uantity, product specification, pac,ing regulations, customs regulations, re#uirement of specific documents@information etc. %vailability of Hessels@%irlines, the transport charges, fre#uency of operation etc., !o loo, for a )ustom 1ouse %gent B)1%C Balso ,no+ as freight for+arders or clearing agentsC for handling the documents@cargo in the customs. If the product is covered under any #uota regulation, find out the agency@council +ho are handling the #uota distribution for the product and the availability of #uota for e ports. FINDING A CUSTOMS 8nce you have selected the mar,et, the ne t step is to find a prospective customer. !his you can get /rom the directory of importers of the country $y +riting to the Embassy of India in that country for assistance $y +riting to the chamber of commerce of that country

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EXPORT PROCEDURE AND DOCUMENTATION $y means of participation in a /air@E hibition abroad either directly or through the E port 0romotion )ouncil $y participating in international fair if organi;ed locally !hrough the personal contacts in that country. $y these processes one can only have the list of customers. 8ne has to dialogue or correspond +ith these customers by sending samples, getting feedbac, from the customers etc. to ultimately select the customer +ith +hom to deal +ith. It is necessary to ,no+ the financial standing of the company +hich can be obtained through the ban, channel or through the office of E).). NEGOTIATING CONTRACT. 8nce the prospective customer is found, the business deal has to be concluded. !he follo+ing aspects may be considered before entering into a final contract +ith the buyer. )redit 3orthiness of the )ustomer. %vailability of the -teamer@%irlines and the fre#uency !he freight charges !he full product specification !he #uantity, 0rice !erms of 0ayment !ype of pac,ing and mar,ings on the pac,ages :ode of shipment E -hipment schedule !olerance of #uantity to be shipped *ocumentation re#uirement for the customer *ocumentation re#uirement of the government of importing country )ompliance of the local governmental rules and regulations

$efore entering into contract one should ta,e note of the above factors. 3hile these are indicative, the re#uirements +ill vary from country to country, product to product and buyer to buyer.

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EXPORT PROCEDURE AND DOCUMENTATION

EXPORT SALES & CONTRACT TERMS & CONDITIONS

Hery often e porters do not enter into any formal contract and finali;e the trade deal through the e change of letters, cable, tele etc. It is, ho+ever, e pedient that the parties Be porters E importersC incorporate all important terms E conditions of their trade deal in a separate document or contract that +ill avoid disputes arising out of uncertainty or ambiguity. E port contract may be sent in duplicate along +ith the 0roforma Invoice to the overseas buyer. NATURE OF INTERNATIONAL TRADE COUNTRACTS. !here are certain, peculiar characteristics of international trade contract +hich are not present in those for sales of goods in the domestic mar,et 3hereas the parties to a domestic trace contract normally needs only agree on the elements +hich are necessary for their particular trade transactions li,e price, description, #uality and #uantity of goods, delivery terms etc the situation +ill be #uite different +hen the buyer and the seller to sale@purchase contract belong to different countries. !he parties to all international trade contracts provide all their relative rights and obligations in several +ays /or e ample, they may agree to adopt either the Fa+ of the country of the buyer or that of the seller. !he traders are normally reluctant to leave the determination of the rights and obligations by implications under the legal system of eitherDs country. !hey prefer to ma,e e plicit provisions regarding the rights and obligations by including a set of detailed and precise terms and conditions in their contract. EXPORT OF SAMPLES?GIFTS.

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EXPORT PROCEDURE AND DOCUMENTATION E ports of bonafide trade and technical samples of freely e portable items shall be allo+ed +ithout any limit. .oods including edible items of value not e ceeding (s. 100000@9 in a licensing year, may be e ported as a gift. 1o+ever items mentioned as restricted for e ports in I!)B1-C shall not be e ported as a gift +ithout a licence@certificate@permission, e cept in the case of edible items. STANDARD CONTRACT FOMS* =ot+ithstanding the efforts made by various national@international organi;ations li,e the 5nited =ations )ommission on the International !rade Fa+, there is still no perfection or a device +hich +ould give the parties an accurate and complete idea of each others understanding of various trade terms, the commercial practices and the rights and the obligations vis9I9vis each other so that the misunderstandings are practically eliminated. =evertheless, the Indian )ouncil of %rbitration published in 1&'' a boo,let on 6-tandard )ontract /orms and :odel %rbitration )lause for use in /oreign !rade )ontracts7. It +as revised and reprinted in 1&'& and 1&<<. It can be referred to by e porter for various clause to be incorporated in the E port )ontract. ENTERING INTO AN EXPORT CONTRACT In order to avoid disputes, it is necessary to enter into an e port contract +ith the overseas buyer. /or this purpose, e port contract should be carefully drafted incorporating comprehensive but in precise terms, all relevant and important conditions of the trade deal. !here should not be any ambiguity regarding the e act specifications of goods and terms of sale including e port price, mode of payment, storage and distribution methods, type of pac,aging, port of shipment, delivery schedule etc. !he different aspects of an e port contract are enumerated as under2

0roduct, -tandards and -pecifications Juantity

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EXPORT PROCEDURE AND DOCUMENTATION

Inspection !otal Halue of )ontract !erms of *elivery !a es, *uties and )harges 0eriod of *elivery@-hipment 0ac,ing, Fabeling and :ar,ing !erms of 0ayment99 %mount@:ode E )urrency *iscounts and )ommissions Ficenses and 0ermits Insurance *ocumentary (e#uirements .uarantee /orce :a4eure of E cuse for =on9performance of contract (emedies %rbitration clause

It +ill not be out of place to mention here the importance of arbitration clause in an e port contract )ourt proceedings do not offer a satisfactory method for settlement of commercial disputes, as they involve inevitable delays, costs and technicalities. 8n the other hand, arbitration provides an economic, e peditious and informal remedy for settlement of commercial disputes. %rbitration proceedings are conducted in privacy and the a+ards are ,ept confidential. !he %rbitrator is usually an e pert in the sub4ect matter of the dispute. !he dates for arbitration meetings are fi ed +ith the convenience of all concerned. !hus, arbitration is the most suitable +ay for settlements of commercial disputes and it may invariably be used by businessmen in their commercial dealings. ARBITRATION: &rbitration clau$e recommended by the Indian Council of &rbitration:( %ll disputes or differences +hatsoever arising bet+een the parties out of @ relating to the meaning, construction and operation or effect of this contract or the breach thereof shall be settled by arbitration in accordance +ith the rules of %rbitration of the Indian )ouncil of 1&

EXPORT PROCEDURE AND DOCUMENTATION %rbitration and the a+ard made in pursuance thereof shall be binding on the parties7 Bor any other arbitration clause that may be agreed upon bet+een the partiesC.

TERMS OF SHIPMENTS ) INCOTERMS

!he I=)8!E(:- BInternational )ommercial !ermsC is a universally recogni;ed set of definition of international trade terms, such as /8$, )/( E )I/, developed by the International )hamber of )ommerceBI))C in 0aris, /rance. It defines the trade contract responsibilities and liabilities bet+een buyer and seller. It is invaluable and a cost9saving tool. !he e porter and the importer need not undergo a lengthy negotiation about the conditions of each transaction. 8nce they have agreed on a commercial terms li,e /8$, they can sell and buy at /8$ +ithout discussing +ho +ill be responsible for the freight, cargo insurance and other costs and ris,s. !he I=)8!E(:- +as first published in 1&3' 999 I=)8!E(:- 1&3' 999 and it is revised periodically to ,eep +ith changes in the international trade needs. !he complete definition of each term is available from the current publication 999 I=)8!E(:- 2000. 5nder I=)8!E(:- 2000, the international commercial terms are grouped into E, /, ) and *, designated by the first letter of the term, relating to the final letter of the term. E.g. EG3Ke +or,s comes under grouped LED. !he purpose of Incoterms is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. !hus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree. !he scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale +ith respect to the delivery of goods. Incoterms deal +ith the number of identified obligations imposed on the parties and the distribution of ris, bet+een the parties. In international trade, it +ould be best for e porters to refrain, +herever possible, from dealing in trade terms that +ould hold the seller responsible for the import customs clearance and@or payment of import customs duties and ta es and@or other costs and ris,s

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EXPORT PROCEDURE AND DOCUMENTATION at the buyerDs end, for e ample the trade terms *E8 B*elivery E JuayC and **0 B*elivered *uty 0aidC Juite often, the charges and e penses at the buyerDs end may cost more to the seller than anticipated. !o overcome losses, hire a reliable customs bro,er or freight for+arder in the importing country to handle the import routines. -imilarly, it +ould be best for importers not to deal in EG3 BE 3or,sC +hich +ould hold the buyer responsible for the e port customs clearance, payment of e port customs charges and ta es, and other costs and ris,s at the sellerDs end MORE CLARIFICATION ON INCOTERMS E)* +,the named placeEx *or.$: E means from. 3or,s means factory, mill or +arehouse, +hich are the sellerDs premises. EG3 applies to goods available only at the sellerDs premises. $uyer is responsible for loading the goods on truc, or container at the sellers premises and for the subse#uent costs and ris,s. In practice, it is not uncommon that the seller loads sthe goods on truc, or container at the sellers pre4mises +ithout charging loading fee. = the #uotation, indicate the named place Bsellers premisesC after the acronym EG3 for e ample EG3 Mobe and EG3 -an %ntonio. !he term EG3 is commonly used bet+een the manufacturer BsellerC and e port9 traderBbuyerC, and the e port9trader resells on other trade terms to the foreign buyers. -ome manufacturers may use the term E /actory, +hich means the same as E 3or,s. #C& +,the named point of departure#ree Carrier: !he delivery of goods on truc,, rail car or container at the specified pointBdepotC of departure, +hich is usually the sellers premises, or a named railroad station or a named cargo terminal or into the custody of the carrier, at sellers e pense. !he pointBdepotC at origin may or may not be a customs clearance centre. $uyer is responsible for the main carriage@freight, cargo insurance and other costs and ris,s. 21

EXPORT PROCEDURE AND DOCUMENTATION In the air shipment, technically spea,ing, goods placed in the custody of an air carrier are considered as delivery on board the plane. In practice, many importers and e porters still use the term /8$ in the air shipment. !he term /)% is also used in the (8@(8 Broll on@roll offC services In the e port #uotation, indicate the point of departure BloadingC after the acronym /)%, for e ample /)% 1ong Mong and /)% -eattle. -ome manufacturers may use the former terms /8! B/ree on !ruc,sC and /8( B/ree on (ailC in selling to e port9traders. #&/ +,the named port of ori in#ree &lon $ide /hip: .oods are placed in the doc, shed or at the side of the ship, on the doc, or lighter, +ithin reach of its loading e#uipment so that they can be loaded aboard the ship, at sellerDs e pense. $uyer is responsible for the loading fee, main carriage@freight, cargo insurance, and other costs and ris,s In the e port #uotation, indicate the port of originBloadingCafter the acronym /%-, for e ample /%- =e+ ?or, and /%- $remen. !he /%- term is popular in the brea,9bul, shipments and +ith the importing countries using their o+n vessels. #01 +,the named port of ori in) #ree on 1oard: !he delivery of goods on the board the vessel at the named port of origin BFoadingC at sellerDs e pense. $uyer is responsible for the main carriage@freight, cargo insurance and other costs and ris,s. In the e port #uotation, indicate the port of origin BloadingC after the acronym /8$, for e ample /8$ Hancouver and /8$ -hanghai. 5nder the rules of the I=)8!E(:- 1&&0, the term /8$ is used for ocean freight only. 1o+ever, in practice, many importers and e porters still use the term /8$ in the air freight. In =orth %merica, the term /8$ has other applications. :any buyers and sellers in )anada and the 5-% dealing on the open account and consignment basis are accustomed to using the shipping terms /8$ 8rigin and /8$ destination.

22

EXPORT PROCEDURE AND DOCUMENTATION /8$ 8rigin means the buyer is responsible for the freight and other costs and ris,s. /8$ *estination means the seller is responsible for the freight and other costs and ris,s until the goods are delivered to the buyerDs premises +hich may include the import custom clearance and payment of import customs duties and ta es at the buyerDs country, depending on the agreement bet+een the buyer and seller. In international trade, avoid using the shipping terms /8$ 8rigin and /8$ *estination, +hich are not part of the I=)8!E(:- BInternational )ommercial !ermsC. C#R +,the named port of de$tinationCo$t and #rei ht: !he delivery of goods to the named port of destination BdischargeC at the sellers e penses. $uyer is responsible for the cargo insurance and other costs and ris,s. !he term )/( +as formerly +ritten as )E/. :any importers and e porters +orld+ide still use the term )E/. In the e port #uotation, indicate the port of destination BdischargeC after the acronym )/(, for e ample )/( Marachi and )/( %le andria. 5nder the rules of the I=)8!E(:- 1&&0, the term )ost and /reight is used for ocean freight only. 1o+ever, in practice, the term )ost and /reight B)E/C is still commonly used in the air freight. CI# +,named port of de$tinationCo$t2 In$urance and #rei ht: !he cargo insurance and delivery of goods to the named port of destination BdischargeC at the sellerDs e pense. $uyer is responsible for the import customs clearance and other costs and ris,s. In the e port #uotation, indicate the port of destination BdischargeC after the acronym )I/, for e ample )I/ 0usan and )I/ -ingapore. 5nder the rules of the I=)8!E(:- 1&&0, the term )I/I is used for ocean freight only. 1o+ever, in practice, many importers and e porters still use the term )I/ in the air freight.

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EXPORT PROCEDURE AND DOCUMENTATION

CPT +,the named place of de$tinationCarria e Paid To: !he delivery of goods to the named port of destination BdischargeC at the sellers e penses. $uyer assumes the cargo insurance, import custom clearance, payment of custom duties and ta es, and other costs and ris,s. In the e port #uotation, indicate the port of destination BdischargeC after the acronym )0!, for e ample )0! Fos %ngeles and )0! 8sa,a. CIP +, the named place of de$tination) Carria e and In$urance Paid To: !he delivery of goods and the cargo insurance to the named place of destination BdischargeC at sellerDs e pense. $uyer assumes the importer customs clearance, payment of customs duties and te es, and other costs and ris,s. In the e port #uotation, indicate the place of destination BdischargeC after the acronym )I0, for e ample )I0 0aris and )I0 %thens. !&# +, the name$ point at frontier!eli3ered &t #rontier: !he delivery of goods to the specified point at the frontier at sellers e pense. $uyer is responsible for the import custom clearance, payment of custom duties and ta es, and other costs and ris,s. In the e port #uotation, indicate the point at frontier BdischargeC after the acronym *%/, for e ample *%/ $uffalo and *%/ 3elland. !E/ +,named port of de$tination!eli3ered Ex /hip: !he delivery of goods on board the vessel at the named port of destination BdischargeC at sellers e pense. $uyer assumes the unloading free, import customs clearance, payment of customs duties and ta es, cargo insurance, and other costs and ris,s.

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EXPORT PROCEDURE AND DOCUMENTATION In the e port #uotation, indicate the 0ort of destination BdischargeC after the acronym *E-, for e ample *E- 1elsin,i and *E- -toc,holm. !E4 +, the named port of de$tination !eli3ered Ex 4uay: !he delivery of goods to the Juay Bthe portC at the destination at buyers e pense. -eller is responsible for the importer customs clearance, payment of customs duties and ta es, at the buyers end. $uyer assumes the cargo insurance and other costs and ris,s. In the e port #uotation, indicate the 0ort of destination BdischargeC after the acronym *EJ, for e ample *EJ Fibreville and *EJ :aputo. !!5 +, the named point of de$tination!eli3ered !uty 5npaid: !he delivery of goods and the cargo insurance to the final point at destination, +hich is often the pro4ect site or buyers premises at sellers e pense. $uyer assumes the import customs clearance, payment of customs duties and ta es. !he seller may opt not to insure the goods at his@her o+n ris,s. In the e port #uotation, indicate the point of destination BdischargeC after the acronym **5 for e ample **5 Fa 0a; and **5 =Dd4amena. !!P +, the named point of de$tination) !eli3ered !uty Paid: !he seller is responsible for most of the e penses +hich include the cargo insurance, import custom clearance, and payment of custom duties, and ta es at the buyers end, and the delivery of goods to the final point of destination, +hich is often the pro4ect site or buyers premise. !he seller may opt not to insure the goods at his@her o+n ris,. In the e port #uotation, indicate the point of destination BdischargeC after the acronym **0, for e ample **0 $u4umbura and **0 :babane.

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EXPORT PROCEDURE AND DOCUMENTATION 6E('term2(#('term2 6C('term 7(!('term: Incoterms 2000, li,e its immediate predecessor, groups the term in four categories denoted by the first letter in the three9 letter abbreviation. 5nder the 6E('TERM (E)*), the seller only ma,es the goods available to the buyer at the sellerDs o+n premises. It is the only one of that category. 5nder the 6#('TERM B/)%, /%-, E/8$C, the seller is called upon to deliver the goods to a carrier appointed by the buyer. 5nder the 6C('TERM B)/(, )I/, )0!, E )I0C, the seller has to contract for carriage, but +ithout assuming the ris, of loss or damage to the goods or additional cost due to events occurring after shipment or discharge. 5nder the 6!('TERM B*%/, *EJ, *E-, **5 E **0C, the seller has to bear all costs and ris,s needed to bring the goods to the place of destination. %ll terms list the sellerDs and buyerDs obligations. !he respective obligations of both parties have been grouped under up to 10 headings +here each heading on the sellerDs side 6mirrors7 the e#uivalent position of the buyer. E amples are *elivery, !ransfer of ris,s, and *ivision of costs. !his layout helps the user to compare the parties respective obligations under each Incoterms.

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EXPORT PROCEDURE AND DOCUMENTATION

PROCESSING AN EXPORT ORDER

?ou should not be happy merely on receiving an e port order. ?ou should first ac,no+ledge the e port order, and then proceed to e amine carefully in respect of Items -pecification 0re9shipment inspection 0ayment conditions -pecial pac,aging Fabeling and mar,eting re#uirements -hipment and delivery date :arine insurance *ocumentation re#uirement etc.

If you are satisfied on these aspects, a formal confirmation should be sent to the buyer, other+ise clarification should be sought from the buyer before confirming the order. %fter confirmation of the e port order immediate steps should be ta,en for procurement@manufacture of the e port goods. In the mean+hile, you should proceed to enter into a formal e port contract +ith the overseas buyer. $efore accepting any order necessary home+or, should have been done as to availability of the production capacity, ra+ material e.t.c. It +ould be in the interest of the e porter to loo, into entering into for+ard contract to safeguard against e change rate fluctuations. Ensure that the mode of payment is also agreed upon. In case of shipment against letter of

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EXPORT PROCEDURE AND DOCUMENTATION credit, the buyer should be advised to open the credit +ell in advance before effecting the shipment.

FINANCIAL RIS&S INVOLVED IN FOREIGN TRADE

%s an e porter +hile selling goods abroad, you encounter various types of ris,s. !he ma4or ris,s +hich you have to undergo are as follo+s2 )redit (is, )urrency (is, )arriage (is, )ountry (is,

?ou can protect yourself against the above ris,s by initiating appropriate steps. Credit Ri$.$ : ?ou can cover your credit ris, against the foreign buyer by insisting upon opening a letter of credit in your favour. %lternatively one can avail of the facility offered by various credit ris, agencies. % specific insurance cover can also be obtained from E).) BE ports )redit E .uarantee )orporationC to cover your country ris, besides covering credit ris,. Currency Ri$.$: %s regards covering the currency ris,, due to the e change rate fluctuations, you can re#uest your ban,er to boo, a for+ard contract.

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EXPORT PROCEDURE AND DOCUMENTATION Carria e Ri$.: !he carriage ris, can be covered by ta,ing an appropriate general insurance policy. Country Ri$.: E).) provides cover to protect the e porter from country ris,s. % detailed procedure ho+ an e porter can get himself protected against the above ris,s are given in separate chapters later.

EXPORT DOCUMENTS
%ny e port shipment involved various documents re#uired by various authorities such as customs, e cise, ($I, Inspection and according depending upon the re#uirements, there are categori;ed into 2 categories, namely commercial documents and regulatory documents. &. Commercial !ocument$. : ' )ommercial documents are re#uired for effecting physical transfer of goods and their title from the e porter to the importer and the realisation of e port sale proceeds. 8ut of the 1' commercial documents in the e port documentation frame+or, as many as 14 have been standardised and aligned to one another. !hese are proforma invoice, commercial invoice, pac,ing list, shipping instructions, intimation for inspection, certificate, of inspection of #uality control, insurance declaration, certificateN of insurance, mateNs receipt, bill of lading or combined transport document, application for certificate origin, certificate of origin, shipment advice and letter to the ban, for collection or negotiation of documents. 1o+ever, shipping order and bill of e change could not be brought +ithin the fold of the %ligned *ocumentation -ystem, 8.

Co<<;r2$8@ I3Ao$2;*

)ommercial invoice is an important and basic e port

document. It is also ,no+n as a N*ocument of )ontentsN as it contains all the information re#uired for the preparation of other documents. It is actually a sellerNs

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EXPORT PROCEDURE AND DOCUMENTATION bill of merchandise. It is prepared by the e porter after the e ecution of e port 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 +ith the contract of sale. Co36;36% of Co<<;r2$8@ I3Ao$2; =ame and address of the e porter. =ame and address of the consignee. =ame and the number of Hessel or /light. =ame of the port of loading. =ame of the port of discharge and final destination. Invoice number and date. E porterNs reference number. $uyerNs reference number and date. =ame of the country of origin of goods. =ame of the country of final destination. !erms of delivery and payment. :ar,s and container number. =umber and pac,ing description. *escription of goods giving details of #uantity, rate and total amount in terms of internationally accepted price #uotation. -ignature of the e porter +ith date. S$73$f$2832; of Co<<;r2$8@ I3Ao$2; It is the basic document useful in preparation of various other shipping documents.

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EXPORT PROCEDURE AND DOCUMENTATION 9 It is used in various e port formalities such as #uality and pre9-hipment inspection e cise 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 e porters as +ell as importers. In$pection Certificate: !he certificate is issued by the inspection authority such as the e port inspection agency. !his certificate states that the goods have been inspected before shipment, and that they confirm to accepted #uality standards. : Marine in$urance policy: .oods in transit are sub4ect to ris, 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. :arine insurance policy is one of the most important document used as collateral security because it protects the interest of all those +ho have insurable interest at the time of loss. !he e porter is bound to insure the goods in case of )I/ #uotation, but he can also insure the goods in case of /8$ contract, at the re#uest of the importer, but the premium payment +ill be made by the e porter. !here are different types of policies such as /PECI#IC P0;IC<: !his policy is ta,en to cover different ris,s for a single shipment. /or a regular e porter, this policy is not advisable as he +ill have to ta,e a separate policy every time a shipment is made, so this policy is ta,en +hen e ports are in fre#uent. #loatin Policy: !his is ta,en to cover all shipments for some months. !here 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 rene+ed. 0pen Policy: !his policy remains in force until cancelled by either party i.e. insurance company or the e porter. 0pen Co3er Policy: !his policy is generally issued for 12 months period, for all shipments to one or more destinations. !he open cover may specify the ma imum value of consignment that may be sent per ship and if the value e ceeded, the insurance company must be informed by the e porter. In$urance Premium: *iffers upon product to product and a number of such other factors, such as, distance of voyage, type and condition of 31

EXPORT PROCEDURE AND DOCUMENTATION pac,ing, etc. 0remium for air consignments are lo+ered as compared to consignments by sea. =.

Co3%5@8r I3Ao$2;*

)onsular invoice is a document re#uired mainly by the

Fatin %merican countries li,e Menya, 5ganda, !an;ania, :auritius, =e+ Oealand, :yanmar, Ira#, %ustralia, /i4i, )yprus, =igeria, .hana, .uinea, Oan;ibar, etc. !his invoice is the most important document, +hich needs to be submitted for certification to the Embassy of the importing country concerned. !he main purpose of the consular invoice is to enable the authorities of the importing country to collect accurate information about the volume, value, #uality, grade, source, etc., of the goods imported for the purpose of assessing import duties and also for statistical purposes. In order to obtain consular invoice, the e porter is re#uired to submit three copies of invoice to the )onsulate of the importing country concerned. !he )onsulate of the importing country certifies them in return for fees. 8ne copy of the invoice is given to the e porter +hile the other t+o are dispatched to the customs office of the importerNs country for the calculation of the import duty. !he e porter negotiates a copy of the consular invoice to the importer along +ith other shipping documents. S$73$f$2832; of Co3%5@8r I3Ao$2; for 6:; EB>or6;r It facilitates #uic, clearance of goods from the customs in e porterNs as +ell as importerNs country. )ertificationN of goods by the )onsulate of the importing country indicarer that the importer has fulfilled all procedural and licensing formalities for import of goods. It also assures the e porter of the payment from the importing country.

S$73$f$2832; of Co3%5@8r I3Ao$2; for 6:; I<>or6;r It facilitates #uic, clearance of goods from the customs at the port destination and therefore, the importer gets #uic, delivery of goods.

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EXPORT PROCEDURE AND DOCUMENTATION !he importer is assured that the goods imported are not banned for imported in his country. S$73$f$2832; of Co3%5@8r I3Ao$2; for 6:; C5%6o<% Off$2; It ma,es the tas, of the customs authorities easy. It facilitates #uic, calculation of duties as the value of goods as determine by the )onsulate is considered for the purpose. >.

C;r6$f$286; of Or$7$3* !he importers in several countries re#uire a certificate of

origin +ithout +hich clearance to import is refused. !he certificate of origin states that the goods e ported are originally manufactured in the country +hose name is mentioned in the certificate. )ertificate of origin is re#uired +hen29 !he goods produced in a particular country are sub4ect toD preferential tariff rates in the foreign mar,et at the time importation. !he goods produced in a particular country are banned for import in the foreign mar,et.

TC>;% of 6:; C;r6$f$286; of Or$7$3 (a) Non'preferential Certificate2 of 0ri in2 9 =on9preferential certificate of origin is re#uired in general by all countries for clearance of goods by the importer, on +hich no preferential tariff is given. It is issued by2 P !he authorised )hamber of )ommerce of the e porting country. !rade %ssociation. 8f the e porting country.

(b) Certificate of 0ri in for a3ailin Conce$$ion$ under "/P 29 )ertificate of origin re#uired for availing of concessions under .eneralised -ystem of 0references B.-0C e tended by certain, countries such as /rance, .ermany, Italy, $E=EF5G countries, 5M, %ustraliaQ Rapan, 5-%, etc. !his certificate can be obtained from specialised agencies, namelyQ

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EXPORT PROCEDURE AND DOCUMENTATION (c) E port Inspection %gencies. Rt. *irector .eneral of /oreign !rade.. )ommodity $oards and their regional offices. *evelopment )ommissioner, 1andicrafts. !e tile )ommittees for te tile products. :arine 0roducts E port *evelopment %uthority for marine products. *evelopment )ommissioners of E0Os Certificate for a3ailin Conce$$ion$ under Common%ealth Preference$ (C*P): )ertificate of origin for the purpose of )ommon+ealth 0reference is also ,no+n as N)ombined )ertificate of 8rigin and HalueN. It is re#uired by t+o member countries, i.e. )anada and =e+ Oealand of the )ommon+ealth. /or concession under )ommon+ealth preferences, the certificates or origin have to be submitted in special forms obtainable, from the 1igh )ommission of the country concerned. (d) Certificate for a3ailin Conce$$ion$ under other /y$tem$ of Preference:'

)ertificate of origin is also re#uired for tariff concessions. under the .lobal -ystem of !rade 0references B.-!0C, $ang,o, %greementB$%C and -%%() 0referential !rading %rrangement B-%0!%C under +hich India grants and receives tariff concessions 8n imports and e ports. E port Inspection )ouncil BEI)C is the sole authority to print blan, )ertificates of 8rigin under $%, -%%() and -%0!% +hich can be issued by such agencies as E0)s, *)s of E0Os, EI), %0E*%, :0E*%, /IE8, etc... Co36;36% of C;r6$f$286; of Or$7$3 =ame and logo of chamber of commerce. =ame and address of the e porter. =ame and address of the consignee. =ame and the number of Hessel of /light =ame of the port of loading.

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EXPORT PROCEDURE AND DOCUMENTATION =ame of the port of discharge and place of delivery. :ar,s and container number. 0ac,ing and container description. !otal number of containers and pac,ages. *escription of goods in terms of #uantity. -ignature and initials of the concerned officer of the issuing authority. -eal of the issuing authority.

S$73$f$2832; of 6:; C;r6$f$286; of Or$7$3 )ertificate of origin is re#uired for availing of concessions under .eneralised -ystem of 0references B.-0C as +ell as under )ommon+ealth 0references B)30C. It is to be submitted to the customs for the assessment of duty clearance of goods +ith concessional duty. It is re#uired +hen the goods produced in a particular country are banned for import in the foreign mar,et. It helps the buyer in adhering to the import regulations of the country. -ometimes, in order to ensures that goods bought from some other country have not been reshipped by a seller, a certificate of origin I- re#uired. ?.

B$@@ of L84$37*

!he bill of lading is a document issued by the shipping

company or its agent ac,no+ledging the receipt of goods on board the vessel, and underta,ing to deliver the goods in the li,e 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. B$@@ of L84$37 %;rA;% 6:r;; <8$3 >5r>o%;%* %s a document of title to the goodsQ

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EXPORT PROCEDURE AND DOCUMENTATION %s a receipt from the shipping companyQ and %s a contract for the transportation of goods.

TC>;% of B$@@ of L84$37 Clean 1ill of ;adin : ' % bill of lading ac,no+ledging receipt of the goods apparently in good order and condition and +ithout any #ualification is termed as a clean bill of lading. Clau$ed 1ill of ;adin : ' % bill of lading #ualified +ith certain adversere mar,s such as, Sgoods insufficiently pac,ed in accordance +ith the )arriage of .oods by -ea %ct,S is termed as a claused bill of lading. Tran$hipment or Throu h 1ill of ;adin : ' 3hen the carrier uses other transport facilities, such as rail, road, or another steamship company in addition to his o+n, the carrier issues a through or transhipment bill of lading. /tale 1ill of ;adin : ' % bill of lading that has been held too long before it is passed on to a ban, for negotiation or to the consignee is called a stale bill of lading. #rei ht Paid 1ill of ;adin : ' 3hen freight is paid at the time of shipment or in advance, the bill of landing is mar,ed, freight paid. -uch bill of lading is ,no+n as freight bill of lading. #rei ht Collect 1ill of ladin :' 3hen the freight is not paid and is to be collected from the consignee on the arrival of the goods, the bill of lading is mar,ed, freight collect and is ,no+n as freight collect bill of lading Co36;36% of B$@@ of L84$37 =ame and logo of the shipping line. =ame and address of the shipper. =ame and the number of vessel. =ame of the port of loading. =ame of the port of discharge and place of delivery.

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EXPORT PROCEDURE AND DOCUMENTATION :ar,s and container number. 0ac,ing and container description. !otal number of containers and pac,ages, *escription of goods in terms of #uantity. )ontainer status and seal number. .ross +eight in ,g. and volume in terms of cubic meters. %mount of freight paid or payable. -hipping bill number and date. -ignature and initials of the )hief 8fficer. .

S$73$f$2832; of B$@@ of L84$37 for EB>or6;r% It is a contract bet+een the shipper and the shipping company for carriage of the goods to the port of destination. It is an ac,no+ledgement indicating that the goods mentioned in the document have been received on board for the 0urpose of shipment. % 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 e porters !he e porter can claim damages from the shipping company if the goods are lost or damaged after the issue of a clean bill of lading. S$73$f$2832; of B$@@ of L84$37 for I<>or6;r% It acts as a document of title to goods, +hich is transferable endorsement and delivery. !he e porter sends the bill of lading to the ban, of the importer so as to enable him to ta,e the delivery of goods. !he e porter can give an advance intimation to the foreign buyer about the shipment of goods by sending him a non9negotiable copy of bill of lading

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EXPORT PROCEDURE AND DOCUMENTATION S$73$f$2832; of B$@@ of L84$37 for S:$>>$37 Co<>83C It is useful to the shipping company for collection of transport charges from the importer, if not collected from the e porter.

#. A$r98C B$@@*

%n air+ay bill, also called an air consignment note, is a receipt

issued by an airline for the carriage of goods. %s each shipping company has its o+n bill of lading, so each airline has its o+n air+ay bill. %ir+ay $ill or %ir )onsignment =ote is not treated as a document of title and is not issued in negotiable form. Co36;36% of A$r98C B$@@ =ame of the airport of departure and destination. !he names and addresses of the consignor, consignee and the first carrier. :ar,s and container number. 0ac,ing and container description. !otal number of containers and pac,ages. *escription of goods in terms of #uantity. )ontainer status and seal number. %mount of freight paid or payable. -ignature and initials of the issuing carrier or his agent. I<>or6832; of A$r98C B$@@* It is a contract bet+een 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. -ince, it contains details about freight it also represents freight bill. @. /hipment &d3ice to Importer:' %fter the shipment of goods, the e porter intimates the importer about the shipment of goods giving him details about the date of shipment, the name of the vessel, the destination, etc. 1e should also send one copy of non9negotiable bill of lading to the importer.

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EXPORT PROCEDURE AND DOCUMENTATION A. P82D$37 L$%6* !he e porter prepares the pac,ing list to facilitate the buyer to chec, the shipment. It contains the detailed description of the goods pac,ed in each case, their gross and net +eight, etc. !he difference bet+een a pac,ing note and a pac,ing list is that the pac,ing note contains the particulars of the contents of an individual pac,, +hile the pac,ing list is a consolidated statement of the contents of a number of cases or pac,s. B. B$@@ of EB2:837;2 !he instrument is used in receiving payment from the importer. !he importer may prefer $ill of E change to F) as it does not involve bloc,ing of funds. % bill of e change is dra+n by the e porter on the importer, to ma,e payment on demand at sight or after a certain period of time. $@E is a means to collect payment. $@E is a means to demand payment. $@E is a means to e tent the credit. $@E is a means to promise the payment. $@E is an official ac,no+ledgement of receipt of payment. /inancial documents perform the function of obtaining the finance collection of payment etc. 2 sets. Each one bearing the e clusion clause ma,ing the other part of the draft invalid. -ight $@E. 5sance $@E. It is ,no+n as draft. Immediate payment T -ight draft. !here are t+o copies of draft. Each one bears reference to the other part %E$. +hen any one of the draft is paid, the second draft becomes null and void. P8r6$;% 6o =$@@ of ;B2:837;. 8. !he dra+er2 !he e porter @ person +ho dra+s the bill.

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EXPORT PROCEDURE AND DOCUMENTATION 9. !he dra+ee2 !he importer @ person on +hom the bill is dra+n for payment. :. !he payee2 !he person to +hom payment is made, generally, the e porter @ supplier of the goods. $ A5B$@$8rC Do25<;36%* !hese documents generally form the basic documents based on +hich the commercial and or regulatory documents are prepared. !hese documents also do not have any fi ed formats and the number of such documents +ill +ary according to individual re#uirements. 8. Profor<8 I3Ao$2;* !he starting point of the e port contract is in the form of offer made by the e porter to the foreign customer. !he offer made by the e porter is in the form of a proforma invoice. It is a #uotation given as a reply to an in#uiry. It normally forms the basis of all trade transactions. Co36;36% of Profor<8 I3Ao$2; =ame and address of the e porter. =ame and address of the importer. :ode of transportation, such as -ea or %ir or :ultimodal transport. =ame of the port of loading. =ame of the port of discharge and final destination. 0rovisional invoice number and date. E porterNs reference number. $uyerNs reference number and date. =ame of the country of origin of goods. =ame of the country of final destination. :ar,s and container number. . =umber and pac,ing description. *escription of goods giving details of #uantity, rate and total amount in terms of internationally accepted price #uotation. -ignature of the e porter +ith date.

40

EXPORT PROCEDURE AND DOCUMENTATION I<>or6832; of Profor<8 I3Ao$2; It forms the basis of all trade transactions. It may be useful for the importer in obtaining import licence or foreign e change. 9. I36$<86$o3 for I3%>;26$o3* 3henever the consignment re#uires the pre9 shipment inspection, necessary application is to be made to the concerned inspection agency for conducting the inspection and issue of certificate thereof. :. D;2@8r86$o3 of I3%5r832;* 3here the contract terms re#uire that the insurance to be covered by the e porter, the shipper has to give details of the shipment to the insurance company for necessary insurance cover. !he detailed declaration +ill cover2 =ame of the shipper A e porter. =ame E address of buyer. *etails of goods such as pac,ages, #uantity, value in foreign currency as +ell as in Indian (s. Etc. =ame of the Hessel A %ircraft. Halue for +hich insurance to be covered.

=. A>>@$286$o3 of 6:; C;r6$f$286; Or$7$3* In case the e porter has to obtain )ertificate of 8rigin from the concerned authorities, an application has to be made to the concerned authority +ith re#uired documents. 3hile the simple invoice copy +ill do for getting )A8 from the chamber of commerce, in respect of obtained the same from the office of the !e tile )ommittee or E port 0romotion )ouncil, the documents re#uirement are different. >. M86;E% R;2;$>62 :ateNs receipt is a receipt issued by the )ommanding 8fficer of the ship +hen the cargo is loaded on the ship. !he mateNs receipt is a prima facie evidence that goods are loaded in the vessel. !he mateNs receipt is first handed over to the 0ort !rust %uthorities. %fter ma,ing payment of all port dues, the e porter or his agent collects the mateNs receipt from the 0ort !rust %uthorities. 41

EXPORT PROCEDURE AND DOCUMENTATION !he mateNs receipt is freely transferable. It must be handed over to the shipping company in order to get the bill of lading. $ill of lading is prepared on the basis of the mateNs receipt. TC>;% of M86;E% R;2;$>6% Clean MateC$ Receipt: ' !he )ommanding 8fficer of the ship issues a clean mateNs receipt, if he is satisfied that the goods are pac,ed properly and there is no defect in the pac,ing of the cargo or pac,age. 4ualified MateC$ Receipt: ' !he )ommanding 8fficer of the ship issues #ualified mateNs receipt, +hen the goods are not pac,ed properly and the shipping company does not ta,e any responsibility of damage. to the goods during transit. Co36;36% of M86;E% R;2;$>6 =ame and logo of the shipping line. =ame and address of the shipper. =ame and the number of vessel. =ame of the port of loading. =ame of the port of discharge and place of delivery. :ar,s and container number. 0ac,ing and container description. !otal number of containers and pac,ages. *escription of goods in terms of #uantity. )ontainer status and seal number. .ross +eight in ,g. and volume in terms of cubic meters. -hipping bill number and date. -ignature and initials of the )hief 8fficer.

S$73$f$2832; of M86;E% R;2;$>6

42

EXPORT PROCEDURE AND DOCUMENTATION It is an ac,no+ledgement of goods received for e port 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. $ill of lading, +hich is the title of goods, is prepared on the basis of the mateNs receipt. It enables the e porter to clear port trust dues to the 0ort !rust %uthorities.

0btainin MateC$ Receipt !he goods are then loaded on board the ship for +hich the :ate or the )aptain of the ship issues :ateNs (eceipt to the 0ort -uperintendent. ?. S:$>>$37 or4;r* it is issued by the -hipping@)onference Fine intimating the e porter about the reservation of space for shipment of cargo +hich the e porter intends to ship. *etails of the vessel, poet of the shipment, and the date on +hich the goods are to be shipped are mentioned. !his order enables the e porter to ma,e necessary arrangements for customs clearance and loading of the goods. @. S:$>>$37 I3%6r526$o3%* at the pre9shipment stage, +hen the documents are to sent to the )1% for customs clearance, necessary instructions are to be give +ith relevance to !he e port promotion scheme under +hich goods are to be e ported. =ame of the specific vessel on +hich the goods are to be loaded. If goods are to be /)F or F)F. If freight amount are to be paid @ collected. If shipment are covered under %.(.E.91 procedure. Instructions for obtaining $ill of Fading etc.

A. B83D @;66;r for 3;7o6$86$o3 of 4o25<;36%* at the post shipment stage, the e porter has to submit the documents to a ban, for negotiation or discounting or collection

43

EXPORT PROCEDURE AND DOCUMENTATION for for+arding the same to the customer and also for reali;ation of e port proceeds. !he ban, letter is the set of instruction for the ban, as to ho+ to handle the documents by them and by the ban, at the buyerDs country +hich may include =ame and address of the buyer. *etails of various documents being sent and the number of the copies thereof. =ame and address of the buyerDs ban, if available. If the documents are sent F@) or on open terms. If the proceeds are to ad4usted against any pre9shipment pac,ing credit loan. If the bill amount is to be ad4usted against any for+ard e change cover. In case of credit bill +ho has to bear the interest, either e porter or if the same is to be collected from the buyer. Instructions in case non9acceptance@non9payment by the buyer. C. R;75@86orC Do25<;36* (egulatory pre9shipment e port documents are prescribed by the different government departments and bodies in order to comply +ith various rules and regulations under the relevant la+s governing e port trade such as e port inspection, foreign e change regulation, e port trade control, customs, etc. 8ut of & regulatory documents four have been standardised and aligned. !hese are shipping bill or bill of e port, e change control declaration B.( fromC, e port application doc, challan or port trust copy of shipping bill and receipt for payment of port charges. 8. S:$>>$37 B$@@* -hipping bill is the main customs document, re#uired by the customs authorities for granting permission for the shipment of goods. !he cargo is moved inside the doc, area only after the shipping bill is duly stamped, i.e. certified by the customs. -hipping bill is normally prepared in five copies 29

44

EXPORT PROCEDURE AND DOCUMENTATION )ustoms copy. *ra+bac, copy. E port promotion copy. 0ort trust copy. E porterNs copy.

TC>;% of S:$>>$37 B$@@ $ased on the incentives offered by the government, customs authorities have introduced three types of shipping bills29 !ra%bac. /hippin 1ill: ' *ra+bac, shipping bill is useful for claiming the customs dra+bac, against goods e ported. !utiable /hippin 1ill2 9 *utiable shipping bill is re#uired for goods +hich are sub4ect to e port duty. !uty'free /hippin 1ill: ' *uty9free shipping bill is useful for e porting goods on +hich there is no e port duty. In order to facilitate easy recognition and #uic, processing, follo+ing colours have been provided to different ,inds of shipping bills 2 Type$ of ood$ *ra+bac, shipping bill *utiable shipping bill *uty9/ree shipping bill Co36;36% of S:$>>$37 B$@@ =ame and address of the e porter. =ame and address of the importer. =ame of the vessel, master or agents and flag. =ame of the port at +hich goods are to be discharged. )ountry of final destination. 1y /ea .reen ?ello+ 3hite 1y &ir .reen 0in, 0in,

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EXPORT PROCEDURE AND DOCUMENTATION *etails about pac,ages, description of goods, mar,s and numbers, #uantity and details of each case. /8$ price and real value of goods as defined in the -ea )ustoms %ct. 3hether Indian or foreign merchandise to be re9e ported !otal number of pac,ages +ith total +eight and value.

S$73$f$2832; of S:$>>$37 B$@@ a) -hipping bill is the main customs document, re#uired by the customs authorities for granting permission for the shipment of goods. b) !he cargo is moved inside the doc, area only after the shipping bill is duly stamped, i.e. certified by the customs. c) *uly endorsed shipping bill is also necessary for the collection of e port incentives offered by the government. d) It is useful to the )ustoms %ppraiser +hile determining the actual value of goods e ported. 9. A.R.E. , for< 'C;36r8@ ;B2$%;(* this form %(E91 is prescribed under )entral E cise rules for e port of goods. In case goods meant for e port are cleared directly from the premises of a manufacturer, the e porter can avail the facility of e emption from payment of terminal e cise duty. !he goods may be cleared for e port either under claim for rebate of duty paid or under bond +ithout payment of duty. In both the events the goods are to be cleared under form %.(.E91 +hich +ill sho+ the details of the goods being e ported, the relevant duty involved and if the duty is paid or goods being cleared under bond, details of goods being sealed either by the e porter or )entral E cise officials etc. :. EB2:837; Co36ro@ 4;2@8r86$o3 For< 'GRFPPFSOFTEX(* under the e change control regulations all e porters must declare the details of shipment for monitoring by the (eserve $an, of India. /or this purpose, ($I has prescribed different forms for different types of shipments li,e .(I, 00 forms etc. !hese declaration forms must be presented to the customs officials at the 4'

EXPORT PROCEDURE AND DOCUMENTATION time of passing of e port documentation. 5nder the E*I processing of shipping bill in the customs, these forms have been dispensed +ith and a ne+ form -*/ has to be submitted to the customs in the place of above forms. =. EB>or6 A>>@$286$o3* this is the application to be made to the customs officials before shipment of goods. !he prescribed form of the application is the -hipping $ill@$ill of E port. *ifferent types are re#uired for shipment li,e e 9 bond, duty free goods, and dutiable goods and for e port under different e port promotion schemes such as claims for duty dra+bac, etc. >. V;:$2@; T$2D;6FC8r6 T$2D;6FG86; P8%% ;62.* before the goods are being ta,en inside the port for loading, necessary permission has to be obtained for moving the vehicle into the customs area. !his permission is granted by the 0ort !rust %uthority. !his document +ill contain the detail of the e port cargo, name and address of the shippers, lorry number, mar,s and number of the pac,ages, driverDs licence details etc. ?. B83D C;r6$f$286; of R;8@$%86$o3* this is the form prescribed under the /oreign !rade 0olicy, +herein the negotiating ban, declares the fob value of e ports and for the date of realisation of the e port proceeds. !his certificate is re#uired fore obtaining the benefit under various schemes and this value of fob is rec,oned as fob value of e ports. D. O6:;r Do25<;36* B@82D L$%6 C;r6$f$286;* it certifies that the ship@aircraft carrying the cargo has not touched the particular country on its 4ourney or that the goods are not from the particular country. !his is re#uired by certain nations +ho have strained political and economical relations +ith the so called 6$lac, Fisted )ountries7. L837587; C;r6$f$286;* Importers in the European )ommunity re#uire a language certificate along +ith the .-0 certificate in respect of handloom cotton fabrics classifiable under =%:EG code "".0&. .enerally four copies of language certificate are prepared by the concerned authority +ho issues .-0 certificate. !hree copies are

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EXPORT PROCEDURE AND DOCUMENTATION handed over to the e porter. % copy is sent along +ith the other documents for realisation of e port proceeds. Fr;$7:6 P8C<;36 C;r6$f$286;* in most of the cases, the $@F or %3$ +ill mention the transportation and other related charges. 1o+ever if the e porter does not +ant 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. !his document sho+ing the freight payment is called the freight certificate. I3%5r832; Pr;<$5< C;r6$f$286;* this is the certificate issued by the Insurance )ompany as ac,no+ledgement of the amount of premium paid for the insurance cover. !his certificate is re#uired by the ban, for arriving at the fob value of the goods to be declared in the ban, certificate of realisation. Co<=$3;4 C;r6$f$286; of Or$7$3 834 V8@5;* this certificate is re#uired by the )ommon+ealth )ountries. !his certificate is printed in a special +ay by the )ommon+ealth )ountries. !his certificate should contain special details as to the origin and value of goods, +hich are useful for determining import duty. %ll other details are generally the same as that of )ommercial Invoice, such as name of the e porter and the importer, #uality and #uantity of the goods etc. C5%6o<% I3Ao$2;* this is re#uired by the countries li,e )anada, 5-% for imposing preferential tariff rates. L;78@$G;4 I3Ao$2;* this is re#uired by the certain Fatin %merican )ountries li,e :e ico. It is 4ust li,e consular invoice, +hich re#uires certification from )onsulate or authorised mission, stationed in the e porterDs country.

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EXPORT PROCEDURE AND DOCUMENTATION S>;2$8@ ProA$%$o3 534;r U3$for< C5%6o<% 834 >r826$2; for Do25<;368rC Cr;4$6 UCP"0 + for Co<<;r2$8@ I3Ao$2;. Ar6$2@;".#* )ommercial Invoice o :ust appear on their face to be issued by the beneficiary named in the credit. o :ust be made out in the name of the applicant. o =eed not be signed $an,s may refuse )ommercial Invoice issued for amounts in e cess of the amount permitted by the credit e cept other+ise stated. !he description of the goods in the commercial invoice must correspond +ith the description of the credit. In all other documents the goods may be described in the .eneral in general terms not inconsistent +ith description in the credit. In all documents goods may be described in general terms not inconsistent +ith the *escription of the goods in the credit. Pr;"S:$><;36 Do25<;36%* -hipping bill. E port order@-ales contract@0urchase order. Fetter of )redit )ommercial invoice. 0ac,ing list. )ertificate of origin. .uaranteed (emittance B..(@-*/@00@-8/!EGC,or -*/. )ertificate of Inspection. Harious declarations re#uired as per custom procedure.

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EXPORT PROCEDURE AND DOCUMENTATION EB2:837; Co36ro@ D;2@8r86$o3 For<* all e ports to +hich the re#uirement of

declaration apply must be declared on appropriate forms as indicated belo+ unless the consignment is of samples and of L=o )ommercial HalueD GR FORM* to be completed in duplicate for e ports other+ise than by post including e port of soft+are in physical form i.e. magnetic tape@discs and paper media. SDF FORM* to be completed in duplicate and appended to the -hipping $ill for e port declare to the customs offices notified by the )entral .overnment +hich have introduced E*I system for processing -hipping $ill. PP FORM* to be completed in duplicate for e port by post. SOFTX* to be completed in triplicate for e port of soft+are other+ise than in the physical form i.e. magnetic tapes@discs and paper media. T:;%; for<% 8r; 8A8$@8=@; for %8@; $3 R;%;rA; B83D of I34$8 E port declaration forms have utmost importance and are binding on the e porters. It is, therefore, necessary that enough care is ta,en +hile declaring e ports on these forms, +ith special reference on the follo+ing points. =ame and address of the authorised dealer through +hom proceeds of e ports have been or +ill be reali;ed should be specified in the relevant column of the form. *etails of commission and discount due to foreign agent or buyer should be correctly declared other+ise difficulties may arise at the time of remittance of such commission. It should be clearly indicated in the form +hether the e port is on Loutright sale basisD or Lon consignment basisD and irrelevant clauses must be stuc, out

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EXPORT PROCEDURE AND DOCUMENTATION 5nder the term Lanalysis of full e port valueD a brea, up of full e port value of goods under /.8.$ value, freight and insurance should be furnished in all cases, irrespective of the terms of contract. %ll documents relating to the e port of goods from India must pass through the medium of an authorised dealer in foreign e change in India +ithin 21 days of shipment. !he amount representing the full e port value of goods must be reali;ed +ithin si months from date of shipment. D$%>o%8@ of Co>$;% of EB>or6 Do25<;3686$o3 For< .( forms covering e port of goods other than 4e+ellery should be completed by the e porter in duplicate and both the copies should be submitted to customs at the port of -hipment. )ustoms +ill give their running serial number on both the copies of the .( forms after verifying the particulars and admitting the corresponding shipping bill. !he value declared by the e porter +ill also be verified by the customs and they +ill also record the assessed value. *uplicate copy +ill be returned to the e porter and the original +ill be remained by the customs for on+ard submission to the (eserve $an,. *uplicate form of the .( form +ill again be presented to the customs at the time of actual shipment. %fter e amination of goods and certifying the #uantity passed for shipment the duplicate copy +ill again be returned to e porter for submission to an authorised dealer. 1o+ever, an e ception to submission of .( forms to the )ustoms authorities have been made in case of deep sea fishing. '8( 00 forms are to be first presented to an authorised dealer for countersignature. !he form +ill be countersigned by the authorised dealer only if the post parcel is addressed to his branch or correspondent ban, in the country or import. !he concerned overseas

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EXPORT PROCEDURE AND DOCUMENTATION branch or correspondent is to be instructed to deliver the post parcel against payment or acceptance of relevant bill, as the case may be. '=( /or post parcel addressed directly to the consignee, the

authorised dealer +ill countersign the form, provided K BiC an irrevocable letter of credit for the full value of e port has been opened in favour of e porter and has been advised through authorised dealer concernedQ or BiiC the full value of shipment has been received in advance by the e porter through an authorised dealerQ or BiiiC 8n receipt of full value of shipment declared on this form the authorised dealer +ill for+ard to ($I the duplicate copy along +ith the certified copy of shipperDs invoice. BivC !he authorised is satisfied on the basis of standing and trac, record of the e porter and arrangements made for realisation of the e port proceed that he cold do so. If the authorised dealer is not satisfied about standing etc. of the e porter, the application is re4ected. =o reference is entertained by the (eserve $an, in such cases. '2( !he original 00 form countersignature +ill be returned to the e porter by the authorised dealer and the duplicate +ill be retained by him. 8riginal 00 form should then be submitted to the post office along +ith the parcel. !he post office through the goods have been dispatched +ill for+ard the original to ($I. !he e port of computer soft+are may be underta,en in physical form i.e. soft+are prepared on magnetic tape and paper media as +ell as in non9physical form by direct data transmission through dedicated earth stations@satellite lin,s. !he e port of computer soft+are in physical form is sub4ect to normal declaration on .(@00 form and regulations

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EXPORT PROCEDURE AND DOCUMENTATION applicable there to +ill also be applicable to such e ports. 1o+ever, e port of non9 physical form should be declared on -8/!EG /orm. $esides computer soft+are, e port of video @ !.H. -oft+are and all other types of soft+are products @ pac,ages should also be declared on the -8/!EG forms. -ince e port of soft+are is fraught +ith many ris,s and special guidelines have been framed for handling such e ports.

OCTROI
8ctroi is the local ta levied by the civic body on goods entering into the city. !here are three procedures for clearing goods +hich are meant for e port. Pro2;45r; ) ,+ EB>or6 o3 >8C<;36 of o26ro$ 456C 834 r;f534 6:;r;of 8f6;r ;B>or6. 0ay the 8ctroi *uty and apply for refund of payment made.

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EXPORT PROCEDURE AND DOCUMENTATION %t 8ctroi =a,a form $ is issued +ith cash receipt for the payment of 8ctroi *uty. )argo is moved to the doc,s. %t *oc,s 8ctroi officer prepares form7)7 E endorses -hipping $ill =umber E -teamers =ame. %fter shipment e porter prepares claim for refund by submitting follo+ing documents2 )overing Fetter for refund of 8ctroi *uty. 8riginal receipt of 8ctroi paid. 8riginal /orm $. 8riginal /orm ). Invoice under +hich material +as bought to the city. E port invoice issued by the E porter to the importer. E port 0romotion )opy of -hipping $ill T 0hoto )opy. $ill of Fading or %ir+ay $ill )opy.

Pro2;45r; ) 2+ EB>or6 9$6:o56 >8C<;36 of O26ro$ D56C. N For< Pro2;45r;. 0repares form = in 3 copies. )hec,ing of documents -hipping $ill, )arting order, E port Invoice by 8ctroi officer. 5nder ta,ing that the goods +ill be cleared for e port +ithin < days of clearance through the octroi post.

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EXPORT PROCEDURE AND DOCUMENTATION 8ctroi officer at *oc,s +ill endorse the -hipping $ill number E shipment details on = form. 0roof of e port... = form +ith above endorsement to be submitted to the 1ead 8ffice along +ith copies of -hipping $ill, $ill of Fading, E port Invoice etc. Pro2;45r; ) . E.P 'EB>or6 Pro<o6$o3( For<. (egistration form U IE) @ ():) U )% )ertificate. =umber +ill be allotted. /ees (s. "00@9

Do25<;36% C:;2D;4 /actory )hallan cum Invoice. %(E T1. E0 forms 3 copies. E port order. -hipping $ill.

Co3%$73<;36 R;<oA;4 6o Do2D% 834 Proof of EB>or6 6o =; 7$A;3 6o O26ro$ 856:or$6$;%. )ompanyDs Fetter. E0 form. E0). $ill of Fading. -hipping $ill T '.2"% -ervice charge.

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EXPORT PROCEDURE AND DOCUMENTATION B8r Co4$37 It is the endeavor of the )entral .overnment to enhance e port competitiveness of the Indian products and to promote substantially. )ompliance +ith prevalent international best practices. =ational tas, force has recommended adoption of $ar9coding for all Indian products +ithin five years. $ar coding, using International -ymbologies @ =umbering, systems +ould enable timely and accurate capture of product information and its communication across the supply chain ahead of physical product flo+. 3ith the ultimate ob4ective of facilitating adoption of $ar9coding for all products using international -ymbologies numbering systems all e ports of finished and pac,aged items meant for retail sale shall incorporate barcodes from a date to be notified by *./!. M&RINE IN/5R&NCE P0;IC< .oods in transit are sub4ect to ris,s of loss of goods arising due to fire on the ship, perils of sea, thefts etc. :arine insurance protects losses incidental to voyages and in land transportation. :arine Insurance 0olicy is one of the most important document used as collateral security because it protects the interest of all those +ho have insurable interest at the time of loss. !he e porter is bound to insure the goods in case of )I/ #uotation, but he can also insure the goods in case of /8$ contract, at the re#uest of the importer, but the premium payment +ill be made by the e porter. !here are different types of policies such as S>;2$f$2 Po@$2C* !his policy is ta,en to cover different ris,s for a single shipment. /or a regular e porter, this policy is not advisable as he +ill have to ta,e a separate policy every time the shipment is made, so this policy is ta,en +hen e ports are infre#uent.

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EXPORT PROCEDURE AND DOCUMENTATION F@o86$37 Po@$2C* !his policy is ta,en to cover all shipments for same months. !here 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 rene+ed. O>;3 Po@$2C* !his policy remains in force until cancelled by either party, i.e. insurance company or the e porter. O>;3 CoA;r Po@$2C* !his policy is generally issued for 12 months period, for all shipments to one or all destinations. !he open cover may specify the ma imum value of consignment that may be sent pre ship and if the value e ceeded, the insurance company must be informed by the e porter. I3%5r832; Pr;<$5<* *iffers upon from product to product and a number of other such factors, such as, distance of voyage, type and condition of pac,ing etc. 0remium for air consignments are lo+er as compared to consignments by sea. T:; I3%5r832; Po@$2C Nor<8@@C Co368$3%* !he name and address of the insurance company. !he name of the assured E description of the ris, covered. % description of the consignment. !he sum insured E the date of issue. !he place +here claims are payable together +ith details of the agent to +hom claims may be directed E %ny other details, as applicable.

QUALITY CONTROL AND PRE"SHIPMENT INSPECTION

(eali;ing the importance of the need for supplying #uality goods as per international standards, the .overnment of India has introduced )ompulsory Juality )ontrol and 0re9 -hipment Inspection of over 10"0 items of e port under E port BJuality )ontrol and 0re9 -hipment InspectionC %ct 1&'3.

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EXPORT PROCEDURE AND DOCUMENTATION %t present, the e port items that are sub4ected to compulsory inspection includes food and agricultural products, chemicals, engineering, coir, 4ute and foot+ear. Compul$ory Pre'$hipment In$pection2 /oods and %griculture E /ishery :ineral E 8re 8rganic E Inorganic )hemicals (efectories E (ubber 0roducts /oot +ear E /oot +ear components )eramic 0roducts E 0esticides Fight Eng. 0roducts -teel Q0roducts Rute 0roducts )oir E )oir 0roducts

Exemption from compul$ory Pre'$hipment In$pection: -tatus 1ouses )ertification by 5nits I0J) T approved by EI% E58@E0O@-EO /irm Fetter from the overseas buyer -pecified products such as Eng@/ishery average level of (s.1." )r.for the last three years no compliant. /or monitoring pre9shipment inspection, .ovt. of India has set up E port Inspection )ouncil BEI8C !he EI) has set up " E port Inspection %gencies BEI%C. !he EI%s are located one each at :umbai, )alcutta, )ochin, *elhi and )hennai. !he EI%s has a net+or, of nearly '0 offices throughout India. Each EI% is given certain 4urisdiction for inspection purpose. /or instance, EI% of :umbai has 4urisdiction over :aharashtra, .u4arat and .oa. ">

EXPORT PROCEDURE AND DOCUMENTATION /y$tem$ of 4uality Control2 /or the purpose of pre9shipment inspection, EI) has recogni;ed three systems of inspection namely2 -elf9)ertification In90rocess Juality )ontrol )onsignment 3ise Inspection

/elf'Certification: 5nder this system, complete authority is given to the manufacturing units to certify their o+n products and issue certificates for e port. !he manufacturing units +hich have been recogni;ed under this scheme have to pay a nominal yearly fee at the rate of 0.1% of /8$ price sub4ect to minimum of (s.2,"00@9 and ma imum of (s.1 la,h in a year to the concerned EI% In'Proce$$ 4uality Control (IP4C): In this system, companies@units ad4usted as having ade#uate level of #uality control right from ra+ material stage to the finished product stage including pac,aging are eligible to get the inspection certificate on a formal re#uest by the e porter. 8ver >00 units all over India are operating under this system. )onstant vigil and surveillance are ,ept on units approved under I0J) 6E port +orth 5nits7, because of their consistent standards of #uality. Con$i nment %i$e In$pection: 5nder this system, each and every consignment is sub4ect to compulsory inspection. !he e porter has to follo+ a certain procedure such as2 and self9

certification system. 5nits approved under the above t+o systems are often ,no+n as

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EXPORT PROCEDURE AND DOCUMENTATION 1e has to ma,e an application to E port Inspection %gency +ith certain documents. !he EI% deputes inspector to inspect the goods %fter the inspection, the goods are repac,ed +ith EI% seal !he inspector then ma,es a report to *eputy *irector of EI% !he *y. *irector of EI% then issues Inspection )ertificate in triplicate if the inspection report is favorable If the inspection report is not favorable, a re4ection note is issued. o It is to be noted that goods mar,ed +ith I-I@%.:%(M@$I-14000@I-8 &000 are not re#uired to be inspected by any agency o 8verseas buyer may depute his o+n inspection team to inspect the goods o Inspection of te tile goods is conducted by !e tile )ommittee in respect of those e porters +ho are registered +ith the te tile committee. Norm$: %de#uate !esting /acility (a+ :aterial !esting E 0rocess )ontrol %fter -ales -ervices E :aintaining 0roduct Juality )ontrol on bought out components :eteorological )ontrol E 0M.. Independent Juality %udit E 1ouses.

#umi ation: /or ensuring that no insects or bacteria are carried +ith the e port certain types of e port products are fumigated before shipment. !he fumigation is carried out in the port of shipment.

SHIPPING AND CUSTOMS FORMALITIES

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EXPORT PROCEDURE AND DOCUMENTATION 'A% >;r 6:; Pr;A8$@$37 L89 $.;.+ ICA !2( !he shipment of e port cargo has to be made +ith prior permission of, and under the close supervision of the custom authorities. !he goods cannot be loaded on board the ship unless a formal permission is obtained from the custom authorities. !he custom authorities grant this permission only +hen it is being satisfied that the goods being e ported are of the same type and value as have been declared by the e porter or his )E/ agent, and that the duty has been properly determined and paid, if any. !he custom procedure can be briefly e plained as follo+s2 S5=<$%%$o3 of Do25<;36%* !he e porter or his agent submits the necessary documents along +ith the shipping bill to the )ustom 1ouse. !he documents include2 o %(E91 B8riginal and duplicateC o E cise gate pass B8riginal and duplicate transportersD copy o 0roforma Invoice o 0ac,ing Fist o .(I form B8riginal and duplicateC o )ustoms Invoice B+here re#uired in the importing countryC o 8riginal letter of credit@contract o *eclaration form in triplicate o Juality )ertificate o 0urchase memo o Fabels o Ficence Bif any re#uiredC including advance licence copy o (ail+ay receipt@lorry +ay bill o Inspection )ertificate by E port Inspection %gency

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EXPORT PROCEDURE AND DOCUMENTATION Derification of !ocument$: !he )ustoms %ppraiser verifies the documents and appraises the value of goods. 1e then ma,es an endorsement of 6E amination 8rder7 on the duplicate copy of shipping bill regarding the e tent of physical e amination of the goods at the doc,s. %ll documents are returned bac, to the agent or e porter, e cept o 8riginal )opy of .( to be for+arded to ($I o 8riginal copy of shipping bill o 8ne copy of commercial invoice Cartin 0rder: !he e porterDs agent has to obtain the carting order from the 0ort !rust %uthorities. )arting 8rder is the permission to bring the goods inside the doc,s. !he carting order is issued by the superintendent of 0ort !rust. )arting 8rder is issued only after verifying the endorsement on the duplicate copy of shipping bill. !he )arting 8rder enables the e porterDs agent to cart goods inside the doc,s and store them in proper sheds. /torin the "ood$ in the /hed$: %fter securing the carting order, the goods are moved inside the doc,s. !he goods are then stored in the sheds at the doc,s. Examination of "ood$: !he e porterDs agent then approaches the customs e aminer to e amine the goods. !he customs e aminer e amines the cargo and records his report on the duplicate copy of the shipping bill. !he customs e aminer then sings the 6Fet E port 8rder7 ;et Export 0rder: !he Fet E port 8rder is then sho+n to the )ustoms 0reventive 8fficer, along +ith other documents. !he )08 is in charge of supervision of loading operations on the vessel. If )08 finds everything in order, he endorses the duplicate copy of shipping bill +ith the 6Fet -hip 8rder7 !his order helps the e porter@shipper to load the goods on the ship.

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EXPORT PROCEDURE AND DOCUMENTATION ;oadin "ood$: !he goods are then loaded on the ship. !he )08 supervises the loading operations. %fter loading is completed, the )hief :ate B)argo 8fficerC of the ship issues the 6:ateDs (eceipt7. !he :ateDs (eceipt is sent to the 0ort !rust 8ffice. !he )E/ agent pays the port trust dues and collects the mateDs receipt. !he )E/ agent then approaches the )08 and gets the certification of shipment of goods on %( /orms and other documents 0btainin 1ill of ;adin : !he :ateDs (eceipt is then handed over to the shipping company Bon +hose vessel the goods are loadedC. !he shipping company issues bill of lading. !he $ill of Fading is issued in2 o 3 negotiable copies of $ill of Fading o 10 to 12 =on9negotiable copies of $ill of Fading. !he negotiable copies have title to goodsQ +hereas non9negotiable copies do not have title to goods but are used for record purpose. PROCEDURE OF EXCISE CLEARANCE* !he common procedure of e cise clearance under 6bond7 and under 6rebate7 is discussed as follo+s2 Preparin of In3oice: !he e port goods have to be cleared from the factory under invoice. !he invoice contains details li,e name of the e porter, value of goods, e cise duty chargeable, etc. !he invoice is to be prepared in triplicate. In case of e port under $ond, the invoice should be mar,ed as 6#or Export %ithout payment of duty(. In addition to the invoice, a prescribed for %(E 1 has to be filed in by e porter. #illin up of &RE'8 form (&nnexure'9E): !he %(E91 form needs to be filled in four copies. % fifth B8ptionalC may be filled in by the e porter, +hich can be used at the time of claiming other e port incentives. !he %(E91 copies have distinct color for the purpose of verification and processing.

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EXPORT PROCEDURE AND DOCUMENTATION &pplication to &$$i$tant Commi$$ioner of Central Exci$e (&CCE): !he e porter has to ma,e an application to %))E regarding the removal of goods from the factory@+arehouse for e port purpose. Information to Ran e /uperintendent of Central Exci$e (R/CE): !he %))E +ill inform the (-)E under +hose 4urisdiction the goods are intended to be cleared for e port !eputation of In$pector: !he (-)E +ill then depute an inspector to clear the goods, either at the factory or +arehouse, and in certain cases at the port. Proce$$in follo+s2 o !he inspector returns the original and duplicate copies to the e porter o !he triplicate copy is sent to officer B%))E or :aritime )ommissioner B:))EC to +hom bond +as e ecuted or letter of underta,ing BF5!C +as given. !his copy can also be handed over to the e porter in a tamper proof sealed cover to be submitted to %))E@:))E. o !he 4th copy +ill be retained by the e cise inspector. o !he "th copy is also handed over to the e porter. o %t the time of e port, original, duplicate and the " th copy BoptionalC +ill be submitted to customs officer. !he customs officer +ill e amine these copies and then e port +ill be allo+ed. o !he customs officer +ill then ma,e endorsement of e port on all copies of %(E91. 1e +ill cite shipping bill number and date and other particulars of e port on %(E91. o !he original copy and #uintuplicate BoptionalC +ill be returned to the e porter. !he duplicate copy +ill be sent directly to the %))EA:))E i.e. e cise officer +ith +hom bond +as e ecuted +ill get 2 copies, one from (-)E Bor e cise inspectorC +hen goods of &RE'8 #orm: !he E cise 8fficer@Inspector +ill ma,e endorsement on all copies of %(E91. !he handling of %(E91 /orm is done as

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EXPORT PROCEDURE AND DOCUMENTATION are cleared from factory and other )ustom 8fficer after e port. !his +ill enable him to ,eep trac, to ensure that all goods cleared from factory or +arehouse +ithout payment of duty are actually e ported. In case of e port after payment of duty, under claim of rebate, the basic procedure is same as above, e cept that the triplicate copy Bby e cise inspectorC and duplicate copyBby customs officerC+ill be sent to the officer to +hom rebate claim is filed. If claim of rebate is by electronic submission, these copies +ell be sent to e cise rebate audit section at the place of e port. Refund or Relea$e of 1ond: !he e porter should ma,e an application to the e cise officer for refund or release of bond. !he application must be supported by original copy of %(E91 form. !he e cise officer crosschec,s the original copy of %(E91 form and the duplicate and triplicate copies of %(E91 form, +hich he had received earlier. If the copies match, then refund is given or the bond is released. FACTORY STUFFING OF CARGO Clearance of ood$ to doc.$: If the goods meant for e port is of a small #uantity +hich may not be sufficient to ma,e one full container, the cargo is said to be less than container load BF)FC cargo. -uch cargo has to be ta,en to the doc,s +here the goods +ill be consolidated Bcombining the cargo of other e porters to ma,e up #uantity for a full containerC by the agent and loaded into a container. 1ere the e amination of the cargo is done at the doc,s.B!here are also inland container depots approved by the customs +here the goods can be consolidated and stuffed into the container by the agent under the supervision of the customs officerC If the goods meant for e port is of sufficient #uantity to ma,e up a full container, the e porter has the option to ta,e the goods to the doc,s and get them e amined and stuffed into a separate container. %n e porter gets the benefit on the freight amount for a full container. B.enerally called box rateC

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EXPORT PROCEDURE AND DOCUMENTATION %lternatively, he can have a container allotted to him and get the same to his :ills 0remises. !he goods meant for e ports can be stuffed into the container under the supervision of the regional )entral E cise %uthority. 1ere the e porter has to 8btain permission from the )ustoms for getting the container to his mills premises for stuffing B1ouse -tuffingC Inform the ).E cise %uthorities at least 24 hours before bringing the container for loading. !he ).E cise %uthority +ill supervise the loading, seal the container and certify the invoice as directed in the permission given by the custom authorities. % special Foc, is used to loc, the doors of the container. -amples from the goods +ill be dra+n, if necessary, as re#uired under the customs permission. -uch samples +ill be sealed and for+arded along +ith the container. !he e aminer in the doc,s may arrange to send the sample for testing. !hen the container is moved to the doc, for loading. .enerally, such containeri;ed goods are not sub4ect to further e amination in the customs. !hey +ill be directly ta,en for loading.

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EXPORT PROCEDURE AND DOCUMENTATION

SALES TAX EXEMPTION PROCEDURE

E port good are e empted from the payment of sales ta . !he e porter can claim e emption from sales ta Bon purchases or sales for e port purposeC, provide the e porter is registered +ith the -ales9!a *epartment. If the e porter is not registered +ith the sales ta department, he cannot utili;e the facility of sales ta e emption. !herefore, it is necessary for the e porter to get his organi;ation registered +ith sales ta department. I R;7$%6r86$o3 Pro2;45r; A>>@$286$o3* !he e porter must apply to the -ales !a 8fficer B-!8C under +hose 4urisdiction the head@ registered office of the e porter is located. D;>5686$o3 of I3%>;26or* !he -!8 may depute an inspector to visit the office of the e porter and inspect2 o (elevant boo,s sho+ing sales@ purchases. o 0artnership *eed or :emorandum and %rticles of %ssociation along +ith Incorporation )ertificate. o 8ther (elevant documents. I3%>;26$o32 !he inspector visits the office of the e porter and inspects the necessary boo,s and other documents. R;>or6 =C I3%>;26or* !he -ales !a Inspector ma,es a report to the -!8 for registration or other+ise. !he -!8 verifies the inspector report. !he -!8, before granting the -! (eg. =umber may cal the e porter for necessary clarifications, if re#uired. S;25r$6C Bo34* !he -!8 normally re#uires the e porter to provide a security bond from another firm +hich is registered +ith the -ales !a *epartment. Gr836$37 of S8@;% T8B R;7. N5<=;r* %fter completing necessary formalities, the -!8 grants -ales !a (eg. =umber to the e porter. '<

EXPORT PROCEDURE AND DOCUMENTATION II. EB;<>6$o3 Pro2;45r; 8btaining /orm L1D2 the registered e porters need to apply to the concerned -!8 for obtaining /orm D1D. the e porter should submit2 o % copy of Fetter of )redit o % copy of Fetter of )redit @E port 8rder. o )opy of the Invoice , +here goods are already purchased for e port purchase. o % copy of shipping bill duty certified by customs. !he e porter has to affi the prescribed court fee stamp on each of the /orm L1D issued. !he -!8 then affi es the e porterDs company stamp on the /orm D1D. F$@@$37 6:; 4;68$@% $3 For< HHI2 %fter e port of goods, the e porter fills the relevant details in L/orm 1D. !he /orm L1D needs to be prepared in triplicate. !he e porter retains one copy, and other t+o copies are sent to the seller from +hom the e porter purchased the goods for e port purpose. !he seller than sends on copy of /orm L1D to -!8 along +ith the (eturn of -ales !a . !he other copy is retained by seller. !he -!8 may issue refund order to the e porter.

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EXPORT PROCEDURE AND DOCUMENTATION

METHODS OF RECEIVING PAYMENT AGAINST EXPORTS

$efore +e proceed to understand the concept of Fetter of )redit, let us understand the various types of payment methods available against e port. METHODS OF PAYMENT !here are three methods of payment depending upon the terms of payment, and each method of payment involves varying degrees of ris,s for the e porter. !he methods are2 A. 0ayment in advance *ocumentary $ills Fetter of )redit 8pen %ccount )ounter !rade PAYMENT IN ADVANCE

!his method does not involve any ris, of bad debts, provided entire amount has been received in advance. %t times, a certain per cent is paid in advance, say "0% and the rest on delivery. !his method of payment is desirable +hen2 !he financial position of the buyer is +ea, or credit +orthiness of the buyer is not ,no+n. !he economic@ political conditions in the buyerDs country are unstable. !he seller is not +illing to assume credit ris,, as un the case of open account method. 1o+ever, this is the most unpopular methods as a foreign buyer +ould not be +illing to pay advance of shipment unless2 !he goods are specifically designed for the customer, and !here is heavy demand for the goods Ba sellerDs mar,et situationC. '&

EXPORT PROCEDURE AND DOCUMENTATION B. DOCUMENTARY BILLS*

5nder this method, the e porter agrees to submit the documents to his ban, along +ith the bill of e change. !he minimum documents re#uired are full set of bill of lading commercial Invoice :arine Insurance policy and other document, if re#uired.

!here are t+o main types of documentary bills2 *ocuments against 0ayment, *ocuments against %cceptance.

Do25<;36% 878$3%6 >8C<;36 'DFP(* !he documents are released to the importer against payment. !his method indicates that the payment is made against -ight *raft. =ecessary arrangements +ill have to be made to store the goods, if a delay in payment occurs. !he ris, involved that the importer may refuse to accept the documents and to pay against them. !he reason for non9acceptance may be political or commercial ones. In India, E).) covers losses arising out of such ris,s. 5nder this system, as compared to *@%, the e porter has certain advantages2 !he document remain in the hands of the ban, and the e porter does not lose possession or the o+nership of goods till payment is made, 8ther reason may include that the e porter may not be able to allo+ credit and +ait for payment. !ocument$ & ain$t acceptance (!F&): !he document are released against acceptance of the !ime *raft i.e. credit allo+ed for a certain period, say &0 days. 1o+ever, the e porter need not +ait for payment till bill is met on due date, as he can discount the bill +ith the negotiating ban, and can avail of funds immediately after shipment of goods.

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EXPORT PROCEDURE AND DOCUMENTATION In case of *@% as compared to *@0 bills, the ris, involved is much grater, as the importer has already ta,en possession of goods +hich may or may not be in his custody on the maturity date of the bill. If the importer fails to pay on due date, the e porter, +ill have to start civil proceedings to receive his payment, if all other alternatives fails. !he ris, involved can be insured +ith E).). C. LETTER OF CREDIT 'LFC(*

!his method of payment has become the most popular form in recent times, it is more secured as company to other methods of payment Bother than advance paymentC. % letter of credit can be defined as 6 an underta,ing by importerDs ban, stating that payment +ill be made to the e porter if the re#uired documents are presented to the ban, +ithin the variety of the F@)7.

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EXPORT PROCEDURE AND DOCUMENTATION

THE LETTER OF CREIDT

I36ro4526$o3 !he cycle of a business transaction can be said to be complete prima facie +hen the buyer has received the product he desires to buy and the seller gets his payment in due consideration of the product supplied. 3hile the seller is ,een to receive the payment for his supplies, the buyer is e#ually ,een that he gets +hat he +ants by the paying for the same. !ough there are many merit and demerits in each of the different mode of payments +e have discussed earlier, in relation either to the buyer or to the seller, +e shall no+ deal in detail about the mode of payment under the *ocumentary )redit. .enerally, though e porters are complacent once they get the letter of )redit on hand feeling that their payment is secured, let me say it is as much a dubious instrument as is a safe instrument. If one does not understand the implications of the terms and condition of a letter of credit, the provisions under 5)0 "00, ho+ co9operative are the e porterDs ban, and ho+ good are the F@) opening ban, and the reimbursement ban,, he is sure to land in trouble at once stage or another. !here are ample cases of frauds under the Fetter of )redit. :ore and more ingenious methods are adopted to circumvent the provisions of 50) "00 by fair or foul means. 1ence, even the safety and security under the Fetters of )redit may prove to be no better than a mirage for a man in the desert. 1ence, sufficient care is to be ta,en by the e porter to ensure that instrument is received in order and the conditions of the F@) can be +ell complied +ith, and there are no clauses of ambiguity.

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EXPORT PROCEDURE AND DOCUMENTATION W:86 $% 8 Do25<;368rC Cr;4$6J !o say in simple language, this is an 5nderta,ing by a $an, associated +ith the buyer to ma,e the payment for the supply of goods by a seller sub4ect to compliance of various re#uirements that may be specified in the document of underta,ing by the $an,. !his document is ,no+n as *ocumentary )redit. % *ocumentary )redit is also called a Fetter of )redit BF@)C. CONTENTS OF A LETTER OF CREDIT % letter of credit is an important instrument in reali;ing the payment against e ports. -o, needless to mention that the letter of credit +hen established by the importer must contain all necessary details +hich should ta,e care of the interest of Importer as +ell as E porter. Fet us see shat a letter of credit should contain in the interest of the e porter. !his is only an illustrative list. name and address of the ban, establishing the letter of credit letter of credit number and date !he letter of credit is irrevocable *ate of e piry and place of e piry Halue of the credit 0roduct details to be shipped 0ort of loading and discharge :ode of transport /inal date of shipment *etails of goods to be e ported li,e description of the product, #uantity, unit rate, terms of shipment li,e )I/, /8$ etc. !ype of pac,ing *ocuments to be submitted to the ban, upon shipment !olerance level for both #uantity and value If F@) is restricted for negotiation <3

EXPORT PROCEDURE AND DOCUMENTATION (eimbursement clause

PROCEDURE INVOLVED IN THE LETTER OF CREDIT !he follo+ing are the step in the process of opening a letter of credit2 E porterDs (e#uest2 !he e porter re#uests the importer to issue F) in his favor. F) is the most secured form of payment in foreign trade. ImporterDs (e#uest to his $an,2 !he importer re#uests his ban, to open a F@). 1e :ay either pay the amount of credit in his current account +ith the ban,. Issue of F)2 !he issuing ban, issues the F@) and for+ards it to its correspondent ban, +ith also re#uest to inform the beneficiary that the F@) has been opened. !he issuing ban, may also re#uest the advising ban, to add its confirmation to the F@), if so re#uired by the beneficiary. (eceipt of F)2 the e porter ta,es in his possession the F@). 1e should see it that the F@) is confirmed. -hipment of .oods2 !hen e porter supplies the goods and presents the full set of documents along +ith the draft to the negotiating ban,. -crutiny of *ocuments2 !he negotiating ban, then scrutini;es the documents and if they are in order ma,es the payment to the e porter. =egotiation2 !he e porterDs ban, negotiates the document against the letter of credit and for+ards the e port documents to the F@) opening ban, or as per their instructions. (eali;ation of payment2 !he issuing ban, +ill reimburse the amount B+hich is paid to the e porterC to the negotiating ban,. *ocument to Importer2 the issuing in turn presents the documents to the importer and debits his account for the corresponding amount. In order to have uniformity and to avoid disputes, the I)) 0aris has evolved uniform customs and practices of documentary credit B5)0*)C, in short ,no+n as 5)0 "00 effective from 1919&'. !hese are rules have been adopted by more than 1"0 countries.

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EXPORT PROCEDURE AND DOCUMENTATION !hey provide the comprehensive and practical +or,ing aid to ban,er, la+yer, importers, e porters, E porters, transporters, e ecutives involved in international trade. =ote2 as soon as an F@) is received ensure that the same is authenticated. :eaning that the genuineness of the F@) is certified by the %dvising $an, by an endorsement +ith the mar,ing L%5!1E=!I)%!E*D 8( EF-E !1E F@) I- 8/ =8 5-E. D$ff;r;36 TC>; of Do25<;368rC Cr;4$6%. !here are various types of *ocumentary )redit opened by a ban, in favour of itDs customer depending upon the re#uirement. Fet us tal, about fe+ types of *ocumentary )redit +hich are in common use. (evocable @ Irrevocable *ocumentary )redit 2% (evocable *ocumentary )redit can be revo,ed BcancelledC by the buyer at his o+n discretion and this does not re#uire the consent of the seller. !he ris, factor here is that the F@) may be cancelled even after the shipment is done and before the beneficiary present the documents to the ban, for claiming the reimbursement. 1ence, a revocable F@) is as goods as no F@). obviously, no seller +ill entertain a revocable F@). )ontrary to this, an Irrevocable *ocumentary )redit once established and advised to the beneficiary, cannot be revo,ed or cancelled unilaterally by the buyer +ithout the consent of the beneficiary B-ellerC.% -eller must al+ays as, for an Irrevocable Fetter of )redit. (estricted@ 5nrestricted *ocumentary )redit2 % *ocumentary )redit stipulates the name of the ban, +ho is authori;ed to negotiate the document for claming the reimbursement. In this case the beneficiary is obliged to negotiate the documents only through the specified ban, i.e. =egotiation of document is restricted to that particular ban,. 8n the contrary if no specific ban, is nominated for negotiation, it may say L=egotiation by any ban,D +hich means the beneficiary is free no negotiate the document through the ban, of his choice. !his is beneficial because he can negotiate the documents through his o+n ban, +here he is having an account. -ince the ban, is not alien to him, he +ill not face any

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EXPORT PROCEDURE AND DOCUMENTATION practical@procedural difficulty in negotiating the document. It is suggested to have an unrestricted F@) or F@) +hich may be restricted to the ban, of the beneficiaryDs choice.

)onfirmed@5nconfirmed *ocumentary )redit2 )onfirmed *ocumentary )redit is one in +hich the beneficiary has the option to have the F@) confirmed by a ban, in the beneficiary country i.e. the ban, +ho confirms the F@) ta,es the responsibility of ma,ing the final payment to the beneficiary upon negotiation of the document in strict compliance +ith the terms and conditions of the Fetter of )redit. $y this process the final payment +ill be made in the beneficiaryDs country by the ban, +hich confirms the F@) immediately upon negotiation of the documents. !he beneficiary do not stand the ris, of +aiting for the document to reach the opening ban, +ho +ill have the final say so to the compliance under the F@) before ma,ing the payment. /urther, the payment is also made immediately after negotiation and +ithout recourse to the beneficiary i.e. the payment once made by the confirmed ban, cannot be revo,ed. :oreover, if the importing countryDs regulation changes and the money is not allo+ed to be repatriated, this +ill eliminate the ris,. 8n the contrary, in an unconfirmed F@), the negotiating ban, only accepts the documents and pays for the same +ith recourse i.e. if as and +hen the documents reach the opening ban,, and the opening find some discrepancy in the documents it may refuse to ma,e the payment or see, clarification for the applicant before reimbursement. !he beneficiary is fully at the mercy of the opening ban, for payment. It is suggested to as, for a )onfirmed F@).

3ith (esource and 3ithout B-ansC (esource Fetter of )redit2 !he revocable or irrevocable F) can further be classified as +ith resource and +ithout resource F). o 3ith resource F)2 In this type the e porter is held liable to the paying@ negotiating ban,, if the draft dra+n against F) is not honored by the importer@issuing ban,. !he negotiating ban, can ma,e the <'

EXPORT PROCEDURE AND DOCUMENTATION e porter to pay the amount along +ith the interest, +hich it has already paid to the beneficiary. o 3ithout B-ansC (esource F)2 In the case of sans B+ithoutC resource letter of credit, the negotiating ban, has no recourse to the e porter, but only to the issuing ban, or to the confirming ban,. =ormally, the negotiating ban, ma,es advance payment to the e porter in resource of letter of credit either by discounting bills against letter of credit or by purchasing the bills of e change. In such an instance, if the issuing ban, fails to ma,e payment or dishonor the letter of credit, then the negotiating ban, cannot get the money bac, from the e porter or hold him liable to pay the amount. 1o+ever, in the case of +ith resource letter of credit, the negotiating ban, can as, the e porter to pay bac, the money along +ith certain other e penses. /or the e porter, sans (esource letter of credit is more safe as compared to 3ith (esource letter of credit. !ransferable@=on9transferable *ocumentary )redit2 In a transferable F@), the beneficiary can transfer the F@) opened in his name in favor of a third party +ho may effect the shipment and negotiate the documents and claim payment under the said F@). (evolving *ocumentary )redit2 3here an e porter is having a regular shipment for a particular customer and the value of each shipment may also be of more or less e#ual value, and then one can call for a (evolving *ocumentary )redit. !he salient feature of this F@) is that the buyer opens an F@) +hich can ta,e care of shipments, say, may be for a period of one year on a monthly basis. /or e.g. an e porter enters into a contract for supply of "000 pairs of !rousers valued appro .5-.V.<",000@9 to be shipped every month. !he buyer can open an F@) for a value of 5-.V.<"000@9 +ith validity for 12 months stipulating shipment every month for a value of 5-V. <"000@9and by adding a clause to ma,e 12 shipment of li,e value the F@) stands replenished for the full value of the F@) after each shipment is made the documents are negotiated for +hich payment are

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EXPORT PROCEDURE AND DOCUMENTATION also made immediately for the value of the shipment. !he main benefit in this F@) is that the buyer, the ban, and the e porter are saved from the routine of opening one F@) every month, the an iety of non9receipt of the F@) on time, the amendments that may be +arranted every time, the ban, charges for opening number of F@)s etc.,. % revolving *ocumentary )redit may have cumulative effect i.e. if a particular shipment is not made, then the value is added to the value for future utili;ation. In an automatic (evolving )redit, the ban, is liable for the total amount covering the entire shipment and +here it is non9automatic its responsibility is restricted to the value of one shipment. In automatic (evolving )redit the value of the credit is automatically replenished by an amendment. 3here there are continuous shipments li,e the one stated above one can call for a (evolving Fetter of )redit. %ssignable *ocumentary )redit2 In this type of F@) the benefit is shared bet+een the first beneficiary and the parties +hose names are assigned on the F@). !he assignee is not a party to the letter of credit but he only derives the benefit as per the F@). this is more beneficial to the assignee because he receives his part of the money once the documents are negotiated by the first beneficiary in +hose name the F@) is opened. )alls for an F@) as necessary. -tand by Fetter of )redit2 !his is aimed at providing a security to a seller in case the buyer fails to perform his part. !hus this F@) is used in case of non9 performance +hile the other types of F@)s are generally for some performance. -uch credits are paying on first presentation and the only document re#uired therein is a simple declaration of non9performance along +ith the statement of claim. !his type of F@) is mainly common in 5.-.%. % standby *ocumentary )redit is generally common on open account trading +here the seller may e pect some security for getting his payment. !his is not permitted in India.

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EXPORT PROCEDURE AND DOCUMENTATION (ed )lause F)2 !he red clause F) is the usual irrevocable F) +ith further authorities the negotiating ban, to ma,e advance to the beneficiary for the purpose of processing the e port goods. !hus, the red F) enables the e porter to obtain pac,ing credit facility for the purpose of processing the goods. It is called a red9cause F) because it is generally printed@ typed in red in,. .reen )lause F)2 !he .reen F) in addition to permitting pac,ing credit advance also provides for the storing facilities at the port of shipment. .reen F)s is e tensively used in %ustralian +ool creditors. $ac,9to9$ac, F)2 $ac,9to $ac, F) is a domestic letter of credit. It is a ancillary credit created by a ban, based on a confirmed e port F) received by the direct e porters. !he direct e porter ,eep the original F) Breceived from issuing ban,C +ith the negotiating or some other ban, in India, as a security, and obtains another F) in favour of domestic supplier. !hrough this route the domestic supplier gains direct access to a pre9shipment loan based on the receipt of domestic or bac,9to9bac, F). *ocumentary F)2 :ost of the FA) is documentary FA). 0ayment is being made by the ban, against delivery of the full set of documents as laid do+n by the terms of credit. !he important documents re#uired to be submitted by the e porter under documentary F) includes the follo+ing2 o $ill of Fading @%ir+ay $ill or any other transport document o )ommercial Invoice o Insurance 0olicy o -hipping $ill o )ertificate of 8rigin o )ombined Invoice and )ertificate of Halue and 8rigin o .-0@)30 certificate o 0ac,ing Fist o )ertificate of Juality Inspection

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EXPORT PROCEDURE AND DOCUMENTATION o $ill of E change o %ny other document if re#uired. % letter of credit may call for some or most of the above documents and may also call for some other documents specific to the shipment. !ravelerDs F)2 !ravelerDs F) is issued to the person +ho intends to ma,e a 4ourney abroad. !he correspondent@ agent of the ban, honors all the che#ues dra+n on this credit by its holder up to the amount mentioned in F). !ravelerDs F) has more advantages as compared to travelerDs che#ues. In case of che#ue, the holder can +ithdra+ up to the amount of the che#ue. %gain, he has to carry a number of che#ue. In case of travelerDs F), the holder can dra+ any amount up to the limit mentioned in the F), and he need to carry only one paper of F).

!ypes of 0ayments under a *ocumentary )redit.

0ayment under a documentary credit can be of the follo+ing types2 payment at -ight2 In this mode, the payment is made by the F@) opening ban, or its nominated ban, or by a confirming ban, on presentation of the documents in full conformity +ith the F@). !he F@) may or may not call for draft at sight for the full value of the documents. *eferred 0ayment -cheme2 In this case the payment is to be made at a future date as stipulated in the F@). 1ere, generally =8 draft is re#uired as the due date of payment is defined in the F@). In case of a confirmed F@), the final payment is made by the confirmed ban, on due date and by the issuing ban, or its nominated ban, if the F@) is not confirmed. %cceptance )redit 2 !his type of credit re#uires a usance draft to be dra+n on a nominated or accepting ban,. !he payment is made by the nominated@accepting ban, on the due date as per instructions of the negotiating ban,. In case of a confirmed F@) the payment on due date is made by the negotiating ban, Bconfirming ban,C.

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EXPORT PROCEDURE AND DOCUMENTATION =egotiation )redit2 1ere the payment is made by the negotiating ban, upon negotiation of the documents if it prepares to ta,e the ris, and +ill recourse to the beneficiary. If the credit is confirmed, then the negotiation ban, is obliged to ma,e the payment upon submission of a clean document by the beneficiary. E pect in the case of confirmed F@) there is al+ays a time lag bet+een the date of negotiation of the document and the date of receipt of the payment. !his is a grey area. If the ban, acts s+iftly and +ithout pre4udice, one gets payment +ithin a +ee,Ds time. If the payment is delayed beyond this time, though an e porter has every right to as, for compensation, in actual practice, no 4ustice is done to the e porter for the delayed payment. Hery rarely, on persistent approach by the e porter@their ban,er, does a defaulting ban, comes for+ard to compensate for the delayed payment. .enerally the e porter has to forego lot of money in correspondence through the negotiating ban, because every communication of the ban, is charged to the e porter. It is no surprise many e porter suffer this loss silently.

/eature of a *ocumentary )redit

% documentary credit is a document in +riting issue by the ban, on behalf of its customer B!he $uyerC. *ocumentary )redit must stipulate the !ype of )redit as detailed above and $36;r 8@$8 +ill also stipulate the /ollo+ing details 2 the name of the $an, issuing the *ocumentary )redit.B!he F@) 8pening $an,C the name and address of the buyer on +hose behalf the credit is Issued.B!he %pplicantC the name and address of a ban, in the country of the seller the credit through 3hom the F@) is to be advised to the seller. !he name and address of the -eller B$eneficiaryC !he :a imum Halue the opening ban, underta,es to pay to the $eneficiary. !he date of issue of the credit.

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EXPORT PROCEDURE AND DOCUMENTATION !he E piry *ate of the F@) !he Halidity *ate for shipment. !he *etails of the product to be shipped.B*escriptionC *etails of document re#uired for claiming the payment from the 8pening ban,. !he name and address of the ban, authori;ed to negotiate the documents. !he (eimbursement )lause.

%s soon as an F@) is received ensure that the F@) is authenticated. If the F@) received in mail the signatures are got to be verified by the advising ban,. In case of tele @s+ift the ban, should endorse on the document authenticated and then only the F@) is a valid document. 3hile the above details are the minimum that a *ocumentary )redit may have in actual practice there can be other stipulations mutually agreeable to the buyer, seller and the opening ban, as also the negotiating ban,. !he guidelines for the interpretation and usage of Fetter of )redit are governed by the 5)0 "00 B5niform )ustoms 0ractice for *ocumentary )reditC published by the International )hamber of )ommerce BI))C. !he 50) "00 covers all the procedural aspects relating to the transactions under a Fetter of )redit. 1ence one is suggested to be familiar +ith all the 4& %rticles as detailed in the 5)0 "00 of 1&&4. 3hile all the elements and events that one may encounter in each and every organi;ation can not be e plained, the 5)0 "00 has attempted to ta,e care most of the #ueries that one may encounter normally. !he I)) 5niform )ustoms and 0ractice +as first published in 1&&3. !a,ing into the consideration of the various developments in the transactions under the *ocumentary )redit the I)) has been revie+ing these rules and updating the same. %s time changes and the international transactions faces ne+ aspects, attempts +ill be made to get the 5)0 "00 revised.

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EXPORT PROCEDURE AND DOCUMENTATION

-crutiny of letter of credit

:ere receipt of letter of credit is no guarantee of payment. !here are many ifs and buts before the documents are submitted to the ban, against the letter of credit for reali;ation of proceeds from the opening ban,. %s soon as the letter of credit is received a through scrutiny is to be underta,en to ensure that /irst and foremost that the credit is properly authenticated by the advising ban,. !he letter of credit has been opened in accordance +ith the terms of the contract. !he name and address of the beneficiary has been spelt properly. !he details of product description, #uality, and value are in order. !he validity of shipment and e piry are correct. !he documents that are re#uired can be submitted. !here is sufficient % of tolerance of #uantity and value. !he unit price and the terms of contract are correct. !he terms and conditions stipulated can be complied +ith. !hat the credit is available for negotiation +ithout restriction. In case of e ports re#uires the credit to be confirmed by the local, then necessary clause is incorporated by the opening ban, on the credit. Fast but not the leastQ the credit has a reimbursing clause enabling the negotiation ban, to get reimbursement of the money paid to the e porter against the documents. !here are only fe+ suggestions. !he re#uirement may differ for different e porter and the scrutiny has be done relative to the re#uirement. AMENDMENTS TO THE CREDIT

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EXPORT PROCEDURE AND DOCUMENTATION 8n scrutiny of the letter of credit, if the e porter finds that some change are re#uired to be made in the credit, he should immediately re#uest the buyer to ma,e necessary change in the letter of credit and the opening ban, issued necessary amendment in this respect. %ny oral and +ritten agreement by the importer about change in the credit directly to the e porter should not be accepted as it is not valid under the credit. %ny change must be advised by the importer through the opening ban, only as a sort of amendment to the original credit. DOCUMENTARY CREDIT IN GENERAL 8f all the various type of payments, the most safest as far as the e porter is concerned is to get an advance payment in full for the value of shipment to be effected. 8bviously, this puts the buyer totally at the mercy of the seller and unless the buyer feels unavoidable he +ill not be prepared to ma,e advance payment. 1ence, of the rest of the modes of payment, the best is calling for a *ocumentary )redit for any shipment. =o+ let us see ho+ +e can ta,e care of the interest of the e porter +hile an F@) is established. It is suggested that the e porter gives the full details as to the various re#uirements to the buyer for incorporation in the F@). this +ill avoid the necessary of as,ing for amendments and +ill save both time and money. $ear in mind every amendment costs you badly. )are are should be ta,en to ensure that there are =8 spelling mista,es, omission and commission of 6, or7, or such small things. % discrepancy is a discrepancy and there is nothing li,e minor discrepancy or ma4or discrepancy as far as the ban, is concerned. % ban, strictly deals in documents and the documents are e pected to be cent percent in line +ith details give in the *ocumentary )redit. Ensure that the Halidity for shipment and for negotiation of documents can be complied +ith. If not possible, call for amendment e tending the validity as re#uired. 5nless the F@) specifies the tolerance for the #uantity and value, the e porter should follo+ the #uantity and value as stipulated in the F@). !here is provision for a tolerance of the #uantity up to " percent more or less than stipulated in the F@) even if the F@) does

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EXPORT PROCEDURE AND DOCUMENTATION not specify tolerance e clusively and unless tolerance is prohibited 0 specifically. 1o+ever, the value of documents, on no account, could e ceed the limits of the F@). )hec, the description of the product properly, the rates if specified, and #uantity of each of the items. %s, for amendment +here you cannot copy +ith the terms. :a,e sure that all the documents as called for by the )redit can be submitted +ithout any e ception. !he last but not the least is the (eimbursement clause B.etting the funds for the shipment madeC. %n F@) +ithout this clause is no F@). if there is no provision as to from +here the e porter is going to get paid for, the +hole e ercise of the F@) is futile. !he opening ban, may specify the reimbursement clauses as follo+s2 !he negotiating ban, to send the documents to the opening ban, +ho +ill, upon receipt of the documents, arrange for reimbursement as claimed by the negotiation ban,. !he negotiating ban, can claim reimbursement directly from a nominated ban, Bsay %$) $an,, =e+ ?or,C either upon negotiation of documents or after a period of W days of negotiation sub4ect to the documents being submitted by the beneficiary is strictly in conformity +ith terms and condition of the letter of credit. I for one prefer the reimbursement clause as in bC so that on one hand my ban, sends the documents to the opening ban, and at the same times claims the reimbursement from nominated ban,. !hese are some of the aspects one should ta,e care to ensure that the F@) established in his favor is in order and that he can comply +ith all the provision thereof. 1o+ever, one is advised to ma,e a chec,list and ta,e a note of each and every condition of the F@) for compliance at the right time. PARTIES TO LETTER OF CREDIT %pplicant2 the buyer or importer of goods.

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EXPORT PROCEDURE AND DOCUMENTATION Issuing $an,2 importerDs ban, +ho issues the F@). $eneficiary2 the party to +hom the F@) is addressed. !he seller or supplier of goods. %dvising $an,2 issuing ban,Ds branch or correspondent ban, in the e porterDs country to +hich the F@) is sent for on+ard transmission to the beneficiary. )onfirming $an,2 the ban, in beneficiaryDs country +hich guarantees the credit on the re#uest of the issuing ban,. B:any a times the advising ban, and confirming ban, are one and the sameC. =egotiation $an,2 the ban, to +hom the beneficiary present his documents for 0ayment u 5nder F@). (eimbursing $an,2 the ban, +hich +ill reimburse the negotiating ban, for the value of the credit. 3here an F@) stipulates that the =egotiation is restricted to a specific ban, +hich is not the %dvising $an, or 3here the F@) is not restricted, and the seller desires to negotiate the document +hich is not the advising ban,, then +e have a separate =egotiating $an,. 3here the opening ban, prefers to advise the F@) through its o+n branch in the beneficiary country or through another ban, of its choice, then the F@) may be advised to the beneficiary directly by this ban, or if it instructed to advise the F@) through the buyerDs nominated ban, then it does so. 1ere, +e have t+o advising ban,. %s far as possible, one should restrict the involvement of the number of the ban,s to the minimum. :ore the number of the ban,s, more the time in the transmission of the F@), in addition to multiplicity of ban, charges.

-0E)I%F =8!E
!hough one may strongly feel that a Fetter of )redit is the safest mode of payment, one +ill face innumerous practical difficulties in so far as compliance +ith the terms and conditions of the F@). since several documents are involved, there are every possible of discrepancy in the documents either bet+een different documents or bet+een the

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EXPORT PROCEDURE AND DOCUMENTATION document or bet+een the document and the F@). the =egotiating ban, soft pedal some of the discrepancies +hich they feel may not be pointed out by the opening ban, as discrepancy to favour its customer. In the li,e manner the opening ban,, to safeguard the interest of the buyer, +ould li,e to ensure that the document submitted against a Fetter of )redit are strictly in full conformity of the F@). /or mastery of the operation under the Fetter of )redit one is advised to completely study the various articles of the 5)0 "00 so that one can be clear in his mind as to the various provisions available under the *ocumentary )redit +hich +ill stand good +hile negotiating the documents +ith the ban,. 3hile the articles of 5)0 "00 come safeguard the interest of both the buyer and the seller, there are certain elements +hich may be outside the definition of the 50) "00. %lso there is certain fle ibility provisions in the 50) "00 +hich one might li,e to e ploit to his favour. -o, in spite of the F@) being the safest method to ensure the payment, unless both the buyer and the seller follo+ the business ethics there is every chance that one gets cheated by the other. %s a prudent e porter one should be very careful in selecting his customer apart from ta,ing other safety measures. If the customer is too good, and you have been dealing +ith them for a long time, one may rela and term the F@) as the best method to receive payment. If the customer turns out to be unscrupulous then he can play havoc. !his is applicable to both the seller and the buyer. !here are boo,s on fraudulent us of the *ocumentary )redits. -ometimes it may be the buyer +ho is at the receiving end and some time it may be the other +ay. % study of such boo, as above may help one to ta,e ade#uate care. $ut, the brain is al+ays +or,ing in multi directions. It +ill be no surprise if one comes across ne+er and ne+er dubious methods being adopted by the contracting parties. TOTAL OPERATION UNDER THE LETTER OF CREDIT. T:; U32o3f$r<;4 LFC.

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EXPORT PROCEDURE AND DOCUMENTATION !he $uyer ma,es an application to his ban, to open an F@). 8pening ban, establishes the F@). 8pening ban, advises the F@) through his associate or through the ban,. =ominated by the beneficiary. !he $an, in the beneficiary country +hich receives the F@) sends the 8riginal F@) to the customer either directly or through the ban, -pecified in the F@). !he buyer complies +ith the F@) re#uirements and submits the relevant documents. !o the ban, for claiming reimbursement. !he negotiating ban, negotiates and sends the documents to the opening ban, or as *irected. :eantime pays the beneficiary. %dvises the opening ban, or the reimbursement ban, the details of his %ccounts and the nominated ban, +here the proceeds are to be credited. 8nce the credit is received, the nominated ban, advises the negotiating ban, of the credit. !hus the negotiating ban, gets the credit for the F@) documents. T:; Co3f$r<;4 LFC. %ll the steps from 1to' as far as the beneficiary are concerned since the payment is made to the beneficiary +ithout recourse. 1o+ever, the negotiating ban, may have to follo+ the subse#uent steps since he has to receive his money from the opening ban,.

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EXPORT PROCEDURE AND DOCUMENTATION

PREPARATION AND SUBMISSION OF DOCUMENTS FOR BAN& NEGOTTIATION FPURCHASE

*ocument against e ports should normally be reali;ed through an authori;ed dealer foreign e change. 1o+ever payment of e port can be received directly from the overseas buyer in the form of ban, draft, pay order, ban,erDs che#ue, personal che#ue foreign currency notes, foreign currency travelerDs che#ue, etc. 3ithout any monetary limit provided the e porterDs trac, record is good, he is a customer of the authori;ed dealers through +hom documents are to be negotiated and prima facie the instrument of payment represents e port proceeds reali;ation. !a,e care to submit various documents in a proper manner and +ithin the prescribed time schedule. %pply to the (eserve $an, for e tension of time in case you feel there is li,ely to be a delay in reali;ing e port proceeds. !he follo+ing are the steps in reali;ing e port proceeds2 %pproaching a $an,2 %fter dispatch of the goods, either by sea, or by air, the e porter should approach his ban, Bauthori;ed dealerC +ith a formal re#uest to reali;e sale proceeds from the foreign buyer. It is obligatory to submit the shipping documents to an authori;ed dealer +ithin 21 days of the date of shipment Bsub4ect to certain e ceptionsC. In India, the e porters have to reali;e the full value of e ports +ithin 1>0 days from the date of shipment, Bunless the payment terms offered are 6deferred payment terms7C. 3here it is not possible to reali;e the sale proceeds +ithin the prescribed period, the e porter should apply for e tension in prescribed form E!G Bin duplicateC to ($I. -ubmission of *ocuments to the $an,2 !he e porter should submit the follo+ing documents >&

EXPORT PROCEDURE AND DOCUMENTATION o $ill of E change o /ull set of $ill of Fading o )ommercial Invoice )opies o )ertificate of 8rigin o Insurance 0olicy o Inspection )ertificate o 0ac,ing Fist o .( Bduplicate copy to for+ard it to ($IC o $an, )ertificate o 8ther relevant documents. !he above documents need to be submitted in t+o complete sets, because it is customary to dispatch t+o sets of documents, one after the other. !his is because, if one set is misplaced or delayed in transit, the importer can get at least the other set and clear the goods. Herification of *ocuments2 !he ban, +ill verify the documents to find o 3hether the re#uired documents are in order. o 3hether the re#uired documents are attested by customs and other authorities. Fetter of Indemnity2 If the e porter +ants immediate payment from his ban,ers, then his ban,ers may provide advance payment only +hen the e porter signs an indemnity letter. !he implications of an indemnity letter is that in the event of refusal of payment by the issuing ban, in respect of F), then the negotiating ban, can as, the e porter to pay bac, the money advanced along +ith necessary charges. Co<<o3 Do25<;36 D$%2r;>832$;% o )redit E pired

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EXPORT PROCEDURE AND DOCUMENTATION o Fate shipment o 0resented after permitted time from date of issue of shipping documents o -hort -hipment o )redit %mount E ceeded o 5nderinsured o *escription of goods on invoice differ from that of credit o :ar, and numbers differ bet+een documents o $ill of lading, Insurance documents, $ill of E change not endorsed correctly o %bsence of *ocuments called for under credit. o Insurance certificate submitted instead of policy. o 3eight in different document differs. o )lass of $ill of lading no acceptable9charter party or 1ouse $@F. o Insurance cover e pressed in currency other than that of credit. o %bsence of signature, +here re#uired on documents. o $ill of e change not dra+n as per tenor stated in credit. o $ill of e change dra+n on +rong party. o Insurance ris,s covered not being those specified in credit. o %bsence of freight paid statement on $@F in )/( of )I/ shipment. o $ill of lading doses not carry shipped on broad stamp. o %mount sho+n on invoice and bill of e change differ. o -hipment not ma,e to port specified. o !ransshipment@part shipment underta,en +here e pressly forbidden. *iscounting of bills2 the ban, may discount or negotiate the bills dra+n against F), and ma,e immediate payment to the e porter, if so re#uired. *ispatch of documents2 before the submission of documents for negotiation@collection, the ban, e amines them thoroughly +ith reference to the terms and conditions of the buyerDs order. Fetter of credit and the la+s relating to

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EXPORT PROCEDURE AND DOCUMENTATION foreign e change control. If any scrutiny, the documents are in order, the ban, dispatches them to its overseas branch@correspondent branch as early as possible. !he overseas branch of the ban, then submits the document to the importerDs ban,, and the importerDs ban, hands it over to the importer.

SHIPMENT THROUGH COURIERS

In addition to the e porter by sea, air, rail or road, e ports are also allo+ed by courier under the courier imports or e porters BclearanceC (egulation %ct, 1&&>. !hese regulations shall apply for clearance of goods carried by authori;ed courier on outgoing flights on behalf of e ports. )onsigner for a commercial consideration. E port !erms E conditions2 E port of any item can be affected by courier, e cept the follo+ing. .oods +hich are sub4ect to cess. .oods proposed to be e ported +ith claim of duly dra+bac,. .oods proposed to be e ported under *E0$, E0)., %F B%dvance FicenseC 3here the value of goods is more than (s. 2",0000@9 .oods +here +eight of individual pac,et is more than 32 ,g.

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EXPORT PROCEDURE AND DOCUMENTATION

CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM

It is brought to the notice of all e porters, importers, )1%s, !rade and .eneral 0ublic that the computeri;ed processing of -hipping $ills under the Indian )ustoms E*I BElectronic *ata InterchangeC -ystem T BE portsC, +ill commence +.e.f.1X"90&92004. !he computeri;ed processing of shipping bills +ould be in respect of the follo+ing categories2 *uty /ree +hite shipping bills *utiable shipping bills B)essC *EE) -hipping $ills E0). -hipping $ills *E0$ -hipping $ills */() -hipping $ills 100% E85 -hipping $ills (e e port, Robbing -hipping $ills *ra+bac, -hipping $ills 8ther =/EI -hipping $ills

!he procedure to be follo+ed in respect of filing of shipping bills under the Indian customs E*I -ystem9E ports at )/-9:ulund shall be as follo+s2 &3

EXPORT PROCEDURE AND DOCUMENTATION 9. !&T& ENTR< #0R /GIPPIN" 1I;;/ 9.8 E porters@)1%s are re#uired to register their IE codes, )1%s Ficence =os, and the $an, %@) =o.Bfor credit of *ra+bac, amountC in the )ustoms )omputer -ystems before an E*I -hipping $ill is filed. 9.9 E porters@)1%s +ould be re#uired to submit at the -E(HI)E )E=!(E the follo+ing documents. 9.: % declaration in the specified format -*/ declaration Juota@Inspection )ertificate *ra+bac,@*EE)@*/()@*E0$ *eclarations etc., as applicable !he formats should be duly completed in all respects and should be signed by the e porter or his authori;ed )1% . /orms, +hich are incomplete or unsigned +ill not be accepted for data entry 9.= Initially, data entry for -hipping $ills +ill be allo+ed to be made only at the -ervice centre. %fter the e porters@)1%s become conversant +ith the E*I procedures, the option of (emote E*I -ystem +ould also be made available. In the (emote E*I system B(E-C E porters@)1%s can electronically file their shipping bills from their offices. 9.> !he schedule of charges to be levied for data entry at the -ervice )entre is as follo+s2 )harges for -@$ills having up to five items )harges for additional bloc, of five items ... ... (s.'0@9 (s.10@9 (s.10@9 (s.20@9

%mendment fees Bfor a bloc, of five itemsC ... 0rinting of a -@$ill for (emote E*I -ystem ...

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EXPORT PROCEDURE AND DOCUMENTATION 9.? !he -ervice )entre operators shall carefully enter the data on the basis of declarations made by the )1%s@E porters. %fter completion of data entry, the chec,list +ill be printed by the *ata Entry 8perator and shall be handed over to the E porters@)1%s for confirmation of the correctness. !hereafter, the )1%@E porters +ill ma,e corrections, if any, in the chec,list and return the same to the operator duly signed. !he operator shall ma,e the corresponding corrections in the date and shall submit the shipping bill. !he operator shall not ma,e any amendment after generation of the chec,list and before submission in the system unless the corrections made by the )1%s@E porters are clearly indicated on the chec,list against the respective fields and duly authenticated by )1%@E porters signature. 9.@ !he system automatically generates the -@$ill =umber. !he operator shall endorse the same on the chec,list in clear and bold figures. It should be noted that no copy of the -@$ill +ould be available at this stage. 9.A !he declarations +ould be accepted at the service centre from 10.00 hrs to 1'.30 hrs. *eclarations received up to 1'.30 hrs +ill be entered in the computer system on the same day. 9.B !he validity of the -@$ill in E*I -ystem is fifteen days only. %fter e piry of fifteen days from the date of filing of shipping bill, the e porter has to file the declaration afresh. : PR0CE!5RE #0R "R'8 :.8 5nder the revised E*I procedure there +ould be no .(91 0rocedure. E portersBincluding )1%sC +ould be re#uired to file a declaration in the form -*/. It +ould be filed at the stage of 6goods arrival7 8ne copy of the declaration +ould be attached to the original copy of the -@$ill generated by the system and retained by the customs.!he second copy +ould be attached to the duplicate -@$ Bthe e change control copyC and surrendered by the e porter to the authori;ed dealer for collection@negotiations.

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EXPORT PROCEDURE AND DOCUMENTATION :.9 !he e porters are re#uired to obtain a certificate from the ban, through +hich they +ould be reali;ing the e port proceeds. If the e porter +ishes to operate through different ban,s for the purpose, a certificate +ould have to be obtained from each of the ban,s. !he certificates +ould be submitted to customs and registered in the system. !hese +ould have to be submitted once a year for confirmation or +henever the ban, is changed. :.: In the declaration form to be filled by the e porters for the electronic processing of e port documents, the e porters +ould need to mention the name of the ban, and the branch code as mentioned in the certificate from the ban,. !he customs +ill verify the details in the declaration +ith the information captured in the system through the certificates registered earlier. :.= In the case of -@$s processed manually, the e isting arrangement of filing .(91 forms +ould continue. 0CTR0I PR0CE!5RE/2 450T& &;;0C&TI0N &N! 0TGER

CERTI#IC&TI0N. 8.8 !he processing of -@$s involving allocation of ready9made garments #uota by the %pparel E port 0romotion )ouncil B%E0)C +ill change +ith the introduction of the system. !he #uota allocation label +ill be pasted on the e port invoice instead of -@$. %llocation number of %E0) +ould be entered in the system at the time of -@$ data entry. !he #uota certification on e port invoice should be submitted to )ustoms along +ith other original documents at the time of e amination of e port cargo. 8.9 %s a transitional measure, %E0) certification even on -@$ form +ould be accepted. 1o+ever, in these cases, -@$ number should be indicated on the invoice +hen goods are presented for e amination. !his transitional facilitation measure +ill be available for a period of t+o months i.e., upto 30th =ovember 2004.

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EXPORT PROCEDURE AND DOCUMENTATION 8.: /or determining the validity date of the #uota, the relevant date +ould be the date on +hich the full consignment is presented for e amination and the date to recorded in the system. 8.= !he certificate of other agencies, such as, the )otton !e tiles E port 0romotion )ouncilQ the 3ildlife Inspection %gency under )I!E-Q the Engineering E port 0romotion )ouncilQ the %gricultural 0roduce E port *evelopment %gency B%0E*%C, the )entral -il, $oard and the %ll India 1andicraft $oard should also be obtained on the invoice. -imilarly, the no ob4ection of the %sst. *rug )ontroller and of the %rchaeological of -urvey India +ould be obtained on the Invoice. !he transitional arrangements +ould be the same as in the case of %E0) certification. 8.> !he e porters +ould have to ma,e use of e port invoice or such other documents as re#uired by the 8ctroi %uthorities for the purpose of octroi e emption. 9. &RRID&; 0# "00!/ &T E)P0RT E)&MIN&TI0N /GE!/ IN C#/ 9.8 !he e isting procedure of permitting entry of goods, brought for the purpose of e amination Band subse#uent2 6Fet e port7 8rderC in the )/on the strength of -@$ shall be discontinued. !he )8=)8( +ill permit entry of the goods on the strength of the chec,list, the date entry form and the declaration. !he )8=)8( +ould endorse the #uantity of goods entering the )/- on the reverse of the chec,list 9.9 !he goods should be brought for e amination +ithin 1" days of filing of declaration in the )entre. In case of delay, a fresh declaration +ould need to be filed 9.: If at any stage subse#uent to the entry of goods in )/- it is noticed that the declaration has not been registered in the system, the e porters and )1%s +ill be responsible for the delay in shipment of goods and any damage, deterioration or pilferage, +ithout pre4udice to any other action that may be ta,en. &<

EXPORT PROCEDURE AND DOCUMENTATION :. PR0CE//IN" 0# /GIPPIN" 1I;;/ :.8 !he -@$ shall be processed by the system on the basis of declaration made by the e porter. 1o+ever, the follo+ing -@$ shall re#uire clearance of the %ssistant )ommissioner@*y. )ommissioner B%)@*) E portsC2 :.9 *uty free -@$ for /8$ value above (s.10 la,h /ree !rade -ample -@$ for /8$ value above (s.2",000 *ra+bac, -@$ +here the dra+bac, e ceeds (s. 8ne la,h

-ub4ect to the provisions of para 20.3 of this 0= the follo+ing categories of -@$ills shall be processed buy the %ppraiser BE port %ssessmentC first and then by the %sstt@*y. )ommissioner2 *EE) *E0$ */() E85 E0).

:.:

%part from verifying the value and other particulars for assessment, the %8 @ %) @ *) may call for the sample s for confirming the declared value or the chec,ing classification under the dra+bac, schedule @ *EE) @ *E0$ @ */() @ E85 etc., 1e may also give special instruction for e amination of goods.

:.=

If the -@$ falls in the categories indicted in para '.1 above, the e porter should chec, up +ith the #uery counter at the )entre, +hether the -@$ has been cleared by %sstt. )ommissioner @*y. commissioner, before the goods are ta,en for e amination. In case %) @ *) raises any #uery, it should be replied through the -ervice )entre or, in case of E*I connectivity, through terminals of the E porter @ )1%. %fter all the #ueries have been satisfactorily replied to, %) @ *) +ill pass the -@$

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EXPORT PROCEDURE AND DOCUMENTATION =. C5/T0M/ E)&MIN&TI0N 0# E)P0RT C&R"0 =.8 8n receipt of the goods in the E port -hed in the )/-, the e porter +ill contact the system e amining officer B-E8Cand present the chec,list +ith the endorsement of )8=)8( on the declaration, along +ith all original documents such as Invoice, 0ac,ing Fist, %(E91B%(94Cetc. 1e +ill also present additional particulars in the prescribed form. =.9 -E8 +ill verify the #uantity of the goods actually received against that entered in the system. 1e +ill enter the particulars in the system. !he system +ould identify the E amining 8fficer Bif more than one are availableC+ho +ould be carrying out physical e amination of goods. !he system +ould also indicate the pac,agesBthe #uantity and the serial numbersC to be sub4ected to e amination. -E8 +ould +rite this information on the chec,list and hand it over to the e porter. 1e +ould hand over the original documents to the E amining 8fficer. =o e amination order shall be given unless the goods have been physically received in the E port -hed. It may, ho+ever, be clarified that )ustoms may e amine all the pac,ages@goods in case of any discrepancy. =.: !he E amining 8fficer may inspect and@or e amine the shipment, as per instructions contained in the chec,list and enter the e amination report in the system. !here +ill be no +ritten e amination report. 1e +ill then mar, the Electronic -@$ and for+ard the chec,list along +ith the original documents to the %ppraiser@-updt. in )harge. If the %ppraiser@-updt. is satisfied that the particulars entered in the system conform to the description given in the original documents Bincluding %E0) #uota and other certificationsC and the Qphysical e amination, he +ill proceed to give 62Fet E port7 order for the shipment and inform the e porter. !he %ppraiser@-updt. +ould retain the chec,list, the declaration and all original documents +ith him. =.= In case of any variation bet+een the declaration in -@$ and the documents or physical e amination report, the %ppraiser@-updt. +ill mar, the electronic -@$ to %)@*) E ports. 1e +ill also for+ard the documents to

&&

EXPORT PROCEDURE AND DOCUMENTATION %)@*) and advise the e porters to meet the %)@*) for further action regarding settlement of dispute. In case the E porter agrees +ith the vie+s of the *epartment, the -@$ +ould be processed finally. 3here the e porter disputes the vie+s of the *epartment, the case +ould be ad4udicated follo+ing the principles of natural 4ustice. >. "ENER&TI0N 0# /GIPPIN" 1I;;/ >.8 %s soon as the -hed %ppraiser@-updt.gives 6Fet E port7 order, the system +ould print ' copies of the -@$ in case of /ree and scheme -@$. In case of *E0$ there are < -@$. If the -@$ B*E0$C is assessed provisionally, then E0 copy +ill be generated only after %)@*) finalises the assessment. 8n the e amination report the %ppraiser@-hed -upt.+ill sign. 8n all the copies, the %ppraiser@-hed -updt., E amination 8ffer as +ell as e porterDs representative@)1% +ill sign. =ame and I* )ard number of the E porters representative@)1% should be clearly mentioned belo+ his signature. >.9 !he distribution of -@$ills is as follo+s2 *E0$ -cheme -@$ills >.: 1. E porterDs copy 2. )ustomDs )opy 3. E change )ontrol )opy 4. -cheme $ill )opy ". E.0.)opy '. !(91, !(92 )opies 8ther -cheme -@$ills 1. 2. 3. 4. ". E porters copy )ustoms copy E change)ontrol )opy E.0.)opy !(91. !(92 )opies

!he original %E0) #uota and other certificates +ill be retained +ith the -@$ills and recorded in the E port -hed.

?. P&<MENT 0# MERCG&NT 0DERTIME (M0T) ?.8 /or the time being the present manual system for payment of :erchant 8vertime B:8!C charges +ill continue.

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EXPORT PROCEDURE AND DOCUMENTATION ?.9 :8! charges +ill be re#uired to be paid by e porter +hen the goods are e amined by )ustoms for allo+ing 6Fet E port7 beyond the normal office hours. =o charges +ould be re#uired to be paid on normal +or,ing days +hen the e amination itself is being done for 6Fet E port7 upto 0".oo 0:. In addition, no charges +ould be re#uired to be paid if the e porter +ants the goods to be entered in )8=)8( B)/-C only for meeting the #uota deadlines.

@. !R&*&; 0# /&MP;E/ @.8 3here the %ppraiser of )ustoms orders for samples to be dra+n and tested, the E amining 8fficers +ill proceed to dra+ t+o samples from the consignment and enter the particulars thereof along +ith name of the testing agency in the system. =o registers +ill be maintained for recording dates of samples dra+n. !hree copies of the test memo +ill be sprepared and signed by the E amining 8fficer, the %ppraiser and E porter. !he disposal of the three copies +ould be as follo+s2 @.9 8riginal to be sent along +ith the sample to the testing agency *uplicate copy to be retained +ith the second sample !riplicate to be handed over to the e porter.

%)@*) may, if he deems necessary, order for sample to be dra+n for purposes other than testing such as visual inspection and verification of description, mar,et value en#uiry etc.

88 45ERIE/ 11.1 3ith the discontinuation of the assessment of -@$ in the E port *epartment, there should not be any #ueries. !he e porter, during e amination, can clarify doubts, if any. In case +here the need arises for 101

EXPORT PROCEDURE AND DOCUMENTATION the detailed ans+er from the e porter, a #uery can be raised in the system buy the %ppraiser, but +ould need prior approval of %)@*) BE portsC !he -@$ +ill remain pending and cannot be printed till the e porter replies to the #uery to the satisfaction of the %ssistant )ommissioner@*y. )ommissioner 89 &MEN!MENT/2 12.1 )orrections@amendments in the chec,list can be made at the service centre provided the system has not generated the -@$ number. 3here corrections are re#uired to be made after the generation of the -@$ =o. or, after the goods have been brought in the doc,s@)/-, amendments +ill be carried out in the follo+ing manner. If the goods have not yet been allo+ed 6Fet E port7, %ssistant )ommissioner@*y. )ommissioner may allo+ the amendment. 3here the 6Fet E port7 order has been given, the %ddl.@Roint )ommissioner BE portsC +ould allo+ the amendments 12.2 In both the cases, after the permission for amendments has been granted, the %sstt.@*y. )ommissionerBE portsC +ill approve the amendments on the system. 3here the print out of the -@$ has already been granted, the e porter +ill surrender all copies of the -@$ill to the %ppraiser for cancellation before amendment is approved in the system. 8:. /G0RT /GIPMENT/2 /G5T 05T2 C&NCE;;&TI0N &N! 1&CH T0 T0*N PERMI//I0N/. 13.1 %)@*E BE portC +ill give permission for issue of short shipment certificate, shut out or cancellation of -@$, on the basis of an application made by the e porter. !he -@$ particulars +ould need to be cancelled @modified in the system before granting such permission. %)@*) should chec, the status of the goods, before granting permission. 8=. &MEN!MENT 0# #REI"GT &M05NT

102

EXPORT PROCEDURE AND DOCUMENTATION 14.1 If the freight@insurance amount undergoes a change before 6Fet E ports7 is given, corresponding changes +ould also need to be made in the -@$ +ith the approval of %)@*) E ports. $ut if the change has ta,en place after the 6Fet E ports7 8rder, approval of %dditional@Rt.)ommissioner +ould be re#uired. =on9intimation of such changes +ould amount to mis9 declaration and may attract penal action under )ustoms %ct 1&'2. 8>. 1".1 REC0N/TR5CTI0N 0# ;0/T !0C5MENT/: *uplicate print out of E*I -@$ cannot be allo+ed to be generated if it is lost, since e tra copies of -@$ are liable to be misused. 1o+ever, a certificate can be issued by the )ustoms stating that 6Fet E ports7 order has been passed in the system to enable the goods to be accepted by the -hipping Fine, for e port. *ra+bac, +ill be sanctioned on the basis of the 6Fet E port7 order already recorded on the system. 8? RE'PRINT 0# /GIPPIN" 1I;;: 1'.1 -imilarly, reprints can be allo+ed +here there is a system failure, as a result of +hich the print outBafter the 6Fet E port7 orderC has not been generated or there is a misprint. 0ermission of %)@*) Be portsC +ould be necessary for the purpose. !he misprint copy shall be cancelled before such permission is granted 8@ 1<.1 E)P0RT 0# "00!/ 5N!ER CE// /or e port items, +hich are sub4ect to e port cess the corresponding serial number of the )ess -chedule should be clearly mentioned. % printed challan generated by the system +ould be handed over to the e porter. !he cess amount indicated should be paid in the $an, of India, E tension $ranch of )/-, under a receipt. 8A. E)P0RT 0# "00!/ 5N!ER C;&IM #0R !R&*1&CH

103

EXPORT PROCEDURE AND DOCUMENTATION 1>.1 !he scheme of computeri;ed processing of dra+bac, claims under the Indian )ustoms E*I system9E ports +ill be applicable for all e ports through )/-. 1>.2 In respect of goods to be e ported under claim for dra+bac,, the e porters +ill file declaration in the form. !he declaration in the form +ould also be re#uired to be filed +hen the e port goods are presented at the E port -hed for e amination E 6Fet E port7 1>.3 !he e porters +ho intend to e port the goods through )/- under claim for dra+bac, are advised to open their account +ith the $an, of India branch situated at )/-9:ulund. !his is re#uired to be done to enable direct credit of the dra+bac, amount to the e porters account, obviating the need for issue of separate che#ue by post. !he e porters are re#uired to indicate their account number opened +ith the $an, of India branch at )/-9 :ulund. It +ould not be possible to accept any shipment for e port under claim for dra+bac, in case the account number of the e porter in the ban, is not indicated in the declaration form. 1>.4 !he e porters are also re#uired to give their account number along +ith the details of the ban, through +hich the e port proceeds are to be reali;ed. 1>." E port declarations involving a dra+bac, amount of more than rupees one la,h +ill be processed on screen by the %)@*) before the goods can be brought for e amination and for allo+ing 6Fet E port72 1>.' !he dra+bac, claims are sanctioned sub4ect to the provisions of the )ustoms %ct 1&'2, the )ustoms and )entral E cise duties dra+bac, rules 1&&" and conditions prescribed under different sub9headings of the %ll Industry rates as per notification number 2'@20039)usB=!C dated 1.4.2003 as amended by notification number 12@20049)usB=!C dated 2&901904. 1>.< %fter actual e port of the goods, the dra+bac, claims +ill be processed through E*I system by the officers of dra+bac, branch on first come first serve basis. !here is no need for filing separate dra+bac, claim. !he

104

EXPORT PROCEDURE AND DOCUMENTATION claims +ill be processed, based on the !rain -ummary@In+ard +ay bill, submitted by )8=)8(. !he status of the -@$ill and sanction of dra+bac, claim can be ascertained from the 6#uery counter7 set up at the service centre. If any #uery has been raised or deficiency noticed, the same +ill be sho+n on the terminal and a printout of the #uery@deficiency may be obtained by the authori;ed person or the e porter from the service centre. !he e porters are advised to reply to such #ueries e peditiously and such replies shall be got entered in the E*I system at the service centre . !he claim comes in #ueue of the E*I system after reply to #ueries@deficiencies is entered by the service centre. 1>.> -hipping $ills in respect of goods under claim for dra+bac, against brand rates +ould also be processed in the same manner, e cept that dra+bac, +ould be sanctioned only after the original band rate letter is produced before the designated customs officer in the office of %sstt@*y. )ommissioner BE portC and is entered in the system. !he e porter should specify the -- =o. of dra+bac, as &>.01 for provisional dra+bac,. 1>.& %ll the claims sanctioned in a particular day +ill be enumerated in a scroll and transferred to the $an, through E*I. !he ban, +ill credit the dra+bac, amount in the %ccount of the e porter on the ne t day and +ill handle accounts of the e porters as per their instructions. $an, +ill also send a fortnightly statement to the e porters about the payments of their dra+bac, claims. 8B. 1&.1 E)P0RT 0# "00!/ 5N!ER !EP1 3hile filing information as per the format, e porters are re#uired to ensure that correct .roup )ode =o. of the goods being e ported and the item =o. of relevant .roup is clearly mentioned Bitem9+ise detailsC. !he e porters@)1%s are advised to fill Item =o, in the same manner as given in the 0ublic =otices issued by *./!. 1&.2 *E0$ )redit in respect of items li,e formulations, in4ections etc. of group code =o.'2 B)hemicalsC are at a specific percentage of credit rate for the

10"

EXPORT PROCEDURE AND DOCUMENTATION relevant bul, drug. /or proper calculations of *E0$ rate, e porters@)1%s are advised to claim e port under the specific -l.=o. if they are e porting in4ections and thereafter mention -l.=o. of .roup )ode '2 of the bul, drug of +hich such in4ections have been made. !he system +ill calculate the said specific percentage of the *E0$ rate of such bul, drugs, formulations of +hich are being e ported. 1&.3 %ll the *E0$ -@$ills having /8$ value less than (s." la,hs and@or *E0$ rates less than 20% +ill be assessed by %ppraiser@-updt. B*E0$ )ellC 1o+ever, the -@$ill having /8$ value more than (s." la,hs and@or credit rate 20% or more +ill be assessed by %)@*) BE portC . %ny #uery at the time assessing by %ppraiser B*E0$ cellC or %)@*) BE portC may be obtained from the service centre and reply to the #uery has to be furnished through service centre. 1&.4 If the group code =o., Item =o. and /8$ value declared is accepted by the %ppraiser@-updt B*E0$ )ellC or %sstt.@*y. )ommissionerBE portC, goods may be brought and entered in the system. !he e amining officer +ill feed the e amination report and 6Fet E port7 order +ill be given by %ppraiser@-updt. in the E*I system. -even copies of -@$ill +ill be printed for the purposes mentioned against each as under 2 )ustoms )opy E porterDs copy E.0.)opy *0$ copy /or record of )ustoms /or record of E porters /or office of *./! /or use in the import cell of I)* $angalore for registration of licence. /or negotiating the e port documents in ban,

E change )ontrol )opy !(91!(92 copies 1&." !here is a provision for changing the .roup )ode =o.@Item =o.@Halue for of the -@$ill. -uch charges may be done by %ppraiser@-updt. B*E0$ )ellC

*E0$ credit purposes and such changes +ill be reflected in the print out %)@*)BE portC as +ell as by %ppraiser@-updt.BE am.C !he credit +ill be allo+ed by the *./! at the rate@value Bfor credit purposes onlyC as approved by )ustoms. !he E0 copy of the shipping bill shall be used by the E porters to obtain *E0$ licence from *./!.

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EXPORT PROCEDURE AND DOCUMENTATION 1&.' In case, for credit purposes, the e porter accepts the lo+er value as determined by customs, such lo+er value +ill be entered by %ppraiser B*E0$ )ellC %)@*) BE portC or by %ppraiser BE amC for each itemBsC 0rintout of -@$ill at item level +ill indicate for /8$ value as +ell value for *E0$ credit purposes. E porters are re#uired to apply for the *E0$ Ficence at the $ value accepted by )ustoms and not the value declared by them. 1o+ever, as *E0$ is issued on the basis of e change rate applicable on the date of Fet E port, e porters are advised to apply for *E0$ Ficence at the value accepted by )ustoms at the time of e port multiplied by e change rate on the date of Fet E portBFE8C B%s per para 4.43 of EGI: 0olicy 2003 editionC 1&.< In case the e porter does not accept the value determined by the customs, the e ports +ill be allo+ed provisionally after ta,ing samples Lfor mar,et en#uiry. !he +ords 6=8! H%FI* /8( *E0$7 +ill be printed on all the copies of -@$ill and the e porters +ill be not be eligible for *E0$ licence against provisionally assessed -@$ills. In such cases, E0 copy of -@$ill +ill not be printed and only ' copies +ill be printed. 1o+ever, mar,et en#uiries about value +ill be conducted in such cases and either after issue of the -ho+ )ause =otice the mar,et value +ill be determined or may be accepted by the E porters on his o+n. In such cases +here samples are dra+n sub4ect to mar,et en#uiry the copy of the -@$ill for claiming *E0$ +ill be generated after determination of value on the basis of mar,et en#uiry and handed over to the e porters duly signed by %ppraiser@-updt. of )ustoms. In such cases +herever mar,et value has been found to be less than t+ice the credit claimed, the mar,et value +ill be mentioned in the E0 copy of -@$ill as under 2 6:ar,et value of the goods is (sYYY..and credit not to e ceed "0% of the mar,et value7 -ample may also be dra+n for the other purposes such as )hemical test,. *E0$ entitlement etc. !he procedure of 0rovisional %ssessment shall be 10<

EXPORT PROCEDURE AND DOCUMENTATION applicable mutates mutandis to above cases as +ell and the cases +ill be finali;ed after necessary reports etc. arte received and unprinted copy of -@$ill meant for *E0$ Ficence shall be released thereafter for printing.

1&.>

(egistration of *E0$ Ficence2 !he *E0$ Ficence in respect of e ports made from this customs station +ill be re#uired to be registered at the same station. $efore registration, the concerned officer +ill verify the -@$illBsC in the Ficence from the computer ensure that e ports have been affected and value mentioned is as determined by customs at the time of e port. In cases of -@$ills assessed provisionally, the verification +ill not be possible because -@$ill +ill not be in the verification #ueue. !he e porters are advised to obtain licences for the items e ported un *E0$ scheme and not for non9*E0$ items. If the lo+er value for credit purposes has been accepted at the time of e port, the licenses shall be obtained only for such lo+er value and not for /8$ value declared in -@$ill or as per $an, realisation certificate. -imilarly in cases +here mar,et value of the goods is less than t+ice the credit availed, the licence shall be obtained for "0% of the present mar,et value of the goods. !he computer at the time of registration of licence +ill calculate admissible credit on the basis of e change rate on the date of realisation of e port proceeds Bas per ban, realisation certificateC for *E0$ items only and at customs approved value at the time of e port. If the amount of licence is more than the amount of credit calculated by the system, it +ill not be possible to register a licence and reference +ill be made to *./! for correction of amount of credit. If the amount of credit as per customs computer matches +ith the credit as per *E0$ licence, computer +ill generate printout regarding verification of the e ports giving details li,e

10>

EXPORT PROCEDURE AND DOCUMENTATION -@$ill =o. date , rate of credit, /8$ value as approved by customs and amount of credit etc. *E0$ licence +ill be registered on the basis of printout of verification report duly signed by %)@*) BE portC. If a *E0$ Ficence is having -@$ills e ported from other ports in the same city the e porters can get the licence registered at any of the ports from +here he intends to import the goods in the city after verification about e ports from other ports from +here e ports +ere affected. !he same procedure +ill be follo+ed for */() Ficences also. 9E. E)P0RT 0# "00!/ 5N!ER 8EEI E05 /CGEME 20.1 !he e porters can get the e port goods e amined by )entral

E cise@)ustoms 8fficer at the factory even prior to filling of -@$ill. -elf sealing facility is also available. 1e shall obtain the e amination report in the form to this 0ublic =otice duty signed and stamped by the e amining officer and supervision officer at the factory. !he e port invoice shall also be signed and stamped by both the officers at the factory. !hereafter the goods shall be brought to the concerned customs +arehouse for the purpose of clearance and subse#uent 6Fet E port7. !he e porters@)1% shall present the goods for registration along +ith E amination (eport, %(E91, E port Invoice duly signed by the E amining 8fficer and supervising officer at the factory, chec, list, declaration in form and other documents such as document of transportation, %(E91, etc., to the e aminer in the concerned shed. %fter registration of goods, the shipping bill +ill be mar,ed to an e aminer for verification of documents and seal. If seal is found intact the -@$ill +ill be recommended for FE8, +hich +ill be given by the shed appraiser. 1o+ever if seal is not found intact, the goods +ill be mar,ed for e amination and FE8 +ill be given if the goods are found in order. 98. E)P0RT 0# "00!/ 5N!ER EPC" /CGEME

10&

EXPORT PROCEDURE AND DOCUMENTATION 21.1 %ll the e porters intending to file shipping bills under the E0). scheme should

first get their E0). licence registered +ith the E port section. /or registration of E0). licence, the e porter@)1% shall produce the Gero copy of E0). licence to the service centre for data entry. % printout of the relevant particulars entered +ill be given to the e porter@)1% for his confirmation. %fter verifying the correctness of the particulars entered, the said printout +ill be signed by the e porter. !hereafter, the original E0). licence along +ith the attested copy of the licence and the signed printout of the particulars shall be presented to the %ppraiser@-upt BE0). )ellC!he %ppraiser@-updt. BE0). )ellC +ould verify the particulars entered in the computer +ith original licence and register the same in E*I system. !he registration number of the E0). Ficence +ould be furnished to the e porters@)1%, +ho shall note the same carefully for future reference. !he said registration number +ould need to be mentioned against respective item on the declaration form filed for data entry of the s@bill, at the time of e port of goods. %ll the E0). -@$ill +ould be processed on screen by the %ppraiser@-updt.BE0). )ellC and the %)@*) BE portC. %fter processing of the E0). -@$ill by the %ppraiser E0). )ell and %)@*) E port, the goods can be presented at the )ustoms +arehouse for registration, e amination and 6Fet E port7 as in the case of other e port goods. %fter train summary is submitted to )8=)8(, the -@$ill +ill be put to %ppraiser #ueue for logging@printing of ledger. %fter logging@printing of ledger, the E0). bill +ill be moved to history tables. 99 22.1 E)P0RT 0# "00!/ 5N!ER TGE !EEC /CGEME 8nly shipping bills pertaining to *EE) boo,s issued on or after 1.4.&" +ill be

processed on the E*I system. 22.2 %ll the e porters intending to file s@bills under the *EE) scheme including those

under the claim for dra+bac, should first get their *EE) $oo, registered +ith the )/:ulund. !he registration can be done in the service centre. !he original *EE) boo, +ould need to be produced at the service centre for data entry. % print out of the relevant particulars entered +ill be given to the e porter@)1%. !he

110

EXPORT PROCEDURE AND DOCUMENTATION *EE) $oo, +ould need to be presented to the %ppraiser@-updt., *EE) )ell, +ho +ould verify the particulars entered in the computer +ith the original *EE) and register the same in the E*I system. !he registration =o. of the *EE) $oo, +ould be furnished to the e porter@)1%, +hich +ould need to be mentioned on the declaration forms at the )/- for e port of goods It +ould not be necessary thereafter for the e porter@)1% to produce the original *EE) boo, for processing of the e port declarations 22.3 22.4 Each boo, +ill be allotted a (egistration =o. should be indicated on the shipping bills in the relevant columns. E porters@)1%s that +ill be filling -@$ills for e port of goods under the *EE) -cheme +ould be re#uired to file additional declarations regarding availment@non9availment of :8*H%! or regarding observance@non9observance of specified procedures prescribed in the )entral E cise 1&44 in the form. !he declaration should be supported by necessary certificates B%(E91 or for non9 availment of :8*H%!C issued by the 4urisdiction )entral E cise authorities. 6Fet E port7 +ould be allo+ed only after verification of all these certificates at the time of e amination of goods. !he fact that the prescribed *EE) declaration is being made should be clearly stated at the appropriate place in the declaration being filled in the service centre or through (E-9:ode. 22." %ll the e port declarations for *EE) +ould be processed on screen by the %ppraiser@-updt., E port *epartment and the %)@*) E ports. !he said processing +ould be a,in to the processing of $ill of Entry on the E*I -ystem +ith provisions for #uery@reply. %fter the declarations have been so processed and accepted, the goods can be presented at the E port -hed along +ith *EE) $oo,s registered in the4 E*I -ystem so that the e port declarations are processed e peditiously. 22.' 22.< /urther, e porters availing of *EE) benefits in terms of various notifications should file the relevant declarations. It is further clarified as follo+s2

111

EXPORT PROCEDURE AND DOCUMENTATION 3hile giving details relating to *EE) operations in the form the e porters@)1%s should indicate the -.=o. of the goods being e ported in the column titled 6I!E: -.=8.I= *EE) $88M 0%(! E7 If inputs mentioned in *EE) Import boo, only have been used in the manufacture of the goods under e port, in column titled 6Item -r.=o. in *EE) $oo, 0art )7 the e porters@)1%s are re#uired to give -.=o. of inputs in 0art9) of the *EE) $oo, and E porters need not fill up column titled 6*E-)(I0!I8= 8/ (%3 :%!E(I%F-7 If some inputs +hich are not in 0art9) of the *EE) $oo, have been used in the manufacture of the goods under e port and the e porter +ants to declare such inputs, he shall give the description of such inputs in column titled 6*E-)(I0!I8= 8/ (%3 :%!E(I%F-7 In the )ol. 6I=*@I:07, the e porters are re#uired to +rite 6=7, if the inputs used are indigenous and 6:7. if the inputs used are imported. In column titled 6)ess -chedule -l.=o.7 the relevant -l.=o. of the -chedule relating to )ess should be mentioned. 9:. E)P0RT 0# "00!/ 5N!ER !#RC /CGEME:

!he details pertaining to e port products i.e. input materials utili;ed as per -I8= should be clearly mentioned in the declaration mentioned at %nne ure % at the time of filing. 9=. E)P0RT "ENER&; M&NI#E/T: Fanding +ise, t the )ustoms electronically. In the beginning, the steamer agents are re#uired to enter the manifest in the )ustoms )omputer -ystem through the -ervice )entre on payment of the prescribed fee. BIn due course, arrangements +ill be made for the electronic delivery of E port .eneral :anifest through E*I -ervice 0roviders. !ill such time, all the E.:s +ill have to be entered at the )ustoms )omputer -ystem only.C 9>. "RIED&NCE G&N!;IN"

24.1 %ll the steamer agents shall furnish the E port .eneral :anifest, 1ouse $ill of

112

EXPORT PROCEDURE AND DOCUMENTATION 2".1 !he %sstt. )ommissioner@ *y. )ommissioner of )ustoms, )/-9:ulund may be approached by e porters or their )1%s for settlement of any problems faced at any stage of the e port clearance.

THE ECGC COVER

!he abbreviated form for Export Credit and "uarantee Corporation i$ EC"C. %s the name indicates this is a sort of guarantee or a sort of cover for the e porter. Fet us no+ see +hat this is all about. =eedless to say that an e porter before entering into a contract +ith the overseas buyer for ma,ing any supply, ta,es care to ensure that the customer +ith +hom he is dealing have some credit +orthiness. !his he may be able to do either through the local agent +ho is in a better position to ,no+ about the customer or through a ban, or through any of the e porterDs associates if happens to be in the area of the customer etc., $ut, in a business things may change. !he financial status of a customer may ta,e drastic turn and an established customer may go ban,rupt +ithin a short period of time. :oreover, the buyer may be +illing to ma,e the payment, but there are other environment +hich prevents him from effecting the transfer of funds through the ban,. /or e.g., there could be brea, out of +ar, the balance of payment position of the country may become unfavourable, there may be some coup of the government etc., and all transactions could be sealed. !hese are the ris, factors for the e porters. 3hat is the guarantee that he +ill get paid for the supplies he has madeZ

113

EXPORT PROCEDURE AND DOCUMENTATION 3ith a vie+ to provide support to Indian e porters, the .ovt. of India set up the E port (is, Insurance )orporation BE(I)C in 1&"<. !his +as transformed into E port )redit E .uarantee )orporation Ftd. in 1&'4. In order to give the Indian identity a sharper focus the name +as again changed to E port )redit E .uarantee )orporation of India Ftd., in 1&>3. !his is a company +holly o+ned by the .ovt. of India and functions under the administrative control of the :inistry of )ommerce and managed by the $oard of *irectors representing .overnment, $an,ing, Insurance, !rade, Industry etc. !hough one may insist for a Fetter of )redit, still there could be some elements of ris, +hich +e +ill study later here. E cept getting an advance payment for the full value of the supplies, any other mode of payment +ill have some ris,. !a,e the case of an e porter +ho has made supplies and before the payment is received the buyer goes ban,rupt or there comes some ne+ provision or policy of .overnment of the importing country preventing repatriation of the funds to other countries +hat recourse the e porter has to recover his dues. !he litigation procedure might be time consuming and the e porter can never be sure of getting his full payment. %n E).) cover a safeguard his interest to a great e tent. %n e porter can either agree for sight payment or can made shipment on credit terms for say '0 days, &0 days etc., In pro4ect e ports the period of payment may e tend to some years. Fonger the period of cre3dit given to the customer, more +ill be the ris, factor for the e porter. In respect of sight bill, there is almost no ris, because the customer has to ma,e payment first before he retires the documents. !herefore, before the title of the goods is passed on to the customer, the importer ma,es the3 payment. 1o+ever, in respect of usance bill Bcredit billsC the buyer retires the documents by accepting the usance draft and ta,es delivery of the goods. In case the customer goes ban,rupt or become insolvent, before the due date of payment, the e porter is totally at a loss. 3hile big units may be able to absorb the one time loss, small e porters +ill get bro,e even +ith one such transaction. 1ere the E).) comes into picture. It ta,es up the responsibility of paying the funds to

114

EXPORT PROCEDURE AND DOCUMENTATION the e porter and ma,es all efforts including legal proceedings to recover the dues from the customer, provided the e porter has ta,en an E).) cover. WHAT ECGC OFFERS FOR PROTECTION OF EXPORTERIS INTEREST J E).) offers various types of insurance cover to protect the e porterDs interest. /or each type of cover an e porter has to ta,e 0olicy specific to the respective re#uirements. !he 0olicy that is most commonly ta,en by the e porters is the -tandard 0olicy or other+ise called the -hipments B)omprehensive (is,sC 0olicy. SHIPMENTS 'COMPREHENSIVE RIS&S( POLICY 8@%o 28@@;4 STANDARD POLICY /or e porters +ith an annual e port turnover in e cess of (s."0 la,hs, the -hipments B)omprehensive (is,sC 0olicy is the one intended for covering shipments on cash basis or on short9term credit basis. B)redits not e ceeding 1>0 daysC !he ris,s covered this 0olicy is as follo+s effective from the date of shipment.2 Commercial Ri$.$ Insolvency of the buyer /ailure of the buyer to ma,e payment +ithin a specified period. $uyerDs failure to accept the goods sub4ect to certain conditions.

Political Ri$.$ Imposition of restrictions by the .ovt. of the buyerDs country or any government action +hich may bloc, or delay the transfer of payment made by the buyer. 3ar, civil +ar, revolution or civil disturbances in the buyerDs country =e+ import restrictions or cancellation of a valid import licence

11"

EXPORT PROCEDURE AND DOCUMENTATION Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges +hich cannot be recovered from the buyer. %ny other cause of loss neither occurring outside India nor normally insured by general insurers and beyond the control of both the e porters and the buyer.

Ri$.$ not co3ered under the Policy The /tandard Policy doe$ not co3er lo$$e$ on account of follo%in ri$.$: )ommercial disputes including #uality disputes raised by the buyer unless the e porter obtains a decree from a competent court of la+ in the buyerDs country in his favour )auses inherent in the nature of the goods $uyerDs failure to obtain necessary import or e change control clearance from authorities concerned Insolvency or default of the agent of the e porter or of the collecting ban, Foss or damage to goods +hich can be covered by general insurers. E change rate fluctuations /ailure of the e porter to fulfill the terms of the e port contract or negligence on his part. /hipment$ Co3ered !he -tandard 0olicy is meant to cover all the shipments that may be made by an e porter during a period of 24 months ahead. !he policy cannot be issued for selected shipments,

11'

EXPORT PROCEDURE AND DOCUMENTATION selected buyer or selected mar,ets. /or specific re#uirements an e porter can opt for different policy from the various services offered by the corporation Exclu$ion$: -hipments made against advance payments received or shipments against confirmed letters of credit +hich has the confirmation from the ban, in India may be e cluded. 1o+ever, shipments against confirmed F@) may be covered for political ris,s only. !he premium for cover under political ris,s +ill be less than that under the comprehensive policy. E).) may also agree to e clude certain items if the e porter is dealingt in different distinct products. /hipment$ to &$$ociate$: -hipments to buyers i.e. the foreign buyers in +hose business the e porter has financial interest, are normally e cluded from the 0olicy. 1o+ever such shipments can be covered against political ris,s. /hipment$ on Con$i nment ba$i$2 -hipments on consignment basis can be covered only against political ris,s. /hipment$ by &ir -ince the buyer is able to ta,e delivery of the goods even +ithout retiring the ban, documents, shipments by air are not covered under the policy. 1o+ever, the e porter may cover such shipments for payments under open terms. !he e porter can have cover for such shipments, if he has obtained )redit Fimit on such buyers on open delivery terms and also pays the premium at rates applicable to open delivery terms. HOW TO GET ECGC COVER /tep 8. 0pen Policy:

11<

EXPORT PROCEDURE AND DOCUMENTATION %n e porter desiring to get the E).) cover has to approach the office of the E).) ma,ing a 0roposal. 1e must ma,e his home +or, and be clear as to +hat +ill be his total turnover during a year ad +hat +ill be the ma imum amount he e pects to be outstanding from various buyers at a given point of time. 8nce this is clear he can apply for an 8pen 0olicy for the maximum amount that he e pects to be outstanding at a given point of time. -uppose, he e pects that at any given time his outstanding +ill be say (s."0@9 la,hs then he can apply for a policy for this amount. %fter verification of the details of the e porter, the E).) may issue a open policy for (s."0 la,hs +ith a validity of say 2 years. !his is the first step.

/tep 9. '

Credit ;imit on Indi3idual 1uyer

0nce the open policy i$ ta.en, as a ne t step the e porter must ma,e out the list of the customers to +hom he e pects to ma,e shipment. #or each and e3ery cu$tomer he has to apply to the E).) to have a limit of liability fi ed. !hat is to say, he has to declare the ma imum amount of bills he e pects to be outstanding from each customer at a given point of time. $ased on the value of business dealing, suppose the e porter e pects that from customer % the outstanding may be (s.10 la,hs. !hen the e porter has to apply to E).) in the prescribed form for getting limit fi ed for the customer. 8n receipt of the application, E).) +ill chec, for the credit +orthiness of the customer either through their o+n net +or, of offices globally, or through the customerDs ban, or through some reputed independent agency. $ased on the credit report, E).) +ill determine the limit that can be fi ed for the customer. If it feels that a limit of (s.10 la,hs is in order, it +ill advise the e porter of the same. -imilarly, the e porter can have the limit fi ed to all his customers. 8nce the limit is ta,en from E).), the e porter is free to ma,e his shipments to the various customers. If shipment for any customer is made before getting the limit fi ed by E).), no ris, +ill be covered for that shipment. /tep : J Payment of Premium and filin of monthly return$ 11>

EXPORT PROCEDURE AND DOCUMENTATION /or the ris, the E).) ta,es, it charges a premium on the value of the shipments actually made. !his is calculated as per the table to be supplied by E).) +hich sho+s the premium per (s.100 of e ports. !his table +hich gives the premium amount payable is framed based on the follo+ing. !he various countries around the globe are divided into different roup$ and are

cla$$ified a$ &82 &92 182 192 C82C9 7 !. The countrie$ are rouped accordin to their economic $tandard. /or e.g. 5-%. )anada, 5M are grouped in category %. !he premium amount +ill be less for group % countries and +ill be increased gradually to group $, ) E * countries. !he premium for group * countries +ill be more because they are all economically +ea,er countries and payment ris,s are high %gain the premium table is based on the period of credit. !he slab is for credits up to &0 days, 120 days, 1>0 days etc. Fonger the credit period greater is the premium. Thu$2 the premium %ill be lea$t for roup & countrie$ and for the $horter credit period and %ill be maximum for roup ! countrie$ and for maximum credit period FILING OF MONTHLY RETURNS* !he e porter has to send a monthly return in the prescribed form to E).) declaring the list of various shipments made and the amount of premium payable as per the premium table. !he e porter has to +or, out the total premium applicable on the shipment effected and ma,e payment to the E).) !he e porter is also e pected to file a :onthly (eturn in a separate form listing all the $ills +hich are not paid on due date, if any, so that E).) is periodically a+are of the defaulters. In case of any eventuality +hen the buyer goes ban,rupt, he may prefer a claim +ith E).) for payment.

11&

EXPORT PROCEDURE AND DOCUMENTATION !he policy that is issued for shipment not covered under F@) is called )omprehensive 0olicy meaning that the policy +ill cover both the commercial and political ris,s. 3hile commercial ris, is that of the buyer going ban,rupt, the political ris, relates to the countryDs policies +hich may prevent the repatriation of funds or there could be outbrea, of +ar preventing financial transactions etc. %ll the above relates to shipments not covered under F@). 1o+ever, an e porter can have a separate E).) 0olicy for shipments under F@). 1ere the e porter +ill have the policy covering only the political ris, since under F@), the ban, stands as a guarantor and there is no commercial ris,. %n e porter must cover all his e ports under E).), including bills on sight basis, and are =8! under F@). 1e cannot be selective to certain countries or certain buyer. !he cover is on +hole turnover basis. /or all shipments under F@), the buyer may ta,e a separate policy to cover the political ris,s. !he premium for F@) shipments +ill be relatively less than that on comprehensive policy. =ote2 E).) cover is not for non9payment on account of dispute on #uality, damages to the goods, theft, pilferage etc. !he cover is only +hen the party goes insolvent or there are some political ris, due to +hich the e porter is not in a position to get the payment immediately or on due date. !his cover must be distinguished from the general insurance. VARIOUS POLICIES OFFERED BY ECGC* 8. /T&N!&R! P0;IC< %n e porter +hose annual e port turnover is more than (s."0 la,hs is eligible for this policy Period of the Policy2 24 :onths

120

EXPORT PROCEDURE AND DOCUMENTATION Exclu$ion$ permitted2 E port to %ssociates Fetters of )redit )onsignment E ports Ri$. Co3ered2 )ommercial (is,s 0olitical (is,s F) 8pening $an, (is,s Percenta e of Co3er2 Minimum Premium2 &0% (s.10, 000@9 ad4ustable

Important 0bli ation$ of the Exporter 8btaining valid credit limit on buyers and ban,s :onthly *eclaration of shipments and payment of premium *eclaration of payment overdue by more than 30 days /iling of claim +ithin 24 months -haring of recovery

Gi hli ht$ 9. Fo+est 0remium (ate =)$ 8/ "% every year *iscrepancy cover of F) %utomatic %pproval fort resale@shipment upto 2"% of .IH Increased discretionary limit /M&;; E)P0RTER/ P0;IC< 12 :onths

Period of the Policy2

121

EXPORT PROCEDURE AND DOCUMENTATION Exclu$ion$ Permitted2 E ports to %ssociates Fetters of )redit )onsignment E ports Ri$. Co3ered: )ommercial (is,s 0olitical (is,s F) 8pening $an, (is,s

Percenta e of Co3er:

&"% for commercial ris,s 100% for political ris,s

Minimum Premium :

(s.2, 000 ad4ustable

Important 0bli ation$ of the Exporter: 8btaining valid credit limit on buyers and ban,s Juarterly *eclaration of shipment and payment of premium.

*eclaration of payment overdue by more than 30 days /iling of claim +ithin 24 months -haring of recovery.

Gi hli ht$ 1ighest coverage@compensation Fo+est premium rate =)$ of "% every year *iscrepancy cover for F)

122

EXPORT PROCEDURE AND DOCUMENTATION :. %utomatic approval for resale@shipment upto 2"% of .IH Increased discretionary limit /PECI#IC /GIPMENT P0;ICIE/ J /G0RT TERM (//P'/T)

!hese policies can be availed of by e porters +ho do not hold our -tandard 0olicy or by e porters having standard policy, in respect of shipment permitted to be e cluded from the purvie+ of the standard policy. E porters can pic, and choose the contract@shipment to be covered and indicate the type of cover re#uired. Period of Policy : !he policy +ould be valid for shipmentBsC made from the date of the policy upto last date allo+ed under the relevant contract for shipment. Ri$. Co3ered: )ommercial (is,s 0olitical ris,s F) 8pening $an, (is, Insolvency ris, on agent on conditions AEI

Percenta e of Co3er:

Important 0bli ation$ of the exporter$: 5pfront premium payment -tatement of shipment made 0ayment %dvice slip -tatement 8f 8verdue /iling of )laim +ithin 12 months from due date -haring of recovery

123

EXPORT PROCEDURE AND DOCUMENTATION Gi hli ht$: /. -election for Insurance cover 8ther e ports not to be declared 6%dd on7 :arine Insurance )over 0remium rate reduced proportionately on higher share of loss to e porter. EXPORTS 'SPECIFIC BUYERS( POLICY

!he specific buyer policy provides cover for shipments made to a particular buyer or set of buyers. %n e porter not holding the standard policy can avail of this to cover their shipments to one or more buyers. E porters holding -tandard 0olicy can also avail this 0olicy for covering shipments to individuals $uyers, if all shipments to such buyers have been permitted to be e cluded from the purvie+ of the -tandard 0olicy. Period of the Policy2 Ri$. Co3ered: 12 :onths )ommercial (is,s 0olitical (is,s Insolvency or default of F) 8pening $an, Percenta e of Co3er2 >0%

Important 0bli ation of the Exporter$2 1. *eposit 0remium on Juarterly in advance 2. -ubmission of shipment declaration #uarterly 3. *eclaration of payment overdue for more than 30 days 4. /iling of the +ithin 12 months from due date ". -haring of recovery Gi hli ht$:

124

EXPORT PROCEDURE AND DOCUMENTATION 1 2 3 -elective buyer can be insured 8ption to e clude F) e ports 0remium rate can be reduced proportionately

0. EXPORTS TURNOVER POLICY !urnover 0olicy is for the benefit of large e porters +ho contribute not less than (s.10 la,hs per annum to+ards premium. !he policy envisages pro4ection of the e port turnover of the policyholder for a year and the initial determination on the premium payable on that basis, sub4ect to ad4ustment at the end of the year based on actual.

Period of the Policy 2 12 :onths Ri$. co3ered2 )ommercial (is,s 0olitical (is,s F) 8pening $an, (is,s Percenta e of Co3er: &0%

Important 0bli ation of the Exporter 1. 2. 3. 4. ". Gi hli ht$: 0remium +ill be payable in four e#ual #uarterly installments in advance -ubmission of #uarterly statement of shipments *eclaration of overdue payments /illing of claim +ithin 24 months from due date -haring of recovery

12"

EXPORT PROCEDURE AND DOCUMENTATION 1. 2. 3. -implified procedure for payment of premium 10% of pro4ected premium is +aived +hen e ports increase beyond pro4ection Increased discretionary limit

!. BUYER EXPOSURE POLICY * !he $uyer E posure 0olicy is to insure the e porters having large number of shipments +ith simplified procedure and rationali;ed premium. %n e porters can chose to obtain e posure based cover on the selected buyer. !he cover +ould be cover against commercial and political ris,. !he option to e clude F) shipment is available. If the e porter has opted for commercial and political ris,s cover, failure of F) opening ban, +ith 3orld (an, up to 2",000 as per latest $an,ers %lmanac is available. If e porters opts for only political ris,s for F) e ports premium at a less rate is offered Period of the Policy: Ri$. co3ered: 12 months $uyer (is, F) 8pening $an, (is,s 0olitical (is,s Percenta e of Co3er: &0% for -tandard policyholder and >0% for others Important 0bli ation$ of the Exporter: 8 9 : = > ? @ 0remium 0ayable in advance 8ption to pay the premium #uarterly in advance is available 0remium non refundable 8btaining approval for e tension in due date beyond 1>0 days *eclaration of overdue payments /iling of claim +ithin 12 months from due date -haring of recovery

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EXPORT PROCEDURE AND DOCUMENTATION Gi hli ht$: 8. 9. :. =. "% discount premium if paid in advance *eclaration procedure +aived E porter to approach only for default in claim 8ne 0olicy for one buyer

#. MULTI"BUYER EXPOSURE POLICY -ome e porters e port to large number of buyers. !he number of shipments made by them is also #uite high. In order to meet the needs of such e porters, :ulti buyer e posure policy is introduced. )over +ould be available for e ports to the buyers in countries listed under open cover category as long as the buyer is not in 6default buyers list7 maintained by the )orporation and available on its +ebsite +++.ecgcindia.com. If the transaction is on F) terms, failure of the F) opening ban, in respect of e ports against F) +ill also covered, /or ban,s +ith 3orld (an, upto 2"000 as per Fatest $an,ers %lmanac )over in respect of e ports to restricted over countries +ould not be available under this policy Period of Policy: Ri$. Co3ered: 12 :onths $uyer (is,s 0olitical (is,s F) 8pening $an, (is,s Percenta e of Co3er: >0%

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EXPORT PROCEDURE AND DOCUMENTATION Important 0bli ation$ of the Exporter$: 8. 0remium payable in advance 9. 8ption to pay the premium #uarterly in advance is available :. 0remium non refundable =. 8btaining approval for e tension is due date beyond 1>0 days >. *eclaration of overdue payments ?. /iling of claim +ithin 12 months from due date @. -haring of recovery

Gi hli ht$: 8. 0olicy is best suited for e porters +ho ma,e fre#uent shipments 9. (educed premium rates available on conditions :. "% reduction on total premium on lump sum payment =. =o declaration re#uired >. %ll buyers in open countries covered on conditions ?. 0rotection up to %ggregate Foss Fimit and Individual buyer up to 10% of %ll. -. CONSIGNMENT EXPORTS POLICY 'STOC&HOLDING AGENT( Economic liberali;ation and gradual removal of international barriers for trade and commerce are opening up various ne+ avenues of e ports opportunities to Indian e porters of #uality goods. % method increasingly adopted by Indian e porters is consignment e ports +here goods are shipped and held in stoc, overseas ready for sale to overseas buyers, as and +hen orders are received. !hus separate )redit Insurance 0olicy is introduce to cover e clusively shipments on consignment basis ta,ing into account their special features, providing ade#uate incentives and simplifying procedures considerably Period of the Policy: 12 :onths

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EXPORT PROCEDURE AND DOCUMENTATION Ri$.$ co3ered: )ommercial (is,s on stoc,holding agent and@or ultimate buyer 0olitical (is,s &0% for -tandard 0olicyholders and >0% for others

Percenta e of Co3er:

Important obli ation$ of Exporter$: %dvance deposit of premium in advance on #uarterly or monthly basis 8btaining credit limit on ultimate buyers beyond the discretionary limit Juarterly@:onthly statement of actual e ports 8verdue declaration /iling of claim -haring of recovery

Gi hli ht$: 1 )overs only the consignments e ports (ationali;ed premium for 3'0 days %utomatic cover for ultimate buyers upto discretionary limit )ommercial ris,s on agents covered E tended period for reali;ation upto 3'0 days CONSIGNMENT EXPORTS POLICY 'GLOBAL ENTITY(

% method adopted by India e porters is consignment e ports +here goods are shipped to their o+n branch office overseas ready for sale to overseas buyers, as and +hen orders are received. !hus separate credit insurance policy is introduce to cover e clusively shipments by the e porters to their branches overseas on consignment basis ta,ing into account their special features, providing ade#uate incentives and simplifying the procedures considerably.

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EXPORT PROCEDURE AND DOCUMENTATION Period of the Policy: Ri$.$ co3ered: )ommercial (is,s on overseas branch on conditions &0% for -tandard 0olicyholders and >0% for others 12 :onths

Percenta e of Co3er:

Important obli ation$ of Exporter$: %dvance deposit of premium in advance on #uarterly or monthly basis 8btaining credit limit on ultimate buyers beyond the discretionary limit Juarterly@:onthly statement of actual e ports 8verdue declaration /iling of claim -haring of recovery

Gi hli ht$: )overs only the consignments e ports (ationali;ed premium for 3'0 days %utomatic cover for ultimate buyers upto discretionary limit )ommercial ris,s on agents covered E tended period for reali;ation upto 3'0 days

, . SERVICES POLICIES -ervices 0olicies offer protection to Indian firms against payments ris,s involved in rendering services to foreign parties. % +ide range of services, hiring or leasing can be covered under these policies. !he e porters can opt for +hole !urnover -ervices 0olicy or for -pecific -ervices 0olicy depending on the nature of services provided. !he premium rates applicable. !o standard policy +ill be applied for +hole turnover services

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EXPORT PROCEDURE AND DOCUMENTATION policy and specific shipment policy B--09-!C premium rates +ill be applied for -pecific -ervice 0olicy. Period of the Policy: Ri$.$ co3ered: )ommercial (is,s on ultimate buyers 0olitical (is,s F) 8pening $an, (is,s &0% for -tandard 0olicyholders and >0% for others 12@24 :onths

Percenta e of Co3er:

Important obli ation$ of Exporter$: %dvance deposit of premium in advance to cover premium 8btaining credit limit on services receiver :onthly statement of actual service provided 8verdue declaration /iling of claim -haring of recovery

Gi hli ht$: 8ption to select the type of cover.

-. MATURITY FACTORING !he :aturity /actoring scheme, as designed by E).) has uni#ue features and does not e actly fit into the conventional mould of maturity factoring. !he changes devised are intended to give the clients the benefits of full factoring services through the maturity

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EXPORT PROCEDURE AND DOCUMENTATION factoring scheme, thus effectively addressing the needs of e porters to avail of pre9 finance BadvanceC on the receivable, for their +or,ing capital re#uirements. 8ne important feature is the very role and special benefits envisaged for ban,s under the scheme. 1enefit$: 100% credit guarantee protection against had debts -ales register maintenance in respects of factored transaction (egular monitoring of outstanding credits, facilitating collection of receivable on due date, recovery, at its o+n cost, of all recoverable had debts

/ettin up Char e$ and #actorin Char e$ !he factoring application fee payable initially is (s.10,000@9 /or setting up permitted limits on each of the overseas customers, the e porter +ill have to pay a processing fee e#ual to 0.0"% of the permitted limit sought sub4ect to minimum of (s.2000@9 after of this, the factoring charges payable as and +hen an e ports bill is to be factored depends on the country to +hich the e ports is made and the credit period. Exporter$ 0bli ation$: (egistration and obtaining permitted limit on the buyer 0ayment of factoring charges +ith statement of e ports made Inform developments

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EXPORT PROCEDURE AND DOCUMENTATION

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