Export Procedure and Documentation Project Report

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#
1
DECLARATION
I M$%%. DIVYA THINGALAYA OF VIVE& COLLEGE OF COMMERCE OF
T.Y.B.M.S. 'SEMESTER VI( HEREBY DECLARE THAT I HAVE COMPLETED
THIS PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THE
ACADEMIC YEAR2! ) 2#. THE INFORMATION SUBMITTED IS TRUE AND
ORIGINAL TO THE BEST OF MY &NOWLEDGE.
DATE*
PLACE* 'SIGNATURE OF THE STUDENT(
2
CERTIFICATE
I Prof. MONA HERBY CERTIFY THAT M$%%. 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 SIGNATURE OF PROJECT GUIDE
'Prof. SUNIL .B. MANTRI( 'Prof. MONA(
3
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
INDEX
SERIAL
NUMBER
CONTENT PAGE
NUMBE
R
, INTRODUCTION !
2 HOW TO SET UP AN EXPORT ORGANISATION -
. HOW ONE BEGINS TO DO EXPORT ,/
/ EXPORT SALES & CONTRACT TERMS &
CONGITIONS
,#
0 TERMS OF SHIPMENT ) INCOTERMS. 2
! PROCESSING AN EXPORT ORDER 2#
# FINANCIAL RIS& INVOLVED IN FOREIGN
TRADE
2-
- EXPORT DOCUMENTS 21
1 OCTROI 0.
, QUALITY CONTROL & PRE"SHIPMENT
INSPECTION
0#
,, SHIPPING ANG CUSTOMS FORMALITIES !
,2 SALES TAXES EXEMPTION PROCEDURE !!
,. METHODS OF RECEIVING PAYMENTS
AGAINST EXPORTS
!-
,/ THE LETTER OF CREDIT #,
,0 PREPARATION AND SUBMISSION OF
DOCUMENTS FOR BAN& NEGOTIATIONOR
PURCHASE
--
,! SHIPMENT THROUGH COURIERS 1,
,# CUSTOM PROCEDURE FOR EXPORT UNDER
EDI SYSTEM
12
,- THE ECGC COVER. ,,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%. Eport is one of the lucrative business activities in
India. !he government also provides various promotional schemes to the eporters for
"
earning valuable foreign echange for the country and for meeting their re#uirements for
importing modern technology and essential inputs. $esides, the income from eport
business is also eempted to the specified etent under the Income !a %ct, 1&'1, (efund
of )entral Ecise and )ustom *uty on eport is also made under the *uty *ra+bac,
-cheme of the .overnment. !here is no -ales !a on products meant for eports.
Eports 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 Eports2 If the goods physically go out of the country or services
are rendered outside the country then it is called as physical eport. *eemed Eports2
3here the goods do not go out of the country physically they can be termed as deemed
eports. !his +ill be sub4ect to certain conditions as prescribed by the *./!. 5nder
*eemed Eports, the goods may be supplied to the manufacturer eporter +ho ultimately
eport 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 eporter +ho eports 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 eport. !he /oreign !rade 0olicy gives the list of
supplies considered under the *eemed Eport )ategory. !he policies and procedures are
different for 0hysical Eports and *eemed Eports as also the benefits available. In a
nutshell, *eemed Eports do not en4oy all the benefits that are available under 0hysical
Eport. !he /oreign !rade defines eports as ta,ing out of India any goods by land, sea,
air. %lthough the act does not term them as 60hysical Eports7, +e have to put phrase to
distinguish it from 6*eemed Eports7 +hich is sales in India but considered as eports
for limited purpose.
TYPES OF EXPORTERS2
'
Eporters can be basically classified into t+o groups
Manufacturer Exporter: %s the eporter has the facility to manufacturer the
product he intends to eport and hence he eports the products manufactured by
him.
Merchant Exporter: %n eporter +ho does not have the facility to manufacture
an item. $ut, he procures the same from other manufacturers or from the mar,et
and eports the same.
%n eporter can be both a manufacturer eporter as +ell as a merchant
eporter, he can eport product manufactured by him or he can eport items bought from
the mar,et.
8nce it is decided to eport, it is mandatory on your part to follo+ certain
procedures, rules and regulations as prescribed by various regulatory authorities such as
*./!, ($I, and )ustoms. !hese procedures, rules and regulations are laid do+n in the
Eim 0olicy 200490&, Echange )ontrol :anual, )ustoms %ct etc. %ccordingly Eport
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,.
*esire to eercise 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 epenses 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 eperiences and epertise 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 eceed "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
maimum 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
>
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 Eporter i.e. buying the goods from the mar,et or from the
manufacturer and then selling it to foreign buyers.
:anufacturer Eporter i.e. manufacturing the goods yourself for eport.
-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 eporter. !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 eport. It is advisable to open the account +ith a ban,
+hich is authorised to deal in /oreign Echange.
STRUCTURE OF AN EXPORT ORGANISATION
mar,eting manager for generating sales
)ommercial manager for loo,ing activities of the eecution of the orders.
staff personnel for carrying out the day9to9day activities namely
&
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). ecise department regarding
pac,ing and clearance of the goods for eport.
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 eport benefits fiiling of
documents +ith the .overnment %uthorities in *ischarge of Eport 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 eample 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.
10
!he )ustoms %uthorities +ill no+ allo+ the eporter to eport 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 echange. !he duly signed application form should be
supported by the follo+ing documents.
$an, receipt B in duplicate C @ *emand *raft for payment of the fees of (s. 1000@9
)ertificate from the ban,er of the applicant firm as per %nneure 1 to the form
given.
8ne copy of 0%= number issued by Income !a %uthorities duty attested by the
applicant.
8ne copy of 0assport -i;e photographs of the applicant duly attested by the
ban,er to the applicant.
*eclaration by the applicant that the proprietor@partners@directors as the case may
be of the applicant company, are not associated as proprietor@partners@directors in
any other firm, +hich has been caution, listed by the ($I. 3here the applicant
declares that they are associated as proprietor@partners@directors in any other firm,
+hich has been caution, listed by the ($I, they +ill be allotted IE) =o. but +ith
an additional condition that they can eport only +ith ($IDs prior approval and
they should approach ($I for the purpose.
Each importer@eporter shall be re#uired to file importer@eporter 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
%ppendi92, importer@eporter shall intimate the same to the licensing authority.
IEC EXEMPT CATEGORIES.
11
!he follo+ing importer eporter is eempted from the re#uirement of IE) code number.
:inistries A *epartment of )entral or -tate .overnment.
0erson importing or eporting goods for their personal use not connected +ith
trade or manufacture or agriculture.
0ersons importingAeporting goods fromAto =epal E :yanmar provided the )I/
value of single consignment does eceed 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@Eport of any commodity by that
firm@company. !here being no date of epiry, the IE) once allotted is valid till it is
revo,ed. $ut, if no import or eport 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(*
12
%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%ppendi9"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 eporter is also re#uired to obtain $usiness
Identification =oB$I=C. /or this eporter is re#uired to contact *./! online on +eb site.
!he licensing authority issues $I= in coordination +ith customs authorities. !his $I= is
re#uired to be mentioned on the shipping bills at the time of customs clearance of the
eport cargo.
RCMC 'R;7$%6r86$o3"C5<"M;<=;r%:$> C;r6$f$286;( ) REGISTRATION WITH
EXPORT PROMOTION COUNCILS )
In order to enable the eporter to obtain benefits@concessions under the /oreign !rade
0olicy, the eporter is re#uired to register himself +ith an appropriate eport promotion
agency by obtaining registration9cum9membership certificate. B():)C. If the eport
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 Importer9Eporter )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 31
st
:arch of the licensing year.
REGISTRATION WITH SALES TAX AUTHORITIES*
.oods that are to be shipped out of the country for eport are eligible for eemptions
from both -ales !a and )entral -ales !a. /or this purpose, eporter 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
13
$efore entering into the venture of eports, one must loo, for the product to be eported
and the mar,et +here he intends to eport.
In case of a manufacturer, obviously he +ould li,e to eport 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 eporter or a trader, one has to identity the product to eport. If the eporter is
already in the trade in the domestic mar,et and is familiar +ith the product it +ould be an
advantage to eport the said product of +hich he has reasonable ,no+ledge.
$efore selecting a product, one must simultaneously made a study and find out the
prospective mar,et. /or finding out the mar,et for the selected product, the follo+ing
methods +ill help.
.et statistical information as to imports of the product by various countries
and their gro+th prospects in the respective countries
%pproach the chamber of commerce for their guidance to find out the mar,et.
%pproach the Eport 0romotion )ouncil dealing in the product of selection to
get more information.
The Preliminary
8nce you are ready +ith the product you +ish to eport and have found the mar,et for
the same, you are ready to proceed further. /ollo+ing se#uences can be follo+ed2
%ny one, +ho +ishes to eport, must first of all get an Importer Exporter
Code Number (IE Code).!his can be obtained by ma,ing a formal
application to the office of the Reional !irectorate "eneral of #orein
Trade (!"#T).
"et your$elf rei$tered %ith the related Export Promotion Council and
become a member. &l$o arrane to obtain Rei$tration'Cum'Member$hip
Certificate (RCMC) from the council. !his has t+in ob4ectives2
o 5nder the /oreign !rade 0olicy, it is mandatory that an eporter gets him
registered +ith the Eport 0romotion )ouncil to avail of various eport
facilities.
14
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 Eport
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 ecise formalities as goods meant for eport can be cleared
+ithout payment of ). Ecise duty on the finished product sub4ect to compliance
of certain formalities.
5nderstand the local government regulations in relations to the eport 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 eports.
FINDING A CUSTOMS
8nce you have selected the mar,et, the net 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
$y means of participation in a /air@Ehibition abroad either directly or through
the Eport 0romotion )ouncil
1"
$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.
1'
EXPORT SALES & CONTRACT TERMS & CONDITIONS
Hery often eporters do not enter into any formal contract and finali;e the trade deal
through the echange of letters, cable, tele etc. It is, ho+ever, epedient that the parties
Beporters 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. Eport 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 eample, 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 eplicit provisions regarding the rights and obligations by including a set of
detailed and precise terms and conditions in their contract.
EXPORT OF SAMPLES?GIFTS.
Eports of bonafide trade and technical samples of freely eportable items shall be
allo+ed +ithout any limit. .oods including edible items of value not eceeding (s.
1<
100000@9 in a licensing year, may be eported as a gift. 1o+ever items mentioned as
restricted for eports in I!)B1-C shall not be eported as a gift +ithout a
licence@certificate@permission, ecept 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 eporter for various
clause to be incorporated in the Eport )ontract.
ENTERING INTO AN EXPORT CONTRACT
In order to avoid disputes, it is necessary to enter into an eport contract +ith the
overseas buyer. /or this purpose, eport 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 eact specifications of goods and terms
of sale including eport price, mode of payment, storage and distribution methods, type
of pac,aging, port of shipment, delivery schedule etc. !he different aspects of an eport
contract are enumerated as under2
0roduct, -tandards and -pecifications
Juantity
Inspection
!otal Halue of )ontract
1>
!erms of *elivery
!aes, *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 Ecuse for =on9performance of contract
(emedies
%rbitration clause
It +ill not be out of place to mention here the importance of arbitration clause in an
eport 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, epeditious 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 epert in the sub4ect matter
of the dispute. !he dates for arbitration meetings are fied +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
%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.
1&
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$, )/( E )I/, developed by the
International )hamber of )ommerceBI))C in 0aris, /rance. It defines the trade contract
responsibilities and liabilities bet+een buyer and seller. It is invaluable and a cost9saving
tool. !he eporter and the importer need not undergo a lengthy negotiation about the
conditions of each transaction. 8nce they have agreed on a commercial terms li,e /8$,
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 eporters 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 taes and@or other costs and ris,s
at the buyerDs end, for eample the trade terms *E8 B*elivery E JuayC and **0
B*elivered *uty 0aidC
20
Juite often, the charges and epenses 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 eport customs clearance, payment of eport customs
charges and taes, and other costs and ris,s at the sellerDs end
MORE CLARIFICATION ON INCOTERMS
E)* +,the named place-
Ex *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
eample EG3 Mobe and EG3 -an %ntonio.
!he term EG3 is commonly used bet+een the manufacturer BsellerC and eport9
traderBbuyerC, and the eport9trader 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 epense.
!he pointBdepotC at origin may or may not be a customs clearance centre. $uyer is
responsible for the main carriage@freight, cargo insurance and other costs and ris,s.
In the air shipment, technically spea,ing, goods placed in the custody of an air carrier are
considered as delivery on board the plane. In practice, many importers and eporters still
21
use the term /8$ in the air shipment. !he term /)% is also used in the (8@(8 Broll
on@roll offC services
In the eport #uotation, indicate the point of departure BloadingC after the acronym /)%,
for eample /)% 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 eport9traders.
#&/ +,the named port of oriin-
#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 epense. $uyer is responsible for the loading fee, main
carriage@freight, cargo insurance, and other costs and ris,s In the eport #uotation,
indicate the port of originBloadingCafter the acronym /%-, for eample /%- =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 oriin)
#ree on 1oard: !he delivery of goods on the board the vessel at the named port of origin
BFoadingC at sellerDs epense. $uyer is responsible for the main carriage@freight, cargo
insurance and other costs and ris,s. In the eport #uotation, indicate the port of origin
BloadingC after the acronym /8$, for eample /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 eporters 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.
/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
22
clearance and payment of import customs duties and taes 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$tination-
Co$t and #reiht: !he delivery of goods to the named port of destination BdischargeC at
the sellers epenses. $uyer is responsible for the cargo insurance and other costs and
ris,s. !he term )/( +as formerly +ritten as )E/. :any importers and eporters
+orld+ide still use the term )E/.
In the eport #uotation, indicate the port of destination BdischargeC after the acronym
)/(, for eample )/( Marachi and )/( %leandria. 5nder the rules of the
I=)8!E(:- 1&&0, the term )ost and /reight is used for ocean freight only. 1o+ever,
in practice, the term )ost and /reight B)E/C is still commonly used in the air freight.
CI# +,named port of de$tination-
Co$t2 In$urance and #reiht: !he cargo insurance and delivery of goods to the named
port of destination BdischargeC at the sellerDs epense. $uyer is responsible for the import
customs clearance and other costs and ris,s.
In the eport #uotation, indicate the port of destination BdischargeC after the acronym )I/,
for eample )I/ 0usan and )I/ -ingapore. 5nder the rules of the I=)8!E(:- 1&&0,
the term )I/I is used for ocean freight only. 1o+ever, in practice, many importers and
eporters still use the term )I/ in the air freight.
23
CPT +,the named place of de$tination-
Carriae Paid To: !he delivery of goods to the named port of destination BdischargeC at
the sellers epenses. $uyer assumes the cargo insurance, import custom clearance,
payment of custom duties and taes, and other costs and ris,s. In the eport #uotation,
indicate the port of destination BdischargeC after the acronym )0!, for eample )0! Fos
%ngeles and )0! 8sa,a.
CIP +, the named place of de$tination)
Carriae and In$urance Paid To: !he delivery of goods and the cargo insurance to the
named place of destination BdischargeC at sellerDs epense. $uyer assumes the importer
customs clearance, payment of customs duties and tees, and other costs and ris,s.
In the eport #uotation, indicate the place of destination BdischargeC after the acronym
)I0, for eample )I0 0aris and )I0 %thens.
!&# +, the name$ point at frontier-
!eli3ered &t #rontier: !he delivery of goods to the specified point at the frontier at
sellers epense. $uyer is responsible for the import custom clearance, payment of custom
duties and taes, and other costs and ris,s.
In the eport #uotation, indicate the point at frontier BdischargeC after the acronym *%/,
for eample *%/ $uffalo and *%/ 3elland.
!E/ +,named port of de$tination-
!eli3ered Ex /hip: !he delivery of goods on board the vessel at the named port of
destination BdischargeC at sellers epense. $uyer assumes the unloading free, import
customs clearance, payment of customs duties and taes, cargo insurance, and other costs
and ris,s.
24
In the eport #uotation, indicate the 0ort of destination BdischargeC after the acronym
*E-, for eample *E- 1elsin,i and *E- -toc,holm.
!E4 +, the named port of de$tination
!eli3ered Ex 4uay: !he delivery of goods to the Juay Bthe portC at the destination at
buyers epense. -eller is responsible for the importer customs clearance, payment of
customs duties and taes, at the buyers end. $uyer assumes the cargo insurance and other
costs and ris,s. In the eport #uotation, indicate the 0ort of destination BdischargeC after
the acronym *EJ, for eample *EJ Fibreville and *EJ :aputo.
!!5 +, the named point of de$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 epense. $uyer
assumes the import customs clearance, payment of customs duties and taes. !he seller
may opt not to insure the goods at his@her o+n ris,s.
In the eport #uotation, indicate the point of destination BdischargeC after the acronym
**5 for eample **5 Fa 0a; and **5 =Dd4amena.
!!P +, the named point of de$tination)
!eli3ered !uty Paid: !he seller is responsible for most of the epenses +hich include
the cargo insurance, import custom clearance, and payment of custom duties, and taes 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 eport #uotation, indicate the point of destination BdischargeC after the
acronym **0, for eample **0 $u4umbura and **0 :babane.
2"
6E('term2(#('term2 6C('term 7(!('term: Incoterms 2000, li,e its immediate
predecessor, groups the term in four categories denoted by the first letter in the three9
letter abbreviation.
5nder the 6E('TERM (E)*), the seller only ma,es the goods available to the
buyer at the sellerDs o+n premises. It is the only one of that category.
5nder the 6#('TERM B/)%, /%-, E/8$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. Eamples are *elivery, !ransfer of
ris,s, and *ivision of costs. !his layout helps the user to compare the parties respective
obligations under each Incoterms.
2'
PROCESSING AN EXPORT ORDER
?ou should not be happy merely on receiving an eport order. ?ou should first
ac,no+ledge the eport order, and then proceed to eamine 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 eport order immediate steps should be ta,en for
procurement@manufacture of the eport goods. In the mean+hile, you should proceed to
enter into a formal eport contract +ith the overseas buyer.
$efore accepting any order necessary home+or, should have been done as to availability
of the production capacity, ra+ material e.t.c. It +ould be in the interest of the eporter to
loo, into entering into for+ard contract to safeguard against echange rate fluctuations.
Ensure that the mode of payment is also agreed upon. In case of shipment against letter of
2<
credit, the buyer should be advised to open the credit +ell in advance before effecting the
shipment.
FINANCIAL RIS&S INVOLVED IN FOREIGN TRADE
%s an eporter +hile selling goods abroad, you encounter various types of ris,s. !he
ma4or ris,s +hich you have to undergo are as follo+s2
)redit (is,
)urrency (is,
)arriage (is,
)ountry (is,
?ou can protect yourself against the above ris,s by initiating appropriate steps.
Credit Ri$.$ :
?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).) BEports
)redit E .uarantee )orporationC to cover your country ris, besides covering credit ris,.
Currency Ri$.$:
%s regards covering the currency ris,, due to the echange rate fluctuations, you can
re#uest your ban,er to boo, a for+ard contract.
Carriae Ri$.:
2>
!he carriage ris, can be covered by ta,ing an appropriate general insurance policy.
Country Ri$.:
E).) provides cover to protect the eporter from country ris,s. % detailed procedure
ho+ an eporter can get himself protected against the above ris,s are given in separate
chapters later.
EXPORT DOCUMENTS
%ny eport shipment involved various documents re#uired by various authorities such as
customs, ecise, ($I, Inspection and according depending upon the re#uirements, there
are categori;ed into 2 categories, namely commercial documents and regulatory
documents.
&. Commercial !ocument$. : ' )ommercial documents are re#uired for effecting
physical transfer of goods and their title from the eporter to the importer and the
realisation of eport sale proceeds. 8ut of the 1' commercial documents in the
eport 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 echange 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 eport
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
bill of merchandise. It is prepared by the eporter after the eecution of eport
order giving details about the goods shipped. It is essential that the invoice is
2&
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 eporter.
=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.
EporterNs 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 eporter +ith date.
S$73$f$2832; of Co<<;r2$8@ I3Ao$2;
It is the basic document useful in preparation of various other shipping
documents.
It is used in various eport formalities such as #uality and pre9-hipment
inspection ecise and customs procedures etc.
It is also useful in negotiation of documents for collection and claim of incentives.
30
It is useful for accounting purposes to both eporters as +ell as importers.
9 In$pection Certificate: !he certificate is issued by the inspection authority such as
the eport inspection agency. !his certificate states that the goods have been
inspected before shipment, and that they confirm to accepted #uality standards.
: Marine in$urance policy: .oods in transit are sub4ect to ris, of loss of goods
arising due to fire on ship, perils of sea, theft etc. marine insurance protects losses
incidental to voyages and in land transportation. :arine insurance policy is one of
the most important document used as collateral security because it protects the
interest of all those +ho have insurable interest at the time of loss. !he eporter is
bound to insure the goods in case of )I/ #uotation, but he can also insure the goods
in case of /8$ contract, at the re#uest of the importer, but the premium payment
+ill be made by the eporter. !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 eporter, 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 eports 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 eporter.
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 maimum value of consignment that may be sent per ship and if the
value eceeded, the insurance company must be informed by the eporter.
In$urance Premium: *iffers upon product to product and a number of
such other factors, such as, distance of voyage, type and condition of
pac,ing, etc. 0remium for air consignments are lo+ered as compared to
consignments by sea.
31
=. 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 eporter 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 eporter +hile the other t+o are dispatched to the customs
office of the importerNs country for the calculation of the import duty. !he eporter
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 eporterNs 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 eporter 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.
!he importer is assured that the goods imported are not banned for imported
in his country.
32
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$3* !he importers in several countries re#uire a certificate of
origin +ithout +hich clearance to import is refused. !he certificate of origin states
that the goods eported are originally manufactured in the country +hose name is
mentioned in the certificate. )ertificate of origin is re#uired +hen29
!he goods produced in a particular country are sub4ect toD preferential tariff rates
in the foreign mar,et at the time importation.
!he goods produced in a particular country are banned for import in the foreign
mar,et.
TC>;% of 6:; C;r6$f$286; of Or$7$3
(a) Non'preferential Certificate2 of 0riin2 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 eporting country.
!rade %ssociation. 8f the eporting country.
(b) Certificate of 0riin for a3ailin Conce$$ion$ under "/P 29 )ertificate of origin
re#uired for availing of concessions under .eneralised -ystem of 0references
B.-0C etended by certain, countries such as /rance, .ermany, Italy, $E=EF5G
countries, 5M, %ustraliaQ Rapan, 5-%, etc. !his certificate can be obtained from
specialised agencies, namelyQ
Eport Inspection %gencies.
Rt. *irector .eneral of /oreign !rade..
33
)ommodity $oards and their regional offices.
*evelopment )ommissioner, 1andicrafts.
!etile )ommittees for tetile products.
:arine 0roducts Eport *evelopment %uthority for marine products.
*evelopment )ommissioners of E0Os
(c) Certificate for a3ailin Conce$$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 eports. Eport 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 consignee.
=ame and the number of Hessel of /light
=ame of the port of discharge and place of delivery.
34
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
%s a receipt from the shipping companyQ and
%s a contract for the transportation of goods.
3"
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 Throuh 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.
#reiht 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.
#reiht 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.
!otal number of containers and pac,ages,
3'
)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 eporters
!he eporter 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 eporter sends the bill of lading to the ban, of the importer so as to enable
him to ta,e the delivery of goods.
!he eporter can give an advance intimation to the foreign buyer about the
shipment of goods by sending him a non9negotiable copy of bill of lading
S$73$f$2832; of B$@@ of L84$37 for S:$>>$37 Co<>83C
3<
It is useful to the shipping company for collection of transport charges from the
importer, if not collected from the eporter.
#. 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.
%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 eporter
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.
A. P82D$37 L$%6* !he eporter 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,
3>
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 Echange to F) as it does not involve bloc,ing of
funds. % bill of echange is dra+n by the eporter 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 etent 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 eclusion 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 eporter @ person +ho dra+s the bill.
9. !he dra+ee2 !he importer @ person on +hom the bill is dra+n for payment.
3&
:. !he payee2 !he person to +hom payment is made, generally, the eporter @
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 fied formats and the number of such documents +ill +ary
according to individual re#uirements.
8. Profor<8 I3Ao$2;* !he starting point of the eport contract is in the form of offer
made by the eporter to the foreign customer. !he offer made by the eporter 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 importer.
:ode of transportation, such as -ea or %ir or :ultimodal transport.
=ame of the port of discharge and final destination.
0rovisional invoice number and date.
EporterNs 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 eporter +ith date.
I<>or6832; of Profor<8 I3Ao$2;
40
It forms the basis of all trade transactions.
It may be useful for the importer in obtaining import licence or foreign
echange.
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 eporter, 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 eporter.
=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 eporter 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 !etile )ommittee or Eport 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
eporter or his agent collects the mateNs receipt from the 0ort !rust %uthorities.
!he mateNs receipt is freely transferable. It must be handed over to the shipping
41
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.
.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
It is an ac,no+ledgement of goods received for eport 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 eporter 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
eporter about the reservation of space for shipment of cargo +hich the eporter
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 eporter 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 eport promotion scheme under +hich goods are to be
eported.
=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 eporter
has to submit the documents to a ban, for negotiation or discounting or collection
43
for for+arding the same to the customer and also for reali;ation of eport
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
echange cover.
In case of credit bill +ho has to bear the interest, either eporter
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 eport 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 eport trade such as eport
inspection, foreign echange regulation, e port trade control, customs, etc. 8ut of &
regulatory documents four have been standardised and aligned. !hese are shipping
bill or bill of eport, echange control declaration B.( fromC, eport 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
)ustoms copy.
*ra+bac, copy.
Eport promotion copy.
0ort trust copy.
EporterNs 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 eported.
!utiable /hippin 1ill2 9 *utiable shipping bill is re#uired for goods +hich are
sub4ect to eport duty.
!uty'free /hippin 1ill: ' *uty9free shipping bill is useful for eporting goods
on +hich there is no eport 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$ 1y /ea 1y &ir
*ra+bac, shipping bill .reen .reen
*utiable shipping bill ?ello+ 0in,
*uty9/ree shipping bill 3hite 0in,
Co36;36% of S:$>>$37 B$@@
=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.
4"
*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 re9eported
!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 eport
incentives offered by the government.
d) It is useful to the )ustoms %ppraiser +hile determining the actual value of
goods eported.
9. A.R.E. , for< 'C;36r8@ ;B2$%;(* this form %(E91 is prescribed under )entral
Ecise rules for eport of goods. In case goods meant for eport are cleared
directly from the premises of a manufacturer, the eporter can avail the
facility of eemption from payment of terminal ecise duty. !he goods may be
cleared for eport 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 eported, the
relevant duty involved and if the duty is paid or goods being cleared under
bond, details of goods being sealed either by the eporter or )entral Ecise
officials etc.
:. EB2:837; Co36ro@ 4;2@8r86$o3 For< 'GRFPPFSOFTEX(* under the echange
control regulations all eporters 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'
time of passing of eport 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 Eport. *ifferent types are re#uired for shipment li,e e9
bond, duty free goods, and dutiable goods and for eport under different
eport 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 eport 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 eports
and for the date of realisation of the eport 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 eports.
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
4<
handed over to the eporter. % copy is sent along +ith the other
documents for realisation of eport 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 eporter 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 eporter 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 :eico. It is 4ust li,e consular invoice, +hich re#uires
certification from )onsulate or authorised mission, stationed in the
eporterDs country.
4>
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 ecess of
the amount permitted by the credit ecept 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.
Eport 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.
4&
EB2:837; Co36ro@ D;2@8r86$o3 For<* all eports 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 eports other+ise than by
post including eport 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 eport 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 eport by post.
SOFTX* to be completed in triplicate for eport 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
Eport declaration forms have utmost importance and are binding on the eporters. It is,
therefore, necessary that enough care is ta,en +hile declaring eports on these forms,
+ith special reference on the follo+ing points.
=ame and address of the authorised dealer through +hom proceeds of
eports 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 eport is on
Loutright sale basisD or Lon consignment basisD and irrelevant clauses
must be stuc, out
"0
5nder the term Lanalysis of full eport valueD a brea, up of full eport
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 eport of goods from India must pass
through the medium of an authorised dealer in foreign echange in
India +ithin 21 days of shipment.
!he amount representing the full eport 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 eport of goods other than 4e+ellery should be
completed by the eporter 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 eporter +ill also be verified by the customs
and they +ill also record the assessed value. *uplicate copy +ill be
returned to the eporter 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 eamination of goods and certifying the #uantity
passed for shipment the duplicate copy +ill again be returned to
eporter for submission to an authorised dealer. 1o+ever, an eception
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
"1
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 eport has
been opened in favour of eporter and has been advised
through authorised dealer concernedQ or
BiiC the full value of shipment has been received in advance by the
eporter 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 eporter and arrangements made for realisation of
the eport proceed that he cold do so. If the authorised dealer is
not satisfied about standing etc. of the eporter, 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
eporter 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 eport 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 eport of computer
soft+are in physical form is sub4ect to normal declaration on .(@00 form and regulations
"2
applicable there to +ill also be applicable to such eports. 1o+ever, eport of non9
physical form should be declared on -8/!EG /orm. $esides computer soft+are, eport
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 eport of soft+are is fraught +ith many ris,s
and special guidelines have been framed for handling such eports.
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
eport.
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.
"3
%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 eporter 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.
Eport invoice issued by the Eporter to the importer.
Eport 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, Eport Invoice by 8ctroi
officer.
5nder ta,ing that the goods +ill be cleared for eport +ithin < days of clearance
through the octroi post.
"4
8ctroi officer at *oc,s +ill endorse the -hipping $ill number E shipment details
on = form.
0roof of eport... = form +ith above endorsement to be submitted to the 1ead
8ffice along +ith copies of -hipping $ill, $ill of Fading, Eport 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.
Eport 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.
""
B8r Co4$37
It is the endeavor of the )entral .overnment to enhance eport 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 eports 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 eporter 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 eporter.
!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 eporter, 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 eports are infre#uent.
"'
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 eporter.
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 maimum value of
consignment that may be sent pre ship and if the value eceeded, the insurance company
must be informed by the eporter.
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 eport under Eport BJuality )ontrol and 0re9
-hipment InspectionC %ct 1&'3.
"<
%t present, the eport 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 Eport Inspection
)ouncil BEI8C !he EI) has set up " Eport 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.
">
/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 eport. !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 maimum 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 eporter. 8ver >00 units all over
India are operating under this system.
)onstant vigil and surveillance are ,ept on units approved under I0J) and self9
certification system. 5nits approved under the above t+o systems are often ,no+n as
6Eport +orth 5nits7, because of their consistent standards of #uality.
Con$inment %i$e In$pection:
5nder this system, each and every consignment is sub4ect to compulsory inspection. !he
eporter has to follo+ a certain procedure such as2
"&
1e has to ma,e an application to Eport Inspection %gency +ith certain
documents.
!he EI% deputes inspector to inspect the goods
%fter the inspection, the goods are repac,ed +ith EI% seal
!he inspector then ma,es a report to *eputy *irector of EI%
!he *y. *irector of EI% then issues Inspection )ertificate in triplicate if the
inspection report is favorable
If the inspection report is not favorable, a re4ection note is issued.
o It is to be noted that goods mar,ed +ith I-I@%.:%(M@$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 tetile goods is conducted by !etile )ommittee in respect
of those eporters +ho are registered +ith the tetile committee.
Norm$:
%de#uate !esting /acility
(a+ :aterial !esting E 0rocess )ontrol
%fter -ales -ervices E :aintaining 0roduct Juality
)ontrol on bought out components
:eteorological )ontrol E 0M..
Independent Juality %udit E 1ouses.
#umiation: /or ensuring that no insects or bacteria are carried +ith the eport
certain types of eport products are fumigated before shipment. !he fumigation is
carried out in the port of shipment.
SHIPPING AND CUSTOMS FORMALITIES
'0
'A% >;r 6:; Pr;A8$@$37 L89 $.;.+ ICA !2(
!he shipment of eport cargo has to be made +ith prior permission of, and under the
close supervision of the custom authorities. !he goods cannot be loaded on board the ship
unless a formal permission is obtained from the custom authorities. !he custom
authorities grant this permission only +hen it is being satisfied that the goods being
eported are of the same type and value as have been declared by the eporter or his )E/
agent, and that the duty has been properly determined and paid, if any.
!he custom procedure can be briefly eplained as follo+s2
S5=<$%%$o3 of Do25<;36%* !he eporter or his agent submits the necessary
documents along +ith the shipping bill to the )ustom 1ouse. !he documents
include2
o %(E91 B8riginal and duplicateC
o Ecise gate pass B8riginal and duplicate transportersD copy
o 0roforma Invoice
o 0ac,ing Fist
o .(I form B8riginal and duplicateC
o )ustoms Invoice B+here re#uired in the importing countryC
o 8riginal letter of credit@contract
o *eclaration form in triplicate
o Juality )ertificate
o 0urchase memo
o Fabels
o Ficence Bif any re#uiredC including advance licence copy
o (ail+ay receipt@lorry +ay bill
o Inspection )ertificate by Eport Inspection %gency
'1
Derification of !ocument$: !he )ustoms %ppraiser verifies the documents and
appraises the value of goods. 1e then ma,es an endorsement of 6Eamination
8rder7 on the duplicate copy of shipping bill regarding the etent of physical
eamination of the goods at the doc,s. %ll documents are returned bac, to the
agent or eporter, ecept
o 8riginal )opy of .( to be for+arded to ($I
o 8riginal copy of shipping bill
o 8ne copy of commercial invoice
Cartin 0rder: !he eporterDs agent has to obtain the carting order from the 0ort
!rust %uthorities. )arting 8rder is the permission to bring the goods inside the
doc,s. !he carting order is issued by the superintendent of 0ort !rust. )arting
8rder is issued only after verifying the endorsement on the duplicate copy of
shipping bill. !he )arting 8rder enables the eporterDs agent to cart goods inside
the doc,s and store them in proper sheds.
/torin the "ood$ 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 eporterDs agent then approaches the customs
eaminer to eamine the goods. !he customs eaminer eamines the cargo and
records his report on the duplicate copy of the shipping bill. !he customs
eaminer then sings the 6Fet Eport 8rder7
;et Export 0rder: !he Fet Eport 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 eporter@shipper to load the goods on the ship.
'2
;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 ecise clearance under 6bond7 and under 6rebate7 is
discussed as follo+s2
Preparin of In3oice: !he eport goods have to be cleared from the factory
under invoice. !he invoice contains details li,e name of the eporter, value of
goods, ecise duty chargeable, etc. !he invoice is to be prepared in triplicate. In
case of eport 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 eporter.
#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 eporter, +hich can be used
at the time of claiming other eport incentives. !he %(E91 copies have distinct
color for the purpose of verification and processing.
'3
&pplication to &$$i$tant Commi$$ioner of Central Exci$e (&CCE): !he
eporter has to ma,e an application to %))E regarding the removal of goods
from the factory@+arehouse for eport purpose.
Information to Rane /uperintendent of Central Exci$e (R/CE): !he %))E
+ill inform the (-)E under +hose 4urisdiction the goods are intended to be
cleared for eport
!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 of &RE'8 #orm: !he Ecise 8fficer@Inspector +ill ma,e
endorsement on all copies of %(E91. !he handling of %(E91 /orm is done as
follo+s2
o !he inspector returns the original and duplicate copies to the
eporter
o !he triplicate copy is sent to officer B%))E or :aritime
)ommissioner B:))EC to +hom bond +as eecuted or letter of
underta,ing BF5!C +as given. !his copy can also be handed over
to the eporter in a tamper proof sealed cover to be submitted to
%))E@:))E.
o !he 4
th
copy +ill be retained by the ecise inspector.
o !he "
th
copy is also handed over to the eporter.
o %t the time of eport, original, duplicate and the "
th
copy BoptionalC
+ill be submitted to customs officer. !he customs officer +ill
eamine these copies and then eport +ill be allo+ed.
o !he customs officer +ill then ma,e endorsement of eport on all
copies of %(E91. 1e +ill cite shipping bill number and date and
other particulars of eport on %(E91.
o !he original copy and #uintuplicate BoptionalC +ill be returned to
the eporter. !he duplicate copy +ill be sent directly to the
%))EA:))E i.e. ecise officer +ith +hom bond +as eecuted
+ill get 2 copies, one from (-)E Bor ecise inspectorC +hen goods
'4
are cleared from factory and other )ustom 8fficer after eport.
!his +ill enable him to ,eep trac, to ensure that all goods cleared
from factory or +arehouse +ithout payment of duty are actually
eported. In case of eport after payment of duty, under claim of
rebate, the basic procedure is same as above, ecept that the
triplicate copy Bby ecise 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 ecise rebate audit section at the place of eport.
Refund or Relea$e of 1ond: !he eporter should ma,e an application to the
ecise officer for refund or release of bond. !he application must be supported by
original copy of %(E91 form. !he ecise officer crosschec,s the original copy of
%(E91 form and the duplicate and triplicate copies of %(E91 form, +hich he had
received earlier. If the copies match, then refund is given or the bond is released.
FACTORY STUFFING OF CARGO
Clearance of ood$ to doc.$: If the goods meant for eport 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 eporters to ma,e up
#uantity for a full containerC by the agent and loaded into a container. 1ere the
eamination 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 eport is of sufficient #uantity to ma,e up a full container, the
eporter has the option to ta,e the goods to the doc,s and get them eamined and
stuffed into a separate container. %n eporter gets the benefit on the freight amount
for a full container. B.enerally called box rateC
'"
%lternatively, he can have a container allotted to him and get the same to his :ills
0remises. !he goods meant for eports can be stuffed into the container under the
supervision of the regional )entral Ecise %uthority. 1ere the eporter has to
8btain permission from the )ustoms for getting the container to his mills
premises for stuffing B1ouse -tuffingC
Inform the ).Ecise %uthorities at least 24 hours before bringing the
container for loading.
!he ).Ecise %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 eaminer 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 eamination in the customs. !hey +ill be
directly ta,en for loading.
''
SALES TAX EXEMPTION PROCEDURE
Eport good are eempted from the payment of sales ta. !he eporter can claim
eemption from sales ta Bon purchases or sales for eport purposeC, provide the eporter
is registered +ith the -ales9!a *epartment. If the eporter is not registered +ith the
sales ta department, he cannot utili;e the facility of sales ta eemption. !herefore, it is
necessary for the eporter to get his organi;ation registered +ith sales ta department.
I R;7$%6r86$o3 Pro2;45r;
A>>@$286$o3* !he eporter must apply to the -ales !a 8fficer B-!8C under +hose
4urisdiction the head@ registered office of the eporter is located.
D;>5686$o3 of I3%>;26or* !he -!8 may depute an inspector to visit the office of
the eporter and inspect2
o (elevant boo,s sho+ing sales@ purchases.
o 0artnership *eed or :emorandum and %rticles of %ssociation
along +ith Incorporation )ertificate.
o 8ther (elevant documents.
I3%>;26$o32 !he inspector visits the office of the eporter 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 eporter for necessary clarifications, if
re#uired.
S;25r$6C Bo34* !he -!8 normally re#uires the eporter to provide a security
bond from another firm +hich is registered +ith the -ales !a *epartment.
Gr836$37 of S8@;% T8B R;7. N5<=;r* %fter completing necessary formalities, the
-!8 grants -ales !a (eg. =umber to the eporter.
'<
II. EB;<>6$o3 Pro2;45r;
8btaining /orm L1D2 the registered eporters need to apply to the concerned -!8
for obtaining /orm D1D. the eporter should submit2
o % copy of Fetter of )redit
o % copy of Fetter of )redit @Eport 8rder.
o )opy of the Invoice , +here goods are already purchased for eport
purchase.
o % copy of shipping bill duty certified by customs.
!he eporter has to affi the prescribed court fee stamp on each of the /orm L1D issued.
!he -!8 then affies the eporterDs company stamp on the /orm D1D.
F$@@$37 6:; 4;68$@% $3 For< HHI2 %fter eport of goods, the eporter fills the
relevant details in L/orm 1D. !he /orm L1D needs to be prepared in triplicate.
!he eporter retains one copy, and other t+o copies are sent to the seller from +hom the
eporter purchased the goods for eport 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 eporter.
'>
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 eport.
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 eporter. !he methods are2
0ayment in advance
*ocumentary $ills
Fetter of )redit
8pen %ccount
)ounter !rade
A. 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.
'&
B. DOCUMENTARY BILLS*
5nder this method, the eporter agrees to submit the documents to his ban, along +ith
the bill of echange. !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$3%6 >8C<;36 'DFP(* !he documents are released to the importer against
payment. !his method indicates that the payment is made against -ight *raft. =ecessary
arrangements +ill have to be made to store the goods, if a delay in payment occurs.
!he ris, involved that the importer may refuse to accept the documents and to pay
against them. !he reason for non9acceptance may be political or commercial ones. In
India, E).) covers losses arising out of such ris,s. 5nder this system, as compared to
*@%, the eporter has certain advantages2
!he document remain in the hands of the ban, and the eporter does not lose
possession or the o+nership of goods till payment is made,
8ther reason may include that the eporter may not be able to allo+ credit and
+ait for payment.
!ocument$ &ain$t acceptance (!F&): !he document are released against acceptance
of the !ime *raft i.e. credit allo+ed for a certain period, say &0 days. 1o+ever, the
eporter need not +ait for payment till bill is met on due date, as he can discount the bill
+ith the negotiating ban, and can avail of funds immediately after shipment of goods.
<0
In case of *@% as compared to *@0 bills, the ris, involved is much grater, as the
importer has already ta,en possession of goods +hich may or may not be in his custody
on the maturity date of the bill. If the importer fails to pay on due date, the eporter, +ill
have to start civil proceedings to receive his payment, if all other alternatives fails. !he
ris, involved can be insured +ith E).).
C. LETTER OF CREDIT 'LFC(*
!his method of payment has become the most popular form in recent times, it is more
secured as company to other methods of payment Bother than advance paymentC.
% letter of credit can be defined as 6 an underta,ing by importerDs ban, stating that
payment +ill be made to the eporter if the re#uired documents are presented to the ban,
+ithin the variety of the F@)7.
<1
THE LETTER OF CREIDT
I36ro4526$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 eporters 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 eporterDs 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 eporter 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.
<2
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 $an,. !his
document is ,no+n as *ocumentary )redit. % *ocumentary )redit is also called a Fetter
of )redit BF@)C.
CONTENTS OF A LETTER OF CREDIT
% letter of credit is an important instrument in reali;ing the payment against eports. -o,
needless to mention that the letter of credit +hen established by the importer must contain
all necessary details +hich should ta,e care of the interest of Importer as +ell as
Eporter. Fet us see shat a letter of credit should contain in the interest of the eporter.
!his is only an illustrative list.
name and address of the ban, establishing the letter of credit
letter of credit number and date
!he letter of credit is irrevocable
*ate of epiry and place of epiry
Halue of the credit
0roduct details to be shipped
0ort of loading and discharge
:ode of transport
/inal date of shipment
*etails of goods to be eported li,e description of the product, #uantity, unit rate,
terms of shipment li,e )I/, /8$ 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
(eimbursement clause
PROCEDURE INVOLVED IN THE LETTER OF CREDIT
!he follo+ing are the step in the process of opening a letter of credit2
EporterDs (e#uest2 !he eporter 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 eporter ta,es in his possession the F@). 1e should see it that
the F@) is confirmed.
-hipment of .oods2 !hen eporter 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 eporter.
=egotiation2 !he eporterDs ban, negotiates the document against the letter of
credit and for+ards the eport 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 eporterC 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.
<4
!hey provide the comprehensive and practical +or,ing aid to ban,er, la+yer, importers,
eporters, Eporters, transporters, eecutives 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
<"
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 eporter 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
<'
eporter 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 eporter,
but only to the issuing ban, or to the confirming ban,.
=ormally, the negotiating ban, ma,es advance payment to the eporter in
resource of letter of credit either by discounting bills against letter of credit or by
purchasing the bills of echange. 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 eporter 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 eporter to pay bac, the money along +ith certain other epenses. /or the
eporter, 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 eporter 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 eporter 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
<<
also made immediately for the value of the shipment. !he main benefit in this F@)
is that the buyer, the ban, and the eporter are saved from the routine of opening
one F@) every month, the aniety 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 epect some security for getting his payment. !his is not
permitted in India.
<>
(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 eport goods. !hus, the red F) enables the eporter 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
etensively 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 eport F) received by the direct
eporters. !he direct eporter ,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,9to9
bac, 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 eporter 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
<&
o $ill of Echange
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.
>0
=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.
Epect 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 eporter has every right to as, for
compensation, in actual practice, no 4ustice is done to the eporter for the delayed
payment. Hery rarely, on persistent approach by the eporter@their ban,er, does a
defaulting ban, comes for+ard to compensate for the delayed payment. .enerally the
eporter has to forego lot of money in correspondence through the negotiating ban,
because every communication of the ban, is charged to the eporter. It is no surprise
many eporter 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 :aimum Halue the opening ban, underta,es to pay to the $eneficiary.
!he date of issue of the credit.
>1
!he Epiry *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 eplained, 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.
>2
-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 epiry 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 eports 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 eporter against the
documents.
!here are only fe+ suggestions. !he re#uirement may differ for different eporter and the
scrutiny has be done relative to the re#uirement.
AMENDMENTS TO THE CREDIT
>3
8n scrutiny of the letter of credit, if the eporter 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
eporter 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 eporter 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 eporter +hile an F@) is established.
It is suggested that the eporter 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. $ear in mind every amendment costs
you badly. )are are should be ta,en to ensure that there are =8 spelling mista,es,
omission and commission of 6, or7, or such small things. % discrepancy is a discrepancy
and there is nothing li,e minor discrepancy or ma4or discrepancy as far as the ban, is
concerned. % ban, strictly deals in documents and the documents are epected to be cent
percent in line +ith details give in the *ocumentary )redit. Ensure that the Halidity for
shipment and for negotiation of documents can be complied +ith. If not possible, call for
amendment etending the validity as re#uired.
5nless the F@) specifies the tolerance for the #uantity and value, the eporter should
follo+ the #uantity and value as stipulated in the F@). !here is provision for a tolerance
of the #uantity up to " percent more or less than stipulated in the F@) even if the F@) does
>4
not specify tolerance eclusively and unless tolerance is prohibited 0 specifically.
1o+ever, the value of documents, on no account, could eceed the limits of the F@).
)hec, the description of the product properly, the rates if specified, and #uantity of each
of the items. %s, for amendment +here you cannot copy +ith the terms. :a,e sure that
all the documents as called for by the )redit can be submitted +ithout any eception.
!he last but not the least is the (eimbursement clause B.etting the funds for the shipment
madeC. %n F@) +ithout this clause is no F@). if there is no provision as to from +here the
eporter is going to get paid for, the +hole eercise of the F@) is futile. !he opening ban,
may specify the reimbursement clauses as follo+s2
!he negotiating ban, to send the documents to the opening ban, +ho +ill, upon
receipt of the documents, arrange for reimbursement as claimed by the negotiation
ban,.
!he negotiating ban, can claim reimbursement directly from a nominated ban,
Bsay %$) $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.
>"
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 eporterDs
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
>'
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 fleibility provisions in the
50) "00 +hich one might li,e to eploit 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 eporter 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.
><
!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,.

>>

PREPARATION AND SUBMISSION OF DOCUMENTS FOR
BAN& NEGOTTIATION FPURCHASE
*ocument against eports should normally be reali;ed through an authori;ed dealer
foreign echange. 1o+ever payment of eport 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 eporterDs 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 eport 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 etension
of time in case you feel there is li,ely to be a delay in reali;ing eport proceeds.
!he follo+ing are the steps in reali;ing eport proceeds2
%pproaching a $an,2 %fter dispatch of the goods, either by sea, or by air, the
eporter should approach his ban, Bauthori;ed dealerC +ith a formal re#uest to
reali;e sale proceeds from the foreign buyer. It is obligatory to submit the
shipping documents to an authori;ed dealer +ithin 21 days of the date of
shipment Bsub4ect to certain eceptionsC. In India, the eporters have to reali;e the
full value of eports +ithin 1>0 days from the date of shipment, Bunless the
payment terms offered are 6deferred payment terms7C. 3here it is not possible to
reali;e the sale proceeds +ithin the prescribed period, the eporter should apply
for etension in prescribed form E!G Bin duplicateC to ($I.
-ubmission of *ocuments to the $an,2 !he eporter should submit the follo+ing
documents
>&
o $ill of Echange
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 $an, )ertificate
o 8ther relevant documents.
!he above documents need to be submitted in t+o complete sets, because it is
customary to dispatch t+o sets of documents, one after the other. !his is because,
if one set is misplaced or delayed in transit, the importer can get at least the other
set and clear the goods.
Herification of *ocuments2 !he ban, +ill verify the documents to find
o 3hether the re#uired documents are in order.
o 3hether the re#uired documents are attested by customs and other
authorities.
Fetter of Indemnity2 If the eporter +ants immediate payment from his ban,ers,
then his ban,ers may provide advance payment only +hen the eporter signs an
indemnity letter. !he implications of an indemnity letter is that in the event of
refusal of payment by the issuing ban, in respect of F), then the negotiating ban,
can as, the eporter to pay bac, the money advanced along +ith necessary
charges.
Co<<o3 Do25<;36 D$%2r;>832$;%
o )redit Epired
&0
o Fate shipment
o 0resented after permitted time from date of issue of shipping
documents
o -hort -hipment
o )redit %mount Eceeded
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 Echange 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 epressed in currency other than that of credit.
o %bsence of signature, +here re#uired on documents.
o $ill of echange not dra+n as per tenor stated in credit.
o $ill of echange 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 $ill of lading doses not carry shipped on broad stamp.
o %mount sho+n on invoice and bill of echange differ.
o -hipment not ma,e to port specified.
o !ransshipment@part shipment underta,en +here epressly forbidden.
*iscounting of bills2 the ban, may discount or negotiate the bills dra+n against
F), and ma,e immediate payment to the eporter, if so re#uired.
*ispatch of documents2 before the submission of documents for
negotiation@collection, the ban, eamines them thoroughly +ith reference to the
terms and conditions of the buyerDs order. Fetter of credit and the la+s relating to
&1
foreign echange control. If any scrutiny, the documents are in order, the ban,
dispatches them to its overseas branch@correspondent branch as early as possible.
!he overseas branch of the ban, then submits the document to the importerDs
ban,, and the importerDs ban, hands it over to the importer.
SHIPMENT THROUGH COURIERS
In addition to the eporter by sea, air, rail or road, eports are also allo+ed by courier
under the courier imports or eporters BclearanceC (egulation %ct, 1&&>.
!hese regulations shall apply for clearance of goods carried by authori;ed courier on
outgoing flights on behalf of eports. )onsigner for a commercial consideration.
Eport !erms E conditions2
Eport of any item can be affected by courier, ecept the follo+ing.
.oods +hich are sub4ect to cess.
.oods proposed to be eported +ith claim of duly dra+bac,.
.oods proposed to be eported under *E0$, 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.
&2
CUSTOM PROCEDURE FOR EXPORT UNDER EDI
SYSTEM
It is brought to the notice of all eporters, 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 BEportsC, +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 eport, 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 -ystem9Eports at )/-9:ulund shall be as follo+s2
&3
9. !&T& ENTR< #0R /GIPPIN" 1I;;/
9.8 Eporters@)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 $ill is filed.
9.9 Eporters@)1%s +ould be re#uired to submit at the -E(HI)E )E=!(E
the follo+ing documents.
% declaration in the specified format
-*/ declaration
Juota@Inspection )ertificate
*ra+bac,@*EE)@*/()@*E0$ *eclarations etc., as applicable
9.: !he formats should be duly completed in all respects and should be signed
by the eporter or his authori;ed )1% . /orms, +hich are incomplete or
unsigned +ill not be accepted for data entry
9.= Initially, data entry for -hipping $ills +ill be allo+ed to be made only at
the -ervice centre. %fter the eporters@)1%s become conversant +ith the
E*I procedures, the option of (emote E*I -ystem +ould also be made
available. In the (emote E*I system B(E-C Eporters@)1%s can
electronically file their shipping bills from their offices.
9.> !he schedule of charges to be levied for data entry at the -ervice )entre is
as follo+s2
)harges for -@$ills having up to five items ... (s.'0@9
)harges for additional bloc, of five items ... (s.10@9
%mendment fees Bfor a bloc, of five itemsC ... (s.10@9
0rinting of a -@$ill for (emote E*I -ystem ... (s.20@9
&4
9.? !he -ervice )entre operators shall carefully enter the data on the basis of
declarations made by the )1%s@Eporters. %fter completion of data entry,
the chec,list +ill be printed by the *ata Entry 8perator and shall be
handed over to the Eporters@)1%s for confirmation of the correctness.
!hereafter, the )1%@Eporters +ill ma,e corrections, if any, in the
chec,list and return the same to the operator duly signed. !he operator
shall ma,e the corresponding corrections in the date and shall submit the
shipping bill. !he operator shall not ma,e any amendment after generation
of the chec,list and before submission in the system unless the corrections
made by the )1%s@Eporters are clearly indicated on the chec,list against
the respective fields and duly authenticated by )1%@Eporters signature.
9.@ !he system automatically generates the -@$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 epiry
of fifteen days from the date of filing of shipping bill, the eporter has to
file the declaration afresh.
: PR0CE!5RE #0R "R'8
:.8 5nder the revised E*I procedure there +ould be no .(91 0rocedure.
EportersBincluding )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 echange control copyC and surrendered
by the eporter to the authori;ed dealer for collection@negotiations.
:.9 !he eporters are re#uired to obtain a certificate from the ban, through
+hich they +ould be reali;ing the eport proceeds. If the eporter +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 eporters for the electronic
processing of eport documents, the eporters +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 -@$s processed manually, the eisting arrangement of filing
.(91 forms +ould continue.
0CTR0I PR0CE!5RE/2 450T& &;;0C&TI0N &N! 0TGER
CERTI#IC&TI0N.
8.8 !he processing of -@$s involving allocation of ready9made garments
#uota by the %pparel Eport 0romotion )ouncil B%E0)C +ill change +ith
the introduction of the system. !he #uota allocation label +ill be pasted on
the eport invoice instead of -@$. %llocation number of %E0) +ould be
entered in the system at the time of -@$ data entry. !he #uota certification
on eport invoice should be submitted to )ustoms along +ith other
original documents at the time of eamination of eport 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 eamination. !his transitional
facilitation measure +ill be available for a period of t+o months i.e., upto
30
th
=ovember 2004.
8.: /or determining the validity date of the #uota, the relevant date +ould be
the date on +hich the full consignment is presented for eamination and
the date to recorded in the system.
&'
8.= !he certificate of other agencies, such as, the )otton !etiles Eport
0romotion )ouncilQ the 3ildlife Inspection %gency under )I!E-Q the
Engineering Eport 0romotion )ouncilQ the %gricultural 0roduce Eport
*evelopment %gency B%0E*%C, the )entral -il, $oard and the %ll India
1andicraft $oard should also be obtained on the invoice. -imilarly, the no
ob4ection of the %sst. *rug )ontroller and of the %rchaeological of -urvey
India +ould be obtained on the Invoice.
!he transitional arrangements +ould be the same as in the case of %E0)
certification.
8.> !he eporters +ould have to ma,e use of eport invoice or such other
documents as re#uired by the 8ctroi %uthorities for the purpose of octroi
eemption.
2. &RRID&; 0# "00!/ &T E)P0RT E)&MIN&TI0N /GE!/ IN C#/
9.8 !he eisting procedure of permitting entry of goods, brought for the
purpose of eamination Band subse#uent2 6Fet eport7 8rderC in the )/-
on the strength of -@$ 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 eamination +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 eporters 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.
.. PR0CE//IN" 0# /GIPPIN" 1I;;/
&<
:.8 !he -@$ shall be processed by the system on the basis of declaration made
by the eporter. 1o+ever, the follo+ing -@$ shall re#uire clearance of the
%ssistant )ommissioner@*y. )ommissioner B%)@*) EportsC2
*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, eceeds (s. 8ne la,h
:.9 -ub4ect to the provisions of para 20.3 of this 0= the follo+ing categories
of -@$ills shall be processed buy the %ppraiser BEport %ssessmentC first
and then by the %sstt@*y. )ommissioner2
*EE)
*E0$
*/()
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
eamination of goods.
:.= If the -@$ falls in the categories indicted in para '.1 above, the eporter
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 eamination. In case %) @ *) raises any #uery, it should be
replied through the -ervice )entre or, in case of E*I connectivity, through
terminals of the Eporter @ )1%. %fter all the #ueries have been
satisfactorily replied to, %) @ *) +ill pass the -@$
/. C5/T0M/ E)&MIN&TI0N 0# E)P0RT C&R"0
&>
=.8 8n receipt of the goods in the Eport -hed in the )/-, the eporter +ill
contact the system eamining 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 Eamining 8fficer Bif more than one are
availableC+ho +ould be carrying out physical eamination of goods. !he
system +ould also indicate the pac,agesBthe #uantity and the serial
numbersC to be sub4ected to eamination. -E8 +ould +rite this
information on the chec,list and hand it over to the eporter. 1e +ould
hand over the original documents to the Eamining 8fficer. =o
eamination order shall be given unless the goods have been physically
received in the Eport -hed. It may, ho+ever, be clarified that )ustoms
may eamine all the pac,ages@goods in case of any discrepancy.
=.: !he Eamining 8fficer may inspect and@or eamine the shipment, as per
instructions contained in the chec,list and enter the eamination report in
the system. !here +ill be no +ritten eamination 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 eamination, he +ill proceed to give
62Fet Eport7 order for the shipment and inform the eporter. !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 eamination report, the %ppraiser@-updt. +ill mar, the
electronic -@$ to %)@*) Eports. 1e +ill also for+ard the documents to
%)@*) and advise the eporters to meet the %)@*) for further action
&&
regarding settlement of dispute. In case the Eporter agrees +ith the
vie+s of the *epartment, the -@$ +ould be processed finally. 3here the
eporter disputes the vie+s of the *epartment, the case +ould be
ad4udicated follo+ing the principles of natural 4ustice.
0. "ENER&TI0N 0# /GIPPIN" 1I;;/
>.8 %s soon as the -hed %ppraiser@-updt.gives 6Fet Eport7 order, the system
+ould print ' copies of the -@$ in case of /ree and scheme -@$. In case of
*E0$ there are < -@$. If the -@$ B*E0$C is assessed provisionally, then
E0 copy +ill be generated only after %)@*) finalises the assessment. 8n
the eamination report the %ppraiser@-hed -upt.+ill sign. 8n all the
copies, the %ppraiser@-hed -updt., Eamination 8ffer as +ell as eporterDs
representative@)1% +ill sign. =ame and I* )ard number of the Eporters
representative@)1% should be clearly mentioned belo+ his signature.
>.9 !he distribution of -@$ills is as follo+s2
*E0$ -cheme -@$ills 8ther -cheme -@$ills
1. EporterDs copy 1. Eporters copy
2. )ustomDs )opy 2. )ustoms copy
3. Echange )ontrol )opy 3. Echange)ontrol )opy
4. -cheme $ill )opy 4. E.0.)opy
". E.0.)opy ". !(91. !(92 )opies
'. !(91, !(92 )opies
>.: !he original %E0) #uota and other certificates +ill be retained +ith the
-@$ills and recorded in the Eport -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.
?.9 :8! charges +ill be re#uired to be paid by eporter +hen the goods are
eamined by )ustoms for allo+ing 6Fet Eport7 beyond the normal office
100
hours. =o charges +ould be re#uired to be paid on normal +or,ing days
+hen the eamination itself is being done for 6Fet Eport7 upto 0".oo 0:.
In addition, no charges +ould be re#uired to be paid if the eporter +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 Eamining 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 Eamining 8fficer, the %ppraiser and Eporter. !he
disposal of the three copies +ould be as follo+s2
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 eporter.
@.9 %)@*) 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 Eport
*epartment, there should not be any #ueries. !he eporter, during
eamination, can clarify doubts, if any. In case +here the need arises for
the detailed ans+er from the eporter, a #uery can be raised in the system
buy the %ppraiser, but +ould need prior approval of %)@*) BEportsC !he
101
-@$ +ill remain pending and cannot be printed till the eporter 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 Eport7, %ssistant
)ommissioner@*y. )ommissioner may allo+ the amendment.
3here the 6Fet Eport7 order has been given, the %ddl.@Roint )ommissioner
BEportsC +ould allo+ the amendments
12.2 In both the cases, after the permission for amendments has been granted, the
%sstt.@*y. )ommissionerBEportsC +ill approve the amendments on the
system. 3here the print out of the -@$ has already been granted, the eporter
+ill surrender all copies of the -@$ill to the %ppraiser for cancellation before
amendment is approved in the system.
8:. /G0RT /GIPMENT/2 /G5T 05T2 C&NCE;;&TI0N &N! 1&CH
T0 T0*N PERMI//I0N/.
13.1 %)@*E BEportC +ill give permission for issue of short shipment
certificate, shut out or cancellation of -@$, on the basis of an application
made by the eporter. !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
14.1 If the freight@insurance amount undergoes a change before 6Fet Eports7
is given, corresponding changes +ould also need to be made in the -@$
102
+ith the approval of %)@*) Eports. $ut if the change has ta,en place
after the 6Fet Eports7 8rder, approval of %dditional@Rt.)ommissioner
+ould be re#uired. =on9intimation of such changes +ould amount to mis9
declaration and may attract penal action under )ustoms %ct 1&'2.
8>. REC0N/TR5CTI0N 0# ;0/T !0C5MENT/:
1".1 *uplicate print out of E*I -@$ cannot be allo+ed to be generated if it is
lost, since etra copies of -@$ are liable to be misused. 1o+ever, a
certificate can be issued by the )ustoms stating that 6Fet Eports7 order
has been passed in the system to enable the goods to be accepted by the
-hipping Fine, for eport. *ra+bac, +ill be sanctioned on the basis of the
6Fet Eport7 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 Eport7 orderC has not been
generated or there is a misprint. 0ermission of %)@*) BeportsC +ould be
necessary for the purpose. !he misprint copy shall be cancelled before
such permission is granted
8@ E)P0RT 0# "00!/ 5N!ER CE//
1<.1 /or eport items, +hich are sub4ect to eport 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 eporter. !he
cess amount indicated should be paid in the $an, of India, Etension
$ranch of )/-, under a receipt.
8A. E)P0RT 0# "00!/ 5N!ER C;&IM #0R !R&*1&CH
103
1>.1 !he scheme of computeri;ed processing of dra+bac, claims under the
Indian )ustoms E*I system9Eports +ill be applicable for all eports
through )/-.
1>.2 In respect of goods to be eported under claim for dra+bac,, the eporters
+ill file declaration in the form. !he declaration in the form +ould also be
re#uired to be filed +hen the eport goods are presented at the Eport
-hed for eamination E 6Fet Eport7
1>.3 !he eporters +ho intend to eport 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 eporters account, obviating the need for
issue of separate che#ue by post. !he eporters are re#uired to indicate
their account number opened +ith the $an, of India branch at )/-9
:ulund. It +ould not be possible to accept any shipment for eport under
claim for dra+bac, in case the account number of the eporter in the ban,
is not indicated in the declaration form.
1>.4 !he eporters are also re#uired to give their account number along +ith
the details of the ban, through +hich the eport proceeds are to be
reali;ed.
1>." Eport declarations involving a dra+bac, amount of more than rupees one
la,h +ill be processed on screen by the %)@*) before the goods can be
brought for eamination and for allo+ing 6Fet Eport72
1>.' !he dra+bac, claims are sanctioned sub4ect to the provisions of the
)ustoms %ct 1&'2, the )ustoms and )entral Ecise duties dra+bac, rules
1&&" and conditions prescribed under different sub9headings of the %ll
Industry rates as per notification number 2'@20039)usB=!C dated 1.4.2003
as amended by notification number 12@20049)usB=!C dated 2&901904.
1>.< %fter actual eport of the goods, the dra+bac, claims +ill be processed
through E*I system by the officers of dra+bac, branch on first come first
serve basis. !here is no need for filing separate dra+bac, claim. !he
104
claims +ill be processed, based on the !rain -ummary@In+ard +ay bill,
submitted by )8=)8(. !he status of the -@$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 eporter from the service
centre. !he eporters are advised to reply to such #ueries epeditiously
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, ecept 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 BEportC and is entered in the system. !he eporter 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 eporter on the net day and +ill
handle accounts of the eporters as per their instructions. $an, +ill also
send a fortnightly statement to the eporters about the payments of their
dra+bac, claims.
8B. E)P0RT 0# "00!/ 5N!ER !EP1
1&.1 3hile filing information as per the format, eporters are re#uired to ensure
that correct .roup )ode =o. of the goods being eported and the item =o.
of relevant .roup is clearly mentioned Bitem9+ise detailsC. !he
eporters@)1%s are advised to fill Item =o, in the same manner as given
in the 0ublic =otices issued by *./!.
1&.2 *E0$ )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"
relevant bul, drug. /or proper calculations of *E0$ rate, eporters@)1%s
are advised to claim eport under the specific -l.=o. if they are eporting
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 eported.
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 %)@*) BEportC . %ny #uery at the
time assessing by %ppraiser B*E0$ cellC or %)@*) BEportC 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. )ommissionerBEportC, goods
may be brought and entered in the system. !he eamining officer +ill feed
the eamination report and 6Fet Eport7 order +ill be given by
%ppraiser@-updt. in the E*I system. -even copies of -@$ill +ill be printed
for the purposes mentioned against each as under 2
)ustoms )opy /or record of )ustoms
EporterDs copy /or record of Eporters
E.0.)opy /or office of *./!
*0$ copy /or use in the import cell of I)* $angalore for
registration of licence.
Echange )ontrol )opy /or negotiating the eport documents in ban,
!(91!(92 copies
1&." !here is a provision for changing the .roup )ode =o.@Item =o.@Halue for
*E0$ credit purposes and such changes +ill be reflected in the print out
of the -@$ill. -uch charges may be done by %ppraiser@-updt. B*E0$ )ellC
%)@*)BEportC as +ell as by %ppraiser@-updt.BEam.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 Eporters to obtain *E0$ licence from *./!.
10'
1&.' In case, for credit purposes, the eporter accepts the lo+er value as
determined by customs, such lo+er value +ill be entered by %ppraiser
B*E0$ )ellC %)@*) BEportC or by %ppraiser BEamC for each itemBsC
0rintout of -@$ill at item level +ill indicate for /8$ value as +ell value
for *E0$ credit purposes. Eporters 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 echange rate
applicable on the date of Fet Eport, eporters are advised to apply for
*E0$ Ficence at the value accepted by )ustoms at the time of eport
multiplied by echange rate on the date of Fet EportBFE8C B%s per para
4.43 of EGI: 0olicy 2003 editionC
1&.< In case the eporter does not accept the value determined by the customs,
the eports +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 eporters +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 Eporters 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 eporters 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 -@$ill as under 2
6:ar,et value of the goods is (sYYY..and credit not to eceed "0% of
the mar,et value7
-ample may also be dra+n for the other purposes such as )hemical test,.
*E0$ entitlement etc. !he procedure of 0rovisional %ssessment shall be
10<
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 eports 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 eports have been affected and value mentioned is as
determined by customs at the time of eport. In cases of -@$ills assessed
provisionally, the verification +ill not be possible because -@$ill +ill not
be in the verification #ueue. !he eporters are advised to obtain licences
for the items eported un *E0$ scheme and not for non9*E0$ items. If
the lo+er value for credit purposes has been accepted at the time of eport,
the licenses shall be obtained only for such lo+er value and not for /8$
value declared in -@$ill or as per $an, realisation certificate. -imilarly in
cases +here mar,et value of the goods is less than t+ice the credit availed,
the licence shall be obtained for "0% of the present mar,et value of the
goods. !he computer at the time of registration of licence +ill calculate
admissible credit on the basis of echange rate on the date of realisation of
eport proceeds Bas per ban, realisation certificateC for *E0$ items only
and at customs approved value at the time of eport. 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 eports giving details li,e
10>
-@$ill =o. date , rate of credit, /8$ 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 %)@*) BEportC. If a *E0$
Ficence is having -@$ills eported from other ports in the same city the
eporters can get the licence registered at any of the ports from +here he
intends to import the goods in the city after verification about eports from
other ports from +here eports +ere affected. !he same procedure +ill be
follo+ed for */() Ficences also.
9E. E)P0RT 0# "00!/ 5N!ER 8EEI E05 /CGEME
20.1 !he eporters can get the eport goods eamined by )entral
Ecise@)ustoms 8fficer at the factory even prior to filling of -@$ill. -elf
sealing facility is also available. 1e shall obtain the eamination report in
the form to this 0ublic =otice duty signed and stamped by the eamining
officer and supervision officer at the factory. !he eport 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 Eport7. !he eporters@)1%
shall present the goods for registration along +ith Eamination (eport,
%(E91, Eport Invoice duly signed by the Eamining 8fficer and
supervising officer at the factory, chec, list, declaration in form and other
documents such as document of transportation, %(E91, etc., to the
eaminer in the concerned shed. %fter registration of goods, the shipping
bill +ill be mar,ed to an eaminer for verification of documents and seal.
If seal is found intact the -@$ill +ill be recommended for FE8, +hich +ill
be given by the shed appraiser. 1o+ever if seal is not found intact, the
goods +ill be mar,ed for eamination and FE8 +ill be given if the goods
are found in order.
98. E)P0RT 0# "00!/ 5N!ER EPC" /CGEME
10&
21.1 %ll the eporters intending to file shipping bills under the E0). scheme should
first get their E0). licence registered +ith the Eport section. /or registration of E0).
licence, the eporter@)1% shall produce the Gero copy of E0). licence to the service
centre for data entry. % printout of the relevant particulars entered +ill be given to the
eporter@)1% for his confirmation. %fter verifying the correctness of the particulars
entered, the said printout +ill be signed by the eporter. !hereafter, the original E0).
licence along +ith the attested copy of the licence and the signed printout of the
particulars shall be presented to the %ppraiser@-upt BE0). )ellC!he %ppraiser@-updt.
BE0). )ellC +ould verify the particulars entered in the computer +ith original licence
and register the same in E*I system. !he registration number of the E0). Ficence
+ould be furnished to the eporters@)1%, +ho shall note the same carefully for future
reference. !he said registration number +ould need to be mentioned against respective
item on the declaration form filed for data entry of the s@bill, at the time of eport of
goods. %ll the E0). -@$ill +ould be processed on screen by the %ppraiser@-updt.BE0).
)ellC and the %)@*) BEportC. %fter processing of the E0). -@$ill by the %ppraiser
E0). )ell and %)@*) Eport, the goods can be presented at the )ustoms +arehouse for
registration, eamination and 6Fet Eport7 as in the case of other eport goods. %fter
train summary is submitted to )8=)8(, the -@$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 E)P0RT 0# "00!/ 5N!ER TGE !EEC /CGEME
22.1 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 eporters 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 eporter@)1%. !he
110
*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) $oo, +ould be furnished to
the eporter@)1%, +hich +ould need to be mentioned on the declaration forms at the
)/- for eport of goods It +ould not be necessary thereafter for the eporter@)1% to
produce the original *EE) boo, for processing of the eport declarations
22.3 Each boo, +ill be allotted a (egistration =o. should be indicated on the shipping
bills in the relevant columns.
22.4 Eporters@)1%s that +ill be filling -@$ills for eport 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 Ecise 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 Ecise authorities. 6Fet
Eport7 +ould be allo+ed only after verification of all these certificates at the
time of eamination 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 eport declarations for *EE) +ould be processed on screen by the
%ppraiser@-updt., Eport *epartment and the %)@*) Eports. !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 Eport -hed along +ith *EE) $oo,s
registered in the4 E*I -ystem so that the eport declarations are processed
epeditiously.
22.' /urther, eporters availing of *EE) benefits in terms of various notifications
should file the relevant declarations.
22.< It is further clarified as follo+s2
111
3hile giving details relating to *EE) operations in the form the eporters@)1%s
should indicate the -.=o. of the goods being eported 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 eport, in column titled 6Item -r.=o. in *EE)
$oo, 0art )7 the eporters@)1%s are re#uired to give -.=o. of inputs in 0art9) of
the *EE) $oo, and Eporters 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 eport and the eporter +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 eporters 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 eport products i.e. input materials utili;ed as per -I8= should
be clearly mentioned in the declaration mentioned at %nneure % at the time of filing.
9=. E)P0RT "ENER&; M&NI#E/T:
24.1 %ll the steamer agents shall furnish the Eport .eneral :anifest, 1ouse $ill of
Fanding +ise, t the )ustoms electronically. In the beginning, the steamer agents
are re#uired to enter the manifest in the )ustoms )omputer -ystem through the
-ervice )entre on payment of the prescribed fee. BIn due course, arrangements
+ill be made for the electronic delivery of Eport .eneral :anifest through
E*I -ervice 0roviders. !ill such time, all the E.:s +ill have to be entered at
the )ustoms )omputer -ystem only.C
9>. "RIED&NCE G&N!;IN"
112
2".1 !he %sstt. )ommissioner@ *y. )ommissioner of )ustoms, )/-9:ulund may be
approached by eporters or their )1%s for settlement of any problems faced at
any stage of the eport clearance.
THE ECGC COVER
!he abbreviated form for Export Credit and "uarantee Corporation i$ EC"C. %s the
name indicates this is a sort of guarantee or a sort of cover for the eporter. Fet us no+
see +hat this is all about.
=eedless to say that an eporter 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 eporterDs 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 eporters. 3hat is the guarantee that he +ill get paid for
the supplies he has madeZ
113
3ith a vie+ to provide support to Indian eporters, the .ovt. of India set up the Eport
(is, Insurance )orporation BE(I)C in 1&"<. !his +as transformed into Eport )redit E
.uarantee )orporation Ftd. in 1&'4. In order to give the Indian identity a sharper focus
the name +as again changed to Eport )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. Ecept 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 eporter +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 eporter has to recover his dues. !he litigation procedure might be time
consuming and the eporter can never be sure of getting his full payment. %n E).)
cover a safeguard his interest to a great etent.
%n eporter can either agree for sight payment or can made shipment on credit terms for
say '0 days, &0 days etc., In pro4ect eports the period of payment may etend to some
years. Fonger the period of cre3dit given to the customer, more +ill be the ris, factor for
the eporter.
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 eporter is totally at a loss. 3hile big units may be able to
absorb the one time loss, small eporters +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
the eporter and ma,es all efforts including legal proceedings to recover the dues from
the customer, provided the eporter 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 eporterDs interest. /or each
type of cover an eporter has to ta,e 0olicy specific to the respective re#uirements. !he
0olicy that is most commonly ta,en by the eporters 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 eporters +ith an annual eport turnover in ecess 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 eceeding 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"
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$$e$ on account of follo%in ri$.$:
)ommercial disputes including #uality disputes raised by the buyer unless
the eporter obtains a decree from a competent court of la+ in the buyerDs
country in his favour
)auses inherent in the nature of the goods
$uyerDs failure to obtain necessary import or echange control clearance
from authorities concerned
Insolvency or default of the agent of the eporter or of the collecting ban,
Foss or damage to goods +hich can be covered by general insurers.
Echange rate fluctuations
/ailure of the eporter to fulfill the terms of the eport contract or
negligence on his part.
/hipment$ Co3ered
!he -tandard 0olicy is meant to cover all the shipments that may be made by an eporter
during a period of 24 months ahead. !he policy cannot be issued for selected shipments,
11'
selected buyer or selected mar,ets. /or specific re#uirements an eporter can opt for
different policy from the various services offered by the corporation
Exclu$ion$:
-hipments made against advance payments received or shipments against confirmed
letters of credit +hich has the confirmation from the ban, in India may be ecluded.
1o+ever, shipments against confirmed F@) may be covered for political ris,s only. !he
premium for cover under political ris,s +ill be less than that under the comprehensive
policy. E).) may also agree to eclude certain items if the eporter is dealingt in
different distinct products.
/hipment$ to &$$ociate$:
-hipments to buyers i.e. the foreign buyers in +hose business the eporter has financial
interest, are normally ecluded from the 0olicy. 1o+ever such shipments can be covered
against political ris,s.
/hipment$ on Con$inment ba$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 eporter may
cover such shipments for payments under open terms. !he eporter 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<
%n eporter 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 maimum amount he epects 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 epects to be outstanding at a given point of
time. -uppose, he epects 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
eporter, 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 net step the eporter must ma,e out the list of the
customers to +hom he epects to ma,e shipment. #or each and e3ery cu$tomer he has
to apply to the E).) to have a limit of liability fied. !hat is to say, he has to declare the
maimum amount of bills he epects to be outstanding from each customer at a given
point of time. $ased on the value of business dealing, suppose the eporter epects that
from customer % the outstanding may be (s.10 la,hs. !hen the eporter has to apply to
E).) in the prescribed form for getting limit fied 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. $ased on the credit report, E).) +ill determine the limit
that can be fied for the customer. If it feels that a limit of (s.10 la,hs is in order, it +ill
advise the eporter of the same. -imilarly, the eporter can have the limit fied to all his
customers.
8nce the limit is ta,en from E).), the eporter is free to ma,e his shipments to the
various customers. If shipment for any customer is made before getting the limit fied by
E).), no ris, +ill be covered for that shipment.
/tep : J Payment of Premium and filin of monthly return$
11>
/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 eports.
!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 eporter 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 eporter has to +or, out the total premium applicable on the shipment effected
and ma,e payment to the E).)
!he eporter is also epected to file a :onthly (eturn in a separate form listing all the
$ills +hich are not paid on due date, if any, so that E).) is periodically a+are of the
defaulters.
In case of any eventuality +hen the buyer goes ban,rupt, he may prefer a claim +ith
E).) for payment.
11&
!he policy that is issued for shipment not covered under F@) is called )omprehensive
0olicy meaning that the policy +ill cover both the commercial and political ris,s. 3hile
commercial ris, is that of the buyer going ban,rupt, the political ris, relates to the
countryDs policies +hich may prevent the repatriation of funds or there could be outbrea,
of +ar preventing financial transactions etc.
%ll the above relates to shipments not covered under F@). 1o+ever, an eporter can have
a separate E).) 0olicy for shipments under F@). 1ere the eporter +ill have the policy
covering only the political ris, since under F@), the ban, stands as a guarantor and there
is no commercial ris,.
%n eporter must cover all his eports under E).), including bills on sight basis, and
are =8! under F@). 1e cannot be selective to certain countries or certain buyer. !he
cover is on +hole turnover basis.
/or all shipments under F@), the buyer may ta,e a separate policy to cover the political
ris,s. !he premium for F@) shipments +ill be relatively less than that on comprehensive
policy.
=ote2 E).) cover is not for non9payment on account of dispute on #uality, damages to
the goods, theft, pilferage etc.
!he cover is only +hen the party goes insolvent or there are some political ris, due to
+hich the eporter is not in a position to get the payment immediately or on due date.
!his cover must be distinguished from the general insurance.
VARIOUS POLICIES OFFERED BY ECGC*
8. /T&N!&R! P0;IC<
%n eporter +hose annual eport turnover is more than (s."0 la,hs is eligible for this
policy
Period of the Policy2 24 :onths
120
Exclu$ion$ permitted2 Eport to %ssociates
Fetters of )redit
)onsignment Eports
Ri$. Co3ered2 )ommercial (is,s
0olitical (is,s
F) 8pening $an, (is,s
Percentae of Co3er2 &0%
Minimum Premium2 (s.10, 000@9 ad4ustable
Important 0bliation$ 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
Gihliht$
Fo+est 0remium (ate
=)$ 8/ "% every year
*iscrepancy cover of F)
%utomatic %pproval fort resale@shipment upto 2"% of .IH
Increased discretionary limit
9. /M&;; E)P0RTER/ P0;IC<
121
Exclu$ion$ Permitted2 Eports to %ssociates
Fetters of )redit
)onsignment Eports
Ri$. Co3ered: )ommercial (is,s
0olitical (is,s
Percentae of Co3er: &"% for commercial ris,s
100% for political ris,s
Minimum Premium : (s.2, 000 ad4ustable
Important 0bliation$ 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.
Gihliht$
1ighest coverage@compensation
Fo+est premium rate
=)$ of "% every year
*iscrepancy cover for F)
122
%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 eporters +ho do not hold our -tandard 0olicy or by
eporters having standard policy, in respect of shipment permitted to be ecluded from
the purvie+ of the standard policy. Eporters 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 $an, (is,
Insolvency ris, on agent on conditions
Percentae of Co3er: AEI
Important 0bliation$ of the exporter$:
5pfront premium payment
-tatement of shipment made
0ayment %dvice slip
-tatement 8f 8verdue
/iling of )laim +ithin 12 months from due date
-haring of recovery
123
Gihliht$:
-election for Insurance cover
8ther eports not to be declared
6%dd on7 :arine Insurance )over
0remium rate reduced proportionately on higher share of loss to eporter.
/. EXPORTS 'SPECIFIC BUYERS( POLICY
!he specific buyer policy provides cover for shipments made to a particular buyer or set
of buyers. %n eporter not holding the standard policy can avail of this to cover their
shipments to one or more buyers. Eporters holding -tandard 0olicy can also avail this
0olicy for covering shipments to individuals $uyers, if all shipments to such buyers have
been permitted to be ecluded from the purvie+ of the -tandard 0olicy.
Ri$. Co3ered: )ommercial (is,s
0olitical (is,s
Insolvency or default of F) 8pening $an,
Percentae of Co3er2 >0%
Important 0bliation of the Exporter$2
1. *eposit 0remium on Juarterly in advance
2. -ubmission of shipment declaration #uarterly
3. *eclaration of payment overdue for more than 30 days
4. /iling of the +ithin 12 months from due date
". -haring of recovery
Gihliht$:
124
1 -elective buyer can be insured
2 8ption to eclude F) eports
3 0remium rate can be reduced proportionately
0. EXPORTS TURNOVER POLICY
!urnover 0olicy is for the benefit of large eporters +ho contribute not less than (s.10
la,hs per annum to+ards premium. !he policy envisages pro4ection of the eport
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$. co3ered2 )ommercial (is,s
0olitical (is,s
Percentae of Co3er: &0%
Important 0bliation of the Exporter
1. 0remium +ill be payable in four e#ual #uarterly installments in
advance
2. -ubmission of #uarterly statement of shipments
3. *eclaration of overdue payments
4. /illing of claim +ithin 24 months from due date
". -haring of recovery
Gihliht$:
12"
1. -implified procedure for payment of premium
2. 10% of pro4ected premium is +aived +hen eports increase beyond
pro4ection
3. Increased discretionary limit
!. BUYER EXPOSURE POLICY *
!he $uyer Eposure 0olicy is to insure the eporters having large number of shipments
+ith simplified procedure and rationali;ed premium. %n eporters can chose to obtain
eposure based cover on the selected buyer. !he cover +ould be cover against
commercial and political ris,. !he option to eclude F) shipment is available. If the
eporter has opted for commercial and political ris,s cover, failure of F) opening ban,
+ith 3orld (an, up to 2",000 as per latest $an,ers %lmanac is available. If eporters
opts for only political ris,s for F) eports premium at a less rate is offered
Period of the Policy: 12 months
Ri$. co3ered: $uyer (is,
0olitical (is,s
Percentae of Co3er: &0% for -tandard policyholder and >0% for others
Important 0bliation$ of the Exporter:
8 0remium 0ayable in advance
9 8ption to pay the premium #uarterly in advance is available
: 0remium non refundable
= 8btaining approval for etension in due date beyond 1>0 days
> *eclaration of overdue payments
? /iling of claim +ithin 12 months from due date
@ -haring of recovery
12'
Gihliht$:
8. "% discount premium if paid in advance
9. *eclaration procedure +aived
:. Eporter to approach only for default in claim
=. 8ne 0olicy for one buyer
#. MULTI"BUYER EXPOSURE POLICY
-ome eporters eport to large number of buyers. !he number of shipments made by
them is also #uite high. In order to meet the needs of such eporters, :ulti buyer
eposure policy is introduced. )over +ould be available for eports 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 eports
against F) +ill also covered, /or ban,s +ith 3orld (an, upto 2"000 as per Fatest
$an,ers %lmanac )over in respect of eports to restricted over countries +ould not be
available under this policy
Period of Policy: 12 :onths
Ri$. Co3ered: $uyer (is,s
0olitical (is,s
Percentae of Co3er: >0%
12<
Important 0bliation$ of the Exporter$:
8. 0remium payable in advance
9. 8ption to pay the premium #uarterly in advance is available
:. 0remium non refundable
=. 8btaining approval for etension is due date beyond 1>0 days
>. *eclaration of overdue payments
?. /iling of claim +ithin 12 months from due date
@. -haring of recovery
Gihliht$:
8. 0olicy is best suited for eporters +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 eports opportunities to Indian
eporters of #uality goods. % method increasingly adopted by Indian eporters is
consignment eports +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 eclusively 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
12>
Ri$.$ co3ered:
)ommercial (is,s on stoc,holding agent and@or ultimate buyer
0olitical (is,s
Percentae of Co3er: &0% for -tandard 0olicyholders and >0% for others
Important obliation$ of Exporter$:
%dvance deposit of premium in advance on #uarterly or monthly basis
8btaining credit limit on ultimate buyers beyond the discretionary limit
Juarterly@:onthly statement of actual eports
8verdue declaration
/iling of claim
-haring of recovery
Gihliht$:
)overs only the consignments eports
(ationali;ed premium for 3'0 days
%utomatic cover for ultimate buyers upto discretionary limit
)ommercial ris,s on agents covered
Etended period for reali;ation upto 3'0 days
1 CONSIGNMENT EXPORTS POLICY 'GLOBAL ENTITY(
% method adopted by India eporters is consignment eports +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 eclusively
shipments by the eporters to their branches overseas on consignment basis ta,ing into
account their special features, providing ade#uate incentives and simplifying the
procedures considerably.
12&
Period of the Policy: 12 :onths
Ri$.$ co3ered:
)ommercial (is,s on overseas branch on conditions
%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 eports
8verdue declaration
/iling of claim
-haring of recovery
Gihliht$:
)overs only the consignments eports
(ationali;ed premium for 3'0 days
%utomatic cover for ultimate buyers upto discretionary limit
)ommercial ris,s on agents covered
Etended period for reali;ation upto 3'0 days
,. SERVICES POLICIES
-ervices 0olicies offer protection to Indian firms against payments ris,s involved in
rendering services to foreign parties. % +ide range of services, hiring or leasing can be
covered under these policies. !he eporters can opt for +hole !urnover -ervices 0olicy
or for -pecific -ervices 0olicy depending on the nature of services provided. !he
premium rates applicable. !o standard policy +ill be applied for +hole turnover services
130
policy and specific shipment policy B--09-!C premium rates +ill be applied for -pecific
-ervice 0olicy.
Period of the Policy: 12@24 :onths
Ri$.$ co3ered:
)ommercial (is,s on ultimate buyers
0olitical (is,s
%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
Gihliht$:
8ption to select the type of cover.
-. MATURITY FACTORING
!he :aturity /actoring scheme, as designed by E).) has uni#ue features and does not
eactly fit into the conventional mould of maturity factoring. !he changes devised are
intended to give the clients the benefits of full factoring services through the maturity
131
factoring scheme, thus effectively addressing the needs of eporters to avail of pre9
finance BadvanceC on the receivable, for their +or,ing capital re#uirements. 8ne
important feature is the very role and special benefits envisaged for ban,s under the
scheme.
1enefit$:
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 Chare$ and #actorin Chare$
!he factoring application fee payable initially is (s.10,000@9 /or setting up
permitted limits on each of the overseas customers, the eporter +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 eports
bill is to be factored depends on the country to +hich the eports is made and the
credit period.
Exporter$ 0bliation$:
(egistration and obtaining permitted limit on the buyer
0ayment of factoring charges +ith statement of eports made
Inform developments
132
133

Export Procedure and Documentation Project Report

Uploaded by

Copyright:

Available Formats

You might also like

Export Procedure and Documentation Project Report

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Export Procedure and Documentation Project Report

Uploaded by

Copyright:

Available Formats

EXPORT PROCEDURE AND DOCUMENTATION

You might also like