1

One - Day Training Programme

ON

EXPORT AND IMPORT

PROCEDURES
DATE: 22-12-2005

FACULTY: PROF.J.L.NARASIMHAN
Organized By
TANSTIA FNF SERVICE CENTRE
Industrial Estate,
Guindy, Chennai - 32

EXPORT IMPORT PROCEDURES

1.

The Export Activity

1.1. Export is a fascinating activity. It deals with despatch of products from

our country and dealings with overseas persons on this account. It makes many
products available to many foreign homes and enhances our countrys prestige and
image. It earns substantial amounts of foreign exchange which helps us to import
many things oil, machinery, technology etc. Today imports are free in the sense
that practically no restrictions are there.
1.2
But Indias share in the total world trade is abysmally low-less than 1%.
Govt. of India have fixed 1% as the target to be achieved by 2007 - value wise at
150 billion dollars.
1.3
The latest Exim policy has identified certain strategies to improve the
quantum and value of exports.
Some of these are:
-

Removal of all controls

Creating an environment of trust and transparency all around.

Simplifying procedures and bringing down transaction costs.
Special focus initiatives for agriculture, handicrafts, gem and jewellery,
leather and footwear sectors.

Certain towns had been identified as towns of Export Excellence under

the older policy (like Triuppur). The threshold limit of Rs.1000 crores
fixed earlier has now been reduced to Rs.250 crores.

1.4

Certain special packages sector-wise have been announced.

Vishesh Krishi Upaj Yojana for boosting up of exports of fruits, vegetables,

flowers, minor forest produce.

for gem and jewellery : duty-free import of consumables allowed for metals
other than gold and platinum upto 2% of FOB value of exports, import of
gold 18 carat and above allowed under the replenishment scheme.

for the handloom sector : import of trimmings and embellishments allowed

upto 5% of FOB value of exports, a new Handloom Special Economic
Zone is being planned.

for the leather industry : duty free import of effluent treatment plants.

A new scheme called Target Plus has been introduced. Exporters who
have achieved a quantum growth would be entitled to duty free credit
based on incremental exports substantially higher than the actual export
targets fixed. For incremental growth of over 20%, 25% and 100%, the
duty free credits would be 5%, 10% and 15% of FOB value of exports.

Served from India Scheme

This scheme has the objective of boosting up the export of services. Individual
service providers who earn foreign exchange of at least Rs.5 lakhs and those who
earn at least Rs.10 lakhs will be entitled to a duty credit entitlement of 10% of total
foreign exchange earned by them. Hotels will have entitlement of 5% and it is 20% in
case of stand alone restaurants. Hotels can use these entitlements to import food
items and beverages.
The above is not an exhaustive list of the various schemes that are available
to those who export and earn foreign exchange. These are only illustrative.
Your desire to get into exports is now getting strengthened. But before you
decide to take a significant step, you should get knowledge of various things.
2. The Knows and NOs of Export
2.1
As Exporter, you should know certain things. You should also say No
to certain things. These are:

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2.2

Knows

Understand these well by making a SWOT analysis of yourself.

Your product its composition its uses in general its specific uses to
certain identified groups of users knowledge helps to give a good
impression on overseas buyers.

Know your laws registrations required -- what are the facilities available and
what is expected of you to get entitled to these.

Know the laws and practices in the countries abroad choose a country for
export of your products understand how your product is received there, what
the buyers see in your product as acceptable and attractive, the
environmental regulations.

2.3

No
-

to laziness, apathy

to procrastination observe punctuality

to conformists.

3.

Things to do before you take the first step

-

Choice of a name
Choice of a good logo
an appropriate organization : sole trader, partnership or limited company.
mode of operation do you plan to be a manufacturer or a merchant exporter
- weigh the advantages and problems finances needed.
Choose the product what do the users in the country of export expect
quality requirements and standards what are the raw materials for the
product, their availability (or seasonality) and special care in packing.
develop good means of communication

4. Registrations
1.

IE Code Number -

imperative meant for identification and collection of

statistics to be quoted in all export documents. Requirements to get IE code

Number

Fill up the application in format given in Ayat Niryat Forms

Profile of Exporter

Copy of PAN if not available,

Copy of application made.

Sales tax Registration Certificate.

Bank Certificate

D/D for Rs.1000/-.

Photographs of applicant

declaration of non-resident interest in the firm.

declaration that Partner / Director / or firm has not been black listed.

name board has been displayed.

Application can be made on line. The fee is Rs.500.
Ministries of Govt, hospitals, persons importing for their personal use
are exempted from the requirement of IEC.

ITC (HS) Classification

You should
documents.

know this number for your product quote in all Export

Registration Cum Membership Certificate (RCMC) from the

relevant Export Promotion Council Atternatively, Registration with

Federation of Import Export Organizations (FIEO).
Sales Tax Registration
Even though Exports are exempted from the purview of Exports,
Registration is considered necessary you should submit monthly
Return indicating total sales, those exempted (exports) etc also help
in getting imports with at payment of Sales Tax (using Form H).

5.

How do you get an Export order?

-

Your contacts abroad.

meet buyers with the help of Chambers of Commerce.
overseas trips

participation in Fairs in India and abroad.

Overseas Trips Points to note

go on appointment

make satisfactory travel, stay arrangements.

go well prepared with all relevant information as you would for an

important presentation.

Carry samples and literature.

Do not expect immediate results. Make minutes and confirm on your

return.

Participation in Fairs

Book the space early.

Understand facilities included in the Fair fee and ask for any special facility
which will be available at extra cost.

Who will man the stall decide he / she should be a knowledgeable

person, with pleasing manners and good communication capability.

Make available literature, samples, order forms.

Follow up enquiries generated.

Meeting buyers visiting India information available through circulars etc.

from chambers of commerce.
Through internet.

6.

Packing and Packaging

6.1

Packing and packaging assume a big significance in export as the products

have to go through a long voyage (or air transport) and several handlings. Any
damage done to them will make them unacceptable to overseas buyers who
will find it difficult and expensive to put these in proper shape.

6.2

The Exporter should strictly follow the instructions of the importer regarding
packing. The instructions could be which quantity should be put in each
container, of what size. For example the importer has ordered for 1000 shirts
.... 300 of A variety, 600 of B and 100 of C. He may instruct the Exporter to
pack in 5 boxes...... 200 in each ...... 60 of A, 120 of B and 20 of C. Or, he
may instruct the Exporter to put the Shirts in 5 boxes, all A in one, B in 2
boxes, C in 2 boxes. In the absence of such instructions, packing should be of
the recognized customary standard for that particular country with certain
specifications laid down by the shipping companies. The Bureau of Indian
Standards (formerly known as ISI) has prescribed packing standards for
certain items.

6.3

Marking

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Marking is an important activity in packing. The objective is to identify the
cargo. Ships and air cargo carriers deal with several consignments belonging to
various Exporters. Marking helps in finding out which consignment is for which
importer. Apart from this, it also helps the inspection of goods by Customs authority
and quick and correct delivery of goods at the destination.
Marking consists of placing certain symbols like square, triangle, rhombus,
circle etc., and certain abbreviations as may be specified by the importer. Details of
all markings are reproduced in the Bill of Lading or Air-way Bill. This helps in linking
the documents with the consignments and proper identification thereof by Customs
and other authorities.

JG
GD

7/24

This means, JG John Gaver is the importer, GD

Gurdas is the Exporter. This is the seventh out
of the total of 24 boxes.

7.

Quality Control and pre-shipment inspection

7.1

Importance of TQM
The use of Total Quality Management principles and quality management

systems is becoming increasingly seen and these are meant to create products that
meet the expectations of buyers. No enterprise can afford to compromise on quality
if it is to establish a good image for its products and for its country. A single
consignment of inferior quality can tarnish the good image of the Exporter specifically
and the country as a whole. Till recently, bad quality goods supplied would find
reaction in customers through complaints which, when taken up earnestly by the
seller and properly redressed, would help in continued patronage from the
complaining customer. But, today, customers do not complain. They simply switch
over to other suppliers when they see inferior quality. They dont even inform the
seller and afford him an opportunity for correction.
It is important to understand that quality is a relative term. What is good
quality as perceived by a buyer in a country may not be considered as good by
buyers in another country. So, it is important for the Exporter to understand the
specific requirements of the buyer and incorporate them in the product.

8
7.2

Who will do the Inspection?

In the case of some commodities, there are organizations of Govt. of India

which do the inspection. Such pre-shipment inspection by such bodies is a
requirement for export. Silk articles, marine products are some examples of such
commodities. In the case of other products, the buyer has his own arrangements for
pre-shipment inspection. He has an agent stationed in India who does the inspection
and provides the quality certificate. In some cases, the buyer himself comes to India
when the manufacture is completed and personally inspects the goods.
7.3

Self Certification Scheme

Under this, units having proper and adequate testing facility fulfilling the
stringent norms prescribed for product quality, design and development, are eligible
to get the facility of Self Certification Scheme to get recognition. Under this scheme
the unit has to apply to the Director (Inspection and Quality Control), Export
Inspection, Govt. of India, New Delhi. The recognized units have to pay 0.1% of FOB
value subject to a minimum of Rs.2500/- and maximum of Rs.1.00 lakh in a year.
Star Export Houses (one star, two star, three star and five star) recognized by
Government, units set up in Export Processing. Zones, Free Trade Zones and 100%
Export Oriented Units (EOUs registered with Ministry of Commerce) are exempted
from the purview of compulsory pre-shipment inspection.
7.4

ISO and Harmonized Standards

The series constitute systems for suppliers and manufacturers and their
adoption ensures that what leaves their warehouses fully meets the buyers
requirements. They are mostly quality assurance standards and not just product
standards.
ISO is the International Organization for standardization specialized agency
for standardization comprising the national standard bodies of more than 90
countries including India. ISO has 180 Technical Committees.
ISO 9000 standards registration is considered as the minimum acceptable
level. Firms which do not have such registration may have difficulty in selling their
products in certain markets and may have to pay higher insurance premium or may

9
even suffer denial of insurance. ISO 9001 deals with Design and R & D, Production,
Testing, Inspection and Servicing.
ISO 9002 Production, Testing and Inspecting
ISO 9003 Final Inspection and Testing.
Registration is done through accredited agents who are third parties doing the
audit of the manufacturers operations vis-a-vis the requirements of the appropriate
authority under ISO 9000 series. The Exporter should start by deciding what kind of
standards he needs to conform to, his buyers requirements, appoint a Project Team,
write detailed procedures and ask an accredited agent (like Bureau of Indian
Standards) to examine the systems as evolved by him.
7.5

Advantages of ISO Registration

ISO Standards give the message to the buyer that the Exporter is committed
to stipulated quality. They help in the following ways:

Increased customer confidence in the Exporter and his products.

Shift of the Exporter'

s emphasis from just an inspection
management.

Saving a lot of time and money for the buyer who has to make personal
visit or appoint an agent for every shipment.

Bringing in the concept of cost effectiveness.

to quality

The steps involved in obtaining ISO accreditation are:

Writing of a quality policy.

Making a quality manual and procedures detailing the manufacturing

process, care required at every stage of the manufacturing process,
method of inspection, records to be maintained about the inspection,
pre-emptive method required to stave off chances of bad, unacceptable
quality coming in etc. This needs close and willing co-operation from
the workers who have been intimately associated with the
manufacture.

Identification and assignment of responsibilities to a quality

management team.

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7.6

Provision of in-built surprise checks to ensure the strict

observance of standards.

Certification Bodies

Given below are brief particulars of a few certification bodies (they accord
certification and do pre-shipment inspection).
1.

Bureau of Indian Standards (BIS)

Head quarters:
Bahadur Shah Zafar Marg
Manak Bhavan, New Delhi - 110 002.
Southern Region Office :
CIT Campus
IV Cross Road, Chennai - 600 113.

2.

Bureau Veritas
609, Balarama 6th Floor
Bandrakurla Complex
Bandra (E), Mumbai - 400 051.
At Chennai
6, Century Plaza
560 Anna Salai
Chennai - 600 018.

3.

SGS India Ltd., (SGS)

SGS House
4B, Adi Sankaracharya Marg
Vikroli (W), Mumbai - 400 083.
At Chennai
304 / 305, Anna Salai
Chennai - 600 018.

8.

Marine Insurance of Export Cargo

8.1

Basic Points

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The basic points to be understood in marine insurance are:

Marine insurance involves indemnity. That is, the Exporter can only get
reimbursement to the extent of loss suffered by him. There is no
question of any profit from marine insurance.

Insurable interest is an important requirement. Only a person or

institution that has insurable interest in the cargo can effect marine
insurance of the cargo.

When the Exporter effects marine insurance, he covers the cargo

against not only the losses arising during the transit (voyage in ship or
air travel) but also losses during the rail transport (from his warehouse
to the port or from the importer'
s port to his warehouse) and even
storage in a warehouse when it becomes necessary during the voyage
and incidental to it.

8.2

Taking up a marine policy - Important points to note

Marine insurance has to be taken up by the Exporter only for CIF

contracts. In the case of a FOB contract, he does not have to do the
insurance. But, he has the obligation to inform the importer about the
shipment and provide details of the ship, the packages, value etc. so
that the importer can effect the marine insurance in good time.

The Exporter does not have to take up a marine policy and pay
insurance premium every time when he is sending a cargo. He may
take a policy for a large amount and pay the premium for the amount.
Every time when he makes a shipment, he need only make a
declaration and the details are endorsed on the policy. This goes on till
the policy "runs out" i.e. the policy amount is over. Then, a fresh policy
can be taken. This kind of a policy is called a `blanket policy'and is
resorted to by large Exporters or those who make frequent shipments.
The need for taking up a policy for each shipment is obviated.

The Exporter on getting the marine insurance policy makes a blank

endorsement on the policy. That is, he puts his signature without
indicating the name of the person to whom the benefit of the insurance
would accrue. This is because the ownership of the goods may change

12
hands during the voyage and the person who gets the ownership and
wants to clear the cargo, may put his name down above the
endorsement of `the insurer'(the person .... here, it is the Exporter).
9.

Export Documents

9.1

Documents can be classified as :

Documents connected with the export cargo could be classified as:
(A)

Basic Documents

Export order

Export invoice

(B)

Packing list.
Documents required by Customs

Shipping Bill

(C)

Foreign Exchange related documents

Form SDF

GR Form

Softex

PP Form

(D)

Documents specifically required by the buyer to avail concession or to

facilitate easy passage of the cargo:

9.2

GSP / Certificate of Origin

Inspection Certificate

Bill of Exchange

Consular Invoice

(E)

Documents relating to shipment

Bill of Lading or Charter party

Marine Insurance Policy

Shipping Bill.

Export Invoice
The document helps the Exporter to

13

ensure that whatever goods the importer wanted have been shipped.

the description, quantity, rates and value of each item is in strict

comformity to the order placed by the importer.

If helps the Customs Authorities to :

9.3

ensure that goods shipped are permitted by the export policy.

compute the customs duty, if any, payable on the export or the import.

check the quantity of goods. They generally open a few packages at

random and check the veracity of details in the invoice.

check if there is any over-invoicing or under-invoicing (that may be

resorted to by the importer to reduce the import duty payable).

Packing List
This helps the importer :

9.4

in checking the contents of each package with the description and with
the actual quantity found;

Shipping Bill

This document is prepared by the Exporter and submitted to the Customs.

Details are : quantity and value of the goods, of the export order, the name of the
vessel carrying the goods, the FOB price of the goods, total number of packages etc.
This is an important document required by Customs for permitting shipment. There
are various types of shipping Bill.
-

9.5

Free shipping bill - used for exports of goods which attract no duty nor
entitled to any duty drawback.
Drawback shipping bill - for goods which are entitled to Drawback. The
FOB price provided in this document forms the basis on which the
Government of India compute and credit the Drawback to the Exporter
- at the rates announced by Government from time to time.
DEPB shipping bill : used when goods are shipped under the DEPB
scheme.
Shipping bill for Ex-bond : used when the exported goods are those
which had been imported earlier and meant for re-export.
Shipping bill for goods on which export duty is payable.

GSP Certificate

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The EEC countries have adopted the generalized system of preference under
which products from developing countries including India are entitled tom
concessional rates of customs duty. Certificates of origin are attached. These
certificates establish the Indian origin of the goods shipped.
9.6
Consular Invoice
This is a document required by some of the Commonwealth and African
countries. This is an Invoice which is sworn as correct before the Consul of the
importing country stationed in the exporting country as correct in all particulars. It
facilitates the clearing of the goods in the importing country.
Legalization certificate or legalized invoice is required by some Middle East
Countries. The Certification is done by the Embassies of these countries (most of
them are located in Mumbai).
9.7

Bill of Lading

This is a document issued by the shipping company giving full details of the
goods accepted for transportation, freight paid or payable and the terms and
conditions subject to which the goods are being transported.
It is at once
- a receipt for the goods shipped
- a contract of affreighment
- a document of title to goods.
The Bill of Lading (B/L) is issued and signed by the shipping company. Often,
the issue is against a Mate'
s Receipt issued by the captain or another high ranking
officer of the ship acknowledging receipt of the goods on board the ship. To the
importer, its utmost utility is that a proper endorsement on this document by the
Exporter transfers the title to the goods in his favour.
10.

Shipment Procedures
Steps involved are :

Booking of space in the ship.

Preparation of the shipping bill.

Arrange for marine insurance

Customs Examination

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Obtaining GSP Certificate.

Getting the B/L.

Collection and making up of the Export documents.

11.

Payment of freight.
Documentary Letter of Credit

11.1

What is documentary LC

A documentary Letter of Credit is a document issued by one bank to another

bank. It outlines various things to be done by the Exporter and guarantees the
payment to the Exporter if he carries out the export, fulfilling all the conditions
outlined in the documentary letter of credit (which we shall call LC in future).
11.2

Steps involved in the operation of LC

Importer makes the application to his bank. Application examined satisfies itself about the security aspect - opens L/C - communication
sent to the Exporter'
s Bank.

11.3

Verification of the authenticity.

L/C communicated to Exporter.

Exporter should study the L/C carefully - make sure it is in accordance

with the terms agreed upon.

Exporter ships the goods. Procures all relevant and stipulated

documents. Presents them to his banker.

Bank verifies - Negotiates or sends documents for collection.

If negotiated, banker follows up and gets the remittance.

Discrepancies in L/C
Some important and frequently seen discrepancies are:
-

Credit expired - shipment made after the stipulated date or documents

presented after the stipulated date.
Credit amount exceeded.
Some documents not submitted.
Inconsistency in documents
Marks and number differ.
No signature on documents.

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Mistakes in Invoice
Name of importer not correctly mentioned.
Description of goods not as given in LC.
Discrepancies in Shipping Documents

11.4

Claused B/L
Short shipment
B/L not properly endorsed.
Goods under - insured.

Insurance policy not correctly endorsed

Risks not covered as stipulated in LC.
Bill of exchange not drawn as mentioned in LC.
Shipment from a port other than what is mentioned in LC.

Consequences of Discrepancies
-

Importer may refuse to accept the documents.

Understanding has to be reached.

If not, Exporter may have to take back the goods or allow some
discount.
Importer may waive discrepancies.

11.5

Uniform Customs Practice

During the course of time, a number of procedures, customs and practices

have evolved in the matter of dealing with Letters of Credit. The International
Chamber of Commerce in Paris has observed all these and worked out a scheme
called "Uniform Customs and Practices for Documentary Credits". This has
undergone revisions and updating. The latest updation is UCP 500. Many countries
have become subscribers to UCPDC. Every Letter of Credit issued by any bank will
refer to this.
12.

ECGC and its services

12.1

What does it do?

It offers cover against risks that cannot be handled by marine insurance

companies.
12.2

Risks covered by ECGC Policy

17

12.3

Political

Commercial - Insolvency of buyer,

documents or goods, or claims.

refusal by buyer to accept the

Quality claims not covered.

Important Points for Exporter

Get ECGC cover and a limit on the buyer when L/C is not opened -Get the Limit before shipment is made.

Make sure the outstanding from the buyer does not exceed the limit
given by ECGC.

Submit monthly returns promptly.

Any bad action from the buyer, inform ECGC - take steps to minimize
the loss and keep ECGC informed.

13.

Export Finance

13.1

Preshipment Finance - Packing Credit

Finance provided by banks to the Exporter may be:
a.

Pre-shipment credit and

b. Post shipment finance.

Preshipment Credit
This is called packing credit. This is available to Exporters and even to
supporting manufacturers of goods who manufacture and supply goods to Exporters.
Firms receiving export orders in their own name and exporting in their own
name will be manufacturer Exporters. Firms receiving orders in their name and
exporting them in their own name but getting the goods manufactured by others will
be merchant Exporters.
Packing credit is provided to an Exporter or supporting manufacturer for
financing the purchase, processing, manufacturing, assembling or packing of goods
meant for export. It is granted on the strength of a LC opened in favour of the
Exporter or even against a firm export order (with ECGC limit for the buyer).

18
It is also granted on the production of adequate evidence like a telex or cable
received from the importer abroad, provided the Exporter is able to produce
conclusive evidence like LC or an export order, within a reasonable time.
Packing Credit (PC) is an important facility provided by a bank for a specific
purpose and is given at a concessional rate of interest.
This being done, the packing credit account has to be closed only through an
export transaction. Packing credit is given against an export order. So it is incumbent
on the Exporter to utilize the facility given for the export, complete the export and pay
off the packing credit loan through the proceeds of the export (either by purchase or
discount of the export bill, if such facility has been given him by the bank or when the
export bill is sent for collection, when the bill is paid by the buyer).
13.2

Post-shipment Finance

Purpose : to enable Exporter to find funds till the export bill is realized and to
close the pre-shipment loan (packing credit loan). This should be closed within 180
days of date of packing credit - extension of 90 days can be got by application to RBI
through the bank.
13.3

Follow up of export bills

An important activity for exporter.
-

Have weekly review of bills, - those that have fallen due for payment,
particularly.
Communicate with buyer to make sure payment has been made - be
careful - this is a sensitive matter.
Keep ECGC informed of overdue bills.
Apply to RBI for extension, if considered necessary.

14.

Export Benefits

14.1

Duty Drawback

Duty drawback is the rebate of any duty relating to the inputs that go into
export products. The export product may contain certain input items purchased by
the Exporter which have suffered excise duty. Or he may have used certain products
that have been imported and which have suffered import customs duty. The excise

19
duty or the import duty thus suffered has to be eliminated as they have no relevance
to exports and cannot be passed on to the overseas buyer. The elimination is done
through the Duty Drawback Scheme. The Duty Drawback is an export incentive but
it is not meant to be a source of income or profit for the Exporter.
It is meant to remove the sting due to the presence of excise or import duty
and make the price competitive vis-a-vis products from other countries.
For claiming duty drawback, the Exporter should use the Shipping Bill for
Drawback. A copy of the Shipping Bill is sent to the Customs Audit. This section
verifies whether the goods have left the country, the rate applicable and the
computation of the drawback amount. They may require clarifications from the
Exporter. If they are satisfied about the bonafides, the Drawback amount is
released. It is not sent directly to the Exporter but is transferred under Electronic
Data Interchange (EDI) system to a bank account that the Exporter has been asked
to open in a specified bank from which the Exporter can transfer to his own bank
account.
14.2

Deemed Exports

Deemed Exports refer to the goods that do not leave the country but which
trigger earning of foreign exchange.
Various categories of goods are coming under Deemed Exports.
a.
b.
c.

Supplies of goods against an Advance Licence.

Suply of goods to EOU'
s, EHTP'
s.
Supply of capital goods to a holder of EPCG licence.

d.

Supply of goods to projects financed by multi-lateral or bilateral

agencies as notified by Department of Economics Affairs, Ministry of
Finance.
Supply of goods to any project for which the Ministry of Finance

e.
f.
g.

permits imports of goods and capital goods at zero duty.

Supply of marine freight containers to 100% EOU, provided they are
exported within six months or permitted extended period.
Supplies to projects funded by UN funded agencies.

Benefits in Respect of Deemed Exports

20
Deemed Exports are eligible for any or all of the following benefits.
a.
b.
c.

Advance Licence for intermediate supply.

Refund of excise duty.
Drawback to the extent permitted.

15.

Promotional Measures

15.1

Duty Exemption Scheme

The objective of the scheme is to permit the Exporter to import inputs dutyfree i.e. to say, without having to pay customs duty on import. An Advance Licence is
issued under the Duty Exemption Scheme. He can import inputs and he will have to
declare exports in which such inputs are used, the declaration to be given in
Shipping Bills. There is a separate category of Shipping Bills for this purpose.
Duty Remittance Schemes consist of:

15.2

Duty Free Replenishment certificate (DFRC) and

Duty Entitlement Pass Book Scheme. (DEPB)

Advance Licence

An Advance Licence is issued to allow duty free imports which are physically
incorporated in the export product (making normal allowance for wastage). Fuel, Oil,
energy, catalysis etc, which are consumed in the course of their use to obtain the
export product may also be allowed under this scheme. Also, mandatory spares
(upto 10% of CIF value of the licence which are to be supplied with the resultant
product) are also allowed under the Scheme.
Advance Licence is issued for
a.

Physical exports - to a manufacturer exporter or to a merchant exporter

or to a supporting manufacturer.

b.

Intermediate suppliers to a manufacturer for the import of inputs

required in the manufacture of goods, to be supplied to the ultimate
exporter.

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c.

Deemed exports.

Advance Licence - Basic Points

Advance Licence is issued subject to actual-user condition.

Imports under Advance Licence are exempt from payment of basic

customs duty, additional customs duty, anti-dumping duty, education
cess and safeguard duty, if any. An Advance Licence issued for
deemed export, i.e. certain classes of deemed export (supply of main
freight containers by 100% EOU'
s and supplies of to projects funded by
UN agencies) are not exempt from anti-dumping and safeguard duty.
They are exempted from payment of basic customs duty and additional
customs duty only. But in the case of supplies to Export Oriented Units
(EOU'
s), units in Special Economic Zones (SEZ'
s) or units in Software
Technology Parks (STP'
s), anti-dumping duty and safeguard duty also
are not payable.

15.3

16.

Advance Licence carries with it the concepts of export obligation and

value addition.

Other Important Points:

Exports need not wait till the issue of the AL. Can be made as soon as
application is made. Quote the file number in all Export documents.

EO completion if not done within the stipulated time, application

should be made for extension. One extension for 6 months may be
granted on payment of a composition of 2% or duty saved on unutilized
items. One more under exceptional circumstances composition free
5%.

AL not transferable. Goods imported under the AL can be sold after EO

fulfilment.

Enhancement of AL no need for fresh application Reduction may

also be considered if VA is maintained.

Export Promotion Capital Goods Scheme

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Import of capital goods for production, post production at 5% customs duty
EO 8 times duty saved to be fulfilled over 8 years from date of licence. (except
licence of 100 crores or for agri-export zones : 12 years). For SSI, 6 times the duty
saved EO completion. 8 years if import value is less than 25 lakhs EO spread.
I to VI years 50%., VII, VIII 50%.
17.

100% EOU Units

(EOUs), Electronics Hardware Technology Parks (EHTPs), Software

Technology Parks (STPs) and Bio-technology Parks (BTPs): These are units which
undertake to export their entire production (except to the extent permitted in
Domestic Tariff Area, DTA) can be registered under the scheme for EOUs, EHTPs
STPs and BTPs. The activities will include not only manufacture but also repair,
servicing, reconditioning, re-engineering and rendering of services. No trading
activity is permitted. These units have to show a net foreign exchange earning in a
period of five years from commencement of manufacture. NFE will be calculated
cumulatively in a block of five years, starting from the commencement of
production. The approval under this scheme is open only to projects having a
minimum investment of Rs.1 crore in plant and machinery.
18.

Units in SEZs

A Special Economic Zone is a specially delineated duty free enclave. It is

deemed to be a foreign territory for purposes of trade operation and duties and tariffs
Goods going to Special Economic Zones (SEZs) from DTA are considered as
exports. SEZ units may be set up for manufacture of goods and rendering of
services. SEZ units may export their products as also their by products and also the
scrap or waste arising out of production. They can import goods without payment of
duty and also from the bonded warehouses set up in DTA. They should be Net
Foreign Exchange Earners calculated cumulatively for a period of 5 years. If they do
not achieve this, they have to pay a penalty. Application for setting up units in SEZ
should be made to the Units Approvals Committee. Units in the services sector
should apply to the Board of Trade.
19.

Star Export Houses

These are export organizations that have done and have the potential for
making sizeable exports. In view of the big contribution they make for the export
development of the country, they enjoy a certain status and some special privileges.

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According to the Exim Policy, merchant and manufacturer exporters, service
providers, Export Oriented Units (EOUS), units located in Special Economic Zones
(SEZs), Agri Export Zones (AEZs), Electronic Hardware Technology Parks (EHTPs),
Software Technology Parks (STPs) and also Bio-technology Parks (BTPs) are
eligible to apply for the status of a Star Export House. Star Export Houses replace
the various categories of export organizations like Export Houses, Star Trading
Houses and Super Star Trading Houses. An existing status holder shall be
automatically treated to be an equivalent Star Export House as per the following
table.
Erstwhile status under Exim Policy
2002 2007
Export House
Trading House
Star Trading House
Superstar Trading House

Converted status as per the Foreign

Trade Policy of 2004 - 2009
One Star Export House
Three Star Export House
Four Star Export House
Five Star Export House

The Criterion for getting recognition as Star Export House will be the export
performance (FOB value) during the current plus the three previous years as per
details given below.

19.2

Category

Performance in Rupees Crores

One Star Export House

Two Star Export House
Three Star Export House
Four Star Export House
Five Star Export House

15
100
500
1500
5000

Double Weightage for : SSI, Tiny sector units, units registered with KVIC,
located in NE states, SIKKM, JK, Handicrafts.

193.

Facilities for Star Export House

Licences on self declaration basis.

Can retain 100% of remittances in EEPC.

Repatriation period 180 to 360 days.

No need to provide bank guarantee.