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
2006 - 2007
EXPORT PROCEDURE AND DOCUMENTATION
INDEX
SERIAL
NUMBER
CONTENT
PAGE
NUMBER

1INTRODUCTION
2 HOW TO SET UP AN EXPORT ORGANISATION
3 HOW ONE BEGINS TO DO EXPORT
4 EXPORT SALES & CONTRACT TERMS & CONGITIONS
5 TERMS OF SHIPMENT – INCOTERMS.
6 PROCESSING AN EXPORT ORDER
7 FINANCIAL RISK INVOLVED IN FOREIGN TRADE
8 EXPORT DOCUMENTS
9 OCTROI
10 QUALITY CONTROL & PRE-SHIPMENT INSPECTION
11 SHIPPING ANG CUSTOMS FORMALITIES
12 SALES TAXES EXEMPTION PROCEDURE
13 METHODS OF RECEIVING PAYMENTS AGAINST EXPORTS
14 THE LETTER OF CREDIT
15 PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK NEGOTIATIONOR PURCHASE
16 SHIPMENT THROUGH COURIERS
17 CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM
18 THE ECGC COVER.
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%. Export is one of the lucrative business activities in India. The government also provides

various promotional schemes to the exporters for earning valuable foreign exchange for the country and for

meeting their requirements for importing modern technology and essential inputs. Besides, the income from

export business is also exempted to the specified extent under the Income Tax Act, 1961, Refund of Central

Excise and Custom Duty on export is also made under the Duty Drawback Scheme of the Government. There

is no Sales Tax on products meant for exports.

Exports can be of goods which can be moved physically from one country to another or can

be of service rendered. Detailed list of services are given in the Foreign Trade Policy covering more than 160

items e.g. Insurance, Hospital, Postal and Telecommunication etc.

TWO CLASSES OF EXPORTS:

 Physical Exports: If the goods physically go out of the country or services are rendered

outside the country then it is called as physical export. Deemed Exports: Where the goods do not go out of the

country physically they can be termed as deemed exports. This will be subject to certain conditions as

prescribed by the DGFT. Under Deemed Exports, the goods may be supplied to the manufacturer exporter who

ultimately export a finished product of which this supply forms a part and ultimately go out of the country. E.g.

Supply of fabrics to the garment exporter who exports the garments made out of the said fabric.

The government may announce from time to time the types of supplies that may be

considered as deemed export. The Foreign Trade Policy gives the list of supplies considered under the Deemed

Export Category. The policies and procedures are different for Physical Exports and Deemed Exports as also

the benefits available. In a nutshell, Deemed Exports do not enjoy all the benefits that are available under

Physical Export. The Foreign Trade defines exports as taking out of India any goods by land, sea, air.

Although the act does not term them as “Physical Exports”, we have to put phrase to distinguish it from

“Deemed Exports” which is sales in India but considered as exports for limited purpose.

TYPES OF EXPORTERS:

Exporters can be basically classified into two groups

•Manufacturer Exporter: As the exporter has the facility to manufacturer the

product he intends to export and hence he exports the products manufactured by

him.

•Merchant Exporter: An exporter who does not have the facility to manufacture

an item. But, he procures the same from other manufacturers or from the market

and exports the same.

An exporter can be both a manufacturer exporter as well as a merchant exporter, he can export product

manufactured by him or he can export items bought from the market.

Once it is decided to export, it is mandatory on your part to follow certain procedures, rules and regulations as

prescribed by various regulatory authorities such as DGFT, RBI, and Customs. These procedures, rules and

regulations are laid down in the Exim Policy 2004-09, Exchange Control Manual, Customs Act etc.

Accordingly Export documents are required to be prepared keeping in view of the requirement of the foreign

buyers and our regulatory authorities.

HOW TO SET UP AN EXPORT ORGANISATION

The proper selection of organization depends upon

 Ability to raise finance.

 Capacity to bear the risk•

 Desire to exercise control over the business.
 Nature of regulatory framework applicable to anyone

If the size of the business is small, it would be advantageous to form a sole proprietary

business organization. It can be set up easily without much expenses and legal formalities. It is subjected to

only few governmental regulations. However, the biggest disadvantage of sole proprietorship business is

limited ability to raise funds which restricts the growth. Besides the owner has unlimited personal liabilities. In

order to avoid this disadvantage, it is advisable to form a partnership firm.

The partnership firm can also be set up with ease and economy. Business can take benefit of

the varied experiences and expertise of the partners. The liability of the partners though joint and several, is

practically distributed amongst the various partners, despite the fact that the personal liability of the partner is

unlimited. The major disadvantage of partnership firm of business organization is that conflict amongst the

partners is a potential threat to the business. It will not be out of place to mention here that partnership firms

are governed by the Indian Partnership Act, 1932 and, therefore they should be formed within the parameters

laid down by the Act. Company is another form of business organization, which 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. A private limited can be

formed by just two persons subscribing to its share capital. However, the number of its shareholders cannot

exceed 50, public cannot be invited to subscribe to its capital and the members right to transfer their share is

restricted. On the other hand, a pubic limited company has a minimum of seven members. There is no limit on

the maximum number of its members. It can invite the public to subscribe to its capital and permit the transfer

of share. A public limited company offers enormous potential for growth because of access to substantial

funds. The liquidity of investment is high because of easiness of transfer of shares. However its formation can

be recommended only when the size of the business is large. For small business, a sole proprietary concern or a

partnership firm will be the most suitable form of business organization. In case it is decided to incorporate a

private limited company, the same is to be registered with the

Registrar of Companies.

CHOOSING APPROPRIATE MODE OF OPERATIONS:

You can choose any of the following modes of operations

•Merchant Exporter i.e. buying the goods from the market or from the

manufacturer and then selling it to foreign buyers.

•Manufacturer Exporter i.e. manufacturing the goods yourself for export.

•Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the

seller and charging the Commission.

•Buying Agent i.e. acting on behalf of the buyer and charging Commission.

•Service provider i.e. providing service from India to another country.

 NAMING THE BUSINESS

Whatever form of business organization has been finally decided, naming the business is an

essential task for every exporter. The name and style should be soft, attractive, short and meaningful. Open a

current account in the name of the organisation in whose name you intend to export. It is advisable to open the

account with a bank which is authorised to deal in Foreign Exchange.

STRUCTURE OF AN EXPORT ORGANISATION

1.marketing manager for generating sales

2.Commercial manager for looking activities of the execution of the orders.

3.staff personnel for carrying out the day-to-day activities namely

o Preparation of pre - shipment documents.

o Co-ordinating with clearing agents on the progress of the shipment to be made.
o Co-ordinating with the ware house\C. excise department regarding packing and clearance of the goods for

export.
o Preparation of post shipment documents foe banks.

o Follow-up with the bank on dispatch of documents, receipt of payment,

availment of bank loans etc.

•

4.To look into the requirement of licenses, claiming of export benefits fiiling of documents with the

5.Government Authorities in Discharge of Export Obligations, if any, filing of returns to the various

6.Government Agencies which are mandatory, prepare and keep an information bank of various transaction of

the company, their domestic as well as international competitors.

7.An office boy for doing leg work.

8.A clearing and forwarding agent to handle the documents and the goods in the
customs premises\ in the ports of lading.

Depending upon the size of the business the numbers of personnel under each category may

increase. For example if a company is transacting substantial volume of business in more than one product.

Then it is necessary to have marketing 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.
The Customs Authorities will now allow the exporter to export or import goods into or
from India unless he holds a valid IEC number. Before applying for IEC number it is necessary to open a bank
account in the name of the company with any commercial bank authorized to deal in foreign exchange. The
duly signed application form should be supported by the following documents.
•Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. 1000/-
•Certificate from the banker of the applicant firm as per Annexure 1 to the form
given.
•One copy of PAN number issued by Income Tax Authorities duty attested by the
applicant.
•One copy of Passport Size photographs of the applicant duly attested by the
banker to the applicant.
•Declaration by the applicant that the proprietor/partners/directors as the case may be of the applicant
company, are not associated as proprietor/partners/directors in any other firm, which has been caution, listed
by the RBI. Where the applicant declares that they are associated as proprietor/partners/directors in any other
firm, which has been caution, listed by the RBI, they will be allotted IEC No. but with an additional condition
that they can export only with RBI’s prior approval and they should approach RBI for the purpose.
•Each importer/exporter shall be required to file importer/exporter profile once with the licensing authority
shall enter the information furnished in Appendix 2 in their database so as to dispense with changes in the
information given in Appendix-2, importer/exporter shall intimate the same to the licensing authority.
IEC EXEMPT CATEGORIES.
The following importer exporter is exempted from the requirement of IEC code number.
•Ministries \ Department of Central or State Government
•Person importing or exporting goods for their personal use not connected with
trade or manufacture or agriculture.
•Persons importing\exporting goods from\to Nepal & Myanmar provided the CIF
value of single consignment does exceed Indian Rs. 25000\-.
APPLICATION FOR OBTAINING AN IEC NUMBER

For obtaining IEC number apply in the prescribe form along with the documents listed above to Regional
Licensing Authority (Office of the Regional DGFT). The registered office or the head office may apply for
allotment of IEC No.
Whenever, there is a change in the name, address or constitution of the holder of IEC
No., such change should be intimated within 30 days to the concern authorities.
IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is also
endorsed to the concerned banker.
VALIDITY:

The IEC No allotted to a firm/company will be valid for all its branches/divisions units/factories as indicated in
the IEC No. Import/Export of any commodity by that firm/company. There being no date of expiry, the IEC
once allotted is valid till it is revoked. But, if no import or export is effected in the previous financial year, the
same will be made inoperative. However, this can be made operative by a formal request to the DGFT.
IDENTITY CARD (For conducting transactions with the office of DGFT):
As it is not always possible for the top man or directors, promoters of the company to
visit DGFT frequently. There is a provision of issuance of identity cards to the proprietors/partners/directors
and their authorized representatives. An application of Issuance of an identity card may be made in the form
(Appendix-5) The document/ License/Certificate/Permissions may be delivered to the identity card holder and
officials of the Licensing Authority(DGFT)shall 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 FIR & affidavit. In addition to obtaining the IEC
No. the exporter is also required to obtain Business Identification No(BIN). For this exporter is required to
contact DGFT online on web site. The licensing authority issues BIN in coordination with customs authorities.
This BIN is required to be mentioned on the shipping bills at the time of customs clearance of the export cargo.
RCMC (Registration-Cum-Membership Certificate) – REGISTRATION WITH
EXPORT PROMOTION COUNCILS –

In order to enable the exporter to obtain benefits/concessions under the Foreign Trade Policy, the exporter is
required to register himself with an appropriate export promotion agency by obtaining registration-cum-
membership certificate. (RCMC). If the export product is that it is not covered by any EPC, RCMC in respect
thereof may be issued by FIEO. An application for registration should be accompanied by a self certified copy
of the Importer-Exporter Code number issued by the regional licensing authority concerned and bank
certificate in support of the applicants financial soundness. The RCMC shall be valid for 5 years ending 31st
March of the licensing year.
REGISTRATION WITH SALES TAX AUTHORITIES:

Goods that are to be shipped out of the country for export are eligible for exemptions from both Sales Tax and
Central Sales Tax. For this purpose, exporter should get himself registered with the Sale Tax Authority of is
state after following the procedures prescribed under the Sales Tax Act applicable to his state.
HOW ONE BEGINS TO DO EXPORT
Before entering into the venture of exports, one must look for the product to be exported
and the market where he intends to export In case of a manufacturer, obviously he would like to export the
product he manufactures as is or with possible modification as may be required by the market. However, in
case of a merchant exporter or a trader, one has to identity the product to export. If the exporter is already in
the trade in the domestic market and is familiar with the product it would be an advantage to export the said
product of which he has reasonable knowledge.

Before selecting a product, one must simultaneously made a study and find out the prospective market. For
finding out the market for the selected product, the following methods will help.
•Get statistical information as to imports of the product by various countries
and their growth prospects in the respective countries
•Approach the chamber of commerce for their guidance to find out the market.
•Approach the Export Promotion Council dealing in the product of selection to
get more information.
The Preliminary
Once you are ready with the product you wish to export and have found the market for
the same, you are ready to proceed further. Following sequences can be followed:
•Any one, who wishes to export, must first of all get an Importer Exporter
Code Number (IE Code).This can be obtained by making a formal
application to the office of the Regional Directorate General of Foreign
Trade (DGFT).
•Get yourself registered with the related Export Promotion Counciland
become a member. Also arrange to obtain Registration-Cum-Membership
Certificate (RCMC) from the council. This has twin objectives:
oUnder the Foreign Trade Policy, it is mandatory that an exporter gets him registered with the Export
Promotion Council to avail of various export facilities.
oBeing a member, you will have access to all the information relating to the
product that could be made available by the council
oMany foreign buyers send their enquiries for the imports to the Export Promotion Council. Hence you will
have few customers interested in your product.
•If you are a manufacturer, find out the provisions under the EXIM Policy of
getting the raw materials duty free.
•Get familiar with the excise formalities as goods meant for export can be cleared without payment of C.
Excise duty on the finished product subject to compliance of certain formalities.
•Understand the local government regulations in relations to the export of the
product.
•Get information of the government’s regulations of the importing country as to restrictions on the quantity,
product specification, packing regulations, customs regulations, requirement of specific
documents/information etc.
•Availability of Vessels/Airlines, the transport charges, frequency of operation
etc.,
•To look for a Custom House Agent (CHA) (also know as freight forwarders or
clearing agents) for handling the documents/cargo in the customs.
•If the product is covered under any quota regulation, find out the agency/council who are handling the quota
distribution for the product and the availability of quota for exports.
FINDING A CUSTOMS
Once you have selected the market, the next step is to find a prospective customer.
This you can get
•From the directory of importers of the country
•By writing to the Embassy of India in that country for assistance
•By writing to the chamber of commerce of that country
•By means of participation in a Fair/Exhibition abroad either directly or through
the Export Promotion Council
•By participating in international fair if organized locally
 Through the personal contacts in that country. By these processes one can only have the list of
customers. One has to dialogue or correspond with these customers by sending samples, getting
feedback from the customers etc. to ultimately select the customer with whom to deal with. It is
necessary to know the financial standing of the company which can be obtained through the bank
channel or through the office of ECGC.
Refer: http://www.scribd.com/doc/24501526/100-Marks-Project-on-Export-Procedure-and-Documentation-
Finally-Completed-2