EXPORT DOCUMENTATION

AND PROCEDURES.
  ***********
 
                       
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Author:
 
           
P.J. Sajimon. M.B.A, P.G.D.C.A, D.B.S
I.C.F.A.I UNIVERSITY, Campus Programs, 403-A, 4th Floor,
Shyam Anukampa, Opp: H.D.F.C Bank, C-Scheme, Jaipur-1, India.
Mobile: 98280-11760
 
 
 
 
 
 
 
 
 
         TABLE OF CONTENTS
 
 
 
Contents                                                                                           Page
 
  

  Acknowledgement                 2
  Introduction                   4
 

          1.New step to start an export business                                                5

 
2.The Sequential Steps Towards Export 11
 
3.Export Documentation             17
 
Commercial Docs                22
 
Insurance Docs                23
 
   Financial Docs                25
 
   Third Party Docs                28
 
   Documents Required By Exchange Control         30
 
4. International Business & Containerisation       31
 
5. World and Indian economy             38
  
   Indian economy                41
 
Appendix                     45
 
 
 
 
 
 
 
 
 
 
 
INTRODUCTION
 
India, the world’s largest democracy with world’s second highest
 population and 7th largest area is also the 4th largest economy in terms of
purchasing power. India ’s richness and diversity of culture, geographic
and climatic conditions, natural and only few other countries in the world
match mineral resources. One of India’s important assets is its vast
reservoir of skilled manpower. India’s enduring institutions, rooted in the
principles of democracy and justice.
 
India’s known strength in handicrafts, gems & Jewellery,
Apparels, software and IT and tremendous e-commerce potential ensures
progressive up trend in growth of the Indian economy. The Government’s
current Import & Export policies offer a more investor friendly economic
environment and are geared towards more investment in promoting
Import and export Trade. These measures have had a significant thrust on
promoting the development of infrastructure facilities in various parts
of India , Like Export Promotion Zones etc.
 
 
 
 
 
 
 
       CHAPTER-1
 

NEW STEP

TO START AN EXPORT BUSINESS

 
 
The first and foremost thing is that one has to form a Company as per the Indian
Rules and regulations.  The Company can be Proprietorship, Partnership, Co-
operative society, Trust, Private limited Company or Public limited Company. A
Brief description of different set-up is as under: -
 
PROPRIETORSHIP/SOLE TRADERSHIP:
 
The sole trader is a person who carries on business exclusively by and for
him.  The leading feature of this kind of concern is that the individual assumes
full responsibility for all the risks connected with the conduct of the
business.  He is not only the owner of capital but is usually the organizer and
manager and takes all the profits, responsibility for losses.  There is no legal
formality or need for registration to commence the business provided it is a
lawful business.
 
PARTNERSHIP FIRM:
 
Partnership has two or members/persons but not more than 20 and 10 in the case
of banking business.  Each one has agreed to share the profit and loss of the
business in a definite proportion.  The business is carried on by all or any one of
them acting for all.  It is governed under the Indian Partnership Act,
1932.  Partner should be a person competent to enter into a contract and business
should be legal.  Partnership can be created orally or written.  Though the
registration is not legally compulsory but registration can be effected at any time
by sending a statement in the prescribed form with prescribed fee to the Registrar
of Firms of the locality.  Every partner is jointly and severally liable for all acts
of the firm.
 
JOINT HINDU FAMILY FIRM (H.U.F):
 
A joint Hindu family carried on a business inherited from its ancestors. It is
governed by Hindu Law.  The head of the family, the Karta, has full authority.  It
does not require registration.   The composition changes by births, deaths,
marriages and divorces in the family.  The shares of the members are not
defined.  The members are liable only to the extent of their share in the family
business but the head of family has unlimited liability.
 
TRUST:
 
The business is carried on generally for the benefit of minors, persons of
unsoundmind, handicapped etc. Two trustees are appointed.  Trust deed is
written and registered with the Registrar of Trust of the State.
 
CO-OPERATIVE SOCIETY:
 
Minimum 7/10 persons competent to enter into a contract are required to form a
Co-operative society.  It is a voluntary organization.  It can be registered with the
Registrar of Co-operative societies for carrying out lawful business.  Co-
operative Societies Act governs it.   It is advantageous from taxation point of
view, e.g. Profit is distributed amongst members in the predetermined ratio after
transferring of 25% of profit to Reserves.
 
PRIVATE COMPANY:
 
A minimum of two and maximum of 50 persons are required to form a private
company.  It may commence business on grant of certificate of Incorporation by
the Registrar of Companies on receipt of Memorandum of Association and
Article of Association (with certain prescribed restrictions) along with prescribed
fee.  It needs to have two Directors.  It may be limited by shares and or by
guarantee.  Company has separate entity from its members.  The Companies Act,
1956, governs it.
 
PUBLIC COMPANY
 
A minimum of seven persons required forming a Public Company
After obtaining Certificate of Incorporation, it has to obtain Certificate of
Commencement of Business for commencing business.  These certificates are
issued by Registrar of Companies on filling certain documents, such as
Memorandum of Association and Article of Association, Address of Registered
office, Approval for Name, Statutory declaration, along with prescribed fee, it
needs to have a minimum of three Directors.  It may be limited by shares and or
by guarantee or with unlimited liability.  The Companies Act, 1956, governs it.
 
LETTER HEAD:
 
Once the type of set up has been decided, the next step is to print letterhead.  The
entrepreneur may entrust the job to commercial artist to design the letterhead and
logo of the company.  The size of the letterhead should be “A-4” as per
international practice.
 
RUBBERSTAMP:
 
As soon as the name of the company is decided, a Rubber Stamp of the company
is to be made.
 
BANK ACCOUNT:
 
The Company now has to open a Current Account in any Commercial
Bank.  While opening account, the entrepreneur may see the facilities,
particularly Foreign Exchange transaction facilities in the Bank.  The selection of
bank is very important, particularly keeping in view of the long-term relations to
be established not only with the concerned heads of the Foreign Exchange
Department but also with the staff for getting prompt services.
 
 
 
PERMANENT ACCOUNT NUMBER (P.A.N ):
 
The Company now has to apply for a permanent (Income Tax) number from the
local office or via designated agencies of Income tax department, in the
prescribed format along with necessary documents and Fee. It will help you to
forward with a smooth business without any type of taxation related problems.
 
IMPORTER- EXPORTER CODE NUMBER (IEC):
 
Every person (whether an individual or firm or company etc.) importing or
exporting goods into or from Indiawill require a Code Number unless
specifically exempted by the Chief Controller of Imports and Exports. The
customs authority will not allow any person to import or export goods into or
from India unless such person holds a valid Importer-Exporter Code
Number.  The Concerned Regional Licensing Authority, under whose
jurisdiction the applicant’s firm is located, will allot code number.
 
Application for allotment of IEC should be made in triplicate in the prescribed
form duly accompanied by Bank receipt/Demand draft evidencing payment of
fee along with the following documents:
A)    A)    Xerox of income tax PAN.
B)     B) Certificate from the banker in the form as mentioned in the IEC application
 form.
 
 
BUSINESS IDENTIFICATION NUMBER (BIN):
 
Application for allotment of BIN should be made in duplicate in the prescribed
form duly to the Concerned Regional Licensing Authority, under whose
jurisdiction the applicant’s firm is located or also can made the application online
directly trough the website DGFT to have BIN.
 
 
 
 
S.S.I REGISTRATION (TINY UNIT):
 
All exporters engaged in manufacturing process and whose investment in plant
and machinery is less than five lakhs can file an application for Registration as a
Small Scale Industrial unit.  The SSI unit registration benefits you in many kinds
in your future business. It attracts levies and priority in bank loan
interest/electricity rates etc.
 
 
SALES TAX REGISTRATION (TIN):
 
For producing export goods, manufacturers exporters/traders, should get
themselves registered with the Local Sales Tax Department of the State/Union
Territory where they are located.
 
CENTRAL EXCISE (RBA):
 
All manufacturer-exporters and merchant-exporters engaged in exporting
excisable goods under “bond” are required to open and maintain a Running Bond
Account (RBA) with the Maritime Collector of Central Excise.
However, SSI units whose clearances don’t exceed Rs.25 lakhs consequently are
exempt from excise duty.
 
 
REGISTRATION WITH EXPORT PROMOTION COUNCILS:
 
The general policy in respect of the role and functions of the Export promotion
Councils is given separately.
 
An exporter may obtain Registration-Cum-Membership Certificate (RCMC)
from any one-export promotion council (EPC) relating to his main line of
business.  However, if the export product is such that it is not covered by any
 
 
EPC, the Regional Licensing Authority concerned thereof may issue RCMC in
respect.  The Federation of Indian Export Organization (FIEO) shall issue the
RCMC.
 
The Chief Controller of Imports and Exports may, on his own motion or
otherwise, direct an EPC or FIEO to register or de-register an exporter of
otherwise issue such other direction to them consistent with and in order to
implement the provisions of the Act, the rules and orders made in the Import and
Export Policy of Ministry of Commerce, Government of India .
 
 
CLEARING AND FORWARDING AGENT (C&F/C.H.A):
 
Clearing and forwarding agents offer a host of services like preparation of
shipping bill, getting the documents authenticated at customs after getting the
consignments checked by customs officers. Some other services them are as
under: -
 
a)      a)      Door to door services
b)      b) Warehousing facilities
c)      c) Regular air consolidation services in India
d)      d) Booking of shipping space
e)      e)      Arrangements for insurance policies
f)       f)       Arrangements for shipping on board
g)      g)      Handling of exhibition goods, its clearance & display at pavilion.
h)      h)      Preparation and processing of all kinds of shipping documents
i) i)        Efficient shipment tracking systems like availing of Flight details with
routes and date etc.
 
Now the exporters have to take special attention to submit the necessary post
shipment documents with his bank and concerned customs/ licensing authority
for getting Licenses/drawback claims if any.
 
 
CHAPTER-2
 
THE SEQUENTIAL STEPS TOWARDS EXPORT OPERATIONS
 
 
1.                        Preliminary Stage: Procurement of all kinds of registration as
mentioned above.
 
2.                        Procurement of an export order and its processing: -
a)                  Terms & conditions of Contract
b)                   Mode of payment
c)                   Confirmation of the order by exporter.
 
3.                        Procurement/Manufacture of goods, as per the specification of the
importer, by securing Pre-shipment finance from your bank on the
basis of security of L/C or Confirmed Export Order or Personal bond
along with ECGC policy.
 
4.                        Clearance of Excise Authorities, from the premise of the exporter
after physical verification:
a)                  On payment of duty and subsequent rebate or
 b)                  Clearance under bond.
 
5.                        To fulfill the requirement of quality control and pre-shipment
Inspection.
 
6.                        Dispatch of goods to the gateway port for shipment by road or Rail
and requisite application to be made to the insurance company for
obtaining insurance cover for various risks.
 
 
 
 
 
7.                        Completion of formalities relevant to MEP or floor price regulation,
canalization, certificate of origin, ECGC cover, consular invoice,
export license etc. wherever required.
 
8.                        Forwarding of shipment documents to C&F /CHA agent, along with
requisite instructions including booking of space with sea-carrier
whose sailing schedule and ports of call suits the exporter’s delivery
commitment.   The documents required by C&F agent for processing
prior to shipment are: -
 
a)                  a)                  Commercial invoice.
b)                  b)                  Original export order.
c)                  c)                  Original copy of L/C.
d)                  d)                  Original G.R form /SDF (It is now waived off
by       R.B.I for shipments values less than US$ 25000).
e)                  e)                  Original AR-4A/AR-4 form with duplicate copies.
f)                   f)                   Original excise gate pass.
g)                  g)                  Packing and weight lists.
h)                  h)                  Certification of inspection.
i) i)                    Declaration form in triplicate.
j) j)                    Consular invoice where necessary.
k)                  k)                  Export license where necessary.
l) l)                    Endorsement regarding floor price, canalization etc. where
necessary.
m)                m)                Purchase Memo on demand where necessary.
n)                  n)                  Railway or Lorry receipt.
o)                  o)                  Certificates of origin.
 
 
 
 
 
 
 
 
9.                        9.                        The C&F agent takes delivery of the goods from the rail
or road carrier and arranges for storage in a warehouse, till carting
order is received from port authorities.  In the meantime prepares the
 shipping bill with requisite details for customs clearance.  Shipping bill
along with other documents mentioned above is submitted to the
export department of the Customs House, for examination.
 
10.                    10.                    On clearance of the shipping bill by the Customs
Authorities, the C&F agent presents the port trust a copy of the
shipping bill to Shed Superintendent of the port authorities and obtains
Carting order for bringing the export consignment in the transit shed
for physical examination. Thereafter Dock Challan with requisite
details along with assessment of Dock charges payable is prepared.
 
11.                    11.                    Dock Challan and the Shipping Bill are forwarded to the
preventive officer for physical examination of the goods and “Let
Ship/Let Export” endorsement.
 
12.                    12.                    The Stevedore, and issue of Mate Receipt by the Master or
the Mate of the ship bring the cargo alongside the vessel with the help
of port labour for loading on the ship.
 
13.                    13.                    On payment of port charges, C&F agent obtains the Mate
Receipt from the port authorities. It is then presented to the Customs
Preventive Officer for certifying the fact of shipment on all copies of
Shipping Bill.  AR-4A/AR-4 form and other
 
 
 
 
 
 
 
 
 
Documents requiring post-shipment endorsement from the Preventive
Officer.
 
14.                    14.                    The Mate Receipt is presented usually to the Agent of the
shipping company for obtaining requisite number of originals and
copies of the Bill of Lading.
 
15.                    15.                    The C&F agent then forwards to the exporter the following
documents: -
1.                   1.                   Full set of Bill of lading.
2.                   2.                   Export Promotion copy of the shipping bill.
3.                   3.                   Copies of customs invoice.
4.                   4.                   Duplicate copy of AR-4A/AR-4 form.
5.                   5.                   Duplicate copy of GR /SDF form (where necessary).
6.                   6.                   Copies of commercial invoice duly attested by
customs.
7.                   7.                   Original export order.
8.                   8.                   Original L/C.
 
 16.                    16.                    On receipt of these documents, the exporter sends to the
importer the shipment advice and forward the following documents: -
1.                   1.                   Non-negotiable copy of the Bill of Lading.
2.                   2.                   Customs invoice.
3.                   3.                   Commercial invoice.
4.                   4.                   Packing list.
 
 
 
 
 
 
 
17.                    17.                    He also files a claim with the Maritime collector of Central
excise in the port town for rebate of central excise duty or for getting
credit in the bond account.
 
18.                    18.                    The exporter secures payment for the value of the export
consignment on presentation and processing of the following
documents to the negotiating bank.
 
1.                   1.                   Duplicate copy G.R/SDF form.
2.                   2.                   Bill of exchange, first and second exchange.
3.                   3.                   Full set of Bill of Lading (clean on board), all
negotiable copies and one non-negotiable copy.
4.                   4.                   Original copy of L/C.
5.                   5.                   Two copies of commercial invoice.
6.                   6.                   Two copies of customs invoice, if necessary.
7.                   7.                   Two copies of Certificates of Origin.
8.                   8.                   Two copies of Packing list.
9.                   9.                   Two copies of Marine Insurance Policy.
10.               10.               Four copies of bank certificate.
11.               11.               Additional copies of commercial invoice to be
certified by the bank and returned to the exporter.
12.               12.               Consular invoice, where necessary.
 
19.                    19.                    The negotiating bank transmits/sent the following
documents to the banker of the importer by first air mail/express
courier followed by a second set of these documents by the second air
mail/courier to ensure receipt of at least one set, if the other is lost in
transit or delayed. (Now a day Messages through SWIFT are
authorized).
 
 
 
1.                   1.                   Bill of exchange.
2.                   2.                   Negotiable Bill of Lading.
3.                   3.                   Commercial Invoice.
4.                   4.                   Customs Invoice.
5.                   5.                   Insurance Policy.
6.                   6.                   Certificate of Origin.
 7.                   7.                   Consular invoice, Export certificate. Where
necessary.
8.                   8.                   Packing list.
 
  
20.                    20.                    The negotiating bank transmits/send the duplicate copy of
GR/SDF form to the Exchange Control Department of R.B.I.  The
original copy of bank certificate, along with attested copies of
commercial invoice are returned to the exporter, and the duplicate copy
of the bank certificate is forwarded to the Jt. DGFT, Import & Exports
of the area on repatriation/ receipt of the bill payment.
 
 
***************** 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER-3
 
EXPORT DOCUMENTATION
 
An export trade transaction distinguishes itself from a domestic
 Trade transaction in more than one-way. One of the significant variations
between the two arises on account of the much heavier documentation work
which is characteristic of an export transaction.  Some of the documents are a
must in export business, arising as they do on account of “custom of trade” and
conventions governing international commercial practices.  Besides, quite few of
these owe their existence to certain statutes; rules and regulations governing
export trade, which inter alias, include export trade control, foreign exchange
regulations, pre shipment inspection, central excise and customs.
 
The documentation and procedures are rendered complex on account of the
inevitable involvement of a number of intermediary agencies and government
authorities such as freight forwarders, carriers, insurance companies, banks,
export promotion councils, Inspection agencies, R.B.I etc. In order to simplify
the documentation procedure, a new Aligned Documentation has been
developed.
 
ALLIGNED DOCUMENTATION SYSTEM (ADS)
 
 Based on UN layout key and the experience gained in many other developed
countries, the government ofIndia has decided to introduce the ADS with effect
from 1st October-1991.  This system involves the preparation of documents on a
uniform and standard A4 size of paper.
 
 
 
 
 
 
 
The documents are aligned to one another in such a way that the common items
of information are given the same relative slots in each of the documents
included in the system.  This makes it possible to prepare one “Master
Document” embodying the information common to all the documents included in
the aligned series and to run off all the aligned documents from the same Master
Document with the help of suitable masking and reproduction techniques.  The
use of masks is intended to blank out such information as is not required in a
particular document.
 
 
Standardized and aligned pre-shipment export documents
 
On an average, about 24 commercial and regulatory documents are associated with
an export transaction in India.  They include 15 important commercial documents
and are discussed as under:
 
a.                   a.                         Performa Invoice
b.                   b.                         Commercial Invoice
c.                   c.                         Packing list
d.                   d.                         Shipping instructions
e.                   e.                         Certification of Inspection/Quality Control
f.                    f.                          Insurance declaration
g.                   g.                         Certificate of insurance
h.                   h.                         Shipping order
i.                     i.                           Mate receipt
j.                     j.                           B/L/ Combined Transport Document
k.                   k.                         Application for certificate of origin
l.                     l.                           Certificate of origin
 
 
 
 
 
 
m.                 m.                       Bill of exchange
n.                   n.                         Shipment advise
o.                   o.                         Letter to the bank for collection/negotiation.
 
                      
The commercial documents are those which, by custom or trade are required for
 effecting physical transfer of goods and their “title’ from the exporter to the
importer and the realization of export sale proceeds.
 
Regulatory Documents   
 
Regulatory Pre-shipment export documents are those, which have been
prescribed by different agencies in compliance of the requirements of various
rules, and regulations under relevant laws governing export trade such as export
inspection, forex, customs etc…. On an average there are 9 regulatory
documents.    
 
1. Gate pass-1/gate pass-2 prescribed by: -        
Central excise Dept.
2. AR4-A/AR-4 form -do-
3. Shipping bill/for export    Customs dept.
For export of goods ex bond -do-
For export of duty free goods -do-
For export of dutiable goods -do-
For export of goods under claim for -do-
Duty drawback
 
 
 
 
 
 
 
4. Export application/Dock Challan    Port trust
Port trust copy of shipping bill
5. Receipt for payment of
Port charges -do-
                                    6.            Vehicle ticket                                        -do-     
                                    7.            GR/PP/SDF forms                                R.B.I
                                    8.            Freight payment certificate
9.                   9.                   Insurance premium payment
Certificate.
DOCUMENT CONNECTED WITH TRANSPORTATION OF GOODS.
 
1.                        1.                        Air Way Bill (AWB) Air consignment Note.
 
The receipt issued by an airline or its agent for the carriage of goods is called
airway bill or air consignment note. It is issued in terms and conditions of the
contract of carriage of goods.  It is not a document of title and it is not issued in a
negotiable form.
 
Generally AWB is issued in three copies, viz; for the carrier, for the consignee
and for the consignor.
 
2.                        2.                        Postal Parcel Receipt (PPR).
 
Like the AWB, the PPR evidence merely the receipt of the goods to be exported
to the buyer and is not a document of title.
 
 
 
 
 
 
 
 
3.                        3.                        Bill of Lading (B/L).
 
A Bill of Lading is the most important document in Foreign Trade. It is generally
issued by a shipping company. It services as a receipt  from the shipping
company who undertakes to deliver the goods at agreed destination on payment
of freight in a prearranged manner and also a document of  title to the
goods.  B/L is generally made out in the sets of two or three originals.  All the
originals are duly signed by the master of ship or the agent of the steamship
company and all the originals are equally valid for taking the delivery of goods
and once one original copy is utilized the other originals become full and void.
 
B/L is  nor a negotiable instrument in terms of Negotiable  instrument Act,
However, it is a practice to call the original copies as negotiable copies.
 
4.                        4.                        Combined Transport Document (CTD)
 
With the introduction of multimode movement of goods in container on the basis
of single contract from and to interior of the country, government has established
Inland Container Depot (ICDs) at selected center.  These dry depots have made it
possible to cover the entire movement of goods, from ICD to destination, under
one transport document called CTD.  Rules governing combined transport
document are designed by International Chamber of Commerce (Brochure
No.298) considering the international practices.
 
 
 
 
 
 
 
 
 
 
 
COMMERCIAL DOCUMENTS.
 
1.                        1.                        Performa Invoice
 
As the name denotes, it is an invoice in established Performa, payment of which
is not intended.  These invoices are used for obtaining financial assistance like
Packing Credit from a banking institution, as Performa invoice together with an
offer, acceptance on which will form a legal contract.
  
2.                        2.                        Commercial Invoice
 
It is the most widely used invoice in commercial transactions.  It is the statement
of account of sale rendered by the seller to the buyer and is prepared on seller’s
letterhead or in the prescribed form on A-4 size paper. It contains the name of the
buyer and his address, date, reference number, quantity, marks description of
goods unit price, total value of goods, terms of payment/C  & B/L no. Etc.
 
3.                        3.                        Consular Invoice
 
A consular invoice is required by some countries like Canda, USA, etc…a consul
for invoice is required to be prepared in a prescribed format and it should be
signed/certified by the consul of the importing country located in the country of
export.  The main purpose of a consular invoice is to enable the importer’s
country to collect accurate and authenticated information about the value,
volume, quality, source etc; of the import for assessing import duties and for
other statistics purposes.
 
 
 
 
 
 
 
4.                        4.                        Customs Invoice
 
Countries like USA, Canada etc. need custom’s invoice. It is generally made out
on a special form prescribed by the custom authorities of the importing country
and helps for allowing entry of goods in the importing country at preferential
tariff rates.  The invoice forms are generally available at the consular office of
the importing country and are required to be signed and withenessed after duly
filling the same.
 
5.                        5.                        Legalized/ Visaed Invoice
 
These are the invoices sworn for their genuineness by the seller as being correct
before the appropriate consulate/chamber of commerce/embassy as the case may
be and they bear the stamp and authentication of the consulate/chapter of
commerce/embassy as being in order.  They collect a nominal charge from the
seller for doing this.
 
 
INSURANCE DOCUMENTS
 
 
1.                        1.                        Letter of insurance.
 
This is analogous to cover note issued by the broker. It is stated that particular
subject are placed under insurance and certificate/policy of insurance will be
issued later on.
 
 
 
 
 
 
 
 
 
 
2.                        2.                        Broker’s Certificate
 
This is also not acceptable as broker issues the same, as broker acts for the
insured and cannot compel insurer to accept the proposal of insurance.
 
3.                        3.                        Insurance Certificate.
 
The insurance on “open cover” or “floating” policy covering all shipment on
certain terms and subjects to conditions laid down.  Unless the insurance
certificate gives details of the conditions of cover it is not so much value to third
party who negotiate the shipping documents.
 
4.                        4.                        Insurance Policy.
 
This is a basic legal document-evidencing contract of insurance between the
insurer and insured.   It gives full details of all the risks covered.  Marine or
transit insurance policies can be assigned by the insured merely by endorsement
and delivery.   Insurance policies are issued in different forms like floating
policy, open policy or cover, specific policy etc…
 
A floating policy is a contract of insurance for covering a number of shipments,
the details of which are not finalized when the contract of insurance is
conclude.  The relevant details like name of the vessel, destination, description of
cargo etc. is therefore required to be declared subsequently and endorse in the
policy.
 
An open cover /policy is valid for a given period of time or permanently
open.  As per this policy the insurer undertakes to insure all the shipments for
which the details are already intimated to the insurer.
 
 
 
 
 
A specific policy covers specific shipments and such policy is readily available
for submitting with the export documents.
 
The coverage of risks is classified into categories like A, B, C etc. and the
insurance policies are issued accordingly.
 
 
 FINANCIAL DOCUMENTS
 
 
1.                        1.                        Draft
 
It is bill of exchange.  According to section 5 of the Negotiable Instruments Act,
1881 a bill of exchange is “ an instrument in writing containing an unconditional
order, signed by the maker, directing a certain person to pay a certain sum of
money only on or to the order of a person to the bearer of the instrument.”
 
A bill of exchange contains an order from the Creditor to the debtor to pay a
specific amount to a person mentioned therein.  The make of the bill is called the
“drawer” the person who is directed to pay is called the “drawee”.  The person
who is entitled to receive payment is called “payee”.
 
 
 
In an export transaction it is advisable that an exporter draws a draft, which may
either “at sight/on demand or usance”. Drafts are mainly make in two sets with
all other concerned documents and mailed to the foreign correspondent through
an authorized dealer for presentation to the drawee/importer, When any of the
drafts is paid on presentation it is called an “at sight/on demand draft and if
accepted when it is a usance draft by the drawee, then the second draft becomes
null and void.
 
 
2.                        2.                        Clean Bill and Documentary Bill
 
When the drawer of a bill encloses with it a document of title to goods or any
other equivalent document it is called a documentary bill.  In an export
transaction the exporter delivers to the banker, documents like full set of B/L,
AWB, PPR etc… together with documents like drafts, invoices, packing list
etc… for presentment to the drawee. Depending upon the tender of the bill i.e.
D/P or D/A, the documents are delivered to the drawee against payment or
acceptance.  If no such documents are attached with the bill, then it is called as a
clean bill.
 
3.                        3.                        Stamp Duty
 
All drafts are drawn on the drawee. Unlike in most of the foreign countries, the
Indian stamp Act does not required the sight drafts to be “stamped”. I.e no stamp
duty is applicable to drafts drawn at sight/demand bills.  Drafts drawn on usance
basis require to be adequately stamped.  Stamp duty is the same no matter
whether the bills is drawn or negotiated in India .
 
 
 
4.                        4.                        Acceptance of Bill
 
A bill of exchange payable on demand or at sight or on a fixed date does not
need acceptance and hence presentment for acceptance is unnecessary unless
 such presentation is specifically desired.  A draft payable after sight must be
presented for acceptance since the maturity date of the bill can only be
determined after such acceptance.
 
When the drawee of a bill signified his consent to the drawer’s order in the bill of
writing his name across the face of the bill with or without the word “accepted”
the bill is said to be accepted.  Acceptance of a bill, therefore,
 
means that the drawee gives his consent to pay the amount mentioned therein on
the due date/maturity date. The foreign correspondent bank usually advises the
due date to the exporter through his banker in India .
 
5.                        5.                        Noting/Protesting of Foreign Bills
 
At the time the bills are forwarded to the exporter’s bank, it is advisable to
provide the bank with clear instructions/steps to be taken in case the bills are
dishonored on presentation or maturity as the case may be. The drawer/holder for
value may cause the dishonor to be noted by a Notary Public on the instrument
or upon a paper attached thereto or partly upon each.  The notary formally makes
a demand of acceptance or payment upon the acceptor or drawee and on his
refusal to do so notes the same on the bill.  Thus “Noting” means the fact that the
bill has been dishonored is recorded on it and puts the drawer/holder for value on
a higher pedestal in the eyes of law.  This is done within a reasonable time after
dishonor.  Usually the notarymakes the following observations: -
 
 
a)                       a)                       The date of dishonor.
b)                       b)                       The reason, if any assigned for such dishonor.
c)                       c)                       The Notary ’s charges.
 
The foreign bills must, thereafter Protested for dishonor, for it is to be
placed as documentary evidence in the court of law.  In other words the
observations made thereon by the notary will be taken at face value.  A
protest is a certificate issued by the Notary Public attesting that the bill
has been dishonored and will usually contain: -
 
 
 
 
a)                  a)                       The name of the person for whom and
against whom the instrument has been protested.
b)                  b)                       A statement that the Notary Public and the
reason for dishonor demanded acceptance or
payment from the acceptor or drawee.
c)                  c)                       The place and time of dishonor of the bill
d)                  d)                       The signature of the Notary Public.
 
 
THIRD PARTY DOCUMENTS
 
1.                   1.                   Certificate of Origin.
  
Generally the importer to furnish to him a certificate stating that the goods are
of his country’s origin will call upon an exporter.  Independent bodies like, the
Chamber of Commerce, Handicrafts Board, Export inspection Council etc, will
give this certificate…  Who Issue them against payment or nominal fees after
being satisfied of the origin of goods.  There may be a preferential tariff in
favour of goods from particular countries and therefore, it has to be ensured
that the exporter who has brought them into his own country from some other
place of origin has not reshipped the goods; which is not eligible for the
preference.
 
2.                   2.                   Black List Certificate.
 
This is to certify that the ship/aircraft carrying the goods has not touched a
particular country on its journey or that the goods are not of a particular
country.  This certificate is usually called where countries have strained
political relations with another.
 
 
 
  
3.                   3.                   Packing List.
 
This document showing details of goods contained in each parcel/shipment.  It
shows item-by-item the contents of the containers or parcels shipped to enable
the buyer/receiver of the shipment to check the shipment.
 
4.                   4.                   Manufacturer’s/Supplier’s quality/Inspection Certificate.
 
This is a certificate to the effect that the goods, which have been
manufactured/supplied, are as per the requirement of the contract of sale.
 
5.                   5.                   Certificate of Inspection.
 
Inspection certificate, indicating that goods have been inspected before some
countries need under some contracts or shipment.  This certificate is generally
required to be issued by one of the authorized independent Inspection Agencies
like Export Inspection Agency, Textile Committee, and Central Silk Board etc.
 
6.                   6.                   Certificate of Analysis.
 
Certificate regarding the chemical analysis of the goods issued by a competent
office.  Certificate of shipping agent that a certain lot of goods have been
shipped.
 
7.                   7.                   Health/Veterinary/Sanitary Certificate.
 
When the goods imported are foodstuffs, marine products, livestock etc. a
certificate from the health/veterinary/sanitary/authorities is called for.  This is
because the importer desires to know if the goods are fit for human
consumption.
  
 
  
 
 
DOCUMENTS REQUIRED BY EXCHANGE CONTROL
 
 
1.                   1.                   GR/ EXCHANGE CONTROL COPY /SDF FORM.
 
 This is one of the most important documents required by Reserve bank
of India for Exchange Control Purpose.  But now GR/SDF forms has been
waived off incase the total value of shipment is less US$-25000.
The GR form contains the brief details of shipment same as mentioned in the
shipping bill. This comes under the Foreign Exchange Management Act.  But
SDF is a self-declaration made by the exporter the repatriation of the amount
within the stipulated time, under the Indian Customs EDI systems for Exports
(ICES/E).
 
 
2.                   2.                   P.P FORM
 
This is also one of the most important documents for exchange control,
prescribed by RBI, if the export parcel/shipment is routed through Authorized
Foreign Post office, as a postal parcel.  But now PP forms has been waived off
incase the total value of shipment is less US$-25000.
 
 
 
 
********* 
 
 
 
 
 
CHAPTER-4
 
 
INTERNATIONAL BUSINESS & CONTAINERISATION
 
 
 
More than 90 per cent of India ’s foreign trade in terms of volume moves by sea-
routes.  These movements consists of Dry and Wet bulk cargoes such as iron ore,
coal, fertilizer, foodgrains, crude oil & petroleum products and manufactured and
semi-processed items classified as general cargoes.
 
To facilitate the movement and marketing of these commodities and products,
two distinct systems of transportation have been established on the following
patterns: -
  
1)            1)                       Tramp Services for bulk cargoes;
and
2)            2)                       Liner Services for general cargoes.
 
 
     
Modern ship building technology has brought forth dry cargo bulk carriers and
tankers to reduce per unit cost of transportation in tramp shipping.  Likewise the
container technology has brought in the cellular ships to carry general cargo in
containers to reduce cargo-handling cost and promote faster movements.
 
 
 
 
 
 
 
 
 
 
The container system of transportation involves bulking of the break-bulk
cargoes by putting them in containers of standard sizes shown below: -
 
Length Streadth Height
 
10’ X 8’ X 8’
20’ X 8’ X 8’-81/2’-9’-91/2’
30’ X 8’ X 8’
40’ X 8’ X 8’
 
Sometimes height increased up to 91/2’ to improve load factor for voluminous
products.  The International Standard Organization for facilitating the use and
acceptability of containers internationally standardizes the dimensions.  A gantry
grane of requisite capacity is designed for loading and unloading of
containers. Similarly for stacking and movement of containers in the port
premises Tran strainers and spreaders are also designed.  The containers are
lifted from four corners, which are fitted with automatic locking
devices.  Aluminium, steel and other alloys of metal are used in manufacture of
containers.  The tare weight of a 20’ container is kept within 2 to 21/2 tones.
 
The container technology is expected to bring in economies of scale through
bulking of the break-bulk liner carries.  An average container vessel will have
four times care carrying capacity of a conventional vessel with fast speed and
fewer ports of all the turnover of its capacity is also higher.  The latter an
aspectios further augmented by loss time spent at loading and discharge
ports.  However it is highly capital-intensive technology and therefore capacity
utilization assumes a critical aspect.  The efficiency and effectiveness of the
container transportation system is also largely depending upon the availability of
suitable port and inland infrastructure, for handling and movements of
containers.  Containerization usually has to pass through three stages in its
  
development.  The movement of containers would progress in the following
phases: -
 
 
a)                  a)                       From port to port (Pier to Pier)- the
carriage of containers is confined to the scalage of
journey.
b)                  b)                       From Inland Container Depot (ICD) in one
country to ICD in another country- the movement of
containers is extended to the interior parts of the
country and
c)                  c)                       Door to Door-the movement of containers
is further extended right to the factory gates of the
manufacturer/exporter to the door of the importer’s
warehouse in a foreign country.
  
Thus the container transportation system through effective co-ordination of
international movements operates on a much wider scale and endeavors to
provide maximum convenience to cargo owners.  The system aims at: -
 
a)                  a)                  Faster and reliable delivery of goods.
b)                  b)                  Better protection of fragile & containable
cargoes.
c)                  c)                  Ensuring original quality of goods.
d)                  d)                  Reduction in pilferage.
e)                  e)                  Physical separation of dirty cargoes.
f)                   f)                   Simplification of documents & procedures.
g)                  g)                  Reduction in the Packing cost of the cargo.
h)                  h)                  Reduction in cargo handling cost & ship’s
time at ports.
 
 
 
 
 
 
The total impact of the resulting benefits of container is loads to quick turn-
round of vessels and larger turnover.  In the second stage of container
technology, with the establishment of ICDs at Anapanti, Amigaon, Ahmedabad,
Coimbatore, Delhi, Jaipur, Ludiana and other centers, major disabilities of the
upcountry shippers would be removed.  About 25 per cent of
 
the general cargo is containerized.  Four major ports in India ; Bombay
(Mumbai) and Cochin on west coast and Madras (Chennai) and Calcutta
(Kolkatta)/Haldia on east coast handle over 4 lakhs containers annually.
 
 Half of them are handled at Bombay. Special types of containers are designed
for specific types of cargo when required by the trade.  The examples of them
are: -
 
 a)                       a)                       Open top containers or flats for machinery and unpacked
heavy pieces.
b)                       b)                       Bulk containers for dry bulk cargoes.
c)                       c)                       Tank containers for liquid bulk cargoes.
d)                       d)                       Refer containers for temperature controlled cargoes
e)                       e)                       Perforated containers for cargoes with moisture.
f)                        f)                        Insulated containers for fruits & vegetables and
g)                       g)                       Hi-tech containers for voluminous cargo.
  
Usually the most common size in use is the 20’ container.  The capacity of a
container vessel is expressed and tally of containers is made in terms of this size
by use of the short form TEUs (twenty feet equivalent units).  The technical
details of these containers are given below: -
 
 
 
 
Category-I
 
Length Width Height Cube
 
Overall 20’ 8’ 8’
6058mm 2438mm 2438mm
Internal 19’-51/2” 7’-8” 7’-4” 1105 Cu.Ft.
5929mm 2337mm 2235mm 31.3M
 
Max. Payload 18000 Kgs.
 
 
 
Category-II
 
Overall 20’ 8’ 8’-6”
6058mm 2438mm 2591mm
Internal 19’-51/2” 7’-8” 7’-91/2” 1174 Cu.Ft.
5929mm 2337mm 2376mm 33.3M
Max. Payload   18000 Kgs.
 
Volumetric Calculation of Weight for charging: -
 
When shipping lightweight and bulky packages, use the following formula to
help you determine their volumetric weight:
 
Multiply the width by the length by depth of your shipment and divide the total
by 6000.
 
 
 
 
For example
 
If the width is 50cm, length 40cm and the depth 30cm.
 
 Vol. Wt. = 50cm x 40cm x 30cm  = 10 Kgs
6000
 
 
Now, see the role of Railways and Warehousing Agencies in the container
transportation system: -
 
a)                       a)                       Terminal operators at inland Container Depots, Container
Freight Stations and Container yards.
b)                       b)                       Stuffing and Destuffing of containers.
c)                       c)                       Croup age and aggregation of Cargoes for LCL/FCL
containers.
d)                       d)                       Repair, clearing and marking of containers.
e)                       e)                       Leasing of containers.
f)                        f)                        Warehousing and storage.
g)                       g)                       Local transportation and handling of containers at various
transit and intermediate points in the intermodel circuit.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Extend of Containerization feasible for different product groups of general
cargo.
 
 
Commodity. Percentage Containerisable.
 
1.Coffe, Tea, Spices, Dairy products, eggs 100%
Fish and fish preparation, fruits, and vegetable
Leather and leather products, medicines, drugs
And pharmaceutics, plastics and plastic products
Tobacco and textile manufacturers.
 
2.Cereal and cereal preparations, chemicals 75%
Crude animal and vegetable products,
Electrical machinery, non-ferrous metals,
Oil seeds, nuts and kernels textile fibers.
 
3.Chemical elements, machinery, fixed vegetable oils 50%
And fats, non-metallic mineral manufacturers.
 
4.Crude fertilizers and minerals, animal 25%
Feedstuffs, mineral tars and crude chemicals,
Pgeen and pgeen boards, pulp and waste pgeen,
Sugar and sugar preparation, transport equipment,
Iron & steel products.
 
 
 
 
 
 
 
CHAPTER-5
 
              WORLD AND INDIAN ECONOMY
 
Due to the strong demand in the United States and vibrant Asian
economies, merchandise trade grew by 2.5% in 2002, up from a 1%
decline in 2001. But trade growth was uneven and masked the sluggish
trade performance in many regions. The trade downside risks on
predictions for 2003 are large, bearing in mind the continued sluggishness
in the world economy, the conflict in Iraq and the setback caused by the
spread of the Severe Acute Respiratory Syndrome (SARS).
 
In value terms measured, exports rose by 4% to USD 6,240 billion nearly
offsetting the decline of the preceding year. Commercial services trade
expanded a little faster than merchandise trade reaching a new record
level of USD 1,540 billion.  The merchandise trade of developing
economies in Asia grew by about 12.5 per cent in volume terms, driving
the entire continent’s exports and imports to grow by double digits.
 
 
 
 
 
 The region also saw diverging growth paths between Japan, still Asia’s
largest economy, and China andIndia , the two most populous nations in
the world. In value terms, China’s merchandise exports and imports
increased by more than 20 per cent while India’s also grew at double-digit
rates. China has over taken the U.K to become the fifth largest trader in
the world.  Japan’s merchandise export growth was only 3 per cent while
imports contracted.
 
The imports into the US grew by 3 per cent driven by continuing
consumer spending and increasingly expansionary fiscal stances. But
exports declined by nearly 4 per cent partly reflecting reduced demand
from some key trading partners whose economies were either hardly
growing, such as Western Europe and Japan, or in outright contraction, as
in Latin America.
 
Western Europe’s trade stagnated in volume terms with merchandise
exports increasing by just 0.6 per cent and imports declining by 0.5 per
cent.
 
 
 
 
 
 Latin America saw on of its worst years with the crises in Argentina,
Venezuela and difficulties in Brazil in the run-up to the national elections.
Latin America’s merchandise imports declined by over 5 per cent in 2002
although merchandise exports rose by about 2 per cent with the decline in
intra-regional trade being balanced by increased shipment to other
regions.
 
Oil exporting LDC saw a strong increase in the dollar value of their
shipments as they increased their production and volume of
trade.  Exports of the non-fuel commodity exporting countries continued
to rise after marked gains in 2001.  However, exporters of manufactured
goods experienced stagnation.
 
In the year 2002, the real effective exchange rate of the UD dollar
depreciated while that of the Euro and Yen appreciated.  However, the
realignments did not seem to have materially affected the US trade deficit,
nor current account surpluses being accumulated by the Euro Zone
Countries, Japan and developing Asia.
The tune of Foreign Direct Investment (FDI) has been rise in 1990’s and
peaked in 2000. But there is till good rate of FDI inflows to China,
Central/Eastern Europe that continued to increase very strongly.
 
INDIAN ECONOMY
 
The Actual GDP growth is estimated to be at 4.4 per cent in 2002-03,
down from 5.6 per cent in 2001-02.  According to these estimates, the
impact of the adverse supply shock from drought conditions following a
weak southwest monsoon turned out to be worse than initially
anticipated.  The rate of savings of the private sector declined marginally
from 4.1 per cent in 2000-01 to 4.00 per cent in 2001-02 while the public
sector dis-saving continued to worsen from 2.3 per cent in 2000-01 to 2.5
per cent in 2001-02.    For the first time after 1975-78 period, the overall
saving investment balance turned around in 2001-02 into a surplus of 0.2
per cent of GDP.  While the public sector savings gap widened in 2001-02
from 8.7 per cent of the GDP in 2000-01 to 8.8 per cent, the private sector
surplus increased from 9.5 per cent to 10.3 per cent of GDP.
 
The foreign exchange reserves increased by US $ 21.3billion during 2002-
03 to US$ 75.4 billion, equivalent to more than a year imports. The
increase in reserves was almost entirely on account of foreign currency
assets despite prepayment of the multilateral debt amounting US$
3.0billion.
 
 
 
The sharp increases in the reserves in the recent period have raised issues
about the costs and benefits of reserves.  The financial   cost of additional
reserve accretion is estimated to be low.  These costs are likely to be more
than offset by the return on additional reserves.  Furthermore, high
reserves have provided important benefits in the form of precautionary
lines of defense against unforeseen external shocks, the welfare gains
from smoothing domestic consumption and investment, and the more
visible benefits of ensuring financial stability despite an unsatisfactory
international environment.
 
The external debt increased by US$ 3.5 billion during April-September
2002 mainly on account of non-resident deposits and official aid.  The
external debt to GDP ratio is estimated to have declined from 20.0 per
cent at end March 2002 to 20.1 per cent at end-September-2002.
 
 The ratio of short-term debt to total debt as well as to total reserves
continued to remain comfortable at 3.0 per cent and 4.8 per cent
respectively as at end of September 2002.  The strength of the foreign
exchange reserves enabled prepayment of foreign currency loans from the
Asian Development bank (ADB) and the World Bank amounting to US$
3.0 billion in February 2003 by the Government of India .
 
 
 
As per the data’s from the Directorate General of Commercial Intelligence
and Statistics (DGCI&S) indicative a vigorous recovery of merchandise
exports from a slump in the preceding year.  Export growth of over 18 per
cent during 2002-03 was broad-based, led by gems and Jewellery,
engineering goods, chemicals and related products, textiles and ores and
minerals.  In terms of market destinations, growth of exports was mainly
to USA, China, the Organization of Petroleum Exporting Countries
(OPEC), European Union and Singapore.
 
In the year 2002-03, our exports has been increased by 18 per cent over
the previous year from US$ 43.8 billion to US$ 51.7 billion, imports rose
by over 17 per cent to from US$ 50.7 billion to US$ 59.4 billion. 
 
 In tune with the changing financial architecture and the trends in business
environment and to consolidate the economic gains, Reserve Bank
of India ushered in several policy initiatives during 2002-03 including
allowing banks and financial institutions to issue Certificates of deposits
on floating rate basis, freedom to banks to decide the period of reset on
variable rate deposits, permission to banks to open Offshore Banking
Units in special Economic Zones.
 
 
 
Meanwhile, the process of liberalization of the insurance sector continued
during the year 2002-03.  More insurance companies were registered with
IRDA taking the total number of insurers to twenty-seven, thirteen each of
life insurance and general insurance companies and one reinsurance
company.  IRDA reported a growth of 38.9 per cent and 26.3 per cent
during the year 2002-03 for life insurance and general insurance sector
 respectively.
 
 
  **************
 
 
 
 
N.B: All rights of this article reserves with author.
   
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