CERTIFICATE

This is to certify that the project work done on EXPORT PROCEDURE AND
DOCUMENTATION, A STUDY W.R.T “NITIN SPINNERS LIMITED” Submitted
to Faculty of Management Studies, Udaipur by Anil Khatik in partial fulfillment of the
requirement for the award of PG Degree in Master of Business Management, is a
bonafide work carried out by him/her under my supervision and guidance. This work has
not been submitted anywhere else for any other degree/diploma. The original work was
carried during 15/07/2010 to 31/08/2010 in “NITIN SPINNERS LIMITED”

DATE: 27/10/2010

Prof. Anil Kothari Dr. Hanuman Prasad

(Training and Placement Officer) (MBA-RMAT Coordinator)
FMS, Udaipur FMS, Udaipur

1
 STUDENT’S DECLARATION

I hereby declare that the Project Report conducted at EXPORT PROCEDURE

AND DOCUMENTATION, A STUDY W.R.T “NITIN SPINNERS LIMITED”
Under the guidance of Prof. ANIL KOTHARI Submitted in partial fulfillment of the
requirements for the PG Degree in Master of Business Management in Faculty of
Management Studies, Udaipur is my original work and the same has not been submitted
for the award of any other Degree/diploma/fellowship or other similar titles or prizes.

PLACE: Udaipur Anil Khatik

DATE: 27/10/2010 (RMAT 3rd Semester)
FMS, Udaipur

2
 ACKNOWLEDGEMENT

I would like to thank Faculty of Management Studies to give opportunity to work

on this project. My sincere thanks to Mr. K. L. Pareek, General Manager(HR) of NITIN
SPINNERS LIMITED for permitting me to do the project.

Thanks to all in marketing department at Nitin Spinners Limited who have helped
me complete this useful project report. My sincere thanks to Mr. Manish Biyani
(Marketing Manager) for his valuable support and guidance. It was overwhelming
experience for me to have kind support right from the beginning to the end of my training
and I also would like to thanks Mr. Lokesh Thakur (Logistics) and Mr. G.S. Rathore
(Asst. Manager, PPC) for their valuable support.

I sincerely express my gratitude to Prof. Karunesh Saxena, Prof. Anil Kothari

and Dr. Hanuman Prasad with all other faculty members for their effective guidance for
the successful completion of this project report.

3
 Table of Contents

S. N. Particulars Page No.

1. Executive Summary 5
2 Introduction to Textile Industry 6-7
3 Introduction to the Company 8-17
4 Introduction to the Project 18-19
5 Review of Literature 20-26
6 Research Methodology 26-27
7 Analysis & Interpretation 27-31
8 Export Procedure at Nitin Spinners Ltd. 31-35
9 Export Documents 35-42
10 Terms of Shipment 42-48
11 Realization of Export Proceeds 48-50
12. Realization of Export Incentives 51-52
13 Sales Turnover & Future Trend of Nitin Spinners Ltd. 52-55
14 Conclusion 56
15 Bibliography 57-58
16 Annexure 59-65

Executive Summary

4
 The project was done at Nitin Spinners ltd. It is a government of India recognized
export house which deals with the cotton yarn and cotton fabric. Nitin Spinners Ltd is
known for its quality and good values.

Textile is emerging as a hip look on the streets and in the office to home covering
men or women, young or old from top to bottom. Thanks to a blend of nature and modern
technology, the new look of textiles are soft and supple. Textile has become a very
specialized high fashion that requires talented specialists to turn into a quality product.
They design and develop textile products such as furnished carpet, curtains at wide
variety of price.

Although the study covers whole organization including their departments such as
Merchandising department, Production department, Shipping department, Packing
department etc, but I mainly concentrated at the Marketing department, which is
responsible to serve as a base for the company.

Whole management of export documents has been done which includes preparing
documents for different modes of exports, to analyze the documents, prepare and send
them to their destination. The documents include Letter of credit, Different kinds of
invoices, Certificate of origin, Bill of lading, Bank receipt certificate, packing list, Bill of
entry etc.

Introduction of Textile Industry

5
 The Indian Textile Industry is one of the largest in the world with a massive
raw material and textile manufacturing base. Our economy is largely dependent on the
textile manufacturing and trade in addition to other major industries. About 27% of the
foreign exchange earnings are on account of export of textiles and clothing alone. The
textiles and clothing sector contributes about 14% to the industrial production and 3% to
the gross domestic product [GDP] of the country.

Around 8% of the total excise revenue collection is contributed by the textile

industry. So much so, the textile industry accounts for as large as 21% of the total
employment generated in the economy. Around 35million people are directly employed
in the textile manufacturing activities. Indirect employment including the manpower
engaged in agricultural based raw-material production like cotton and related trade and
handling could be stated to be around another 60million.

Indian textile industry is constituted of the following segments: Readymade

Garments, Cotton Textiles including Handlooms, Man-made Textiles, Silk Textiles,
Woollens Textiles, Handicrafts, Coir, and Jute. The Apparel Export Promotion Council
[AEPC] represents over 8000 small, medium, and large exporters. The country ranks
sixth among the top garment exporting countries globally. Nearly 78% of garments are
exported from India are cotton-based. The main products are ladies garments, blouses,
skirts, T-Shirts and trousers.

INDIAN EXPORT AND IMPORT SCENARIO (2009)

Indian textile trade has undergone massive restructuring following the 1991
liberalization policies. Indian textile exports fell from $200.9 billion in 2008 to $165
billion in 2009. India was ranked 22nd in the world in terms of textile export volume.
During this period, the growth rate was recorded as 18.11% and the bigger surprise was
that the import sector had experienced a growth rate of 34.30%. India was ranked 15th in
the world in terms of import volume.

6
VISION OF INDIA 2010 FOR TEXTILES
 Textile economy to grow to $85billion by 2010
 Creation of 12 million new jobs in textile sector.
 To increase India’s share in world trade to six per cent by 2010.
 Achieve export value of $40 billion by 2010.
 Modernization and consolidation for creating a globally competitive industry.

Introduction to the company

 Nitin spinners ltd. is engaged in manufacturing of combed and curded

7
 cotton yarn from Ne4 to Ne40 in single and multifold and knitted fabrics.
 Nitin spinners plant & machineries imported from textile machinery
manufacturers like Rieter (Switzerland), Savio (Italy), Mayer 7 Cie (Germany),
Schlofhorst (Germany), Truetzschler (Germany), and Elitex (Czechoslovakia).
 Nitin spinner also installed plant & machinery purchased from laxmi
machine works, Kirloskar Toyoda textile machine & Zinser textile system.
 Presently they have capacity of 27,216 spindles and 1872 rotors for
cotton yarn with manufacturing capacity of 10000 TPA and Kitting machines for
Knitted fabrics with a manufacturing capacity of 2000 TPA.
 They have captive power plant of 8.5 MW based on Furnace Oil along
with stand by arrangements for electricity.
 Cost per unit is lower by 35% to 40% against per unit cost charged by
state Electricity Board.
 Nitin spinner exporting Cotton yarn and Knitted fabrics to countries like
Australia, Bahrain, China, Colombia, Egypt, Israel, Italy, Korea, Mauritius, Russia,
Poland, U.K., U.S.A.
 Right now Nitin spinners are restricted to 18 – 20 countries.
 They are decided to expend their manufacturing capacity by adding
50400 spindles for cotton yarn production and 12 knitting machines for Knitted fabric
production.
 They are going to set – up a power plant of 8.18MW near existing unit
located at Hamirgarh, Bhilwara.
 Nitin spinner is the only company who is producing 100% cotton yarn
and fabric in Bhilwara.

History & Expansion of Nitin Spinners Ltd.

8
 Nitin spinners was incorporated as a private ltd. company on 15-10-1992 under
the companies act 1956 in the state of Rajasthan having the name “NITIN SPINNERS
PRIVATE LIMITED”

 It was converted into a public limited company on 15-11-1994 as “NITIN

SPINNERS LIMITED ”. The individual promoters of the company Mr. R.L. Nolkha,
Mr. Dinesh Nolkha and Mr. Nitin Nolkha”.
 First unit of Nitin spinners was set up in the year 1993 at Hamirgarh
Bhilwara for manufacturing coarse cotton yarns with two open – end spinning
machines with 192 Rotors each aggregating 384 rotors which were acquired from
Elitex, Czechoslovakia, under EPCG scheme.
 The first expansion of nitin spinners ltd. was took place in 1994 when they
install one Autoconer Machine of 216 Rotors from Schlafhorst AG & Co., Germany
and increased the number of Rotors to 600. The total capital outlay of this project was
Rs. 400 lacs.
 The second expansion was took place in 1996-97. The expansion project
involved acquisition of two autoconer open-end spinning machines of 240 rotors each
from Schalafhorst ag & Co., Germany, increasing our capacity to 1080 Rotors. The
total capital outlay towards this project was Rs. 1,100 lacs.
 The third expansion was took place in the year 1998-99 it involved two
open end spinning machines of 384 Rotors from Elites, Czechoslovakia,. The total
capital outlay of this project was Rs. 190 lacs.
 The fourth expansion project in the year 1999 it involved installation of
14.112 spindles to produce combed and carded cotton yarns of 20s to 40s count. At
this expansion phase they also went for forward integration programme by installing 7
knitting machines. The total outlay of this project was Rs. 5,018 lacs.
 The fifth expansion in the year 2003it involved the addition of 13,104
spindles and 6 knitting machines. Capital outlay of this project is Rs. 3,550 lacs.
 Sixth expansion project in February 2005 it involved addition of 408 Rotors

9
 and 2 knitting machines. The capital outlay of this project was Rs.250 lacs.

Product line of Nitin Spinners Ltd.

A. Yarns

Recognized worldwide as the industry leaders for spun yarns, it has perfected it’s
spinning processes by applying state of the art automated technology and innovation in
every phase of our yarn manufacturing process.
The range of Yarn that we manufacture includes:

Open End yarns from Ne 5/1 to Ne 30/1 ( Nm 8/1 to Nm 50/1 )

Multifold Open End Yarns
Ring Spun Combed Yarns from Ne 20/1 to Ne 50/1 ( Nm 34/1 to Nm 85/1) 
Multifold Ring Spun Yarns
'S' & 'Z' Twist Yarns
Dyeable cheese cones - Soft package
100% Organic Cotton Yarns and Blends

B. Fabric
In quest for value addition and to augment the spinning process they manufacture
high quality knitted fabrics. The quality yarns produced in their unit are used to
manufacture top quality grey fabrics to be consumed by the global apparel industry. All
the fabrics are made on the latest Mayer & Cie knitting machines. They are
manufacturing knitted fabrics as well as fabrics with Elastane upto 10%. They offer
fabrics in greige form in tubular and open width. The range includes:
Single Jersey
Pique structures 
Interlock structures
Rib structures
Three Thread Fleece
Our fabrics are available in different diameter and gauges.

Board of Directors
10
 1. Mr. R L Nolkha
(Chairman & Managing Director)

2. Mr. Dinesh Nolkha

(Managing Director)

3. Mr. Nitin Nolkha

(Executive Director)

4. Mr. P Maheshwari
(Chief Financial Officer)

5. Mr. Y R Shah
(Director)

6. Mr. Bhagwan Ram

(Director)

7. Dr. S S Banerjee
(Nominee Director)

8. Mr. Sudhir Garg

(Company Secretary & DGM Legal)

Organizational Structure of the Company

Board of
Directors

Managing
Director

11
 Chief Executive
Officer

GM GM GM
Marketing PPC Finance

Executives Executives

GM
GM GM Quality
Purchase/Store
Production Control

Executives Executives Executives

Management Potential
Mission

Developing long term relationship with suppliers with an aim to be the most reliable
supplier in Textile Value Chain from Fibre to Garment.
Providing superior quality products at competitive prices and establishing a brand
value in the international arena.

12
 Exceeding industry standards with exceptional customer and technical service.
Maintaining our competitive strategic position through leading edge technology.
Providing a safe, fulfilling and rewarding work environment for employees Promote
partnerships with government agencies and institutions of international recognition.
Providing training to our employees for their future development.
  
Vision
Remain at the forefront in high quality textile products manufacturing.
   
Create value for shareholders and allied industries.
   
Increase foreign exchange earnings by being a preferred international supplier.
   
Stay effective & proactive in developing new markets and products
   
Completing our vertical integration chain by entering into high quality apparel
manufacturing.
   
Endeavour for the ultimate satisfaction of our allied partners with:
   
 The Right Technology

 The Right Raw Material

 The Right People And above all

 The Right ATTITUDE

 

Financial Data

Balance sheet
Schedule As at 31.03.2010 As at 31.03.2009
Particular
no. (Rs. In Lacs) (Rs. In Lacs)
a. Sources of fund
 Shareholder’s fund

13
Share Capital 1 4583.30 4083.39
Reserves & surplus 2 3378.49 3310.56
7961.88 7393.95
 Loan Fund 3
Secured Loans 30850.72 27409.50
Unsecured Loans - 2531.77
30850.72 29941.27
Total 38812.60 37335.22

b. Application of Fund
 Fixed Asset 4
Gross Block 37510.38 37701.03
Depreciation 8002.66 6384.73
Net Block 29507.72 31316.30
 Capital work in progress - 7.93
29507.72 31324.23
Investment 5 0.06 0.06
Current asset, loans and
6
advances
Inventories 7602.86 4092.69
Sundry Debtors 940.25 1524.24
Cash & bank balances 9.93 53.05
Loans & Advantages 1251.51 2269.43
9804.55 7944.41
 Less: Current liabilities
7
& Provisions
Current Liabilities 709.32 2187.21
Provisions 107.63 95.77
816.95 2282.98
Net Current Asset 8987.60 5661.43
Deferred Tax Asset 317.22 349.50
Total 38812.22 37335.22

Profit & Loss Account

Schedule Year ended Year ended
Particulars
no. 31.03.2010 31.03.2009
INCOME 8 30195.96 26292.31
Gross sales 30195.96 26292.31

14
Less: excise duty 0.47 65.49
Net sales 30195.49 26226.82
Other income 9 42.47 89.28
Increase/decrease in stock 10 109.90 201.54
Total 30128.06 26517.64

EXPENDITURE
Material consumed 11 18576.39 16856.04
Payment to and provisions for
12 1300.59 1077.68
employee
Operating and other expenses 13 6785.31 5890.60
Financial Expenses 14 1500.03 2380.92
Total 26153.22 26205.24
Profit before depreciation &
1964.84 312.40
Exceptional items
Exceptional items - 2926.47
Depreciation 1865.11 1691.39
PBT 99.73 4305.46
Less Taxation:
Current 15.41 -
Deferred 32.28 1560.91
Fringe Benefit Tax - 2.62
Mat Credit Entitlements 15.41 -
PAT 67.45 2747.17
Less: Adjustments for Earlier
Years
Depreciation Written Back - 1998.92
Income Tax 0.48 16.35
Deferred Tax Expenses - 679.43
Net P/L after adjustment of
67.93 1411.33
earlier years
Add: Balance brought forward - 1206.65
Balance available for
67.93 204.65
appropriation

APPROPRIATION
Dividend on Preference Shares - 1.28
Dividend Tax - 0.22
Capital Redemption Reserve - 50.00

15
Transfer from General Reserve - 356.18
Balance Carried to Balance
67.93 0.66
Sheet
Basic & Diluted EPS 0.15 6.73

Overseas Market of Nitin Spinners Ltd.

Introduction to the Project

16
1.1 Need for the Study

Export in simple words means “selling goods abroad” or it refers to “the

outflow of goods and services and inflow of foreign exchange”.

Each country has its own rules and regulations regarding the foreign trade. For
the fulfillment of all the rules and regulations of different countries an exporting
company has to maintain and fulfill different documentation requirements. The
documentation procedure depends on the type of goods, process of manufacturing,
type of industry and the country to which goods is to be exported.

In order to complete an order, many activities like communication between

different departments, the process of outsourcing raw material, payment process,
quality, control, packing and shipment of goods etc. are undertaken. Different
departments work in synchronicity & various documents are prepared in the process.
Hence, a single mistake or lack of proper planning can lead to the rejection of the
whole order or increase the cost.

Today’s world is the global village in which each country is trading with other
countries in the form of export or import. This field has a great scope because today
each company whether it is small or big wants to engage in foreign trade.

Hence, it is very important to study the export procedure and documents

involved in it. Hence, selecting this project is a judicious decision.

1.2 Objectives of the Study

17
 a) To understand the yarn and knitted fabric Business Processes.
b) To understand the working of various departments of Nitin Spinners Ltd.
contributing towards processing of an export order.
c) To study the Export Documentation in Nitin Spinners Ltd
i. Pre – Shipment procedures
ii. Post – Shipment procedure

1.3 Scope of the Study

The aim of this project report is to unfold stepwise all complexities
involved in the export business right from receiving an export order to final
realization of export proceeds. It gives a detail idea of how different departments
in Apparel export firm are synchronization so that an export order is processed.

This project would be helpful to fulfill many loopholes of manufacturing,

processing and analyzing the export order as well as documentation.

It will also look into the steps taken to manage risks in the point of the firm.

1.4 Limitations of the Study

 It takes into account only the practical implications of documentation
 Only cotton yarn and fabric exports have been analyzed.
 Disclosure of certain sensitive information, e.g. the commissions for the Post-
Shipment formalities
 Formalities at both the stages of shipment are subject to change by the home or
foreign Country’s norms.

2. Review of Literature

18
 Review of literature shows the previous studies carried out by the researcher in
this field in order to gain insight into extent of research. The research problem can be
more understood and made specific referring to theories, reports, records and other
information made in similar studies. This will provide the researcher with the knowledge
on what lines the study should proceed and serves to narrow the problem.

Thomas A. Cook (1994)1 says, “One of the major pitfalls in an international sale is the
quality of the documentation supporting the transaction. A mistake in spelling, execution,
language or number of copies will cause substantial delays in obtaining clearance and
require additional expenditures to complete the process.”

Many potential exporters shy away from exporting due to the fear of the potential
headaches caused by export documentation. In reality, while the process is complicated
and has a steep learning curve, with the right approach and support from several
resources the process can be simplified and the inherent obstacles lifted.

Most of the necessary documents required for an export transaction are the
invoice, packing list, export declaration and the bill of lading. Other documents that may
be required include: payment instruments (letters of credit, sight drafts), health/sanitary
certificates, certificates of origin, export/import licenses, SGS inspection certificates,
carnets (customs passes), certificates of insurance and required import documents.

In addition to knowing the specific documents, the exporter will need to know
language, the number of copies, required signatories, format, notarization,
consularization, and the shipping instructions.”

Laurel Delaney (2006)2, describes AES Direct, a free online process for filing Shipper's
Export Declarations. AES stands for Automated Export System. Here are some
highlights:

19
 1. Ensures export compliance - It returns a confirmation number to verify that you
successfully filed your export documentation.
2. Corrects errors - Get immediate feedback when data is omitted or incorrect, and
correct errorsat any time.
3. Eliminates paper review - Eliminates time delays of handling paper.
4. Stays up-to-date with trade agreements - AES conforms to NAFTA and GATT,
making it easier to do business in multiple countries.
5. Evaluates and measures potential markets - Provides accurate and timely
export statistics.

Koch and John (2007)3 say the subsequent need is to reduce the risk of loss to the small
business exporter if and when their foreign customer does not pay the exporter's sales
invoice. Again, there are solutions to mitigate these risks of loss, which result from two
sets of risk of loss event perils:

1. Foreign "Commercial" Risk of Loss Events

This event occurs in the foreign client's inability or failure to pay invoices due
to bankruptcy/Insolvency, Slow-Pay Behavior (Protracted Default) , Devaluation
of Foreign Currency

2. Foreign 'Political' Risk of Loss Events

This event occurs when a foreign country's regulations and statutes allow
Confiscation of Goods, Suspension of Import Licenses, War, Civil Strife,
Rebellion, and Currency Inconvertibility.
Sales made under irrevocable letters of credit (LCs) are a traditional tool used
to mitigate risk of loss. An LC places the U.S. exporter's bank and their foreign
customer's bank inside the trade transaction, reducing the risk of loss to both

20
 parties for failure of either one to live up to the export sales/purchase contract. The
exporter's commercial bank will assist with the LCs if the bank provides
international banking services, or if the bank uses another correspondent bank that
maintains an international banking department. There are some drawbacks to LCs.
Not all foreign buyers can pay under an LC because of the high fees, often 2-3%
of shipment value. An LC requires a credit relationship between the foreign
importer and its bank, which might divert precious working capital from the
foreign buyer's other local credit needs.

Corinne Campbell4 (2009): says, ‘The True Cost of Exporting’ is the cost of export
documentation, a necessary expense that can be eased by knowing what’s required. Here
are some ways to tighten upon export documentation.

Organizing the right documentation and paperwork makes the export process
simpler, smoother and cheaper. When it comes to a paper trail in export, it doesn’t matter
if you are shipping large volumes or just sending a few samples: the goods have to get
there and the exporter has to get paid. Not having the right paperwork can result in an
importer not being able to accept the goods and the exporter not being paid, which is
costly in terms of time and money.

Export documentation covers the spectrum of: shipping documents, commercial

documents, inspections, permits and consular stamps. Each requires preparation time,
courier costs and fees with its associated risks of mistakes adding to delays and
considerable costs.

Documentation must be precise because slight discrepancies or omissions may

prevent merchandise from being exported, result in non-payment, or even result in the
seizure of the exporter’s goods by customs. Most documentation is routine for freight

21
forwarders and customs brokers, but the exporter is ultimately responsible for the
accuracy of its documents. The number and kind of documents the exporter must deal
with varies depending on the destination of the shipment. Because each country has
different import regulations, the exporter must be careful to provide all proper
documentation. It is important to do your research with customs, your industry
association, government departments, freight forwarders and the overseas buyer to be
fully aware of the procedures per product and per country of export.

It would be a waste of time and money to go through researching the specific

needs of your export and not having the internal knowledge to implement a process.
Training yourself and your staff in the intricacies of export including documentation,
logistics, finance as well as cultural issues can make the difference between being
successful for years to come or failing after the first shipment.

International trade carries high levels of risk. Knowing how to avoid the pitfalls is
the key to success.

Posner and Martin5 (2000) in his study found that it is surprising that many traders do not
use Incoterms to help them draft their export documentation. The International Chamber
of Commerce's (which has an international membership from over 130 countries) Guide
to Inco terms 2000 is a superb helpline to the companion Inco terms 2000, which came
into force on 1 January 2000. A definition of EXW EX Works says there is not only a
color chart showing the seller's primary duty but it also describes the documents required,
the optional documents that may be required and the buyer's primary duty.

2.1 Foreign Trade Policy 2009-2014 – Special Focus Initiatives

 Government of India shall make concerted efforts to promote exports in all sectors by
specific sectoral strategies that shall be notified from time to time Rs. 325 crores
22
 would be provided under promotional schemes for textile for exports made with effect
from 1st April 2009.

 EPCG Scheme at zero duty has been introduced for certain engineering products,
electronic products, basic chemicals and pharmaceuticals, apparel and textiles,
plastics, handicrafts, chemicals and allied products and leather and leather products.

 Technical textiles have now been added under Focus Product Scheme.

 Under DEPB Scheme,

a. Duty credit scrip under Chapter 3 i.e. Promotional measures and under DEPB
scheme will now is issued without waiting for realization of export proceeds. The
exporters will be required to submit proof of export proceeds realization with the
time limits prescribed by RBI. This provision is now applicable.

b. DEPB scripts were earlier used for payment of duty only on imported items that
were under free category but now this utilization is now extended for payment of
duty for import of restricted items as well.

 Under EPCG Scheme,

a. In case of decline in exports of a product(s) by more than 5%, the export

obligation for all exporters of that product(s) is to be reduced proportionately and
this provision is extended for the next year.

b. Reduction in customs duty under EPCG scheme from 5% to 3%.

 Additional funds of Rs. 1200 crores have been allotted for CST/TED/Drawback
refunds.

23
 Allowing payment of interest on delayed payments of Terminal excise duty and
central sales tax.
 additional fund of Rs. 1400 crores is provided to clear the backlog claims of TUF.

2.2 Government of India,” Rates of Duty Drawback, 2010-2011”9

1. The drawback rates have been determined on the basis of certain broad parameters
including, interalia, the prevailing prices of inputs, standard input/output norms
(SION), share of imports in the total consumption of inputs and the applied rates of
duty. The incidence of duty on HSD/Furnace Oil has been factored in the drawback
calculation. The incidence of service tax paid on taxable services which are used as
input services in the manufacturing or processing of export goods has also been
factored. The Commissioners may ensure that the exporters do not avail of the refund
of this tax through any other mechanism while claiming the all industry rate of
drawback.

2. The Drawback Schedule includes several new items. These include coffee (raw
beans), in bulk, coffee (roasted and /or decaffeinated), in bulk, tea, in bulk, tea in
consumer packs including tea bags(sachets), instant coffee, parts/components of
harness and saddler made of leather or non leather including textiles or synthetic
materials, stainless steel, jeweler, brass bushes and optical fibre cables. The Schedule
may please be perused for details.

3. The drawback rates have undergone changes in line with the changes in prices of
inputs, duties etc. Thus the Drawback rates have been decreased in most cases. The
more important changes in textile sector are discussed below: -

 Cotton Yarn and Fabrics:

24
 The earlier drawback rate for grey cotton yarn of less than 60 counts was 6%
(grey) / 7.1% (dyed). The rate for cotton yarn of 60 counts and more was 9.5%
(grey) / 10.6% (dyed).

The new rate now is 4% for cotton yarn (grey) and 5% for cotton yarn (dyed)
irrespective of the counts of the yarn. As for cotton fabrics, the new rate is 4.6%
(grey) / 5.5% (dyed) with a drawback cap of Rs.14per kg (grey) / Rs.20per kg (dyed).
The new drawback rate for lungies and Real Madras Handkerchiefs is 5.5% with a
cap of Rs.20/kg, the same as applicable for dyed fabrics.

In the case of denim fabrics the new rate is 5.7% with a cap of Rs.21.5/kg as
against the earlier rate of 8.5% with a cap of Rs.32/kg.

3. Research Methodology

3.1 RESEARCH DESIGN

Our primary objective of doing this project is to get the first hand knowledge of
functioning of an export unit. Since we are not comparing two different entities on the
basis of their financial results, rather we are learning the export procedure. Hence
exploratory research design is the need of the hour.
Further there are few reasons which made me to use Exploratory Qualitative
research:
 It is not always desirable or possible to use fully structured or formal methods to
obtain information from respondents.
 People may be unable & unwilling to answer certain questions or unable to give
truthful answers.

25
  People may be unable to provide accurate answer to question that tap their sub
consciousness.

3.2 RESEARCH TOOLS USED

 In Primary data, Qualitative research through In-Depth Interviews has been

adopted. For interviews non–structured open-ended questions were used.
 In Secondary data, both internal & external research was done. For internal
research Ready to use documents available with the organization were used. For
external research Internet website & published books were consulted.
 Using the sales turnover of past five years, simple percentage are calculated for
basic styles and for the company’s buyers.
 Using the statistical technique of least square method future trend for this
concern has been forecasted.

4. Analysis and Interpretation

4.1 To understand the Textile Business Process involved in Nitin Spinners Ltd.

The textile supply chain accounts for a good share in terms of number of
companies and people employed. The textile spinning industry here is divided into three
main segments. At the top of the supply chain, there are fiber (raw material) producers
using either natural or synthetic materials, i.e. suppliers of the raw material. The second
segment of the supply chain is the yarn and fabric manufacturer which converts fibre or
yarn into in to yarn/fabric with many processes involved. The third segment is the buyers
who are responsible for making apparels available to consumers.

It has been explained using the “T” angle yarn/fabric supply chain. This shows
how buyer, suppliers and yarn manufacturer are linked to each other. The “T” angle

26
 illustrates how information flows from the buyer to the yarn manufacturer. The
information normally, specification of the yarn/fabric given by the buyer, are studied by
the manufacturer and accordingly list of raw materials required is made. Once approved
by buyer, the orders are placed with the suppliers with approved samples. When the raw
materials are received as per the specifications given to the supplier, in-house
manufacturing starts with the production. The different process of manufacturing results
in the final yarn/fabric product which is finally dispatched to the Buyer.

4.2 The “T” angle of the textile Supply Chain

Yarn or Fabric Specification

Cotton Production

The The
Buyer Supplier

Bale packing
Samples & Order

The Manufacturer
Order & Purchase
Packaging

4.3 The buyer side of the Supply chain

Finishing Production
The buyer side generally involved in fabric manufacturing or garment
manufacturing. They give yarn/fabric specification to the manufacturer and their
finished product to the retailers or further garmenting production house.

27
 1. Yarn/fabric Specification:
In order to get the desire final product the buyer decide which specification
have to given to the manufacturer. These specifications are dependent upon the
fabric to made or garment to be made by the buyer.
The specifications are ultimately influenced by the end user demand for
which the product is being intended to make.

2. Samples & Order

The other activity which the buyer side does is that to prepare sample and
to order the quantity desired after proper inspecting the manufacturer samples and
negotiating properly, the order is made.
Samples to be sent to the manufacturers must be prepares with extreme care
otherwise may cause arrival of faulty lot, which would surely be bearing only loss.

4.4 The supplier side of the Supply Chain

The supplier of the Nitin Spinners Ltd. Are the cotton producers or who are
merchandiser of the cotton. There are some local suppliers as well as overseas
suppliers also.
Main concerns about the supplier side are:

1. Cotton production

The main activity of the supplier is cotton production. These are generally
Ginning Industry who extracts the cotton fibre from the cotton balls. Other
supplier may be the trader of cotton.

Indian cotton staple length is generally 2.5-4.0 cm for better quality cotton
yarn, Nitin Spinners purchase cotton overseas, i.e. Switzerland, Iceland, Pakistan,
Bangladesh etc.

28
 2. Bale Packing

The cotton is packed into very tight compressed lot that is known as Bale.
These lots are formed according to the manufacturer direction or at prescribed
standard.

4.5 The Manufacturer Side if the Supply Chain.

The manufacturer is having main activities of order of contract, to give order to the
suppliers, production, finishing and packing.

1. Order and purchase

The manufacture first task after getting an order is to give order to the
supplier the desired quantity of raw material, with proper specification according
to product demanded by the buyer.
The order is negotiated and the contact is made with the supplier supply the
specified raw material.

2. Production

When the raw material is obtained, the PPC department sends production
schedule to the production department. According to the PPC schedule the
production is completed.
After the production the product is sent to the final finishing which are
dying and processing.

3. Finishing and Packing

After the production the finishing humidification is done and the product is
sent for packaging. Packagings are done differently for domestic and export
purpose.

29
5. Export Procedure at Nitin Spinners Ltd.
An exporter without any commercial contract is completely exposed of foreign
exchange risks that arises due to the probability of an adverse change in exchange rates.
Therefore, it becomes important for the exporter to gain some knowledge about the
foreign exchange rates, quoting of exchange rates and various factors determining the
exchange rates. In this section, we have discussed various topics related to foreign
exchange rates in detail.

It is essential that a person engaged in international trade be aware of the various

procedures involved. The business of exports is heavily document-oriented & one must
get acquainted with the entire procedure. Failure to comply with documentary
requirement may lead to financial loss.

Export from India required special document depending upon the type of product
and destination to be exported. Export Documents not only gives detail about the product
and its destination port but are also used for the purpose of taxation and quality control
inspection certification.

The procedural aspect of export operations are quite formidable and for that matter
even an experienced exporter is overwhelmed by the magnitude of procedural
requirements at every stage of export execution right from the time an export order is
obtained until the realization of export procedures and the benefits thereof.

30
31
 5.2 Pre-Shipment Procedure

 On receiving the requisition & purchase order from merchant (See Annexure 3 and
4), documentation department issues an invoice. Two invoices are prepared i.e.
commercial invoice & custom invoice. Commercial invoice is prepared for the buyer
& Custom invoice is prepared for the Custom authorities of both the countries.
 Packing list is prepared which details the goods being shipped.
 GSP certificate is prepared if the consignment is exported to EU or countries
mentioned in the GSP list.
 Buying house inspects the goods & issues an inspection certificate.
 Certificate of origin is also issued and attached, if required.
 Following documents are given to Customs for their reference:
 Custom Invoice
 Packing list
 IEC certificate
 Purchase Order or L/C, if required.
 Custom annexure
 On receipt of above documents, customs will issue clearance certificate.
 After custom clearance a set of documents with custom clearance receipt is sent along
with the consignment to the forwarder. Forwarder books the shipment & as per the
size of the cartons calculates CBM & decides which container to be used.
 Following documents are sent to buying house for their reference, as per buyer’s
requirement:
 Invoice
 Packing List
 GSP (if exports to Europe)
 Certificate of Origin (if required)
 Wearing Apparel sheet
 A copy of FCR/ Airway Bill/ Bill of Lading

32
 Buying house then intimates the buyer about the shipment & gives the details
regarding it. Buying house will send a set of these documents to the buyer.
 Buyer collects the consignment from the destination port by showing the following
documents:
 Invoice
 Packing List
 Bill of lading/ FCR/ Airway Bill
 On shipment of goods, exporter will send the documents to the importer’s bank.

5.3 Post-Shipment Procedure

 A foreign buyer will make the payment in two ways:
 TT ( telegraphic transfer) i.e. Wire Transfer – (Advance payment, as per the clause
50% advance & remaining 50% on shipment)
 Letter of Credit
 If the payment terms are a confirmed L/C then the payment will be made by the
foreign bank on receiving the following documents:
 Invoice
 Packing list
 B/L
Any other required by the buyer or the country of import.

 The payment terms can be:

 At Sight
 Within 15 days from Bill of Lading or Airway Bill date.
 Within 30 days from Bill of Lading or Airway Bill date.
 Within 60 days from Bill of Lading or Airway Bill date.
 Within 90 days from Bill of Lading or Airway Bill date.

33
 After shipment, exporter sends the documents to the buyer’s bank for payment. As the
buyer’s bank receive the documents it will confirm with the buyer for release of
payment. On confirmation, it will make the payment in the foreign currency. The
transaction will be Bank to Bank.

 The domestic branch will credit the exporter’s account, as against the respective
purchase order or invoice, in Indian rupees by converting the foreign currency as per
the current bank rate.

 If the payment is through wire transfer, the payment will be made as per the terms
agreed by the exporter (Advance payment, as per the clause – 50% advance &
remaining 50% on shipment).

6. Export Documents
An export trade transaction distinguishes itself from a domestic trade transaction
in more than one way. One of the most significant variations between the two arises on
account of the much more intensive documentation work. The documents mentioned in
the pre & post shipment procedure are discussed below:

1. Invoice:
It is prepared by an exporter & sent to the importer for necessary acceptance.
When the buyer is ready to purchase the goods, he will request for an invoice. Invoice
is of 3 types:
a. Commercial invoice:
It is a document issued by the seller of goods to the buyer raising his claim for the
value of goods described therein, it indicates description of goods, quantity, value
agreed per unit & total value to be paid. Normally, the invoice is prepared first, &

34
 several other documents are then prepared by deriving information from the
invoice. (See Annexure 1)

b. Consular invoice:
It is certification by a consul or Government official covering an international
shipment of goods. It ensures that exporter’s trade papers are in order & the goods
being shipped do not violate any law or trade restrictions.

c. Customs invoice:
It is an invoice made on specified format for the Custom officials to determine the
value etc. as prescribed by the authorities of the importing country. (See
Annexure 2)

2. Packing list:
It shows the details of goods contained in each parcel / shipment. Considerably
more detailed and informative than a standard domestic packing list, it itemizes the
material in each individual package and indicates the type of package, such as a box,
crate, drum or carton. Both commercial stationers and freight forwarders carry
packing list forms. (See Annexure 3)

3. Certificate of Inspection:
It is a type of document describing the condition of goods and confirming that
they have been inspected. It is required by some purchasers and countries in order to
attest to the specifications of the goods shipped. This is usually performed by a third
party and often obtained from independent testing organizations. (See Annexure 7)

4. Certificate of Origin:
Importers in several countries require a certificate of origin without which
clearance to import is refused. The certificate of origin states that the goods exported

35
 are originally manufactured in the country whose name is mentioned in the certificate.
Certificate of origin is required when: - (See Annexure 4)

 The goods produced in a particular country are subject to’ preferential tariff rates
in the foreign market at the time importation.
 The goods produced in a particular country are banned for import in the foreign
market.

5. GSP:
It is Generalized System of Preference. It certifies that the goods being
exported have originated/ been manufactured in a particular country. It is mainly
useful for taking advantage of preferential duty concession, if available. It is
applicable in countries forming European Union. It has total of 12 columns to be
declared by the exporter. They are:
1. Exporter’s name, address and country
2. Importer’s name, address and country
3. Means of transport and route
4. For official use(to be filled by the officials)
5. Item no.
6. Marks and no. packages
7. No. and kind of packages and description of goods
8. Origin criterion
9. Gross weight or quantity
10. No. and date of invoice
11. For certification of competent authority- in this column the competent authority
will stamp and sign for the certification of the form.
12. Declaration by the exporter – in this column the exporter declares the above
details mentioned are correct and country where the goods produced for export

36
 and name of the importing country and then stamped and signed by the authorized
representative of exporter with place an date.

This form A GSP is sent between the countries, which have bilateral
agreements. This certified original form will be used by importing country to import
the consignment with deduction in import duty.

6. IEC Certificate:
It is an Import-Export Code Certificate issued by DGFT, Ministry of
Commerce, and Government of India. It is a 10 digit code number. No exports or
imports will be affected without the IEC code. It is mandatory for every exporter.

7. Quality Test Report:

It is like a test report from SQC which gives the detail regarding the quality of
the product packed. (See Annexure 6)

8. Bill of Lading:
The bill of lading is a document issued by the shipping company or its agent
acknowledging the receipt of goods on board the vessel, and undertaking to deliver
the goods in the like order and condition as received, to the consignee or his order,
provided the freight and other charges as specified in the bill have been duly paid. It is
also a document of title to the goods and as such, is freely transferable by
endorsement and delivery. (See Annexure 5)
A bill of lading normally contains the following details:

 The name of the company

 The name and address of the shipper / exporter
 The name and address of the importer / agent
 The name of the ship

37
  Voyage number and date
 The name of the ports of shipment and discharge
 Quality, quantity, marks and other description
 The number of packages
 Whether freight paid or payable
 The number of originals issued
 The date of loading of goods on the ship
 The signature of the issuing authority.

9. Airway Bill:
An airway bill, also called an air consignment note, is a receipt issued by an
airline for the carriage of goods. As each shipping company has its own bill of lading,
so each airline has its own airway bill. Airway Bill or Air Consignment Note is not
treated as a document of title and is not issued in negotiable form.

10. Mate's Receipt:

Mate's receipt is a receipt issued by the Commanding Officer of the ship when
the cargo is loaded on the ship. The mate's receipt is a prima facie evidence that goods
are loaded in the vessel. The mate's receipt is first handed over to the Port Trust
Authorities. After making payment of all port dues, the exporter or his agent collects
the mate's receipt from the Port Trust Authorities. The mate's receipt is freely
transferable. It must be handed over to the shipping company in order to get the bill of
lading. Bill of lading is prepared on the basis of the mate's receipt. It contains
information relating to :
 Description of packages.
 Condition of goods / packages loaded on the vessel.
 Name of the vessel
 Date of loading
 Port of delivery

38
  Name of the address of the shipper exporter
 Name and address of the importer/consignee.
 Other required details.

Importance of Mate’s receipt:-

The main importance of mate’s receipt is that is serves as an acknowledgement of
the goods loaded on the ship. After loading, the goods remain in the custody of the
captain / mate of the ship.

1. It enables the agent of the exporter to pay port trust dues. After making payment of
port dues, the agent collects the mate’s receipt and submits it to the customs
preventive officer.
2. It enables the shipping agent of the exporter to present the mate’s receipt to the
customs preventive officer to record the certificate of shipment of all copies of
shipping bill and other documents.
3. The export agent can obtain bill of lading on the basis of mate’s receipt from the
shipping company.

11. Shipping Bill:

Shipping bill is the main customs document, required by the customs authorities
for granting permission for the shipment of goods. The cargo is moved inside the dock
area only after the shipping bill is duly stamped, i.e. certified by the customs. Shipping
bill is normally prepared in five copies:
 Customs copy
 Drawback copy
 Export promotion copy
 Port trust copy
 Exporter's copy
Types of Shipping Bill

39
 1. Manual Shipping Bill
2. Computer generate EDI shipping bill

Manual Shipping Bill:

It will be prepared in quadruplicate and two additional copies in the prescribed
format. It contains exporter’s name and address, Invoice no. and date, shipping bill no.,
Number and description of packages, Quantity, weight and value of goods, Name of
vessel in which goods are to be shipped, country of destination, total amount of duty, port
at which goods to be discharged, and any other details if applicable. It will be filled by
the customs agent and signed by both the exporter and customs agent. This document
used for the customs clearance of the exporting goods. After customs clearance the
shipping bill will be numbered with date and duly stamped and signed with “Let export”
permission by the customs official. After this only customs agents will allow the goods to
clear through sea or air.

Computer Generated EDI

It also contains the same details as that of manual shipping bill prepared by
customs, which is having an on line EDI (Electronic Data Interchange) system. This will
be signed by the CHA (Customs House Agent) and customs official with “Let export”
permission.
When goods are manufactured in India on which drawback duty is allowed, the
shipping bill used is called the drawback shipping bill.

12. Letter of Credit:

This method of payment has become the most popular form in recent times; it is
more secured as company to other methods of payment (other than advance payment). A
letter of credit can be defined as “an undertaking by importer’s bank stating that payment
will be made to the exporter if the required documents are presented to the bank within
the variety of the L/C”.

40
Contents of a Letter Of Credit
A letter of credit is an important instrument in realizing the payment against
exports. So, needless to mention that the letter of credit when established by the importer
must contain all necessary details which should take care of the interest of Importer as
well as Exporter. Let us see shat a letter of credit should contain in the interest of the
exporter. This is only an illustrative list.
 Name and address of the bank establishing the letter of credit
 Letter of credit number and date
 The letter of credit is irrevocable
 Date of expiry and place of expiry
 Value of the credit
 Product details to be shipped
 Port of loading and discharge
 Mode of transport
 Final date of shipment
 Details of goods to be exported like description of the product, quantity, unit rate,
terms of shipment like CIF, FOB etc.
 Type of packing
 Documents to be submitted to the bank upon shipment
 Tolerance level for both quantity and value
 If L/C is restricted for negotiation
 Reimbursement clause

7. Terms of Shipments – Inco terms

The INCOTERMS (International Commercial Terms) is a universally recognized
set of definition of international trade terms, such as FOB, CFR & CIF, developed by the
International Chamber of Commerce (ICC) in Paris, France. It defines the trade contract
responsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving
41
tool. The exporter and the importer need not undergo a lengthy negotiation about the
conditions of each transaction. Once they have agreed on a commercial terms like FOB,
they can sell and buy at FOB without discussing who will be responsible for the freight,
cargo insurance and other costs and risks.

The purpose of Inco terms is to provide a set of international rules for the
interpretation of the most commonly used trade terms in foreign trade. Thus, the
uncertainties of different interpretations of such terms in different countries can be
avoided or at least reduced to a considerable degree. The scope of Inco terms is limited to
matters relating to the rights and obligations of the parties to the contract of sale with
respect to the delivery of goods. Inco terms deal with the number of identified obligations
imposed on the parties and the distribution of risk between the parties.

7.1 More Clarification on Inco terms

EXW (At the named place)

Ex Works:
Ex means from. works means factory, mill or warehouse, which are the seller’s
premises. EXW applies to goods available only at the seller’s premises. Buyer is
responsible for loading the goods on truck or container at the seller’s premises and for the
subsequent costs and risks. In practice, it is not uncommon that the seller loads the goods
on truck or container at the seller’s premises without charging loading fee.

The term EXW is commonly used between the manufacturer (seller) and export-
trader (buyer), and the export-trader resells on other trade terms to the foreign buyers.
Some manufacturers may use the term Ex Factory, which means the same as Ex Works.

42
FCA (At the named point of departure)
Free Carrier:
The delivery of goods on truck, rail car or container at the specified point (depot)
of departure, which is usually the sellers premises, or a named railroad station or a named
cargo terminal or into the custody of the carrier, at seller’s expense. The point (depot) at
origin may or may not be a customs clearance centre. Buyer is responsible for the main
carriage/freight, cargo insurance and other costs and risks.
In the air shipment, technically speaking, goods placed in the custody of an air
carrier are considered as delivery on board the plane. In practice, many importers and
exporters still use the term FOB in the air shipment.

FAS (At the named port of origin)

Free Alongside Ship:
Goods are placed in the dock shed or at the side of the ship, on the dock or lighter,
within reach of its loading equipment so that they can be loaded aboard the ship, at
seller’s expense. Buyer is responsible for the loading fee, main carriage/freight, cargo
insurance, and other costs and risks In the export quotation, indicate the port of
origin(loading)after the acronym FAS, for example FAS New York and FAS Bremen.
The FAS term is popular in the break-bulk shipments and with the importing countries
using their own vessels.

FOB (At the named port of origin)

Free on Board:
The delivery of goods on the board the vessel at the named port of origin
(Loading) at seller’s expense. Buyer is responsible for the main carriage/freight, cargo
insurance and other costs and risks. In the export quotation, indicate the port of origin
(loading) after the acronym FOB, for example FOB Vancouver and FOB Shanghai.

43
 Under the rules of the INCOTERMS 1990, the term FOB is used for ocean freight
only. However, in practice, many importers and exporters still use the term FOB in the air
freight. In North America, the term FOB has other applications. Many buyers and sellers
in Canada and the USA dealing on the open account and consignment basis are
accustomed to using the shipping terms FOB Origin and FOB destination.

FOB Origin means the buyer is responsible for the freight and other costs and
risks. FOB Destination means the seller is responsible for the freight and other costs and
risks until the goods are delivered to the buyer’s premises which may include the import
custom clearance and payment of import customs duties and taxes at the buyer’s country,
depending on the agreement between the buyer and seller. In international trade, avoid
using the shipping terms FOB Origin and FOB Destination, which are not part of the
INCOTERMS (International Commercial Terms).

CFR (At the named port of destination)

Cost and Freight:

The delivery of goods to the named port of destination (discharge) at the seller’s
expenses. Buyer is responsible for the cargo insurance and other costs and risks. The term
CFR was formerly written as C&F. Many importers and exporters worldwide still use the
term C&F.

CIF (At named port of destination)

Cost, Insurance and Freight:
The cargo insurance and delivery of goods to the named port of destination
(discharge) at the seller’s expense. Buyer is responsible for the import customs clearance
and other costs and risks.

44
 In the export quotation, indicate the port of destination (discharge) after the
acronym CIF, for example CIF Pusan and CIF Singapore. Under the rules of the
INCOTERMS 1990, the term CIFI is used for ocean freight only. However, in practice,
many importers and exporters still use the term CIF in the air freight.

CPT (At the named place of destination)

Carriage Paid To:
The delivery of goods to the named port of destination (discharge) at the seller’s
expenses. Buyer assumes the cargo insurance, import custom clearance, payment of
custom duties and taxes, and other costs and risks. In the export quotation, indicate the
port of destination (discharge) after the acronym CPT, for example CPT Los Angeles and
CPT Osaka.

CIP (At the named place of destination)

Carriage and Insurance Paid To:
The delivery of goods and the cargo insurance to the named place of destination
(discharge) at seller’s expense. Buyer assumes the importer customs clearance, payment
of customs duties and taxes, and other costs and risks.

DAF (At the names point at frontier)

Delivered at Frontier:
The delivery of goods at the specified point at the frontier on seller’s expense.
Buyer is responsible for the import custom clearance, payment of custom duties and
taxes, and other costs and risks.

DES (At named port of destination)

Delivered Ex Ship:
The delivery of goods on board the vessel at the named port of destination (discharge) at
seller’s expense. Buyer assumes the unloading free, import customs clearance, payment

45
of customs duties and taxes, cargo insurance, and other costs and risks.

DEQ (At the named port of destination

Delivered Ex Quay:
The delivery of goods to the Quay (the port) at the destination on the buyer’s
expense. Seller is responsible for the importer customs clearance, payment of customs
duties and taxes, at the buyers end. Buyer assumes the cargo insurance and other costs
and risks.

DDU (At the named point of destination)

Delivered Duty Unpaid:
The delivery of goods and the cargo insurance to the final point of destination, which are
often the project site or buyers premises at seller’s expense. Buyer assumes the import
customs clearance, payment of customs duties and taxes. The seller may opt not to insure
the goods at his/her own risks

DDP (At the named point of destination)

Delivered Duty Paid:
The seller is responsible for most of the expenses, which include the cargo
insurance, import custom clearance, and payment of custom duties, and taxes at the
buyers end, and the delivery of goods to the final point of destination, which is often the
project site or buyers premise. The seller may opt not to insure the goods at his/her own
risk.

7.2 “E”-term, “F”-term, “C”-term & “D”-term:

 Inco terms 2000, like its immediate predecessor, groups the term in four categories
denoted by the first letter in the three-letter abbreviation.

46
  Under the “E”-TERM (EXW), the seller only makes the goods available to the
buyer at the seller’s own premises. It is the only one of that category.
 Under the “F”-TERM (FCA, FAS, &FOB), the seller is called upon to deliver
the goods to a carrier appointed by the buyer.
 Under the “C”-TERM (CFR, CIF, CPT, & CIP), the seller has to contract for
carriage, but without assuming the risk of loss or damage to the goods or
additional cost due to events occurring after shipment or discharge.
 Under the “D”-TERM (DAF, DEQ, DES, DDU & DDP), the seller has to bear
all costs and risks needed to bring the goods to the place of destination.

All terms list the seller’s and buyer’s obligations. The respective obligations of
both parties have been grouped under up to 10 headings where each heading on the
seller’s side “mirrors” the equivalent position of the buyer. Examples are Delivery,
Transfer of risks, and Division of costs. This layout helps the user to compare the party’s
respective obligations under each Inco terms.

8. Realization of Export Proceeds

Once the goods have been physically loaded on board the ship, the exporter should
arrange to obtain his payment for the exports made by submitting relevant documents.
A complete set of documents normally submitted for the purpose of negotiation is called
a negotiable set of documents, which usually consist of the following:
1. Bill of exchange
2. Bill of lading
3. Commercial invoice
4. Packing list
5. Inspection certificate
6. GSP certificate
8.1 Negotiation
47
 A complete set of negotiable documents is presented to the negotiating bank
through whom the documentary letter of credit has been advised. Where the exporter has
complied with all the terms and conditions of the letter of credit while submitting his
documents to the negotiating bank, the documents are deemed to be clean. The letter of
credit opened by the buyer through his bank (opening bank) authorizes drawing a bill of
exchange against which payment will be made by the opening bank on behalf of the
buyer, provided the terms and conditions specified in the letter of credit are complied
with.

8.2 Bill of exchange

It is the negotiable instrument through which the amount of export invoice /
invoices will be collected from the corresponding bank specified by the importer through
exporter’s bank. It contains number and date drawn on, credit no., corresponding bank
address, the amount to be collected, terms of payment, importer’s name and address with
invoice no. and bill of lading or airway bill no. the drafts drawn are of two types.
1. Sight draft
2. Usance draft

If the letter of credit stipulates payment at sight, the exporter draws a “sight draft”
on the buyer or his bank. When sight drafts are drawn by the exporter, he expects the
buyer to arrange for payment immediately on presentation of the draft. Until payment for
the draft is made, shipping documents will not be handed over to the buyer to enable him
to clear the goods. (See Annexure 7)

When the exporter has offered credit terms for payment, a “Usance draft” is
usually drawn by the negotiating bank of the exporter. It is drawn for the payment after a
specified period. The buyer on whom the draft is drawn retires the draft after 30days,
60days or 90days as agreed between him and the exporter at the time of concluding the
contract. The letter of credit opened by the buyer will clearly specify the credit period

48
which has been agreed upon and would mention that the draft should be drawn for 30,60
or 90 days, as the case may be.

For a credit period beyond 180 days, the exporter has to obtain the prior
permission of the exchange control authorities in India. The bill of exchange drawn
should correspond to the conditions stipulated in the letter of credit.
Besides the negotiation of the documents, the banker has to perform other formalities. As
part of the negotiation set of documents, the exporter has submitted the duplicate copy of
the GR-1 form. After negotiation are complete, and payment is physically received by the
bank, the duplicate copy of the GR-1 form is sent to the RBI after due checks.

The exporter requires a commercial invoice attested by the bank for his use in
claiming incentives. The bank attests the extra copies of the commercial invoice supplied
by the exporter and returns them to him.

To enable the exporter to claim incentives applicable for exports, a certificate

known as Form I or “Bank Certificate” is required. The Form I or Bank certificate
describes the product exported, its value, the details of the invoice, the bill of lading
against which the export was made, the rate of conversion for the exchange for the
exchange used, etc. the case of CIF contracts, the bank certificate specifies the fob value,
freight and insurance under separate headings as evidenced in the bill of lading, insurance
policy and invoice. The bank certificate also indicates the GR-1 form number against
which the export was made. The original copy of the bank certificate is furnished to the
exporter and the duplicate copy is sent to the JDGFT of the area. A third copy may be
kept for its official records.

9. Realization of Export Incentives:

49
 The incentives the exporter will get in today’s context and the manner in which
they can be obtained are as follows:
9.1 Duty Drawback:
This refers to a rate fixed by the government based on the customs duty and excise
duty components which go into the production of an export product. This does not refer
to the finished product excise duty, but to the excise and customs duty paid on all the raw
materials and components which go into the production.
Every year the Department calls for latest data on these through the Export Promotion
Councils, determines the drawback rate and publish it for the exporters by June of the
year.
When the shipping bill is submitted to the customs for the shipping of goods, it
consists of a set of five copies. The duplicate copy is known as the ‘Drawback copy’, and
this will contain all the details like description of the product, the port of destination, the
total amount of drawback as per government notification etc. this copy is endorsement by
customs and sent directly by them to the drawback cell in the customs department
situated in the port from which goods were exported. The exporter can approach this cell
for his drawback payment with any additional details they may ask for.

9.2 Excise Rebate:

Finished goods which are subject to excise duty for home consumption are exempt
from the duty when they are exported. The scheme is also applicable where the exported
goods contain excisable goods in their manufacture.
The exporter can avail of this facility in either of the following methods, where
finished goods are excisable:
1. Export under Bond:
Under this method, the exporter has to execute a bond in favour of Central
Excise Authorities. The amount of the bond will be equal to the duty on the estimated
maximum outstanding of goods leaving the factory without paying the duty and

50
 pending acceptance of their proof of export by excise authorities. No excise need to be
paid by the exporter.

2. Refund of Duty:
If the duty is already paid, after export is made, the exporter should make a
claim with the Central Excise Authorities. After verification of the claim, the excise
authorities will arrange for the refund of the central excise.
Where the excisable materials have been used in the manufacture, similar to the above
arrangement, the exporter can avail of the facility of manufacturing under bond or he
can claim refund after duty is paid.

10. Turnover of Nitin Spinners Ltd. & Future Trend

The index given below shows the total sales made by the company during last 5
financial year:

Table1: Sales of Nitin Spinners Ltd. For Last 5 years

S.N
Financial Year Sales (Lacs) Variation (Lacs) Percentage (%)
.
1. 2005-2006 9817.34 - 9.640
2. 2006-2207 15632.14 5814.8 15.350
3. 2007-2008 19922.24 4290.1 19.560
4. 2008-2009 26292.31 6370.07 25.812
5 2009-2010 30195.96 3903.65 29.645

51
 35000

30000

25000

20000
sales (Lacs)
variation (Lacs)
15000

10000

5000

0
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Graph1: Sales Turnover for Last 5 Financial Years.

Interpretation:

From the graph it can be seen that the company is growing continuously, but little
ups and downs in growing demand.

10.1 Expected Future Trend Analysis

With the available data for the past five years from 2006 – 2010, the future trend
of this concern in export has been forecasted.

Methodology:
The methodology adopted here is the least square method.
Formulae:
na + bΣ X =ΣY
aΣX + b X2 = ΣXY

52
By solving the above equations we get the values of ‘a’ and ‘b’.
a = ΣY / n
b = ΣXY / ΣX2
Then substituting the values of a and b in the linear equation we get
Y = a + bx

Table2: Future Trend Analysis of Sales of Nitin Spinners Ltd.

Y
S. N. Year X X2 X.Y
Rupees(Lacs)
1 2006 9817.34 -2 4 -19634.68
2. 2007 15632.14 -1 1 -15632.14
3. 2008 19922.24 0 0 0
4. 2009 26292.24 1 1 26292.24
5. 2010 30195.96 2 4 60391.92
Total L 101859.99 0 10 51417.54

Calculation
Y = a + bx
a = ΣY/n = 101859.99 / 5 = 20371.992
b = ΣXY/ΣX2 = 51417.54/10 = 5141.754
X = (x – 2007)
x = year for which the sales is estimated.

Substituting the value of ‘a’ and ‘b’ in the formula we get the future exports:
 For 2011: 20371.992 + 5141.754(3) = 35797.254 Lacs
 For 2012: 20371.992 + 5141.754(4) = 40939.008 Lacs
 For 2013: 20371.992 + 5141.754(5) = 46080.762 Lacs

Graph2: Future Trend for Sales of Nitin Spinners Ltd.

53
 expected sales (Lacs)
50000
45000
40000
35000
30000
expected sales (Lacs)
25000
20000
15000
10000
5000
0
2011 2012 2013

Interpretation:
Form the graph given above we can that the Nitin Spinners Ltd is pretty increasing
sales and hopefully it would be gaining the sales turnover of approx rupees 46,000 lacs in
the Financial Year 2012-2013.
Thus the company seems to be in good position as the year passes.

CONCLUSION
54
 The study was conducted to know the process involved in a Yarn Spinning firm
and to study about the various departmental functions which coordinates to complete the
export cycle. The export procedure of the firm has been seen clearly and other related
aspect has been known.

From the analysis it is found that the performance of the company is satisfactory,
but the company is facing problem regarding excess of documents which causes delay in
transportation. Therefore necessary steps should be taken to limit the number of
documents so that the company can make distribution at right for the company and it
helps the company to have competitive advantage over its competitors.

There are signs of good future for NITIN SPINNERS LTD. because of growing
demand for Indian knitwear in the world market.

11. Bibliography

55
Books
1. Balagopal T.A.S, “Export Management”, Himalaya Publishing House, nineteenth
edition 2007
2. Jeevanandam.C., “Foreign Exchange- practice, concepts and control”, Sultan Chand
and Sons, tenth edition 2007
3. Kothari C.R., “Research Methodology, Method & techniques”, New Age
International. Pvt. Ltd, Second Edition, 1985
4. Mahajan M.I.,” A guide on export policy, procedure and documentation”, Tata
McGraw hill publishing company ltd, Third Edition 2005
5. Dr.Varma.M.M. & Aggarwal R.K, “Foreign Trade Management”, King Book,
second edition 2006
6. Puri, V. K., “Exporters’ Guidelines, A Basic Book on How to Export as per Govt.
Policy & Procedures”, 2nd Edition, JBA Publishers, 2008-09
7. Paul, Justin & Aserkar, Rajiv, “Export Import Management”, 2nd Edition, Oxford
University Press, 2009, Chapter – 2, pp. 17-29.

Reference Sites
 http://www.nitinspinners.com
 http://www.sebi.gov.in/dp/splfinal.pdf as retrieved on April 20, 2010
 Overcoming the obstacles to export documentation (1), Thomas A. Cook.
o http://search.barnesandnoble.com/Export-Import-Procedures-and-
Documentation/Thomas-E-Johnson
 Export Documentation Made Easy (2), Laurel Delaney
o http://www.allbusiness.com/business-planning-structures/starting- a-
business/3878207-1.html

56
 Export Trade Sector Using Available Trade Finance Tools and Resources (3),
Koch and John.
o http://www.allbusiness.com/trade-development/trade-development-
finance/8890466-1.html
 True cost of export documentation (4), Corinne Campbell.
o http://www.dynamicbusiness.com/articles/articles-export/true-cost-of-
export-documentation2043.html
 Guide to Inco terms 2000, Posner and Martin (5).
o http://www.allbusiness.com/legal/international-law-foreign-
investmentfinance/918569-1.html
 All Industry Rates of Duty Drawback, 2008-099.
o http://www.cmai.in/download/circulars/Pre_Budget_Memorandum.pdf
 Foreign Trade Policy 27th August 2009 - 31st March 2014
o http://dgftcom.nic.in/exim/2000/policy/ftp-plcontent0910.pdf

***************

57
 Annexure

Annexure: 1 Commercial Invoice

Annexure: 2 Custom Invoice
Annexure: 3 Packing List
Annexure: 4 Certificate of Origin
Annexure: 5 Bill of Lading
Annexure: 6 SQC Quality Report
Annexure:7 Bill of Exchange

58