Export Marketing Full

PRODUCT
PLANNINGANDD
PRICING DECISIONS
"Everything that is beautiful
and noble is the product of
reason and calculation."
Charles Baudelaire
Product Planning for Export Marketing

Product Planning Decisions (April2019)
Branding Decisions
Packaging Decisions (April 2019)
Labelling
Marking
Pricing
Factors Influencing Export Price (April 2019)
Objectives of Export Pricing

Export Pricing Strategies
International Commercial (INCO) Terns
Free on Board (FOB)
Export Pricing Quotation
-
Cost, Insurance and Freight (CIF)

Cost and Freight (C&F)
Problems on FOB Quotation
Export Marketing (T.Y.B.Com.: SEM-V
PRODUCT PLANNING DECISIONS

The product manager and the marketing manager need to
product decisions in several areas. The product decision areasake
ar
as follows: are
1. Product Design:
Product design plays an important role in
gaining customer
acceptance. Product design is the process of creating
new and
improved products. Ihe
product designer s role is to
combine
art, science, and technology to create new and
products.
improved
Exporters must be proactive in designing and re-designing

products. For effective product designs, managers needthe to
conduct:
Marketing research -
to
identify customers' preferences.
Research and development - to come up with
designs and to modify the designs of existing innovative
products.
2. Product Mix/Product Line Decisions:
The exporter should decide uwhether to
concentrate on one
product or deal with a product mix/product line. Product mix
involves a set of
market.
products, which a exporter may
to theoffer
For
instance, a firm may offer food
detergents, and so on. Product line isproducts, toiletries,
a
group of related
products. A food items product line may include milk powders,
health drinks, fruit
juices, confectionaries, etc.
Some firms may
concentrate on a single product may be to
concentrate all their efforts on that
lack of resources. Other firms product or may be due to
may go for a product mix,
especially; FMCG (fast moving consumer goods) companies
prefer product-mix in order to make optimum use of resources,
and to generate higher returns.
Product lanning and Pricing Decisions
3
3. Product Packaging:
The exporter should designthe proper packaging.
serves various purposes Packaging
protection, preservation, and
-
yromotion of the product. Packaging

factors such as nature of the depends upon several
consumers of the product, etc.products, price of the product,
For instance, if the product is
meant for upper class audience,
then the product
packaging must be of high quality and
appropriately designed.
Nowadays, environmental aspects need to be considered,
especially when the product is exported to developed nations.
Packaging which is non-degradable plastic, for
example is
-
less in demand or rejected.

Bio-degradable, recyclable, reusable
packaging is now the order of the day.
4. Product Labelling:
Labelling indicates the contents of the product. Like packaging,
effective labelling can promote the product. Developed countries
insist on certain instructions on the product's labels.
For instance, the European Union insists on the amount of
pesticides and insecticides used on horticultural products. Also,
on packaged food products and medicines, specific instructions
must be labeled.
The EU also insists that labelling must be done in at least 4

major languages spoken in European Union (English, Spanish,
French and German). Even in India, it is advisable to have
multilingual labels, especially in the case of medicines.
5. Product Pricing:
Products must be properly priced. The exporter should consider
important factors while pricing the product, such as costs,
demand, competition, nature of the product, nature of
consumers, objectives of the firm, and so on.
The exporter must choose a proper method of pricing, such as

markup pricing, marginal cost pricing, target return on
investment, cost plus pricing, going rate pricing, etc.
Export Marketing (T. B.Com.: SEM-
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Product Positioning:
6. efforts directed atr
Positioning refers
to the marketing
in the minds ofn
creating
a
distinct image
braetarge
and maintaining
brandproduct
vis-à-vis competing mpeting brands.
audience of the
an effective positioning
stratoo. in
should adopt the minds ne
The exporter
distinctanafavoura ble image in
order to create a be done on the basis
customers.
Positioning
can
of
the target
etc.
thefeatures, use, price,
7. Product Promotion:
7. activities to inform
has to resort to promotional
The exporter the products
c u s t o m e r s to purchase
and to induce the target sold in the
can be easily
An effectively promoted product
must decide
about promotion nix,
the
market. Therefore, afirm
sales promotion, sponsorships,
which includes advertising,
and so on.
personal selling, publicity,
8. Product Warranty:
that the
A warranty is a from the manufacturer
assurance
should decide
perform as stipulated. The marketer
product wvill and the nature of warranty
-
about the period of warranty,

whether on the entire product, or certain partsof the products,
If the exporter sells in different markets, then he
and so on.
in all the
may have to decide either to give the same warranty
markets, or to customize for each market or region.
9. Branding Decisions:
9.
Branding decision forms an important aspect of product
planning. Firms must consider the essentials of branding while
giving brand names, and marks to their product.
For instance, a brand name should be easy to pronounce, and

should be as short as possible, and relevant to the product.
markets.
Language is vital in
overseas
10. After-sale-service:
decide about the after-sale-serzino
The exporter should
the case of durables, and on industriai
decisions, especiallhy in
items such as machinery.
5
Product Planning and Pricing Decisions
Effective after-sale-service is vital to build long-term customer
relationship. Therefore, business firms should train their service
force not only in terms of skills to maintain or repair the product,
but also to have a proper attitude towards the customers.
11. Product Distribution Decisions:

Product planning also involves distribution decisions. The
marketer should select the right distribution channels to reach
to the customers.
The choice of channels depends upon several factors, such as
nature of the product, nature and size of customers, philosophy
of the firm, competitors' strategy, and so on. As far as possible,
the number of channel intermediaries must be less, so as to
provide better value to the customer.
wwww.
BRANDING DECISIONS
Meaning and Techniques of Branding

It is a process ofgiving distinct name or a mark to a product to give
ita distinct as compared to competing brands.
identity
of brand management.
Selecting a brand name is the primary task
You can
William Shakespeare may be wrong "What's in a name.
-
call rose by any other name. Brand names make a

lot of difference.
For instance brand names like Mercedes, Nike, Cartier, etc.,
name must be
command lot of respect and goodwill. The brand
relevant to the product, easy to pronounce, appealing to the target
Customers, and so on.
different approaches in selecting brand

name:
There are
1. Individual Brand Names:

Amulti-brand company may adopt individual brand name for
different products. For instance, HUL have different individual
brand names for its soaps such as Lux, Liril, Lifebuoy, etc.
Several firms like P&<G, Nestle, Cadbury, Suzuki, GM and others
have adopted this strategy.
6 Export Marketing (T.Y.B.Com.:
SEM-
.Companies may use different brand names for different an1 1:.
products within the same product class. For instance, HUL
the brand name of Wheel for lower quality.washing ,uses
and Surf for higher quality brand. powder
The main advantage of brand
individual name strategy is tha
hat
the company does not attach its reputation to a single branal
name. If a particular brand fails in the market, the reputation
of the firm may not get affected.
2. Blanket Corporate Name:

Thisapproach is followed when a company uses the corporate
brand name for its diverse product categories. For instance
the Tata Group uses this brand name strategy tor several of its
products such as Tata Tea, Tata Coffe, Tata Salt, Tata Stel
and so on.
The main advantage of this strategy is that it

develops customers
trust in the brands of reputed firms like that of Tata
Group.
Sony, Philips, etc.
3. Corporate-cum-Individual Brand Names:
Certain companies may combine the
corporate name and the
individual brand name to create a distinct brand
identity. For
instance, Cadbury adopts this strategy for its brands such
as
Cadbury Dairy Milk, Cadbury Gems, Cadbury Fivestar, and so
on.
(Cadbury India Ltd. is a subsidiary of Mondelez International.

Therefore, in April 2014, Cadbury India Ltd. is
Mondelez India Foods Ltd. However, the renamed as
brand names will
continueto be sold under the earlier brand names like
Dairy Milk, Perk, Bournvita, etc.) Cadbury
The main advantage of this strategy is that the brands
advantage of corporate brand equity. The get the
spend less on product introduction and company may also
promotion.
4 Family Brand Names:
When a
company adopts the same brand name for different
brands in a
particular product line is called as family brand
Product Planning and Pricing Decisions 7
name. For instance, Amul brand name is used by Gujarat
Cooperative Milk Marketing Federation (GCMMF) for several
products such as Amul Butter, Amul lce-cream, Amul
Chocolates, Amul Ghee, Amul Milk, etc. Also, Nestle providdes
the same brand name to ready to eat/serve food items - Maggi
Noodles, Maggi Ketchup, and so on.

The main advantage of this strategy is that it is less expensive
to introduce related products in a particular product line. The
company may also adopt a common advertising campaign tor
its family brand names.
5. Different Brand Names in International Markets:

MNCs may sell the same brand under different brand name in
the international markets.
Examples:
(a) KFC (Kentucky Fried Chicken) in United States and in other
Countries.
PFK (Poulet Frit Kentucky) in Quebec, Canada (because

of
Quebec is the predominantly French speaking province
Canada).
b)Lay's in United States and elsewhere.
Walkers(U.K.)
()Axe (body spray) launched in France.
these
(d) 4Lynx in U.K., Ireland, Australia and China (because in
countries Axe brand name was already trade marked).
(e) Burger King (USA)

Hungry Jack's (Australia)
() Milky Way (USA)
Mars Bar (Other countries)
() Olay (USA)
OLaz (Germany)
8 Export Marketing B.Com.: SEM
(h) Good Humor (USA)
Kwality Wals (Asia)
Budweiser (North America and India)
)
Bud (Europe)
(Note: Students may quote 1 or2examples.)
6. Names of Founders:
The company may also introduce the products with the na
of founders or inventors. Examples are Colgate, Ford, Nes name
etc.
7. Typical Numbers:
At times, companies may follow certain numbers such as 5
(cigarettes), 501 (cake soap), and so on.
8. Combination of Names and Numbers:
There can be a combination of names and numbers. Thiel
includes 7Up, 7 0'clock blades, and so on.
9. Names with Relevance to the Product:
Some firms make a deliberate attempt to devise brand
that have relevance to the product
names
category. For instance, Nike
-sports wear brand, named after the Greek Goddess of Victory
Other brand names that have relevance to the
include Tips and Toes (nail polish). product categor
10. Names
Communicating Atributes:
Some firms name the brands that
the product. communicate attributes of|
Examples
include:
Revital (health
supplement capsules from Ranbaxy)
Fair& Lovely face cream
(creates hope fair and beautit
complexion).
Touchwood paint for wooden furniture.
9
Factors Influencing Branding
relevant
strategy enables the marketer to give the most
Branding
influencing branding
brand name to the product. Some of the factors
are as follows:
1. Customers:
the branding of the

The nature of customers may influence
products. For instance:
the
If the product is meant for teenagers and youngsters,
brand
brand name needs to be a lot trendy. An ice-cream
at youngsters may be branded as Go Cool or
targeted
B-Cool.
brand
I f the product is meant for upper class audience, the
name may sound a bit more international. For example,
the top brands of cars are: Lamborghini Veneno, Bugatti
Porsche
Veyron, Koenigsegg Agera, Hennessey Venom,
Aston.
Spyder, Rolls Royce Phantom, Ferrari, Bentley,
Martin, Mercedes-Benz, and so on.
2. Corporate Name Branding:
when
A company may consider corporate name branding only
it is sure that the new brands that are introduced with corporate
name are of high quality and meeting customer requirements.
For instance, Tata Group uses corporate name branding - Tata
Tea, Tata Salt, Tata Steel, Tata Coffee, Tata Sky, and
so on.
if it is
However, iff the new brand is a technological failure
or
of other brands of the

quality, it may spoil the name
of poor
company.
3. Competition:
When there is huge competition, there is a need to differentiate
the product. To differentiate the product, the company needs
to highlight the product's special features that could benefit
the consumers. Therefore, there is a need for separate brand
name to enable the customers to identify the brand.
10 Export Marketing (T.Y.B.Com.: SEM-Vn
When there is huge competition, a company may come
product variants with multiple brand options. For instan.
HUL manufacturers Surf washing for middle upper class an
upper class audience, and Wheel washing powder is targeted
to middle-middle class and middle-lower class.
If the competition is low, there may not be a need to create

separate brands for each product otering. A company may have
only one brand name for a product category.
4. Company Resources:
Branding depends on availability of funds with the company.
Building a brand is a costly affair. Lot of money needs to be
spent on publicity, advertising, sales promotion, salesmanship
andsoon.1herefore, if a company has lot of funds, it may spend
on building separate brands.
When a company has limited resources, it may go for'umbrella

branding (same brand name för a group of related products as
in the case of Amul). Umbrella brand
helps to reduce promotion
and launching expenditure.
5. Market Area:
At times, the brand namemay be selected depending on the
area where the product is marketed. For instance, if the
is marketed in Europe, the brand name
product
may have good meaning
in English or other major European languages.
The brand must have universal
usage, especially if it is exported
to several countries. The brand
name must not have
connotation in foreign negative
languages.
6. Market Size:
When the market size for a
product category is
quite large, a
company may adopt branding
strategy provided the profits
generated could fund the investment in the brand.
If themarket size is relative small, and
investment in building a brand may not growing
be
slowly, the
situation, a company may
Injustified. such
go tor umbrella branding (a
group
of products having same brand name such as
'Amul), wherein
11
and Pricing Decisions
Product Planning
lower. This means
the launching costs and promotion costs are
gets
under umbrella branding, the branding expenditure
reduced.
7. Nature of Product:
instance,
The brand be relevant to the product. For
name must
HUL cannot extend its brand name 'Surf (generally meaning

'Chocolaty' for
foam of waves) to a new brand of ice-cream or
a brand of washing powder.

of the
Brand names capable of describing features
must be
'Al Clear for
product such as 'Fair and Lovely' for face cream,
anti-dandrutt shampoo, and so on.
8. Preference of Promoters:
the preferences or wishes of the
Branding may be done as per
instances where
founders or promoters. There are several
include:
brands are named after their founders. Examples
in 1806
William Colgate introduced Colgate toothpaste
brand in 1824
John Cadbury introduced Cadbury
brand in 1866
Henri Nestle introduced the Nestle
Jamsetji Tata introduced the

Tata Group brand in 1868
Ford Motors brand in 1903
Henry Ford introduced the
Michio Suzuki introduced the Suzuki brand in 1909.
9. Popularity of Existing Brand:

extension after
At times, a may consider brand
company
brand. For instance,
considering the popularity of its existing
the brand 'Amul (Anand Milk Union Limited) became very
extended to several
popular in the butter segment, which is
other diary products such as milk, cheese, ghee, milk powder,
curd, ice-cream, chocolates, confectionaries, sweets, etc.
10. Registration Formalities:
The brand name should be such that it can be easily registered
under the Trade Marks Act, 1999. For instance, in India the
brand name or trade mark must be registered. The brand name
12 Export Marketing (T.Y.B.Com.:
SEM-VI
must not be objected by competitors for registration. If the hras
name is registered, it cannot be copied by others in the ne
rand
product category. sane
11. Reputation of the Company:
A firm must consider its reputation in the market whi
branding a product. If a company enjoys good reputation i
e
the market, it must come up with unique brands and not som
funny brand names.
some
PACKAGING DECISIONS
Meaning
The terms Packaging and Packing are used inter changeably.
However there is a difference between the two terms. Packing refers
to protective covering used for transportation of goods, whereas,
Packaging refers to the containers in which products reach to the
ultimate consumer. Packaging can also be referred as a process of
developing and designing packages.
Importance of Packaging
The importance of packaging is explained as follows:
1. Protection to Products:
Packing protects the product in transit and also while handling
the same. For example, glassware
can be protected from
breakage in transit with the help of suitable packing.
2 Preservation of Quality:
Packing preserves the quality of the product. In the absence of
suitable packing, items like food products, chemicals, etc.,
get exposed to moisture and may deteriorate in quality,
may
Therefore, the marketer must consider the nature of the product,
climatic conditions, etc., to design packaging.
13
3. Promotion:
Now-a-days, manufacturers take lot of efforts to produce good
in the case
packages as they carry advertising value. Especially, of the
of impulse purchases, packaging attracts attention
customers and may induce them to buy the product.
4. Conformance to Buyer's Specifications:

so that
In the case of specific orders, proper packing is needed
it conforms to the specifications of the buyer. If not the buyer
may not accept the goods.
5. Conformance to Standards:
Packing is also required to conform to certain standards laid

down, especially in the case of export goods. Developed
countries insist on reusable packaging or eco-friendly
packaging8
Consumer Preference:
6.
is because consumers
Packing facilities consumer choice. This
brand names, trade marks and other
can easily identify the
matter on the packages.
Convenience to Dealers:
7.
The dealers must not find storing the products.
difficulty in
so as to avoid
The packages should not be unnecessarily bulky
the shelves or racks.
the wastage of space on
8. Convenience to Customers:
For
convenience in handling the product.
Packing offers which are easy to
oil comes in plastic bottles,
example, cooking
handle and to use.
9. Commands Higher Price:

higher price in the market.
items command
Properly packed are packed in attractively
For instance, French perfumes
command higher price.
designed bottles and therefore, they
10. Quality:
A package which carries the popular mark or brand name,
the product
carries an assurance of quality, and buyers often buy
without opening the package.
14
Export Marketing (T.Y.B.Com.: SEM-VI
11. Reduces
Possibility of Adulteration:
Proper packing reduces the chances of adulteration or mixing
of the contents by unethical traders.
Unfortunately, now-a-days.
packaging technology has made the job of unethical sellersa
lot easier to duplicate
packaging,
12. Re-Use Value:
The package may offer value to the
a re-use
Therefore, the package may be so designed to facilitate the re
consumers
use
purpose. For instance, coffee bottles may be so designed
that it can be used as a
glass or mug.
13. Facilitates Distribution:
Proper packing facilitates distribution of goods. This is because

it offers convenience in
handling the products in transit. The
packing also preserves and protects the product.
Essentials of a Good Packaging

The following are the important requirements of a good package
1. Suitability:
A good
package must be suitable to the product. For instance,
medicines must preferably come in
glass bottles and not in
plastic bottles. Again, glassware should be packed with
cushioning material.
2. Attractive:
Packages must be attractive. They should attract the attention

of the
prospects or buyers and make them to buy the product.
It should have the
advertising value.
3. Buyer's Specifications
Packing should also conform to buyer's specifications. If buyer
has ordered special type of
packing, then such instructions must
be followed in designing and producing packages.
4. Convenience to Customers:
Packages should offer convenience in the case of carrying,
handling and using the product. They must come in convenient
sizes and shapes as per the requirements of the customers.
5. Convenience to Dealers:
The dealers must not find
The packages should not be
difficulty in storing the products.
the wastage of
unnecessarily bulky so as to avoid
space on the shelves or racks.
6. Dependable:
Consumers often rely on the packages and
buy the product.
Whatever is indicated on the package must be available inside
the package in terms of
quality, and quantity.
7. Ease in Identification:
Packages should be such that they are easily identifiable by the
customers, dealers, and others. The printed matter and
symbols,
or marks on the packages must be such that the customers are
familiar with.
8. Ease in Displaying:
Packages must be convenient to display in the showcases or on
the racks at the stores. They should be attractive, compact and
conveniently displayable.
9. Economy:
The cost of the package must be reasonable. If it is a fashionable
or gift item, then packing may be a bit expensive. But in case of
day-to-day use items, unnecessary expense must not be incurred
in designing and producing thepackage.
10. Conform to Standards:
The package must conform to standards laid down by the
Bureau of Indian Standards and such other organisation,
especially in the case of foreign trade.
11. Re-Use Value:
The package may offer a re-use value to the consumers.
Therefore, the package may be so designed to facilitate the re-
use purpose. For instance, coffee bottles may be so designed
that it can be used as a glass or mug.
12. Handiness:
A package must be handy. A customer should find no difficulty
in carrying it conveniently.
16 Export Marketing (T.Y.B.Com.: SEM-VI)
13. Handling Instructions:
The handling instructions on the packages must be properlv
written. For example 'This side up', "Glass Handle with Care'
In case of foreign trade, the
instructions must be written in
etc.
the foreign language.
14. Supplementary Packing:
in the case of certain
There is need for supplementary packing
a
products. For instance, fragile

and breakable goods should have
or box.
soft-packing inside the case
LABELLING OF EXPORT GOODS
graphic communication on the

Product labelling is any written or
the product. Labelling indicates the contents of the

package or on
product. Like packaging, effective labelling can promote the product.

Developed countries insist on certain instructions on the product's
labels. For instance, the European Union insists on the amount of
pesticides and insecticides used on horticultural products. Also, oon

packaged food products and medicines, specific instructions must
be labeled.
The EU also insists that labelling must be done in at least 4 major
languages spoken in European Union (English, Spanish, French and
German). Even in India, it is advisable to have multilingual labels,
especially in the case of medicines.
Information on the Labels:

The labels provide information relating to:
Name of the brand and/or logo
Name of the company that
produced the brand
Nature of the product
.Place of origin (manufactured)
Description of goods/contents/ingredients
Poduct Planmng alnd Pricing Decisions 17
Date of manufacture and the batch number.
Statutory information such as expiry date, side effects of the

product.
Need/Advantages of Labelling
1. Brand Identification:
It helps the customers to identify the product. Customers can
identify the brand name and/or logo which is labeled or printed
on the product package or container.
2. Brand Image:
It gives distinct image of brand with the help of its brand name/
logo on the label. Brand image is the perception of the brand in
the minds of the customers and others. Based on attractive
display of brand name/logo, special features of the product,
etc., labelling can help to create a distinct image of the brand.
3. Brand Promotion:
Labelling helps to promote the product. With the help of font
type used for lettering, font size, colour, graphics, etc., labelling
can help to promote the brand. Attractive labelling on products
or
packages catches the attention of the buyers.
4. Statutory Requirements:
It helps to fulfill such
statutory requirements, as
statutory
warnings, expiry date, etc. For instance, on cigarette packs, it is
Statutory to mention -Cigarette smoking is injurious to health.'
5. Transportation:
t enables the
ne
transportation company to know the nature of
product. Accordingly, precautions are taken while loading
r unloading. For instance, fragile products like glass need to
be handled with care.
6.
Purchase Decision:
acilitates
for the purchase decision. For instance, a buyer may look
contents, date of
manufacture, date of expiry, etc., and
accordingly decide to purchase the product.
18 Export Marketing (T.Y.B.Com.: SEM-V)
7. Use of the Product:
Labelling also facilitates proper
iuse
of the product. For instance
in the case of medicines details
such as dosage is indicated
and accordingly the consumer (patient) takes the medicine. In
the case of certain clothes, washing and ironing instructions
are stated on the labels, which help the user to follow them.
Custom Clearances: Developed countries insist on certain

8.
instructions on the labels on the packages or products that are
exported from other countries. For instance, the European
Union insists on labels to indicate the amount of pesticides and
insecticides used for horticulture products. The customs may
conduct a check based on the contents on the labels and
accordingly may allow customs clearance.
MARKING OF EXPORT GOODS

Marking refers to put certain marks on the carton boxes or container
packages for proper identification. The exporter needs to provide
information in respect of exporter's mark,
importer's mark, port of |
shipment and destination, gross and net
weight, handling
instructions (such as fragile
date of
goods handle with care, this side up)
shipment, and so on.
Requirements of Marking of Export Goods

When the exporter
ships a container load or more,
identification of your simple
cargo should be enough. However, if the
exporter shipping a smaller
1s
exporter must quantity one or few
cartons, the
provide
marked with water
detailed identification. The cartons must be
can be read even
proof markers and with big and bold letters
from a distance: that
The following are the essentials of a good
1. marking of export goods
Consignee Details: The
consignee's
number, and the order name, address,
carton. This will facilitatenumber must be mentioned contact
on the
shipping company to the right proper delivery of cartons the by
consignee.
Product
Planningand Pricing Decisions
19
aarter's Details: The cartons must be marked
22 addre and contact number. If with the name.
dress, any problems arise
ansit, the exporter can be easily notified of the same, during
. Country of Origin: The

exporter' s and address need not
name
he country of
the origin. The exporter may have
oOods and then re-exported. 'Therefore, there imported the
mention the country of origin. Some countries is a need to
concessions, if the give special tariff
goodsare
originated from certain countries.
4Contents: The exporter may mark the carton with the
inside. However, if the product is contents
one may not indicate the
expensive high in demand,
or
contents forthe fear of theft. Whether
tomark the cartoon with the
contents, the exporter and the
importer may decide about the same. At times, the shipping
company or the customs may insist on the same:
5. Marking in English Language: The exporter needs to mark in
the cartons in
English language, unless specified by the
importer. The customer may indicate that the carton be marked
by the
local language of the
need for importer. In that case, there is a
proper translation.
6.
ymbols and Phrases: The exporter needs to mark the cartons
With
symbols and phrases for proper identification and
nandling during transit. Readymade waterproof stickers are
available for symbols and phrases.
ome of the examples include: The symbol of two arrows
pwards indicates-This Side Up", Umbrella protection

cates'Protect from Water', Glass indicates "Fragile -
Handle with Care" and so on.

20 Export Marketing (T.Y.B. Com.: SEM-V)
7. Identify the number of cartons: There is a need to identify
the
number of cartons that the exporter is shipping on each carton
For exanmple, if the exporter 1s shippingb cartons, the numbers
of five, three of five, four of five, and
would be one of five, two
will e n s u r e that all the five
five offive. This type of numbering
at the port of destination.
cartons will arrive together
the cartons may be marked on

8. Mark on All Sides: If possible,
at the top. However, marking
the 5 visible sides-four sides and
o n two visible sides. This will enable
must be there at least
the cartons.
quicker identification of
must make sure that
9. Weight and Measurement: The exporter on the
dimension markings are
the net and gross weight and
outside of the carton. Preferably the internationally accepted
standard is the metric system such as meters, liters, kilograms,|
etc.
PRICING FACTORS DETERMING

EXPORT PRICE
A marketer must
Pricing of a product depends upon several factors.
consider certain factors before finalizing the prices. The factors
influencing pricing are broadly divided into two groups, as show
below
FACTORS AFFECTING PRICING
INTERNVAL FACTORS EXTERNAL FACTORS
Costs Competition
Ohjectives of Firm Demand1
Product .Consumers
Iuge of Firm... .Channels..
Planning and Pricing Decisions
Droduct
21
INTERNAL FACTORS
Costs:
1.
must consider costs
The exporte:
overseas
while
markets. The costs can be fixing prices in the
groups:
broadly divided into2
Fixed costs.
Variable costs.
An exporter may consider only variable
part of the output is sold in costs, when a small
the overseas
case, the exporter would recover all markets. In such a
domestic market. However, if an the fixed costs from the
export sells a major part of
output in the overseas markets; both
are considered while fixing fixed and variable costs
prices in the overseas
2. Credit Policy: markets.
Pricing may be influenced by credit
exporter provides longer credit
policy of the firm. If an
may be charged (say 180 days); higher
in case of because; there are more chances of prices
is shorter
longer credit period. However, when the bad debts
(say 30 days); the exporter credit period
to may charge lower
generate
more orders. prices
3. Corporate Image:
EXporters enjoying a good

charge higher prices as image tothe overseas markets may
in
enjoy compared those firms, which do not
wtn
reputation
in the overseas markets.
Customers trust firms
good corporate image and,
paying therefore, they do not mind
ke
higher prices. For example: firms with
distinct mage
Nike, Rolex Watches and others
Compared to other charge higher prices as
4.
competing brands.
Objectives of the Firm:
Exporter nust consider the objectives of the firm, while fixing
prices. For instance:
T the objective of a firm is to increase return on investimeng
it
may charge a higher price.
22 Export Marketing (T.Y.B. Com.: SEM-VI)
lt the objective is to capture a large market share; a firm
may charge a lower price.
5 Product
product
The product plays an important role in fixing price. Ifa
firmn either adopt premium pricing
1s
of superior quality; a may
strategy or
high value pricing strateg8
for
n premium pricing, a firm would charge high price
high quality.
of high value pricing, a firm would charge
In the case
moderate price for high quality.

value strategy, where
There a r e also firms that adopt super
case of
a high quality product
is sold at low price, as in the
Parle G and other brands by Parle Biscuits.
6. Promotional Activities:
activoities. If a firm undertakes
Pricing is related to promotional
then price planning
heavy advertising and sales promotion,
must ensure that these promotional costs will be recovered, at
least in the long term. It is often observed that highly advertised
orpromoted brands command high price as compared to lowly
promoted brands.
7. Product Life Cycle:

The stage of a products life cycle influences pricing. For instance:
At the introductory strategy; a firm may charge lower price

to induce people to buy the product.
At the growth stage, a firm may increase the price to take

advantage of the growing demand, especially when there
is limited competition.
Exporter may also consider the probable length of the product's
life cycle. If the probable length of the product's life is expected
to be long, then lower price may be charged, as compared to
the products with shorter life span.
Planning and Pricing
Decisions
Prnduct
23
EXTERNAL FACTORS
& Competition:
Exporter needs to consider the degree of competition in the

rket. When there is high competition, prices may be lower
ad vice-versa. The price of competing brands, as well as those
of substitutes must be considered while fixing prices. Generally,
the price must be within the range of that of the competitors.
9 Consumers:
Exporter needs to consider the nature of consumers while fixing
the prices in the overseas markets. For instance:
If the customers are price sensitive (especially in the

developing countries), exporter may charge lower prices.
If the customers are not price sensitive
(especially in the
developed countries), exporter may charge higher price,
especially in the case of superior quality products should
consider various consumer factors while fixing prices.
10. Demand:
Price of goods to a great extent depends upon demand. For
instance, an increase in demand may lead to an increase in price,
even though there may be no rise in costs. Demand may increase
due to economic conditions in the market, problems with the
supplies of competitors and so on.
t is to be noted, that increase in demand need not result in
ncrease in prices, as nowadays, socially responsible marketers
and
pass on a
part of the benefits of large-scale production
distribution to the consumers.
. Economic Conditions:
must be
economic conditions prevailing in the marketrecession,
LS1dered while fixing prices. During the times of
en consumers have less money to spend, exporters mlay
red
c e the prices to influence buving decision of the consumers.
a
charge
Howeve,
hioh , during economic boom, exporters may
higher price.
24 Export Marketing (T. Y.B. Com.: SEM-Vv)
12. Financial Incentives:
Government, influences
The financial incentives offered by the
number of
markets. Exporters get a
pricing in the o v e r s e a s Refund, Excise
incentives such as DBK, Octroi Refund, VAT
incentives a r e given by the
Refund/Exemption, etc. The
to quote lower prices
Government to encourage the exporters
in the overseas markets.
13. Channel Intermediaries:

the number of channel
The marketer must consider the chain of
intermediaries and their expectations. The longer
of profit
intermediaries, higher would be the price (because
margins of intermediaries).
14. Market Opportunities:

market opportunities for
The marketer may consider the
growth. If the market promises long term growth prospects,
then the marketer may consider fixing lower prices.
Note: Students may write 8 to 10 points in the exam. 4/5 each from
Internal and External Factors.
OBJECTIVES OF EXPORT PRICING

The first step in developing a pricing strategy is to develop pricing
objectives - what the pricing decisions must accomplish. Pricing
objectives must support the broader objectives of the marketing
department (such as increasing market share) and that of the|
organisation's overall objectives (such as enhancing shareholders'
wealth or enhancing corporate image).
The following are the main objectives of pricing:
1. Survival:
It is the most important objective of pricing; especially when
companies are faced with the problem of over-capacity, intense
competition, or changing consumer wants. Most firms adopt
survival objective during recession, when customers on an
average have less money to spend.
Product Planning 25
Drices are reduced (at times even below to cost) in order
maintain sufficient tlow of cash for working capital. Profits are
less important than survival. As
long as
prices cover variable
costs and some fixed costs, the company survives in the market.
However, survival is a short-term objective, as
price-cutting is
not always the answer. Marketers need to be careful with the
pricing strategy that brings short-term.benefits at the expense
of long-term goals.
Reducing prices in order to increase sales can cause customers
to be price sensitive. This may lead to Christmas Sale
"
Syndromne", i.e., in European and American markets, shoppers

wait for prices to drop at the time of Christmas season to
buy
goods.
2 Profit Objectives:
One of the main objectives of pricing is to earn
profit. The profit
objective of pricing can be expressed in two ways:
(a) Return on Investment: A number of firms fix their prices

to stimulate consumer interest in their brand over other
competing brands. Attractive prices result in higher sales,
which in turn helps to achieve a certain level of return on
nvestment return
or
capital employed. This in turm
on
helps a firm to achieve its one of the overall objectives
enhancing shareholders' wealth.
(6) Profit Maximization: A profit maximization objective
Seeks to get as much profit as possible. Profit maximization
does not necessarily involve fixing high prices. Low prices
may bring in higher sales and profits.
3. Sales Objectives:
Firms also fix prices in order to attain sales objectives. The sales
Objectives can be expressed in two ways:
a) Market Share Growth: A firm may fix the price of ts
Products, at a certain level, so as defend its current
to
Tket share, and, if possible to increase the market share
h i s purpose, a firm may adopt penetration pricB
dtegy for new product launch, and competitive pricing
for its
existing prices.
(b) Sales Growth: Marketing managers would like to achieUe
sales revenue growth in terms
of unit sales growth or in
1money terms. Increase in sales is an important indicator of
a firm's success. Increase in sales targets does not
necessarily result in other objectives, such as profits. This
is because, sales may increase, but
profits may actually
decrease, or a firm may even sufter losses despite growing
sales. Therefore, pricing objectives should not
just focus
on
growth sales, but also on profits.
in
4 Competitive-Effect Objectives:
At times, a firm may deliberately seek to reduce the effectiveness
of one or more
competitors. It may fix its prices in such a way
that it would enable it to win over competitors' customers. For
instance, a departmental store can offer a heavy discount in
early December on garments, footwear, etc., directed at
Christmas shoppers so as to win over customers from other
departmental stores/retail shops.
5. Image Differentiation:
Some firms may create image differentiation through pricing.
They may charge a premium pricefor their products to create a
distinct image vis-à-vis the competitors, in the minds of their
target audience. Firms like Mercedes Benz, Rolex Watches, and
others have adopted this strategy.
Some other firms may charge a moderate price for high quality
products. For instance, a firm may position its product on the
moderate price vis-à-vis high quality, such as NewportJeans -
"Good Jeans for Less."
6. Market Skimming Objective:
The firms that launch a new product in a market may adopt the|
market skimming strategy. In this case, the productis launched
at a high price, and then gradually it is reduced over a
of time.
period|
Skimming, apart from other benefits, helps a firm to recover
high development costs associated with new products. For
market skimming to be successful, there must be certain|
conditions, such as:
uct Planning and Pricing Decisions
Pro 27
The firm must have a
degree of security in the
patents. form of
.The product must have unique selling proposition.
Cash Recovery:
7 Early
Firms that face liquidity problems or those that believe that
ife of the product or market is likely to be short may adopt a
pricing strategy designed with the objective to generate a high
cash flow and lead to an early recovery of cash. Such firms
may provide a series of special offers and discounts, and
a strict credit policy, so as to increase immediate sales and
adopt
achieve prompt payment.
8. Market Entry Barrier Objective:

Firms may adopt low price strategy with the objective of
preventing others from entering the market. The potential
entrants would recognize the low returns available and the
dangers of getting involved in a price war. In this way, existing
firms may be able to minimise the amount of competition in
the market.
9. Customer Satisfaction Objectives:

A good number of quality-focused firms believe that profits
result from customer satisfaction, as the primary objective. They
believe that by focusing solely on short-termprofits, a company
loses sight of winning customers and retaining them. These
firms instead develop pricing objectives based on pleasing
customers over the long term.
Firms may adopt a high value strategy, where product quality

Is high and the price is moderate (neither high, low) instead
nor
of adopting premium strategy where high quality product is

Sold at high price. However, it is to be noted that s o m e
to the upper-upper class would
customers, especially, belonging status
be satisfied with premium strategy, as they enjoy prestige
with highly priced items.
10. Social
Responsibility Objectives:
often play a major role in pricing
oCial responsibility objectives
and of non-profit organisations.
uecisions of the government
social responsibility
Even professionals like doctors may adopt
as their pricing objective.
doctors may charge consulting
fee on the
For instance, some
Poorer sections may be charged less.
basis of ability tò pay.
sections may be charged more. Also.
whereas, the richer of large-
firms may pass on the economies
professional business
and distribution, at least partly, to the
scale production
social responsibility
consumers, with the objective of fulfilling
towards the consumers.
Note: Students may write 8 points

one paragraph each for 7/ marks
EXPORT PRICING STRATEGIES(For Reference

to attain pricing
Pricing strategy refers to a plan of action designed
method. A pricing
objectives. Pricing strategy differs from pricing
method helps to calculate and fix the prices on the bases of costs,
competitors' pricing, etc. Pricing method is part pricing strategy.
a of
There are several pricing strategies. The exporter may adopt

a
the product in the

particular strategy at the time of launching
overseas market. The exporter has to adapt pricing strategies
needs to constantly
depending upon the product life cycle. Exporter
review the pricing strategy adopted by his firm. If required, the
exporter may switch over from
one strategy to another.
The following are some of the important pricing strategies:
1. Skimming Pricing Strategy:

Meaning: A high premium price is charged when a product
(that offers unique customer benefits) is launched in the market.
Objective: This strategy aims at high profit margins in the early

stages of product introduction.
Types: The skimming pricing strategy can be of two

types:
(a) Rapid Skimming Pricing where high prices are charged
-
and the
product is promoted with heavy promotional
expenditure.
(b) Slow Skimming Pricing - where high prices are charged
and there is limited promotional effort to promote the
product.
Penetration
2. PricingStrategy:
The pricing strategy of low price in the early stages of product
introduction is called as "penetration pricing strategy.
Objective: The main objective is to capture a large share of the

market in the early stages of product introduction in the market.
Types: This strategy can be of two types:

(a) Rapid Penetration Pricing Strategy - where low prices are
charged and the product is promoted with heavy
promotional expenditure.
()Slow Penetration Pricing Strategy where lowprice is
-
charged and there is limited promotional expenditure to

promote the product.
3. Probe Pricing Strategy:

The exporter may fix a higher price in the export market during
This is done to find
the early stages of product introduction.
towards the price. The
out probe the reaction of the buyers
or
prices are then adjusted accordingly.

The exporter may follow this technique,
especially, when
is not available in respect of competitors'
sufficient information
of the buyers and so on.
pricing, purchasing power
4. Follow the Leader Pricing Strategy: of
The exporter may fix his prices
depending upon the prices
be very close to that of
the leading competitor.
The prices may
the by the leader.

prices charged
be advisable as the situation of
However, this strategy may not
from that of the leader
in terms of
the exporter may differ
costs, etc.
product quality, features,
5. Differential Trade Margins Pricing Strategy:
differential trade margins
pricing
The exporter may adopt trade
various types of discounts or
allow
strategy. He may
(T.Y.B.Com.: SEM-VI)
Export Marketing
30 discounts that can be offered includes
various durino
margins. The seasonal discounts
bulk orders,
discounts on
quantity discournts to encourage prompt
sales, cash
off-season to push up trade
The prices
discounts, etc.
discounts,
payments, goodwill upon the type
of discount
adjusted depending
are accordingly
offered.
Strategy:
6.
6. Standard Export Pricing the same price for all the
In this case, the exporter
may charge
countries as well as in developing
markets -
in developed
export
However, this strategy is mostly not followed as prices
markets. be fixed
a number of
factors. Again, prices need to
depend upon as compared to that
on the lower
side for developing markets
countries.
of markets in developed
7. Differential Pricing For Different Markets Strategy:

to different markets
In this case, different prices are charged
factors. The exporter can' have
depending upon a number of
differential pricing strategy for home markets and
for o v e r s e a s
between two
markets. Again, there can be differential pricing
or more overseas marketsS.
The differential pricing is justified due to :

(a) Differences in expenses such as documentation, freight,
insurance, packing, etc.
(b) Differences in costs to be charged- total costs for domestic

markets and only variable costs for export markets,
especially when major sales are in the home market,
(c) Differences in the level of competition - where there is no
or less competition, prices can be
high and vice-versa,
(d) Differences in demand in international markets
there is a need to where -
modify product and incur additional

costs, then prices
can be
where little or no
high for such markets and low
product modification is required,
(e) Attitude of buyers-if the
buyers attitude towards exporting
country's goods is negative, thern the
prices to gain entry in such markets,exporter may fix low
markets, he may charge higher whereas, in other
prices.
T'rriuct Planning and Pricing Decisions
31
S. Transfer Pricing Strategy:
Transfer pricing refers to the pricing of goods or services among
subsidiaries within a multinational corporation. This strategy
is adopted by subsidiaries of an MNC (Multinational
Corporation) when they trade with other subsidiaries or with
the parent company. The main objective of transfer pricing is
to reduce the inmpact of custom duties.
Generally, the selling firm charges lower price to the buying

firm. In such a situation, the selling firm (subsidiary or parent
firm) may suffer a loss, while the buying one will make a profit.
However, the overall profits of the parent firm in the
consolidated balance sheet would not be affected.
9 Trial Pricing:
An export firm may charge a lower price to induce customers
to buy the product, especially at the introductory stage. When
the demand increases, exporter may charge a higher price. The
purpose is to win customer acceptance first and make profits
later.
10. Flexible-Price Strategy:

different customers
An export firm offers the same product to
when a new product is
at different prices. For instance,
to its loyal
introduced, a firm may sell it at a special price
customers. Also, a retailer may
offer special price to frequent-
not buy
compared to other customers, who do
shopper as
for
reward
frequently from that store.
The special price is a
customers loyalty.
1. Predatory Pricing:
to kill
Some large firms mayadopt predatory pricing it
low price and/or may
Competition. The firm may charge
free of cost. The purpose
is to gain
provide certain services
in the market. Predatory pricing is
monopolistic position because under penetration
aifferent from penetration pricing
market share. But
to gain large
pricing low price is charged low prices to kill
the company charges
under pricing
predatory
competition.
Export Marketing (T.Y.B. Com.: SEM-V) |
32
INCOTERMS
w.w.ww
Commercial lerms) are a standard set o

the International Chamber ef
Incoterms
(International
which w a s created by
terminology, Terms a r e used universally
in 1936. The INCO
Commerce (ICC)
forwarding for traders, buvers
ers,
defining the parts of freight
key
sellers and banks.
Users of INCO Terms:
and traders, anyone|

Incoterms are today by practitioners
used
chain of delivering goods overseas will
involved in the supply
probably come across incoterms, including:
Traders
Producers
Buyers
Sellers
Governments
Banks
Coverage of INCO Terms:
The language that was agreed by incoterms guidance covers the

following areas of international commerce and trade:
Tasks involved in shipping
Parties to hold contract
Responsibility (Buyer or Seller) of risk

Delivery of goods (buyers and sellers)
Duties relating to Insurance
of goods
Customs duties and taxes
33
Product Planning
Types
of INCO Terms:
1. Ex Works (EXW):
Incoterm defined by the International
Ex Works is a type of
seller (or shipper
Chamber of Commerce.. Ex Works makes the
of goods responsible for packaging and leaving the
/ supplier)
goods at their tactory.or place of manufacture.
for everything from

The buyer (or consignee) is then responsible
made available:
the point of the goods being
Loading goods onto transport
or terminal
Transporting goods to a port
Shipping the goods
or terminal
Unloading the goods at the buyer's port
destination or
to the end
Transporting the goods
warehouse.
2. Free Carrier (FCA):

agreement where a (or shipper
seller
Free Carrier is a common
and loading8
is responsible for packaging
supplier) of goods hub or port. The seller is
truck at their transport
goods onto a clearance of the goods at
the port or
also responsible for export
terminal.
the vessel,
by customs, loaded
on
are cleared
Once the goods
is accepted, responsibility shifts
been loaded and the shipment
and delivery
the buyer to arrange shipment
from the seller to
or customer.
to the end warehouse
Ex Works, where the seller is just

FCA is different from
available theat their own factory
goods
responsible for making
or place of manufacture.
else:
responsible for everything
The buyer (or consignee) is then
Shipping the goods
terminal
at the buyer'sport
or
Unloading the goods
Transporting the goods to the end destination or
warehouse
3. Carriage Paid To (CPT):

It is an INCO Term which waa set out by the International
Chamber of Commerce in their Incoterms 2010 guide with the
of the
aim of standardizing shipping terms and defining all
responsibilities between buyers and sellers.
CPT is common for large importers who have their own port
agents that can manage the delivery of goods when they arrive
in their country.
However, the risk of the seller passes on to the buyer once the
goods leave their country or port, despite the seller paying for
the transport of the goods.
The buyer (or consignee) is then responsible for everything else:
. Insuring the goods as they are being shipped (but not

paying for this shipment)
Unloading the goods at the buyer's port or terminal
Transporting the goods to the end destination or

warehouse
4. CIP - Carriage and Insurance Paid To:
CIP is an Incoterm where the seller is responsible for the

delivery
of goods to an agreed destination in the buyers country, and
must pay for the cost of this
carriage. The sellers risk however,
ends once they have placed the
goods on the ship, at the origin
destination.
The buyer can pay for additional
insurance during carriage of
the goods. The risk is
the first carrier.
passed when the goods are received by
Carriage and Insurance Paid to is eligible for
any form of
transportation.
Cost and Insurance Paid To
cost of requires the seller to pay for the
transporting the goods and also minimum insurance to
transport them to the end destination.
35
Product Planning
Product
With CIP, the seller pays for both the transportation and
the insurance to the destination. The seller also needs to insure
the goods during carriage, and it's normally always at a
minimum cover level as the liability lies with the buyer at this
for
point. Minimum insurance might not be adequate
manufactured goods or high value / precious merchandise.
Delivery at Terminal (DAT):
5.
Under DAT the seller clears goods for export and is fully
at a named
responsible for the goods until they have arrived
be unloaded
terminal at the end destination. The goods must
at the terminal. DAT can be used

with any transportation mode.
at Terminal is used when the seller's responsibility

Delivery
until the end terminal or
includes the full delivery of goods up
as well as the unloading of
the goods. The
port of destination,
incurred until the place of
seller pays for all of the expenses and taxes at
customs clearance
delivery and the buyer pays for
destination.
6. Delivery at Place (DAP): and seller's

DAP is an incoterm defining the buyer
this case, the seller is
responsibilities when moving goods. In
of origin
moving the goods from the country
responsible for which includes
the end destination,
to
right through
transport and unloading.
responsibility for loading,
issues with the goods
that seller bears the risk of any
DAP m e a n s extra fees for
If there anyare
agreed delivery point.
until the incur such expenses.
the goods, the seller must
unloading at
the goods
DAP requires the
seller to load, ship and unload or terminal
after the
port
destination place (normally DAP can
an agreed of destination).
arrive at the country needs to
where the goods and the seller
mode of transportation,
be used for any
pay for:
i m p o r t customs clearance
duties
taxes
loading/ unload costs
7. Delivery Duty Paid (DDP):
DDP is used to describe the delivery of goods where the seller
takes most of the responsibility. The seller/supplier is
associated with the
responsible for paying for all of the costs
deliveryof goods rightup to the named place of destination. t
is also expected that the seller clears the goods at export and
import customs.
The buyer is then responsible for unloading the goods at the

end destination.
DDP can be used to describe ocean, road or air transportation

of goods, including multimodal transportation.
8. Free Alongside Ship (FAS) :
Under FAS, the exporter is responsible for customs clearance
of goods and delivering them to the vessel at the point of origin.
Under FAS, the seller is responsible for delivering the goods
next to the shipping vessel.
FAS is often used for cargo that doesn't fit into containers -
known as Out of Gauge (OOG) cargo as these would
be transported to a container
-
typically
yard under the FCA incoterm.
The cost for loading the goods onto the vessel is the
responsibility of the seller. The buyer is responsible for the cost
of loading the goods onto the ship, and all costs thereafter
9. Delivery Duty Unpaid (DDU):
Under DDU, the seller is required to deliver
goods to the agreed-
upon destination in the country of
imports. The buyer is
responsible for the rest of the costs and further delivery of the
shipment unless other terms are agreed in advance.
10. Free on Board
(FOB)
11. Cost and
Freight (C&F or CFR)
12. Cost, Insurance and
Freight (CIF)
The terms FOB, C&F
and CIF
Quotations.)
are
explained under Export
37
Droduct Planning and Pricing Decisions
EXPORT PRICING QUOTATIONS
MEANING:
A quotation is an offer made by an exporter in reply to enquiry

an
the importer. The quotation should clearly state the price and
from for
terms and conditions. Price quotations are the basis
other
to the seller and
determining the amount to be paid by the buyer cost of insurance,
as to who will bear the
they also provide guidelines and other responsibilities.
in
transport, damage to goods transit
Information required for making a Quotation
is to be made.
(a) Currency in which quotation
FOB/C&F/CIF
(b) Breakdown of costs -
(c)Discounts, if any.
Methods of payment-D/P,D/A,
or against letter of credit.
(d)
if
Commission of intermediary, if required and any.
(e)
Who is to pay for freight?
(gWho is to arrange
for shipping space?
insurance cover?
(h) Who is to arrange for
one or more
lots?
Whether shipment is to
be delivered in
G)
) Delivery schedule.
non-fulfilment of delivery schedule.

(k) Penalties, if any, for
() Any other details, if required.

explained in detail
as
are
The three main important quotations
follows:
1. FREE ON BOARD (FOB)
includes all
the seller quotes a price which
Under the FOB contract, delivered on board
incurred until the goods are
actually
the expenses shipment. It
constitutes:
the ship at the port of
38 Export Marketing (T.Y.B.Com.: SEM-V)
(a) Ex-Factory price
(b) Packing charges
(c) Customs and Port charges
(d) Documentation charges
(e) Export duty, if arny
( Inland transportation cost
(g Wharfage and Porterage
(h) Other expenses, if any.
) Profit margin is added and export incentives are deducted.
FOB PRICE = Cost ofgoods + Expenses upto Board the Ship
+Profit- Export Incentives

Usually the FOB contract requires the following seller and buyer
OBLIGATIONS.
The seller must:

(a) Costs and Expenses: The seller must bear all costs and expenses
till the goods are loaded on the ship. The costs include:
Ex-factory cost
Packing cost
Loading expenses.
(b) Intimation to Buyer: The seller must inform the
buyer regarding
the loading of goods on the
ship. This intimation would enable
the importer to make
the port of destination.
arrangements for customs clearance at
(c) Documentation: The seller must submit

to the buyer to take necessary documents
include:
possession of goods. The documents
Bill of lading
39
Commercial invoice
Consular invoice
Certificate of origin
Other relevant documents.

d Suitable Packing: The seller must properly pack the goods
depending on certain factors such as follows:
a. Mode of transport (air/ship)

b. Nature of goods.
C. Buyer's requirements, etc.
(e) Supply of Goods: The seller must supply the goods to the buyer
as per the terms of contract. If the goodssupplied are not as per
the order, the buyer has the right to reject the shipped goods.
(Deliver the Goods on Board: The seller must deliver the goods
on the vessel named by the buyer at the port of shipment.
The
seller must make arrangements for loading of goods on the ship.
The buyer must:

needs to book the space
(a) Booking of Shipping Space: The buyer
on board a vessel and give the seller notice in respect of the
name of the vessel, loading berth and delivery date.
risks after
(6) Costs and Risks: The buyer has to bear all costs and
the buyer has to
the goods are loaded on the ship. For instance,
pay the unloading charges.
the buyer obtains the
)Insurance Premnium: Under FOB contract,
in transit.
insurance policy to cover the risks/damages insurance
of
Therefore, the buyer has to make payment
premium to the insurance company.
the ship/vessel.
Freight Payment:The buyer books spaceonto the shipping
the
Therefore, the buyer needs to pay freight

from the port of shipment
Company for transporting the goods
to the port of destination.
40 Export Marketing (T. Y.B. Com.: SEM-VI)
(e) Payment to Exporter: The buyer needs to make payment to the
exporter as per the terms of contract. The payment must be
made on or before the due date.
Under FOB quotation, the seller loses his right of lien on the goods
and the right of stoppage in transit. This is because the shipping
company is under the contract of the buyer. In India, export
incentives such as duty drawback, are given on the basis of FOB
price.
2. Cost and Freight (C &F)
The importer may request the exporter to quote C&F price which
means FOB price plus cost of transportation of the goods to the port
of destination.
C & F Price =
FOB Price +
Freight
Seller and buyer OBLIGATIONS under C&F contract.
The seller must:

In addition to obligations merntioned under FOB (a to f), the seller
must pay freight charges of the shipping company.
The buyer must
(a) Arrange and pay for insurarnce.

(b) Pay clearing charges and import duties.
(c) Make payment to exporter as per the commercial invoice.

3. Cost Insurance & Freight (CIF)
It includes FOB
price plus freight plus marine insurance upto the
port of destination. It is preferred by the importer over FOB because
there are fewer responsibilities for him as the
for fluctuations in rates of exporter takes all risk
freight and insurance unless otherwise
specified in the contract.
CIF Price =
FOB Price +
Freight + Marine Insurance
Seller and buyer OBLIGATIONS under CIF contract.
41
The seller must:
obligations mentioned under FOB (a

to to f), the seller
In addition
must pay freight and insurance premium.
The buyer must:
duties.
(a) Pay clearing charges and import
b) Make payment to exporter as per the commercial invoice.

is asked on C&F or CIE, students need to
Note: If separate question
and not to write (a tofof
explain all seller and buyer obligations
FOB).
FOB PRICE V/S CIF PRICE

CIF PRICE
FOB PRICE
1. Meaning It includes all costs and expenses till

and expenses
It includes all costs on the thegoods are loaded on
the vessel
till the goods are loaded and
vessel.
plus payment offreight charges
insurance premium.
2. Formula: FOB Price + Insurance

Profit- CIF Price =
FOB Cost +
FOB Price
=
+Freight
Incentives
CIF Price as
3.Preference: is The importer prefers
The FOB price quotation there is less
burden on him.
the exporter|
normally preferred by
The
|4. Freight Charges: include It includes freight charges.
price does not charges.
The FOB
exporter pays the freight
pays
freight charges. The importer
the freight charges.
5. Insurance Premium: It includes
insurance premium
The FOB price does not include The exporter pays
the
The charges.
insurance premium charges.
insurance
same.
importer pays the
premium charges.
Y.B.Com.: SEM-Vi)
42
ExportMarketing (T.
6. Booking ofShipping Space: The exporter books the shipping

The importer books the shipping
space.
Space.
7.Amount: due
Theamountinvolved higher
is
The amount of FOB price is lower
than that of CIF quotation.
to freight and insurance premium
India:
8. Popularity in in
The CIF quotation is not popular
FOB quotation is more popular
|India as compared to FOB,
amongIndian
exporters.
9. Incentives Receivable:
incentives The export incentives are calculated
In India, exporters get
on the basis of FOB price. on FOB price and not on CIF price.
PROBLEMS ON FOB QUOTATION

to
1. From the following details, find out the minimum FOB price
basis. What will be the profit/
be quoted on no profit no loss
cost 32,000,
loss if a price of 31,000 FOB is quoted? E>x-factory
DBK 5% of FOB price.
Expenses upto board the ship 6,000,
Solution:
Ex-factory cost T 32,000
Expenses upto board the ship 76,000
FOB cost 38,000

Since profit amount is nil FCOB cost is equal to FOB revenue.
Formula: FOB price + DBK = FOB Cost + Profit
Let FOB price be x

x+ 5% ofx =38,000 +0
x+5% x = 38,000
1.05 x =
38,000
X
38,00036,190
1.05
t llannig and P'iicing Decisions 43
FOB
Thus, I the mininm price that can be quoled at no profit no
basis is 36,190
oss
Profit/loss ifa price of 731,000 FOB is quoted is as follows:

be x
Let profit
Eormula: FOB price + DBK = FOB cost + Profit.
1.000+5% of 31,000 38,000 +

=
x
31,000+1,550= 38,000 + x
32.550-38,000 = x
x= -5,450
Thus, if price quoted is 31,000,

the loss will be 5,450/-
Calculate the minimum FOB price which can be quoted by

an
22 details. Also calculate
exporter to Australia from thefollowing earned @
the amount of foreign exchange that
can be 25/-per
Australian dollar:
Ex-factory cost 75,000

Packing cost F15,000
Transport cost F10,000

cost
Contribution of profit @ 10% of F.O.B.
Duty drawback @ 10% ofF.O.B. price
Solution:
Given - Ex-factory cost 775,000
- Packing cost 15,000
- Transport cost 10,000
- Total F.0.B. cost 1,00,000
10,000
-
10% Profit Margin

1,10,000
- FOB REVENUE
44 Export Marketing (T.Y.B.Com.: SEM-V
-
DBK 10% FOB price

- FOB price?
Formula to calculate FOB price-

FOB price+ incentives FOB cost +
=
profit
Let FOB price be x
10x
x+
100
100 1,00,000 +10,000
x+.10x= 1,10,000
= 1,10,000
X =
L.1
1.1 1,00,000
Therefore, the exporter can quote minimum FOB
PRICEZ1,00,000
Foreign exchange that can be earned
Exchange rate 1 Australian dollar =R25
soR 1,00,000 will fetrh 00,000

25 4,000
4,000 Australian Dollars
33. Calculate minimum FOB Price
from the
calculate the amount of
foreign
following details. Also
dollar is equal exchange
if one American that would be
to 7
30/- earned
Total Number of units: 1000
units
Ex-Factory Cost 25/- per unit
Packing Cost 2/- per unit
Transport Expenses3/- per unit.
Duty Drawback 10% of FOB
Price
Profit
Margin 10% on FOB Cost.
a1d P'ncing Decisions
itut l'lan111g
P r i t Plan
Solution
Ex-factory
Cost 1000 x 25 25,000
2
Packing Cost 1000 2,000
x
Transport Expenses 1000 x 3 3,000

FOB Cost 30,000
Profit Margin 10% 3,000
FOB REVENUE 33,000
DBK 10% FOB price
FOBPrice?
Formula to calculate FOB Price
=
FOB Price + Incentives = FOB Cost + Profit
Let FOB Price be x
10x
X 10 30,000+3,000
100
xt.10x = 33,000
1.1x = 33,000
X = . 33,000 30,000
1.1
FOB Price is 7 30,000.
FOB Price 30,000 1,000
Foreign Exchange Earned Exchange Rate 30
Forex earned is $ 1,000.

Product P'lanning aná Pricing Decisions 45
Solution:
Ex-factory Cost 1000 x 25 25,000

Packing Cost 1000 x 2 2,000
Transport Expenses 1000 x 3 = 3,000
FOB Cost 30,000

FOB REVENUE 33,000
DBK 10% FOB price
FOBPrice?
Formula to calculate FOB Price =
FOB Price + Incentives = FOB Cost + Profit
Let FOB Price be x
X+ 10x 30,000+3,000
100
x+.10x=33,000
1.1x 33,000
X 33,000 30,000
1.1
FOB Price is 30,000.
FOB Price 30,000 1,000
Foreign Exchange Earned Exchange Rate 30
Forex earned is $ 1,000.

Export Marketing (T.
Y.B.Com.: SEM
46
calculate the FOB Price:
4. From thefollowing data,
728,000
G) Ex-factory Cost
7500
i) Packing Cost
700
(ii) Transportation
towards Profit
73,800
Contribution
(iv)
Drawback 10% on FOB Price.
(v) Duty
Conversion rate -1$ =
{ 45.
(vi)
Solution:
Ex-factory Cost 28,000

Packing Cost 500
Transportation 700
FOB Cost 29,200

Profit 3,800
FOB Revenue 33,000

Formula : FOB Price + Incentives =
FOB Revenue
Let FOB price be x
10x
x+ = 33,000
100
1.1 x= 33,000
x = 33,000 = 30,000
1.1
FOB price is 30,000/
FOB Price 30,000
Foreign exchange earnea = 666.67
Exchange Rate 45
Foreign exchange earned is $ 666.67.
Planning and 'ricing Decisions 47
With the help of the following information, calculate minimum
FOB Price m dollars, if 1$ = 7 40/-
Totalnumber of units = 1000 units; Ex-Factory Cost - 7 25/-

perunit; Packing Cost =T2/-per unit, Transportation Expenses
T 3 / - p e r unit; Profit Margin = 10% on FOB Cost; DBK = 10%
of FOB Price.
Solution:
Ex-factory Cost (1000 units x 257) 25,000
Packing Cost (1000 units

x 2) 2,000
Transportation Expenses (1000 units x 3) 3,000
FOB Cost 30,000
FOB Revenue
33,000
+ Incentives = FOB Cost + Profit

Formula: FOB Price
Let FOB Price be x.
x+ 10x = 30,000 +3,000

100
1.1x 33,000
33,000
X = = 30,000
1.1
is 30,000.
FOB Price in Indian Rupees
is $ 750.
Minimum FOB Price in dollars
PRACTICE ON FOB PRICE

FROBLEMS FOR
to bequoted
F.O.B. price in U.S. Dollars
minimum intormation:
Calculate the basis of the following
o n the
Dy an Indian exporter
Export Marketing (T. Y.B.Com.: SEM-VI)
48
Ex-factory Cost T1,50,000/-
Packing Cost 30,000/

Transport Cost 20,000/-
Contribution to Profit @ 10% of F.O.B. Cost.
Duty drawback@ 10% of F.O.B. price.

1 US Dollar = 7 50
Rate of Exchange
Ans.FOB price in = F2,00,000
FOB price in $ = 4,000 US $.
2.
2. Calculate the minimum F.O.B. price in YEN be Quoted by an
to
Indian Exporter on the basis of the following informations:
Ex-factory cost 750,000/-

Packing cost 74,000/-
Transport charges 6,000/
Profit 6,000/-
DBK 25% of F.O.B. price
1 3 YENS).
Ans.FOB price in = 752,800.
FOB price in YEN=52,800 x 3 = 1,58,400 Yens.
3 From the following data calculate minimum FOB price in EURO. |
Materials Cost 1,40,000

Labour Cost 60,000
Local Transportation
8,000
Other Expenses 2,000
Profit Contribution 20% of FOB
-
49
Draw back of Duty -
5% of FOB
price
(LEURO=40)
Ans. FOB Price in 2,40,000
FOB Price in EURO 6,000
ACalculate the minimum FOB Price in US $ from the following

information:
Ex-factory Cost -
34,000
Packing Cost 6,000
Transportation - 3,000
Loading Charges- 1,000
Contribution to Profit - 10% of FOB Cost
Duty Drawback -
10% of FOB Price
Exchange Rate7 44 1$.

Ans. FOB Price in 44,000
FOB Price in dollar 1000
5. Calculate minimum FOB price in $ to be quoted to an importer

from the following details:
Ex-factory cost- T 30,000
Packing cost 73,500
Expenses upto loading - 1,500

Profit expected - 21% of FOB cost
Duty Drawback - 10% FOB price

44.
Calculate minimum FOB price in $ when 1$
=
Ans. FOB price in rupees is 38,500.
FOB price in dollars is $ 875.

50 Export Marketing (T. Y.8 .Com.: SEM- VT)
Not e: To find fore ign exc han ge ear ned :
a) Wh en the Ind ian Rup ee Val u e is less as com pare d to

fore ign curr enc y, (as in the case of mos t fore ign currenci es
like doll ars, pou nds , euro , etc.) the foll owi ng form ula to
be use d:
FOB Pric e in Rup ees

Exc han ge Rat e
b) Wh en the Ind ian Rqp ee Val ue is mor e as com pare d to one

uni t of fore ign curr enc y (as· in the case of Japa nese Yen),
then foll owi ng form ula to be use ~ :
FOB Pric e in Rup ees x Exc han ge Rate
e in
6. Fro m the foll owi ng data calc ulat e the min imu m FOB pric
EUR O.
Mat eria l Cos t ~ 2,10,000
Lab our Cos t ~ 90,000
Loc al Tra nsp orta tion ~ 12,000
Oth er Exp ense s ~ 3,000
Pro fit Con trib utio n 20% of FOB Cos t
Dut y Dra wba ck 5% of FOB Pric e
(1 Eur o = t 50)
Ans . FOB Pric e ~3,60,000/-
FOB Pric e in EUR O = 7200
e in
7. Fro m the foll owi ng data calc ulat e the min imu m FOB pric
US$ .
~ 1,50,000
Cos t of Mat eria ls
~ 80,000
Cos t of Lab our
produ ct Plann ing nnd Prici II<'
,, n I.I ./::;/(Ill
·. · ,-.;.
r.-1
Local Trans porta tion ,)
~ 12,00 0
Pack aging Char ges
~ 8,000
Profi t Cont ribut ion
2 0% of FOB Cost
Duty Draw back
5 % of FOB Price
. (l US $ = ~ 45)
Ans. FOB Price "2,85 ,714/ -
FOB Price in US $ = 6349 _
2
1. E~pla in facto rs _influencing expo rt pricin g.

2. Discu ss the vano us expo rt pricin g strate gies.
3. Write a note on Inco Term s._ .
4. Write_brief not~s _o n break even point and margi nal cost pricin g.
5. Explam FOB pnc1 ng quota tion.
6. Expla in C&F prici ng quota tion.
7. Expla in CIF prici ng quota tion.
8. Probl em on FOB pricin g.
9. Write note on : Skim ming Pricin g
10. Discu ss the vario us prod uct plann ing decis ions in expor t marke ting.
11. What are the facto rs influe ncing brand ing of a produ ct in overs eas
mark ets?
12. Expla in the need and impo rtanc e of packa ging in expor t mark ets.
13. What is label ling? Discu ss its advan tages to expor ters.
14. Write a note on mark ing of good s for expor t markets.
A.. State whet her the follo wing state ment

s are True or False :
l. Brand
)
ing is not yital in expo rt mark ets. . .
~. Gene rally, fixed costs
vary with the incre ase in pro~uct1on.
In India , expo rt incen tives are caku la ted on ClF pnce .
52 Export· Mark<'f-ing (T. Y.B. Corn.: SEM - Vf)
4. Objectives' of the finn is an internal factor for price calcu lation.
s. Cmnpetition is an internal factor for price calculation.
6. Exporters consider only internal factors to fix export prices.
7. Packaging only serves the purpose of protection of goods in transit.
8. The exporters consider only n1arket data to fix prices. .
9. Skinun:ing pricing strategy is followed for standard products. ,
10. Trial pricing involves fixing higher prices at fhe product launch.
11. In FOB pricing, the exporter ignores duty drawbac;k.
12. In CIF pricing quotation, the freight charges are paid by the importer.
13. In C & F pricing quotation, the freight charges are paid by the exporter.
14. The packages must have proper identification marks.
15. In India export incentives are given on the basis of FOB price .
. 16. Transfer pricing is followed among the subsidiaries of an MNC.
17. Probe pricing is undertaken to judge the reaction of the customers to
the price.
18. Penetration pricing strategy is adopted to gain a large market share.
i9. The exporter fixes the price after considering various factors.
20. INCO Terms are universally accepted.
II. Match the following columns :
Group A GroupB
1. Skimming Pricing (a) Same pricing world wide
2. Penetration Pricing (b) Larger market share
3. Probe Pricing (c) Low price to induce buyers
4. Transfer Pricing (d) Higher price to sense demand
5. Trial Pricing (e) Different price in different
markets ·
(f) Innovative products
(g) Pricing by subsidiaries of MNC
C. Give full forms :

1. FOB
2. C&F
3. CIF
pr(lducf Planning and Pricing Decisions .r ,,
/,)
FAS
4. JNCO T ern1s
s. pMCG
6.
7. EXW
8. FCA
9. OAP
10. DDP
11. DDU
12. DAT
13. CPT
14. CIP
Di str ib ut io n .in Export M ar ke tin g
. .
• Factors Influencing Di str ibu tio n Ch an ne ls

• Direct Ex po rti ng Ch an ne l
• Ind ire ct Ex po rti ng Channels (A pri l 2019) ·
ne ls
• Direct Ex po rti ng v/s Ind ire ct Ex po rti ng Ch an
, Logi~tics in Export M ar ke tin g
• Co mp on en ts of Lo gis tic s (A pri l 2019)
pri l 20191
• Selection Criteria of Mo de s of Tr an sp or t (A
• Need for Insurance
I
Promotion in Export M ar ke tin g

l 2019}
• Sales Pr om oti on Techniques in Ex po rt (A pri
• Im po rta nc e of Trade Fairs an d Ex hib iti on s
• Benefits of Pe~sonal Se llin g
• Es sen tia ls of Ad ve rti sin g
I
otion 55
£:xport_Distribution and Prom
is a m ea ns th ro .
A di st rib ut io n ch an ne luc ti on to th ug h w hi ch go od s ar e m ov ed
{ram th e pl ac e of pr od e pl ac e of co ns um pt io n.
. .
ri bu tio . . .
co ns id er di re ct di st ne l an d/ or m d1·re ct
Exporters m ay an A b tt n ch an
is tri bu tio n ch ne ls · e er a·bppro ac h t O sel ect an ap pr op na te
d E ·
channel is to st ar t w it h th e m a1 uy er an d se le ct a ch an ne l(s ) th at
. /a re m os t ef fe ct iv e . .
1s
in flu en ce ch ne · n:
l ·se.lect.10
n fa ct or s th at · . an
Following ar e th e m ai
1. C us to m er C ha ra ct er
is tic s:
co ns id er cu st om er ch ar ac te ris tic s in th e ch oi ce .
A n ~x p? rte ~ m ay .: .
·
of d1 st r1 bu tto n ch an ne ls
s _ar e la rg e irt nu m be r an d are lo ca te d in

(a) If th e cu st om er fi rm m ay se le ct in di re ct
tr ie s, th e ex po rt
se ve ra l co un
tio n ch an ne ls as it m ay no t be fe as ib le to reach to
di st ri bu di ff er en t m ar ke ts . Fo r
·c us to m er s in
la rg e nu m be r of er go od s m ay ad op t
ex po rt er of co ns um
in st an ce , an ·
.
in di re ct ch an ne ls .
. .
e fe w in nu m be r an d th e ex porter.ex po rt s
(b) If th e cu st om er s ar e ex po rt fir m can se le ct di re ct
rt m ar ke t; th
in on ly on e ex po e fi rm to se rv e di re ct ly
m ay be po ss ib le fo r th
ch an ne l as it an expo:r;ter ca te rs to fe w
st om er s. Fo r in st an ce , if
to th e cu
ri al bu ye rs in fe w ex po rt m ar ke ts ; th e ex po rt er m ay
· in d~ st ·
re ct ex po rt in g ch an ne l.
se le ct di
2. Product C ha ra ct er is tic s: uc t cl as s an d pr od uc t
te ri st ic s in cl ud e pr od
Pr od uc t ch ar ac
at ur es lik e du ra bi lit y, sh ap e, si ze , de si gn , etc.
fe
gh pr ic ed lu xu ry go od s like R ol ls Ro yc e,
(a) In th e ca se of hi , th e ex po rt er m ay ad op t
, B en tle y, et c.
La m bo rg hi ni on e or tw o sh ow ro om s
e di st ri bu tio n th ro ug h
ex cl us iv s of a pa rt ic ul ar count-ry.
m aj or m et ro ci tie
es pe ci al ly in th e
(b) In case of FMCG products, the exporter may adopt indirect
channels, because the number of buyers are large and buy
in smaller quantities in different countries.
(c) In case of perishabl e items like vegetable s, meat products,

etc., the exporter may select shorter indirect channels to
avoid re-handli ng and spoilage. · ·
3. Company Profile:
A company 's corporate image, resources , and distributio n
.capabilities influence the selection of distributi on channels:
(a) If an exporter has limited resources, it will have to depend
on intermedi aries, and therefore, it will select indirect
channels in overseas markets. · ·
(b) If ~n export firm has a distinct image in the overseas

markets, it may select reputed dealers in the overseas
markets.
(c) If an export firm has a strong network of its sales
representa tives in overseas markets, it will make efforts to
distribute the goods through direct channels.
·4. Competitors' Distribution Strategy:
Generally, a firm may consider the distributi on strategy of itf
competito rs in the choice of channel selection. Normally , a
marketer may use the same channel that is used by the
competito rs.
(a) Almost all exporters of FMCG goods use indirect channels
to distribute the product.
(b) In case of certain industrial goods such as heavy machinery
and equipmen t, most of the firms resort to direct channel.
5. Area Coverage:
An export firm may consider the area coverage in the choice of
distribution channel:
·(a) If an export firm exports in only one or two overseas
markets and if it caters to few customers; it may resort to
direct exporting.
t Distribution and Promoti on .5 7
r,xpor
(b) If an export firm exports to sevral oversea s mark_et s _and
that too to a large numbe r of buyers, it 1nay select 1nd1rec t
channe ls.
Middle men Charac ~eristic s:
6.
The charac teristic s of middle men, such as their resour ce
strength s and capabil ities, must be conside red. ·
(a) A firm may distrib ute the produc ts through sole selling
agents , especi ally when the .agents have their own
distrib ution faciliti es such as wareho uses, .showro oms,
deliver y vehicle s, etc., the compan y may go for indirec t
channe ls.
(b) Someti mes, retailer s may be relucta nt to·stock goods with
higher price; the compa ny may resort to direct selling.
7. Econom ic Condit ions:
Econom ic conditi ons prevail ing in the oversea s market s are
conside red for selectio n of distribu tion channe ls: ·
During recessio n, middlem en may be relucta nt to stock produc ts
u11.less they are provide d with extra incenti ves such as ✓push
commis sion'. Therefo re, during recessio n, if extra_incenti11es to
middlem en are not feasible , the export firm may resort to direct
channel of distrib ution, especia lly in few ma'rket s.
For instanc e, to sell readym ade garmen ts during recessi on, a .
garmen t exporte r may take part in trade fairs arid exhibit ions
and sell the produc ts directly to the custom ers.
8. Techno logical Factors :
The technol ogical factors also influen ce channe l selectio n For
instance , technol ogical develo pments in telecom munica tions
have n1ade it possibl e for home shoppi ng via telemar keting.
Also, interne t has made it possibl e for custom ers to place direct
orders on-line, thereby , elimina ting the need for interme diaries.
9.
Size of the Orders :
The size of the order may influen ce the choice of channe l
selecti.on. Norma lly, when a compan y receive s la_rge size orders
and that too from few custom ers, it may prefer direct channe l
t
58 Export Marketing('/'. Y.R .Com.: SEM-VI)
to serve tl,c custome rs. H owever, when a firm gets s mall si7.e
orders fron1 a large nu1nber of custom ers, it may adopt indirect
channels.
10. Channe l Objectives:
The channel objectiv es have a direct influence on the choice of
distribu tion channel For instance, a firm may want to maintain
close contact with_its ultimat e customers, it may adopt direct
channel. Also, if the firm wants to deliver the goods quickly to
the custome rs, it may adopt direct channel . Howeve r, if the
channe l objectiv e is wider market coverag e, it m ay adopt
indirect channel s.
In direct exportin g, the exports are underta ken directly by the

manufa cturer. The manufa cturing firm makes its own arrangem ent
to export its p~oduct s either within the existing sales network or by
creating a separate export departm ent or division . This type of
exporte rs are known as Manufa cturer Exporte rs.
The direct exporte r may take the benefit of any or a combin ation of
the followin g arrange ments to book orders: ·
a) Appoin ting agents / distribu tors in oversea s markets .

b) Deputin g sales represen tatives abroad. __
c) Openin g sales offices abroad.

d) Direct booking of orders through correspo ndence.
Advantages of Direct Exporting :
The direct exporte r enjoys the followin g advanta ges :

1. Reputat ion :
The direct exporter can ear n a good name in the domestic n1arkl'1
as well as in the export m arkets. He can earn a ~ood na1ne by
providi ng good qu a lity goods and services .
,t Distribution and Promotion S9
EtP0 1 . . ·
Produc tion Capacit y :
2, optimu m
If a manufa cturer sells O I 111· h
t b bl t n Y t e domesti c market, then he
1nay nol eka fedo make opti1nu1n use of product ion capacity
due to ac o emand in th e d omestic• · ·
· Id • market. Exporti ng
•
enable him t o 111ak e optimum ·
. wou
overseas use of product ion
capacity. ·
3. Spreadi ng of Risks :
The direct exporte r can spread busines s risks by exporti ng to
several oversea s ~arkets . If he sells only in domesti c market,
there may be busines s risks due to recessio n, or other reasons .
4, Export Obliga tion:
At times, the manufa cturer may have to fulfill export obligati on
due to import of machin ery under the Export Product ion Capital
Goods (EPCG) Scheme . The manufa cturer exporte r can fulfill
export obligati on by direct exports.
5. Direct Contro l :
The manufa cturer exporte r can have a direct control over export
marketi ng. He can ];,.ave a control over pricing, packagi ng,
promoti on; after-sa le-servi ce, etc.
6. Export Incenti ves: ·
The direct exporte r can claim a number of ihcentiv es such as
duty drawba ck, exempt ion from income tax, exempt ion from
sales tax, refund of excise duty, etc.
Disadvantages of Direct Exporting :

1. Higher Risks:
Direct exporti ng involve s mo~e r~sks because of manufa cturing
risks sales risks and also credit nsks. Export through mercha nt
expo~ters would reduce sales and credit risks. ..
2. More Investm ent:
The direct exporte r require s more investm ent. He ha~ to invest
in manufa cturing activitie s such as_ p_l~nt and .machin ery. He
also needs to invest in marketi ng activ1ties such as showroo n1s,
after-sal e-servic e centres, etc.
Export Marketing (T. Y.B.Com.: SEM-Vl)
60
3. Lacks Specialisation:
rke ting and
Direct exp orte r req uire s con cen trat ion on bot h ma
thr oug h
pro duc tio p asp ect s. Ho we ver , if exp ort e~
tion aspects.
inte nne dia ries , he can con cen trat e onl y on pro duc
4. Hig h Overheads:
has to bear
The dire ct exp orte r has to bea r hig h ove rhe ads . He
distribution
pro duc tion ·ove rhe ads as we ll as ma rke ting and
ove rhe ads .
5. Pro ble m for Sm all Manufacturers:
the ir own.
Small firms ma y find it difficult to exp ort dire ctly on
mar ket ing
The y ma y dep end on the me rch ant exp orte rs or on
coo per ativ es to exp ort the ir pro duc ts.
6. Less Economies of Distribution:
ies of large
The dire ct exp orte r ma y not be abl_e to rea p eco nom
ort er can
sca le in res pec t of dist ribu tion . The me rch ant exp
bin e several
how eve r, enjoy suc h economies, as he can com
shi pm ent s together.
ign buy ers . The

The ma nuf act ure r doe s not directly exp ort to fore
as: (a) Me rch ant
ma nuf act ure r exp orts thro ugh inte rme dia ries , suc h
din g Ho use s, (d)
Exp orte rs, (b) Exp ort Ho use s, (c) All for ms of Tra
Exp ort Con sor tia, etc.
Advantages of Indirect Exporting :
1. Less Risks:
thr oug h
Th e ma nuf act ure r wh o exp ort s ind ire ctly
bea r only
inte rme dia ~ie s ~as to .bea r less risk s. He has to
ma nuf act unn g nsk s and not sell ing risk s.
2. Less Investment:
d not invest
The ma nuf act ure r requires less inv estm ent as he nee
onl y in the
in exp ort ma rke ting infr astr uct ure . He has to inv est
pro duc tion field.
Distrib ution and Promot ion 61
£xport • .
specia hsaho n:
3. f
The ~an.u acture r can conce ntrate only on his produ ction
activ~t~es. Thus he can specia lise in produ ction. The marke tjng
activ1t1es are looked after by the interm ediarie s.
4, suitab le to Small Firms:

The indirec t metho d of export ing is 1nore suitab le to small firms.
This i~ ~ecau se sma!l firms face a numb er of proble ms in
negoti ating and selling their produ cts in the intern ationa l
market s• They can export their produ cts throug h interm ediarie s
or marke ting coope ratives .
5. Techn ical Guida nce:

The manu factur er can obtain techni cal guida nce ·for the
manuf acture of produ cts from the export houses throug h whom
he export s.
6. Less Overh eads :

The _indirec t expor ter has to bear less overhe ads as compa red
to direct expor ter. This is becau se the manuf acture r has to bear
only produ ction overhe ads.
Disadvantages of Indir ect Expo rting :
1. Lower Profit s:
The manuf acture rs may get lower profits . This is becaus e; the
margin of the merch ant export ers and other interm ediari es is ·
includ ed in the consu mer price.
Howev erI in the case of direct export ing, there is no questi on
•
of includ ing the margi n of merch ant export ers 1n the cons~ mer
price, and theref ore, the manuf acture r export er may get higher
profits.
2
· Less or No Exp.o rt Incent ives: •
!he manuf acture r may not get incen! ives. This is beca~s e, the
~nterm ediarie s who expor t in their names can claim the
incenti ves offere d on export s.
62 Export Marketing (T. Y.B.Com. : SEM-V/)
3. Lack of Positive Support from Intermediaries:
At times, the inten11ediaries may not give positive support to
the n1anufacturer. This means, the intermediaries may promote
the exports of only a few 1nanufacturers with whom they have
better relations.
4. Second Hand Information:
The manufacturer may not get first hand informati~n of the
export markets. At times, the intermediaries may not provide
necessary information on time.
5. Lack of Control:
The manufacturer may not have direct control over export
packaging, pricing, .promotion and other marketing activities.
The intermediaries m~y undertake such activities. This may
affect the sales of the manufacturer. ·
6. Lower Sales:
The manufacturer may not be able to get more sales through
the intermediaries. This is possible when certain intermediaries
favour and promote the export sales ·of certain manufacturers.
There are various channels of indirect exporting, which are as

follows:
1. Merchant Exporter:
The merchant exporter is the intermediary between the
manufacturer and the overseas buyer. He obtains orders fron1
overseas buyers, assembles the goods from local suppliers, and
then exports. The main advantages are:
• Lower risks - only marketing risks.
• Lower overheads - only marketing overheads.
• Specialisation in marketing activities.
• Lower investment, i.e., investment only in marketing
activities.
-
-t Distributio n and Promotion 63
f,xpm
canalisin g Agencies :
2.
The canalisin g agencies deal with canalized items. The canalized
items c~ be exported only through a Govt agency. For instance,
items hke Gum Karaya, Mineral Ores, Niger Seeds, and
petroleum Products are canalized in India. These items are to
be exported only through a Govt agency. The canalisin g
agencies include:
• National Cooperat ive Marketin g Federatio n (NAFED )

• Tribal Cooperat ive Marketin g Federatio n (TRIFED )
• Minerals and Metals Trading Corporat ion (MMTC)
• Indian Oil Corporat ion (IOC), and so on.
3. State Corporat ions:
In some states of India such as Bihar, UP and Gujarat, State
Governm ents have set up corporati ons to look after exports of
small scale sector. This is because; small sector units find it
difficult to negotiat e with overseas bu·y ers, and also to
undertak e various export formalitie s. Therefore , the small units
supply the goods to state corporati ons, which iook after export
activities.
4. Export Consorti um:
Manufac turers, especiall y in the small sector can organize
themselv es into a cooperati ve organisat ion for export purpose,
which is called as export consortiu m. The ex·p ort consortiu m
enable individu al exporter s to take the advantag e of joint
. marketin g · efforts, such as joint negotiati on with overseas
buyers, joint marketin g research, joint shipme_n t, etc.
5. Overseas Sales Agents:
The export firm can appoint overseas agents to distrib_u te and
market its goods. The export firm can directly supply the goods
to the overseas sales agents, who take up the responsib ility to .
distribute the export firm's goods in the overseas markets. .
The overseas sales agents can be appointe d for a particula r
country or a region or for a group of countries .
64 1:.,11or l M11rfa,fi11x ('/'. Y. H.( '0111 .: Sl :M - Vf)
6. Status Holders (Siar Export Houses):

Luge L',po rt orga nisation s can bcco rnc s tar ex port h o uses.
C urrently there arc fi ve types of s tatu s hold e rs s u ch one star
c,port house, tvvo star export house, three star ex port house,
four star export house, and five sta r export hou se, whk h are
classified on export perforn1ance criteria.
Eligibil ity
The follo,,ving export organisati ons are eligible to claim status
of export houses/ trading houses:
• Merchant and 1nanufact urer exporters
• Service providers
• Export oriented units
• Units located in SEZ, Agri Export Zones (AEZ) l
• Units located in Electronic Hardware Technolog y Parks \
(EHTP), Software Technolog y Parks (STP)
• Units located in Bio Technolog y Parks (BTP)
Status Category
Status recognitio n depends upon FOB export performan ce
during the current plus the preceding two years as per FTP I
2015-20·
-
·
There are five categories of status-hol ders with different level
of export performan ce (EP) :-
Status Category EP (FOB/FOR) value in US$ Million

During Current Year and Previous 2 Years
One Star EH 3
Two Star EH 25
Three Star EH 100
Four Star EH 500 -
Five Star EH 2000 ~
I
65
n an d Pr om ot io n
[xport D is tr ib ut io .
ov id ed w it h pr iv ile ge s an d facilities
The st at: us ho ld er s ar e pr
su ch as . .
p fo r Im po rt of C ap it al G oo ds .
• In ce nt iv e Sc ri
fo re ig n ex ch an ge ea rn ed in E E FC
• 10 0% re te nt io n of
ar ne r's Fo re ig n C ur re nc y) A cc ou nt .
(E xc ha ng e E
ti at io n of ex po rt do cu m en ts th ro ug h
• E xe m pt io n
ba nk .
of ne go .
se lf -d ec la ra tio n ba si s is al lo w ed . ·
• C us to m s cl ea ra nc e on
da ys fo r ex po rt cr ed it is al lo w ed in st ea d of
• Pe ri od of 36
18 0 da ys .
0
· ·
om fu rn is hi ng ba nk .g ua ra nt ee to cl ai m ex po rt
• E xe m pt io n fr
in ce nt iv es , etc.
G
IN D IR EC T.EXPORTIN
D IR EC T EX PO R TI N G
1. M ea ni ng : r ex po rt s
rt ak en Th e m an uf ac tu re r ex po rte
Export m ar ke tin g is un de th e go od s· th ro ug h in te rm
ed ia rie s.
tu re r.
directly by th e m an uf ac
n: r m ay no t
2. First H an d In fo rm at io Th e m an uf ac tu re r ex po rte
rt er ca n ge t . n .as he ha s
The 1n an uf ac tu re r ex po ge t f us t ha
nd in fo rm at io
th e
first ha nd in fo rm at io n on to de pe nd on in te rm ed ia
ne s.
,Jmporter's re qu ir em en t.
3. Co nt ro l: re r m ay no t be ab le
Th e n1an uf ac tu
The ex po rte r ca n ex er ci se
di re ct di re ct co nt ro l ov.er
to ex er c is e et c.
control ov er pa ck ag in g,
pr ic in g,
pa ck ag m. g, pr ic in g' pr om ot io n,
ic e, et c.
Pr-_omotion af te r sa le se rv
r- I
4· Re pu ta tio n:
an u fa ct ur er m.ay no t ea rnTh
T he m
1'he di re ct ex po rt er ca n ea
rn
ta .
tio n1. n ov er se as m ar ke ts . . e
pu
l m ar ke ts . ·es ge ts th e re pu ta tio n.
good\vill in in te rn at io na re
in te rm e
d.ia n
66 Export Marketing (T. Y.B.Com.: SEM-VJ;
5. Risks:
There are more risks as the exporter The risks involved are less as the
has to assume production and manufacturer has to bear only the
marketing risks. manufacturing risks.
6. Investment:
It requires more investment for The manufacturer requires less
manufacturing as well as for investment as he has to look after
distribution network. only the manufacturing aspects.
7. Incentives :
The direct exporter can claim a The manufacturer may not be able
.number of incentives such as to claim various inc;entives unless
income tax benefits, duty drawback, the e)_(port documents are in his
special licences etc. name.
8. Overheads : ·
The manufacturer/ exporter has The manufacturer has to bear only
to b~ar production and distribution production overheads.
overheads.
9. Specialisation:
It requires concentration on both In indirect marketing, the
marketing and production aspects manufacturer can specialise in
and as_such lacks specialisation. .manufacturing aspects.
10. Suitability:
It is more suitable and feasible for It is more suitable.and feasible for
large-scale exporters. small scale exporters.
11. Prices:
Exports can fetch high prices if Exports may fetch lower prices due
sold directly by manufacturer. to intermediaries margin.
The logistics is a · network of people, organisations, technology,

activities, information and resources inv olved in_movement of
products from the supplier to the customer. Therefore, logistics
include information, cu stomer order processing, inventory
management, material handling, logistical packaging,
transportation, and warehousing.
·t Distribution and Promotio'n 67
£tp01
philiP ~otler defin~s log_istics as "planning, implementing, and
controlling th~ p~ysical fiou:s of materials and finished goods from
tlte place of origin to the point of use to meet the customer needs at
a profit." ·
The International Council of Logistics Management defines logistics
as "the process of planning, implementing, and controlling the
efficient an~ effective flow and storage-of raw materials, in-pr?cess
inventory, finished goods and related information from the point of j
origin to the point of consumption to meet customer requirements."
components of Logistics/Dist ribution:

The main elements or components ofJogistics _are as follows:
lllventory
i'f.fanageme11t
J,J/arehousi11g ·
Logistical Materials
Packing H'tm.tlling
Cu.f tomer
Order
Processing
(Diagram shows Key Elen1ents of Logistics)
1. Facility Location and Network Design_ :

The logistics department must design the location_of facilities
from where the logistics operations would be earned out and
·
· mterconnection.
th eir
The logistics department should decide a~out the l?catio:r:i,.s_ize

anct nun1ber of log istics facilities like material handhng _fac1hhes,
111anufacturing plants, warehouses, wholesale and retail outlets.
E.rl' o r f Mar kl'li nx ('T. Y.B. Com .: SEM-Vl)
68
like levels
These aspects of logistics wo uld affe~t oth er asp :cts
ry.
of invent ory, tran spo rtat ion , pac kag ing and del ive
2. Inforn1ation:
~ct ivit y of
Log isti cs is ess ent iall y an inf orm ati? n bas ed
atio n system_
inv ent oiy n1ovement across a sup ply chain. Inf orm
ser vic e to
pla ys an iin por tan t rol e ,in del ive rin g sup eri or
cus tom ers.
sm issi on of
IT is use d for collecting, sto rag e, ana lys is, and tran
processing,
dat a in res pec t of all com pon ent s of logistics, ord er
ous ing , and
inv ent ory ma nag em ent , tran spo rtat ion , .wa reh
n sys tem
ma teri als han dli ng. A we ll ma nag ed inf orm atio
pon ent s of
ena ble s efficient per for ma nce of the · var iou s com
logistics.
3. Cu sto me r Ser vic e Standards: '
It refe rs to the qua lity of serv ice, wh ich a firm
pro vid es to its
qua ntit ativ e
cus tom ers . The com pan y's ma nag em ent set s
gui del ine s for _c ust om er serv ice.
for del ive ry
For ins tan ce, Do min o's Piz za has set sta nda rd
wit hin 30 min ute s of pla cin g the ord er.
accordingly
At tim es, the cus tom er sets the serv ice sta nda rd and
rds .
sele cts sup plie rs tha t me et or exc eed tho se sta nda
4. Cu sto me r Order Pro ces sin g:
It inv olv es rec eip t of ord ers and pro ces sin g of
ord er so tha t the
ht tim e and at
ord ere d pro duc ts rea ch to the cus tom er at the rig
·
the rig ht place.
tom er service
Ord er pro ces sin g is clo sely link ed to the firm 's cus
nda rds , the
sta nda rds . Bas ed on the cus tom er ser vic e sta
pro duc ts to
compan y ma kes eve ry pos sib le effo rt to del ive r the
the cus tom ers . ·
ow ing :
The ord er pro ces sin g sec tion mu st ver ify the foll
• Location of the del ive ry.
• Specifications of the ord er.

[ , po rt Oi5tribution and Pr om oti
on
• D el iv er y sc he du le .
69
• Pa ym en t te rm s an d co nd 't•
.
1 io ns .
5. W ar eh ou sin g:
W ar eh ou si ng in vo lv es th t
ca n be gr ou pe d un de r tweos br or ag e of pr od uc ts. The wa re ho
us es
oa d t .
ca eg on es : -
• A s~orage ~a re ho us e ke ep s
pr od uc ts for relatively lo ng
pe ri od s of tim e an d is us ed
m os t of te n for pr od uc ts th at
ar e se as on al in su pp ly or de
m an d.
• A di st ri bu tio n warehouse is.us
ed to ga th er an d redistribute
pr od uc ts . D is tri bu tio n wa re ho
us es ke ep pr od uc ts for a time
as sh or t as po ss ib le . Th
ey ar e m ai nl y us ed by
m an uf ac tu re rs th at ha ve
se ve ra l sm al l cu st om er s at
di ff er en t lo ca tio ns .
M aj or w ar eh ou si ng de ci sio
ns in wa re ho us in g include:
• Si ze an d nu m be r of w ar eh ou
se s.
• 0 w ne rs l11. p of w ar eh ou se s - ow ne d or hi re d.
Lo ca tio n of w ar eh ou se s .
•
D es ign an d la y ou t o f wa re ho us es .
•
6. Tr an sp or ta tio n:
om
• h
nt d fr th e su pp lie r to t e
It f.ac1·1·1 ta te s th e m ov em e of oo-oo. s d d t
b . Th e fo rm of tra ns p_ordta tio n us e to sh ip pr o uc ds
f ro
u ye i · .1 th e km O P du ct , th e distance, an .
de pe nd s pr im ar 1 Y_o~ di st rib pt io
ut io n m an a? er hasdan:o de sn to
the co st . Th e ph ys 1c a be r of
of co m pa ni es an
ch oo se fron1. a nu m ·
tra ns po rta tio n. I
t f go od s ca n ta ke place
.
Tr an sp or ta tio n M d
od es : Th e m ov em en hoas air, ro
ad, rail, wa~er, I
. f tra ns po rt su e d
th ro ugh va no us
n1.o es o
) Th e ch
. f m o e o f tra ns po rta tio nf \
. (fo r o-a s oice o f oo ds, location o
an d pi pe1m e ·
. f to rs su ch as
0 na tu re O g \
d ep en ds on ce - rta 1n ac
f tra ns po rt at i·0 n ' etc.
th e cu ston1.er , co st o
\
70 Export Marketing (T. Y.B .Corn.: SEM-VJ)
(For Reference) -
Transportation Companies: Transportation companies are
classified into four basic types:
• Conimon carriers - transportation firm. that performs
services within a particular line of business for the general
category of distributors.
• Contract carriers - transportation firms that carry goods
for hire by individual contract or agreement and not for
the general public/ distributors . .
• Private carriers - Companies that transport their own
goods in their own vehicles.
• Freight forivarders - Common carriers that purchase bulk
space froin other carriers by lease or contract and resell
this space to small volume shippers.
7. Materials Handling:
Material handling refers to the activity ofmQvingitems within
plants, warehou.ses, transportation terminals and retail stores.
Equipment used to h;andle goods includes forklift trucks,
conveyor belts, and trucks.
Unitization and containerization have improved materials
handling in many ways:
'
• Unitization - combining as many packages as possible into
one load that can he handled by a forklift truck. It is
sometimes done with steel bands or shrink packaging.
• Containerization-putting packages, usually ma.d e up of
several unitized loads into a form that is relatively easy to
transfer.
Improved material handling has reduced product damages,
delays in d eliveries, theft and incidental overheads. For
selecting the right material handling systen1, the company
considers the volume and weight of load, the speed required
.for material movement and the level of delivery service to be
offered to the customers.
otion
Export Distribution and Prom
71
8. Inventory M an ag em en t:
In ve nt or. y m an ag ei ne nte.Ist co nc er ne d WI"th 1na1 . aining th e ri gh t
nt
Leve I o f m ve nt or y to m ·
ne r re qu ue m en ts at th e lo w es t
e cu st o1 .
cost. In ve nt or y In an ag e es to ach"1eve a ba la nc e be tw ee n
In en t tn
.
t
costs o f n1 ai nt ai ni ng in v 11 0
re du ce in ve nt or y co st s
s'y
i:
ta ny
~~
Ir
es
tn
a
s
nd cu st om er sa tis fa ct io n. To
us e co m pu te ri ze d in ve nt or y
co nt ro l m an· ag em en t
s ei ns .
The co or m pa nydsh ou ld ,~ ai ntat.n ri.ght level of inventory. Over-

in ve nt y an un der -t.nv en to ry is to be avoided.
or ki ng capital,
• O ve r- in ve nt or y bl oc ks w
delivery schedules.
• U nd er - in ve nt or y affects
9. L og is tic al Pa ck ag in g:
is an im po rt an t el em en t of lo gi st ic s
Lo gi st ic al pa c~ a? in g
_c al pa ck ag in g is / di ff er en t fr om pr od uc t
ne tw o~ k. LogI~h pe rf or m s se ve ra l fu nc tio ns :
gi st ic al pa ck ag in g
pa ck ag m g. Lo
n - lo gi st ic al pa ck ag in g .p ro te ct s th e
• P ro te ct iv e fu nc tio
ri ng tra ns it. .
pr od uc t fr om da m ag e du
- lo gi st ic al pa ck a
_ gi ng fa ci lit at es th e
• St or ag e fu nc ti on
st or ag e of th e_pr od uc t.
tio n~ th e pa ck ag es ar e m ar ke d in su ch a
• In fo rm at io n fu nc si ly id en tif ie d - by colour,
od uc ts in it ar e ea
w ay th at th e pr an dl in g in st ru ct io ns ar e
la be ls . A ls o pr op er .h
pi ct ur es or ly in th e ca se of fragile,
ck ag es es pe ci al
li st ed on th e pa
ab le pr od uc ts .
pe ri sh a~ le , an d in fl am m
nc tio n - it fa ci lit at es th e tr an sp or ta tio n
• T ra ns po rt at io n Ju
.pl ac e to an ot he r.
of th e pr od uc ts fr om on e
- it fa ci lit at es th e lo ad in g an d un lo ad in g
• H an dl in g/ un ct io n
of go od s.
gi st ic s fu nc tio ns of pa ck ag~ng, i.e., :protection,
The di ff er en t lo han~hn_g pro~1~e a go od
sp or t, in fo rm at io n an d
st or ag e, tr an ie s th at ex is t 1n log1stics.
e of th e in te rd ep en de nc
ex am pl
I 72
Export Marketing (T. Y.B.Com.: SEM-VJ)
In international trade there are mainly four modes of transports

namely , road, sea, rail and air. It is necess ary for compa nies to
choose the right mode of transp ort to ensure that the goods reach to
the buyers in proper condit ion and at the right time.
In case of certain produc ts, there is only one mode of transp ort which
is feasible. For instanc e, In the case of export of diamo nds, air
transp ort is more feasible. Howev er, in case of severa l products,
alterna tive modes of transp ort are possible. Therefore, there is need
to select best mode· of transp ort consid ering the time factor, freight
charge s, etc.
In order to select the best alternative, the compa ny hiring the shipper
must evalua te the following factors:
1. Logistic Feasibility:
The export firm must consider the logistic feasibility to consider
the right mode of transp ort. For instance, in certain countries
there is no feasible means of transp ort or the quality of ~ode of
transp ort may be not suitabl e. For instan ce, rail or land
transp ort may not be availa ble betwee n two tradin g nations
or if availab le, the land (road and rail) transp ort may not be in
good condit ion as is the case of severa l develo ping countries.
Therefore, the option s availa ble would be air transp ort or sea
(water ) transp ort.
2. Stowage of the Cargo:

Stowag e is the amoun t of space availa ble for stowingn:,aterials
aboard a ship, rail or an airplane.
Stowage involves the placement or lading of cargo in an aircraft

or on the rail or on the ship in such a way that it gives maximuill
space usage, and allows easy access to the cargo at the point of
offloading.
For example: An exporter who wants to export goods frortt
Mumb ai to Shangh ai in China in several contain ers may select
. rt Distribution and Promotion
£l 110
r ~
sea transport as compared t O · ·

h. · 'd h air transport because container
s tpptng provt es uge space at lower freight rates.
3, Value of the Goods:

freight charge in air. transport 1s ·
· more costly as compared to
Iand transport and the
. . least · ·
expensive 1s the sea transport. Thus,
if .t h e mereh.an
d .
d 1se 1s of lo
w va1ue and large quantities it is
better to av~i arr transport, and instead select the sea tran~port.
However,
. arr. transport is via .. .
. precious
· · ble mo d e of transportmg
mmerals or items such as diamonds.
4. Shipping Quantity:
An e~porter must consider the volume and weight of the
consignment: ·
• If the export quantity of a consignment is large, the exporter

may choose sea transport. · ·
• If the export quantity of one consignment is low, the
exporter may choose a~ transport depending upon on the
nature and value of goods. . . ·. · · · ·
5. Perishability of the Cargo:

When the cargo is perishable, it would be better to export the
goods through air transport. Sea transport is less preferred due
to longer ·transit times; the perishable ·cargo may get spoilt. ·
There is no better option than air freight, although in the case
of short routes, ground transportation is often a good choice.
Maritime transport is less than optimal in the case of perishable
goods due to transit times, which tend to be longer and may
reduce the cargo's commercial life cycle. · Land transport, used
for short distances, may be well suited for perishable cargo.
6. Urgency of the Buyer:
The choice of mode of transport al.so depe~ds on the urgency of
the buyer to receive the merchandise. For tnstance, buyers may
need certain goods quickly sue~ as "!edici~es, spare pa~ts, and
such other goods. In such a situation, air transport ts more
preferred as compared to sea and land transport. However if
urgency is not the issue, the exporter may choose sea transport
and land transport-for very short routes.
74 I :.rJ""-, Morkf'linx (I'. Y.H. Com.: SEM-V[)
7. Risks Factor:
The n1ode of tra ns port d epend s on the ris ks which o ne is willing
to ass u111e. There a re certain ris ks assodated with tra ns portation
such as loss due to accidents, loss d u e to sea p irates, e tc.
Generally, air transport is the safest, and therefore, an exporter
1nay select air transport to reduce the amount of risks. However,
the freight rates of air transport are higher as compared to sea
and land transport.
8. Costs of Port Terminals:
An -exporter 1nust consider the costs of por t (air and sea)
terminals, and the cost of bonded warehouses. The costs vary
from country to country.
Generally, the port terminal costs are highest, and therefore, it

is not advisable to ship smaller. consignments through -sea 1
transport. Minimum port terminal fees are charged irrespective

of the quantity of cargo.
The air cargo terminals represent moderate costs, which are
· reduced if the merchandise is shipped (through airplane)
qu ickly.
In case of land transport,· bonded warehouses may provide
lower charges but the freight charges of land transport tend to
increase over longer distances.
There is a need for insu rance to cover the risks in exp ort business.
Exporters suffer loss on account of various risks su ch as:
• Commercial risks such as loss d u e to delay in shipment
insolvency of the buyer, etc.
• Political r isks such a s risk s du e to war, revolution , civil
d ist urbances in the importer's or exporter's country.
• Legal risks on account of commercia l disputes between the seller
and buyer.
ExportDistribution and Promotion
75
Cargo risks due to
ship collisions,
Isions, robbery by sea
pirates,
explosion on the vessel, etc.
Credit risks such as default of credit
payment by the importer.
Exchange rate risks for the exporters when domestic currency
appreciates against other currencies such as US dollars.
Risks due to natural calamities such as floods,
earthquakes, etc.
Certain risks such as cargo risks can be insured with the marine
insurers. Some other risks such as commercial risks, credit risks and
Dolitical risks can be insured with ECGC.
The need for insurance against risks can be stated as follows:
1. Protects against Commercial Risks:

Exporters may have to suffer loss due to commercial risks such
as
Insolvency of the buyer
Failure of the buyer to make the payment on due date or

after reasonable period of time.
Buyer's failure to accept goods subject to certain conditions
ECGC policy
Therefore, it is advisable for the exporter to obtain
to cover against commercial risks.
2 Protection against Credit Risks:

extend credit terms to the
n export trade, the exporter may
importer may fail to make payment within
importer. However, In such an
within a reasonable period of time.
the due date o r
suffers credit risks. Therefore, the exporter
Instance, the exporter credit risks.
to protect against
may obtain ECGC policy
3. Loss due to
General Average Principle:
0 Protect Against
a n internationally
accepted principle where
is all parties share
eneral Average to the vessel,
accidents o c c u r
certain types of
in the loss equally.
to sign a bond and/
importer may be required
ne exporter or
of the cargo following
order to obtain release
Or cash deposit in
a case relating to general average principle, even though there
was no loss or damage to the goods.
event, the
By insuring against general average principle
and expedites
insurance company a s s u m e s the responsibility
the release of the cargo.
4. Contractual Requirement:
the exporter the
to insure
The export contract may require
For instance, under CIF contract, the exporter has to
goods. to the goods due to
obtain the insurance to protect against loss
or destruction or theft of goods.
Therefore, under CIF
damage and
contract, the exporter obtains the
insurance policy pays
the insurance premium.
C&F contract, the importer has
Under FOB contract and under
to obtain insurance policy and pay for the insurance premium.
5. Coverage for Limited Carrier Liability:

for certain causes
The carriers or vessels may not be responsible
of loss that occur in transit. For instance,
the acts of God, or the
have limited risk
General Average Principle, the carriers
on the type
liability. The exporter or the importer (depending the
exporter
of contract) has to bear the major loss. sucha case,
In
minimize the loss.
or importer obtains insurance to
6. To Reduce the Time for Recovery of Loss:

and destruction of cargo,
If there is loss on account of damage
or the importer
and if the cargo is not insured, the exporter
loss
lot of time and effort to recover the
may have to spend
effort and money is
from the shipping company. The time,
markets.
involved for settling the claims in the courts of foreign
with the
Therefore, it is advisable to insure the loss to goods
settle the claims
insurance firms so that the insurance firms can
within short period.
7. To Protect Against Political Risks:
The
There are various political risks in the international trade.
political risks include
War, revolution, orcivil disturbances in the buyer's country
Distribution and P'romotion
17
and the
exporter suffers the loss due to non-receipt or
payment or
damage to
goods.
Cancellation of export licence (if any) or
imposition
export licensing restrictions in exporter's country after the
of new
date of contract (under

contract policy of ECC)
Imposition of restrictions on remittances by the
Government in the buyer's country, etc.
Therefore, it is advisable for the exporter to obtain ECGC policy
to cover loss due to political risks.
8. To Avoid Blocking of Working Capital:

Insurance is required to avoid the blocking of working capital
on account of various risks. For instance, if the non-insured
goods ae damaged or destroyed, the exporter or importer may
have to waste lot of time and effort in fighting court cases to
recover the loss. However, if insurance is obtained, the exporter
or importer may get the funds quickly from ECGC or general
the problem of
insurers, thereby, the exporter need not have
working capital.
SALES PROMOTION TECHNIQUES
of promotion-mix. The
element
Sales promotion is an important
advertising, salesmanship,
other elements include publicity,
trade fairs and exhibitions,
public relations, packaging,
Sponsorships,
direct marketing, et.
or tools that induce
of various techniques
a e s promotion consists i n t e r m e d i a r i e s . Sales
customers and
d desired response
from
exporter such
as:
benefits to the
Promotion offers certain
persuades the buyers to buy the product.

lt induces o r
It helps to develop brand image
It develops brand loyalty. etc.

advantage,
competitive
the exporter to gain
t enables
The techniques of sales promotion are broadly divided into three
8roupsS
SALES PROMOTION TECHNIQUES
TRADE- SALES-FORCE
CONSUMER- INCENTIVES
ORIENTEÐ ORIENTED
Performance-Oriented
Coupons Cash Bonuses Suggestion Incentive, etc.
Discounts Credit Ternts
Exchange Scheme Special Incentives
Stock Return, etc.
Free Samples, etc
Consumer-Oriented Promotion Tools:

I.
aimed at increasing the
The consumer-oriented promotion tools
are
and to attract new customers to the firm's

existing customers,
sales to
consumer-oriented promotion
product. Some of the commonly used
tools are:
1.
1. Combo-Packs:
to
A firm may provide combo packs to persuade the buyers
be
buy the firm's products. For example, a toothbrush may
banded o r included along with a toothpaste pack. The combo
discounted rate.
pack may be provided at a
2. Discounts:
It refers to reduction in price on particular items during
a
festival
particular period of time. This is quite c o m m o n during
season or during off-season period.
It is very effective in
stimulating short-term sales, especially when the firm offers
genuine discount.
3. Exchange Offers:
he customer is allowed to exchange the old product for a new
from the
One. The old product's exchange value is deducted
new product. This sales promotion tool
is usea Dy
PTICe of the
SEveral firms to promote durables such as TV sets, refrigeratorD
motor-bikes, and so on.
Expo
Distribution and Pronotion 79
4 Free Samples:
4. involves free offer of a product, delivered door to door, sent
through direct mail, attached to another product, or given along
with the purchase of some other product. For example free
samples may be provided in respect of food and beverages,
toiletries and detergents, and so on. Free samples are normally
provided during the introductory stage of the product life cycle.
5. Gifts:
A firm may provide free gift to the customer on the purchase of
the firm's products. The free gift must be of use to the customer.
For example, a toothbrush can be given free along with a pack
of toothpaste,or shaving blades can be gifted along with the
shaving-razor or shaving gel.
6. Product Warranties:
Warranties are promises made by the seller that the product
of time. In case of
will perform as specified for a certain period
a default or defect, the
seller agrees to rectify the same and ven
replace the product, if so required.

7. Premium Offers:
These can be extra quantities
of the same product at the regular
firms selling FMCG
Premium offers are used by several
price.
soaps, food items, and
so on.
goods such as detergents,
8. Order Coupons:
customer on the
offer price reduction or savings to
They The coupons may be
mailed or
purchase of a specific product. inserted in
along with other products,
or
enclosed attached
Coupons c a n be
or
advertisement.
d
magazine o r n e w s p a p e r can be
of a n e w brand. It
etfective in inducing trial purchase social-club
in case of magazines,
used to e n s u r e brand loyalty
membership, etc.
9.Personality Promotions:
number of
is used to attract greater
This
*us type of promotion
sale of particular items.
store and to
promote
4Stomers in a be hired to
personality may
nstance, a famous sports
Export Marketing (T.Y.B.Com.: SEM-VI)
80
to customers visiting a sports shop ona
provide autographs
particular day.
10. Installment Sale:

of the price and the
Consumers initially pay smaller amount
installments over a period of time.
balance amount in monthly
such as refrigerators, cars,
At present, many c o n s u m e r durables
sold on installment basis.
motorbikes, electronic items, etc., are
11. Other Forms:

There are several other forms of consumer promotions such as
free trials, contests, patronage rewards, in store-demonstrations,
etc.
II. Trade-Oriented Promotions:
The trade-oriented promotion tools are directed at channel

intermediaries to induce them to stock and promote the sale of
products. Some of the important trade-oriented promotion tools are:
1. Cash and Trade Discount:

A firm may offer attractive cash discount to the dealers so that
they make payment on time. Apart from cash discount, a firm
may provide trade discount to the dealers to induce them to
place large orders.
22. Credit Terms:

Special credit terms may be offered to encourage bulk orders
from retailers or dealers. However, it is to be noted that longer
credit terms may likely to result in higher bad debts. Therefore
firms may provide shorter credit terms with attractive
incentives.
3. Cooperative Advertising:
The manufacturer may
agree to share the advertising expenses
of the dealers. This would induce the dealers to undertake a
g0od amount of advertising to promote sales in their areas.
4. Staff Incentives:
Marketers may provide special gifts, or prizes to the staff of the
Export
Distribution and Promotion 81
dealers for attaining a particular level of sales target. The
marketer may also provide training to the staff of the dealers.
Stock Return:
5 Some firms may take back partly or wholly the unsold stock
with the retailers, and distribute it to other dealers, where there
is a demand for such stock.
Special Incentives:
6.
A firm may provide special incentives to high-performing
dealers. For instance, a firm may provide free gift of car, gold
jewellery, sponsored holiday trip to dealer/family, etc.
7. Dealer Conferences:
its dealers would
A firm may organize dealer conference, where
be given
participate in such a conference. The dealers may
information of the company's performance, future plans and
soon. The dealers can
also provide valuable suggestions to the
conferences. Such conferences are normally
company at such
held at luxurious places such as five-star hotels, and special
be givento high-performing dealers.
gifts and awards may
8. Dealer Trophies:
a special trophy
to the highest
Some firms may institute
dealer in a particular period
of time (mostly a year).
performing such as.
with the trophy, the dealer may get a special gift
Along
tour or outside the country.
within
a sponsored
9. Push Incentives:
of cash
the dealers, in form
or
incentive given to
It is a special the sale of a product, especially
a
in kind to push and promote an extra carton can be

instance,
product. For
newly launched ordered.
provided for every four
. Sales Force Incentives:

1. Performance-Oriented Reward:
performance-oriented
with
be provided
aies torce may completing a particular
sales persons
EWards. For instance, gifts, and promotions.
rewarded with special
dles target are
The performance-oriented rewards induce the sales staff to
perk-up their performance.
2. Suggestion Incentive:
The sales force may also be provided with special rewards for
valuable suggestions. The suggestions may
be in respect
giving
of product modifications, or innovative schemes too promote
the sales.
(Note: Students may write total 8 of 10 for 8 marks answer.-

a
about 5 points eachfrom customer-oriented techniques and trade-
oriented Techniques).
IMPORTANCE OF TRADE FAIRS

AND EXHIBITIONS
Participation in trade fairs and exhibitions is an important element

of promotion-mix. In trade fairs and exhibitions, an export firm can
display and demonstrate its products and provide information about

its products so as create a good impact on the visitors at the fair or
exhibition.
The importance of trade fairs and exhibitions is explained as follows:
1. Creating Awareness:
Participation in trade fairs and exhibitions enable the exporters
to create awareness of the products in the minds of the
customers. The exporter can display and demonstrate the
products in trade fairs and exhibitions. Generally, a large
number of people visit trade fairs and exhibitions, and they
come to know about the displayed products.
2. Developing Attitudes:
Participation in trade fairs and exhibitions enable the exporter
to develop positive attitude of the products in the minds ot
overseas buyers or to correct the negative attitudes.
For instance, in Western Europe and North American markets

customers have a negative attitude towards certain India
port Distribution and Promotion
83
aOods. Participation
go in trade fairs
the exporters to create a provides an toO
opportunity
attitude) in the minds of thefavourable impression (positive
customers through creative or
innovative behaviour of the
exporter's staff at the trade fairs.
3. Demonstration of Product:
Trade fairs and exhibitions provide an excellent
for the exporters to demonstrate the opportunity
product. Effective
demonstration ot the product can create a good impact on the
potential
customers visiting the fair or exhibition. The
good
impact may lead to higher orders from the overseas customers.
4 Developing Trust of Customers:

Participation in trade fairs and exhibitions provide an
opportunity to the exporters to interact with overseas buyers.
Effective personal interaction with the overseas buyers may lead
to developing a bond with the overseas buyers. Once the trust
or bond is the prospects may become buyers and
developed,
the buyers may become loyal customers.
Customers:
5. Compiling List of Prospective
excellent opportunity
fairs and exhibitions provide and
Trade customers. Such
to compile a list of prospective
to the exporters customers
the o v e r s e a s prospective
list can be useful to provide launches, n e w sales
to new product
with information relating
markets, etc.
promotion schemes,
entry in new
6. Brand Image: a good

brand
exhibitions c a n help to develop in the minds
Trade fairs and of the brand
is the perception provide
image. Brand image the trade fairs, the exporter may
c u s t o m e r s . At visitors.
Therefore, the
of target
as well as gifts to the favourable image of the
Iree samples develop a
customers may
prospective
orders.
brand and may place
thee
7. to develop
Corporate Image: enable an exporter
the trade
exhibitions v i s i t o r s at
and of the
rade fairs in the
minds
quality
of the staff
of the
company
fair, the
at the
age of the s e t
up
quality
a i r s . The
Export Marketing (1.1.
84 t r e a t m e n t given
to the visitors,
with the visitors, the of the company.
interacting good image
in developing
etc., goes a long way
8. Competitive Advantage: can
exhibitions
8. trade fairs and
participating
in who are
the competitors
A company
and efforts of
observe the strategies fairs.
in such trade
also participating
incentive
offer special
c o m p a n y may
competing company can
For instance, a participating
The
the c u s t o m e r s . and accordingly
package to about such package
c o m e to
know
gaining
instantly
its incentive package, thereby,
improve upon
advantage in the market.
competitive
9. Educating Customers:
exhibitions provides an opportunity to the
Trade fairs and
the customers in respect of:
exporter to educate
Uses of the product.
Operations of the product.

etc.
Information about the special features of the product,
Expansion of Markets:
10.
and exhibitions may enable the exporter to expand
Trade fairs
one country to
another. This is because; trade
the market from
brand image arnd corporate image in the
fairs helps to develop
enable the exporter to enter in
minds of the visitors. This may
new markets, especially
in the country where the trade fair or
exhibition was held.
BENEFITS OF PERSONAL SELLING

Personal selling refers to face-to-face communication between the
firm's representative and the prospects. Personal selling is an
important element of promotion-mix.
Personal selling provides several benefits to the organisation, which
are as follows:
Export DistriourOnt ana
ort Distribut and
Promotion
1. Tdentification of Prospective 85
Personal selling enables the Buyers:
may obtain exporter
The sales force to identify
leads
through various sources. After about prospective prospect buyers.
ap the the leads, the sales customers
customers by
custome prospective
customers and
force may
(FAB). highlighting may convert them into

features, advantages
tages and benefits
benefits
2. Persuasion of Customers:
Personal selling helps to
persuade the customers to buy
company's products. Persuasion can be done
by offering various
customer-oriented sales promotion techniques such as:
After-sale-service
Banded products.
Coupons or vouchers
Discounts
Exchange offers,
Free samples
Gifts, etc.
In personal selling, the salesperson highlights various benefits,
the
uses and features of the product, thereby, persuading
customer to buy the firm's products.
the sales person provides additional
Apart from persuasion,
as that of forthcoming
information to the customers such
etc.
sales promotion offers,
product launches, new
3 Increase in Sales: skills on the part

and good negotiation
c u s t o m e r s to buy
communication
Directive
to induce the target
Of the sales force helps in purchases by
The increase
n e company's
products. turn brings
more
which in
higher sales,
Customers leads to
profits to the firm.

Increase in Market Share:
4
to increase not only the sales but also
Personal selling helps result in more
increase in market share. Personal selling may
orders. The increase in
number of customers with increase in
orders results in
customers with large number and repetitive
increase in market share.
5. Corporate Image:
of the firm.
Personal selling helps to improve corporate image
between the buyer and the
The quality of personal interaction
The services
sales person helps to develop corporate image.
and facilities provided by the sales force also helps to improve
corporate image.
6. Competitive Advantage:
to the
Personal selling may generate competitive advantage
firm. Effective personal selling can create a good brand image
and corporate image, which in turn will help the firm to gain
firm can
competitive advantage in the market. The exporter's
market on account of
easily face the competition in the staff.
committed and dedicated efforts of the personal selling
7.
7. Customer Satisfaction:
Customer
Personal selling may lead to customer satisfaction.
satisfaction takes place when product performance is equal
to
customer expectations. Customers may

be fully satisfied due
to quality of services and facilities provided by the personal
selling staff.
8. Customer Loyalty:
Personal selling may lead to customer loyalty. Due to effective
salesmanship or personal selling efforts, the customer may
become brand loyal, which implies:
Repeat purchases by satisfied customers.

Recommendations by satisfied customers to others.
9. Corrections of Erroneous Impressions:

Personal selling may help to correct erroneous or negativ
impressions of the product and of the company in the minds o
rt Distribution, Promotion 87
the customers. The personal selling staff may provide factual
about the to correct thee
data product and the company
erroneous impression in the mind of the customers.
10. Handling Objections:

and
Objections are often indications of interest by the prospect 1s
should not be misunderstood by salespeople. The prospect
to justity
in fact requesting additional information to help him and
a decision
to buy. The prospect may not be fully convinced
assists the
also
the issues raised are thus very important. It
to establish exactly what is on the prospect's mind.
salesperson
Customers when pressed for orders, voice their objections
resistance. The resistance of the customers
known as customer's
be psychological or logical.
may either
interference,
includes resistance to
Psychological resistance impatience,
importance for well established brands,
giving the talk, aversion towards
r e l u c t a n c e to participate in
decision making, etc.

r e a s o n s associated
with
on some
resistance is based
Logical guarantees and
schedule, after-sale-service,
price, delivery should
these
overcome
warranties, etc. Salesperson He must
adopting a positive approach.

objections by for buy.
objections into
reasons
c o n v e r t the
11. Dealer RelationshipsS: dealer relationships.

to maintain good sales
Personal selling helps vital to push
and promote
markets are
Dealers in overseas
of the exporter. to
to stock, display and
convinces the dealers the sales
The salesperson For this purpose,
d e m o n s t r a t e the
exporter's products. the dealers in
the
r e l a t i o n s with
develop good
maintained
p e r s o n has to dealers c a n be
Relations
with the such a s :
incentives
markets.
Overseas sales-promotion
dealer-related
Dy offering
discounts
Cash and trade
Credit terms.
Cooperative advertising
Staff incentives
Stock return
Special incentives to high-performing dealers.
Dealer conferences
Push incentives, etc.
12. Post-Sale Relationship Management:

Personal selling helps to develop effective post-sale relationship
with the buyers. Once the product is sold, the sales person
should not forget or ignore the buyer. The sales person needs
to be in touch with the buyer after the sale.
The sales person undertakes follow-up with the buyer to find

ot the satisfaction level, and to provide solutions to any problem
faced by the buyer. Post-sale relationship goes a long way in
improving goodwill of the organisation and in developing
customer loyalty.
ESSENTIALSOF ADVERTISING
N EXPORT MARKETING
International advertising Is a communication process that takes place
in several countries that differ in terms of communication
styles,
cultures and consumption patterns. The advertisers in export
markets must consider the following guidelines or essentials to make
advertising effective:
1. Target Audience:
The advertiser must consider the nature of target audience in
different export markets and accordingly drafts the
advertisements.
The advertiser must consider various factors
relating to targe
audience such as demographic, geographic,
psychograph
sociographic, and behavioural.
Export
Distibution and Promotio 89
For instance, in certain countries such as developed countries
of Western Europe and North America (USA and Canada), the
customers are fully aware of the uses and benefits of using
ertain products. However in developing countries of Asia and
Africa, large number of people may not be fully aware of certain
products (may be due to low literacy and poverty). Therefore,
the advertiser may adopt hard sell (highlighting features with
reasons) advertising in developing countries of Asia arnd Africa
and soft sell (no reasons are stated) advertising in developed
countries.
2. Objectives of Advertising:
in
The advertiser must consider the objectives of advertising
overseas markets. Generally, the main objective advertising
of
and
is to create top of mind awareness through repetitive
to develop positive
creative advertising. Also, there is need
attitude towards the product.
of a w a r e n e s s and attitude, there
are
Apart from the objectives
brand image, developing
sevral other objectives such as creating
education of customers, etc.
brand loyalty,
attitude towards Indian
a negative
For instance, there is Indian
the European markets, as well as
products in s o m e of Indian exporters must
Therefore,
brands have a low image.
perception of
overseas
make efforts to change

the negative
towards Indian goods.
buyers
3. Media of Advertising: advertising on
restrictions on
countries, there
are
in some restrictions o n TV
there a r e certain
instance,
certain media. For other countries.
In s o m e
France and
advertising in Germany, in terms of
number of ads per
restrictions
Countries, there in s o m e countries
are
For instance,
timings of adverting.
hour, or
after 8 TV ads a r e not allowed).
such a s p.m. commercials
there are r e s t r i c t i o n s BBC do not allow TV
channels such
as
Also certain
license fee.
as it is
funded by restrictions on
media
out
m u s t find
advertiser campaign.
herefore, the the advertising
accordingly plan
o r advertising and
4. Language of Advertising:
Translation from one language to another language is crucial
The literal translation may fail to
in international advertising.
across the countries due to cultural
convey the desired message
factors.
For instance, the English Phrase 'Come Alive' when translated
out of the Grave'.
in Chinese language sounds like 'Come
Therefore, advertiser must consider language

an
nuances in
different countries while drafting the ads.
5. Selection of Brand Ambassadors:

If the export firm wants to select a brand ambassador to promote
the it products in overseas markets; it must see to it that the
chosen ambassador fits in the global markets. Also, the character
or personality of the ambassador must match with the character
or personality of the brand.
firm to
For instance, it is not advisable for an Indian export
select Indian cricket stars as brand ambassadors in European,
because cricket
North American, and Latin American markets
countries play cricket).
is not a truly world sports (as only a few
or tennis stars may be
Instead, international football stars
considered as these sports are truly global in nature. A export
to a particular country
firm may select an ambassador specific
or region where the export
firm wants to promote its product.
6. Selection of Ad Agency:
An export firm must select the right ad agency considering
various factors such as:
Reputation of the ad agency
Size of the ad agency.
Type of te ad agency
Clients of the ad agency (avoid competitors' ad agency)
International connections of the ad agency
etc.
F e e s and other charges of the ad agency,
ort Distribution and Promotio
91
Tt is to be noted that
large export firm, which is exporting in
a
several countries may select one global ad and

one global ad campaign worldwide McDonald'sadpt
(such as agency - I'm
Loving it).
7. Cultural Considerations:
The culture of a
country influences the marketing and
advertising campaigns. Customers are quite sensitive about
cultural aspects depicted in the
advertisements.
themes incorporating family life, Advertising
respect for elders, harmony
with nature,, distinct life styles, innovation and
celebrities, content of
novelty,
use of
advertising, etc., must reflect the culture
of a
specific country or
region.
For instance, in Japan, intimate scenes between men
and women
are considered to be in bad taste and
they are banned in Saudi
Arabia. However, such scenes may be
accepted in Western
Europe. The Ministry of Information in Saudi Arabia prohibits
any advertisement depicting unveiled woman. Most Arab
countries prohibit explicit depiction of sensuality.
8. Education:
The level of literacy plays an important role in deciding the ad

content and message to be used in international market. Market
segments with lower level of adult literacy need to be addressed
by way of more audio visual content rather than a written
message. It should be ensured that the visuals convey the
desired message rather than the text part of the advertisement.
For instarnce, in several Asian and African markets, the level of

literacy is low as compared to the Western European and North
American markets. Therefore, soft-sell advertising copy may
not work well in the Asian and African markets where there is
low literacy. Instead hard-sell copy highlighting the reasons to
a special focus on
buy the may work well, with
product
llustrations rather than written content.
9
Advertising Code of Conduct:
e regulatory framework of a country influences the
advertising in international market. The advertising code of
Ond uct must be strictly followed in various countries.
92 Export Marketing (T.Y.B.Com.: SEM-VI
relate to following issues:
The advertising codes may
Advertisement in foreign language
Use of sensuality
Comparative advertising referring

to the competing
product of rival firms
Use of children as models
Advertisement related to alcohol and tobacco
Advertisement related to health and pharmaceuticals, etc.
The exporter must consider the advertising codes in the overseas

markets. The advertising codes in different countries may vary
to a certain extent. For instance, the advertising code in Middle
East Countries differs from that of Western European Countries.
Therefore, an export firm needs to study the advertising codes
of the country in which it wants to advertise, so that it does not
land up in problems.
For instance, in China, the Advertising Law prohibits anyone

endorsinga product that he or she has never used that product.|
Also children below 10years of age cannot endorse any product
Also, the Advertising Law in China prohibits the use of
superlatives such as 'the most' and 'the beste'. Minimum fines
for false or misleading advertising are (Australian Dollar) AUD
$ 40,000 or UK Pound 20,000/
10. Advertising Budget:

An export firm must consider its ad advertise in
budget to
international markets. The ad budget determines the following
aspects of advertising:
The type of brand ambassadors.

The repetition of ads.
Selection of media-type.
Duration of the ad campaign.

93
Distribution and Promotion
Export
Quality and content of advertising.
Selection of ad agency, etc.
For instance,
if the ad exporter cannot think
budget is low, the
famous brand ambassadors to endorse the brand.
of using
Instead, commoners people) may be selected for
(common
advertising the product.
REVIEW QUESTIONS
channels in export
1. What are factors influencing choice of distribution
marketing?
and disadvantages of direct exporting.
2. Explain the advantages
of indirect exporting.
3. Discuss the advantages and disadvantages
distribution in export marketing.
4. Explain the indirect channels of
in export marketing.
5. Discuss the components of logistics
selection criteria of modes
of transport in export marketing.
6. Explain the
insurance in export marketing
Discuss the need for
7 techniques in export marketing?
8. What a r e various sales promotion exhibitions in export
trade fairs and
Discuss the importance of
9
marketing.
selling in export marketing.
10. Explain the benefits of personal
of advertising
11. Discuss the essentials
OB ECTIVE QUESTIONS *****
the bracket:
with the appropriate option given in
Fill in the blanks channels
4 influence
of d i s t r i b u t i o n
the choice
1. -
characteristics
Morale, Global)
(Customer, Employee manutacturer
makes own arrangenent
the
2 Under marketing,
to distribute the goods.
(Direct, Indirect, regional) of FOB worth
3 to achieve export performance
ne star export house has and previous
two years.
the current year
US S million during
(3, 25, 100)

Export Mnrkeling (T. Y.B.Com.: SEM-VI)
94
refers to quality of service which a firm provides to it
4 Customer Order Processing
customers. (Customer Service Standards,
Customer Feedback)
for a relatively long period
5 A warehouse keeps the products
of time (Storage, Distribution, Bonded)
refers to the amount of space storing materials
available for
.
o n a ship or on a plane. (Stowage,
Storage, Logistics)
account of insolvency of
the buyer.
i s k s takes place on
(Commercial, Political, Legal)

c o n s u m e r oriented
sales promotion
is an example of
Performance Incentives)
technique. (Free Sample, Trade Discounts,
in demonstrating the product
to the
Participation in helps
99 Events, Dramas)
prospective customers. (Trade Fairs, Sports
10. .helps in obtaining leads of prospective buyers.
Personal Selling, Advertising, Publicity)
Ans The firs t option 1s te correct answe

false:
State whether the following statements are true
or
(B)
Product characteristics do not influence
the choice of distribution
1.
channels in export marketing
does not generate reputation to the
2 Generally, the direct exporting
market and in the export markets.
exporter in the domestic direct
risks as compared to exporter.
3. Indirect exporter has to bear more
US
House has to achieve FOB export performance of
4 Five Star Export two yearS.
$ 500 million during the current year and previous
to
less privileges and facilities as compared
5 The status holders get
pure manufacturer exporter.
A distribution warehouse is used
to store goods for a tairly long period
of time.
not consider the urgency
of the buyer in selecting
7. The exporter need
the mode of transport in international markets.
Commercial risks takes place o n account of war, civil disturbances,
8
etc., in the importer's country
9. Advertising helps in handling objections of the buyers.
the
10 An advertiser in the international market must consider
Council of lndn.
advertising code drafted by Advertising Standards
Ans: Allstatements are false.

95
3 EXPORT FINANCE
uWeakness of attitude
becomes eakness of
character. "-Albert Einstein
Methods of Payment
Methods (April2019)
Procedure toOpen LC
Countertrade - Types (April 2019)
Benefits of Countertrade
Finance
Pre and Post Shipment
Finance
Features of Pre-shipment
Finance
Features of Post-shipment
Export Finance (April

2019)
Procedure to Obtain
Finance (April 2019)
Post Shipment
Pre-shipment vfs
Institutions
Role of Export Financing
Commercial Banks
EXIM Bank
SIDBI (April2019)
ECGC
96 Export Marketing (T. Y.B.Com.: SEM-V
METHODs OF PAYMENT
METHODS OF PAYMENT
INEXPORTMARKETING
There are various methods of payment. Each method of payment

has its own advantages and limitations. The methods of payment
can be broadly divided into 6 groups as follows:
1. Payment in Advance
This method does not involve any risk of bad debts, provided entire
amount is received in advance. At times, a certain per cent is paid in
advance, say 50% and the rest on delivery of products.
This method of payment is desirable when:
(a) The financial position of the buyer is weak or credit worthiness

of the buyer is not known.
(b) The economic/political conditions in the buyer's country are

unstable.
The seller is not to credit risk, as in the case of

(c) willing assume
open account method.
However, this is the most unpopular method as a foreign buyer

would not be willing to pay in advance of shipment unless:
specifically designed for the customer and

(a) The goods are
seller's marker
(b) There is heavy demand for the goods (a
situation).
2. Open Account Method
After thegoods are dispatched, the exporter sends documents oftr
to goods to the inporter along with his invoice and then waitS
payment. If no credit is allowed, the importer pays immea0LE
Export F i a n c e
97
Thisnethod
is
simple and avoids additional
ethods of payment. However, there is charges
other met involved m
involve in this method a considerable
siderable risk
risk
d.a PXporter may follow this method

only when:
The exporter
expo. is confident
of the buyer's financial
reputation. standing and
(b There is long and well established relationship between the two
parties.
The exporter has enough financial regulations in the
importer's
country otherwise the importer may not pay the amount on
stipulated date.
(d) There are no exchange regulations in the importer's country
otherwise the importer may not pay the amount on stipulated
date.
e) The foreign exchange regulations of the exporting country
should permit such payment.
( The political environment is sound and stable in the importer's

Country.
3. Payment against Shipment on Consignment
consignee or agent,
Theexporter supplies the goods to the
overseas
giving up the title. Payment is made only when

without actually
overseas consignee to other
the goods are ultimately sold by the
parties
be paid to the
is costly, because of commission to
Ihis method s a m e time it is very
from other charges and at the
COnsignee, apart back if remained unsold
return the goods
SKy. The consignee may dues in time. The price
may not clear off the
ud even the consignee as it depends
on market
conditions
uncertain
O be realised is also
in the buyer's country.
an advantage
to the buyer as the buyer
0wever, this method offers and the seller may get a
purchasing
examine the goods before
can
the quality.
satisfied about
gher price if the buyer is
98 Exporl Markeling (1. Y.B.Com.: Sl.M VI)
In India prior approval is required to be taken from the exchanu.
control department of RBI for shipment on consignment basis.
4. Documentary Bills
Under this method, the exporter agrees to submit the documents to

his bank along with the bill of exchange. The documents required
are (a) a full set of bill of lading (b) invoice (c) marine insurance
policy and other documents, if required.
There are two main types of documentary bills:
(a) Documents against Payment (DP)
(b) Documents against Acceptance (DA)
(a) Documents against Payment (DP Bills):

The documents are released to the importer against payment. This
method indicates that the payment is made against Sight Draft.
Necessary arrangements will have to be made to store the goods, if
a delay in payment occurs.
The risk involved is that the importer may refuse to accept the
documents and to pay against them. The reasons for non-acceptance
may be political or commercial ones. In India, ECGC covers losses
arising out of such risks.
Under this system, as compared to D/A, the exporter has certain
advantages:
(a) The documents remain in the hands of the bank and the exporter
does not lose possession or the ownership of goods till the
payment is made.
(b) The exporter does not suffer bad debts as credit period is not
granted to the importer.
(b) Documents against Acceptance (DA Bills):

The documents are released against acceptance of the bill of
exchange. The credit is allowed for a certain period, say 90 days.
However, the exporter need not wait for payment till the bill is nmet
on due date; as he can discount the bill with the negotiating, bank
and can obtain funds immediately after shipment of goods.
E x p o r tF i m n a n c e
99
ase of D/ A as compared to D/P bills, the risk involved is much

In ater, as the importer takes the possession of goods before the
the exporter. This means, there are chances
al payment isbill
made to
f i n a lp a y m e
bad debts, ifof exchange is dishonoured.

of
due date, the exporter, will have too
fails to pay on
the importer
all other
hart civil proceedings to receive his payment, if
The risk involved can be insured with ECGC.
alternatives fail.
Deferred Credit Payment:
5.
deferred credit basis. The credit
sold on
Generally, capitalgoods are can be e v e n 10 years
neriod allowed is more than 180 days, and it
on the value of goods
and other terms of contract.
depending
the payment in instalment
receives
over a period of
The exporter received through the bank
in the
is generally
time. The payment send reminders to the
bank drafts. The exporter needs to
form of dates as per
instalments o n the due
to make payment of
importer
the contract.
6. Letter of Credit
most popular form in recent
become the
This method of payment has of payment
to other methods
secured as compared
times, as it is m o r e
other than advance payment).
"an undertaking by
importer's
A letter of credit be defined as can
made to the exporter
if the required
will be the
bank stating that payment within the validity of
to the bank
aocuments a r e presented
L/C".
include:
he various parties to LC
bank
an application to his
who makes
Applicant
-
the importer
for LC.
issues the LC.
bank which
Bank -
the importer's
Issuing which informs
country
the bank in exporter's
Adoising Bank -
of LC.
regarding
the receipt
the exporter
LC is transferred)
or the third party (if
Beneficiary
-
the exporter
of LC
Who gets the money
(e) Confirming Bank - the bank in exporter's country that
guarantees the LC.
() Negotiating Bank - the exporter's bank that negotiates the

export documents and realizes LC proceeds.
(Note: Students may write about 10 to 15 lines on each of the 6

methods at the examns for 7h mnarks question.)
PROCEDURE TO OPEN LETTER OF CREDIT

****
The following are the steps in the process of

credit
opening of a letter of
1. Exporter's Request: The exporter requests the importer to issue

LC in his favour. LC is the most
secured form of payment in
foreign trade.
2 Importer's Request to his Bank : The importer requests his

bank to open a L/C. He may either pay the amount of credit in
advance or may request the bank to open credit in his current
account with the bank.
3. Issue of LC: The issuing bank issues the L/C and forwards it
to its correspondent bank with a request to inform the
beneficiary that the L/C has been opened. The issuing bank
may also request the advising bank to add its confirmation to
the L/C, if required by the
so
beneficiary.
4. Receipt of LC: The exporter takes
in his possession the
L/C
He should see to it that the L/C is confirmed.
5. Shipment of Goods: Then the exporter supplies the goods and

presents the full set of documents along with the draft to the
negotiating bank.
6. Scrutiny of Documents: The negotiating bank then scrutinises
the documents and if they are in order makes the payment to
the exporter.
7. Realisation of Payment: The issuing bank will reimburse the

amount (which is paid to the exporter) to the negotiatingbank
E x p o r tF i n a n c e 101
B.
Documents to Importer: The issuing bank in turn presents the
documents to the importer and debits his account for the
corresponding amount.
YPESOFLETTER OF CREDIT
everal types of LC. Some of the types of LC are:
1, Revocable LC: The issuing bank reserves the right to modify

1
or cancel the LC at any time without the prior permission of
the beneficiary. However, after revoking the LC, the issuirng
bank has to notice to the
give Revocable LCs are
beneficiary.
donot want to accept a revocable
risky and as such the exporters
LC
The issuing bank cannot modify orcancel the LC, if the
has already made advance
negotiating bank (exporter's bank)
on LC amount
payment to the exporter against drafts drawn
modification notice)
(prior to receiving of cancellation or
2. Irrevocable LC:The exporter prefers irrevocable LC. The issuing
bank cannot modify or cancel the LC without prior permission
insist on
of the beneficiary or exporter. Exporters generally
weakness of
irrevocable LC because it does not the inherent
revocable LC.
3. With Recourse LC: The exporter is held liable to the paying

drawn against LC is not
negotiating bank, if the draft/bill bank
honoured by the importer/issuing bank. The negotiating
amount along with interest
can make the exporter to pay the
and charges, if the negotiating bank
has already made the
or purchasing of bills drawn
payment either by discounting
against LC amount.
4.
Without Recourse LC: The negotiating bank has no recourse
to the exporter, but it has recourse only to the issuing bank or

to the confirming bank. The question of recourse arises only
when the negotiating bank made advance payment to the
exporterand the bill of exchange is dishonoured by the
importer.
5. Confirmed LC: When the issuing bank is practically unknown
in the exporter's country, the exporter may ask the issuing bank
to make arrangements to confirm the LC by a local bank in the
exporter's country. The confirming bank undertakes to honour
all the drafts/bills drawn and presented by the exporter within
the terms of LC. The confirming bank charges fees for
confirming LC.
6. Unconfirmed LC: In this case, the correspondent bank in the

exporter's country does not its confirmation and thereby, it does
not accept liability to make payment under the LC. The exporter
may also not get the LC because he may be sure of receiving
money from the importer s bank.
7. Transferable LC: A transferable LC contains provision that

a
the benefits of LC can be transferred either fully or partly to
one or more parties. The issuing bank must be informed
regarding the transfer of LC to a third party.
8. Non Transferable LC: The exporter cannot transfer the LC to a

third party. Usually, all LCs are non transferable in nature
unless it is expressly stated the LC can be transferred.
9. Back-to-Back LC: It is a domestic LC. It is drawn against the

original LC. The exporter may keep the original LC with the
negotiating bank and request the bank to issue a local LC in
favour of the local supplier who has supplied goods to the
exporter. The amount of back-to-back LC will be lower than
that of the original LC.
10. Other Types: There are various other types of LC such as fixed
LC, revolving LC, red LC, green LC, clean LC, restricted LC,
and so on.
COUNTERTRADETYPES
Countertrade is a reciprocal form of international trade in which
goods or services are exchanged for other goods or services rather
than for hard currency. This type of international trade is more
common in lesser-developed countries with limited foreign
exchange or credit facilities.
ExportFimance
103
"Countertrade means exchanging oods or services

W i k i p e d i a
services,
h are paid for, in whole or part, with other goods
or
be used
her than with money. A monetary valuation can however
rather
"
ertrade for accounting purposes.

i n c o u n t e r
'S.
Coltntertrade takes place due to the following reasons:

Shortage of hard currency
Lack of credit
BOP problems
income
Low commodity prices low export
-
Surplus capacity
Arms trade
sector
. Lack of a well-developed private
Lack of international trading experience

in international
LDCs low share of manufactured goods
market.
Types
of countertrade:
There are mainly eight types
1. Barter:
of exchange of goods
for goods.
the oldest form
Barter system is for other
there is exchange of products directly
In barter trade,
as means of payment.
products without the use of money
commodities are
under barter exchange, principal
Generally, countries. For
in two different
two parties
exchange between for wheat or sulphuric
acid for
exchanged
example, oil can be
ammonia, and so on.
calculate
determined for both products to
A "shadow price" is short-term
these to be traded. It is often a
the quantities of fluctuations.
exchange
Contract to guard against currency
104 Export Markeling (1T. Y.B. Com.: SEM-VI)
Generally, barter trade takes place between Governments of
two countries. For example: In 2000, India and Iraq agreed on
an "oil for wheat and rice" barter deal, (subject to United
Nations approval under Article 50 of the UN Persian Gulf
War sanctions), that would facilitate 300,000 barrels of oil
delivered daily to India (at a price of $6.85 a barrel) in exchange
of wheat and rice of that equal amount.
2. Switch Trading:
It is a practice in which one company sells to another company
its obligation to make a purchase in a given country. For
example:
Switch trading: Party A and Party B are countertrading
rice for sugar. This means Party A is supposed to get sugar
from B and Party B is supposed to get rice from Party A.
third
Party A may switch its obligation to pay Party B to a
party, known as the switch trader.
The switch trader gets the sugar from Party B at a discount
and sells it for money.
A monetary valuation can, however, be used in

counter trade for accounting purposes.
3. Counter Purchase:
It is also called as parallel trading or parallel barter. It involves

payment in cash.
Counter trade involves sale of goods and services to one

to
company in another country by a company that promises
make a future purchase of a specific product from that company.
A counter purchase is a type of countertrade in which two
parties agree to buy goods from and sell goods to each other
under separate sales contracts.
One form of counter purchase is an international trading deal
whereby anexporter agrees to purchase a quantity of goods

ot
from an importer in exchange for the importer's purchase
are
sold by each party
the exporter s product. The goods being
typically unrelated but may be of equivalent value
p o r tH n a n c e
In a counter purchase:
105
The first contract is the
+he terms in which an original sales
seller.
initial contract, outlining
buyer purchases from an initial
The second
parallel
the original seller contract outlines
the
agrees to buy unrelated terms in which
original buyer. goods from the
Basically, this is contractually enforced
a
two parties who
agree,
at relationship between
some
one another. point, to provide business for
Thus, countertrade involves 2
more or less equal amount
contracts, 2 sales, 2 deliveries of
Buyback:
It occurs when a firm builds a
plant in a couuntry
technology, equipment, training, or other services to thesupplies
-
or
and agrees to take a certain percentage of the country

partial payment for the contract. plane's output as
For
example, exporter of textile machinery agrees to buy a
an
specified portion of the manufactured goods (cloth) as an
incentive to the buyer.
5 Offset:
In an offset arrangement in which the seller assists in marketing
Products manufactured by the buying country or allows part
or the
exported product's assembly to be carried out by
lanufacturers in the buying country. This practice is common
derospace, defense and certain infrastructure industries.
example: A Government purchases expensive military

equipme
p m e n t where the importing country reduces its cost by
locally manufacturing or assembling part of the equipment. The

local mponent
compo (offset) is usually
not more than 20 to 30% of
the
the deal value.
Compensation Trade the

barter in which one of
of
mpensation trade is form a
IOns is partly in goods and partly in hard currency.
transactions is
Export Marketing (T. Y.B.Com.: SEM-VI)
106
7. Cooperation Agreements:
It involves a triangular deal between three parties of three
different countries. It is suitable for bulky and heavy goods,
For example: An exporter from USA sells to a cash-strapped

Eastern European country that delivers the bartered goods to a
Western European one which, in turn, pays the US company,
8. Hybrid Countertrade:
It requires approval of foreign investment by a Government on
the condition that all or most of the production of the investing
company is to be exported. In other words, approval of foreign
investment is subject to export condition.
BENEFITS OF COUNTERTRADE
There are several benefits of Counter-Trade:

1. Entry in Difficult Markets:
Countertrade enables the entry in difficult markets. At times,
there are sanctions imposed on certain countries by the United
Nations due to various reasons. The barter trade of principal
commodities is allowed on humanitarian grounds. Therefore,
the consumers in the affected country (on whom sanctions are
imposed) can get basic goods on account of barter trade
approved by UN.
2. Overcomes Problem of Exchange Rate Fluctuations:

Countertrade overcomes the problem of exchange rate
fluctuations. For instance, in cases like barter trade, the goods
are exchanged for goods, which means the exchange is not
determined in currency terms. Therefore, countertrade is no
affected by exchange rate fluctuations.
3.
3. Optimum Use of Production Capacity:
Countertrade enables firms or countries to make optimum uust
se
ses
of production resources. This is because countertrade increas

the demand for goods and services, which in turn resuls *
Expo. Finance
107
more production, thereby making optimum use ofof production
capacity. use
production
Overcomes Foreign Exchange Reserves Problem:
Countertrade overcomes the problem of
foreign exchange
reserves problem. Since in certain cases, there is no outflow of
foreign exchange, there is no effect on Balance of
nOsition of country which is importing goods Payments
under
countertrade.
Markets for Products in Decline Stage of PLC:

Countertrade may create markets for products which are in the
decline stage of product life cycle. For instance, certain products
become outdated in certain countries, especially in developed
countries. Therefore, such products can be exported in less
developed or backward countries, where there is demand for
such goods.
6. Overcomes Credit Difficulties:

there is no need to provide credit facilities to the
Generally, Therefore,
are exchanged for goods.
importers as goods such as
to o v e r c o m e credit difficulties
countertrade helps
chances of bad debts for the exporters.
7. Bilateral Ties Between Countries:

Countertrade may help to develop good bilateral relations
times, some countries
countries. At
between participating
are deprived of such goods
drastically need basic goods as they UN. However, on
of embargo or sanctions by
on account
allow barter trade of principal
humanitarian grounds UN may
commodities.
OAllows Inputs at Lower Rates: at lower rates.

the import
of inputs
facilitates a n agreement
is
ountertrade there
countertrade
certain cases of for the exchange of

Under transact
business
parties to
two As such
the parties may
etween inputs.
with that of for inputs (raw
unished goods in exchange
finished goods
agree to trade rates.
parts) at lower
materials o r
Export Marketing (T.Y.B. Com.: SEM-VI)
108
9.
Boosts Foreign Investment
boost to foreign investment. For
Countertrade may give a
countertrade, the Government allows
example, under hybrid
the condition that a part or whole of the
foreign investment on MNCs enter into such
production is to be exported. Large
of market expansion.
agreements for the purpose
10. Employment Opportunities:

Countertrade increases demand for goods and services, Increase
in demand leads to higher production and distribution
activities. Increase in production and distribution leads increase
in demand for workforce. As a result, employment increases in
the exporting and importing countries.
PRE AND POST SHIPMENT FINANCE
FEATURES OF PRE-SHIPMENT FINANCE
MEANING
is
Pre-shipment finance is also referred to as "Packing Credit". It
of
provided by commercial banks to the exporter prior to shipment
goods. The main purpose of packing credit is to meet working capital
needs of exporters.
FEATURES
The salient features of packing credit are as follows:
1. Eligibility:
Pre-shipment finance can be granted only to those exporters

who produce a confirmed export order and/or a letter of credit
received against the export contract.
Indirect exporters which export through export houses and
others can also obtain packing credit provided:
E x p o r tF i n a n c e
109
Indirect exporter produces a letter from concerned export
house or other concerned party stating that a portion of
the export order has been allotted in his favour.
The export house or other concerned party should also state

that it does not wish to obtain packing credit for the same.
2 Purpose
The pre-shipment finance is required by the exporter to meet
working capital requirements before shipment of goods such
as
Payment for raw materials,
Payment of wages, etc.

3. Documentary Evidence/Security:
The pre-shipment finance can be granted against the following:
(a) Confirmed export order.
(b) Letter of credit received against the contract.

ECGC
(c) Relevant policy issued by
sureties known to bank.
(d) Personal bond from
Forms/Methods of Preshipment Finance:

loan.
(a) Cash Packing credit
6) Against hypothecation.
C A g a i n s tpledge, etc.
Amount of Packing Credit on the amount of export

credit depends bank. The bank
he amount of packing exporter by the
of the r e c e i v a b l e such
a s DBK.
credit rating
order andconsider the export incentives
a y also
6. Credit: Further
extension
Period of Packing of 180 days. bank
period
granted for
a a
commercial
means,
Is normally
provided.
This
maximum
270 days.
be of
period
9 0 days
can
credit for a
packing
dn provide
Export Marketing (1.Y.B.Com.: SEM-VI)
110
Interest:t
7. Rate of
at a lower rate of interest as compared
Packing credit is provided
borrowers. With
etfect from 1st July, 2010, commercial
to other credit at the base rate or
interest on packing
banks must charge
not below the base rate.
above the base rate and
8. Loan Agreement:
of loan, the banks require the exporter to
Before disbursement
The loan agreement contains
execute a formal loan agreement.
conditions relating to
the loan.
terms and
Maintenance of Accounts:
9.
9. accounts
directives, banks must maintain separate
As per RBI running
each pre-shipment advance. However,
in of
respect and 100%
of units in SEZ/EPZ
accounts are permitted in case
EOUS.
10. Disbursement of Loan:

sanctioned in lumpsum.
credit advances are
Normally, packing
disbursed in a phased
manner.
amounts are
However, the
11. Monitoring the

use of advance: of
credit should monitor the use
The bank advancing packing whether the amount is

used
i.e.,
packingcredit by the exporter,
or not.
for export purpose
12. Repayment: of export proceeds

of loan must be made out
The repayment in which
can be made
out of local funds
only. No repayment not be treated as pre-shipment finance
advance will
case, the
interest rate which is charged
and the banks can charge higher
to other borrowers.
POSTSHIPMENT FINANCE
FEATURES OF
Post shipment finance is provided to meet working cap
of goods. It bridges t
requirements after the actual shipment
between the date of shipment and actual receipt O
financial gap
Export Finance
111
rment from
paym
overseas
buyer thereof. The salient features
chipmentfinance are of post-
1. Eligibility:
It is extended to the exporter who has
name, attested
export documents in his
by the customs.
2. Purpose
Post shipment finance provides
working capital to the exporter
from the date of shipment to the date
of realization of export
proceeds. For instance, post shipment credit can be obtained to
pay dues to Custom House Agent, or such other expenses after
shipment of goods.
3 Documentary Evidence
It is extended against the evidence of shipping documents
indicating the actual shipment of goods or necessary evidence
in case of deemed exports.
4. Forms of Post-shipment Finance:

Post shipment finance may be provided in one of the following
forms:
LC.
(a) Export bills negotiated under
Advance against DBK.
(b)
collection, etc.
(c) Advance against bills under
5. Credit:
Amount of Post-shipment
finance depends upon the
The of post-shipment of
exporter after shipment
amount
of the
requirements
Working capital
goods.
Finance:
6 Period of Post-Shipment loan is provided
90 days. The
period is usually may be
provided.
he short term Additional 90 days
banks.
y Commercial
rate of
7Rate of Interest ted at
is granted
a lower rate
lower
finance facility i n t e r e s t charged

for domestic
Post-shipr
Ost-shipment
to the
rate of
2010,
commercial banks
rlterest, as compared 1stJuly
effect from
With
Or local parties.
Export Marketing (T.Y.B. Com.: SEM-V)
112
charge interest
rate on post shipment credit at base rate o r ahou e
of the bank.
base rate
8. Loan Agreemet:
the bank requires the exporter to
Before disbursement of loan,
execute a formal loan agreement.
9. Maintenance of Accounts:
As per RBI directives, banks must maintain separate account
in respect of each post-shipment advance. However, running
accounts are permitted in case of units in SEZ/EPZ and 100%
EOUs.
10. Disbursement of loan Account:
Normally, post-shipment credit advances are not sanctioned
in lump-sum but disbursed in a phased manner.
11. Monitoring the use of Advance:

The bank advancing post-shipment credit should monitor, the
use of credit
post shipment the exporter i.e. whether the
by
is used for export purpose or not. Penalty can be
amount
imposed for misuse.
12. Repayment
received,
As the export proceeds and/or, incentives are
soon as
the exporter should repay the amount to

bank advancing credit.
and
Normally, the advancing bank realizes the export proceeds
then makes necessary entries in the exporter's account.
PROCEDUREOF OBTAININGEXPORTFINANCE
xporters obtain packing credit and post shipment credit to mee

1s as
a
Working capital needs. The procedure in export financing

follows
1. Application:
to
Ihe exporter must an make application in prescribed tor
the bank. The application must be supported with releves
documents such as:

In case of Packing Credit
(A)
An undertaking stating that the advance will be
(a)
utilised for the specific purpose in respect of export
of goods.
An undertaking stating that the shipment will be

(b)
effected within a certain time limit and submit the
relevant shipping documents to the bank in time.
(c) Agreement of hypothecation or letter of pledge.

(d) Demand pro-note signed on behalf of the company/
firm.
(e) Letter of continuity signed on behalf of the company/

firm.
LC in original.
() Confirmed export order and/or
of ECGC.
(g) APpropriate policy/guarantee
other documents as required by the bank.

(h) Any
Credit
In case of Post Shipment
(B) authorities.
documents
attested by custom
(a) Shipping
on behalf of the company/
Demand pro-note signed
(b)
firm.
on behalf of the company/
Letter of continuity signed

c)
firm. resolution.
Board of Directors
Certificate of the
(d)
to operate the account.
Letter of authority
(e
2. Tocessing of Application: consideration the
into
processed
taking
The application is
e
following order/LC (in
evidence in the form ofexport
document
(in c a s e
shipping
Documentary
and
credit)
the case of packing
114 Eaxport Marketing (T.Y.B.Com.: SEM-V
of post-shipment) or correspondence exchanged between

the applicant and the importer.
(b) Credit worthiness of the applicant.

3.
3. Sanctioning of Loan:
If the application is found in order, the bank sanctions the
amount. Normally the loan is sanctioned depending upon FOB
value of export order / LC or market value of the goods
whichever is less.
4. Loan Agreement:
Before disbursement of loan, the banks require the exporter to
execute a formal loan agreement. The loan agreement contains
terms and conditions relating to the loan.
5. Loan Disbursement:
Normally, packing credit/ post shipment advances are not
sanctioned in lump-sum but are disbursed in a phased manner.
6. Maintenance of Accounts:
As per RBI directives, banks must maintain separate accounts
in respect of each preshipment / post-shipment advance.
However, running accounts are permitted in case of units in
EPZ/SEZand 100% EOUs.
7. Monitoring of Accounts:
The bank advancing packing credit/ post-shipment should
monitor the use of packing credit by the exporter, i.e. whether
the amount is used for export purpose or not.
8. Repayment:
As soon as the export proceeds and / or incentives are receivea,
the exporter should repay the amount to bank advancing credit
Normally the advancing bank realises the export proceeds and
then makes necessary entries in the exporter's account.
Export F a n c e
115
PRE-SHIPMENT FINANCE V/S

POST-SHIPMENT FINANCE w.www
PRE-SHIPMENT FINANCE POST-SHIPMENT FINANCE

1. Meaning:
Credit is extended to the exporter Post shipment finance is provided
of goods. after the actual shipment of goods.
prior to shipment
2. Purpose:
It is required to meet working
t is required to meet working
capital before shipment of goods.capital after shipment goods.
of
. Beneficiary:
is offered to Indian parties as wel|
It is offered to Indian exporters/ or| It
as to overseas buyers and agencies.
Suppliers of export goods.
4. Documentary Evidence:
the
finance is provided It is provided against
Pre-shipment
evidence documentary evidence ofshipping|
against the documentary documents attested by customs.
of Export order / LC.
5. Form of Finance:
It can be granted against purchase
itcan be granted against DBK, deemed
redLC of bills, deferred exports,
etter of hypothecation, exports, etc.
back-to-back LC, etc.
|6. Factors Determining Credit Amont:
The amount of finance
depends
The amount of finance depends nature of export goods/
credit upon the
uponthe export order and services and the
a m o u n t of
rating by the Bank. post-shipment expenses.
a m o u n t of credit is
. Quantumi of Credit Generally, the
is
enerally, the a m o u n t of credit ot packing credit
lower than that of
needs
gher than that of post-shipment
capital because the working capital
lower
workine is generally
i t because the after shipment
quired beforeshipment is
more
the pre-shipment stage.
than that at
than that at the post-shipment
stage.
8. days
Period of Finance: The period
is upto 180
Theforeperiod
he is
upto 270days
shipment of goods.
after s h i p e n t
ol gpovds.
ROLE OF EXPORT FINANCING INSTITUTIONS wwwwci
ROLE OF COMMERCIAL BANKS

A major part of export finance is provided by commercial banks.
They also provide other facilities and services to the exporters. The
functions of commercial banks can be grouped under two heads:
(A) Fund Based Assistance
(B) Non-Fund Based Assistance.
The assistance provided by commercial banks in respect of export

finance can be charted as follows:
Commercial Banks
Fund Based Assistance Non-Fund Based Assistance
A t the pre-shipmnent stage Bank Guarantees

At the post-shipment stage Advisory &other Services
(A) Fund Based Facilities

The commercial banks provide fund based activities at
-
) Pre-shipment Stage and

(ii) Post-Shipment Stage.
) At thepre-shipment stage: The commercial banks provide
180
finance on short terms basis for normal period of
a
The various
days at a very concessional rate of interest.
forms of advance are:
(a) Cash packing credit loan

(b Advance against hypothecation
(c) Advance against pledge, etc.
(i At the post-shipment stage: The commercial bankS
provide finance at the post-shipment stage normally for a
period of 90 days at a concessional rate of interest. The
various forms of post-shipment finance are:
(a) Negotiation of Bills drawn under LC

(b) Purchase/ Discounting of Bills
() Overdraft against bills under collection, etc.
(B) Non-Fund Based Assistance:

Bank Guarantees: RBI has authorised commercial banks
to issue guarantees and furnish bid bonds in favour of
overseas buyer. Prior permission of RBI is not required
except in case of exports of capital goods under deferred
payments, construction contracts, consultancy and
technical services contracts and turnkey projects. The.
various guarantees issued by banks are:
(a) Guaranteeforforeign currency loans sanctioned by a

financial institution abroad to Indian exporters who
abroad.
raise funds to finance their projects
Performance guarantee
which is generally required
(b) and also in case of turnkey
in export of capital goods
and construction projects.
payment of retention
(c) Banks issue a guarantee for
o v e r s e a s party
who would release the
money by the
to the Indian party only after
retention money
from bank.
receiving guarantee
issue advance payment guarantee to
(d) The banks also makes certain
who normally
the buyer
exporter against a bank
overseas
the Indian
advance payment to
guarantee.
to enable exporters to
bonds so as
(e Banks issue bid tenders.
in various global
participate
Other Services:
(a) They collect export proceeas Jrom the importer and credit the
same to exporter's account.

(b) The banks assist the exporter in the collection of useful
information on the credit worthiness of the foreign buyer
through theirforeign agents/branches.
c) The banks issue bank drafts in case of payment of freight charges
and such other charges.
(d) The banks send the duplicate copy of GR form to the RBI after
realisation of export proceeds.
(e) The banks issue bank certificates in respect of export sales value,
which are useful for claiming incentives.
ROLE OF EXIM BANK

The Export Import Bank of India came into existence in 1982. It has
its headquarters at Mumbai and its branches and offices in important
cities in India and abroad.
Purpose:
The EXIM Bank was established for the purpose of financing
medium and long term loans to the exporters thereby promoting
foreign trade of India. It took over the functions of international
wing of IDBI.
The main objectives of EXIM Bank are

term and long term)
(a) To provide financial assistance (medium
to exporters and
importers.
(6) To function as the principal financial institution for coordinating
the
working of institutions engaged in providing export finance
(C)To promote foreign trade of India.
(d)lo deal with all matters that may beconsidered to be incident
or conducive to the attainment of above objectives.
119
nctions of EXIMBank:
The assistance provided by EXIM Bank to the exporters can be

ouped under two heads:
(A) Fund Based ASsistance
(B) Non-Fund Based Assistance

The various assistance provided by Exim Bank can be charted as
follows
EXIM BANK
Fund Based Assistance Non-Fund Based Assistance

Financial Guarantees
Indian Parties
Indian Banks Advisory and
Overseas Buyers Other Services

Overseas Banks
(A) FUND BASED ASSISTANCE

1 Assistance to Indian Exporters:
to Deferred Credit Exports.
4Itprovides financial assistance
to "Deemed Exports".
It offers credit facilities
countries.
tfinances Indian joint ventures inforeign
EOUs.
d) Finances units in SEZ and
100%
for procuring r a w
e finance to exporters
provides pre-shipment
and other inputs
which are necessary for the
ldterials to be exported.
and equipment
ufacture of machinery
and equipment on
) It finances machinery
lances export / import of
lease basis. loan
foreign exchange
3 It provides Comput
OVIdes Computer
Software Exporters
Subjectto RBI clearance.
(h) It provides finance tacillty against deterred credit to exporters
technology and other services.
of consultancy,
It provides tinance to Indian exporters to undertake variotG
export marketing activities in India and abroad through Export
Marketing Fund (EMF).
It also operates Export Development Fund (EDF) to finance

)
techno-economic survey/research or any other study for the
development of Indian Exports.
2. Assistance to Indian Commercial Banks

(a) It provides Refinance Facilities so as to enable commercial
banks to offer credit to Indian exporters who extend term credit
to importers.
(b) It offers Export Bills Rediscounting Facility to commercial banks

in India who have earlier discounted bills of exporters.
3 Assistance to Overseas Buyers : It offers 'Overseas Buyer's

Credit' facility to foreign importers for import of Indian capital
goods and related services with repayment spread over a period
of years.
4.
4. Assistance to Overseas Banks:
(a) Long term finance is also provided under "Lines of Credit"to

finance financial institutions abroad, who in turn, extend
finance to importers of their country to buy Indian capital goods.
(b) It provides Relending Facility to overseas banks to make

available term finance to their clients for import of Indian goods.
(B) NON-FUND BASED ASsISTANCE:

5. Guarantees and Bonds: EXIM Bank provides non-fund based
assistance in the form of guarantees such as bid bond guarante
performance guarantee, etc. These guarantees are provided
together with commercial banks.
(Referfo guarantees explained under Commercial Banks)

Export Finance
121
Advisory and other Services:
6.
(a) Tt advises Indian companies, in executing contracts abroad andd

sources of overseas
on
finarncing.
(b) It advises Indian exporters on global exchange control
practices.
The EXIM bank offers financial and
advisory services to Indian
construction projects abroad.
d) It advises small-scale manufacturers on export markets and
product areas.
(e) It provides access to Euro financing sources and global credit

sources to Indian exporters.
( It assists the exporters under forfaiting scheme.
ROLEOFSIDBL
Small Industries Development Bank of India (SIDBI), was set up on

it acts as
April 2, 1990 under an Act of Indian Parliament. Presently
the Principal FinancialInstitution for the Promotion, Finançing and
Development of the Micro, Small and Medium Enterprise (MSME)
sector and also co-ordinates the functions of the institutions engaged
in similar activities.
and has network of 15
SIDBI has its head office in Lucknow (UP)
a
offices in India.
offices and about 31 branch
egional
FUNCTIONS OF SIDBI
finance and
schemes for the promotion,
SIDE B l provides various
enterprises sector. Some
micro and small
the
velopment of units in into three groups:
ne schemes are broadly classified
S C H E M E S OF SIDBI
Assistance Bills Schemes

Direct
Refinance Assistance
Export Marketing (T. Y.B. Com.: SEM-VI)
122
I. REFINANCE ASSISTANCE
1. Seed Capital Scheme:

seed capital to promoters of SSI units
SFCs SIDCs provide
then obtain refinance from SIDBI. This
The SFC/ SIDC can
to meet promoters'
scheme enables the entrepreneurs
contribution towards equity.
Equipment Refinance Scheme:

2.
SSI units to
SFCs/SIDCs provide equipment refinance to
for the purpose of expansion and
purchase equipment
modernisation. The SFC 7 SIDC can then obtain refinance from
SIDBI, if so required.
3. Tourism Related Finance Scheme:

SFCs SIDCs provide finance to entrepreneurs for setting up
of amusement
tourism related activities, such as development
etc. The SFC/ SIDC can
parks, cultural centres, restaurants,
then obtain refinance from SIDBI.
ASSISTANCE
II. SCHEMES OF DIRECT
4. Project Finance Scheme:

SIDBI direct finance to SSI units for setting up new
provides
to those units with export
projects. Preference is given
hi-tech and those promoted
orientation, import substitution,
track record.
by entrepreneurs with good
be less than 75 lakh and the debt
The project cost should not
ratio -not to exceed 2:1.
equity
5. ISO9000Scheme:
certification.
to obtain ISO 9000
SIDBI provides direct finance
quality systems in SSI units, with a
The objective is to promote
view to strengthen their marketing
and export capabilities.
on
meet the expenses
This scheme enables the SSI unit to
certification fee, equipment
Consultancy, documentation, audit, 1SO 900u
and calibrating instruments required for obtaining
certification.
Export Finance
6Equipment Finance Scheme 123

SIDBIprovides direct finance to SSI units
eguipment, required for the for the
purchase of
modernisation. purpose of expansion annd
IL. BILLS SCHEMES
7. Direct Discounting Scheme
(DDS):
SIDBI directly discounts
the bills drawn
The DDS is by MSEs.
of two types:
(a) DDS (Equipment) where bills are normally of 5
-
minimum transaction value 1 lakh. years and

(b) DDs
(Components)
than 90 days. where -
unexpired period is not more

8. Bills
Rediscounting Scheme (BRS):
SIDBI also rediscounts the bills
by commercial banks. There are that were earlier discounted.
two types of
BRS:
(a) BRS
(Equipment) -
where the usance of bills is

years. normally 5
(b) BRS (Short Tern) where -
than 90 days. the unexpired usance is not more
ROLE OF ECGO
n order to provide export credit and insurance
support to Indian
exporters, the GOI has set up the E>xport Risks Insurance
ERIC) in July, 1957. It is now known as Export CreditCorporation
Orporation (ECGC) of India Ltd. Guarantee
ECGC is a company wholly owned by the GOI. It
ne functions under
administrative control of the Ministry of Commerce and is
anaged by a Board of Directors representing
Danking, Insurance, Trade and Industry. Government,
124 Export Marketing (T. Y.B.Com.: SEM-VI)
Objects of ECGC:
To vrotect the exporters against credit risks, i.e. non-repayment
by buyers.
To protect the banks against losses due to non-repayment of
loans by exporters.
Covers Issued by ECGC
The Covers issued by ECGC can be divided broadly into four groups:
(A) Standard Policies - issued to exporters to protect them against

payment risks involved in exports on short term credit.
(B) Specific Policies designed to protect Indian firms against

payment risk involved in (i) exports on deferred terms of
payment (ii) services rendered to foreign parties and (ii)
construction works and turnkey projects undertaken abroad.
C) Financial guarantees - issued to banks in India to protect them
from risks of loss involved in their extending financial support

to exporters at preshipment and post-shipment stages; and
(D) Special Schemes such as Transfer Guarantee meant to protect

banks which add confirmation to letters of credit opened by
foreign banks, Insurance cover for Buyer's Credit, etc.
(Note: Students may write about 75 to 90 words on each ofthefour

covers for 7% marks question. Refer explanation below.)
(A) STANDARD POLICIES:

The standard policy is issued in the case of consumer goods, whicn
are sold on credit not exceeding 180 days. It is a whole
turnove
policy. All shipments are covered under one policy for a period or
180 days.
ECGC has designed 4 types of standard policies to provide cover

for shipments made on short term
credit:
(a) Shipments (Comprehensive Risks) Policy to cover bot"
political and commercial risks from the date of shipment.
ExportFinance
125
chinents (Political Risks) Policy - to cover only political risks
(b from the date of shipment.
Contracts (Conmprehensive Risks) Policy - to cover both
mmercial and political risks from the date of contract.
Contracts (Political Risks) Policy - to cover only political risks

(d) from the date of contract.
Risks Covered under the Standard Policies:

Commercial Risks:
)
Insolvency of the buyer
due within a
Failure of the buyer to make the payment date.
period, normally four months from the due
specified
to certain conditions.
failure to accept goods subject
Buyer's
(i) Political Risks:
remittances by the
restrictions on
Imposition of o r any government
in the buyer's country
government to exporter.
o r delay payment
which may block
action
disturbances
in the buyer's
or civil
W a r , revolution,
country. new import
licence or
Cancellation of a valid import country, after the date
r e s t r i c t i o n s in
the buyer's
licensing as applicable.
o r contract,
of shipment
imposition
of n e w export
licence o r contract
Cancellation of export the date of
in India after
restrictions
licensing
(under contract policy). insurance
or
transport
additional
handling, of voyage
Payment of
diversion
or
interruption
occasioned by the buyer.
charges recovered
from
which cannot be India,

not
outside
loss Occurring the

cause
of and beyond
other insurers
Any commercial
insured by
ormally and/or buyer.
Control of the exporter
Export Marketing (T.Y.B.Com.: SEM-V)
126
under Standard Policies:
Risks not covered
to the follOWing risks are not covered:
The losses due
Commercial disputes including quality disputes raised by the

buyer, unless the exporter obtains a decree from a competent
court of law in the buyer's country in his favour.
Causes inherent in the nature of the goods.
Buyer's failure to obtain import or exchange authorisation from

authorities in his country.
Insolvency or default of any agent of the exporter or of the
collecting bank.
L o s s or damage to goods which can be covered by commercial
insurers.
Exchange fluctuation.
Discrepancy in documents.
(B) SPECIFIC POLICIES:

The Standard Policy is a whole turnover policy designed to provide
a continuing insurance for the regular
flow of exporter's shipment
c o n s u m e r durables for
which
of raw materials, c o n s u m e r goods and
credit period does not normally exceed 180 days.
or
Contracts for export of capital goods or turnkey projects
cOnstruction works or rendering services abroad of "
are not
repetitive nature. Such transactions are, therefore, insured by ECG
0n a case-to-case basis under specific policies,
Contracts (o
pecitic policies are issued in respect of Supply Works
terms), Services Abroad and Construction
dererred payment
Abroad.
() Specific Policy for Supply Contracts : ort

in case of exp"
Specitic Policy for Supply Contracts is issued or
can be of any
of capital goods sold on deferred credit. It
fourforms:
Export F n a n c e
Svecific Shipments 127

(Comprehensive Risks) Policy to cover
both commercial and
political risks at the
stage. post-shipment
Specific Shipments (Political Risks)
political risks after shipment date. Policy to cover only
Specific Contracts (Comprehensive Risks)
political and commercial risks after contractPolicy
to cover
date.
Specific Contracts (Political Risks) Policy to cover only
political risks after contract date.
This policy like standard policies covers 90% of the loss on
account of commercial arnd political risks.
(t) Service Policy:

Indian firms provide a wide range of services like technical or
professional services, hiring or leasing to foreign parties (private
or government). Where Indian firms render such services, they
Would be exposed to payment risks similar to those involved
in export of goods. Such risks are covered by ECGCunder this
policy.
overseas government, then Specific
lf the service contract is with
be obtained and if the
Services (Political risks) Policy can
services contract is with overseas private
parties then Specific
bervices (Comprehensive Risks) Policy c a n be obtained,
bank
which are not supported by
especially those contracts
guarantees.
case-to-case basis. The policy
on a
Vormally cover is issued
COvers 90% of the loss suffered.
Construction Works Policy: ell as turnkey

construction jobs as well
This policy Covers civil
services. This policy c o v e r s
involving supplies and and foreign
ects both with private
contracts
tuction
80vernment. a c c o u n t ofcontracts
suffered o n
his policy
Policy covers 85% of loss
suffered on account
agencies and 75% of loSs

8vernment
with private parties
construction contracts
(C) FINANCIAL GUARANTEES
require adequate
financial support from hanlee
Exporters
a their export contracts. E L G Dacks the lending programmes of
esof
banks by issuing financial guarantees. The guarantees protect the
hanks from losses on account of non-repayment of loans by
exporters.
The ECGC charges a premium for its services which may vary from
5 paise to 7.5 paise per month for R 100/-The premium charged
depend upon the type of guarantee and it is subject to change, if
ECGC so desires.
(i) Packing Credit Guarantee:

Any loan given to exporter for the manufacture, processing,
purchasing or packing of goods meantfor export against a firm
order of L/C qualifies for this guarantee.
Pre-shipment advances given by banks to firms who enter
contracts for export of services or for construction works abroad
to meet preliminary expenses are also eligible for cover under
this guarantee. ECGC pays two thirds of the loss.
Wholeturnover Packing Credit Guarantee: This is a variation

of Packing Credit Guarantee. This guarantee is issued to banks
which undertake to obtain cover for packing credit advances
granted to all its customers on an All-India basis. In this case
the risk covered is 75%.
(ii) Export Production Finance Guarantee:

This guarantee enables banks to provide finance at pre
or
shipment stage to the fullextent of the domestic cost
production and subject to certain guidelines.
Ihe guarantee under this scheme covers some specire
maue
products such textiles, woollen carpets, ready
as
garments, etc. The loss covered is tuwo-thirds.
(iii) Export Finance Guarantee:

by
s8uarantee covers post-shipment advances granted su"
banks to exporters against export incentives receivable
port Fiance
DBK. In
In case, the 129
exporter
nks suffers loss. The loss does not
repay the
insured is upto three loan, then the
fourths or 75%.
Post Shipment Export Credit
iv) P o s t
Post shipment finance Guarantee:

given to exporters by banks
nurchase, or discounting
pu
of export bills through
uarantee. Betore
gua
extending such qualifies for this
Sure that the exporter has obtainedguarantee, the ECGC makes
Policy. The loss covered under this Shipment or Contract Risk
guarantee is 75%.
iv)ExportPerformance Guarantee:
Exporters are often called upon to execute bid bonds
supported
by a bank guarantee and if the contract is secured by the
than he has to furnish a bank guarantee to foreign partiesexporter
to
ensure due pertormance or against advance payment or in lieu
of retention money. An export proposition may be frustrated if
theexporter's bank is unwilling to issue the guarantee.
This guarantee protects the bank against 75% of the losses that
it may suffer on account of guarantees given by it on behalf of
exporters.
Guarantee:
(vi) Export finance (Overseas Lending)
lt abank financing a n overseas project provides foreigna
from the
loan to the contractor, it c a n protect itself
currency this
Tisk of n o n payment by
the contractor by obtaining
under this policy is to the extent of
guarantee. The loss covered
rate.
75% to 90% depending upon premium
(D) SPECIAL SCHEMES:

and Specific) and
(Standard
Apa from providing policies schemes. These schemes a r e
ort
provides special
h ntees, ECGC the exporters.
The schemes are
rOVided to the banks and to
i)) Transfer
Transfer Guarantee: banks in India
The Gua*ntee Prks of
ransfer g u a r a n t e e
is
is provided to
of
safeguard
c o n f i r m a t i o n of L/C.
The
losses arising coo both.

out of
risks
both. Loss due to
st
S C a n be either
political
covered upto
commercial
or
90% and
or
that due to Lmercial

commercial
is
l c a l risks
risks upto 75%.
ii) Insurance Cover for Buyer's Credit and Lines of Credit:
Financial Institutions in India have started direct lending to
buyers or financial institutions in developing countries for
importing machinery and equipment from India. This sort of
financing facilitates immediate payment to exporters and frees
them from the problem of credit management.
ECGC has introduced this scheme to protect financial

institutions in India which extend export credit to overseas
buyers or institutions.
(iii) Overseas Investment Insurance

With the increasing exports of capital goods and turnkey
projects from India, the involvement of exporters in capital
participation in overseas projects has assumed importance.
ECGC has evolved this scheme to provide protection for such
investments. Normally the insurance cover is for 15 years.
(iv) Exchange Fluctuation Risk Cover

This scheme provides protection to exporters of capital goods,
civil engineering contractors and consultants who have to
receive payment Over a period of years for their services. Where
such payments to be received in foreign currency, they are
are
open to exchange fluctuation

risk as the forward exchange
market does not provide cover for such deferred payments.
(Note : Brief out the ECGC Write one page each

answer on
-
on
Standard Policies, Specific Policies and Financial Guarantees.)
REVIEWQUESTIONS
1. Explain the different methods of payment.

2. Discuss the features of pre-shipment/packing
creat
3. Discuss the features of post shipment finance.
4. Explain the procedure of obtaining export finance.
5. Discuss the role ofcommercial banks in export finance.
6. Explain the role of EXIM Bank in export finance.

7. Describe the role of SIDBI in export finance.
8. Explain therole of iCCC
1.31
What the
various guarantees issued by ECGC
financial
9. countertrade? Discuss its types.
What is
10. benefits of countertrade.
Explain the
11 procedure to open letter of credit.
the
2 Discuss
13.
Explain the types of Letter of Credit.
OBIECTIVEQUESTIONS
True False:
whether the following statements are
or
State
EXIM Bank provides finance only
to exporters.
1. assistance to
Commercial banks in
India provide only fund-based
2 exporters.
to exporters.
EXIM Bank does provide financial guarantees
not
3. losses during transit.
risks o n account of
ECGC before shipment of
c o v e r s
4 of 90 days
credit is available for period
a
55. Packing
goods. after shipment
credit is available
for a period of 30 days
b. Post-shipment
of goods. and importers.
term finance
to exporters
short
7. EXIM Bank provides industries.
medium and large
to
finance
8.SIDBIprovides standard policies to the exporters.
incentives to
9. ECGC issues only ECGC give
financial
guarantees
issued by
. The financial
the exporters.
scheme is
introduced by SIDBl. risks.
T h e forfaiting
commercial
standard policies of ECGC cover only to the loss

on account
of
he ECGC is due
covered by
The political risks method.
payment
political parties. in the case
of a d v a n c e
involved
by the importer's
credit risk modified
TEnere is credit c a n be easily
15 letter of
rrevocable
credit.
letter of
bank. involved in the
payment
16. There aarr e only three parties against
documents
c a s e of
17. Cre i n the
period is given
Eit Bank of
India.
method. D e v e l o p m e n t
18 I stands for
Industrial
State
finance to e x p o r t e r s .
19. B
EXIM Dank p r o v i d e s
short t e r m
in case
of bills.
material.
payment
20. TThe expo
20
gets
immediate
to purchase
raw
porter exporters
. Post ship finance
enables
pment
All statements are False.

132 columns:
Match the following
II.
Group A Group B3
Packing credit (a) Safest method
Letter of Credit (b) Credit risks
2.
3. SIDBI (c) Risks due to loss by fire
4. ECGC (d) Forfaiting scheme
5. EXIM Bank (e) 180 days before shipment
() 90 days before shipment
(g) Small industries
Ans: (1)(e 2(a), (3)-(g (4(b (5)( d
Group A Group B
B.
1. Performance Guarantee (a) Global Tenders
2. Bid Bond Guarantee (b) Consumer Goods
2.
Forfaiting Scheme (c) Supply Contracts
3.
Standard Policy of ECGC (d) Construction Projects
4.
(e) Immediate Cash Receipts
5. Specific Policy of ECGC
Ans: (1-d, 2)-(a,(3-e,4-(, 15f

in the bracket:
II. Fill in the blanks with the appropriate option given
credit.
- f i n a n c e is also referred to as packing
(Pre-shipment, Post-shipment, Long-term)
2. Post-shipment finance is generally available
for a period of .
days. (180, 360, 90) small

3 provides medium term and long
term export finance to
units.
(EXIM Bank, SIDBI, ECGC)
4. for period ot days.
Packing credit is generally provided a
(90, 180, 380)

trade.
-Is of payment in international
the safest method
ot credi)
(Documents against Acceptance, Deferred credit, Letter
letter of credit.
6. Generally, there are. parties involved in
(6,3, 2)
ExportFinance
133
Under method, the documents are released the
against payment of bills
to importer
Documents against Acceptance, Letter of Credit, Documents against
Paymernt)
5.
.covers credit risks of the exporters.
ECGC, EXIM Bank, Marine Insurance)
9 policy of ECGC covers risks in the case of consumer goods.
Specific, Standard, Services)
10. Commercial risks include-
(risks due to war, insolvency of the buyer, risks due cancellation of
import licence)
Ans: (1) Pre-shipnent (2) 90 (3) SIDBI (4 180(5) Letter of credit(6)6

(7) Documents against Payment(8) ECGC (9) Standard (10) insolvency
of the buyer
EXPORT
4 PROCEDURE AND
DOCUMENTATION
We can complain because rose
bushes have thorns, or rejoice
because thorn bushes have
rOSes. Abraham Lincoln
Pre-Shipment Stage
Registration with Different Authorities
Pre-Shipment Procedure (April2019)
Procedure of QC & PSI
Shipment and Post Shipment Stage
Shipment and Customs Stage Clearance (April 2019
Role of CEF or CHA Agents (April 2019)
Realisation of Export Proceeds
Procedure of Export Under Bond
Procedure of Export under LUT
Importance Export Documentation

Commercial Invoice-cum- Packing List
Billof Lading/Airway Bill
Shipping Bil/Bill of Export (April 2019)
Pr0cedure and Documentatio 135
Export
Consular Invoice
. Certificate of Origin (April 2019)
REGISTRATION WITH VARIOUS AUTHORITIES
such as follows:
The exporter may register with various authorities,
1. Registration of the Organisation:

the exporter must decide about the type of
Before exporting,
also
organisation, the type of product to be exported, and
must
complete other preliminary activities including appointmernt

of agents to book orders.
After setting up the organisation, the exporter must register
the organisation with concerned authorities depending upon
the type of the organisation:
the Companies Act, 2013.
A joint stock company under
A partnership firm under the Indian Partnership
Act, 1932.
A cooperative organisation
under the Cooperative Societies
Act.
from local
A sole trading firm may obtain permission
authorities, if required.
2. Registration with RBI:

tor every exporter register
to
Prior to 1997, it was necessary
Number for Exporters (CNX),
with RBI. RBI was granting Code
on any correspondence by
which w a s required to be quoted
is
the exporter with RBI. Now, RBI registration for exporters
not required.
3. Registration with DGFT:
General of Foreign
Exporters must register with Directorate
Code (1EC) Number. IEC
Trade to get Importers-Exporters
Export Marketing (T. Y.B. Com.: SEM-VD
136
code required for the purpose of expor!
Number is a ten digit
No exporter is allowed to export without
as well as import.
IEC Number.
If the goods are exported to Nepal or to Myanmar through Indo-
Myanmar boarder or to China through Gunji, Namgaya,
Shipkila or Nathula ports then it is not necessary to obtain IEc
Number, provided the CIF value of a single consignment does
not exceed Indian 25000/
Application for IEC Number can be submitted to the nearest
regional authority of DGFT. Application form which is known
as 'Aayaat Niryaat Form- ANF2A' can also be submitted online
at the DFGT web-site: http://dgft.gov.in.
While submitting an application form for IEC Number, an
applicant is required to submit the following.documents:
A photocopy of Permanent Account Number (PAN)
Current Bank Account Number
Banker's Certificate.
A sum of 1000/- must be paid towards the application fee.
The amount can be paid in the form of Demand Draft or
payment through EFTS (Electronic Fund Transfer System)
througha nominated bank.
4. Registration with Tax Authorities:
Exporters need to register with various tax authorities to claim
exemptions and deductions, wherever applicable. The various
tax authorities include:
income Tax Department to obtain Permanent Account

Number (PAN)
ate SalesTax Department for VAT and with Central Sales

Tax Department.
Central Excise Authorities of

to claim exemption exCS
duty.
Procedure and Documentation
Export 137
Registration with
5.
Export Promotion Council:
Registration with
Registration EPC is not
compulsory, but it importantis
6ar exportersto become
members of concerned EPC. There are
otnt 28 EPCs in India. Each EPC looks after the
abou
specific product. promotion of
ExDorters obtain Registration-Cum-Membership-Certificate
RCMC) from their respective EPC. For instance, ready-made
garments exporter may register with Apparel EPCand exporter
of engineering goods may register with Engineering EPC.
An application for registration must be accompanied by self
certified copy of IEC number, Membership fee should be paid
in the form of cheque or demand draft. The membership fee
differs depending upon the type of EPC.
The RCMC is valid from 1st April of the licensing year in which
it is issued. It is valid for 5 years ending 31st March of the
licensing year, unless otherwise specified.
6. Registration with Commodity Boards:
Exporters of commodities such coir, coffee, rubber, spices,
as
with respective commodity board.

tea, tobacco, etc. may register
The CBs a r e similar to that of EPCs.
whereas, CBs develop
The EPCs promote manufactured items,
commodities. An application
and promote agriculture-related
for RCMC along with a photocopy of IEC
must be submitted
documents.
number along with other relevant
7. Registration with FIEO:

House/Trading House) exporter is
A Status Holder (Export Indian Export
RCMC from Federation of
required to obtain of FIEO is required by
Statuas
Organisations. Membership Trade Policy.
benefits under Foreign
various
1olders to avail status holders to get
certain
also enables
ne registration Central Excise
authorities.
oenetits Customs and

from
under its multi-products group
RCMC
O c a n issue the for which registration
is sought
products
egory, if the e x p o r t (covered by two different
a l under at least two product
groups
Procedure and.Documentation 137
egistrationion with Export Promotion Council:
Registratio
Registration with EPC is not compulsory, but it is important

are
exporters to become members of concerned EPC. There
for exporters
or
about 28 EPCS
at
in ndia. Each EPC looks after the promotion
specific product.
Exporters obtain Registration-Cum-Membership-Certificate

RCMC) from their respective EPC. For instance, ready-made
and exporter
garments exporter may register with Apparel EPC EPC.
of engineering goods may register with Engineering
application for be accompanied by self-
registration must
An
of IEC number, Membership fee should be paid
certified copy
fee
inthe form of cheque o r demand draft. The membership
differs depending upon the type of EPC.
the licensing year in which
The RCMC is valid from 1st April of
31st March of the
it is issued. It is valid for years ending
5
licensing year, unless otherwise specified.

6. Registration with Commodity Boards:
as coir, coffee, rubber, spices,
Exporters of commodities such
etc. register with respective commodity board.
tea, tobacco, may
The CBs are similar to that of EPCs.
whereas, CBs develop
The EPCs promote manufactured items,
commodities. An application
and promote agriculture-related
with a photocopy of IEC
must be submitted for RCMC along
documents.
number along with other relevant
Registration with FIEO:

exporter is
A Status Holder (Export House/Trading House)
obtain RCMC from Federation of Indian Export
required to
Membership of FIEO is required by Status
Organisations.
under Trade
Foreign Policy.
Holders to avail various benefits certain
status holders to get
ne registration also enables Excise authorities.
DEnefits from Customs and Central
F can issue the RCMC under its multi-products group

which registration is sought
gory, if the export products for
dl under at least two product groups (covered by two differentt
EPCs). However, registration with EPC is compulsory for the
main line of business in such cases.
FIEO is the registering authority for service exporters other than

service exporters of 14 specified services (as listed in the
Appendix-2 of Handbook of Procedures Volume 1).
8. Registration with Other Authorities:

The exporters may register with various other authorities to
avail facilities or services offered by them. The other authorities
include:
Regional Chambers of Commerce and Industry

Export Credit Guarantee Corporation
.Indian Institute of Foreign Trade
.India Trade Promotion Organisation
Indian Institute of Packaging
Quality Council of India, etc.
PRE SHIPMENT PROCEDURE IN EXPORTS

ww ww.w.
There are various activities to be undertaken at pre-shipment

the
The main steps involved at the pre-shipment procedure
are:
stage.
1. Preliminary Activities:
activities
The exporter has to perform a number preliminary
of
activities
before receiving export order. The preliminary
involve:
authorities such as DGFT to
(a) Registration with various
obtain Importer-Exporter Code (IEC) Number, registration
with concerned EPC to obtain Registration-cum-
Membership Certificate (RCMC), etc.
(b) Appointment of agents in the overseas markets to solici
for export orders.
Export Procedure and Docunentation
(c) Designing website to provide 139
orders. information and to secure
a)
Appointmentof distributors setting up of sales
abroad, etc. or
divisions
2Order- Receipt and Confirmation:
The exporter obtains orders from the
on-line or through the agents. The overseas buyers either
the receipt of the order. The exporter needs to confirm
exporter
with the importer. The contract also needs to sign contract
a
must have clear
conditions. terms and
3. Letter of Credit:
Generally, the exporter requests the importer to issue letter of
credit, especially in the case of large contracts. Letter of credit
is the safest method of payment in international trade. (LC is
an
undertaking given by the importer's bank guaranteeing the
payment on behalf of the importer.)
After getting request from the
exporter, the importer requests
his bank to issue LC in favour of the
exporter. The
bank issues the LC and dispatches the same to the importer's
exporter.
4.
Obtaining Packing Credit:
Atter getting the LC, the exporter obtains packing (pre-
Shipment) credit from his bank. Packing credit is required to
meet working capital needs before shipment of goods.
lo obtain packing credit, the exporter must make an application

to the bank with required documents such as
Copy of LC,
Copy of confirmed export order,

etc.
Letter of pledge/hypothecation,
5. Goods:
0duction o r Procurement of
manutacturer
Once packing
ce pa credit is obtained, the exporter
as per buyer's
Kes for production ot goods
arrangement
the goofs tron
PeCitications, A merchant exporter procures
140
the local market or from overseas market, and then
arrangement for exports. makes
6 Packing and Marking of Goods:

The exporter must make suitable packing depending
upon:
Buyer's specification.
Mode of transport.
Nature of goods, etc.
The packages muust be appropriately marked with:
.Courntry of origin.
Port of shipment
Port of destination
Handling instructions.
N e t and Gross weight, etc.
7. Pre-shipment Inspection:
The exporter should apply to ElA, if the export cargo is subject
to quality control and pre-shipment inspection. The EIA issues
an Inspection Certificate, if satisfied with the quality and if not,
issues a Rejection Note. Atpresent, exporters who have obtained
ISO 9001 certification or equivalent, do not have to get their
goods inspected by EIA.
8. Central Excise Clearance
Export goods are exempted from Central Excise. However,
clearance has to be obtained from excise authorities. There are
two ways of excise clearance
(a) Export under Rebate, (b) Export
under Bond.
9. ECGC Cover:
The exporter should obtain ECGC cover to protect against credit
risk. The exporter may obtain either standard policy or
specific
policy, depending upon, the type of product/service and period
of credit extended to overseas buyer.
Export Procedure and Documentation 141
10. Marine Insurance Policy:
As soon as the goods are ready for export, the exporter has to
apply to Insurance Company for insurance cover- if itis a CIF
Quotation or if the importer wants the exporter to obtain the
cover on his behalf. The insurance policy is obtained
in
duplicate. Certain other formalities such as Certificate of Origin,
Consular Invoice, should be completed at this stage.
11. Appointment of Custom House Agent:
The exporter needs to appoint CHA to

look after forwarding of
activities:
goods. The CHA undertakes the following
vessel
Booking of space on the
bill.
Preparation of shipping
customs.
Submission of documents to the
order'.
Obtaining 'let export
order, etc.
Obtaining 'let ship
to CHA:
12.
Instructions
instructionsto the CHA
relevant
The exporter needs to give CHA must be handed

over
of goods. The
forwarding action including
custom
regarding further
for
documents
certain documents include
attestation.
The
Commercial invoice
Certificate of origin.
Consular invoice.
and duplicate)
form
(original
GR
O t h e r r e l e v a n t d o c u m e n t s .
PROCEDURE OF QUALITY CONTROL

AND PRE-SHIPMENT INSPECTION
Realizing the importance of the

need for supplying quality goods
as per international standards, the Government of India
had
introduced Compulsory Quality Control and
Pre-Shipment
Inspection (QC&PSI) of several items of export under Export
Quality Control and Pre-shipment Inspection) Act, 1963.
The export items that were subjected to compulsory inspection were
food and agricultural products, chemicals, engineering, coir, jute
and footwear. At present, most of the exporters have obtained ISO
9000 certification, and therefore, the items of such exporters are not
subject QC&PSI.
For monitoring pre-shipment inspection, Government of India has
set up Export Inspection Council (EIC). The EIC has set up 5 Export
Inspection Agencies (EIA). The EIAs are located one each at Mumbai,
Kolkata, Kochi, Delhi and Chennai. The EIAs has a network of nearly
60 offices throughout India. Each ELA is given certain jurisdiction
for inspection purpose. For instance, ElA of Mumbai has jurisdiction
over Maharashtra, Gujarat and Goa.
Systems of Quality Control:

For the purpose of pre-shipment inspection, EIC has recognised three
systems of inspection, namely:

(a) Self-Certification.
(b) In-Process Quality Control.

(c) Consignment Wise Inspection.
Self-Certification:
manufacturing
Under this system, complete authority is given to the
certificates for export.
units to certify their own products and issue
which have been recognised under this
The manufacturing units
a nominal yearly fee at the rate
of 0.1% of FOB
scheme have to pay
of 1 lakh in
price subject to minimum of R2,500/-and maximum
a
year to the concerned

EIA.
In-Process Quality Control (IPQC):

level
In this system, companies /units adjudged as having adequate
material stage to the finished
of quality control right from raw
the inspection
get
product stage including packaging are eligible
to
certificate formal request

on a by the exporter. Over 800 units all
over India are operating under this system.
units approved under

Constant vigil and surveillance are kept on the
approved
Units under the above
IPQC and self-certification system. because of
are often known as "Export Worthy Units'",
two systems
standards of quality.
their consistent
Consignment Wise Inspection:

is subject to
each and every consignment
Under this system, has to follow a certain
The exporter
Compulsory inspection.
procedure such as:
Inspection Agency
application to Export
He has to make
an
a) with certain documents.
inspector to inspect the goods.

The EIA deputes
b) are repacked with
EIA seal.
the goods
After the inspection,
c) to Deputy
Director of ElA.
then makes a report
The inspector
d) then Issues Inspection
Certificate
Director of EIA
The Deputy is f a v o u r a b l e .
e) if the inspection
report
is
in triplicate rejection note
favourable, a
is not
inspection report
f) If the
issued.
Inspection:
Pre-Shipment
Procedure of underSelE-Certification and

IPQC,
The p p r o c e d u r e
are not approved procedure.
who inspection
Exporters wise
consignment
follow
must
is as follows:
144 Export Markeling (T. Y.B.Com.: SEM-VI
1. Application:
The exporter must make an application to the concerned FLA
in the prescribed
form in duplicate. The original copy is
submitted to ElA, and the
duplicate to the EIC, at least 7 da
in advance before the actual
shipment of goods. The application
form must be accompanied with the following
documents:
(a) A crossed cheque/D.D in favour of EIA towards
fees.
inspection
(b) A copy of commercial invoice.
c) A copy of export contract giving details of importer's

specifications.
2. Deputation of Inspector:
After receiving the
application, the EIA deputes an inspector
to inspect the goods. The
exporter must keep ready all the goods
duly packed for inspection. The inspector may conduct
inspection either at the factory or at the warehouse where the
goods are kept for inspection.
3. Inspection and Testing:
The inspector usually conducts
inspection on sample basis.
Facilities for conducting a test may be
if he
provided to the inspector,
so desires. Where such facilities not
are available, tests are
conducted' at independent laboratories and the results
evaluated.
4.
Repacking of Goods:
If the Inspector is satisfied
with the. quality, the items are
repacked. The entire consignment is marked and sealed in the
presence of the Inspector with the official EIA seal.
5.
Reporting to ElA:
The inspector makes a report to Deputy Director of EIA for tne
purpose of examination of report and for
The report can be favourable or taking suitable actio
unfavourable.
6. Inspection Certificate:
If the report of the
inspector is favourable, the Deputy Directotor
of EIA issues an
inspection certificate in triplicate.
(a) Original Copy to the Customs.
(b) Duplicate Copy to the Importer.
(c) Triplicate copy to be retained by the Exporter

7. Rejection Note:
If the consignment is not approved for export, the Dy.Dir. of
ELA issues a rejection note. In other words, unfavourable report
is issued to the exporter. This means that the exporter cannot
export the goods.
8. Appeal against Rejection Note:

The exporter can appeal against the rejection note within 10
days from the date of the receipt of rejection note. The appeal is
then reviewed by a panel of experts. If needed, inspection may
be done once again. The decision of the panel ot experts is final
on both the parties Exporter and Export Inspection Agency.
This means if the rejection note is rejected by the Appellate
Panel (panel of experts), the exporter is issued inspection
certificate.
Note: It is to be noted that goods marked with ISVAGMARK/BIS
14000/TSO 9000 are not required to be inspected by any agency.
Overseas buyer may depute his own inspection team to inspect the
goods.
Inspection of textile goodsis conducted by Textile Committee in

respect of those exporters who are registered with the Textile
Committee.
SHIPPING AND CUSTOMS
STAGE FORMALITIES/CLEARANCE
The goods can be loaded on the ship only after obtaining clearance
rom the custom authorities. Necessary formalities have to be
Completed relating to custom clearance before shipment of goods.
The following
is the procedure involved in custom clearance and
shipment of goods:
1. Submission of Documents:
The exporter through the CHA submits relevant documents to
the custom authorities for verification. The documents include:
Commercial invoice
Certificate of origin
Consular invoice.
GR form (original and duplicate)
Packing List
Shipping Bill
Other Relevant Documents.
2. Verification of Documents:
The Customs Appraiser verifies the documents and appraises
the value of goods. He then makes an endorsement of
Examination Order on the duplicate copy of shipping bill
regarding the extent of physical examination of the goods at
the docks.
All documents are returned back to the agent or exporter, except
Original Copy of GR to be forwarded to RBI.

Original Copy of Shipping Bill.
One Copy of Commercial Invoice.
3. Carting Order:
The exporter's agent has to obtain the carting orderfromn the
Port Trust Authorities. Carting Order is the permission to bring
the goods inside the docks. The Carting Order is issued by the
Superintendent of Port Trust.
Carting order is issued only after verifying the endorsement

on the duplicate copy of shipping bill by the customs appraiser.
rocedure and Documentation
p o r tP r o c e d u r
147
endorsement
end
must also be there on the Port Trust Copy of
The
ping Bill.
Shipping Bill. The Carting order enables the exporter's agent
cart goods inside the docks and store them in jproper sheds.
to cart goods
Storing
of Goods in the Sheds:
After obtaining carting order, the CHA gets the goods
After obtain inside
she docks. The goods are then stored in the shed (warehouse)
atthe docks. The goods are kept in the shed till they are loaded
on the ship.
Also, the goods are stored in the shed for the
Durpose of examination of goods by the custom authorities.
Examination of Goods:
the Customs Examiner
The exporter s agent then approaches
h e Customs Examiner examines the
to examine the goods.
records his report the duplicate copy of the
on
cargo and Let Export
bill. The customs examiner then signs the
shipping
Order
6 Let Ship Order:
shown to the Customs Preventive
The Let Export Order is then of
with other documents. The CPO is in charge
Officer, along CPO finds
on the vessel. If
supervision of loading operations
he endorses the duplicate copy of shipping
everything in order,
Order'. This order helps the exporter/
bill with the Let Ship
on the ship.
shipper to load the goods
1.
Loading of Goods: and the let ship order,
'let export order
After obtaining the The CPO supervises the
o n the ship.
tne goods a r e loaded that only the goods cleared by customs
0ading operations so
areloaded on board the ship
Chief Mate (Chief Cargo Officer)
is completed, the Receipt is the
e r loading The Mate
of the Mate Receipt.
issues is loaded
Al ship number of packages
Owledgement that certain
condition.
on the and inc e r t a i n
ship
8.
Payment of Port Trust Dues:
mate receipt
to the port trust office.
The er Mate sends the for using the shed and the
ed and
The CHA trust dues t r u s t dues,
the CHA
the port
docke pays of port
docks O
forr clearance.
cl After payment
approaches the CPO for certification of shipment of goods on
shipping bill and other documents.
9. Obtaining Bill of Lading:

The Mate's Receipt handed over to the shipping
is then
company (on whose vessel the goods are loaded). The shipping
company issues Bill of Lading. The Bill of Lading is issued in:
2 or 3 Negotiable Copies.
10 to 12 Non-negotiable Copies.
The negotiable copies have title to goods, whereas non-
negotiable copies do not have title to goods but are used for
record purpose.
10 Payment to CHA:
The exporter has to make payment to the CHA for the services
rendered by him. The exporter also needs to pay the expenses
incurred by CHA regarding shipping and custom clearance.
wwww.wwe
ROLE OF C&F/CUSTOM HOUSE AGENT

The CHA provides a number of services. The services of the CHA
includes the following:
1. Obtaining Shipping Order:

order from the shipping
The CHA may obtain shipping
order enables booking of space on the
company. The shipping on the
the importer does the booking of space
ship. At times,
ship.
2 Arrangement for Internal Transport:
of internal
necessary arrangement
The CHA agent would make
to transport the goods from
is required
transport. Such transport warehouse to the docks or airport.
the exporter's factory or
3. Preparation of Shipping Bil:

The shipping
the shipping bill in five copies.
The CHA prepares clearance.
d o c u m e n t required
for customs
D I l 1s a n important
Procedure and Documentation 149
Export
The shipping prepared on the basis of other documents
bill is
prOvided to
pr
him by the exporter such as commercial invoice,
packing list, etc.
Submission of Documents to Customs:

4
The CHA submits the relevant documents to the customs house
for the purpose of verification. The documents include required
number of copies of:
Commercial Invoice Packing List
Shipping Bill GR- Form
ARE -1 Form, etc.
Obtaining Carting Order:

5.
The CHA has to obtain the carting order from the Port Trust
inside
Authorities. Carting order is required to get the goods
the docks for the purpose of examination and shipment.
6. Storing of Goods:
would then make
After obtaining the carting order, the CHA
in the sheds at the docks. Such
arrangement to store the goods
of examination of goods.
storing is required for the purpose
7. Obtaining Let Export Order:
examined by the Customs Examiner.
The CHA gets the goods
then he will issue the Let
If the Customs Examiner is satisfied,
Export Order.
8. Obtaining Let Ship Order:

the customs preventive
The agent shows the let export order to
The customs
officer before loading of goods on the ship.
let order and the goods.
preventive officer may check the export
which gives permission
If satisfied, he will issue Let Ship Order
to load the goods on the ship.
9. Loading of Goods:
goods the
to load the on
he agent then makes arrangement loaded in
the goods are
ship. The agent has to see to it that
g0od condition on the ship.
10. Payment of Port Trust Dues:
The agent would then make payment of port trust dues for
making use of docks. After that he will collect the mate receipt
from the port authorities (which was earlier sent to them by
the cargo officer).
11. Obtaining Bill of Lading:
The agent then goes to the shipping company and exchanges
the mate receipt to bill of lading. The bill of lading is the
document required by the importer for customs
important
clearance at the port of destination.
ww
REALISATION OF EXPORT PROCEEDS

wwwww.
OEEEOBOS00000000000000000
In India, the export proceeds must be realized within 180 days from
certain
the date of shipment in the case of consumer goods. However,
organisations such as units in SEZ, STPs, EHTPs, BTPs, EOUs, Export
Houses and Trading Houses can realise payment within 360 days.
In case of capital goods, the exporter can sell on deferred payment

180 days. Under
terms, i.e., credit period can be allowed beyond
deferred payment terms, the payment can
be received in instalments
over a period of time which may extend even beyond 10 years
and the amount involved.
depending upon the type of capital goods
Procedure in Realisation of Export Proceeds:
1. Submission of Documents to Bank:

The exporter must submit relevant export documents (certified
by customs) to the bank. The documents must be submitted
within 21 days of shipment. The documents include:
Bill of Lading
Shipping Bill
Commercial Invoice
Consular Invoice.
Export Proced
and
Documentation
Certificate of Origin. 151
. GRForm
Other Relevant Documents.

2
Verification of Documents:
The bank verifies documents
to find out
whether or not:
.Required documents are in order.
Relevant details are properly filled
in all documents.
Documents are certified by customs.
Documents as per letter of credit.
3. Certification of Documents:
If the bank is satisfied with the
documents, the bank certifies
the documents including the copies of shipping bill.
Certain documents such as shipping bil, commercial invoice,

etc., which are certified by the bank are required by the exporter
to claim incentives like duty drawback.
for
Bank certified documents are also required by the importer
customs clearance at the port of destination.
4. Dispatch of Documents:
the documents to the importer's
The exporter's bank dispatches the
transfers the documents to
bank
bank. The importer's
upon the method of payment.
mporter depending
Bills method,
Payment (DP)
D o c u m e n t s Against he
ln c a s e of o v e r to importer
only when
handed
documents are
the bank.
to the
makes payment
Acceptance
(DA) Bills
Against it he
Documents to importer
I n case of are
handed
over
exporter.
documents the
method, the drawn by
exchange
and in
the bill of exporter
dccepts received by over to
handed
payment are
advance
of
d o c u m e n t s
n case the
of l e t t e r
of credit,
Case
the importer immediately on receipt of such documen
ents
by the importer's bank.
5. Letter of Indemnity:
The exporter's bank may ask exporter to sign letter ofindemnity
The letter of indemnity is required when the bank makes
advance payment to the exporter against discounting of bills,
Under letter of indemnity, the exporter gives an undertaking

to the bank to repay the advance amount plus other charges,if
the discounted bills are dishonoured by the importer.
6. Discounting of Bills:
The exporter may discount the Documents against Payment
bills or bills drawn against LC. The exporter may discount the
bills and obtain advance for working capital needs. The advance
against discounting of bills is adjusted against the payment
received from the importer.
7. Payment by Importer:
The importer makes payment to the importer's bank. The
importer's bank transfers the amount to the exporter's bank.
The exporter's bank credits the account of the exporter on receipt
of the funds from the importer's bank.
8. Processing of GR Form:
The exporter's bank records the actual amount received on the
duplicate copy of GR. The bank then sends the GR copy to RBl.
The RBI cross checks the amount received on the
duplicate copy
with the original copy of GR (earlier received from the
If the amount received is less than
customs;
mentioned on the origina
copy, the exporter may have to give necessary explanation.
9. Follow-up:
The exporter needs 1s
to follow-up the payment. If payment
received within the due date, the
not
When the amount is
exporter sends remina
received, the exporter
acknowledge the same. The acknowledgementimmedia
must
enabies to
develop good relations with the importer.

153
Export Procedure and Documentation
PROCEDURE OF EXPORT UNDER BOND

wwo.
Under GST regime exports would be considered as zero-rated

supply. Any person (exporter) making zero-rated supply shall be
eligible to claim refund either of following options:
(a) He may supply goods or services or both under bond or under

letter of undertaking, subject to such conditions, safeguards and
procedures, without payment of integrated tax and claim refurnd
of unutilized input tax credit.
(b) He may supply goods or services or both, subject to such

conditions, safeguards, and
procedure as may be prescribed,
on of
payment integrated tax and claim refund of such tax paid
on goods services or both supplied in accordance with the
or
provisions of section 54 (Refunds) of Central Goods and Services
Tax or rules made there under
(Refund Rules, 2017).
Export Under Bond
The following are the provisions and procedure of Export Under
Bond:
1. A Bond (in nature of Indemnity bond) in Form GST RFD-11 is
executed on non-judicial stamp paper between the exporter and
the Government. As a transition provision, exports were
allowed under existing Bonds till July 31, 2017, by which date,
the above mentioned Form GST RFD-11 had to be furnished
for future exports.
2. The Bond need not be given separately for each export as thiss
would make the compliance burdensome. The Bond would be
like a running Bond (with debit / credit facility)
3. The Bond should sufficiently cover the amount of tax involved

in the export based on estimated tax liability as assessed by the
exporter himself. The exporter shall ensure that the outstanding
tax liability on exports is within the bond amount. In case the
bond amount is insufficient to cover the tax liability in yet to be
154 Export Markeling(T.Y.B,. Com.: SEM.
completed exports, the exporter shall furnish a fresh bon
M-VI
dt
cover such liability.
As an ease of compliance, the Bond shall be accepted b
the
jurisdictional Deputy/ Assistant Commissioner havin
ing
jurisdiction over the principal place of business of the export
rter
(though Rule 96A(1) requires to be filed with the Jurisdictional
Commissioner)
5. In the Bond, the exporter undertakes that he shall export the
goods/services and observe all the provisions of the Act
services.
Rules in respect of export of goods /
6. A Bank Guarantee will have to be furnished to the
Commissioner as a security under the Bond. The Jurisdictional
Commissioner may decide about the amount of Ba k Guarantee
depending upon the track record of the exporter.If
Commissioner is satisfied with the track record of an exporter
then furnishing of bond without bank guarantee would suffice
In any case the bank guarantee should normally not exceed
15% of the bond amount.
7. The Bonds also will state that in the event of breach or failure
in performance, the Government shall invoke the bank
guarantee to make good all the loss /damages.
8. The Bond has to be furnished prior to the export. Once the Bond
is furnished, the exporter can carry out the export of goods,
services
9 No tax will be paid on the export supply and the invoice shall
carry a declaration as 'SUPPLY MEANT FOR EXPORT UNDER
BOND OR LETTER OF UNDERTAKING WITHOUL
PAYMENT OF INTEGRATED TAX
10. The format of Form GST RFD-11 along with format of the Bona
to be executed is available in Circular No 26/2017 Customs
dated July 1, 2017
11. Presently, the module for furnishing of GST FORM RFD-11

not available on the ST common portal. Hence, the Form
RFD-11 has to be downloaded from cbec.gov.in and furnisn furnished
manually to the jurisdictional Deputy/Assistant Commissione

missioner
Export Procedure and Docunentation 155
12 Form ARE-1, which all along was an important statutory
document to avail export benefits, both under Excise and
Customs Laws, is now dispensed off with the onset of GST,
except that it will now apply only to commodities to which
provisions of Central Excise Act continue to be applicable.
PROCEDURE OF EXPORT UNDER

LETTER OF UNDERTAKING (LUT)
Export Under Bond requires furnishing of Bond supported by a Bank

Guarantee, which results in blocking of working capital since Bank
would ask the exporter for a margin money deposit against the
to exercise
Guarantee. For this reason, every exporter would want
Optionto export against LUT in lieu of a Bond.
under
The following are the provisions and procedures for export
LUT
1. The Government is selective

in giving this option and at present,
submission of LUT
registered person shall be eligible for
only
in place of a Bond.
5 of the Foreign
A status holder as. specified in paragraph
or
Trade Policy 2015-2020;
remittances
received the due foreign inward
Who has of the export turnover,
m i n i m u m of 10%
amounting to a the preceding
not be less than Rs 1 Crore, in
which should for any
he has not been prosecuted
financial year,
and of the
Act, 2017 o r under any
offence under
the CGST of tax evaded
amount
where the
laws in c a s e
existing
exceeds2.5 lakhs.
addressed to
the
RFD-11,
in Form GST Person.
Undertaking
2
2. A Letter of has to be
executed by the
Registered
existing
President of India be a l l o w e d under
may mentionecd
provision, exports the a b o v e

which date,
transition
Asa
by
July 31, 2017, be f u t u r e enports.
LUTs till f u r n i s h e d for
RED-11 has to
Form GST
Export Marketing (T.Y.B. Com.: SEM.
156
3. As an ease of compliance, the LUT shall be accepted by
SEM-VI)
jurisdictional Deputy/Assistant Commissioner hav the
jurisdiction over the principal place of business of the expo ing
(though Rule 96A(1) requires to be filed with the Jurisdictio
tional
Commissioner).
4. In the LUT, the exporter would undertake the following: (a) To
export goods within 3 months from invoice date (b) To ceive
consideration for export of services in foreig currency within
urrency within
1 year from invoice date (c) To observe all the provisions of t
Act/ Rules in respect of export (d) In event of failure to do the
export he shall.pay IGST (Integrated Goods and Services
Tax)along with interest 18% on the IGST from the invoice
date till date of payment.
5. The LUT has to be furnished prior to the export. Once the LUT
is furnished, the exporter can carry out the export of goods/
services.
6. No tax will be paid on the export supply and the invoice shall
carry a declaration as 'SUPPLY MEANTFOR EXPORT UNDER
BOND OR LETTER OF UNDERTAKING WITHOUT
PAYMENT OF INTEGRATED TAX'.
7. The LUT will be valid for 12 months and should be furnished

for each financial year in
duplicate.
8. No Bank Guarantee is required to be furnished to the
Commissioner. However, if the exporter fails to comply wIm
the conditions of the LUT, he may be asked to furnish a Bona
9.
9. The format of Form GST
RFD-11 along with format of the LUT
to be executed is
available in Circular No ms
26/2017 Custo
-
dated July 1, 2017.

10 Presently, the module for furnishing of GSTFORM
FORM RFD-11
not available on the GST
common portal. Hence, the
RFDT GST
RFD-11 has to be For

downloadedDeputy/Assistant
manually to the jurisdictional from cbec.gov.inCommissio
.in and furnishe
sioner.
aiesione
11. Form ARE-1, which all
along important statutor
nent to
document avail export was an
benefits, important
both under Excise anu a n d
and Documentation 157
t P r o c e d u r e
E x p o r t
EAP Customs Laws, is

O m s La
now dispensed off with the onset of GST,
that it will
ept that
except now apply only to commodities to which
eisions of Central Excise Act continue to be applicable.
p r o v i s i
cOMMERCIAL INVOICE-CUM-PACKING LIST

C O M M E R C
which
It contains all the information
document.
basic
basic export the
is aa
This is other documents. It is
the preparation of all
This
for
e required
exporter's
bill for goods.
as
it c a n be designed
s t a n d a r d form for such invoice, but information
There is no if aný
of the exporter. However, it must
the requirements
ner the importer,
requirement of
the special require
per as USA etc.
to be includedwith. Many
countries like Canada,
be complied invoice.
of
special type
contain:
commercial
invoice should
The
address of the exporter.
and
The name
a)
address of the importer.
The name and etc.
(b) like quality,
quantity, weight,
c)The
description of goods,
discounts, if any.
less
The value of
goods,
(d) importer.
amount
payable by the
( T h e net
and
conditions of sale.
)Terms
exporter.
signature
of the as
The such
8 incuded
to be
shipment
Other d e t a i l s
of
(h) Name of the shup

exporter.
L/Cnumber. of the
number
licence
G) m p o r t - E x p o r t
number.
Bill of Lading
& Packaging specifications
(1)
158
Export Marketing (T.Y.B.Com.:
(m) Identification marks on the SEM-VD
package.
(n) Shipping Bill number and date.
(o) Shipping terms and conditions.
(p) Freight charges.

(q) Marine Insurance premium.
(r Any other details, if required.
Importance of Commercial Invoice:
The commercial invoice is
important both to the exporter and to the
importer.
1. Importance to the Exporter
(a) Customs Clearance: A copy of commercial invoice is
required for the exporter for customs clearance at the port
of shipment. The customs
verify the commercial invoice
along with other documents and allow customs clearance.
(b) Claiming of Incentives: Exporter requires a copy of

commercial invoice to claim incentives. For example, to
claim DBK exporter needs a copy of commercial invoice
along with other required documents, duly certified by
customs and/or bank.
(c) Recording and Filing: A copy of commercial invoice is

required for the exporter for recording and filing. Such
recording and filing is required for the purpose of future
reference, if required.
(d) Receipt of Payment: A copy of commercial invoice is

required by the exporter to receive payment from the
importer. The exporter may send reminder if required to
the importer to make payment within the due date.
(e) Documentary Proof: Commercial Invoice can act as a

documentary proof in case of disputes between the
exporter and importer regarding the amount payable by
the importer and such other aspects.
Ewort Procedure
and Documentation 159
() Preparation of Other Docunents: It helps the exporter or

his agent to prepare other documents based on the
commercial invoice, such as shipping bill.
2 Importance to the Importer

(a) Customs Clearance: A copy of commercial invoice is
required by the importer for customs clearance at the port
of destination. The customs of the importing country
verifies the commercial invoice along with other
documernts and allows customs clearance.
Certain countries allow
b) Claiming Preferential Tariffs:
preferential import
tariffs on of goods from India. For
countries provide
instance, under GSTP, the developing
on imports from
preferential tariffs (lower tariff duties)
commercial invoice is required
India. Therefore, a copy of
concessions.
to claim tariff
A of commercial invoiceis
(c) Recording and Filing: copy
and filing. Such
for the importer for recording
required for the purpose of
future
and filing is required
recording
reference, whenever necessary.
the importer to pay

Customs Duty: It helps
(d) Payment of destination.
customs duty at the port of
amount
to know the exact
Exporter:
It helps
Payment to
(e
(e)
that is to be paid to
the exporter.
loan from
to obtain
be required
Loan: It may
Obtaining of goods.
() against
the import
the bank
LADING/AIRWAY
BILL
BILL OF upon
company
the s h i p p i n g (exporter)
issued by the shipper
the port of
document
between
lading is
a
A bill of It is a
contract
o f goods to
carriage r e q u i r e d by
of the goods. for the
such
Shipment and as
company
goods
title to
d e s t i n a t i o n .
shipping of
and the d o c u m e n t
a t the
port
It is a
the goods
d e s t i n a t i o n .
clear
to
importer
the
160 Export Marketing (T.Y.B.Com.: SEM-I
-VI)
A bill of Lading normally contains the following details
(a) The name of the shipping company

(b) The name and address of the shipper/exporter.
() The name and address of the importer/agent.

(d) The name of the ship.
(e) Voyage number and date.
() The name of the ports of shipment and discharge.
Quality, quantity, marks and other description.
(h) The number of packages.
i) Whether freight paid or payable.
G) The number of originals issued.

(k) The date of loading of goods on the ship.
1) The signature of the issuing authority.

BLis usually made out in signed set of 2 originals, any one of which
can give title to goods. The shipping company also issues non-
negotiable (unsigned) copies which are not documents title to goods
but are normally used for record purpose.
The reverse side of BL bears the terms and conditions of the contract
of carriage. The clauses on most BLs are more or less similar. A Bl
should be clean i.e. it should not contain any adverse remarks by
the shipping company as to the quality and condition of goods.
The goods can be consigned to order which means the importer can
authorise someone else to collect the goods on his behalf. In this
case the BL will be endorsed, normally on the reverse side, by tne
exporter. If the importer/ consignee is named, the goods will onuy
ent
be released to him, unless he transfers his right by endorsemen

endorsement),
(the bill of lading must however provide for such
Bill of Lading
Types of
(a) Clean BL: This type of BL do not contain any adverse remarks
as to the condition and quality of goods. A clean BL is always
insisted by the importer.
(b) Claused BL: Such BL contains an adverse entry by the shipping

company, such as, "TWO CASES DAMAGED'.
) Stale BL: If the BL is presented to the bank for negotiations

after many days from its issue it is called as Stale BL. As far as
possible BL must be presented to the banks as soon as possible,
otherwise it will create undue difficulties to the importer as
well as to the exporter.
(d) Freight Paid BL: When freight is paid by the shipper, then this
type of BL is issued with the words 'freight paid.
(e) Freight Collect BL:When the shipper do not pay freight, such
bill will indicate that freight is to be collected from the importer.
To Order BL: In this type, the BL is issued to the order of a

certain person.
In this importer/consignee /agent is named in

Straight BL:
the BL, it is called straight BL.
either the shipped/
(h) On Board & Received BL: The BL can be
whether the
board or received for shipment depending upon
or received by the shipping
goods are loaded on board the ship
company for storing.
lines
) Container BL: This BL is issued bythecontainer shipping
an inland place of the
when the cargo is transported from
of its arrival.
shipper to the final place
IMPORTANCE OF BILL OF LADING:
1. Importance to the Exporter:
(a) Proof of shipment: condition

proof of shipment. It indicates the
Bill of lading gives due to
of goods. If any damage takes place
and description
negligence of shipping company, the exporter can hold the
shipping comparny responsible.
(b) Payment of Freight:

Acopy of bill of lading is required by exporter to pay freight.
The exporter pays freight under C&F and CIF contracts.
(c) Recording and Filing:

A photocopy of bill of lading is retained by the exporter for
recording and filing. Such recording and filing is required for
the purpose of future reference, if
required.
(d) Claiming of Incentives:
Exporter requires a copy of bill of lading to claim incentives.
For example, to claim DBK exporter needs a copy of bill
of
lading along with other required documents, duly certified by
the bank.
(e) Shipment Advice to Importer:

A photocopy of bill of lading is required by the exporter for
sending shipment advice to the importer. Based on shipment
advice, the importer makes arrangement for customs clearance
at his port.
2. Importance to Importer:
(a) Customs Clearance:
A copy of bill of lading is required for the importer for customs
clearance at the port of destination. The customs of the
importing country verifies the bill of lading along with other
documents and allows customs clearance.
(b) Payment of Freight:

A copy of bill of
lading is required by importer to pay freight to
the shipping company. The importer pays freight under FOB
contract.

A copy of bill of lading is required for the importer for recording
and filing. Such
recording and filing is required for the purpose
of future reference, whenever
necessary.
(d) Title to Goods:

Bill of lading is a document that provides title to goods.
Therefore, the bill of lading enables the importer to take
possession of goods.
3. Importance to the Shipping Company:
a) It helps the shipping company to collect the freight from the

shipper or the importer.
(b) It safeguards the interest of the

shipping company against
wrong claims by the exporter or importer in respect of damage
to goods prior to loading of goods because any such damage is
reflected in the Bill of Lading.
SHIPPING BILL/BILL OF EXPORT

This is the main document required by Custom authorities. It grants
permission for shipment of goods. It is only after the shipping bill is
stamped by the customs, the cargo is allowed to be carted to the
docks. The shipping bill is generally prepared in five
copies:
(a) Customs Copy,
(b) Drawback Copy,
(c) Export Promotion Copy,
(d) Port Trust Copy, and
(e) Exporter's Copy.

The shipping bill contains
description of goods and other particulars
such as:
(a) Name and address of the exporter.

(b) Number and description of packages.
(c) Quantity, weight and value of goods.
(d) Name of vessel in which goods are to be shipped.
164 Export Marketing (T. Y.B.Com.: SEM-VIJ
(e) Country of Destination.
() Total amount of duty.
(g) Port at which goods to be discharged.
(h) Any other details, if applicable.
Types:Generally there are five types of Shipping Bills
1. Free Shipping Bill:
It is used in of goods which neither attract any export
case
duty
nor entitled for duty drawback. It is printed on white paper.
2. Dutiable Shipping Bill :
It is used in case of goods which attract export duty and it may
or may not be entitled for
duty drawback. It is printed on yellow
paper.
3. Drawback Shipping Bill:
This is used in case of DBK or when refund of duties is allowed
on the goods exported. Generally it is printed on green paper,
but when DBK claim is to be paid to a bank, then yellow paper
may be used.
4 Shipping Bill for Shipment Ex-Bond:

It is used in case of imported goods for re-export and which are
kept in-bond. It is printed on yellow paper.
5. Coastal Shipping Bill:

It is used in case of shipment which is moved from one port to
another by sea in India. It is not an export document.
Generally, the format of shipping bill in case of export by air and by

be
sea is more or less the same, except colour of the form may
different.
Importance of Shipping Bill:

document. The shipping
The shipping bill is an important export
only to the exporter and not to the importer. Without
bill important
is
the shipping bill, it is not possible to export the goods. The
importance of shipping bill to the exporter can be stated as follows

The original copy of shipping bil is required for the
exporter
for customs clearance at the port of
shipment. The customs
verify the shipping bill along with other documents and allow
customns clearance.
(b) Claiming of DBK:

Exporter requires the second copy of shipping bill to claim duty
drawback. DBK is a refund towards duty paid on inputs used
for export production.
(c) Claiming of Export Promotion Incentives:

The triplicate copy of shipping bill is
required for the exporter
to claim export promotion incentives other than DBK. The other
export promotion incentives include refund of excise duty on
export products, refund of Octroi duty, refund of VAT, etc.
(d) Carting Order:
The fourth copy of shipping bill is required for obtaining carting
order from the port trust authorities. The port trust authorities
check the fourth copy of shipping bill and provide carting order.
Thecarting order is the permission to get the goods inside the
docks.
(e) Recording and Filing:

The fifth copy of shipping bill is required for the exporter for
recording and filing. Such recording and filing is required for
the purpose of future reference, if required.
(f) Loading of Goods:

Shipping bill enables the exporter or his agent to load the goods
on the ship. The customs preventive officer checks the original
copy of the shipping bill and then allows for loading of goods
on the vessel.
166 Export Marketing (T. Y.B.Comn.: SEM-VJ
CERTIFICATE OF ORIGIN
****
ertan countries require their importers to obtain certificate of origin

from the exporter, certifying the origin of goods. Without certificate
of clearance of imported goods is refused. This certificate
origin,
may form a part of the commercial invoice itself. This certificate is
iSsued by the Chamber of Commerce or some other authorised
agency.
Some countries, such as countries in the Middle East and Gulf insist
on certificate of origin attested by their consulate stationed in India.
Types: The Certificate of Origin is of three types, namely:

(A) Certificate required in general by all countries for clearance of
goods by the importer.
(B) Certificate required for availing tariff concession under GSP

extended to imports from India by certain countries like
Germany, Italy, Japan, USA, New Zealand etc.
(C) Certificate required for availing concessions under Common

Wealth Preferences (CWP).
All the three types of certificates are to be obtained in prescribed
form from specified authorities.
For No. A
type the certificate can be obtained
- from Chamber ot
Commerce/Trade Association.
For type No. B the certificate can be obtained from EIA, Jt.
-
DGFT,
Central Silk Board, Textile Committee Development Commissioner
- Handicrafts, Coir Board, Jute Commissioner. EIA and Jt. DGFT
can issue certificate for anyitem, whereas the other agencies can
within their purview.
issue certificates for only those products falling
the officer o
For type No. C - the certificate has to be obtained from
concerned.
the High Commissioner of the country
IMPORTANCE OF CERTIFICATE OF ORIGIN
1. Importance to the Exporter:

The original copy of certificate of origin is required for the
exporter tor customs clearance at the port of shipmernt. The
customs verify the certificate of origin along with other
documents and allow customs clearance.
(b) Recording and Filing:
A photocopy of certificate of origin is retained by the exporter
for recording and filing. Such
recording and filing is required
for the purpose of future reference, if
required.
(c) Proof of Origin:
The certificate of origin certifies the of
origin goods, i.e., the
country in which goods are produced.
2. Importance to the Importer:

a) Customs Clearance:
A copy of certificate of origin is required for the importer for
customs clearance at the port of destination. The customs of
the importing country verifies the certificate of origin along
with other documents and allows customs clearance.
(b) Claiming Preferential Tariffs:

Certain countries allow preferential tariffs on import of goods
from India. For instance, under Common Wealth Preferences
(CWP), imports from India are given preferential treatment for
import duties by the importing countries belonging to the
Common Wealth Nations. Therefore, a copy of certificate of
origin is required to claim tariff concessions.

A photo-copy of certificate of origin is required for the importer
for recording and filing. Such recording and filing is required
for the purpose of future reference, whenever necessary.
(d) Proof of Origin:
The certificate of origin certifies the origin of goods, i.e., the
country in which goods are produced. Therefore, the importer
is assured that the goods are not re-shipped by the exporter.
CONSULAR INVOICE
Certain countries like Philippines, Australia, New Zealand, etc
require that the goods imported in their country should be certified
by the Consulate of their country stationed in the exporter's country.
The exporter has to pay a certain fee to obtain this
Such charges/fees vary from
certificate/invoice.
country to country. This invoice
facilitates prompt clearance ofgoodsfrom the customs authorities
in the imnporting country.
Normally, it is necessary to convince the customs authorities of the
importing country that the description and value of goods as shown
in theexporters invoice is and the that
one
compared to
same as
imported goods. At times, customs authorities, on

suspicion may
desire to open the packages and check the goods for the purpose of
calculating duties payable to customs. If this is done a considerable
delay takes place in clearing the goods and the importer may be put
to hardships. To avoid all this
problem both to the customs
authorities and to the importer, a consular invoice is
is issued by the Consulate of the
obtained, which
importing country stationed in
India.
It is generally prepared in three copies. One copy is retained by the
Consulate office for reference, the second
copy is sent to the customs
authorities of the importing country and the third
the exporter to copy is given to
forward the same through his bankers to the importer
along with other documents.
IMPORTANCE OF CONSULAR INVOICE

The
importance of consular invoice is similar to that of certificate of
origin. The importance of consular invoice is stated as followS:
Eport Procedure and Docume
ntation
Importance to the Exporter: 169
1
(a) Clearance from Restrictions:
Once the consular
invoice is
certified by the consulate of
inmporting country, the
exporter is assured that
the
import restrictions on the there are no
goods exported from India. Also, the
exporter is assured that there would
be
of export proceeds. no
problem in realization
b) Customs Clearance:
The original copy of consular
for customs clearance at the
invoice is required for the
port of shipment. The exporter
verify the consular invoice along with customs
allow customs clearance. other documents and
c) Recording and Filing:

A photocopy of consular invoice
is retained by the
recording and exporter for
filing. Such recording and filing is required
the for
purpose of future reference, if required.
d) Proof of Origin:
The consular invoice certifies the
origin of goods, i.e., the
country in which goods are produced.
Importance to the Importer:
a) Customs Clearance:
A copy of consular invoice is required for the importer for
Customs clearance at the port of destination. The customs of
the importing country verifies the consular invoice along with
other documents and allows customs clearance.
b) Recording and Filing:

for the importer
A photo-copy of consular invoice is required
and filing is required
TOr recording and filing. Such recording
Tor the purpose of future reference, whenever necessary.
c) Proof of Origin:
he consular invoice certifies the origin of goods, i.e., the
Therefore, the importer
Ountry in which goods are produced.
dssured that the goods are not re-shipped by the exporte.
170 Export Marketing (T. Y.B.Com.:
3. Importance to the Customs: SEM-VI)
The customs of the exporting country can easily clear the
e goods,
co
T h e customs of the importing country can easily

import duties without checking or opening the
calculate th.
the
packages.
COMMERCIAL INVOICE V/S

CONSULAR INVOICE
COMMERCIAL INVOICE CONSULAR INVOICE
1. Meaning:
It is a statement of sale account It is a certificate issued by the
prepared by exporter. It is the consulate of the importer' s country
exporter's bill for the export goods stationed in the exporter's country
that is to be paid by the importer. stating the details as to value of
It contains details as to the
quality, | goods that are imported from the
quantity, value and other exporting country.
description of goods.
2. Necessity:
This is the main document
in This document is not
required by al
export sale. It is a must in all
importers, a very few importing
export transactions. countries insist on such an invoice.
3. Issuing Authority:
The exporter prepares it on his The exporter has to pay a
own letter-head and need not
certain fee
for obtaining this invoice from the
obtain from any authority. consulate of importing country.
4. Number of Copies
It can be prepared in any number It is prepared in three copies, one
of copies, five or six or even s
more, | sent to the customs at the importer's
depending uponthe requirement end, the other is kept by consulate
of the
exporter, importer and the and the third to
bank.
exporter.
5. Purpose:
Its basic purpose is to inform lts basic purpose is to obtain prompt
the importer that the amount clearance through customs at the
mentioned therein isduefrom him importer's end.
t Procedure and Documentation
Lipo
171
Exporters References:
norter retains some copies of| The exporter does not retain
mercial invoice for his records. | of consular invoice. He copy
om
sends it to
importer.
CERTIFICATE OF ORIGIN
V/S CONSULAR INVOICE
CERTIFICATE OF ORIGIN CONSULAR INVOICE
1. Meaning
It is a certificate stating the fact It is a certificate issued by the
that the goods which are being
consulate of the importing country|
exported have been originated or stationed in theexporting courntry
produced in the country of export. regarding the value of the goods
t is a document testifying the that are exported from the country
origin of goods. of export.
2. Issuing Authority:
It can be issued by Chambers of It is issued by the consulate of the
|Commerce, EIA, Coir Board, Jute importing country, stationed in the
Commissioner, etc. exporters country.
3. Importance:
|This document enables the This certificate enables the
importer to get the benefit of GSP importer to clear the goodsfrom his
preterence or CWP Preference customs authorities promptly.
trom the importing country.
4. Format:
|t is prepared in prescribed form. This invoice has a prescribed form,
The format of the certificate may designed by the consulate of the
Vary from agency to agency who importing country.
1Ssues the same.
5. Types:
There are three types Type A
- There is no classification of
lype Band Type C. consular invoice.
6. Order:
The exporters first obtains the The consular invoice is attested
Certificate of Origin after obtaining Certificate of Origin.
REVIEN QUESTIONS
1.
1. Explain the registration of exporters with different authorities.
2. Discuss the pre-shipment procedure involved in exports.
3 Describe the steps involved in Quality Control and Pre-shipment
Inspection.
4. Explain the shipping and customs clearance formalities in export trade.
55. Discuss the role of Clearing & Forwarding Agents or CHA.
6. Explain the procedure involved in realization of export proceeds.
7. Describe the procedure of export under bond
8. Write a note on export procedure under Letter of
Undertaking
10. Bring out the importance of the following doçuments:
(a) Commercial Invoice
(b) Bill of Lading/ Airway Bill
(c) Shipping Bill/Bill of Export
(d) Consular Invoice
()Certificate of Origin
OBJECTIVE QUESTIONS
I. State whetherthe following statements are True or False
1. Carting order is issued by Carting officer.
2 It is optional for the exporters to obtain IEC Number.
3. The 'Let Export Order is issued by Customs Preventive Officer.
4. The 'Let Ship Order' is issued by Customs Examiner.
5. The DGFT issues RCMC certificate.
6. It is compulsory to obtain RCMC certificate.
7. An exporter need not register with FIEO.
8. It is compulsory for the exporter to obtain Letter of Credit from the
importer.
9. Let Ship Order is not necessary in India.
10. Bill of Lading is prepared in only two copies.
11 Bll of Lading is
required for customs clearance at the port of shipment.
12.
Registration with RBI is compulsory for exporters.
13. The shipping bill is issued by the shipping company.
14 The non-negotiable Bill of lading is not a document title to goods.
15. The negotiable bill of lading gives title to goods.
Export Procedure and Documentation
173
6. A copy of shipping bill is required by the importer.
17. The commercial invoice
represernts Government invoice.
18. The Certificate of Origin is issued
by DGFT.
19. The consular invoice is issued
by the consulate of the exporter's
country.
20. Commercial invoice and consular invoice are issued
by samne the
authority.
21. Bill of lading is required for custom clearance.
22. The Certificate of Origin is issued only Chambers
23. The
by of Commerce.
shipping bill is an
important document required by the importer.
24. The certificate of
origin is issued only by Chamber of Commerce.
25. Bill of Lading is an
customs clearance.
important document required by exporter for
26. Under Free Shipping Bil, the
27.
goods are exported free of cost.
Consular Invoice is issued by the Consulate of the
exporting country.
Ans: Allstater ts are False except 14, 15.
II. Fill in the blanks with the

appropriate option given in the bracket:
1.
Exporters have to register with- to obtain IEC number.
(DGFT, RBI, EPC, CoC)
2. A status holder
exporter obtains. -from FIEO.
(IEC, Mate's Receipt, RCMC, Shipping Bill)
3 is required to get the goods inside the docks for the purpose
of examination of goods.
(Let Export Order, Bill of Lading, Carting Order)
4 - i s the basic document required in exports,
(Commercial Invoice, Certificate or Origin, Consular Invoice, Bill of
5
Lading)
is an important document to be submitted to custom
authorities in five copies. (Mate's Receipt, Shipping Bill, Bill of Lading)
6. Consular invoice is issued in - copies. (5, 4, 3, 2))
7. is a document title to goods.
(Mate's Receipt, GR Form, Bill of Lading, Shipping Bil)
8. is an important document required for realization of export
proceeds.
(GR Form, ARE-1 Form, Shipping Bill, Packing List)
Order (4) Commercial Invoice
Ans: (1) DGFT (2) RCMC (3) Carting (8) GR Fom
(5)Shipping Bill (6) 2 (7) Bill of Lading
174 Export Marketing (T.Y.B.Com.: SEM-VI1
II. Match the following columns:
A. Group A Group BB
RCMC Certificate (a) Port Trust
2. IEC Number (b Custom Preventive Officer
3. Let Export Order (c) Customer Examiner
4. Let Ship Order (d) DGFT
5. Carting Order (e) Export Promotion Council
(f) Custom Appraiser
Ans: (1)- (e), (2) (d), (3)- (c), (4) - (b), (5) - (a)
Group AA Group B
1. Shipping Bill (a) Realization of export proceeds

2 Bill of Lading (b Excise Clearance
3 GR Form () Chief Cargo Officer
ARE Form (d) Custom House Agent
5 Consular Invoice (e) Consulate of exporting country
6. Mate Receipt () Port Trust Clearance
(g)
(8) Consulate of Importing country
(h) Shipping Company
Ans: (1)-(d), (2)-(h,(3) (a, 4) (b, (5- 6 (o

Abbreviations 175
ABBREVIATIONS
(For Reference)
Abbreviation Full Form

ACCE Assistant Commissioner of Central Excisee
ADB Asian Development Bank
ASIDE Assistance to States for Infrastructure
Development for Exports
ASSOCHAM The Associated Chambers of
Commerce and
Industry of India
ARE Form Application for Removal of Excisable Goods for
Exports
BTP Biotechnology Park
BOA Board of Approval
BIS Bureau of Indian Standards
C&F Agent Clearing and Forwarding

C&F Quotation Cost & Freight Quotation
CHA Custom House Agent
CIF Cost, Insurance and Freight.
CoC Chamber of Commerce
CPO Customs Preventive Officer
CCC Customs Clearance Certificate
CII Confederation of Indian Industry
CGST Central Goods and Services Tax
176 Export Marketing (T.Y.B.Com.: SEM-VD
DBK Duty Drawback
DGCI&S Directorate General of Commercial
Statistics Intelligence&
DGFT Directorate General of Foreign Trade
DIPP Department of Industrial Policy and Promotion
DTA Domestic Tariff Area
ECD Exchange Control Department (of RBI)

ECGC Export Credit Guarantee Corporation of India Ltd.
EEFC Exchange Earners Foreign Currency Account
EHTP Electronic Hardware Technology Park
EIA Export Inspection Agency
EIC Export Inspection Council
EXW Ex Works Inco Term
EOU Export Oriented Unit
EPC Export Promotion Council
EPCG Export Promotion Capital Goods Scheme
EXIM Bank Export Import Bank of India
FDI Foreign Direct Investment

FEMA Foreign Exchange Management Act
FIEO Federation of Indian Export Organisations
FICCI Federation of Indian Chambers of Commerce and
Industry
FOB Free Board
on or Freight on Board
FTP Foreign Trade Policy
FEDAI Foreign Exchange Dealers' Association
Abbreviations
177
GR Guaranteed Remittance
GSP Generalised System of Preferences
GSTP Global System of Trade
Preferences
GST Goods and Services Tax
IBRD International Bank for

Reconstruction and
Development
ICA Indian Council of Arbitration
ICC International Chamber of Commerce.
IEC
Importer Exporter Code Number.
IIFT Indian Institute of
Foreign Trade
IGST Integrated Goods and Services Tax
IMF International Monetary Fund
IIP Indian Institute of
Packaging
ISS India International Seafood Show
IRMAC Industrial Raw Materials Assistance
Centre
ISO International Organisation for Standardization
IOC Indian Oil Corporation
ITPO India Trade Promotion
Organisation
IPQC In Process
Quality Control System
LC Letter of Credit
LIBOR London Inter-Bank Offered Rate
LUT Letter of Undertaking
MAI Market Access Initiative

MCCE Maritime Commissioner of Central Excise
MDA Marketing Development Assistance
MMTC Minerals and Metals Trading Corporation
MPEDA Marine Products Export Development Authority
MSEs Micro and Small Enterprises
MSMEs Micro, Small and Medium Enterprises
MSSIDC Maharashtra Small Scale Industries Development
Corporation
NABL National Accreditation Board for Testing and

Calibration Laboratories
NCTI National Council for Trade Information
NFE Net Foreign Exchange
OECD Organisation for Economic Cooperation and

Development
OGL Open General Licence
PAN Permanent Account Number

PSCFC Post Shipment Credit Denominated in Foreign
Currency
RBI Reserve Bank of India

RCMC Registration-cum-Membership Certificate
RSCE Range Superintendent of Central Excise
SAD Special Additional Duty

SEZ Special Economic Zone
SEEPZ Santa Cruz Electronics Export Promotion Zone
SGST State Goods and Services Tax
SIDBI Small Industries Development Bank of India
Abbreviations
179
SIL Special Import Licence
SMEs Small and Medium
SLEPC State Level
Enterprises
Export Promotion Committee
STC State Trading Corporation
STP
Software Technology Park
STPI Software Technology Parks of India
STOCD Standardization, Testing & Quality Control
Directorate
TFAI Trade FairAuthority of India
TRIFED Tribal Cooperative Marketing Federation
UNCTAD United Nations Conference on Trade and

Development
World Trade Centre

WTC
Whole Turnover Packing Credit Guarantee
WTPCG
WTO
World Trade Organisation
180
Export Marketing (T.Y.B.
Com.: SEM-VI)
GUIDELINES TO ANSWERR-
EXPORT MARKETING PAPER
The paper is of 100 marks to be answered in 3
hours.
For
objective questions such as True or False, Fill in
you can write only the answers in the Blanks,
the given statements. proper sequence without copying
This will save
and it is also your time, university
convenient to the
professors to assess yourstationery
answers
In the
-
case of Match the Columns both the
with the words and not -
-
must be shown
3
shown as 1 f, 2- groups
c, d and so on.
For 7 to 8 marks
questions write meaning and explain 7 to 8 points.
Explanation to each point may be in about 5 to 7 lines.
Preferably keep one line blank after each
good presentation and for the convenience point's explanation for
assess your answers.
of the examiners to
The point's
heading must be underlined.
Use only ball point pen preferably withblank ink.
The question number
must be stated such as 1 (a) 1 (b) or 2
(a) 2 (b). This becomes easier forclearly
the examiners to assess your
paper.
Preferably write the question topic or the
the answer. question at the start of
Answer booklets with illegible
and the examiners can mark thehandwriting may not be assessed,
answer with Zero.
Make your
presentation attractive with good quality ink. Avoid
unnecessary cancellations and big
handwriting to increase the
number
of
of pages:. Examiners
may get irritated with poor quality
presentation and bluffing.
Contact your
professors for further clarifications and guidance.
University Question Paper
181
UNIVERSITY QUESTION PAPER
*****
APRIL 2019
Marks: 100
Time:3 Hours
N.B.:1. All questions are compulsory.
2. to the
Figures right state the marks
allotted to
questions. the
3. Do not change the order of
objective as well as
subjective sub-questions.
Q.1 (A) Select the
appropriate option from the alternatives given:
(Any 10)
(10)
1.
Packaging helps in of the
product.
(a) Financing (b) Protection
(c) Licensing
2 FOB quotation includes.
(a) Ex-factory Cost (b) Insurance
c) Marine Freight
3.
Branding and Packaging are important considerations of
(a) Trade Credit (b) Product Planning
c)Shipping Formalities
4. - is the route by which the goods move to foreign buyers.
(a) Advertising (b Marking

c) Distribution Channel
consist of techniques to induce response from customers
5
and intermediaries.
(b) Sales Promotion
(a) Inspection
(c) Labelling
is management of the flow of goods between the point of
6.
origin and the point of consumption.
(a) Logistics (b) Warehousing

(c)Packaging
7. Packing credit is required - the shipment.
(a) After (b) Before
() During
8. was established to provide medium and long-term
finance to exporter in India.
(a) ECGC (b) EXIM Bank
(c) DGFT
9. - is a commercial risk covered by ECGC.
(a) Insolvency of the buyer (b) Civil Disturbance
(c) War
10. certifies the consular invoice.
(a) IIP (b) Commodity Banks

(c) Consulate
11. issues the registration cum membership certificate.
(a) DGFT (b) EPC
(c) Chamber of Commerce

states that the goods which are exported from a specific
12
Country.
(a) Bill of Lading (b) Certificate of Origin
(c) Shipping Bill

Ans: (1) - (b), (2) - (a), (3) - (b), (4) - (c), (5) - (b), (6), - (a), (7) (b),
(8) (a), (9) (a), (10) (C), (11) -(b), (12) (b)
-
-
True or False
( b ) State whether the following statements are
(10)
(AnyTen):
1. instruction.
Marking on packages give handling
giving information about the products to the
Labelling aims at
consumer.
University Question Paper 183
3
Personal selling offers scope for teedback from consumer.
Exporters need not consider competition and consumer

preferences to fix export prices.
Insurance prevent risks from taking place.

6. Letter of credit is issued by the exporter's bank.
7. Importer Exporter Code number is provided by DGFT.

8. C&F agent looks after the
shipment formalities for a
Commission.
9 SIDBI provides finance to small scale sector.
10 Exporters prefer sea transport for perishable goods in export

marketing.
11. Pre-shipment finance is provided only for capital goods.
12. Carting order is provided by custom authorities.
Ans: True: 1, 2, 3, 7, 8, 9; False:
4, 5, 6, 10, 11, 12
Q.2 Answer any two of the following: (15)
(a) Explain various product planning decisions in export
marketing.
(b) Discuss various factors determining export
pricing.
(c) From the following data calculate minimum FOB price to be
quoted by an exporter. Also calculate the amount of foreign
exchange that can be earned at 7 44 US $.
Particulars Amount
Material Cost 34,000

Labour Cost 76,000
Transportation Cost 4,000
Profit Earned 10% of FOB Cost
10% of FOB Price

Duty Drawback
Q.3 Answer any two of the following: (15)
(a) Explain the various types of indirect channels of exporting.
(b)What factors are considered while selecting modes of transport

in export trade ?
Discuss the different sales promotion techniques in export
(c)
marketing.
Q4 Answer any two of the following: (15)
(a) Explain briefly the different methods of payment in export
trade.
(b) Distinguish between Pre-shipment Finance and Post-Shipment
Finance.
(c) Describe the role of SIDBI in export finance.
Q.5 Answer any two of the following (15)

(a) Describe the Pre-Shipment procedure in export.
(b Explain the procedure involved in custom clearance of export

consignment.
(c) What is Shipping Bill ? State its importarnce.
Q.6 Write short notes on any four of the following. (20)

(a) Procedure to obtain Export Finance
(b) Packaging
(c) Components of Logistics
(d) Countertrade
(e) Role of C&F Agent
() Certificate of Origin

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PRODUCT

Product Planning for Export Marketing

Packaging Decisions (April 2019)

Objectives of Export Pricing

Cost, Insurance and Freight (CIF)

PRODUCT PLANNING DECISIONS

Exporters must be proactive in designing and re-designing

yromotion of the product. Packaging

less in demand or rejected.

The EU also insists that labelling must be done in at least 4

The exporter must choose a proper method of pricing, such as

about the period of warranty,

For instance, a brand name should be easy to pronounce, and

11. Product Distribution Decisions:

Meaning and Techniques of Branding

call rose by any other name. Brand names make a

Customers, and so on.

different approaches in selecting brand

1. Individual Brand Names:

2. Blanket Corporate Name:

The main advantage of this strategy is that it

(Cadbury India Ltd. is a subsidiary of Mondelez International.

Noodles, Maggi Ketchup, and so on.

5. Different Brand Names in International Markets:

PFK (Poulet Frit Kentucky) in Quebec, Canada (because

(e) Burger King (USA)

the branding of the

of other brands of the

If the competition is low, there may not be a need to create

When a company has limited resources, it may go for'umbrella

HUL cannot extend its brand name 'Surf (generally meaning

a brand of washing powder.

Jamsetji Tata introduced the

9. Popularity of Existing Brand:

The importance of packaging is explained as follows:

4. Conformance to Buyer's Specifications:

Packing is also required to conform to certain standards laid

9. Commands Higher Price:

Proper packing facilitates distribution of goods. This is because

Essentials of a Good Packaging

Packages must be attractive. They should attract the attention

products. For instance, fragile

LABELLING OF EXPORT GOODS

graphic communication on the

the product. Labelling indicates the contents of the

product. Like packaging, effective labelling can promote the product.

pesticides and insecticides used on horticultural products. Also, oon

Information on the Labels:

Date of manufacture and the batch number.

Statutory information such as expiry date, side effects of the

Custom Clearances: Developed countries insist on certain

MARKING OF EXPORT GOODS

Requirements of Marking of Export Goods

. Country of Origin: The

pwards indicates-This Side Up", Umbrella protection

Handle with Care" and so on.

the cartons may be marked on

PRICING FACTORS DETERMING

FACTORS AFFECTING PRICING

INTERNVAL FACTORS EXTERNAL FACTORS

EXporters enjoying a good

may charge a lower price.

moderate price for high quality.