INDIA’S FOREIGN TRADE

POLICY
 INDIA;S FOREIGN TRADE OVERVIEW

The origin of India’s Foreign trade can be traced back to the

age of the Indus Valley civilization. 
The License Raj and the large number of trade barriers were
intended to be done away with liberalization. Opening up
the economy to MNC’s and foreign investors including the
core and financial sectors to private & foreign companies
transformed India into a land of opportunities.
In early 1990’s the Indian economy had witnessed dramatic
policy changes. The idea behind the new economic model
popularly known as LPG in India was to make the economy
one of the fastest growing economies in the world.
DIRECTION OF INDIA’S FOREIGN TRADE
The Direction of Trade is referred to describe the statistical
analysis of the set of a country’s trading partners and their
significance in trade. In short, the set of countries where the
goods are traded to their significance on a country’ trade is
known as the Direction of Trade.

Direction of India’s Trade-Exports: It is the analysis of group

of countries to which India exports its goods. There has been
an ever-expanding geographical diversification of India’s
exports since independence. The number of countries
purchasing India’s exports and the quantity of exports to
these countries are continuously increasing.
 Direction of India’s Trade-Imports: Group of Countries from which
India imports its goods. Formerly, there were many countries with
whom we had no or insignificant trade. But, at present we have trade
relations with most of the countries in the world. There has been
rapid increase in the imports from almost all the countries with
spectacular increase in case of a few countries.
Prior to our independence our import trade was primarily with OECD
countries particularly with U.K. The share of OECD countries has
declined rapidly after independence and also U.K. The main reason
for these changes in the direction of India’s imports is diversified and
increasing demand for imports arising from development
requirements. At present, India’s biggest suppliers are Germany,
Belgium, UK, France, Italy, Netherland, Spain.
 COMPOSITION’S OF INDIA’S TRADE

The Statistical analysis of a country’s product groups in its

international trade is referred to as Composition of Trade.
The analysis carried out for product groups exported is
known as the Composition of Exports. As a result of
industrial progress during the planning period, there has
been an increasing diversification of Indian exports over the
years. Before independence and during the initial years of
planning, India’s major exports were tea, jute, cotton,
textile. As the economy progressed, a large number of
finished goods, like capital goods & other engineering
items, chemical, leather, ready made garments, handicrafts
etc., have entered the export list.
EXPORT- IMPORT POLICY OF CURRENT YEAR
1. 48/2020-20212020-21: Electronic filing of Non-Preferential Certificate of Origin
(CoO) through the Common Digital Platform for India’s Exports.

2. 47/2020-212020-21Issuance of Import Authorization for ‘Restricted’ items from

DGFT HQs w.e.f. 22.03.2021 – regarding.

3. 46/2020-212020-21Necessary documents to be submitted while applying for

import authorization for import of Denatured Ethyl Alcohol.

4. 45/2020-212020-21Procedure and Criteria for submission and approval of

applications for export of Diagnostic Kits and their components/laboratory reagents.

5. 44 2020-21Online Module for Adjudication, Appeal, Review proceedings under

Foreign Trade (Development & Regulation) Act, 1992, ('the Act') as amended and
Foreign Trade (Regulation) Rules, 1993, ('the Rules') as amended.
6. 43/2020-212020-21Electronic filing and Issuance of Preferential Certificate of
Origin (CoO) for India’s Exports under India-Mercosur PTA and India-Thailand EHS
w.e.f. 25th February 2021.

7. 42/2020-212020-21Issuance of Certificate of Origins (Non-Preferential)

[CoOs(NP)] through Common Digital Platform (CDP).

8. 41/2020-212020-21Introduction of online e-Certificate Management System for

Imports –reg

9. 40/2020-212020-21Introductino of online e-Tariff Rate Quota System for Imports

10. 39/2020-212020-21Procedure and Criteria for submission and approval of

applications for export of Diagnostic Kits and their components/laboratory reagents.
 EXPORT PROCEDURES & DOCUMENTATION

Step 1: Receive an Inquiry

The first step in the shipping documentation process
is when someone inquires about buying your
products. When a potential buyer expresses interest,
they will send a letter of inquiry outlining the
terms of their interest along with a request for an
informal or formal quote.
Step 2: Screen the Potential Buyer and Country
After you receive an inquiry from a buyer, you first need to make sure you can
do business with them. 
That means screening them on the denied and restricted party lists. You can
manually screen their name, their company name, and their address by
checking each of the hundreds of lists published by the U.S. government, or
you can automate that process by using software like Shipping Solutions,
which automatically checks against the latest version of all the lists.
If your buyer shows up on any of the lists, you cannot do business with them.
If they do not show up, proceed with caution.
The screening step also includes making sure you can ship your goods to
the buyer’s country. In some cases you can ship only if you apply for an
export license. It’s best to complete the licensing process as early as you
can to avoid causing delays in your timeline.
Step 3: Provide a Proforma Invoice
After screening your buyer and their country, you may need to provide
the buyer with a proforma invoice for the transaction. The proforma
invoice is the first impression you will make on your buyers, so make
sure you do it right. 
It acts like a quote and looks like a commercial invoice, and it can be
used to arrange financing for the purchase.
If the proforma invoice results in an order, the final commercial invoice
will closely resemble the proforma invoice. That means all of the costs
included in the quotation are firm and may not be varied beyond the
terms outlined in the letter of credit.
Certain countries may require a proforma invoice if they tightly control
their currency, require an import permit, or protect local industry by
placing import quotas on certain types of goods. 
Step 4: Finalize the Sale
After you send the proforma, the buyer will either reject or accept your proposal. As part of the
acceptance process, they will most likely want to negotiate the terms of the sale. This will result in
a verbal or written contract.
Not only should these negotiations include a discussion of the price to be paid, but they should
also include a discussion of:
The payment terms you'll be using, whether it's cash in advance, open account, or something in
between.
The term of sale you’ll be using, which is typically one of the 11 Incoterms 2020.
How your goods will be shipped.
Who’s responsible for shipping the goods.
Who’s responsible for hiring the freight forwarder or carrier.
Who’s responsible for filing the electronic export information through AES.
How the transaction will be paid. If you’re using a letter of credit, you need to make sure you have
the necessary documents to satisfy its requirements.
What documents need to be provided by which party. As the exporter, you’ll need to meet
whatever regulations your buyer may have in their own country as well as the documentation and
regulation requirements of the U.S.
By taking care of all these important details before
you ship any goods, you’ll save a lot of time and
avoid potential headaches—especially if you have
specific deadlines to meet.
Once you've reached agreement on these points and
any others you or your buyer wants to discuss, you'll
receive the order, which may appear in the form of
a purchase order.
Step 5: Prepare the Goods and the Shipping Documents
Commercial Invoice
Once you have finalized your sale and prepared your goods for export, you need to
prepare the proper shipping documents. That typically includes three copies of the 
commercial invoice with these important data elements.
Packing List
In addition, you would typically include a packing list, which provides the freight
forwarder, carrier, and ultimate consignee with information about your shipment, the
packing details, and the marks and numbers as noted on the outside of the boxes.
A packing list is also a means by which customs authorities in the importing country
assess security and compliance. And it is a required document to file a claim with the
carrier or insurance company in the event of cargo damage or loss.
Certificate of Origin
While some countries will accept a statement of origin on the commercial invoice, the
customs authorities of other countries may require a separate document titled a
certificate of origin. The certificate of origin is documentary evidence that the goods
originated in the country stated in the certificate, commercial invoice, or packing list.
If the United States has negotiated a free trade trade agreement (FTA) with the country to which you are
exporting—and if your goods qualify for reduced tariffs under the terms of the agreement—
you may want to provide the specific form for that trade agreement. You'll find 
free PDF samples of many of these FTA certificates of origin on the Shipping Solutions website.
Shipper's Letter of Instruction
Based on the discussions you had with your buyer in step four about the type of export and who is filing
through AES, you may need to prepare a Shipper’s Letter of Instruction (SLI). An SLI provides your
company with a written record of who received the shipping documents, who to contact for questions,
who to contact for proof of export, and who issued the export control information that was used to
support the decision to export the goods.
In a routed export transaction—unless you specifically negotiate for filing—the forwarder/buyer will most
likely file through AES. Otherwise, you can file through AES yourself or your agent will file through AES
for you. If your agent files, you must provide an SLI as well as power of attorney to file on your behalf.
Bills of Lading
You will need at least one—but you may need several—bills of lading to accompany your export. For
example, you may need an inland bill of lading to move your goods to a port or airport. For moving goods
out of the United States you will need a separate bill of lading, which is usually filled out by your freight
forwarder. If necessary, you will also need to complete a dangerous goods form at this point.
Step 6: Run a Restricted Party Screening (Again)
Right before the goods ship for export, run one last
restricted party screening to make sure nothing’s
changed on any denied or restricted party. If you use 
Shipping Solutions Restricted Party Screening Wizar
d
 to do this, your screenings will automatically be
documented in the software, providing a paper trail
evidence of your due diligence in the event of an
audit.
Step 7: Miscellaneous Forms and Ship Your Goods
There may be other specific documents to prepare before
you can export your goods. These may be identified in the
sales contract you negotiated with your buyer, documents
required under the terms of a letter of credit or other
payment options, or forms requested by the freight
forwarder. These additional documents may including 
a bank draft or, for a temporary export, an ATA carnet.
Once all your documents are accurately completed and you
fulfilled the other steps of this export process, go ahead
and ship your goods!
One Last Tip: Recordkeeping
Don't forget that not only must you prepare a variety
of documents for your export shipment, it is your
responsibility to keep copies of all of your documents
, as well as all other correspondence throughout the
sale, including phone calls, emails, etc. After all, it is
your job—not your buyer’s, your forwarder's’, or
anyone else’s— to document the whole process.
About the Proforma Invoice
A proforma invoice is a quotation prepared to resemble a commercial invoice. It is
used to arrange a letter of credit to pay for the goods or, if needed, to arrange
financing for the purchase. If done correctly, and if an order results, the final
commercial invoice will closely resemble the proforma invoice.
Tips for Using the Proforma Invoice
A proforma invoice will likely be the first document you create in your exporting
process.
The proforma invoice is not required documentation—but it is very useful when
quoting letter of credit payment terms.
By correctly completing your proforma invoice and making sure details like sales
terms, product descriptions, and pricing are clear, 
you can avoid making costly changes.
A proforma invoice should be valid for a specific period. A reasonable time should
be allowed for the buyer to respond, after which the proforma invoice is no longer
valid.
CERTIFICATES RELATED TO SHIPMENTS

Bill of Lading
The bill of lading is usually the first common document
used in international shipment and it is a contract between
the owner of the goods and the carrier. It will state what
goods are shipping, where they are going and where the
shipment started. In addition, once the shipment is picked
up, the bill of lading serves as a receipt issued by the carrier.
Certificate of Manufacturer
This is a notarized document certifying that the goods have
been produced by the manufacturer, fulfills the general
product requirements and is ready for shipment.  
Certificate of Origin
This document is prepared  by the manufacturer and is certified by a
government entity or chamber of commerce. It’s used to identify the country
of the manufacturer where the goods were made. For example, the U.S.
Food & Drug Administration requires a certificate of origin for every product
imported  to the US.
Commercial Invoice
When the international sale is complete and goods are ready to be shipped
out, a commercial invoice is the document used to describe the entire export
transaction from beginning to end including the shipping terms. It is one of
the most important documents because it provides critical information and
instructions to all parties involved: buyer, freight forwarder, U.S. and
foreign customs, import broker, banks, carriers, etc. Many countries may
require specific invoices or licenses, so if not done correctly, U.S. businesses
will incur fees or delays in shipments.
Consular Invoice
A consular invoice is a form available through a consular
representative of the country you’re shipping to and it
certifies the shipment of goods. It is not required in every
country, but is used to help many emerging nations
facilitate customs and collection of taxes.
Dock Receipts
The purpose of this receipt is to provide the exporter with
proof that the delivery of goods to the international
carrier was successful and in good condition.
Inspection Certificate
These inspections are usually done with industrial
equipment, perishable merchandise and meat products.
It certifies the items were received in good condition
and that  the shipment contained the correct quantity.
Insurance Certificate
For export shipments, this document certifies you have
bought an insurance policy for cargo on board.
Insurance may be purchased because liability and large
losses are a concern to the exporter.
Packing List
A packing list is similar to a shipping list in that it lists the
goods being shipping, information on how it was packed, how
the goods are numbered, and weight/height dimensions. Even
though it’s not always required, it’s an important document
used by freight forwarders to prepare a bill of lading and to
understand how much cargo is needed.
Electronic Export Information (EEI)
A required government online form for all exports in excess of
$2,500 or ones that require an export license. The EEI must
be filed with the U.S. Census Bureau to collect trade statistics
and apply export controls.
 DOCUMENTS RELATED TO PAYMENT

1) Letter of Credit. A letter of credit is a document-

containing guarantee of a bank to make payment to the
exporter, under certain conditions and up to a certain
amount, provided the conditions contained in the letter of
credit are complied with. For a detailed' presentation, reader
may refer to the chapter on Export Financing.
(2) Bill of Exchange The Negotiable Instruments Act, 1881
defines a Bill of Exchange as " an instrument in writing
containing an unconditional undertaking, signed by the
maker, directing a certain person to pay a certain sum of
money only to, or to the order of, a certain person or to the
bearer of the instrument".
There are five important parties to a Bill of Exchange:
 
The Drawer: The drawer is the person who has issued the bill. In an export
transaction, exporter draws the bill as money is owed to him.
The Drawee: The drawee is the person on whom the bill is
drawn .Exporter draws the bin on the importer who is the drawee. Drawee is
the debtor who owes money to the exporter (creditor).
The Payee: The payee is the Person to whom the money is payable. The bill
can be drawn by the exporter payable to the drawer (himself) or his banker.
The Endorser: The endorser is the person who has placed his signature on
the back of the bill signifying that he has obtained the title for the bill on his
own- account Or on t of the original payee.
The Endorsee: The endorsee is the person on obtain the payment from the
drawer.
DOCUMENTS RELATED TO INSPECTION

Inspection Certificate:
This is issued by an independent third party (such as
an independent inspection agency, or the supplier of
the goods) stating that the goods have been
inspected and conform to the
quality/specification/other contractual terms.
 DOCUMENTS RELATED TO EXISABLE GOODS

Central Excise Clearance: Document # 1.

Invoice:
The goods are to be delivered against a document
known as invoice under Rule 11 of Central Excise
(No. 2) Rules, 2001. It is issued by manufacturer in a
set of three copies. The original copy is for the buyer,
the duplicate is for the transporter and the triplicate
for the assesse. Transportation of goods without
invoice is violation of rules.
Central Excise Clearance: Document # 2.
Personal ledger account (PLA):
When the goods are removed after payment of duty, the personal ledger
account is required to be maintained by the exporter. The estimated
amount of excise duty to be paid by the exporter is deposited to the
nationalized bank or treasury. The amount deposited in the bank is
shown as credit in the PLA on the basis of the proof of deposit.
At the time of removal of consignment, the amount of duty actually
levied is shown as debit entry. An equivalent amount is again re-
credited after the proof of export is received. Thus debit and credit
entries are continuously maintained in the personal ledger account.
However, in case of exports against bond or LUT (legal undertaking)
where the duty is not actually paid, the exporters are not required to
maintain personal ledger account.
Central Excise Clearance: Document # 3.
ARE-1 (application for removal of excisable goods 1):
This document is in the form of an application to the
jurisdictional central excise superintendent made by the
exporter while removal of the goods. It mentions separately
all the details of the consignment, such as value of the
consignment and the amount of duty involved.
An exporter has to submit the ARE-1, 24 hours in advance
from the time of removal of the goods, in four copies. Once
the goods are handed over to the carrier, the ARE-1 form is
endorsed by the Customs, and it becomes the proof of exports.
Central Excise Clearance: Document # 4.
ARE-2 (application for removal of excisable goods-2):
This document is used for refund of excise duty paid on the finished
goods as well as the production inputs used in the manufacture of final
products.
Since the refund of central excise duty on the finished products is
obtained against the ARE-1 formalities, the ARE-2 is a consolidated
application for removal of goods for exports under claim for rebate of
duty paid on excisable material used in the manufacture and packaging
of such goods and removal of excise dutiable goods for export under
rebate claim on the finished stage or under bond without payment of
excise duty.
However, due to the cumbersome procedure involved, ARE-2
formalities have not gained popularity among exporters.
Central Excise Clearance: Document # 5.
CT-1:
This document is used for procurement of excisable goods
without payment of excise duty for exports. It mentions
details, such as description of goods, quantity, value and
the excise duty payable on goods to be removed duty-free
on the basis of information furnished by the exporter.
CT-1 form is issued by the designated central excise
authority with which the manufacturer exporter or
merchant exporter executes the legal undertaking (LUT)
or bond, respectively.
Central Excise Clearance: Document # 6.
Black list certificate:
Countries that have strained political relations or are at war
require the Black List Certificate as evidence that:
i. The origin of goods is not from a particular country
ii. The parties involved, such as the manufacturer, bank, insurance
company, shipping line, etc. are not blacklisted
iii. The ship or aircraft would not call at ports of such country unless
forced to do so
It is required to be furnished only by the exporter only when
specifically asked for by the importer for exports to certain countries.
Central Excise Clearance: Document # 7.
Health/veterinary/sanitary certificate:
The importer or the importing county’s customs department
sometimes requires a certificate for export of foodstuff,
livestock, marine products, hides and skins, etc., from health,
veterinary, or sanitary authorities. This is done so as to ensure
that imported cargo is not contaminated by any disease or
health hazard.
In order to assure the exporter about the receipt of payment
and to the importer of the transfer of the title of the goods,
banking channels are commonly involved in international
trade transactions for routing the payments.
SAMPLES
 SAMPLES

COMMERCIAL INVOICE LETTER OF CREDIT