48645968 Project on Export Procedure

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UNIVERSITY OF MUMBAI

A Project Report On

EXPORT PROCEDURE & DOCUMENTATION

SUBMITTED BY

CHINNARAJ LAKSHMANAN

T.Y.B.M.S.

V–Semester

PROJECT GUIDE

PROF. MITESH PARMAR

MUMBAI COLLEGE OF ARTS, COMMERCE & SCIENCE

JK KNOWLEDGE CENTER

BEHIND MBPT HOSPITAL, VADALA (E), MUMBAI-37

Academic Year:2010-2011



DECLARATION

I MR. CHINNARAJ LAKSHMANAN OF MUMBAI COLLEGE OF ARTS, SCI &

COM OF T.Y.B.M.S. (SEMESTER V) HEREBY DECLARE THAT I HAVE

COMPLETED THIS PROJECT ON EXPORT PROCEDURE AND

DOCUMENTATION IN THE ACADEMIC YEAR 2010 – 2011. THE

INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY

KNOWLEDGE.

DATE:

PLACE: MUMBAI (CHINNARAJ LAKSHMANAN)



CERTIFICATE

I Prof. MITESH PARMAR HEREBY CERTIFY THAT MR. CHINNARAJ

LAKSHMANAN OF MUMBAI COLLEGE OF ARTS, SCI & COM OF T.Y.B.M.S.

(SEMESTER V) HAS COMPLETED THE PROJECT ON EXPORT PROCEDURE

AND DOCUMENTATION IN THE ACADEMIC YEAR 2010 – 2011. THE

INFORMATION SUBMITTED IS TRUE, ORIGINAL AND AUTHENTIC TO THE

BEST OF MY KNOWLEDGE.

PROJECT GUIDE BMS CO ORDINATOR

EXTERNAL EXAMINAR PRINCIPAL



ACKNOWLEDGEMENT

IT IS THE MATTER OF GREAT PLEASURE AND PRIVILEGE TO BE

ABLE TO PRESENT THIS PROJECT REPORT ON EXPORT PROCEDURE AND DOCUMENTATION.

THE COMPILATION OF THE PROJECT IS A MILESTONE IN THE LIFE

OF THE MANAGEMENT STUDENT AND ITS EXECUTION IS INEVITABLE

WITH THE CO-OPERATION OF THE PROJECT GUIDE. I WISH TO RECORD A

DEEP SENSE OF RESPECT AND GRATITUDE TO MY PROJECT GUIDE, PROF.

MITESH PARMAR FOR HER ENCOURAGEMENT TO COURSE OF MY WORK.

IT IS DUE TO THE ENDURING EFFORT AND GUIDANCE OF MY GUIDE

THAT ULTIMATELY MADE IT SUCCESS.

I CANNOT JUST CONDONE THE VALUABLE OPPORTUNITY GIVE TO

ME BY THE UNIVERSITY OF MUMBAI FOR COMPILING AND SUBMITTING

THE PROJECT, WHICH I FEEL IS AN OPPORTUNITY TO EXPRESS MY VIEWS

ABOUT EXPORT PROCEDURE AND DOCUMENTATION.

I ACKNOWLEDGE MY INDEBTNESS TO VARIOUS AUTHORS FOR

MAKING USE OF VALUABLE INFORMATION LIBERALLY.

IT IS MY PROUD PRIVILEGE TO EXPRESS MY DEEP SENSE OF

APPRECIATION AND GRATITUDE TO MY PARENTS AND FRIENDS FOR

THEIR SUPPORT AND CO-OPERATION IN THE COURSE OF THE PROJECT

EITHER DIRECTLY OR INDIRECTLY INVOLVED IN TIME WITH THEIR

VALUABLE CONTRIBUTION.



INDEX

SERIAL

NUMBER

CONTENT PAGE

NUMBE

R1 INTRODUCTION 6

2 HOW TO SET UP AN EXPORT ORGANISATION 8

3 HOW ONE BEGINS TO DO EXPORT 14

4 EXPORT SALES & CONTRACT TERMS &

CONGITIONS

17

5 TERMS OF SHIPMENT – INCOTERMS. 20

6 PROCESSING AN EXPORT ORDER 27

7 FINANCIAL RISK INVOLVED IN FOREIGN

TRADE

28

8 EXPORT DOCUMENTS 29

9 OCTROI 53

10 QUALITY CONTROL & PRE-SHIPMENT

INSPECTION

57

11 SHIPPING ANG CUSTOMS FORMALITIES 60

12 SALES TAXES EXEMPTION PROCEDURE 66

13 METHODS OF RECEIVING PAYMENTS

AGAINST EXPORTS

68

14 THE LETTER OF CREDIT 71

15 PREPARATION AND SUBMISSION OF

DOCUMENTS FOR BANK NEGOTIATIONOR

PURCHASE

88

16 SHIPMENT THROUGH COURIERS 91

17 CUSTOM PROCEDURE FOR EXPORT UNDER

EDI SYSTEM

92

18 THE ECGC COVER. 112

INTRODUCTION



India has a mission to capture 2% of the global share of trade by 20010, up

from the present level of less than 1%. Export is one of the lucrative business activities in

India. The government also provides various promotional schemes to the exporters for

earning valuable foreign exchange for the country and for meeting their requirements for

importing modern technology and essential inputs. Besides, the income from export

business is also exempted to the specified extent under the Income Tax Act, 1961,

Refund of Central Excise and Custom Duty on export is also made under the Duty

Drawback Scheme of the Government. There is no Sales Tax on products meant for

exports.

Exports can be of goods which can be moved physically from one country

to another or can be of service rendered. Detailed list of services are given in the Foreign

Trade Policy covering more than 160 items e.g. Insurance, Hospital, Postal and

Telecommunication etc.

TWO CLASSES OF EXPORTS:

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

are rendered outside the country then it is called as physical export. Deemed Exports:

Where the goods do not go out of the country physically they can be termed as deemed

exports. This will be subject to certain conditions as prescribed by the DGFT. Under

Deemed Exports, the goods may be supplied to the manufacturer exporter who ultimately

export a finished product of which this supply forms a part and ultimately go out of the

country. E.g. Supply of fabrics to the garment exporter who exports the garments made

out of the said fabric.

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

that may be considered as deemed export. The Foreign Trade Policy gives the list of

supplies considered under the Deemed Export Category. The policies and procedures are

different for Physical Exports and Deemed Exports as also the benefits available. In a

nutshell, Deemed Exports do not enjoy all the benefits that are available under Physical

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

air. Although the act does not term them as “Physical Exports”, we have to put phrase to

distinguish it from “Deemed Exports” which is sales in India but considered as exports

for limited purpose.

HOW TO SET UP AN EXPORT ORGANISATION



The proper selection of organization depends upon

• Ability to raise finance.

• Capacity to bear the risk.

• Desire to exercise control over the business.

• Nature of regulatory framework applicable to anyone

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

proprietary business organization. It can be set up easily without much expenses and legal

formalities. It is subjected to only few governmental regulations. However, the biggest

disadvantage of sole proprietorship business is limited ability to raise funds which

restricts the growth. Besides the owner has unlimited personal liabilities. In order to

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

The partnership firm can also be set up with ease and economy. Businesscan take benefit of the varied experiences and expertise of the partners. The liability of

the partners though joint and several, is practically distributed amongst the various

partners, despite the fact that the personal liability of the partner is unlimited. The major

disadvantage of partnership firm of business organization is that conflict amongst the

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

that partnership firms are governed by the Indian Partnership Act, 1932 and, therefore

they should be formed within the parameters laid down by the Act. Company is another

form of business organization, which has the advantage of distinct legal identity and

limited liability to the share holders.

It can be a private limited company or a public limited company. A private

limited can be formed by just two persons subscribing to its share capital. However, the

number of its shareholders cannot exceed 50, public cannot be invited to subscribe to its

capital and the members right to transfer their share is restricted. On the other hand, a

pubic limited company has a minimum of seven members. There is no limit on the

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

permit the transfer of share. A public limited company offers enormous potential for

growth because of access to substantial funds. The liquidity of investment is high because

of easiness of transfer of shares. However its formation can be recommended only when

the size of the business is large. For small business, a sole proprietary concern or a

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

decided to incorporate a private limited company, the same is to be registered with the

Registrar of Companies.

CHOOSING APPROPRIATE MODE OF OPERATIONS:



You can choose any of the following modes of operations

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

manufacturer and then selling it to foreign buyers.

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

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

seller and charging the Commission.

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

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

NAMING THE BUSINESS

Whatever form of business organization has been finally decided, naming

the business is an essential task for every exporter. The name and style should be soft,

attractive, short and meaningful. Open a current account in the name of the organisation

in whose name you intend to export. It is advisable to open the account with a bank

which is authorised to deal in Foreign Exchange.

STRUCTURE OF AN EXPORT ORGANISATION

• marketing manager for generating sales

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

• staff personnel for carrying out the day-to-day activities namely

o Preparation of pre - shipment documents.

o Co-ordinating with clearing agents on the progress of the shipment to be

made.

o Co-ordinating with the ware house\C. excise department regarding

packing and clearance of the goods for export.

o Preparation of post shipment documents foe banks.

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

availment of bank loans etc.

• To look into the requirement of licenses, claiming of export benefits fiiling of

documents with the Government Authorities in Discharge of Export Obligations,

if any, filing of returns to the various Government Agencies which are mandatory,



prepare and keep an information bank of various transaction of the company, their

domestic as well as international competitors.

• An office boy for doing leg work.

• A clearing and forwarding agent to handle the documents and the goods in the

customs premises\ in the ports of lading.

Depending upon the size of the business the numbers of personnel under

each category may increase. For example if a company is transacting substantial volume

of business in more than one product. Then it is necessary to have marketing manager for

each product so that the person can concentrate on a particular trade to enhance the

business.

REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING

IMPORTER EXPORTER CODE (IEC) NUMBER.

The Customs Authorities will now allow the exporter to export or import goods into or

from India unless he holds a valid IEC number. Before applying for IEC number it is

necessary to open a bank account in the name of the company with any commercial bank

authorized to deal in foreign exchange. The duly signed application form should be

supported by the following documents.

•

Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. 1000/-• Certificate from the banker of the applicant firm as per Annexure 1 to the form

given.

• One copy of PAN number issued by Income Tax Authorities duty attested by the

applicant.

• One copy of Passport Size photographs of the applicant duly attested by the

banker to the applicant.

• Declaration by the applicant that the proprietor/partners/directors as the case may

be of the applicant company, are not associated as proprietor/partners/directors in

any other firm, which has been caution, listed by the RBI. Where the applicant

declares that they are associated as proprietor/partners/directors in any other firm,

which has been caution, listed by the RBI, they will be allotted IEC No. but with

an additional condition that they can export only with RBI’s prior approval and

they should approach RBI for the purpose.

• Each importer/exporter shall be required to file importer/exporter profile once

with the licensing authority shall enter the information furnished in Appendix 2 in



their database so as to dispense with changes in the information given in

Appendix-2, importer/exporter shall intimate the same to the licensing authority.

IEC EXEMPT CATEGORIES.

The following importer exporter is exempted from the requirement of IEC code number.

• Ministries \ Department of Central or State Government.

• Person importing or exporting goods for their personal use not connected with

trade or manufacture or agriculture.

• Persons importing\exporting goods from\to Nepal & Myanmar provided the CIF

value of single consignment does exceed Indian Rs. 25000\-.

APPLICATION FOR OBTAINING AN IEC NUMBER

For obtaining IEC number apply in the prescribe form along with the documents listed

above to Regional Licensing Authority (Office of the Regional DGFT). The registered

office or the head office may apply for allotment of IEC No.

Whenever, there is a change in the name, address or constitution of the holder of IEC

No., such change should be intimated within 30 days to the concern authorities.

IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is also

endorsed to the concerned banker.

VALIDITY :

The IEC No allotted to a firm/company will be valid for all its branches/divisions

units/factories as indicated in the IEC No. Import/Export of any commodity by that

firm/company. There being no date of expiry, the IEC once allotted is valid till it is

revoked. But, if no import or export is effected in the previous financial year, the same

will be made inoperative. However, this can be made operative by a formal request to the

DGF

IDENTITY CARD (For conducting transactions with the office of DGFT):



As it is not always possible for the top man or directors, promoters of the company to

visit DGFT frequently. There is a provision of issuance of identity cards to the

proprietors/partners/directors and their authorized representatives. An application of

Issuance of an identity card may be made in the form (Appendix-5) The document/

License/Certificate/Permissions may be delivered to the identity card holder and officials

of the Licensing Authority(DGFT)shall not be responsible for any loss etc. In case of loss

of an identity card a duplicate card may be issued on the basis of an FIR & affidavit. In

addition to obtaining the IEC No. the exporter is also required to obtain Business

Identification No(BIN). For this exporter is required to contact DGFT online on web site.

The licensing authority issues BIN in coordination with customs authorities. This BIN is

required to be mentioned on the shipping bills at the time of customs clearance of the

export cargo.

RCMC (Registration-Cum-Membership Certificate) – REGISTRATION WITH

EXPORT PROMOTION COUNCILS –

In order to enable the exporter to obtain benefits/concessions under the Foreign Trade

Policy, the exporter is required to register himself with an appropriate export promotion

agency by obtaining registration-cum-membership certificate. (RCMC). If the export

product is that it is not covered by any EPC, RCMC in respect thereof may be issued by

FIEO. An application for registration should be accompanied by a self certified copy of

the Importer-Exporter Code number issued by the regional licensing authority concerned

and bank certificate in support of the applicants financial soundness. The RCMC shall be

valid for 5 years ending 31st March of the licensing year.

REGISTRATION WITH SALES TAX AUTHORITIES:

Goods that are to be shipped out of the country for export are eligible for exemptions

from both Sales Tax and Central Sales Tax. For this purpose, exporter should get himself

registered with the Sale Tax Authority of is state after following the procedures

prescribed under the Sales Tax Act applicable to his state.

HOW ONE BEGINS TO DO EXPORT



Before entering into the venture of exports, one must look for the product to be exported

and the market where he intends to export.

In case of a manufacturer, obviously he would like to export the product he manufactures

as is or with possible modification as may be required by the market. However, in case of

a merchant exporter or a trader, one has to identity the product to export. If the exporter is

already in the trade in the domestic market and is familiar with the product it would be an

advantage to export the said product of which he has reasonable knowledge.

Before selecting a product, one must simultaneously made a study and find out the

prospective market. For finding out the market for the selected product, the following

methods will help.

• Get statistical information as to imports of the product by various countries

and their growth prospects in the respective countries

•Approach the chamber of commerce for their guidance to find out the market.

• Approach the Export Promotion Council dealing in the product of selection to

get more information.

The Preliminary

Once you are ready with the product you wish to export and have found the market for

the same, you are ready to proceed further. Following sequences can be followed:

• Any one, who wishes to export, must first of all get an Importer Exporter

Code Number (IE Code).This can be obtained by making a formal

application to the office of the Regional Directorate General of Foreign

Trade (DGFT).

• Get yourself registered with the related Export Promotion Council and

become a member . Also arrange to obtain Registration-Cum-Membership

Certificate (RCMC) from the council. This has twin objectives:

o Under the Foreign Trade Policy, it is mandatory that an exporter gets him

registered with the Export Promotion Council to avail of various export

facilities.

o Being a member, you will have access to all the information relating to the

product that could be made available by the council

o Many foreign buyers send their enquiries for the imports to the Export

Promotion Council. Hence you will have few customers interested in your product.

• If you are a manufacturer, find out the provisions under the EXIM Policy of

getting the raw materials duty free.

• Get familiar with the excise formalities as goods meant for export can be cleared

without payment of C. Excise duty on the finished product subject to compliance

of certain formalities.



• Understand the local government regulations in relations to the export of the

product.

• Get information of the government’s regulations of the importing country as to

restrictions on the quantity, product specification, packing regulations, customs

regulations, requirement of specific documents/information etc.

• Availability of Vessels/Airlines, the transport charges, frequency of operation

etc.,

• To look for a Custom House Agent (CHA) (also know as freight forwarders or

clearing agents) for handling the documents/cargo in the customs.

• If the product is covered under any quota regulation, find out the agency/council

who are handling the quota distribution for the product and the availability of

quota for exports.

FINDING A CUSTOMS

Once you have selected the market, the next step is to find a prospective customer.

This you can get

• From the directory of importers of the country

• By writing to the Embassy of India in that country for assistance

• By writing to the chamber of commerce of that country

• By means of participation in a Fair/Exhibition abroad either directly or through

the Export Promotion Council• By participating in international fair if organized locally

• Through the personal contacts in that country. By these processes one can only

have the list of customers. One has to dialogue or correspond with these

customers by sending samples, getting feedback from the customers etc. to

ultimately select the customer with whom to deal with. It is necessary to know the

financial standing of the company which can be obtained through the bank

channel or through the office of ECGC.

NEGOTIATING CONTRACT.

Once the prospective customer is found, the business deal has to be concluded. The

following aspects may be considered before entering into a final contract with the

buyer.

• Credit Worthiness of the Customer.

• Availability of the Steamer/Airlines and the frequency

• The freight charges



• The full product specification

• The quantity, Price

• Terms of Payment

• Type of packing and markings on the packages

•

Mode of shipment & Shipment schedule• Tolerance of quantity to be shipped

• Documentation requirement for the customer

• Documentation requirement of the government of importing country

• Compliance of the local governmental rules and regulations

Before entering into contract one should take note of the above factors. While these are

indicative, the requirements will vary from country to country, product to product and

buyer to buyer.

EXPORT SALES & CONTRACT TERMS & CONDITIONS



Very often exporters do not enter into any formal contract and finalize the trade deal

through the exchange of letters, cable, telex etc. It is, however, expedient that the parties

(exporters & importers) incorporate all important terms & conditions of their trade deal in

a separate document or contract that will avoid disputes arising out of uncertainty or

ambiguity. Export contract may be sent in duplicate along with the Proforma Invoice to

the overseas buyer.

NATURE OF INTERNATIONAL TRADE COUNTRACTS.

There are certain, peculiar characteristics of international trade contract which are not

present in those for sales of goods in the domestic market

Whereas the parties to a domestic trace contract normally needs only agree on the

elements which are necessary for their particular trade transactions like price, description,

quality and quantity of goods, delivery terms etc the situation will be quite different when

the buyer and the seller to sale/purchase contract belong to different countries. The

parties to all international trade contracts provide all their relative rights and obligations

in several ways

For example, they may agree to adopt either the Law of the country of the buyer or that

of the seller. The traders are normally reluctant to leave the determination of the rights

and obligations by implications under the legal system of either’s country. They prefer to

make explicit provisions regarding the rights and obligations by including a set of

detailed and precise terms and conditions in their contract.

EXPORT OF SAMPLES\GIFTS.

Exports of bonafide trade and technical samples of freely exportable items shall be

allowed without any limit. Goods including edible items of value not exceeding Rs.

100000/- in a licensing year, may be exported as a gift. However items mentioned as

restricted for exports in ITC(HS) shall not be exported as a gift without a

licence/certificate/permission, except in the case of edible items.

STANDARD CONTRACT FOMS:

Notwithstanding the efforts made by various national/international organizations like the

United Nations Commission on the International Trade Law, there is still no perfection or

a device which would give the parties an accurate and complete idea of each others

understanding of various trade terms, the commercial practices and the rights and the

obligations vis-à-vis each other so that the misunderstandings are practically eliminated.



Nevertheless, the Indian Council of Arbitration published in 1966 a booklet on “Standard

Contract Forms and Model Arbitration Clause for use in Foreign Trade Contracts”. It was

revised and reprinted in 1969 and 1977. It can be referred to by exporter for various

clause to be incorporated in the Export Contract.

ENTERING INTO AN EXPORT CONTRACT

In order to avoid disputes, it is necessary to enter into an export contract with the

overseas buyer. For this purpose, export contract should be carefully drafted

incorporating comprehensive but in precise terms, all relevant and important conditions

of the trade deal.

There should not be any ambiguity regarding the exact specifications of goods and terms

of sale including export price, mode of payment, storage and distribution methods, type

of packaging, port of shipment, delivery schedule etc. The different aspects of an export

contract are enumerated as under:

• Product, Standards and Specifications

• Quantity

• Inspection

• Total Value of Contract

• Terms of Delivery

• Taxes, Duties and Charges

• Period of Delivery/Shipment

•

Packing, Labeling and Marking• Terms of Payment-- Amount/Mode & Currency

• Discounts and Commissions

• Licenses and Permits

• Insurance

• Documentary Requirements

• Guarantee

• Force Majeure of Excuse for Non-performance of contract

• Remedies

• Arbitration clause

It will not be out of place to mention here the importance of arbitration clause in an

export contract Court proceedings do not offer a satisfactory method for settlement of

commercial disputes, as they involve inevitable delays, costs and technicalities. On the

other hand, arbitration provides an economic, expeditious and informal remedy for

settlement of commercial disputes. Arbitration proceedings are conducted in privacy and

the awards are kept confidential. The Arbitrator is usually an expert in the subject matter



of the dispute. The dates for arbitration meetings are fixed with the convenience of all

concerned. Thus, arbitration is the most suitable way for settlements of commercial

disputes and it may invariably be used by businessmen in their commercial dealings.

ARBITRATION :

Arbitration clause recommended by the Indian Council of Arbitration:”All disputes

or differences whatsoever arising between the parties out of / relating to the meaning,

construction and operation or effect of this contract or the breach thereof shall be settled

by arbitration in accordance with the rules of Arbitration of the Indian Council of

Arbitration and the award made in pursuance thereof shall be binding on the parties” (or

any other arbitration clause that may be agreed upon between the parties).

TERMS OF SHIPMENTS – INCOTERMS



The INCOTERMS (International Commercial Terms) is a universally recognized set of

definition of international trade terms, such as FOB, CFR & CIF, developed by the

International Chamber of Commerce(ICC) in Paris, France. It defines the trade contract

responsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving

tool. The exporter and the importer need not undergo a lengthy negotiation about the

conditions of each transaction. Once they have agreed on a commercial terms like FOB,

they can sell and buy at FOB without discussing who will be responsible for the freight,

cargo insurance and other costs and risks.

The INCOTERMS was first published in 1936 --- INCOTERMS 1936 --- and it is revised

periodically to keep with changes in the international trade needs. The complete

definition of each term is available from the current publication --- INCOTERMS 2000.

Under INCOTERMS 2000, the international commercial terms are grouped into E, F, C

and D, designated by the first letter of the term, relating to the final letter of the term. E.g.

EXW—exworks comes under grouped ‘E’.

The purpose of Incoterms is to provide a set of international rules for the interpretation of

the most commonly used trade terms in foreign trade. Thus, the uncertainties of different

interpretations of such terms in different countries can be avoided or at least reduced to a

considerable degree. The scope of Incoterms is limited to matters relating to the rights

and obligations of the parties to the contract of sale with respect to the delivery of goods.

Incoterms deal with the number of identified obligations imposed on the parties and the

distribution of risk between the parties.

In international trade, it would be best for exporters to refrain, wherever possible, fromdealing in trade terms that would hold the seller responsible for the import customs

clearance and/or payment of import customs duties and taxes and/or other costs and risks

at the buyer’s end, for example the trade terms DEO (Delivery Ex Quay) and DDP

(Delivered Duty Paid)

Quite often, the charges and expenses at the buyer’s end may cost more to the seller than

anticipated. To overcome losses, hire a reliable customs broker or freight forwarder in the

importing country to handle the import routines.

Similarly, it would be best for importers not to deal in EXW (Ex Works) which wouldhold the buyer responsible for the export customs clearance, payment of export customs

charges and taxes, and other costs and risks at s

PROCESSING AN EXPORT ORDER



You should not be happy merely on receiving an export order. You should first

acknowledge the export order, and then proceed to examine carefully in respect of

• Items

• Specification

• Pre-shipment inspection

• Payment conditions

• Special packaging

• Labeling and marketing requirements

• Shipment and delivery date

• Marine insurance

• Documentation requirement etc.

If you are satisfied on these aspects, a formal confirmation should be sent to the buyer,

otherwise clarification should be sought from the buyer before confirming the order.

After confirmation of the export order immediate steps should be taken for

procurement/manufacture of the export goods. In the meanwhile, you should proceed to

enter into a formal export contract with the overseas buyer.

Before accepting any order necessary homework should have been done as to availability

of the production capacity, raw material e.t.c. It would be in the interest of the exporter to

look into entering into forward contract to safeguard against exchange rate fluctuations.

Ensure that the mode of payment is also agreed upon. In case of shipment against letter of

credit, the buyer should be advised to open the credit well in advance before effecting the

shipment.

FINANCIAL RISKS INVOLVED IN FOREIGN TRADE



As an exporter while selling goods abroad, you encounter various types of risks. The

major risks which you have to undergo are as follows:

• Credit Risk

• Currency Risk

• Carriage Risk

• Country Risk

You can protect yourself against the above risks by initiating appropriate steps.

Credit Risks :

You can cover your credit risk against the foreign buyer by insisting upon opening a

letter of credit in your favour. Alternatively one can avail of the facility offered by

various credit risk agencies. A specific insurance cover can also be obtained from ECGC

(Exports Credit & Guarantee Corporation) to cover your country risk besides covering

credit risk.

Currency Risks:

As regards covering the currency risk, due to the exchange rate fluctuations, you can

request your banker to book a forward contract.

Carriage Risk:

The carriage risk can be covered by taking an appropriate general insurance policy.

Country Risk:

ECGC provides cover to protect the exporter from country risks. A detailed procedure

how an exporter can get himself protected against the above risks are given in separate

chapters later.

EXPORT DOCUMENTS



Any export shipment involved various documents required by various authorities such as

customs, excise, RBI, Inspection and according depending upon the requirements, there

are categorized into 2 categories, namely commercial documents and regulatory

documents.

A. Commercial Documents. : - Commercial documents are required for effecting

physical transfer of goods and their title from the exporter to the importer and the

realisation of export sale proceeds. Out of the 16 commercial documents in the

export documentation framework as many as 14 have been standardised and

aligned to one another. These are proforma invoice, commercial invoice, packing

list, shipping instructions, intimation for inspection, certificate, of inspection of

quality control, insurance declaration, certificate' of insurance, mate's receipt, bill

of lading or combined transport document, application for certificate origin,

certificate of origin, shipment advice and letter to the bank for collection or

negotiation of documents. However, shipping order and bill of exchange could

not be brought within the fold of the Aligned Documentation System,

1. Commercial Invoice: Commercial invoice is an important and basic export

document. It is also known as a 'Document of Contents' as it contains all the

information required for the preparation of other documents. It is actually a seller's

bill of merchandise. It is prepared by the exporter after the execution of export

order giving details about the goods shipped. It is essential that the invoice is

prepared in the name of the buyer or the consignee mentioned in the letter of credit.It is a prima facie evidence of the contract of sale or purchase and therefore, must

be prepared strictly in accordance with the contract of sale.

Contents of Commercial Invoice

• Name and address of the exporter.

• Name and address of the consignee.

• Name and the number of Vessel or Flight.

• Name of the port of loading.

• Name of the port of discharge and final destination.

• Invoice number and date.

• Exporter's reference number.

• Buyer's reference number and date.

• Name of the country of origin of goods.

• Name of the country of final destination.



• Terms of delivery and payment.

• Marks and container number.

• Number and packing description.

• Description of goods giving details of quantity, rate and total amount in terms of

internationally accepted price quotation.• Signature of the exporter with date.

Significance of Commercial Invoice

• It is the basic document useful in preparation of various other shipping

documents.

• It is used in various export formalities such as quality and pre-Shipment

inspection excise and customs procedures etc.

• It is also useful in negotiation of documents for collection and claim of incentives.

• It is useful for accounting purposes to both exporters as well as importers.

2 Inspection Certificate: The certificate is issued by the inspection authority such as

the export inspection agency. This certificate states that the goods have been

inspected before shipment, and that they confirm to accepted quality standards.

3 Marine insurance policy: Goods in transit are subject to risk of loss of goods

arising due to fire on ship, perils of sea, theft etc. marine insurance protects losses

incidental to voyages and in land transportation. Marine insurance policy is one of

the most important document used as collateral security because it protects the

interest of all those who have insurable interest at the time of loss. The exporter is

bound to insure the goods in case of CIF quotation, but he can also insure the goods

in case of FOB contract, at the request of the importer, but the premium payment

will be made by the exporter. There are different types of policies such as

• SPECIFIC POLICY: This policy is taken to cover different risks for a

single shipment. For a regular exporter, this policy is not advisable as he

will have to take a separate policy every time a shipment is made, so this

policy is taken when exports are in frequent.

• Floating Policy: This is taken to cover all shipments for some months.

There is no time limit, but there is a limit on the value of goods and once

this value is crossed by several shipments, then it has to be renewed.• Open Policy: This policy remains in force until cancelled by either party

i.e. insurance company or the exporter.

• Open Cover Policy: This policy is generally issued for 12 months period,

for all shipments to one or more destinations. The open cover may specify

the maximum value of consignment that may be sent per ship and if the

value exceeded, the insurance company must be informed by the exporter.



• Insurance Premium: Differs upon product to product and a number of

such other factors, such as, distance of voyage, type and condition of

packing, etc. Premium for air consignments are lowered as compared to

consignments by sea.

4. Consular Invoice: Consular invoice is a document required mainly by the

Latin American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand,

Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This

invoice is the most important document, which needs to be submitted for

certification to the Embassy of the importing country concerned. The main purpose

of the consular invoice is to enable the authorities of the importing country to

collect accurate information about the volume, value, quality, grade, source, etc., of

the goods imported for the purpose of assessing import duties and also for statistical

purposes. In order to obtain consular invoice, the exporter is required to submit

three copies of invoice to the Consulate of the importing country concerned. TheConsulate of the importing country certifies them in return for fees. One copy of the

invoice is given to the exporter while the other two are dispatched to the customs

office of the importer's country for the calculation of the import duty. The exporter

negotiates a copy of the consular invoice to the importer along with other shipping

documents.

Significance of Consular Invoice for the Exporter

• It facilitates quick clearance of goods from the customs in exporter's as well

as importer's country.

• Certification' of goods by the Consulate of the importing country indicarer

that the importer has fulfilled all procedural and licensing formalities for

import of goods.

• It also assures the exporter of the payment from the importing country.

Significance of Consular Invoice for the Importer

• It facilitates quick clearance of goods from the customs at the port

destination and therefore, the importer gets quick delivery of goods.

• The importer is assured that the goods imported are not banned for imported

in his country.

Significance of Consular Invoice for the Customs Office



• It makes the task of the customs authorities easy.

• It facilitates quick calculation of duties as the value of goods as determine

by the Consulate is considered for the purpose.

5. Certificate of Origin: The importers in several countries require a certificate of

origin without which clearance to import is refused. The certificate of origin states

that the goods exported are originally manufactured in the country whose name is

mentioned in the certificate. Certificate of origin is required when:-

• The goods produced in a particular country are subject to’ preferential tariff rates

in the foreign market at the time importation.

• The goods produced in a particular country are banned for import in the foreign

market.

Contents of Certificate of Origin

• Name and logo of chamber of commerce.

• Name and address of the exporter.

• Name and address of the consignee.

• Name and the number of Vessel of Flight

• Name of the port of loading.

• Name of the port of discharge and place of delivery.

• Marks and container number.

•

Packing and container description.• Total number of containers and packages.

• Description of goods in terms of quantity.

• Signature and initials of the concerned officer of the issuing authority.

• Seal of the issuing authority.

6. Bill of Lading: The bill of lading is a document issued by the shipping

company or its agent acknowledging the receipt of goods on board the vessel, and

undertaking to deliver the goods in the like order and condition as received, to the

consignee or his order, provided the freight and other charges as specified in the bill

have been duly paid. It is also a document of title to the goods and as such, is freely

transferable by endorsement and delivery.

Bill of Lading serves three main purposes:



• As a document of title to the goods;

• As a receipt from the shipping company; and

• As a contract for the transportation of goods.

7. Airway Bill: An airway bill, also called an air consignment note, is a receipt

issued by an airline for the carriage of goods. As each shipping company has its own bill

of lading, so each airline has its own airway bill. Airway Bill or Air Consignment Note is

not treated as a document of title and is not issued in negotiable form.

7. Shipment Advice to Importer:- After the shipment of goods, the exporter

intimates the importer about the shipment of goods giving him details about the date

of shipment, the name of the vessel, the destination, etc. He should also send one

copy of non-negotiable bill of lading to the importer.8. Packing List: The exporter prepares the packing list to facilitate the buyer to check

the shipment. It contains the detailed description of the goods packed in each case,

their gross and net weight, etc. The difference between a packing note and a

packing list is that the packing note contains the particulars of the contents of an

individual pack, while the packing list is a consolidated statement of the contents of

a number of cases or packs.

9. Bill of Exchange: The instrument is used in receiving payment from the importer.

The importer may prefer Bill of Exchange to LC as it does not involve blocking of

funds. A bill of exchange is drawn by the exporter on the importer, to make

payment on demand at sight or after a certain period of time.

B Auxiliary Documents: These documents generally form the basic

documents based on which the commercial and or regulatory

documents are prepared. These documents also do not have any

fixed formats and the number of such documents will wary

according to individual requirements.

1. Proforma Invoice: The starting point of the export contract is in the form of offer

made by the exporter to the foreign customer. The offer made by the exporter is in

the form of a proforma invoice. It is a quotation given as a reply to an inquiry. It

normally forms the basis of all trade transactions

2. Declaration of Insurance: Where the contract terms require that the insurance

to be covered by the exporter, the shipper has to give details of the shipment to



the insurance company for necessary insurance cover. The detailed declaration

will cover:

• Name of the shipper \ exporter.

• Name & address of buyer.

• Details of goods such as packages, quantity, value in foreign

currency as well as in Indian Rs. Etc.

• Name of the Vessel \ Aircraft.

• Value for which insurance to be covered.

3. Application of the Certificate Origin: In case the exporter has to obtain

Certificate of Origin from the concerned authorities, an application has to be

made to the concerned authority with required documents. While the simple

invoice copy will do for getting C\O from the chamber of commerce, in respect of

obtained the same from the office of the Textile Committee or Export PromotionCouncil, the documents requirement are different.

4. Mate's Receipt : Mate's receipt is a receipt issued by the Commanding Officer of

the ship when the cargo is loaded on the ship. The mate's receipt is a prima facie

evidence that goods are loaded in the vessel. The mate's receipt is first handed

over to the Port Trust Authorities. After making payment of all port dues, the

exporter or his agent collects the mate's receipt from the Port Trust Authorities.

The mate's receipt is freely transferable. It must be handed over to the shipping

company in order to get the bill of lading. Bill of lading is prepared on the basis of

the mate's receipt.

C. Regulatory Document: Regulatory pre-shipment export documents are prescribed

by the different government departments and bodies in order to comply with various rules

and regulations under the relevant laws governing export trade such as export inspection,

foreign exchange regulation, ex port trade control, customs, etc. Out of 9 regulatory

documents four have been standardised and aligned. These are shipping bill or bill of

export, exchange control declaration (GR from), export application dock challan or port

trust copy of shipping bill and receipt for payment of port charges.

1. Shipping Bill: Shipping bill is the main customs document, required by the

customs authorities for granting permission for the shipment of goods. The

cargo is moved inside the dock area only after the shipping bill is duly

stamped, i.e. certified by the customs. Shipping bill is normally prepared in

five copies :-

• Customs copy.

• Drawback copy.



• Export promotion copy.

• Port trust copy.

• Exporter's copy.

D. Other Document:

• Black List Certificate: it certifies that the ship/aircraft carrying the

cargo has not touched the particular country on its journey or that the

goods are not from the particular country. This is required by certain

nations who have strained political and economical relations with the

so called “Black Listed Countries”.

• Language Certificate: Importers in the European Community require a

language certificate along with the GSP certificate in respect of

handloom cotton fabrics classifiable under NAMEX code 55.09.Generally four copies of language certificate are prepared by the

concerned authority who issues GSP certificate. Three copies are

handed over to the exporter. A copy is sent along with the other

documents for realisation of export proceeds.

• Freight Payment Certificate: in most of the cases, the B/L or AWB

will mention the transportation and other related charges. However if

the exporter does not want these details to be disclosed to the buyer, the

shipping company may issue a separate certificate for payment of the

freight charges instead of declaring on the main transport documents.

This document showing the freight payment is called the freight

certificate.

• Insurance Premium Certificate: this is the certificate issued by the

Insurance Company as acknowledgement of the amount of premium

paid for the insurance cover. This certificate is required by the bank for

arriving at the fob value of the goods to be declared in the bank

certificate of realisation.

• Combined Certificate of Origin and Value: this certificate is required

by the Commonwealth Countries. This certificate is printed in a special

way by the Commonwealth Countries. This certificate should contain

special details as to the origin and value of goods, which are useful for

determining import duty. All other details are generally the same as

that of Commercial Invoice, such as name of the exporter and the

importer, quality and quantity of the goods etc.



• Customs Invoice: this is required by the countries like Canada, USA

for imposing preferential tariff rates.

• Legalized Invoice: this is required by the certain Latin American

Countries like Mexico. It is just like consular invoice, which requires

certification from Consulate or authorised mission, stationed in the

exporter’s country.

Pre-Shipment Documents:

• Shipping bill.

• Export order/Sales contract/Purchase order.

• Letter of Credit

• Commercial invoice.

• Packing list.• Certificate of origin.

• Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or SDF.

• Certificate of Inspection.

• Various declarations required as per custom procedure.

Exchange Control Declaration Form: all exports to which the requirement of

declaration apply must be declared on appropriate forms as indicated below unless the

consignment is of samples and of ‘No Commercial Value’

• GR FORM: to be completed in duplicate for exports otherwise than by

post including export of software in physical form i.e. magnetic

tape/discs and paper media.

• SDF FORM: to be completed in duplicate and appended to the

Shipping Bill for export declare to the customs offices notified by the

Central Government which have introduced EDI system for processing

Shipping Bill.

• PP FORM: to be completed in duplicate for export by post.

• SOFTX: to be completed in triplicate for export of software otherwise

than in the physical form i.e. magnetic tapes/discs and paper media.

MARINE INSURANCE POLICY



Goods in transit are subject to risks of loss of goods arising due to fire on the ship, perils

of sea, thefts etc. Marine insurance protects losses incidental to voyages and in land

transportation.

Marine Insurance Policy is one of the most important document used as collateral

security because it protects the interest of all those who have insurable interest at the time

of loss. The exporter is bound to insure the goods in case of CIF quotation, but he can

also insure the goods in case of FOB contract, at the request of the importer, but the

premium payment will be made by the exporter.

There are different types of policies such as

Specific Policy: This policy is taken to cover different risks for a single shipment. For a

regular exporter, this policy is not advisable as he will have to take a separate policy

every time the shipment is made, so this policy is taken when exports are infrequent.

Floating Policy: This policy is taken to cover all shipments for same months. There is no

time limit, but there is a limit on the value of goods and once this value is crossed by

several shipments, then it has to be renewed.

Open Policy: This policy remains in force until cancelled by either party, i.e. insurance

company or the exporter.

Open Cover Policy: This policy is generally issued for 12 months period, for all

shipments to one or all destinations. The open cover may specify the maximum value of

consignment that may be sent pre ship and if the value exceeded, the insurance company

must be informed by the exporter.

Insurance Premium: Differs upon from product to product and a number of other such

factors, such as, distance of voyage, type and condition of packing etc. Premium for air

consignments are lower as compared to consignments by sea.

The Insurance Policy Normally Contains:

• The name and address of the insurance company.

• The name of the assured & description of the risk covered.

• A description of the consignment.

• The sum insured & the date of issue.

QUALITY CONTROL AND PRE-SHIPMENT INSPECTION



Realizing the importance of the need for supplying quality goods as per international

standards, the Government of India has introduced Compulsory Quality Control and Pre-

Shipment Inspection of over 1050 items of export under Export (Quality Control and Pre-

Shipment Inspection) Act 1963.

At present, the export items that are subjected to compulsory inspection includes food

and agricultural products, chemicals, engineering, coir, jute and footwear.

Systems of Quality Control:

For the purpose of pre-shipment inspection, EIC has recognized three systems of

inspection namely:

• Self-Certification

• In-Process Quality Control

• Consignment Wise Inspection

Self-Certification:

Under this system, complete authority is given to the manufacturing units to certify

their own products and issue certificates for export. The manufacturing units which

have been recognized under this scheme have to pay a nominal yearly fee at the rate

of 0.1% of FOB price subject to minimum of Rs.2,500/- and maximum of Rs.1 lakh

in a year to the concerned EIA

In-Process Quality Control (IPQC):

In this system, companies/units adjusted as having adequate level of quality control right

from raw material stage to the finished product stage including packaging are eligible to

get the inspection certificate on a formal request by the exporter. Over 800 units all over

India are operating under this system.

Constant vigil and surveillance are kept on units approved under IPQC and self-

certification system. Units approved under the above two systems are often known as

“Export worth Units”, because of their consistent standards of quality.

SHIPPING AND CUSTOMS FORMALITIES



(As per the Prevailing Law i.e., ICA 62)

The shipment of export cargo has to be made with prior permission of, and under the

close supervision of the custom authorities. The goods cannot be loaded on board the ship

unless a formal permission is obtained from the custom authorities. The custom

authorities grant this permission only when it is being satisfied that the goods being

exported are of the same type and value as have been declared by the exporter or his C&F

agent, and that the duty has been properly determined and paid, if any.

The custom procedure can be briefly explained as follows:

• Submission of Documents: The exporter or his agent submits the necessary

documents along with the shipping bill to the Custom House. The documents

include:

o ARE-1 (Original and duplicate)

o Excise gate pass (Original and duplicate transporters’ copy

o Proforma Invoice

o Packing List

o GRI form (Original and duplicate)

o Customs Invoice (where required in the importing country)

o Original letter of credit/contract

o Declaration form in triplicate

o Quality Certificate

o Purchase memo

o Labels

o Licence (if any required) including advance licence copy

o Railway receipt/lorry way bill

o Inspection Certificate by Export Inspection Agency

• Verification of Documents: The Customs Appraiser verifies the documents and

appraises the value of goods. He then makes an endorsement of “ExaminationOrder” 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



o Original Copy of GR to be forwarded to RBI

o Original copy of shipping bill

o One copy of commercial invoice

• Carting Order: The exporter’s agent has to obtain the carting order from 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. The Carting Order enables the exporter’s agent to cart goods inside

the docks and store them in proper sheds.

• Storing the Goods in the Sheds: After securing the carting order, the goods are

moved inside the docks. The goods are then stored in the sheds at the docks.

•Examination of Goods: The exporter’s agent then approaches the customsexaminer to examine the goods. The customs examiner examines the cargo and

records his report on the duplicate copy of the shipping bill. The customs

examiner then sings the “Let Export Order”

• Let Export Order: The Let Export Order is then shown to the Customs

Preventive Officer, along with other documents. The CPO is in charge of

supervision of loading operations on the vessel. If CPO finds everything in order,

he endorses the duplicate copy of shipping bill with the “Let Ship Order” This

order helps the exporter/shipper to load the goods on the ship.

• Loading Goods: The goods are then loaded on the ship. The CPO supervises the

loading operations. After loading is completed, the Chief Mate (Cargo Officer) of

the ship issues the “Mate’s Receipt”. The Mate’s Receipt is sent to the Port Trust

Office. The C&F agent pays the port trust dues and collects the mate’s receipt.

The C&F agent then approaches the CPO and gets the certification of shipment of

goods on AR Forms and other documents

• Obtaining Bill of Lading: The Mate’s Receipt is then handed over to the

shipping company (on whose vessel the goods are loaded). The shipping company

issues bill of lading. The Bill of Lading is issued in:

o 3 negotiable copies of Bill of Lading

o 10 to 12 Non-negotiable copies of Bill of Lading.

The negotiable copies have title to goods; whereas non-negotiable copies do not have

title to goods but are used for record purpose.



PROCEDURE OF EXCISE CLEARANCE:

The common procedure of excise clearance under “bond” and under “rebate” is

discussed as follows:

• Preparing of Invoice: The export goods have to be cleared from the factory

under invoice. The invoice contains details like name of the exporter, value of

goods, excise duty chargeable, etc. The invoice is to be prepared in triplicate. In

case of export under Bond, the invoice should be marked as “For Export without

payment of duty”. In addition to the invoice, a prescribed for ARE 1 has to be

filed in by exporter.

• Filling up of ARE-1 form (Annexure-20): The ARE-1 form needs to be filled in

four copies. A fifth (Optional) may be filled in by the exporter, which can be used

at the time of claiming other export incentives. The ARE-1 copies have distinct

color for the purpose of verification and processing.

• Application to Assistant Commissioner of Central Excise (ACCE): The

exporter has to make an application to ACCE regarding the removal of goods

from the factory/warehouse for export purpose.

• Information to Range Superintendent of Central Excise (RSCE): The ACCE

will inform the RSCE under whose jurisdiction the goods are intended to be

cleared for export

• Deputation of Inspector: The RSCE will then depute an inspector to clear the

goods, either at the factory or warehouse, and in certain cases at the port.• Processing of ARE-1 Form: The Excise Officer/Inspector will make

endorsement on all copies of ARE-1. The handling of ARE-1 Form is done as

follows:

o The inspector returns the original and duplicate copies to the

exporter

o The triplicate copy is sent to officer (ACCE or Maritime

Commissioner (MCCE) to whom bond was executed or letter of

undertaking (LUT) was given. This copy can also be handed over

to the exporter in a tamper proof sealed cover to be submitted to

ACCE/MCCE.

o The 4th copy will be retained by the excise inspector.

o The 5th copy is also handed over to the exporter.

o At the time of export, original, duplicate and the 5 th copy (optional)

will be submitted to customs officer. The customs officer will

examine these copies and then export will be allowed.



• Refund or Release of Bond: The exporter should make an application to the

excise officer for refund or release of bond. The application must be supported by

original copy of ARE-1 form. The excise officer crosschecks the original copy of

ARE-1 form and the duplicate and triplicate copies of ARE-1 form, which he had

received earlier. If the copies match, then refund is given or the bond is released.

FACTORY STUFFING OF CARGO

Clearance of goods to docks: If the goods meant for export is of a small quantity

which may not be sufficient to make one full container, the cargo is said to be less

than container load (LCL) cargo. Such cargo has to be taken to the docks where the

goods will be consolidated (combining the cargo of other exporters to make up

quantity for a full container) by the agent and loaded into a container. Here the

examination of the cargo is done at the docks.(There are also inland container depots

approved by the customs where the goods can be consolidated and stuffed into the

container by the agent under the supervision of the customs officer)

If the goods meant for export is of sufficient quantity to make up a full container, the

exporter has the option to take the goods to the docks and get them examined and

stuffed into a separate container. An exporter gets the benefit on the freight amount

for a full container. (Generally called box rate)

Alternatively, he can have a container allotted to him and get the same to his Mills

Premises. The goods meant for exports can be stuffed into the container under the

supervision of the regional Central Excise Authority. Here the exporter has to

• Obtain permission from the Customs for getting the container to his mills

premises for stuffing (House Stuffing)

• Inform the C.Excise Authorities at least 24 hours before bringing the

container for loading.

The C.Excise Authority will supervise the loading, seal the container and certify the

invoice as directed in the permission given by the custom authorities. A special Lock isused to lock the doors of the container. Samples from the goods will be drawn, if

necessary, as required under the customs permission. Such samples will be sealed and

forwarded along with the container. The examiner in the docks may arrange to send the

sample for testing. Then the container is moved to the dock for loading. Generally, such

containerized goods are not subject to further examination in the customs. They will be

directly taken for loading.



SALES TAX EXEMPTION PROCEDURE

Export good are exempted from the payment of sales tax. The exporter can claim

exemption from sales tax (on purchases or sales for export purpose), provide the exporter

is registered with the Sales-Tax Department. If the exporter is not registered with the

sales tax department, he cannot utilize the facility of sales tax exemption. Therefore, it is

necessary for the exporter to get his organization registered with sales tax department.

I Registration Procedure

• Application: The exporter must apply to the Sales Tax Officer (STO)

under whose jurisdiction the head/ registered office of the exporter is located.

• Deputation of Inspector: The STO may depute an inspector to visit the

office of the exporter and inspect:

o Relevant books showing sales/ purchases.

o Partnership Deed or Memorandum and Articles of Association

along with Incorporation Certificate.

o Other Relevant documents.

• Inspection: The inspector visits the office of the exporter and inspects the

necessary books and other documents.

• Report by Inspector: The Sales Tax Inspector makes a report to the STO for

registration or otherwise. The STO verifies the inspector report. The STO, before

granting the ST Reg. Number may cal the exporter for necessary clarifications, if

required.

• Security Bond: The STO normally requires the exporter to provide a security

bond from another firm which is registered with the Sales Tax Department.

• Granting of Sales Tax Reg. Number: After completing necessary formalities, the

STO grants Sales Tax Reg. Number to the exporter.

II. Exemption Procedure

• Obtaining Form ‘H’: the registered exporters need to apply to the concerned STO

for obtaining Form ’H’. the exporter should submit:

o A copy of Letter of Credit

o A copy of Letter of Credit /Export Order.



o Copy of the Invoice , where goods are already purchased for export

purchase.

o A copy of shipping bill duty certified by customs.

The exporter has to affix the prescribed court fee stamp on each of the Form ‘H’ issued.

The STO then affixes the exporter’s company stamp on the Form ’H’.

• Filling the details in Form ‘H’ : After export of goods, the exporter fills the

relevant details in ‘Form H’. The Form ‘H’ needs to be prepared in triplicate.

The exporter retains one copy, and other two copies are sent to the seller from whom the

exporter purchased the goods for export purpose. The seller than sends on copy of Form

‘H’ to STO along with the Return of Sales Tax. The other copy is retained by seller. The

STO may issue refund order to the exporter.



METHODS OF RECEIVING PAYMENT AGAINST EXPORTS

Before we proceed to understand the concept of Letter of Credit, let us understand the

various types of payment methods available against export.

METHODS OF PAYMENT

There are three methods of payment depending upon the terms of payment, and each

method of payment involves varying degrees of risks for the exporter. The methods are:

• Payment in advance

• Documentary Bills

• Letter of Credit

• Open Account

• Counter Trade

A. PAYMENT IN ADVANCE

This method does not involve any risk of bad debts, provided entire amount has been

received in advance. At times, a certain per cent is paid in advance, say 50% and the rest

on delivery. This method of payment is desirable when:

• The financial position of the buyer is weak or credit worthiness of the buyer is

not known.

• The economic/ political conditions in the buyer’s country are unstable.

• The seller is not willing to assume credit risk, as un the case of open account

method.

However, this is the most unpopular methods as a foreign buyer would not be willing to

pay advance of shipment unless:

• The goods are specifically designed for the customer, and

• There is heavy demand for the goods (a seller’s market situation).

B. DOCUMENTARY BILLS:

Under this method, the exporter agrees to submit the documents to his bank along with

the bill of exchange. The minimum documents required are

• full set of bill of lading

• commercial Invoice



• Marine Insurance policy and other document, if required.

There are two main types of documentary bills:

• Documents against Payment,

• Documents against Acceptance.

Documents against payment (D/P): 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 that the importer may refuse to accept the documents and to pay

against them. The reason 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:

• The document remain in the hands of the bank and the exporter does not lose

possession or the ownership of goods till payment is made,

• Other reason may include that the exporter may not be able to allow credit and

wait for payment.

Documents Against acceptance (D/A): The document are released against acceptance

of the Time Draft i.e. credit allowed for a certain period, say 90 days. However, the

exporter need not wait for payment till bill is met on due date, as he can discount the bill

with the negotiating bank and can avail of funds immediately after shipment of goods.

In case of D/A as compared to D/P bills, the risk involved is much grater, as the

importer has already taken possession of goods which may or may not be in his custody

on the maturity date of the bill. If the importer fails to pay on due date, the exporter, will

have to start civil proceedings to receive his payment, if all other alternatives fails. The

risk involved can be insured with ECGC.

C. LETTER OF CREDIT (L/C):

This method of payment has become the most popular form in recent times, it is moresecured as company to other methods of payment (other than advance payment).

A letter of credit can be defined as “ an undertaking by importer’s bank stating that

payment will be made to the exporter if the required documents are presented to the bank

within the variety of the L/C”.



PROCEDURE INVOLVED IN THE LETTER OF CREDIT

The following are the step in the process of opening a letter of credit:

• Exporter’s Request: The exporter requests the importer to issue LC in his favor.

LC is the most secured form of payment in foreign trade.

• 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 his current account with the bank.

• Issue of LC: The issuing bank issues the L/C and forwards it to its correspondent

bank with also 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 so required by the beneficiary.

• Receipt of LC: the exporter takes in his possession the L/C. He should see it that

the L/C is confirmed.

•Shipment of Goods: Then exporter supplies the goods and presents the full set of documents along with the draft to the negotiating bank.

• Scrutiny of Documents: The negotiating bank then scrutinizes the documents and

if they are in order makes the payment to the exporter.

• Negotiation: The exporter’s bank negotiates the document against the letter of

credit and forwards the export documents to the L/C opening bank or as per their

instructions.

• Realization of payment: The issuing bank will reimburse the amount (which is

paid to the exporter) to the negotiating bank.

• Document to Importer: the issuing in turn presents the documents to the importer

and debits his account for the corresponding amount.

In order to have uniformity and to avoid disputes, the ICC Paris has evolved uniform

customs and practices of documentary credit (UCPDC), in short known as UCP 500

effective from 1-1-96. These are rules have been adopted by more than 150 countries.

They provide the comprehensive and practical working aid to banker, lawyer, importers,

exporters, Exporters, transporters, executives involved in international trade.

Note: as soon as an L/C is received ensure that the same is authenticated. Meaning that

the genuineness of the L/C is certified by the Advising Bank by an endorsement with themarking ‘AUTHENTICATED’ OR ELSE THE L/C IS OF NO USE.



PREPARATION AND SUBMISSION OF DOCUMENTS FOR

BANK NEGOTTIATION /PURCHASE

Document against exports should normally be realized through an authorized dealer

foreign exchange. However payment of export can be received directly from the overseas buyer in the form of bank draft, pay order, banker’s cheque, personal cheque foreign

currency notes, foreign currency traveler’s cheque, etc. Without any monetary limit

provided the exporter’s track record is good, he is a customer of the authorized dealers

through whom documents are to be negotiated and prima facie the instrument of payment

represents export proceeds realization. Take care to submit various documents in a proper

manner and within the prescribed time schedule. Apply to the Reserve Bank for extension

of time in case you feel there is likely to be a delay in realizing export proceeds.

The following are the steps in realizing export proceeds:

• Approaching a Bank: After dispatch of the goods, either by sea, or by air, the

exporter should approach his bank (authorized dealer) with a formal request to

realize sale proceeds from the foreign buyer. It is obligatory to submit the

shipping documents to an authorized dealer within 21 days of the date of

shipment (subject to certain exceptions). In India, the exporters have to realize the

full value of exports within 180 days from the date of shipment, (unless the

payment terms offered are “deferred payment terms”). Where it is not possible to

realize the sale proceeds within the prescribed period, the exporter should apply

for extension in prescribed form ETX (in duplicate) to RBI.

• Submission of Documents to the Bank: The exporter should submit the following

documents

o Bill of Exchange

o Full set of Bill of Lading

o Commercial Invoice Copies

o Certificate of Origin

o Insurance Policy

o Inspection Certificate

o Packing List

o GR (duplicate copy to forward it to RBI)

o Bank Certificate

o Other relevant documents.

The above documents need to be submitted in two complete sets, because it is

customary to dispatch two sets of documents, one after the other. This is because,



if one set is misplaced or delayed in transit, the importer can get at least the other

set and clear the goods.

• Verification of Documents: The bank will verify the documents to find

o Whether the required documents are in order.

o Whether the required documents are attested by customs and other

authorities.

• Letter of Indemnity: If the exporter wants immediate payment from his bankers,

then his bankers may provide advance payment only when the exporter signs an

indemnity letter. The implications of an indemnity letter is that in the event of

refusal of payment by the issuing bank in respect of LC, then the negotiating bank

can ask the exporter to pay back the money advanced along with necessary

charges.

Common Document Discrepancies

o Credit Expired

o Late shipment

o Presented after permitted time from date of issue of shipping

documents

o Short Shipment

o Credit Amount Exceeded

o Underinsured

o Description of goods on invoice differ from that of credit

o Mark and numbers differ between documents

o Bill of lading, Insurance documents, Bill of Exchange not endorsed

correctly

o Absence of Documents called for under credit.

o Insurance certificate submitted instead of policy.

o Weight in different document differs.

o Class of Bill of lading no acceptable-charter party or House B/L.

o Insurance cover expressed in currency other than that of credit.

o Absence of signature, where required on documents.

o Bill of exchange not drawn as per tenor stated in credit.

o Bill of exchange drawn on wrong party.

o Insurance risks covered not being those specified in credit.

o Absence of freight paid statement on B/L in CFR of CIF shipment.



o Bill of lading doses not carry shipped on broad stamp.

o Amount shown on invoice and bill of exchange differ.

o Shipment not make to port specified.

o Transshipment/part shipment undertaken where expressly forbidden.

•

Discounting of bills: the bank may discount or negotiate the bills drawn against LC, and make immediate payment to the

exporter, if so required.

• Dispatch of documents: before the submission of

documents for negotiation/collection, the bank examines them thoroughly with

reference to the terms and conditions of the buyer’s order. Letter of credit and the

laws relating to foreign exchange control. If any scrutiny, the documents are in

order, the bank dispatches them to its overseas branch/correspondent branch as

early as possible. The overseas branch of the bank then submits the document to

the importer’s bank, and the importer’s bank hands it over to the importer.



SHIPMENT THROUGH COURIERS

In addition to the exporter by sea, air, rail or road, exports are also allowed by courier under the courier imports or exporters (clearance) Regulation Act, 1998.

These regulations shall apply for clearance of goods carried by authorized courier on

outgoing flights on behalf of exports. Consigner for a commercial consideration.

Export Terms & conditions:

Export of any item can be affected by courier, except the following.

•

Goods which are subject to cess.• Goods proposed to be exported with claim of duly drawback.

• Goods proposed to be exported under DEPB, EPCG, AL (Advance License)

• Where the value of goods is more than Rs. 25,0000/-

• Goods where weight of individual packet is more than 32 kg.



CUSTOM PROCEDURE FOR EXPORT UNDER EDI

SYSTEM

It is brought to the notice of all exporters, importers, CHAs, Trade and General Public

that the computerized processing of Shipping Bills under the Indian Customs EDI

(Electronic Data Interchange) System – (Exports), will commence w.e.f.1`5-09-2004.

The computerized processing of shipping bills would be in respect of the following

categories:

• Duty Free white shipping bills

• Dutiable shipping bills (Cess)

• DEEC Shipping Bills

• EPCG Shipping Bills

• DEPB Shipping Bills

• DFRC Shipping Bills

• 100% EOU Shipping Bills

• Re export, Jobbing Shipping Bills

• Drawback Shipping Bills

• Other NFEI Shipping Bills

The procedure to be followed in respect of filing of shipping bills under the Indian

customs EDI System-Exports at CFS-Mulund shall be as follows:

2. DATA ENTRY FOR SHIPPING BILLS

2.1 Exporters/CHAs are required to register their IE codes, CHAs Licence

Nos, and the Bank A/C No.(for credit of Drawback amount) in the

Customs Computer Systems before an EDI Shipping Bill is filed.

2.2 Exporters/CHAs would be required to submit at the SERVICE CENTRE

the following documents.

• A declaration in the specified format

• SDF declaration

• Quota/Inspection Certificate

• Drawback/DEEC/DFRC/DEPB Declarations etc., as applicable



2.3 The formats should be duly completed in all respects and should be signed

by the exporter or his authorized CHA . Forms, which are incomplete or

unsigned will not be accepted for data entry

2.4 Initially, data entry for Shipping Bills will be allowed to be made only at

the Service centre. After the exporters/CHAs become conversant with the

EDI procedures, the option of Remote EDI System would also be made

available. In the Remote EDI system (RES) Exporters/CHAs can

electronically file their shipping bills from their offices.

2.5 The schedule of charges to be levied for data entry at the Service Centre is

as follows:

Charges for S/Bills having up to five items ... Rs.60/-

Charges for additional block of five items ... Rs.10/-

Amendment fees (for a block of five items) ... Rs.10/-

Printing of a S/Bill for Remote EDI System ... Rs.20/-

2.6 The Service Centre operators shall carefully enter the data on the basis of

declarations made by the CHAs/Exporters. After completion of data entry,

the checklist will be printed by the Data Entry Operator and shall be

handed over to the Exporters/CHAs for confirmation of the correctness.

Thereafter, the CHA/Exporters will make corrections, if any, in the

checklist and return the same to the operator duly signed. The operator shall make the corresponding corrections in the date and shall submit the

shipping bill. The operator shall not make any amendment after generation

of the checklist and before submission in the system unless the corrections

made by the CHAs/Exporters are clearly indicated on the checklist against

the respective fields and duly authenticated by CHA/Exporters signature.

2.7 The system automatically generates the S/Bill Number. The operator shall

endorse the same on the checklist in clear and bold figures. It should be

noted that no copy of the S/Bill would be available at this stage.

2.8 The declarations would be accepted at the service centre from 10.00 hrs to

16.30 hrs. Declarations received up to 16.30 hrs will be entered in thecomputer system on the same day.

2.9 The validity of the S/Bill in EDI System is fifteen days only. After expiry

of fifteen days from the date of filing of shipping bill, the exporter has to

file the declaration afresh.



3 PROCEDURE FOR GR-1

3.1 Under the revised EDI procedure there would be no GR-1 Procedure.

Exporters(including CHAs) would be required to file a declaration in the

form SDF. It would be filed at the stage of “goods arrival” One copy of

the declaration would be attached to the original copy of the S/Bill

generated by the system and retained by the customs.The second copy

would be attached to the duplicate S/B (the exchange control copy) and

surrendered by the exporter to the authorized dealer for

collection/negotiations.

3.2 The exporters are required to obtain a certificate from the bank through

which they would be realizing the export proceeds. If the exporter wishes

to operate through different banks for the purpose, a certificate would have

to be obtained from each of the banks. The certificates would be submittedto customs and registered in the system. These would have to be submitted

once a year for confirmation or whenever the bank is changed.

3.3 In the declaration form to be filled by the exporters for the electronic

processing of export documents, the exporters would need to mention the

name of the bank and the branch code as mentioned in the certificate from

the bank. The customs will verify the details in the declaration with the

information captured in the system through the certificates registered

earlier.

3.4 In the case of S/Bs processed manually, the existing arrangement of filing

GR-1 forms would continue.

• OCTROI PROCEDURES, QUOTA ALLOCATION AND OTHER

CERTIFICATION.

1.1 The processing of S/Bs involving allocation of ready-made garments

quota by the Apparel Export Promotion Council (AEPC) will change with

the introduction of the system. The quota allocation label will be pasted on

the export invoice instead of S/B. Allocation number of AEPC would be

entered in the system at the time of S/B data entry. The quota certification

on export invoice should be submitted to Customs along with other

original documents at the time of examination of export cargo.

1.2 As a transitional measure, AEPC certification even on S/B form would be

accepted. However, in these cases, S/B number should be indicated on the

invoice when goods are presented for examination. This transitional

facilitation measure will be available for a period of two months i.e., upto

30th November 2004.



1.3 For determining the validity date of the quota, the relevant date would be

the date on which the full consignment is presented for examination and

the date to recorded in the system.

1.4 The certificate of other agencies, such as, the Cotton Textiles Export

Promotion Council; the Wildlife Inspection Agency under CITES; the

Engineering Export Promotion Council; the Agricultural Produce Export

Development Agency (APEDA), the Central Silk Board and the All India

Handicraft Board should also be obtained on the invoice. Similarly, the no

objection of the Asst. Drug Controller and of the Archaeological of Survey

India would be obtained on the Invoice.

The transitional arrangements would be the same as in the case of AEPC

certification.

1.5 The exporters would have to make use of export invoice or such other

documents as required by the Octroi Authorities for the purpose of octroi

exemption.

2. ARRIVAL OF GOODS AT EXPORT EXAMINATION SHEDS IN CFS

2.1 The existing procedure of permitting entry of goods, brought for the

purpose of examination (and subsequent: “Let export” Order) in the CFS

on the strength of S/B shall be discontinued. The CONCOR will permit

entry of the goods on the strength of the checklist, the date entry form andthe declaration. The CONCOR would endorse the quantity of goods

entering the CFS on the reverse of the checklist

2.2 The goods should be brought for examination within 15 days of filing of

declaration in the Centre. In case of delay, a fresh declaration would need

to be filed

2.3 If at any stage subsequent to the entry of goods in CFS it is noticed that

the declaration has not been registered in the system, the exporters and

CHAs will be responsible for the delay in shipment of goods and any

damage, deterioration or pilferage, without prejudice to any other action

that may be taken.



3. PROCESSING OF SHIPPING BILLS

3.1 The S/B shall be processed by the system on the basis of declaration made

by the exporter. However, the following S/B shall require clearance of the

Assistant Commissioner/Dy. Commissioner (AC/DC Exports):

• Duty free S/B for FOB value above Rs.10 lakh

• Free Trade Sample S/B for FOB value above Rs.25,000

• Drawback S/B where the drawback exceeds Rs. One lakh

3.2 Subject to the provisions of para 20.3 of this PN the following categories

of S/Bills shall be processed buy the Appraiser (Export Assessment) first

and then by the Asstt/Dy. Commissioner:

• DEEC

•

DEPB• DFRC

• EOU

• EPCG

3.3 Apart from verifying the value and other particulars for assessment, the

AO / AC / DC may call for the sample s for confirming the declared value

or the checking classification under the drawback schedule / DEEC /

DEPB / DFRC / EOU etc., He may also give special instruction for

examination of goods.

3.4 If the S/B falls in the categories indicted in para 6.1 above, the exporter

should check up with the query counter at the Centre, whether the S/B has

been cleared by Asstt. Commissioner /Dy. commissioner, before the goods

are taken for examination. In case AC / DC raises any query, it should be

replied through the Service Centre or, in case of EDI connectivity, through

terminals of the Exporter / CHA. After all the queries have been

satisfactorily replied to, AC / DC will pass the S/B

4. CUSTOMS EXAMINATION OF EXPORT CARGO

4.1 On receipt of the goods in the Export Shed in the CFS, the exporter will

contact the system examining officer (SEO)and present the checklist with

the endorsement of CONCOR on the declaration, along with all original

documents such as Invoice, Packing List, ARE-1(AR-4)etc. He will also

present additional particulars in the prescribed form.



4.2 SEO will verify the quantity of the goods actually received against that

entered in the system. He will enter the particulars in the system. The

system would identify the Examining Officer (if more than one are

available)who would be carrying out physical examination of goods. The

system would also indicate the packages(the quantity and the serial

numbers) to be subjected to examination. SEO would write this

information on the checklist and hand it over to the exporter. He would

hand over the original documents to the Examining Officer. No

examination order shall be given unless the goods have been physically

received in the Export Shed. It may, however, be clarified that Customs

may examine all the packages/goods in case of any discrepancy.

4.3 The Examining Officer may inspect and/or examine the shipment, as per

instructions contained in the checklist and enter the examination report in

the system. There will be no written examination report. He will then mark

the Electronic S/B and forward the checklist along with the originaldocuments to the Appraiser/Supdt. in Charge. If the Appraiser/Supdt. is

satisfied that the particulars entered in the system conform to the

description given in the original documents (including AEPC quota and

other certifications) and the ;physical examination, he will proceed to give

“:Let Export” order for the shipment and inform the exporter. The

Appraiser/Supdt. would retain the checklist, the declaration and all

original documents with him.

4.4 In case of any variation between the declaration in S/B and the documents

or physical examination report, the Appraiser/Supdt. will mark the

electronic S/B to AC/DC Exports. He will also forward the documents toAC/DC and advise the exporters to meet the AC/DC for further action

regarding settlement of dispute. In case the Exporter agrees with the

views of the Department, the S/B would be processed finally. Where the

exporter disputes the views of the Department, the case would be

adjudicated following the principles of natural justice.

5. GENERATION OF SHIPPING BILLS

5.1 As soon as the Shed Appraiser/Supdt.gives “Let Export” order, the system

would print 6 copies of the S/B in case of Free and scheme S/B. In case of

DEPB there are 7 S/B. If the S/B (DEPB) is assessed provisionally, then

EP copy will be generated only after AC/DC finalises the assessment. On

the examination report the Appraiser/Shed Supt.will sign. On all the

copies, the Appraiser/Shed Supdt., Examination Offer as well as

exporter’s representative/CHA will sign. Name and ID Card number of the



Exporters representative/CHA should be clearly mentioned below his

signature.

5.2 The distribution of S/Bills is as follows:

DEPB Scheme S/Bills Other Scheme S/Bills

• 1. Exporter’s copy 1. Exporters copy

• 2. Custom’s Copy 2. Customs copy

• 3. Exchange Control Copy 3. ExchangeControl Copy

• 4. Scheme Bill Copy 4. E.P.Copy

• 5. E.P.Copy 5. TR-1. TR-2 Copies

• 6. TR-1, TR-2 Copies

5.3 The original AEPC quota and other certificates will be retained with the

S/Bills and recorded in the Export Shed.

6. PAYMENT OF MERCHANT OVERTIME (MOT)

6.1 For the time being the present manual system for payment of Merchant

Overtime (MOT) charges will continue.

6.2 MOT charges will be required to be paid by exporter when the goods are

examined by Customs for allowing “Let Export” beyond the normal office

hours. No charges would be required to be paid on normal working days

when the examination itself is being done for “Let Export” upto 05.oo PM.In addition, no charges would be required to be paid if the exporter wants

the goods to be entered in CONCOR (CFS) only for meeting the quota

deadlines.

7. DRAWAL OF SAMPLES

7.1 Where the Appraiser of Customs orders for samples to be drawn and

tested, the Examining Officers will proceed to draw two samples from the

consignment and enter the particulars thereof along with name of the

testing agency in the system. No registers will be maintained for recording



dates of samples drawn. Three copies of the test memo will be sprepared

and signed by the Examining Officer, the Appraiser and Exporter. The

disposal of the three copies would be as follows:

• Original to be sent along with the sample to the testing agency

• Duplicate copy to be retained with the second sample

• Triplicate to be handed over to the exporter.

7.2 AC/DC may, if he deems necessary, order for sample to be drawn for

purposes other than testing such as visual inspection and verification of

description, market value enquiry etc.

11 AMENDMENTS:

11.1 Corrections/amendments in the checklist can be made at the service centre

provided the system has not generated the S/B number. Where correctionsare required to be made after the generation of the S/B No. or, after the

goods have been brought in the docks/CFS, amendments will be carried

out in the following manner.

• If the goods have not yet been allowed “Let Export”, Assistant

Commissioner/Dy. Commissioner may allow the amendment.

• Where the “Let Export” order has been given, the Addl./Joint Commissioner

(Exports) would allow the amendments

11.2 In both the cases, after the permission for amendments has been granted, theAsstt./Dy. Commissioner(Exports) will approve the amendments on the

system. Where the print out of the S/B has already been granted, the exporter

will surrender all copies of the S/Bill to the Appraiser for cancellation before

amendment is approved in the system.

13. SHORT SHIPMENTS, SHUT OUT, CANCELLATION AND BACK

TO TOWN PERMISSIONS.

13.1 AC/DE (Export) will give permission for issue of short shipment

certificate, shut out or cancellation of S/B, on the basis of an application

made by the exporter. The S/B particulars would need to be cancelled/modified in the system before granting such permission. AC/DC should

check the status of the goods, before granting permission.



14. AMENDMENT OF FREIGHT AMOUNT

14.1 If the freight/insurance amount undergoes a change before “Let Exports”

is given, corresponding changes would also need to be made in the S/B

with the approval of AC/DC Exports. But if the change has taken place

after the “Let Exports” Order, approval of Additional/Jt.Commissioner

would be required. Non-intimation of such changes would amount to mis-

declaration and may attract penal action under Customs Act 1962.

15. RECONSTRUCTION OF LOST DOCUMENTS:

15.1 Duplicate print out of EDI S/B cannot be allowed to be generated if it is

lost, since extra copies of S/B are liable to be misused. However, a

certificate can be issued by the Customs stating that “Let Exports” order

has been passed in the system to enable the goods to be accepted by the

Shipping Line, for export. Drawback will be sanctioned on the basis of the

“Let Export” order already recorded on the system.

16 RE-PRINT OF SHIPPING BILL:

16.1 Similarly, reprints can be allowed where there is a system failure, as a

result of which the print out(after the “Let Export” order) has not been

generated or there is a misprint. Permission of AC/DC (exports) would be

necessary for the purpose. The misprint copy shall be cancelled before

such permission is granted

17 EXPORT OF GOODS UNDER CESS

17.1 For export items, which are subject to export cess the corresponding serial

number of the Cess Schedule should be clearly mentioned. A printed

challan generated by the system would be handed over to the exporter.

The cess amount indicated should be paid in the Bank of India, Extension

Branch of CFS, under a receipt.

18. EXPORT OF GOODS UNDER CLAIM FOR DRAWBACK

18.1 The scheme of computerized processing of drawback claims under the

Indian Customs EDI system-Exports will be applicable for all exports

through CFS.

18.2 In respect of goods to be exported under claim for drawback, the exporters

will file declaration in the form. The declaration in the form would also be



required to be filed when the export goods are presented at the Export

Shed for examination & “Let Export”

18.3 The exporters who intend to export the goods through CFS under claim for

drawback are advised to open their account with the Bank of India branch

situated at CFS-Mulund. This is required to be done to enable direct credit

of the drawback amount to the exporters account, obviating the need for

issue of separate cheque by post. The exporters are required to indicate

their account number opened with the Bank of India branch at CFS-

Mulund. It would not be possible to accept any shipment for export under

claim for drawback in case the account number of the exporter in the bank

is not indicated in the declaration form.

18.4 The exporters are also required to give their account number along with

the details of the bank through which the export proceeds are to be

realized.

18.5 Export declarations involving a drawback amount of more than rupees onelakh will be processed on screen by the AC/DC before the goods can be

brought for examination and for allowing “Let Export”:

18.6 The drawback claims are sanctioned subject to the provisions of the

Customs Act 1962, the Customs and Central Excise duties drawback rules

1995 and conditions prescribed under different sub-headings of the All

Industry rates as per notification number 26/2003-Cus(NT) dated 1.4.2003

as amended by notification number 12/2004-Cus(NT) dated 29-01-04.

19. EXPORT OF GOODS UNDER DEPB

19.1 While filing information as per the format, exporters are required to ensurethat correct Group Code No. of the goods being exported and the item No.

of relevant Group is clearly mentioned (item-wise details). The

exporters/CHAs are advised to fill Item No, in the same manner as given

in the Public Notices issued by DGFT.

19.2 DEPB Credit in respect of items like formulations, injections etc. of group

code No.62 (Chemicals) are at a specific percentage of credit rate for the

relevant bulk drug. For proper calculations of DEPB rate, exporters/CHAs

are advised to claim export under the specific Sl.No. if they are exporting

injections and thereafter mention Sl.No. of Group Code 62 of the bulk

drug of which such injections have been made. The system will calculate

the said specific percentage of the DEPB rate of such bulk drugs,

formulations of which are being exported.

19.3 If the group code No., Item No. and FOB value declared is accepted by the

Appraiser/Supdt (DEPB Cell) or Asstt./Dy. Commissioner(Export), goods

may be brought and entered in the system. The examining officer will feed

the examination report and “Let Export” order will be given by



Appraiser/Supdt. in the EDI system. Seven copies of S/Bill will be printed

for the purposes mentioned against each as under :

Customs Copy For record of Customs

Exporter’s copy For record of Exporters

E.P.Copy For office of DGFT

DPB copy For use in the import cell of ICD Bangalore for registration of licence.

Exchange Control Copy For negotiating the export documents in bank

TR-1TR-2 copies

19.4 There is a provision for changing the Group Code No./Item No./Value for

DEPB credit purposes and such changes will be reflected in the print out

of the S/Bill. Such charges may be done by Appraiser/Supdt. (DEPB Cell)

AC/DC(Export) as well as by Appraiser/Supdt.(Exam.) The credit will be

allowed by the DGFT at the rate/value (for credit purposes only) as

approved by Customs. The EP copy of the shipping bill shall be used by

the Exporters to obtain DEPB licence from DGFT.

19.5 In case, for credit purposes, the exporter accepts the lower value as

determined by customs, such lower value will be entered by Appraiser

(DEPB Cell) AC/DC (Export) or by Appraiser (Exam) for each item(s)

Printout of S/Bill at item level will indicate for FOB value as well value

for DEPB credit purposes. Exporters are required to apply for the DEPB

Licence at the B value accepted by Customs and not the value declared by

them. However, as DEPB is issued on the basis of exchange rate

applicable on the date of Let Export, exporters are advised to apply for

DEPB Licence at the value accepted by Customs at the time of export

multiplied by exchange rate on the date of Let Export(LEO) (As per para

4.43 of EXIM Policy 2003 edition)

20. EXPORT OF GOODS UNDER 100% EOU SCHEME

20.1 The exporters can get the export goods examined by Central

Excise/Customs Officer at the factory even prior to filling of S/Bill. Self

sealing facility is also available. He shall obtain the examination report in

the form to this Public Notice duty signed and stamped by the examining

officer and supervision officer at the factory. The export invoice shall also

be signed and stamped by both the officers at the factory. Thereafter thegoods shall be brought to the concerned customs warehouse for the

purpose of clearance and subsequent “Let Export”. The exporters/CHA

shall present the goods for registration along with Examination Report,

ARE-1, Export Invoice duly signed by the Examining Officer and

supervising officer at the factory, check list, declaration in form and other

documents such as document of transportation, ARE-1, etc., to the



examiner in the concerned shed. After registration of goods, the shipping

bill will be marked to an examiner for verification of documents and seal.

If seal is found intact the S/Bill will be recommended for LEO, which will

be given by the shed appraiser. However if seal is not found intact, the

goods will be marked for examination and LEO will be given if the goods

are found in order.

21. EXPORT OF GOODS UNDER EPCG SCHEME

21.1 All the exporters intending to file shipping bills under the EPCG scheme should

first get their EPCG licence registered with the Export section. For registration of EPCG

licence, the exporter/CHA shall produce the Xerox copy of EPCG licence to the service

centre for data entry. A printout of the relevant particulars entered will be given to the

exporter/CHA for his confirmation. After verifying the correctness of the particulars

entered, the said printout will be signed by the exporter. Thereafter, the original EPCG

licence along with the attested copy of the licence and the signed printout of the

particulars shall be presented to the Appraiser/Supt (EPCG Cell)The Appraiser/Supdt.

(EPCG Cell) would verify the particulars entered in the computer with original licence

and register the same in EDI system. The registration number of the EPCG Licence

would be furnished to the exporters/CHA, who shall note the same carefully for future

reference. The said registration number would need to be mentioned against respective

item on the declaration form filed for data entry of the s/bill, at the time of export of

goods. All the EPCG S/Bill would be processed on screen by the Appraiser/Supdt.(EPCG

Cell) and the AC/DC (Export). After processing of the EPCG S/Bill by the Appraiser

EPCG Cell and AC/DC Export, the goods can be presented at the Customs warehouse for registration, examination and “Let Export” as in the case of other export goods. After

train summary is submitted to CONCOR, the S/Bill will be put to Appraiser queue for

logging/printing of ledger. After logging/printing of ledger, the EPCG bill will be moved

to history tables.

22 EXPORT OF GOODS UNDER THE DEEC SCHEME

22.1 Only shipping bills pertaining to DEEC books issued on or after 1.4.95 will be

processed on the EDI system.

22.2 All the exporters intending to file s/bills under the DEEC scheme including those

under the claim for drawback should first get their DEEC Book registered with the CFS

Mulund. The registration can be done in the service centre.

The original DEEC book would need to be produced at the service centre for data entry.

A print out of the relevant particulars entered will be given to the exporter/CHA. The



DEEC Book would need to be presented to the Appraiser/Supdt., DEEC Cell, who would

verify the particulars entered in the computer with the original DEEC and register the

same in the EDI system. The registration No. of the DEEC Book would be furnished to

the exporter/CHA, which would need to be mentioned on the declaration forms at the

CFS for export of goods It would not be necessary thereafter for the exporter/CHA to

produce the original DEEC book for processing of the export declarations

22.3 Each book will be allotted a Registration No. should be indicated on the shipping

bills in the relevant columns.

22.4 Exporters/CHAs that will be filling S/Bills for export of goods under the DEEC

Scheme would be required to file additional declarations regarding

availment/non-availment of MODVAT or regarding observance/non-observance

of specified procedures prescribed in the Central Excise 1944 in the form. The

declaration should be supported by necessary certificates (ARE-1 or for non-

availment of MODVAT) issued by the jurisdiction Central Excise authorities.“Let Export” would be allowed only after verification of all these certificates at

the time of examination of goods. The fact that the prescribed DEEC declaration

is being made should be clearly stated at the appropriate place in the declaration

being filled in the service centre or through RES-Mode.

22.5 All the export declarations for DEEC would be processed on screen by the

Appraiser/Supdt., Export Department and the AC/DC Exports. The said

processing would be akin to the processing of Bill of Entry on the EDI System

with provisions for query/reply. After the declarations have been so processed and

accepted, the goods can be presented at the Export Shed along with DEEC Books

registered in the4 EDI System so that the export declarations are processedexpeditiously.

22.6 Further, exporters availing of DEEC benefits in terms of various notifications

should file the relevant declarations.

23. EXPORT OF GOODS UNDER DFRC SCHEME:

The details pertaining to export products i.e. input materials utilized as per SION should

be clearly mentioned in the declaration mentioned at Annexure A at the time of filing.

THE ECGC COVER



The abbreviated form for Export Credit and Guarantee Corporation is ECGC. As the

name indicates this is a sort of guarantee or a sort of cover for the exporter. Let us now

see what this is all about.

Needless to say that an exporter before entering into a contract with the overseas buyer

for making any supply, takes care to ensure that the customer with whom he is dealing

have some credit worthiness. This he may be able to do either through the local agent

who is in a better position to know about the customer or through a bank or through any

of the exporter’s associates if happens to be in the area of the customer etc., But, in a

business things may change. The financial status of a customer may take drastic turn and

an established customer may go bankrupt within a short period of time.

Moreover, the buyer may be willing to make the payment, but there are other

environment which prevents him from effecting the transfer of funds through the bank.

For e.g., there could be break out of war, the balance of payment position of the country

may become unfavourable, there may be some coup of the government etc., and all

transactions could be sealed.

These are the risk factors for the exporters. What is the guarantee that he will get paid for

the supplies he has made?

With a view to provide support to Indian exporters, the Govt. of India set up the Export

Risk Insurance Corporation (ERIC) in 1957. This was transformed into Export Credit &

Guarantee Corporation Ltd. in 1964. In order to give the Indian identity a sharper focus

the name was again changed to Export Credit & Guarantee Corporation of India Ltd., in1983. This is a company wholly owned by the Govt. of India and functions under the

administrative control of the Ministry of Commerce and managed by the Board of

Directors representing Government, Banking, Insurance, Trade, Industry etc.

Though one may insist for a Letter of Credit, still there could be some elements of risk

which we will study later here. Except getting an advance payment for the full value of

the supplies, any other mode of payment will have some risk.

Take the case of an exporter who has made supplies and before the payment is received

the buyer goes bankrupt or there comes some new provision or policy of Government of the importing country preventing repatriation of the funds to other countries what

recourse the exporter has to recover his dues. The litigation procedure might be time

consuming and the exporter can never be sure of getting his full payment. An ECGC

cover a safeguard his interest to a great extent.



An exporter can either agree for sight payment or can made shipment on credit terms for

say 60 days, 90 days etc., In project exports the period of payment may extend to some

years. Longer the period of cre3dit given to the customer, more will be the risk factor for

the exporter.

In respect of sight bill, there is almost no risk because the customer has to make payment

first before he retires the documents. Therefore, before the title of the goods is passed on

to the customer, the importer makes the3 payment. However, in respect of usance bill

(credit bills) the buyer retires the documents by accepting the usance draft and takes

delivery of the goods. In case the customer goes bankrupt or become insolvent, before the

due date of payment, the exporter is totally at a loss. While big units may be able to

absorb the one time loss, small exporters will get broke even with one such transaction.

Here the ECGC comes into picture. It takes up the responsibility of paying the funds to

the exporter and makes all efforts including legal proceedings to recover the dues from

the customer, provided the exporter has taken an ECGC cover.

Shipments on Consignment basis:

Shipments on consignment basis can be covered only against political risks.

Shipments by Air

Since the buyer is able to take delivery of the goods even without retiring the bank

documents, shipments by air are not covered under the policy. However, the exporter

may cover such shipments for payments under open terms. The exporter can have cover

for such shipments, if he has obtained Credit Limit on such buyers on open delivery

terms and also pays the premium at rates applicable to open delivery terms.

Step 1. Open Policy:

Step 2. - Credit Limit on Individual Buyer

Step 3 – Payment of Premium and filing of monthly returns



FILING OF MONTHLY RETURNS:

The exporter has to send a monthly return in the prescribed form to ECGC declaring the

list of various shipments made and the amount of premium payable as per the premium

table. The exporter has to work out the total premium applicable on the shipment effected

and make payment to the ECGC

The exporter is also expected to file a Monthly Return in a separate form listing all the

Bills which are not paid on due date, if any, so that ECGC is periodically aware of the

defaulters.

In case of any eventuality when the buyer goes bankrupt, he may prefer a claim with

ECGC for payment.

The policy that is issued for shipment not covered under L/C is called Comprehensive

Policy meaning that the policy will cover both the commercial and political risks. While

commercial risk is that of the buyer going bankrupt, the political risk relates to the

country’s policies which may prevent the repatriation of funds or there could be outbreak

of war preventing financial transactions etc.

All the above relates to shipments not covered under L/C. However, an exporter can have

a separate ECGC Policy for shipments under L/C. Here the exporter will have the policy

covering only the political risk since under L/C, the bank stands as a guarantor and there

is no commercial risk.

An exporter must cover all his exports under ECGC, including bills on sight basis, and

are NOT under L/C. He cannot be selective to certain countries or certain buyer. The

cover is on whole turnover basis.

For all shipments under L/C, the buyer may take a separate policy to cover the political

risks. The premium for L/C shipments will be relatively less than that on comprehensive

policy.

Note: ECGC cover is not for non-payment on account of dispute on quality, damages to

the goods, theft, pilferage etc.

The cover is only when the party goes insolvent or there are some political risk due to

which the exporter is not in a position to get the payment immediately or on due date.

This cover must be distinguished from the general insurance.



VARIOUS POLICIES OFFERED BY ECGC:

1. STANDARD POLICY

2. SMALL EXPORTERS POLICY

3. SPECIFIC SHIPMENT POLICIES – SHORT TERM (SSP-ST)

4 . EXPORTS (SPECIFIC BUYERS) POLICY

8. CONSIGNMENT EXPORTS POLICY (STOCKHOLDING AGENT)

9 CONSIGNMENT EXPORTS POLICY (GLOBAL ENTITY)

10. SERVICES POLICIES



9. MATURITY FACTORING

The Maturity Factoring scheme, as designed by ECGC has unique features and does not

exactly fit into the conventional mould of maturity factoring. The changes devised are

intended to give the clients the benefits of full factoring services through the maturity

factoring scheme, thus effectively addressing the needs of exporters to avail of pre-

finance (advance) on the receivable, for their working capital requirements. One

important feature is the very role and special benefits envisaged for banks under the

scheme.

Benefits:

• 100% credit guarantee protection against had debts

• Sales register maintenance in respects of factored transaction

•

Regular monitoring of outstanding credits, facilitating collection of receivable ondue date, recovery, at its own cost, of all recoverable had debts

Setting up Charges and Factoring Charges

• The factoring application fee payable initially is Rs.10,000/- For setting up

permitted limits on each of the overseas customers, the exporter will have to pay a

processing fee equal to 0.05% of the permitted limit sought subject to minimum

of Rs.2000/- after of this, the factoring charges payable as and when an exports bill is to be factored depends on the country to which the exports is made and the

credit period.

Exporters Obligations:

• Registration and obtaining permitted limit on the buyer

• Payment of factoring charges with statement of exports made

• Inform developments

48645968 Project on Export Procedure

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Transcript of 48645968 Project on Export Procedure