Foreign Payment

8/8/2019 Foreign Payment

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SUMMER TRAINING REPORT ON

THE PROCEDURE OF IMPORTS &

EXPORTS IN FOREIGN PAYMENT

For

BHEL

By

Pooja Rajput

237

In Partial fulfillment for the award of the degree

Post Graduate Diploma In Management

2009-2011

New Delhi Institute of Management50(B&C), 60, Tughlakabad Institutional Area, New Delhi-110062

E-mail : [email protected] Website : www.ndimdelhi.org


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SUMMER TRAINING REPORT ON

ECONOMIC VALUE OF ADDED

For

BHEL

Under the supervision

Of

Submitted By- Submitted to-

Pooja Rajput Prof.V.K.Mahajan

Roll number 237


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DECLARATION

I Pooja Rajput student of New Delhi Institute of Management 2009-2011

declare that every part of the Project Report Economic value added that I have

submitted is original.

I contacted the nominated guide for discussing the project.

Date of project submission:

Signature of the student :

Facultys Comments :

Signature of Faculty guide :

Name :


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CONTENTS

CHAPTER1-Executive summary

CHAPTER2-Literature Review

2.1 Company Background2.2 Overview of the company2.2.1 Introduction of BHEL,Haridwar2.2.2 Product and services of BHEL2.2.3 BHEL in India2.2.4 Divisions of BHEL2.2.5 Major competitors of BHEL

2.2.6 Customer of BHEL Product2.2.7 SWOT Analysis2.2.8 Awards won by BHEL

CHAPTER3- Introduction of the project

3.1 Concept of foreign payment3.2 Process of imports

3.2.1 Purchase order

3.2.2 Letter of credit3.2.3 Trade documentation3.2.4 Payments collection method

3.3 Import regulation3.4 Process of export3.5 Export regulation

CHAPTER4- Major Learning

CHAPTER5- Finding & Conclusion

CHAPTER7- References

APPENDIX APPLICATION FOR LETTER OF CREDIT


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CHAPTER-1

Executive summary


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Every Organization, irrespective of its size and mission, may be viewedas a financial entity. Management of an organization, particularly a

business firm, is confronted with issues and decisions, which havefinancial implications.

An attempt has been made to relate theory to practice. Of course, thetheory presented has its imperfections and inadequacies. Yet, it is a

potent tool to understand the various aspects of HEEP, BHEL, Hardwar.

The purpose of the study is to acquaint oneself with the actualproceedings in the enterprise. This study is in the curriculum for M.B.A.

degree course. This helps in inculcating the managerial qualities. Theexperience, which comes while undergoing the study, is unique and itlater on enhances the placement chances in the various businessenterprises.

This project report puts forward the various aspects relating to the

Imports and Exports along with Export Incentives being claimed by theHEEP unit of BHEL.

In todays fast changing world both Imports as well as Exports arenecessary since the whole world has become one market. No one can

survive in isolation. Imports are necessary where we are deficient andExports are necessary to accelerate the countrys transition to a globallyvibrant economy. Exports helps to derive maximum benefits from

expanding global market opportunities. To stimulate sustainedeconomic growth by providing access to essential raw material,consumables and capital goods required for augmenting production. Toenhance the technological strength, and efficiency of Indian agriculture,industry and services, thereby improving their competitive strength

while generating new employment opportunities, and encourage the


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attainment of internationally accepted standards of quality and toprovide consumers with goods quality products at reasonable prices

As a Public Sector Undertaking BHEL understands its responsibility in

regard and believes that its obligations can be fulfilled not only by providing social benefits but by helping in the economic development

of the country. And export promotion being a major part of it, is also amajor responsibility of BHEL.

BHEL has been regularly exporting a large portion of its turnover & it

has proved itself in terms of quality & quantity.

HEEP being a unit of BHEL, Hardwar has also been a part of thiseconomic as well as social cause. It has also been exporting the goods

for a pretty long period.

In order to be competitive enough in the world market it is necessary to produce the goods at minimum possible cost and for this it also

becomes necessary for the company to be in tune with the new policiesadopted in the world market.

This project has been undertaken with the sole objective of reviewingthe process of Imports and Exports along with the procedure of claimingExport Incentives, so that it may be possible for HEEP to produce itsgoods at the most competitive terms.

The procedures of Imports & Exports followed in HEEP, BHEL alongwith the Export Incentives being claimed by BHEL like Duty FreeLicense, Special Import License, Terminal Excise Duty, Duty

Drawback etc. is mentioned in the Report.

The study has enabled me to enhance my knowledge as regards theactual proceedings of the enterprise particularly in BHEL. It has also

made me aware of the problems faced by the researcher or trainee whileconducting a project work. The study have provided me the experienceon how to conduct such type of industrial project work and what


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procedures to be followed and necessary steps to be taken to gatheruseful information in the minimum time.

The scope of the study is confined to the appraisal of the HEEP BHELin particular. In the matter of performance appraisal, I have coveredgeneral working of the finance department and the Import and Export

related concepts in particular.

This study also reveals the hindrances that come in between whileundergoing this study and my confidence and ability to contact people is

increased. The main advantage of experience cannot be ruled out.

The present study is mainly based on the data made available fromvarious sources. The data and information has been collected by

compiling the figures from the Annual reports of the HEEP, BHEL andthe books concerned with the BHEL awareness. Further with the help ofthe unstructured questionnaire the information was gathered on theactual proceedings of the HEEP, BHEL. Availability of the data on

actual performance as required for analysis is very important in carrying

out a meaningful project report. The interpretation and the analysis ofthe data depend entirely upon the reliability of the data. The time of 2

months for my training is very short a time to study the various financial patterns of the HEEP, BHEL still I have tried my level best to getacquainted with the working pattern of the unit as well as Import andexport related details. This report is a step in this regard.

I am sure; this report would be of great help for the company.


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CHAPTER-2

Literature Review


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2.1 COMPANY BACKGROUND

About BHEL

Established in 1956, Bharat Heavy Electricals Limited (BHEL) is the largest

engineering and manufacturing enterprise of its kind in India today. The

company is engaged in engineering, development and manufacture of wide

variety of electrical and mechanical equipment for generation, transmission and

utilization of energy and electrical power.

Placed among the top 12 manufactures of power plant equipments of the

world, BHEL provides products, systems and services for ENERGY,

INDUSTRY and TRANSPORTATION, OIL & GAS and

TELECOMMUNICATION SECTORS. In each of these sectors, BHEL offers

total service to its customers on turnkey basis.

The first plant of BHEL was set up in Bhopal, which signaled the dawn the heavy

electrical industry in India. In the early sixties three more major plants were set up

in Hardwar, Hyderabad & Tiruchirapalli.

BHEL's business broadly covers conversions, transmission, utilization and

conservation of energy in core sectors of economy that fulfills vital infrastructure

needs of the country. Its products have established an enviable reputation of high

quality and reliability, which is largely due to emphasis placed all along on

contemporary technology. BHEL has consistently upgraded its design and

manufacturing facilities to International standards acquiring and assimilating some

of the best technologies of the world from the leading companies in USA,

EUROPE & JAPAN together with technologies from its own R&D Centers.


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With Corporate Headquarters at New Delhi, the company now has 14

Manufacturing divisions, 9 Service centers and 4 power sectors regional

centers besides project sites spread all over India and also abroad to provide

prompt and effective service to customers in India and abroad.

BHEL has 53,000 employees comprising trained engineers, technicians &

skilled artisans and supporting technical staff.

2.2 OVERVIEW OF THE INDUSTRY

2.2.1 INTRODUCTION OF BHEL HARIDWAR

BHEL or the Bharat Heavy Engineering Limited is one of the largest engineering

and manufacturing organizations in the country and the BHEL, Haridwar is their

gift to Uttaranchal. With two large manufacturing plants, BHEL in Haridwar is

among the leading industrial organizations in the state. It has established a Heavy

Electrical Equipment Plant or HEEP and a Central Foundry Forge Plant or CFFP in

Haridwar. The Heavy Electrical Equipment Plant in

Haridwardesignsandmanufactures turbo generators, AC and DC motors, gas

turbines and huge steams. The Central Foundry Forge Plant in Haridwar deals withsteel castings and manufacturing of steel forgings.

The BHEL plants in Haridwar have earned the ISO - 9001 and 9002 certificates for

its high quality and maintenance. These two units have also earned the ISO - 14001


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certificates. Situate in Ranipur near Haridwar, the Bharat Heavy Engineering

Limited employs over 8,000 people.

2.2.2 PRODUCT & SERVICES OF BHEL

Power

Air Preheaters

Boilers

Control Relay

Panels

ElectrostaticPrecipitators

Fabric Filters

Fans

Gas Turbines

Hydro Power

Plant

Piping Systems

Pulverizers

Pumps

Seamless Steel

Tubes

Soot blowers

SteamGenerators


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Steam Turbines

Turbogenerators

Valves

Industry

Capacitors

Ceralin

Compressors

Desalination Plants

Diesel Generating Sets

Industrial Motors & Alternators

Gas Turbines

Oil Field Equipment

Solar Photovoltaics

Power Semiconductor Devices

Seamless Steel Tubes

Sootblowers

Steel Castings & Forgings

Steam Generators

Steam Turbines

Turbogenerators

Valves

Transmission

Bushings

Capacitors

Control Relay Panels

Dry-type Transformers

Energy Meters

HVDC Transmission System

Insulators

Switchgears

Power System Studies


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Control Shunt Reactor

Transportation

Electric Rolling Stock

Electrics for Rolling Stock

Electrics for Urban Transportation System

Non Conventional Energy

Source

Mini/Micro

Hydro Sets

Solar Lanterns

Solar

Photovoltaics

Solar WaterHeating

Systems

Wind Electric

Generators

R&D Products

Fuel Cells

Surface Coatings

Automated storage &

Retrivals

Load Sensors

Transparent Conducting

Oxide


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2.2.3 BHEL IN INDIA

# REGIONAL OFFICES (POWER SECTORS)

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

1. NEW DELHI (NORTHERN REGION)

2. CALCUTTA (EASTERN REGION)

3. NAGPUR (WESTERN REGION)

4. CHENNAI (SOUTHERN REGION)

# BUSSINESS OFFICES

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

1. BANGLORE2. JAIPUR3. LUCKNOW4. CHENNAI5.NEW DELHI6. PATNA7. RANCHI8. SECUNDRABAD

9. BARODA10.BHUBANESHWAR11.MUMBAI12.CALCUTTA13.CHANDIGARH14.GUWAHATI15.JABALPUR


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# MANUFACTURING UNITS

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

1. BANGALORE2. BHOPAL3. GOINDWAL

4. HARDWAR5. HYDERABAD6. JAGDISHPUR7. JHANSI8. RUDRAPUR9. RANIPET10.TIRUCHIRAPALLY

# SERVICE CENTRES

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

1. BANGLORE2. BARODA3. CALCUTTA4. CHANDIGARH5. SECUNDRABAD

6.NEW DELHI7.NAGPUR8. PATNA9. VARANASI


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2.2.4 DIVISIONS OF BHEL

There are 18 Divisions of BHEL, they are as follows :

1. HEEP, Hardwar

2. HPEP, Hyderabad

3. HPBP, Tiruchy

4. SSTP & MHD, Tiruchy

5. CFFP, Hardwar

6. BHEL, Jhansi

7. BHEL, Bhopal

8. EPD, Bangalore

9. ED, Bangalore

10.BAP, Ranipet

11.IOD, New Delhi

12.COTT, Hyderabad

13.IS, New Delhi

14.CFP, Rudrapur

15.HERP, Varanasi

16.Regional Operations Division ARP, New Delhi

17.TPG, Bhopal


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18.Power Group (Four Regions and PEM)

2.2.5 MAJOR COMPETITORS OF BHEL

1. Ansaldo Italy

2. Asea Brown Boueri Switzerland

3. Beehtel USA

4. Block & Neatch USA

5. CNMI & EC China

6. Costain U.K.

7. Electrim Poland

8. Energostio Russia

9. Electro Consult Italy

10.Franco Tosi France

11.Fuji Japan

12.GEC Alsthom U.K.

13.General Electric USA

14.Hitachi Japan

15.Mitsubishi Japan

16.Mitsui Japan

17.Raytheon USA

18.Rolls Royce Germany


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19.Sanghai Electric Co. China

20.Seimens Germany

21.Toshiba Japan

22.Westinghouse USA


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2.2.6 CUSTOMERS OF BHELs PRODUCTS

y DOMESTIC:-

1. PUNJAB STATE ELECTRICITY BOARD (PSEB)

2. UTTAR PRADESH STATE ELECTRICITY BOARD (UPSEB)

3. NATIONAL THERMAL POWER CORPORATION (NTPC)

4. APPOLO TYRES

5. ABB

6. NATIONAL HYDEL POWERCORPORATION (NHPC)

7. ANDHRA PRADESH STATE ELECTRICITY BOARD(APSEB)

8. WEST BENGAL STATE ELECTRICITY BOARD(WBSEB)

9. BIHAR STATE ELECTRICITY BOARD(BSEB)

10.INDIAN OIL CORPORATION(IOC)

11.MADHYA PRADESH STATE ELECTRICITY BOARD(MPSEB)

12.SAIL

13.BCCL

14.ORRISA STATE ELECTRICITY BOARD(ORSEB)

15.KARNATAKA STATE ELECTRICITY BOARD(KSEB)


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16.BIRLA CEMENT

17.BIRLA TYRES

18. BPKARO STEEL PLANT

19. GRASIM INDUSTRIES

20. GOA SHIP YARD

21. HARYANA STATE ELECTRICITY BOARD(HSEB)

22. HIMACHAL PRADESH STATE ELECTRICITY BOARD(HPSEB)

23. DLW,VARANSI

24. INDIAN NAVY

25. DELHI VIDYUT BOARD

26. DEPTT. OF ATOMIC ENERGY

27. ASSAR OIL

28. SIEMENS , NEW DELHI

29. ONGC

30. L&T

31. KIRLOSKAR

32. JK CEMENT

33. SCOOTER INDIA LTD.


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y INTERNATIONAL:-

1. M/S EBARA CORPORATION ,JAPAN

2. M/S ZEECO INCORPORATION ,USA

3. SIMMCO INTERNATIONAL

4. SIEMENS,GERMANY

5. SIEMENS,SINGAPORE

6. BAIJI PROJECT ,IRAQ

7. KYCR COIL INDUSTRIES LTD,BANGLADESH

2.2.7 SWOT ANALYSIS OF BHEL

Strengths

y Ability to set up power plants on turnkey basis, complete know- how formanufacture of entire equipment is available with the company.

y Ability to manufacture or procure to supply spares.


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y Fully equipped to take capital maintenance and servicing of the powerplants.

y

Largest source of domestic business leading to major presence and influencein the market.

y Ability to successfully overhaul and renovate power stations equipment ofdifferent international companies

y Low labour cost.

y For non- BHEL products, services and spares are not easily available and ifthey are,price charged are very high.

y Sound financial position in terms of profitability and solvency.

Weaknesses:

y Difficulty in keeping up the commitments on the product delivery anddesired sequence of supplies.

y Larger delivery cycles in comparison with international suppliers of similarequipment.

y Lack of effective marketing infrastructure.

y Due to poor financial position of state electricity boards, which are themajor customers of BHEL in India, liquidity position of BHEL is not

satisfactory.

y Being a public sector company BHEL is suffering from sub optimality ofcontrol due to:

1. Displacement of social objectives by political objectives, which may lead

toredundant costs and also rising costs.


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2. Direct political intervention in managerial decision over an arm length

relationship that would restrict governments task of setting appropriate

managerial incentive structure.

3. Private goals that lead to budget growth and employment growth.

4. Internal inefficiencies in bureaucratic activity.

Opportunities:

y Demand for power and hence plant equipment is expected to grow.

y Private sector power plants to offer expanded market as utilities suffersresource crunch.

y Ageing power plants would give rise to more spares and services business.

y Life expansion program for old power stations.

y Export opportunities.

y Easy processing of joint ventures/ collaboration/import/ acquisition of newtechnology.

Threats:

y Increased competition both national and international.

y Level playing ground not available, foreign companies spending much moreon business promotion tactics

y Multilateral agencies reluctant to lend to power sector because of poorfinancial management of S.E.Bs


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2.2.8 AWARDS WON BY BHEL

y NATIONAL EXPORT AWARD 1993-94

By Ministry of Commerce for Excellence Export Performance.

y ALL INDIA TOP EXPORTER'S SHEILD

By Engineering Export Promotion Council For Outstanding Export

Performance.

y PM'S SHRAM VEER AWARD 1994

To Shree R.C. Malhotra of BHEL Hardwar.

y SUMAN SHARMA AWARD 1994

By Institution of Engineers (INDIA) for Outstanding Women's Design

Engineer- To Smt. Parul Bala of BHEL, Hardwar.

y National Safety Awards

Two BHEL Units viz., Trichy and Electronics Division- Banglore have

won three awards for the year 200 l Also; Trichy Unit has three awards for the

year 2002.

y National Awards for Excellence in Energy Management

CII Awards for "Excellence in Energy Management" awarded by CII

Southern Region has been won by BAP-Ranipet for the year 2003.

y National Design Awards

One employee from Corporate R& D, Hyderabad was selected for the

National Design Award 2003.


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CHAPTER-3

INTRODUCTION TO

THE PROJECT


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3.1 FOREIGN PAYMENT SECTION

The foreign payment section deals with all foreign currency payments for Imports

of Raw Materials , Spares components , Capital Equipments as well as payments to

collaborators . Further the section also deals with Insurance of all assets , buildings

, incoming and outgoing materials etc. In addition to the above all accounting of

Imports are also dealt with by the section.

Foreign Payment Section of BHEL, HEEP, Hardwar also looks after the total

INSURANCE coverage of the unit. The various Insurance Policies which are

usually taken are as follows:-

1. Fire Insurance Policy2. Marine Policy

a) Inward policy:

y Indigeneous

y Importsi. FOB Policy

ii. Custom Duty Policyb) Outward Policy

y Indigeneous

y Exports3. Cash-in-Transit Policy4. GPA (Group Personal Accident Policy)5. Vehicle Policy6. Fidelity Guarantee of Cashiers/Storekeepers


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3.2 PROCESS OF IMPORTS :- To understand imports we need to firstunderstand the procurement process or in other words the Materials Management

process in the Company . The process of imports starts with the demand or need

for the material and its non availability in the local market . The various terms usedin Materials Management needs to be understood in order to have a better

overview of the process. The various agencies involved are as follows :-

INDENTOR :- The department or the person who requires the material makes

the request for the same to the stores department. Such a request is made in a

specified format and that is called indent or material requisition .

The stores department then verifies the availability of the requisite material with

it and issues Stores Issue Voucher through which the material is issued. But if the

material is not available then the Purchase Department is intimated to initiate

purchase procedure.

Before inviting the tenders from various suppliers of the material, it is seen

whether we have purchased this material earlier or not and if we have then from

which parties?

There might be:

y A sole supplier , or

y The company may have a set of registered vendors for each type of item

(This ensures maintenance of quality standards since before registration, thesesuppliers are measured against specified standards), or

y Many suppliers

In the third case a call tender is floated in various leading news dailies. Once all

the interested parties have submitted their bids, a comparative statement of all

these are drawn to find out their relative suitability to the firm's requirement.

At first their technical suitability is assessed and thereafter the party costing the

least and accepting terms of payment favourable to the company, is awarded theorder.

However, after the initial processing, further terms are negotiated with the

selected supplier. Based on such agreed terms, a purchase order (P.O.) is drawn by

the Purchase Department.


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3.2.1 Purchase Order

Purchase Order is an order placed on the supplier for the supply of specified

quantity of specific material at a specified rate in accordance with the terms and

conditions spelt out in the order. The purchase order contains the followingessential information:

a)Name of the supplier

b) Description of the material

c) Unit of the measurement

d) Quantity to be supplied

e) Rate at which the supply is to be made

f) Terms of delivery

g) Destination and mode of transport

h) Terms of payment

i) Import license number, date and its validity period

j) Other special conditions like requirement of test certificate/guaranteecertificate, pre- inspection, insurance, compensation for delayed supply etc.

The purchase order also contains reference to indent number, name of the

indentor, financial concurrence and allocation (capital or revenue). In case of plant

and machinery items, additional information like trans number is also given in

some of the divisions.


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3.2.2 What is Letter of credit?

L/C. A binding document that a buyer can request from his bank in order to

guarantee that the payment for goods will be tranferred to the seller. Basically, a

letter of credit gives the seller reassurance that he will receive the payment for thegoods. In order for the payment to occur, the seller has to present the bank with the

necessary shipping documents confirming the shipment of goods within a given

time frame. It is often used in internationl trade to eliminate risks such as

unfamiliarity with the foreign country, customs, or political instability.

Elements of a Letter of Credit

y A payment undertaking given by a bank (issuing bank)

y On behalf of a buyer (applicant)

y To pay a seller (beneficiary) for a given amount of money.

y On presentation of specified documents representing the supply of

goodsWithin specified time limits

y Documents must conform to terms and conditions set out in the letter of

credit

y Documents to be presented at a specified place .


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STATEMENT OF RESEARCH OBJECTIVE :-

Analysis the whole Role of LETTER OF CREDIT in PAYMENT OF THEIMPORT GOODs. From the requisition for the Opening a letter of credit is

received from the Purchased Department. The Purchase Department should

arrange to obtain release of foreign exchange and import licence be forwarding

the requisitions. Till the Final payment of INVOICES.

THE PROCESS CONSIST OF LOTS OF STEPS AS FOLLOWS :

Opening of Letter of Credit

Conditions of Letter of Credit.

Retirement of Documents.

Final payment of Invoices.

Payment through Bank Drafts in foreign Currency.

Payment against Foreign Credits.

Payment for imports under Deferred payment terms etc.


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ANALYSIS THE ROLE OF LETTER OF CREDIT :-

Payments through letter of credit :

Opening of letter of letter of credit :

Normally foreign suppliers are paid through irrecoverable letter of credit opened

for the purpose. Whenever payments to any foreign suppliers are involved, a

requisition for opening a letter of credit is received from the purchase department.

The purchase department should arrange to obtain release of foreign exchange and

import license before forwarding the requisition. The following document will be

furnished to the bankers at the time of making a request for opening a letter of

credit :

a) Name and full address of the party.

b) Name of the country.

c) Amount in foreign/Indian currency.

d) Brief description of material.

e) Date of delivery/shipment.

f) Validity date of Letter of Credit.

g) Country of origin of goods.

h) Port of shipment.

i) Exchange control copy of import license.

j) Copies of purchase order/amendments

Request to the bankers for opening letter of credit will also indicate under what

conditions the letter of credit are operative and what are the documents that have to

be furnished by the suppliers of getting payments.


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Conditions of letter of credit :

As a condition of letter of credit, the original negotiable bill of lading along with

sight draft has to be sent to the BHELs bankers immediately after the shipment of

goods. The following documents should also the enclosed of the bill of lading :

a) Commercially certified invoices describing the goods, quality, unit and

total value.

b) Certificate of country of origin.

c) Detailed packing list.

d) Test certificate as per the terms of the purchase order.e) Bank guarantee for the agreed percentage of the value of the contract as

per the terms of the purchase order.

f) Formal receipt from the seller as an evidence for having received

payment for the goods delivered.

g) Declared by the supplier certifying that :

i. The contents in each case are not less that those entered in the

invoices/packing list;

ii. The invoicing for the supplies effected is strictly in accordancewith the agreed rates as stipulated in the relative purchase order;

and

iii. The quality of goods are guaranteed as new and to the specification

required by BHEL.

h) Declaration by the supplier that the set of non negotiable copies of

dispatch documents have been sent to the Regional Manager, BHEL at

Madras/Bombay/Calcutta (i.e. the port of entry) as the case may be.

i) Certified copy of the telegraphic message sent by the beneficiary givingfull particulars of dispatch of goods.


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Retirement of Documents :

When the bankers receive all documents (usually received in triplicate) as stated in

the purchase order and the conditions of Letter of Credit, they will retire the

documents debiting the account of BHEL. If there is any discrepancy, the bankers

will intimate the BHEL division concerned and ask for acceptance before retiring

the documents. If the discrepancy is minor in nature like expiry of Letter of Credit,

stale bill of lading etc., the stores Accounts section will give clearance for

accepting the documents for retirement. If the discrepancy is not a minor one, the

purchase department will be addressed and only after obtaining their acceptance,

the bankers will be requested to clear the documents. After retirement, the entire

document is sent to the stores accounts section i.e. to the group dealing with

payment for imported purchases. One copy each of bill of lading and invoices are

retained in the Stores Accounts section and the other sets are forwarded to the

Purchase Department and the port clearance officer in the Regional Officer for

clearing the goods from the port. Generally purchase order provides that the

supplier should forward advance sets of non negotiable documents to the Stores

Officer of the plant as well as the Regional Manager located at the port of

clearance to ensure timely action for clearance of goods.

After keeping a note of the details of bank advice slip on the invoice, thesame forwarded to the Cash and Bank section (Bank Wing) to make an entry in the

bank book. After making an entry in the bank book, the Cash and Bank section will

send bank payment advice slip to the Stores Accounts section dealing with

imported supplies for allocating the debit to the concerned head of account.

Before making the entry in the advance register, the debit given by the

bankers will be verified with reference to the invoice and the terms of the purchase

order. Apart from making an entry in the advance register, note will also be kept inthe monthly statement in Form SAM 15 sent to purchase department which is

intended to provide necessary feedback on the outflow of foreign exchange.

The document received from the bankers and the bank debit advice will be filed

along with the purchase folder for reference.


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Final Payment of invoices :

Foreign suppliers are normally paid 100% advanced payment against thedocument.

In some cases, 90% or 95% payment is also made against the document in such

cases before admitting the balance payment,

a) Whether the balance payment is due as per the terms of the purchase

order.

b) Normally the balance payment is paid directly to the suppliers bankers

without operating letter of credit; however, if the payment of balance

amount is also insisted upon through letter of credit payment will bemade accordingly.

A note of final payments will also be kept in the memorandum of

payments in Form SAM 9 and also supplier wise bill register in Form

SAM 4.

Payment through Bank Drafts in Foreign Currency :

Payments through bank drafts in foreign currency are arranged on receipt of

requisition to that effect from the purchase department. Generally bank drafts are

sent when goods have already been shipped or payment by opening Letter of credit

is not desirable. The requisition for drafts should be accompanied by the following

documents/information.

a)Name and full address of the party in favour of whom bank draft is to beobtained.b) Amount of bank draft in Foreign/Indian Currency.c) Three copies of invoices (two for bankers and one for the stores accounts

section).

d) Import license number and its date of validity.


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e) Exchange control copy of the import license or in the absence, theparticulars of tits where about.

f) Country of origin of Goods.g)Name of carrying streamer (if dispatched by post parcel or air, the details

thereof should be furnished).

h) The dates and other details of Bill of Lading, if the materials have beendispatched.

The bill will be passed after due verification of endorsements on the memorandum

of payment against the same invoice has not already been authorized. A note of

authorization will also be kept in the memorandum giving the particulars of

requisition number and date, invoice number, date and amount, date of

authorization and amount authorized. The form A obtainable from the State Bank

of India will also be completed and forwarded along with the cheque for obtaining

the bank draft.

Payments against Foreign Credits :

Payments against UK Credits, IDA Credits and Other Foreign Credits Procedure in

Bhopal Division :

The responsibility for obtaining necessary release of foreign exchange and import

license vests in the Purchase Departments. It is also for the Purchase Department to

ensure at the time of issue of Purchase Orders that the release of foreign exchange

is not exceeded. The purchase orders should invariably contain indication of the

source from which payment is to be met. BHEL Bhopal may authorize the Chief

Accounting Officer, High Commission of India, London to make payments against

UK Credits and copies of payment certificates issued by them to the High

Commission of India, London with reference to the shipping documents and

invoices are endorsed to the Stores Accounts (foreign payment) section and the

purchase department of Bhopal division. Payment certificates received along with

invoices are posted in the memorandum register of raw materials and plant and

machinery in Form SAM16 (Bhopal division form FPF 06). Necessary entries


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should also be made in import license register wherein separate pages are allotted

for each import license to facilitate compiling of the report due to purchase

department once a quarter showing the amount utilized against each license and

also against each credit.

On account of purchases made by Bhopal division from overseas suppliers

payments are made through High Commission of India, London, which has to be

settled by Bhopal division in accordance with the procedure laid down by

Government of India from time to time.

Each payment by Bhopal division will be linked with the entries in the

memorandum register of raw materials and plant and machinery.

Payment for imports under Deferred payment Terms :

Facility of deferred payment in installments for the value of raw materials and

components, equipments and other fixed assets are extended by the foreign

supplier/collaborators on the basis of guarantees issued by the Government of

India. The procedure followed in this regard is indicated below. The payment

under deferred credit system involves the following stages :

a) Cash down payment for a portion of the value of the supplies. This is

converted into rupee equivalent of the foreign currency at the actual rate

of exchange prevailing on the date of payment.

b) Payment against Letter of Credit when shipping documents are received

for a percentage of the value of supplies. This is also done by converting

the foreign currency at the actual rate of exchange prevailing on the date

of payment.

c) The balance i.e. the deferred position is converted into rupees at the

official exchange rate prevalent on the date of down payment/payment

against letter of credit as the case may be the rupee equivalent of the

deferred payment will be divided by the total number of installments to

arrive at the rupee equivalent of the individual installments.


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The determination of the maturity dates of installments in respect of deferred

payments is done with reference to the last date of scheduled or as per the

conditions stipulated in the contract with the foreign suppliers/collaborators. In

orders to arrange the remittances of installments with interest thereon promptly

on the due dates, the application along with Form A duly completed will have

to be submitted to the Reserve Bank of India at least one month in advance for

obtaining the permission. On receipt of the Reserve Bank of Indias permission,

the companys bankers will be authorized to remit the amount to the foreign

bankers for credit to the account of the supplier. A register in Form SAM 17

will also be maintained for keeping a record of total payments on the deferred

credits and also to ensure that the payments are released by the due dates.

Payment for imports made on Deferred Payment Terms;

Procedure in Haridwar Division

a) A number of imports of components and raw materials from USSR

collaborators are being made in Haridwar Division on deferred payment

basis. In terms of the contract for these imports entered into with

collaborators, 7.5% of the value of imports is payable within 30 days from

the date of singing of the contract, by means of remittance to the account of

bank for Foreign Trade of USSR in favour of the supplier through the StateBank of India. A further payment of 7.5% of the total value of imports is

required to be made payment which carries interest at the rate of 3% is

payable in 20 half yearly equal installments.

b) As and when a contract for import of goods on deferred payment basis is

entered into, a copy of the same is received from the purchase department.

On receipt of the same, a request for remittance of 7.5% value of the total

imports is made to the State Bank of India giving therein the particulars of

the contract, import license number and reference to the attested list of goodsattached with the import license. On receipt of advice from the State Bank of

India for having arranged the advanced payment, a bank payment advice slip

for the amount involved is sent to the Stores Accounts (foreign purchase)

section by the cash and Bank section for the purchase of allocation.


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c) For the 7.5% due on shipment on goods, wherever the documents are

negotiated by the foreign suppliers against the letter of credit established by

the company, the bank authority arrange payment of the same by debit to

Companys bank account. On receipt of advice of payment and the relevant

shipping documents including invoices from the bank, correctness thereof is

checked with reference to the contract. The bank payment advice slip is

received from the cash and bank section for the amount debited by the bank

and the amount is allocated to the advance suppliers. At the same time the

following entry is passed in the foreign purchase group for the liability to be

created for the deferred payment installments.

d) In terms of the contract, the supplier send the foreign plus the interest

charges on the shipment made for acceptance by BHEL, Hardwar. These

foreign bill of exchange are returned to the suppliers duly accepted after

verification with the liability lying under head of account. Payment of the

accepted draft is arranged by the foreign purchase group on the due date by

sending a request to the State Bank of India for making necessary payments

to the suppliers by debit to companys account. On receipt of the advice of

payment from the State Bank of India, a bank payment advice payment slip

is prepared by the cash section and send to the Stores Accounts (foreign

purchase) section for allocation. The amount paid is allocated

simultaneously; the interest portion is debited to Deferred Credits.

e) Procedure for pricing the Store Receive Vouchers (SRVs) and accounting

allocated in respect of above purchase will be the same as have been

proposed for other imported purchases.


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3.2.3 Trade Documentation

International market involves various types of trade documents that need to be

produced while making transactions. Each trade document is differ from other and

present the various aspects of the trade like description, quality, number,

transportation medium, indemnity, inspection and so on. So, it becomes important

for the importers to make sure that their documents support the guidelines as per

international trade transactions. A small mistake could prove costly for any of the

parties.

For example, a trade document about the bill of lading is a proof that goods have

been shipped on board, while Inspection Certificate, certifies that the goods have

been inspected and meet quality standards. So, depending on these necessarydocuments, a seller can assure a buyer that he has fulfilled his responsibility whilst

the buyer is assured of his request being carried out by the seller.

The following is a list of documents often used in international trade:

y Air Waybill

y Bill of Lading

y Certificate of Origin

y Combined Transport Document

y Draft (or Bill of Exchange)y Insurance Policy (or Certificate)

y Packing List/Specification

y Inspection Certificate

Air Waybills

Air Waybills make sure that goods have been received for shipment by air. A

typical air waybill sample consists of of three originals and nine copies. The first

original is for the carrier and is signed by a export agent; the second original, the

consignee's copy, is signed by an export agent; the third original is signed by the

carrier and is handed to the export agent as a receipt for the goods.


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Air Waybills serves as:

Proof of receipt of the goods for shipment.

An invoice for the freight.

A certificate of insurance.

A guide to airline staff for the handling, dispatch and delivery of the

consignment.

The principal requirement for an air waybill are :

y The proper shipper and consignee must be mention.

y The airport of departure and destination must be mention.

y The goods description must be consistent with that shown on other

documents.y Any weight, measure or shipping marks must agree with those shown on

other documents.

y It must be signed and dated by the actual carrier or by the named agent of a

named carrier.

y It must mention whether freight has been paid or will be paid at the

destination point.

Bill of Lading (B/L)

Bill of Lading is a document given by the shipping agency for the goods shippedfor transportation form one destination to another and is signed by the

representatives of the carrying vessel.

Bill of landing is issued in the set of two, three or more. The number in the set will

be indicated on each bill of lading and all must be accounted for. This is done due

to the safety reasons which ensure that the document never comes into the hands of

an unauthorised person. Only one original is sufficient to take possession of goods

at port of discharge so, a bank which finances a trade transaction will need to

control the complete set. The bill of lading must be signed by the shippingcompany or its agent, and must show how many signed originals were issued.

It will indicate whether cost of freight/ carriage has been paid or not :

"Freight Prepaid" : Paid by shipper

"Freight collect": To be paid by the buyer at the port of discharge.The bill of

lading also forms the contract of carriage.


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To be acceptable to the buyer, the B/L should :

y Carry an "On Board" notation to showing the actual date of shipment,

(Sometimes however, the "on board" wording is in small print at the bottom

of the B/L, in which cases there is no need for a dated "on board" notation to

be shown separately with date and signature.)

y Be "clean" have no notation by the shipping company to the effect that

goods/ packaging are damaged.

The main parties involve in a bill of lading are:

y Shipper

o The person who send the goods.

y

Consigneeo The person who take delivery of the goods.

y Notify Party

o The person, usually the importer, to whom the shipping company or

its agent gives notice of arrival of the goods.

y Carrier

o The person or company who has concluded a contract with the shipper

for conveyance of goods

The bill of lading must meet all the requirements of the credit as well as complying

with UCP 500. These are as follows :

y The correct shipper, consignee and notifying party must be shown.

y The carrying vessel and ports of the loading and discharge must be stated.

y The place of receipt and place of delivery must be stated, if different from

port of loading or port of discharge.

y The goods description must be consistent with that shown on other

documents.

y Any weight or measures must agree with those shown on other documents.

y Shipping marks and numbers and /or container number must agree with

those shown on other documents.

y It must state whether freight has been paid or is payable at destination.

y It must be dated on or before the latest date for shipment specified in the

credit.

y It must state the actual name of the carrier or be signed as agent for a named

carrier.


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Certificate of Origin

The Certificate of Origin is required by the custom authority of the importing

country for the purpose of imposing import duty. It is usually issued by the

Chamber of Commerce and contains information like seal of the chamber, details

of the good to be transported and so on.

The certificate must provide that the information required by the credit and be

consistent with all other document, It would normally include :

y The name of the company and address as exporter.

y The name of the importer.

y Package numbers, shipping marks and description of goods to agree with

that on other documents.

y

Any weight or measurements must agree with those shown on otherdocuments.

y It should be signed and stamped by the Chamber of Commerce.

Combined Transport Document

Combined Transport Document is also known as Multimodal Transport Document,

and is used when goods are transported using more than one mode of

transportation. In the case of multimodal transport document, the contract of

carriage is meant for a combined transport from the place of shipping to the place

of delivery. It also evidence receipt of goods but it does not evidence on boardshipment, if it complies with ICC 500, Art. 26(a). The liability of the combined

transport operator starts from the place of shipment and ends at the place of

delivery. This documents need to be signed with appropriate number of originals in

the full set and proper evidence which indicates that transport charges have been

paid or will be paid at destination port.

Multimodal transport document would normally show :

y That the consignee and notify parties are as the credit.

y The place goods are received, or taken in charges, and place of finaldestination.

y Whether freight is prepaid or to be collected.

y The date of dispatch or taking in charge, and the "On Board" notation, if any

must be dated and signed.

y Total number of originals.

y Signature of the carrier, multimodal transport operator or their agents.


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Commercial Invoice

Commercial Invoice document is provided by the seller to the buyer. Also known

as export invoice or import invoice, commercial invoice is finally used by the

custom authorities of the importer's country to evaluate the good for the purpose of

taxation.

The invoice must :

y Be issued by the beneficiary named in the credit (the seller).

y Be address to the applicant of the credit (the buyer).

y Be signed by the beneficiary (if required).

y Include the description of the goods exactly as detailed in the credit.

y Be issued in the stated number of originals (which must be marked

"Original) and copies.y Include the price and unit prices if appropriate.

y State the price amount payable which must not exceed that stated in the

credit

y include the shipping terms.

Bill of Exchange

A Bill of Exchange is a special type of written document under which an exporter

ask importer a certain amount of money in future and the importer also agrees to

pay the importer that amount of money on or before the future date. This documenthas special importance in wholesale trade where large amount of money involved.

Following persons are involved in a bill of exchange:

Drawer: The person who writes or prepares the bill.

Drawee: The person who pays the bill.

Payee: The person to whom the payment is to be made.

Holderof the Bill: The person who is in possession of the bill.

On the basis of the due date there are two types of bill of exchange:

y Bill of Exchange after Date: In this case the due date is counted from the

date of drawing and is also called bill after date.

y Bill of Exchange after Sight: In this case the due date is counted from the

date of acceptance of the bill and is also called bill of exchange after sight.


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Insurance Certificate

Also known as Insurance Policy, it certifies that goods transported have been

insured under an open policy and is not actionable with little details about the risk

covered.

It is necessary that the date on which the insurance becomes effective is same or

earlier than the date of issuance of the transport documents.

Also, if submitted under a LC, the insured amount must be in the same currency as

the credit and usually for the bill amount plus 10 per cent.

The requirements for completion of an insurance policy are as follow :

y The name of the party in the favor which the documents has been issued.

y The name of the vessel or flight details.

y The place from where insurance is to commerce typically the sellers

warehouse or the port of loading and the place where insurance cases usually

the buyer's warehouse or the port of destination.

y Insurance value that specified in the credit.

y Marks and numbers to agree with those on other documents.

y The description of the goods, which must be consistent with that in the credit

and on the invoice.

y The name and address of the claims settling agent together with the place

where claims are payable.y Countersigned where necessary.

y Date of issue to be no later than the date of transport documents unless cover

is shown to be effective prior to that date.

Packing List

Also known as packing specification, it contain details about the packing materials

used in the shipping of goods. It also include details like measurement and weight

of goods.

The packing List must :

y Have a description of the goods ("A") consistent with the other documents.

y Have details of shipping marks ("B") and numbers consistent with other

documents


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Inspection Certificate

Certificate of Inspection is a document prepared on the request of seller when he

wants the consignment to be checked by a third party at the port of shipment before

the goods are sealed for final transportation.

In this process seller submit a valid Inspection Certificate along with the other

trade documents like invoice, packing list, shipping bill, bill of lading etc to the

bank for negotiation.

On demand, inspection can be done by various world renowned inspection

agencies on nominal charges.

3.2.4 Payments collection methods in Import International

Trade.

Payment Collection Against Bills also known documentary collection as is a

payment method used in international trade all over the world by the exporter for

the handling of documents to the buyer's bank and also gives the banks necessary

instructions indicating when and on what conditions these documents can bereleased to the importer.

Collection Against Bills is published by International Chambers of Commerce

(ICC), Paris, France. The last updated issue of its rule was published on January 1,

1966 and is know as the URC 522.

It is different from the letters of credit, in the sense that the bank only acts as a

medium for the transfer of documents but does not make any payment guarantee.

However, collection of documents are subjected to the Uniform Rules for

Collections published by the International Chamber of Commerce (ICC).


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Role of Various Parties

Exporter

The seller ships the goods and then hands over the document related to the goods

to their banks with the instruction on how and when the buyer would pay.

Exporter's Bank

The exporter's bank is known as the remitting bank , and they remit the bill for

collection with proper instructions. The role of the remitting bank is to :

y Check that the documents for consistency.

y Send the documents to a bank in the buyer's country with instructions on

collecting payment.

y Pay the exporter when it receives payments from the collecting bank.

Buyer/Importer

The buyer / importer is the drawee of the Bill.

The role of the importer is to :

y Pay the bill as mention in the agreement (or promise to pay later).

y Take the shipping documents (unless it is a clean bill) and clear the goods.

Importer's Bank

This is a bank in the importer's country : usually a branch or correspondent bank of

the remitting bank but any other bank can also be used on the request of exporter.

The collecting bank act as the remitting bank's agent and clearly follows the

instructions on the remitting bank's covering schedule. However the collecting

bank does not guarantee payment of the bills except in very unusual circumstance

for undoubted customer , which is called availing.

Importer's bank is known as the collecting / presenting bank. The role of the

collecting banks is to :

y Act as the remitting bank's agent

y Present the bill to the buyer for payment or acceptance.


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y Release the documents to the buyer when the exporter's instructions have

been followed.

y Remit the proceeds of the bill according to the Remitting Bank's schedule

instructions.

If the bill is unpaid / unaccepted, the collecting bank :

y May arrange storage and insurance for the goods as per remitting bank

instructions on the schedule.

y Protests on behalf of the remitting bank (if the Remitting Bank's schedule

states Protest)

y Requests further instruction from the remitting bank, if there is a problem

that is not covered by the instructions in the schedule.

y Once payment is received from the importer, the collecting bank remits the

proceeds promptly to the remitting bank less its charges.

Documents Against Payments (D/P)

This is sometimes also referred as Cash against Documents/Cash on Delivery. In

effect D/P means payable at sight (on demand). The collecting bank hands over the

shipping documents including the document of title (bill of lading) only when the

importer has paid the bill. The drawee is usually expected to pay within 3 working

days of presentation. The attached instructions to the shipping documents wouldshow "Release Documents Against Payment"

Risks :

Under D/P terms the exporter keeps control of the goods (through the banks) until

the importer pays. If the importer refuses to pay, the exporter can:

y Protest the bill and take him to court (may be expensive and difficult to

control from another country).

y Find another buyer or arrange a sale by an auction.

With the last two choices, the price obtained may be lower but probably still better

than shipping the goods back, sometimes, the exporter will have a contact or agent

in the importer's country that can help with any arrangements. In such a situation,

an agent is often referred to as a CaseofNeed, means someone who can be

contacted in case of need by the collecting bank.


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If the importers refuses to pay, the collecting bank can act on the exporter's

instructions shown in the Remitting Bank schedule. These instructions may

include:

y Removal of the goods from the port to a warehouse and insure them.

y Contact the case of need who may negotiate with the importer.

y Protesting the bill through the bank's lawyer.

Docuemts Against Aceptance (D/A)

Under Documents Against Acceptance, the Exporter allows credit to Importer, the

period of credit is referred to as Usance, The importer/ drawee is required to accept

the bill to make a signed promise to pay the bill at a set date in the future. When he

has signed the bill in acceptance, he can take the documents and clear his goods.

The payment date is calculated from the term of the bill, which is usually a

multiple of 30 days and start either from sight or form the date of shipment,

whichever is stated on the bill of exchange. The attached instruction would show

"Release Documents Against Acceptance".

Risk

Under D/A terms the importer can inspect the documents and , if he is satisfied,

accept the bill for payment o the due date, take the documents and clear the goods;

the exporter loses control of them.

The exporter runs various risk. The importer might refuse to pay on the due date

because :

y He finds that the goods are not what he ordered.

y He has not been able to sell the goods.

y He is prepared to cheat the exporter (In cases the exporter can protest the bill

and take the importer to court but this can be expensive).y The importer might have gone bankrupt, in which case the exporter will

probably never get his money.


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Usance D/P Bills

A Usance D/P Bill is an agreement where the buyer accepts the bill payable at a

specified date in future but does not receive the documents until he has actually

paid for them. The reason is that airmailed documents may arrive much earlier than

the goods shipped by sea.

The buyer is not responsible to pay the bill before its due date, but he may want to

do so, if the ship arrives before that date. This mode of payments is less usual, but

offers more settlement possibility.

These are still D/P terms so there is no extra risk to the exporter or his bank. As an

alternative the covering scheduled may simply allow acceptance or payments to be

deferred awaiting arrival of carrying vessel.

There are different types of usance D/P bills, some of which do not require

acceptance specially those drawn payable at a fix period after date or drawn

payable at a fixed date.

Bills requiring acceptance are those drawn at a fix period after sight, which is

necessary to establish the maturity date. If there are problems regarding storage of

goods under a usance D/P bill, the collecting bank should notify the remitting bank

without delay for instructions.

However, it should be noted that it is not necessary for the collecting bank to

follow each and every instructions given by the Remitting Banks.


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STORES RECEIPT VOUCHER

S.R.V. - it is a document through which the receipt of the materials by the stores

department and their acceptance is communicated to the stores accounts sectionand other departments. The stores receipt voucher contains the following

information :

a)Ward/section from which the SRV is issued or where the stores are to bestocked ultimately.

b)Name of the supplier.

c)Challan number and date.

d)Purchase order number and date.

e)Charge order / work order number (to be given in the case of directlychargeable items).

f)Name of the indentor.

g)Railway receipt / luggage way bill number and wagon number, carrier

receipt number and material delivery challan number and date under whichthe materials are received.

h)Name of the ship.

i) Bill of lading number and date.

j) Description of the material with material code number.

k)Unit of measurement.

l) Quantity supplied.

m)Quantity accepted and quantity rejected.

n)Bin card balance particulars.


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o)Railway / lorry freight particulars.

p)Other charges like postage, demurrage / wharfage paid etc.

Provision may also be made in the stores receipt voucher to indicate the date of

receipt of stores in the Material Receiving section, the date of handing over for

inspection, the date of completion of the inspection and the date of taking over

of the stores by the store keeper.


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3.3 Import Regulations

Payment

Within 180 days of shipment date Maximum interest for the credit period : Prime rate of the currency of

payment

Delayed payment permitted only in genuine cases No interest for delay normally, only on insistence, interest upto 60

days beyond 180 days

Payment by debit to account/cheque/rupee payment into NR account. Cash for settlement not permitted. Nepal/Bhutan - settlement in Rupees only.

Advance Payment

Suppliers insistence on advance payment

Import within 3 mth (12 mth for Capital Goods) Undertaking to submit Bill of Entry within 15 days from the end of

this period

For amounts > USD 25,000, bank guarantee required

Prepayment of Usance bills

Permitted after deduction of proportionate interest at a maximum ofPrime rate.

Precautions in handling Import documents

Know your customer before handling import documents for them Direct Bills - Only PSUs, Ltd Cos, Trading Houses, 100%

subsidiaries

Others can receive upto USD 10,000 directly


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For books/Life saving drugs/R&D institutions limit is USD 25,000 A.D.s can receive docs upto USD 25,000 directly from exporter (TCI

reqd)

Documents required to make payment

Invoice, P/L etc and other documents asked for in the L/C,documentary collection

Transportation document Debit authority/acceptance of discrepancies Form A1 Bill of Entry/undertaking to submit the same Import Licence (if any)

3.4 PROCESS OF EXPORTS

The policy regarding the export of goods from BHEL (HEEP) department is as

following-In exercise of the powers conferred by sub-rule (3) of rule 19 of the Central Excise

(No.2) Rules, 2001, the Central Board of Excise and customs hereby notifies the

condition and procedures for export of all excisable goods, except to Nepal and

Bhutan without payment of duty from the factory of the production or themanufacture or warehouse or any other premises as may be approved by the

commissioner of Center Excise, namely: -

1. CONDITION:

That the exporter shall furnish a general bond in the form specified Annexure-Ito the Assistant Commissioner of Central Excise or the Deputy Commissioner of

Central Excise having jurisdiction over the factory, warehouse or such approved

premises, as the case may be, or the Maritime Commissioner or such other officer asauthorized by the Board on this behalf in asum equal at least to the duty chargeable

on the goods, with such surety or sufficient security,as such officers may approve for

the due arrival there of at the place of export and their export there from underCustoms or as the case may be postal supervision. The manufacture-exporter may

furnish a letter of undertaking in the Form specified in Annexure-II in lieu of a bond.


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That goods shall be exported within six months from the date on which thesewere cleared for export from the factory of the production the manufacture orwarehouse or other approved premises within such extended period as Assistant

Commissioner of Central Excise or Deputy Commissioner of Central Excise or

Maritime Commissioner may in any particular case allow.

That when export is from a place other registered factory or warehouse, the

excisable goods are in original packed condition and identifiable as their origin;

That export of mineral oil products falling under Chapter27 of the First

Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as stores for consumption

on board of an aircraft on Foreign run shall be subject to conditions and limitation, tobe applied mutatis mutandis, as notified in the Ministry of Finance (Department of

Revenue), Notification No. 40/2001-Central Excise (N.T.). dated 26th June issued

under rule 18 of Central Excise (No.2) Rules, 2001.

2. Procedure:

(i) Procedure for removal without payment of duty under this notification-

(a) After furnishing bond, a merchant-exporter shall obtain certificates in FormCT-1 specified in Annexure- III issued by the Superintendent of Central Excise

having jurisdiction over the factory or warehouse or approved premises or

Maritime Commissioner or such other officer as may be authorized by the Board

on this behalf and on the basis of such certificate he may procure excisable goodswithout payment of duty for export by indicating the quantity, value and duty

involved therein;

(b) The exporter who has furnished bond shall ensure that the debit in bondaccount does not exceed the credit available therein at any point of time;

(c) The manufacturer-exporter may remove the goods without payment of dutyafter furnishing the letter of undertaking as specified under condition (i);

(d) Such Central bond or letter of undertaking shall not be discharged unless the

goods are exported to the satisfaction of the Assistant Commissioner of CentralExcise or the Deputy Commissioner of Central Excise or Maritime Commissioner

or such other officer as may be authorised by the Board on this behalf within the

time allowed for such export or otherwise accounted for to the satisfaction of such

officer, or until the full duty due upon any deficiency of goods, not accounted so,

and interest, if any, has been paid.


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(ii) Sealing of goods and examination at place of dispatch-

(a) For the sealing of goods intended for export at the place at dispatch theexporter shall present the goods along with four copies of application in the

Form A.R.E.-1 specified in Annexure IV to the superintendent or Inspector

of Central Excise who will verify the identity of goods mentioned in theapplication and the particulars of goods mentioned in the application and the

particulars of duty paid or payable, and if found in order, he shall seal by theCommissioner of Central Excise and endorse each copy of the application in

token of having such examination done;

(b) The said Superintendent or Inspector of Central Excise shall return theoriginal and duplicate copies of application to the exporter and retain the

quadruplicate copy;

(c) The triplicate copy of application shall be sent to the officer to whom bondor letter of undertaking has been furnished, either by post or by handing over

to the exporter in a tamper proof sealed cover after posting the particulars inofficial records;

(d) The exporter may prepare quintuplicate copy of application for claiming anyother export incentive. This copy shall be dealt in the same manner as the

original copy of application;

(e) In case of export by parcel post after the goods intended for export has beensealed, the exporter shall affix to the duplicate application sufficient postagestamps to cover postal charges and shall present the documents, together withthe package to which it refers, to the postmaster at the office of booking.

Dispatch of goods by self-sealing and self-certification-

(a) Where the exporter desires self-sealing and self-certification for removal ofgoods from the factory, warehouse or any approved premises, the owner, the

working partner, the Managing Director or the Company Secretary, of themanufacturing until of the goods or the owner of warehouse or a person duly

authorized by such owner, working partner or the Board of Directors of suchcompany, as the case may be, shall certify on all the copies of the application

that the goods have been sealed in his presence, and shall send the original and

duplicate copies of the application along with the goods at place of export, andshall send triplicate and quadruplicate copies of the application to the


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Superintendent or Inspector of Central Excise having jurisdiction over the

factory, warehouse, any such approved premises within twenty four hours ofremoval of the goods;

(b) The said Superintendent or Inspector of central Excise shall return the original

and duplicate copies of application to the exporter and retain the quadruplicatecopy;

(c) The triplicate copy of application shall be sent to the officer to whom bond orletter of undertaking has been furnished, either by post or by handing over to

the exporter in a tamper proof sealed cover after posting the particulars in

official records;

(d)The exporter may prepare quintuplicate copy of application for claiming anyother incentive. This copy shall be dealt in the same manner as the originalcopy of application;

(e) In case of export by parcel post after the goods intended for export has beensealed, the exporter shall affix to the duplicate application sufficient postagestamps to cover postal charges and shall present the documents, together with

the package to which it refers, to the postmaster at the office of booking.

Dispatch of goods by self-sealing and self-certification-

Where the exporter desires self-sealing and self-certification for removal of

goods from the factory, warehouse or any approved premises, the owner, the workingpartner, the Managing Director or the Company Secretary, of the manufacturing unit

of the goods or the owner of warehouse or a person duly authorized by such owner,working partner or the Board of Directors of such company, as the case may be, shall

certify on all the copies of the application that the goods have been sealed in his

presence, and shall send the original and duplicate copies of the application along withthe goods at place of export, and shall send the triplicate and quadruplicate copies of

the application to the Superintendent or Inspector of Central Excise having

jurisdiction over the factory, warehouse, any such approved premises within twenty

four hour of removal of the goods;

The superintendent or the inspector of the central excise shall, after verifying

the particulars of the bond or letter of undertaking an endorsing the correctness orotherwise, of the particulars on the application, send to the officer to whom the bond

or the letter of undertaking has been furnished either by post or by handing over to the

exporter in a tamper proof sealed cover after recording the particulars in the officialrecord;


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The exporter may prepare quintuplicate copy of application for claim any otherexport incentive. The copy shall be dealt in the same manner as the original copy of

application,

In case of export by parcel post after the goods intended for export has beensealed, the exporter shall affix to the duplicate application sufficient postage stamp to

cover postal charges and shall present the document, together with the package towhich it refers, to the postmaster at the office of booking.

Examination of goods at the place of export.

On arrival at the place of export, the goods shall be presented together with

original, duplicate and quintuplicate (optional) copies of the application to the

commissioner of customs or other duly appointed officer;

The commissioner of custom or other duly appointed officer shall examine the

goods with the particulars as specified in the application and if he finds that the sameare correct and exportable in accordance with the laws for the time being in force,

shall allow export thereof and certify on the copies of the application that goods have

been duly exported citing the shipping bill number and date and other particulars ofexport:

Provided that if the superintendent or inspector of central excise sealed

packages or container at the place of dispatch, the officer of customs shall

inspect the packages or container with reference to declarations in theapplication to satisfy himself about the exportability thereof and if the seals

are found intact, he shall allow export.

(c) The commissioner of customs or the other duly appointed officer shall return the

original and quadruplicate (optional copy for exporter) copies of application to theexporter and forward the duplicate copy of application either proof sealed cover to the

officer specified in the application, with whom the exporter has furnished bond or a

letter of undertaking.

(d) The exporter shall use the quintuplicate copy for the purchase of claiming anyother export incentive.

Cancellation of applications-

If the excisable goods are not exported the Assistant Commissioner of Centralexcise or the Deputy Commissioner of Central Excise or Maritime Commissioner or


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such other as authorized by the Board on this behalf, as the case may be, to whom the

bond or letter of undertaking has been furnished, may, on written request forcancellation of application, cancel said application and allow diversion of goods for

consumption in India subject to the sub-para (b);

The exporter shall pay the specified application along with interest at the rate of

twenty four per cent per annum on such duty from the date of removal for export fromthe factory or warehouse or any other approved premises till the payment of duty.

Procedure in respect of exported goods subsequently re-imported and returned

to the factory:

Exported excisable goods which are re-imported for carrying out repairs, re-conditioning, refining, re-making or subject to any similar process may be returned to

the factory of manufacture for carrying out the said processes and subsequent re-

export.

Any waste or refuse arising as result of the said processes shall be removed

from the factory on payment of appropriate duty or destroyed after informing theproper officer in writing at least 7 days in advance and after observing such condition

and procedure as may be specified by the commissioner of Central Excise and there

upon the duty payable on such waste or refuse may be remitted by the saidCommissioner of Central Excise.

Ex planation I- For the purpose of this notification, merchant-exporter means

any exporter who procures and exports excisable goods manufactured by any otherperson.

Ex planation II- For the purpose of this notification, Maritime Commissioner

means the Commissioner of Central Excuse under whose jurisdiction one or more

of the port, airport or post office of exportation is located in Mumbi, Kolkata,Chennai, Paradeep, Visakhapatnam, Cochin, Kandla and Tuticorin.


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Order placed On BHEL

Domestic Exports Goods manufacturedby BHEL

Submission of bond toExcise/Customs

Authorities

Removal of goods fromfactory after inspection

& sealing by exciseinspector

Dispatch to Foreignpurchaser by Sea/Air

Negotiation ofDocuments under L/C


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EXPORT DOCUMENTS :

y Documents required to be sent by bank:

o Bill of exchange (if required).o Invoice, P/L etc. and other documents asked for in the L/C,

documentary collection.

o Airway bill/Bill of Lading.o Collection Order.o GR/SDF/PP Form.o Original L/C, FIRC (in case of advance payments).

EXPORT REGULATIOS:

PAYMENT

To be received within 180 days ofshipment date .

Paymen through banking chanel or DDs/Pos/Cheques/out ofFCNR/account/Curreny notes/Credit Cards.

Can retain 50% in EEFC account.

GR/PP/Softex FormsDuly certified by customs,declare velue of export and undertaking to realize

export proceeds.To be forwarded to RBI by the bank after realization.

OTHER REGULATIONS

Advance payments monitoring and FIRCs.Discounts to be declared on GR/PP forms.

Reduction in Invoice value allowed only uoto 10%.Extention of due dateallowed, beyond 180 days requires RBI permission.Agency Commission can be paid by deduction or remittance.


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GENERAL CHECKLIST:

A Checklist for all Documents

y Names and addresses agree

y Description of goods consistent

y Corrections signed or initialed

y Shipping marks consistent

y Names of beneficiary and applicant agree with L/C

y Description of goods agrees with L/C or P.O.

y Clauses, certification are present and agree with L/C.

QUICK CHECK

A quick check of documents under L/Cs should cover

y Amount complies

y Quantity of goods complies

y Shipped before latest shipment date

y L/C still valid

y All called-for documents present

y Documents not staley Short shipment may be partial shipment if permitted


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CHATER-4

MAJOR LEARNING


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MAJOR LEARNING

STUDENTS WORK PROFILE :

I am working over there as a EXECUTIVE TRAINEE in Foreign Payment

section of Finance Department.

y As concern to my profile is that to accept the request for Letter of Credit.

y To process the application of letter of Credit

y Making of Amendments & establishment in Letter of Credit, If required.

y Sending of documents, which are received from Bank to purchase and

import department after the Establishment of Letter of credit.

y Making the send/receive entries of Application of Letter of Credit to the

Bank.

In brief to my profile is that contribution in the whole process of payment of

import materials.

y The received documents are registered in the B/L system.

y Checking of documents with Letter of Credit & Purchase Order conditions

like INVOICE, BILL OF LADING, TEST CERTIFICATE, GUARANTEE

CERTIFICATE, PENALTY CLAUSE etc.

y Processing of Bill, Passing of Bill & Preparation of Payment Authority.

y Sending of Payment Authority to the Cash Section.

y Updating Payment details in PD system & accounting.


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CHAPTER-5

RESEARCH

METHODOLOGY


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RESEARCH METHODOLOGY :-

I choose the project of analysis the whole role of LETTER OF CREDIT in

PAYMENT OF THE IMPORT GOODS. I discussed the project with my

instructor and coordinator Mr. INDER Kr. ARORA (Manager, Finance)

(Foreign Payment) at HEEP, BHEL, Hardwar.

He approved the project, After that a simple course of action has been

followed for Working on this project. Entire information and data were

gathered from the other internal documents, which were personally shown by

members of company in our interest of BHEL, Hardwar.

A great help was provided by our instructor MR. INDER Kr. ARORA in

understanding the facts and figures. Mr. INDER Kr. ARORA made it possible

to us to ask our query from that person who can answer it best then anybody

else in the company. Although it has been a difficult task but the availability of

proper data and timely guidance given by Mr. INDER Kr. ARORA made it

little simpler to complete this project.


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CHAPTER-6

CONCLUION


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CONCLUION

From the study of the PROCESS OF IMPORTS & EXPORTS in BHEL, HEEP,

Hardwar I conclude that BHEL, HEEP unit is both an importer and exporter with

par excellence. All legal formalities, Exchange control requirements / FEMA /

EXIM Policy requirements are adhered by the Company. Even in the case of

Exports BHEL has never faulted in fulfillment of its legal formalities. All bonds

have been duly redeemed in time.

Imports have shown a decreasing trend in 2008 compared to 2009 whereas Exportshave shown an increasing trend .BHEL has built a natural leverage against the rise

and fall of the Rupee since the overall receivables (Debtors) of the Company

broadly match the foreign exchange outflow/payables (Creditors). Libya order is

also recently received by the Company. The Libya order is the single largest

Export order in the countrys history. All Export Incentives are received by the

Company with strict adherence to the legal formalities prescribed by

DGFT/Ministry of Commerce.

So, from the above study I had a very good experience about the practical aspects

of Imports & Exports in a large Engineering firm like BHEL.


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INFORMATION REGARDING IMPORTS & EXPORTS

2001-2002 2000-2001

VALUE OF IMPORTS (CIF BASIS):

RAW MATERIALS 3386.60 2264.65

COMPONENTS & SPARE PARTS 1991.02 941.97

CAPITAL GOODS 408.15 188.52EXPENDITURE IN FOREIGN CURRENCY ON ACCOUNTOF :

-ROYALTY 32.17 24.78

-KNOW-HOW , PROFESSIONAL CONSULTATION FEES 0.97 0.90

-INTEREST & OTHERS (INCLUDING ON FOREIGN SITES) 223.6 183.33VALUE OF CONSUMPTION-RAWMATERIALS,COMPONENTS

STORES & SPARE PARTS:

-IMPORTED (INCL. CD & INCINDENTIALS) 4335.64 2884.22

-INDEGENOUS 11251.79 7516.47

PERCENTAGE OF TOTAL CONSUMPTION:-IMPORTED (INCL. CD & INCINDENTIALS) 28% 28%

-INDIGENOUS 72% 72%

EARNING IN FOREIGN EXCHANGE:

EXPORT OF GOODS 1569.74 817.53

INTEREST 0.06 0.02

ERACTION CHARGES 196.55 119.70

MISCELLANEOUS 18.19 1.84


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CHAPTER-7

References


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Foreign Payment

Documents

Transcript of Foreign Payment