09891663303

A PROJECT REPORT ON

EXPORT & IMPORT

DOCUMENTATION PROCEDUREORIENT CRAFT LIMITED

SUBMITTED IN PARTIAL FULFILLMENT FOR

THE AWARD OF DEGREE OF

MASTERS OF INTERNATIONAL BUSINESS (MIB)UNDER THE GUIDANCE OF

DR. N. U. K. SHERWANI

SUBMITTED BY:

KHALID MAHBOOBROLL NO. 07-MIB-17 ENROLMENT NO. 04-1585

MIB: SEM. III (2007-2009)DEPARTMENT OF COMMERCE & BUSINESS STUDIES JAMIA MILLIA ISLAMIA, NEW DELHI 110 025

Acknowledgement

First of my sincere thanks goes to all people helped me in making the practical any way how, directly or indirectly.

I express my deep sense of gratitude to my project coordinator DR. N.U.K. SHERWANI whose experience and guidance helped me a lot in preparing the project report entitled Export & Import Documentation ProcedureI express my special thanks to those who supported me during the analysis phase also to those people of management who have helped me during the queries about software requirements, hardware requirements and network specification.

I would be failing in my duty if I dont offer special thanks to my parents and god almighty for his showers of blessing and pray that he may continue to bless my endeavors.

KHALID MAHBOOB

ROLL NO. 07-MIB-17

MIB: SEM. III

DECLARATION

I, KHALID MAHBOOB, hereby declare that the project entitled Export Import Documentation Procedure is prepared and written by me under the noble guidance of Dr. N.U.K. Sherwani, in partial fulfillment of degree of Master of International Business (2007-2009), at Jamia Millia Islamia, Department of Business and Commerce Studies, New Delhi 110 025.

The recommendations and suggestions are only applicable to the company concerned and the institute for academic purpose.

KHALID MAHBOOB

ROLL NO. 07-MIB-17

MIB: SEM. III

TABLE OF CONTENTS1. Executive Summary52. Introduction 63. Objective of the Study104. Company Profile of Orient Craft Ltd.115. Industry Overview176. Research Design and Methodology387. Critical Review of Literature398. Export Process in Orient Craft Ltd479. Export Incentives availed by Orient Craft 6210. Conclusion7511. Recommendations

7612. Bibliography79

EXECUTIVE SUMMARY

The report is an Experience-based, which contains the in-depth study of all the departments involved in the business of foreign trade.

The report gives us the information about the various Export Process of Orient Craft Ltd. It involves Procurement of the Export order, its securitization, execution, preparation of the logistics, shipment and the negotiation of the bill. This also helps to understand the link between the various departments involved.

This report also contains the importance of various documents involved at the time of the shipment and the Negotiation of the bill.

It contains the role of Clearing and Forwarding Agent in the process of export.

It also contains the various Export Incentives availed by the Orient Craft Ltd. It has complete analyses of it along with the copy of the documents in the Annexure

Last but not the least, the report highlights the Indian Apparel Industry along with its strength, weaknesses and its scenario after Jan, 2005.

INTRODUCTION

The garment sector plays as extremely significant role in India in terms especially of share in value added, foreign exchange earnings, and employment. With the impending dismantling of quotas in 2004 under mandate from the Agreement in Textile and Clothing (ATC) of the WTO, the focus has clearly shifted to the future of the Indian clothing exports. Together with textiles the industry constitutes 20 per cent of industrial production, 9 per cent of excise collections, 30 per cent of export revenue and 18 per cent of employment in industrial sector. On a relative basis, the industry is globally more competitive than other industries in the country. In additional, the industry has a high potential to grow, as it is labour intensive where India has natural advantage. The most important destination for Indias garments exports have been the USA and the European Union capturing 32% and 36% of total exports respectively. With the removal of quotas in 2005 India faces new challenges with respect to exporting textile particularly garments. This study is therefore conducted to assess the possible threats and opportunities the Indian garment industry faces. It also attempts to find out weather on the whole the Indian garment industry is competitive or not. However, despite the various advantages, industry performance has been sub-optimal in comparison to other countries. Indias share in re-location of world trade has been extremely low in comparison to countries like China and even Sri Lanka and Bangladesh. In additional, domestic per capita consumption of textile products at 2.5 kilograms (USA-30 kilograms, World average at 7.5 kilograms) is among the lowest in the world.

The post ATC era is likely to witness growing competition mainly for the major consumption markets of USA and Europe. The developing countries like India and many other Asian countries, which earn valuable foreign exchange by exporting apparel, will have to open up their domestic market to international players. The competitiveness of the industry shall, therefore, become critically important. Indian apparel industry will need to improve its performance on quality, productivity and technology front.

Clothing as the Engine of Growth

The global textile trade in clothing is increasing at a fast rate of 7-8 per cent. The world trade in clothing is expected to increase from 200 billion Dollars to 400 billion by 2010. Indias participation in the global trade in clothing is extremely limited. The resurgence of Indian clothing industry hinges critically on clothing becoming the engine of growth in the textile industry. However, the current scenario is not favorable for the growth of clothing industry on account of: Small size units, Outdated technology, High level of outsourcing, Limited range, Basic products, and Unfavourable labour laws.

There is need to formulate special set of policies for the clothing industry. Labour reforms for the clothing industry as a special case is immediately called for. I have attempted some of these issues in some details

1.3 What is Multi Fibre Arrangement (MFA) and Agreement on Textile and Clothing (ATC)?

The MFA governed trade in the trade and clothing industry and consisted of a framework of bilateral agreements or unilateral actions that established quotas limiting the amount of imports to countries whose domestic industries were facing serious damage from rapidly increasing imports.

The MFA, intended only to be a temporary arrangement, has been in existence for twenty-one years. The MFA provided for the application of selective quantitative restrictions when surges in imports of particular goods are caused or threatened to cause damage to the industry of the importing country.

On January 1 1995, WTO replaced the MFA with the Agreement on Textiles and Clothing (ATC).

The ATC is a transitional tool that will be used in place of the MFA until January 1, 2005. The ATC has a number of defining features. Some of these are:

A. The product coverage, encompassing yarns, fabrics, made-up textile products and clothing;

B. A program for the progressive integration of these textile and clothing products into GATT 1994 rules;

C. The liberalization process to progressively enlarge existing quotas (until they are completely removed) by increasing the annual growth rate at each stage and;

D. Establishment of the Textiles Monitoring Body (TMB) to supervise the implementation of the other provisions.

The TMB consists of a chairperson and ten members acting in their personal capacity. It monitors actions taken under the agreement to ensure they are consistent and it in turn reports to the Council on Trade in Goods, which reviews the operation of the agreement before the implementation of each new step in the process. The TMB also deals with disputes arising from the ATC. If these remain unresolved they are forwarded to the WTOs Dispute Settlement Body.

The ten members are appointed by WTO members according to an agreed grouping of WTO member into constituencies. In January 1995 the General Council decided upon the format of the TMB for the first stage of the quota phase out. At the end of 1997, the second stage (1998-2001) with TMB members from the following constituencies: ASEASN member countries; Canada and Norway; Pakistan and China; The EU; Korea and Hong Kong (China); India and Egypt/Morocco/Tunisia; Japan; Latin America and Caribbean; The US; Turkey, Switzerland and Bulgaria/ Czech Republic/ Hungary/ Poland/ Romania/ Slovak Republic/ Slovenia.

There are also two non-participating observers from members not already represented, one from Africa and one from Asia. Members of the TMB are expected not to act as representatives or lobbyists for their respective governments.

The abolition of the MFA/ATC is presently underway and is taking place in four (4) steps. Full phase out of existing quotas is scheduled to occur on 1st January2005.

OBJECTIVE OF THE STUDY

The study is undertaken to fulfill the following objectives:

PRIMARY OBJECTIVES

To understand in brief the procedure of Export at Orient Craft Limited

To learn and analyze the various incentives availed by the firm

To know the documents required in the functioning of Export and negotiation process.

SECONDARY OBJECTIVES

To learn about Indian apparel industry

To Understand the Multi Fibre Agreement (MFA) and Agreement on Textiles and clothing (ATC)

To understand the role of Clearing and forwarding agent involved in the export process.

PROFILE OF ORIENT CRAFT LTD.

Orient Craft Ltd. a government recognize trading house was promoted by shree Sudhir Dhingra, who has been the managing director of the company since inception. 1978.The Company was renamed in 1992 as orient craft ltd. on becoming a deemed public company.

The company initially worked in a European market however, in the late eighties; it started exploring the American market, which offers possibility of large lots of single style of production. The company started from single style of production and manufacturing unit and has moved on to multiple locations with the passage of time. From a modest manufacturing space of less than 6000 sq. ft. in 1987, the company now commands more than 800000 sq. ft. covered area to manufacturing. To meet the continuous growing demand of the international market the company developed a project at Gurgoan in 1992 to manufacturing high fashion ladies garments. The unit is located at the highly developed Maruti industrial complex on two acre plot. It has also setup three 100% export oriented unit to produce garments using imported raw materials. In the process , the company has further built a new factory over 325000 sq. ft., which is Indias single largest multi product manufacturing plant for producing various diverse products under one roof like cut and sew knits, woven sports, silk apparel and ladies formal suits and coordinates.

Orient Craft imports latest generation production and finishing equipment to compete with the best production standards in the world. The Company has accordingly imported sewing machines fusing presses, steam presses, stitching machines, Cutting Machines and embroidering equipment from Japan and Germany, washing and dry cleaning equipment from U.K. and laser beam systems from Italy. In 1992-93 Orient Craft was awarded the "Design and Process Quality Award" by the International Quality Management, U.K. The award recognizes product and process developments which benefit the environment, is commercially successful, and of exceptional quality.

DIRECTORS

The Company is a board managed Company. The following are on the board:-

1.Mr.Sudhir Dhingra

-Managing Director

2.Mr.K.K.Kohli

-Director

3.Mr.Ravi Dhingra

-Director

4.Mr.Anoop Thatai

-Director

5.Mr. S.P Sood

- Director

Mr.K.K.Kohli is a Director since the inception of the Company. He has an accounting background with deep insight into handling documentation and quota dealings. He looks after all matters relating to Apparel Export Promotion Council, which allocates quota, all labor relations and allied matters. He is also looking after the day-to-day functioning and control of the unit located at Okhla.

Mr.Ravi Dhingra, age 50 years, was inducted into the Board on 23rd November, 93. He has a degree in Law and is a graduate in Business Management. He has spent considerable time in U.S.A. He joined the group in 1989 and is a partner in one of the sister concerns of Orient Craft Limited Viz. M/s.Fashion Express Company, which has a large number of imported production and finishing equipment. He is also the Managing Director of another associate Company M/s.Orient Clothing Co. (P) Limited.

Mr.Anoop Thatai, age 40 years has been with the Company since 1987. He was earlier a partner in M/s.Fashion Express Company. Under his supervision, the Company made the first break into knitwears and has now created a knitwear division. In the restructuring of the Company, he now holds 20% of the equity of the Company.

PRODUCTS

The Company started as a manufacturer of women garments made out of woven fabric only. From 1994, Orient Craft started executing orders in a small way for men's shirts. In early 1995, knitwear division was added and the Company started manufacturing men's and women wear made out of hosiery material.

Orient Craft today manufactures women dresses, skirts, blouses, tops, pants and men's shirts and sportswear and does items of home furnishing. Knitted garments today account for 38% of the Company's turnover, woven 56% and the balance is made out of home furnishing products.

The company has opened up his new unit of home furnishing recently

CUSTOMERS

Till 1986, the Company was exporting to the European market. In 1987, it decided to shift its profile and explore the possibility of executing large orders of one style. Orient Craft prides itself in making quality products for the following customers

1. Liz Claiborne Inc.

2. Tommy Hilfiger Inc.

3. The Gap Inc.

4. Banana Republic

5. Limited Express Stores

6. Susan Bristol

7. Dillard Department Stores Inc.

8. Ann Taylor.

9. Ralph Lauren

10. Roca wear

11. May Department stores.

12. Marc Jacob

13. D.K.N.Y

STRATEGIES AND PLANS 2005-2006 ONWARDS

During the year under review, the company has taken certain far-reaching steps to face the onslaught of competition, which would emanate from some of the neighboring countries after the dismantling of the quota regime.

Orient Craft has broadened the product range and have now acquired ability to manufacture suits also. The company now has complete range of products from men and women and caters to all age groups from infants to the aged.

Orient Craft has invested consistently in upgrading the skills of its blue-collared workers and has brought renowned technicians of international standing from across the globe. These people have been assigned the responsibility took upgrade the stitching standards, reengineer the product and lay out the factory to be in tune with the latest practices being followed by some of the most efficient garment manufacturers in the world. This has helped in attaining higher quality standards while reducing the process wastages.

Orient Craft has taken up strong capital expenditure programmed to stay in line with the latest needs to face competition. During 2002-03, they have spent approximately Rs. 32.00 crores on creating new capacities. They intend to spend another Rs. 16.00 crores towards this end, during 2005-2006. This would enable them to attain an export target of approximately Rs. 600.00 Crores during 2005-2006.

Orient Craft has also decided to setup a marketing office in New York. This office would help us tap customers who procure only from their domestic market. Orders will be picked up from the domestic customers and manufacturing will be done at various factories of Orient Craft, in India.Orient Craft intends to set up a Joint Venture with one of the leading companies specializing in creating special effects on garments through washes. This venture would enable to manufacture products for the very niche market. Orient Craft will be climbing the value chain as also be able to ward off the immense competition when the quotas are dismantled in 2005.

Orient Craft will invest approximately Rs. 2.50 Crores in the equity of this Joint Venture. The day-to-day management will rest with the overseas partner while OCL will provide support through management of local affairs and the supporting needs for smooth functioning of the company.

The year ended on 31st March 2003 has been a landmark year. Orient Craft has sown great resilience to combat both, a very soft market leading to sharp down turn in gross margin and onslaught of rupee appreciation leading to lower realizations. It had to sacrifice about 12-15% of our margins in comparison to lat year prices. However, they have been able to overcome this difficult period through various cost cutting measures and adopting techniques for improving efficiencies.

The company has also been doing exceedingly well in both its woven garments division and in the knits segment of business. But for the quota constraints, it would have crossed our turnover Rs. 500.00 crore during the current year. However, the company believes that investing in quotas in the current year when the quota regime is being phase out, would be an unwise step and Instead, they are planning to set up additional manufacturing facilities using these funds, which would have been spent otherwise on quota acquisition from the market.

ORIENT CRAFT'S RESPONSE TO GATT

With the signing of the GATT Agreement, the Textile Sector in India has got a great boost. India has been a very strong player in textiles and garment exports. U.S.A. and Western Europe had been protecting their domestic market from the South East Asian and South Asian Countries through quantitative restrictions called Quotas as was stipulated in the Multi - Fibre Arrangement (MFA). Now, after the Uruguay Round of talks it has been decided to dismantle the quota regime. In the first phase, 16% of the items on which quotas apply, have been done away with.

While GATT brings in great opportunities for the garment trade, it also poses major challenges. The opportunity comes mainly in the shape of bigger market access and therefore chance for higher volumes of exports. As we are all aware, textile is a traditional industry and both the Indian entrepreneur and the labor have acquired great skills in the industry. Moreover, garment industry being labor intensive in nature, India has tremendous cost advantage, as its labor is very cheap. In addition, the country is now producing world standard yarn flowing out of the large investment made in the yarn industry during the last few years. Due to improvement in quality of inputs and cheap prices, India has out priced its competitors from countries like Hong Kong, Taiwan, Korea and Japan and today many more U.S. and European customers are looking closely at the Indian market for sourcing their products. However, countries like China, Malaysia,

Indonesia, Thailand, Sri Lanka, Bangladesh and Pakistan are emerging as strong competitors to India and are investing in modern plant and machinery for producing quality garments. While all these countries also have the advantage of cheap labor, barring Pakistan and China these countries do not have the raw material for producing fabric and have to look for imports, which ultimately make their product more expensive.

However, after the melting down in their currency, many of the South East Asian tigers have been able to price their goods cheaper and as such become a major concern for exports out of India.

This is borne by the fact that in 2002-2003, Indian products were priced cheaper by about 12% in spite of the cost of production having gone up. This resulted in the capacity utilization coming down in the industry and the smaller players folding up.

INDUSTRY OVERVIEW

Export Documents

Pre-shipment documents:

Commercial documents

The commercial documents are those which, by customs of trade, are required for effecting physical transfer of goods and their title from the exporter to the importer and the realization of export sale proceeds.

14 out of 16 commercial documents have been standardized and aligned to one another. Shipping order and bill of exchange could not be brought within the fold of the aligned documentation system because of their very different data elements and having a very little in common with other commercial documents.

The commercial documents may be classified into principal documents and auxiliary documents.

Principal documents

Out of the 16 commercial documents mentioned above, the exporter is required to send the following eight documents to the importer. These are known as the principal export documents.

1. Commercial invoice

2. Packing list

3. Bill of lading

4. Combined transport documents

5. Certificate of inspection/quality control

6. Insurance certificate/policy

7. Certificate of origin

8. Bills of exchange and shipment advice

Auxiliary documents

The remaining eight commercial documents are known as auxiliary documents.

1. Proforma invoice

2. Intimation for inspection

3. Shipping instructions

4. Insurance declaration

5. Shipping order

6. Mate receipt

7. Application for certificate of origin

8. Letter to the bank for collection/negotiation of documents

Regulatory documents

Regulatory pre-shipment export documents are those which have been prescribed by different government departments/bodies in compliance of the requirements of various rules and regulations under relevant laws governing export trade such as export inspection, foreign exchange regulations, export trade control, customs etc.

There are 9 regulatory documents associated with the pre-shipment stage of an export transaction and are as follows:

1. Gate pass-I/Gate pass-II (prescribed by central excise authorities)

2. AR4/AR4A form (prescribed by central excise authorities )

3. Shipping bill/bill of export (prescribed by central excise authorities )

For export of goods

For export of duty free goods

For export of dutiable goods

For export of goods under claim for duty drawback

4.export application (prescribed by port trust)

5.receipt for payment of port charges

6.vehicle ticket

7.exchange control declaration prescribed by RBI GR/PP forms

8.freight payment certificate

9.insurance premium payment certificate

The different commercial regulatory documents may be classified into documents related to shipments, documents related to payment; documents related to inspection, documents related to excisable goods and documents related to foreign exchange regulations.

Documents related to goods:

(i) Invoice

CUSTOMS INVOICEThe customs invoice is used in lieu of the commercial invoice in a few importing countries for customs purposes, but the importer often needs a commercial invoice too. The customs invoice can be in a form called the certificate of value. The invoices vary in format but they contain essentially the same data as in the commercial invoice and packing list. The invoice is self-certified by the exporter. The blank customs invoice is available from the customs broker or forwarder and specialized printer. Certain importing countries may require their importers, not the exporters in the exporting country, to provide the completed customs invoice for customs clearance.

CONSULAR INVOICE

As the name implies, the consular invoice is a specific invoice issued by the Consul of the importing country. Many importing countries, mainly less developed countries, have already phased out this invoice. It is used for customs clearance and other purposes, as such any errors or omissions on the invoice may cause problems and fines at the customs in the importing country. The consular invoice is a form of non-tariff barrier. The format of the consular invoice form varies greatly, but it contains essentially the same data as in the commercial invoice and packing list. The invoice form is either in the language of the importing country (e.g. Spanish usually) or bilingual, that is, a combination of English and Spanish usually. The exporter's declaration normally is included in a consular invoice. The consular legalization and payment of a consular fee is required. The consular fee can be a percentage of the FOB invoice value.

(ii) Packing list:

The packing list is the detailed list of contents of the shipment, including quantities, items, model numbers, dimensions and net and gross weights. A packing list should specify per carton or crate the number and type of units of material inside. The shipper gets the packing list ready at the time the goods are being is prepared for shipping. There is no standard format for packing lists.

Although it is not a required customs document, the packing list is often used by the customs broker to obtain additional information about the shipment.

(ii) Certificate of origin:

The Certificate of Origin is only required by some countries. In many cases, a statement of origin printed on company letterhead will suffice. Special certificates are needed for countries with which the United States has special trade agreements, such as Mexico, Canada and Israel. More information about filling out these special certificates is available from the

Certificates related to shipment:

(i) Mate receipt: mate receipt is a receipt issued by the commanding office of the ship when the cargo is loaded on the ship, and contains information about the name of the vessel, berth, date of shipment, description of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship etc.

(ii) SHIPPING BILL: -Shipping bill is the main document for obtaining custom permission for shipping goods. This document is of four types: -

Free shipping billsDrawback shipping bills

Ex-bond shipping bills

Dutiable shipping bills is filled up where the consignment is subject to export duty and where duty drawback is to be claimed. Whereas free shipping bills is filled up when the consignment is subject to export duty and no duty drawback is tobe claimed. Ex-bond shipping bills is needed in case of shipment from the customer bounded warehouse.

(iii) Airway bills: - Airfreight shipments are handled by air waybills, which can never be made in negotiable form.

(iv) Bill of lading: - is a contract between the owner of the goods and the carrier (as with domestic shipments). For vessels, there are two types: a straight bill of lading which is non-negotiable and a negotiable or shipper's order bill of lading. The latter can be bought, sold, or traded while the goods are in transit. The customer usually needs an original as proof of ownership to take possession of the goods

DOCUMENTATION: -Generally documentation is perceived to be the most complex, difficult and critical activity of export marketing particularly in India. Successful consummation of an export order needs innovative skills and meticulous planning including proper compliance and subsequent documentary provision.

REGULATORY CONTROL IN INDIA

After becoming an exporter company it is required to obtain a (RCMC) from the relevant export promotion council, commodity board or any other designated body. This certificate is needed for getting some more export incentives given by the govt.of India. Next step in becoming an exporting unit is to obtain importer-exporter code number from director general of foreign trade.

a) GR FORM / PP FORM: -GR FORM / PP FORM in duplicate is required for every consignment for obtaining customs clearance. This form is needed as a legal requirement under the Foreign Exchange Regulation Act of India. GR FORM is needed for all consignments other than ones being shipped by post, while PP FORM is needed for goods going by post.

b) DOCUMENTATION: -Various documents originated during export marketing activities of Orient Craft are defined below: -

SALE ORDER / CONTRACT: -

It is a premiere document that has to be generated in any transaction. It is an agreement between buyer and seller, in which seller has agreed to buy them, at an agreed price with specified delivery terms. Delivery terms may be F.A.S, F.O.B, and C&F etc.

F.A.S (Free Along Side)

In this seller has the obligation to deliver the goods alongside the vessel on the quay. The buyer has to bear all the cost and risk of loss or damage to the goods.

Dutiable shipping billsF.O.B (Free On Board): -

When the delivery condition is F.O.B, the seller has the liability to load the goods / materials on the vessel specified by the buyer. The transportation, insurance and other agreements are to be made by the buyer.

C & F (Cost and Freight): -

The seller must pay the costs and freight necessary to bring goods to the named port of designation but the risk of loss and damage to the goods is transferred from the seller to the buyer.

In case of International Trade the buyer and seller separated by distant boundaries. Hence it becomes less viable for the parties to come together to form a contract. Thus it so happens the buyer or seller initiates the formation of contract by sending purchase order or sale order respectively. Sometimes the buyer intimates the seller by sending the purchase order, or if seller finds the initiative lucrative, he sends his sale order to the buyer. Thus in this way the parties enter into a contract with each other. Such type of contract is known as Constructed Contract. Various contents of sale order are listed below:-a. Price of the product

b. Quantity and quality of the product

c. Period of delivery

d.Port of delivery

e. Standard terms and condition

f. Types of financial arrangements

g. Payment terms

Documents related to payment(i) LETTER OF CREDIT: -L /C is the most popular method of payment / receipt in foreign trade transaction as well as it the mother document which give rise to all other documents. Under L/C the buyer promise to pay the seller on due date. In this type of credit, the buyers liable to pay. It is thus also known as bankers commercial or documentary credit.

It is commonly referred as commercial L/C as it a means to opening a credit in favour of someone, under which payment will be made provided that certain conditions are fulfilled within given time. PARTIES INVOLVED IN L/C: -1.Buyer or importer

2. I) Issuing or opening Bank

II) Reimbursing Bank

3. Seller or exporter or beneficiary

4. I) Advising / confirming Bank

II) Paying Bank

III) Negotiating Bank

Based on security, L/C can be classified into 3 types: -1.Revocable or irrevocable: -

A revocable L/C can be cancelled or modified, by the buyer at any time without any notice to the seller. But an irrevocable L/C cannot be cancelled without prior notice to the seller of exporter.2.Confirmed or Unconfirmed: -When the bank authorized by opening bank confirms an irrevocable L/C, it becomes confirmed. Otherwise the L/C is unconfirmed. 3.Recourse or without recourse: -If the advising bank pays the seller but does not get reimbursing from the opening bank, then this bank can recover the whole money with interest from the seller.

But in case of without recourse, the liability of the exporter ends after he has deposited the required documents and received payments.

(ii) BILLS OF EXCHANGE: -It is a document for the goods exported. It is the means of collecting money through banking channels and also a method of payment by credit. A bill of exchange is also referred as Draft. It is a legal document. In India, Section 5 of Negotiable Act, 1881, defines bill of exchange as:-

An instrument in writing containing an unconditional order, signed by the maker, directing the person to pay certain amount .

It has the following characteristics:-

a. It is an instrument in writing

b. It is an unconditional order signed by Maker (Drawer) c. It is a direction given to a specific person (Drawee)

d. It is a direction to make payment of specific or fixed amount.

A bill of exchange performs the following functions: -

i. Means for collecting payment

ii. Means for demanding payments

iii. Means for extending credit

iv. It is a promise of payment

v. It is a receipt of payment

Various documents are required for custom clearance. Exporter or his agent submits the following documents to the custom department so as to get custom clearance for export.(iii) BANK CERTIFICATE OF PAYMENTIt is a certificate issued by the negotiating bank of the exporter, certifying that the bill covering particular consignments has been negotiated and that the proceeds received in accordance with exchange control regulation in the approved manner.

DISPATCH INSTRUCTION: -Dispatch instruction is almost like sale order. It is an instruction or order given by the companys marketing department to the plant to dispatch specified goods to the port of any other designations.

Contents of dispatch instruction are given below:-

a. Specification and quantity of materials to be transported

b. Port of dispatch

c. Shipment schedule

d. Place and port of schedule

e. Name of the buyer

A.R.4 FORM: - It is an application, by the company to the central excise department of custom, for excise relief.

In India exportable goods are exempted from duty. Hence if the company exports goods to foreign countries, to gain foreign exchange, it applies to central excise department to get exemption, from excise duty, by giving application in a prescribed format under rules 158, 185, 1730. This application is known as the A.R.4 FORM.

The contents of A.R.4 FORM are listed below:-

a) Name and address of range officer

b) Name of the company

c) Port of loadingd) Country of loading

e) Central excise regd. No.

f) Number and description of goods

g) Gross weight / net weight

h) Value of goods

i) Weight and quantity of goods

j) Duty rate and amount

k) Amount of rebate claimed

l) Remarks

m) Declaration of the company

DELIVERY INVOICE: - The plant prepares it at the time of removal of goods from the plant. It is meant for excise purpose. It contains the following: -

a. Quantity of goods dispatched

b. Price of goodsc. Mode of dispatch

d. Port of dispatch

e. Buyers details

f. A.R.4 reference

PROFORMA INVOICE: -It is basically a form of quotation by the seller to the buyer. It is a sort of invitation to the buyer from the seller to place a firm order to him. It is deposited with the custom clearance for estimation of excise duty. It helps in getting custom clearance.

A Proforma invoice contains:-

a. Exporters name

b. Consignees name

c. Notifys name

d. Buyers name

e. Countrys of origin

f. Designation

TEST CERTIFICATE: -It is a verification certificate that shows that the goods shipped have the required cast no. And percentage composition.

INSPECTION CERTIFICATE: -It is a document which certifies that the goods have been inspected (prior to shipment). This certificate is generally desired by the importer so that he can be sure that right types of goods ordered are being send by the exporter. In India certain goods are subjected to quality control. For this purpose an agency called (EIC) was created.

G.R FORM: -It is one of the most important documents in international business. This form is obtained from R.B.I. This form is filled by the exporter and is endorsed by the customs. This form is one kind of guarantee given by exporter to R.B.I. The exporter gives guarantee that within six months of transaction the foreign currency involved will be realized.

G.R FORM contains: -

a. Exporters name and address

b. Invoice no. And date

c. Consignees name and addressd) Port of loading and discharge

e) Country of designation

f) Exchange rate

g) Currency of invoice

h) Net & gross weight, particulars, description

SHIPPING BILL: -It is the main document on which custom permission for export is given. It is custom document. It is a document, which is necessary for loading the cargo on ship.

It contains the following: -

a. Exporters name and address

b. Invoice no. And date

c. Port of loading

d. Port of designation

e. Details of packages and goods

f. Analysis of export value; currency; amount

MATE RECEIPT: -When the cargo is loaded on the ship, the commanding officer / captain of the ship will issue the receipt called the mate receipt for goods loaded.

It contains the following information:-

a. Name of the vessel

b. Berth

c. Date of shipment

d. Description of packages etc

BILL OF LADING: -It is a document which is issued by the shipping company acknowledging the receipt of goods mentioned there / in and undertaking that the goods are in condition and will be delivered to the consignee, provided that the freight specified therein is duly paid.

It serves the following 3 purposes: -

It is a document of title of goods shipped,

It is a receipt for goods, received by the steamship company,

It contains the terms of the contract between the shipper and shipping company

MARINE INSURANCE: -When the goods are transported from one place to another there is always risk involved. Hence to avoid such transit losses, marine insurance is taken up. In India there are various insurance companies, such as General Insurance Company. Insurance Policy is normally done through agents.

Marine insurance contains the following:-

a. Name and address of the subsidiary of insurance company

b. Claim payable

c. Name of the insured

d. Vessel no.e. Place of dispatch

f. Port of loading and dispatchg. Destination

h. Insured value

i. Terms of insurance

j. Particulars and description of goods

100% E.O.U. -

Export Oriented Units means an industrial unit offering for its entire production, excluding rejects and items otherwise specifically permitted to be supplied to the domestic Tariff Area (DTA). Such units may be set up under the Export Oriented Unit (EOU) scheme or Export Processing Zone (EPZ), Electronic Hardware Technology Park (EHTP). Such units may be engaged in manufacture/production or trading of any goods, like Hardware.Units engaged in service activities may also be considered on merits.

The scheme of 100% Export Oriented Units (EOUs) was introduced in the year 1980 with the objective of generating of production capacity for exports by providing an appropriate policy frame work, flexibility of operations and incentives. Inorder to enable them to operate successfully in the international markets, such units are allowed to import machinery, raw materials and components and consumables free of customs duties, and if procured indigenously, full exemption of excise duty is available. These units have to operate under customs bond and are expected to achieve the levels of net foreign exchange earnings fixed by the Board of Approval as a percentage of their exports.

EOUs are governed by the following basic terms and conditions:

It may be established anywhere in India subject to locational criteria, local zoning laws and environmental regulations.

The unit will undertake to manufacture in bonded area and to export its entire period ordinarily of five years.

If a unit approved under this scheme is unable for any reason, to fulfill its export obligations, the Board of Approval will review the case and recommend the future course of action to be taken in regard to that unit.

Once a 100% EOU is de-bonded, it would have to pay the following duties.

Customs duty on capital goods on the depreciated value but at the rate prevailing at time of import.

Customs duty on unused raw materials, components, consumables and spares of value at the time of import at rates in force at the time of clearance.

In respect of excisable goods, excised duty without any depreciation and at rates applicable at the time of clearance.

EOUs established any where in India and export 100% its products except certain fixed percentage of sales in the domestic Tariff Area as may be permissible under the policy. Import Documentation

Documentary Requirements:

Customs documents are the set of documents required by a customs authority to accurately and completely identify goods which are being imported. Every country has its own specific rules and regulations governing information and documentary requirements.

The minimum documentation required to be submitted with customs import entries or Informal Clearance Documents includes:

Air way-bill or bill of lading

Invoices

Any other papers (including packing lists, insurance documents, etc) relating to the shipment.

The Customs Act 1901 requires importers to retain commercial documents relating to a transaction for five years from the date of entry. These documents may be required for Customs audit purposes. Failure to meet the requirement may attract a penalty of $2000.

Airway Bill:

Any 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, each airline has its own airway bill.

Bill of lading

The bill of lading is a document, issued to a consignee, by a carrier, that describes the goods to be shipped, acknowledges their receipt and states the terms of the contract for their carriage. The shipper is responsible for completing the bill of lading and providing the completed document to the carrier at the time the shipment is sent.

The carrier provides a copy of the bill of lading to the exporter before departure, as evidence of the transfer of goods from the exporter to the carrier. A copy of the bill of lading is also forwarded to the importer, to arrange for the pick-up of the goods, and a third copy is kept for the carriers records.

Original bill of lading:

The original bill of lading always stipulates the contract of carriage.

Possession of the original bill of lading at destination entitles the bearer to the goods.

The original bill of lading is sometimes sent to a financial institution that represents the shipper. The financial institution remits the original bill of lading to the importer once all financing and other obligations are met.

Manifest:A manifest is an itemized list of the contents of the shipment, to be shown to officials for customs clearance. Another name for the manifest is cargo control document (CCD). The most commonly used manifest is a Form A8A.

The carrier prepares the manifest based on the information provided by the shipper. The carrier must provide the customs broker with a manifest in order for the broker to obtain a release from Customs.

A manifest or CCN has its own identifier, called the cargo control number. Once submitted and accepted by Customs, the manifest and cargo control number are monitored by Customs to ensure the proper clearance and closure of the shipment.

Packing list:

The packing list is the detailed list of contents of the shipment, including quantities, items, model numbers, dimensions and net and gross weights. A packing list should specify per carton or crate the number and type of units of material inside. The shipper gets the packing list ready at the time the goods are being is prepared for shipping. There is no standard format for packing lists.

Although it is not a required customs document, the packing list is often used by the customs broker to obtain additional information about the shipment.

Commercial Invoice:

A commercial invoice is the basic document from which the buyer or importer pays the vendor or exporter.

On import shipments, the commercial invoice generally serves a dual purpose: to enable the exporter to collect his/her money and to assist the importer in clearing the goods through Customs.

The commercial invoice does not need to conform to a rigid format. The exporter or manufacturer is free to set out the information in any manner they choose, provided that the prescribed data elements found on the invoice are included. Specifically, the following information must be included and be clear, accurate and precise:

Exporter name and address

Consignee name and address

Description of the goods

Net and gross weights

Unit price

Extended price

Currency of settlement

Terms of delivery and terms of payment

Date

Reference numbers

Import licenses

Freight included or excluded

Import permits and special certificates:The goods subject to government department requirements need special permits, certificates or other paperwork, in addition to the standard customs documentation. In some cases, shipments may require examination by customs officers to verify marking or proper labeling. In others, qualified inspectors, working on behalf of the OGD in question, must review the documentation and/or examine the goods prior to release.

Often the data needed to satisfy OGD requirements is not normally provided with the shipment. It must then be supplied by the importer to the customs broker at the time of customs entry.

OGDs are becoming more stringent with regard to imports. Whats more, new, additional OGD requirements are being implemented all the time. It is crucial that your customs broker be aware of these regulations to ensure correct processing and compliance of your shipments subject to OGD requirements.

Orient Craft prepares all appropriate certificates and import permits on a duty free-per-permit basis as it is a 100% E.O.U. and present these to the OGDs and Customs, in order to secure the release of the shipment.

Import documentation procedure is as follows:

The papers and documents required before starting the steps and procedures of clearing goods imported for companies and establishments or others in general

Copy of the commercial register and a form of the business activity issued by the Ministry of Commerce and Industry

Certificate of membership with the Chamber of Commerce and Industry

Certificate of origin for imported goods certified by the competent authorities in the exporting or producing country

Original invoice of purchase certified by the competent authorities in the exporting or producing country

Bill of Lading for goods imported by sea or air

Manifest papers of goods imported by sea or air

Delivery order by the shipping agent of goods imported by sea or air

Letter of Authority certified party concerned with custom clearance in case of inability to appear in person.

RESEARCH DESIGN AND METHODOLOGY

SOURCES OF DATA

PRIMARY DATADirect Interview of Executives working in the concerned departments

SECONDARY DATAConcerned documents of the company, various apparel magazines, companys handbooks on concerned topics

SAMPLING SIZE AND DESIGN

Convenience sampling was followed by selecting the most appropriate 25 elements from the organization that were related to my study, and then they were interviewed as to gather every possible detail about the process under study.

METHODOLOGY OF RESEARCH

Primary descriptive research method has been used for the completion of this project.

Methodology followed during the study was to assist the executives of various departments related in day to day working and interviewing personals from other concerned departments to gain a detailed knowledge about the export process and the incentives availed by Orient Craft Ltd.

The departments involved are:

1. The Top and Middle Level Management of the Documentation department

2. The Top and Middle Level Management of the Banking department

3. Executives involved in the Logistics department

4. Executives involved in the Merchandise department of the firm

CRITICAL REVIEW OF LITERATURE

The Indian textile sector has its roots going back several thousand years. After the industrial revolution in Europe, this sector in India also saw growth of an industrial complex. However, over the last 50 years the textile industry in India has shown a chequered performance.

The apparel industry is the largest source of foreign exchange flow into the country with the garments exports accounting for almost 16% of the total exports of the country. The industry is very vast with over 30,000 readymade garments manufacturing units and employs nearly three million people. Indian garments export business has made great strides in the past few years and today many of the leading fashion labels, from all over the world, are known to source their products from India.

The garment manufacturers, exporters, suppliers, stock lists and wholesalers make for a very venturesome clothing and apparel industry in India. There is great demand for Indian readymade garments the world over. They are renowned in the international market for their durability, high quality and exquisite work. The ready availability of highly skilled cheap labor is one of the primary reasons for Indian garments being so economically priced. Apart from this, there are other factors in favor of the Indian garments industry like the cost effectiveness in manufacturing, raw materials and quick adjustment to what will sell, offering high quality at competitive prices, shorter lead times and a virtual monopoly in embellishments. These are the reasons that attract leading international brand and fashion chain to visit India to choose from its extensive range of fabric available in a multitude of colors and designs, unparalleled by any in the world. Embellishments include elaborated hand embroidery, which is in great vogue abroad and of variety a accessories like buttons, zippers, laces etc.

Indian garment manufacturers and exporters have for long been living in a regime of subsidies and incentives. This has resulted in compliancy in building up larger capacities and increasing earnings through higher production levels instead of living on subsidies.

The export promotion package compares favorably with incentives offered elsewhere in the world. It makes a special effort to attract foreign investors to set up export-oriented units in India. The government provides a number of incentives and facilities for exporters. Since July 1991, there have been dramatic changes in the trade policy regime in India. The objective of these reforms has been to enhance export performance by improving export incentives and eliminating discretionary controls.

The accompanying diagram clearly shows that most of the Garment Manufacturers and exporters fall into the category of up to 2 crores. The fact that the number of companies having a turnover of over 100 crores is only 15 (as per figure from AEPC) speaks volumes about the fragmented and how divided the Indian scenario has been.

EXPORTS

India has seen a steady increase in the export of readymade garments in the past few months. India's export of readymade garments, to restricted countries, during January-July 2002 amounted to 714.5 million pieces which are valued at $2,497.7 million (Rs.12,175.00 crore), a clear increase of 7.31 percent in quantity and 3.11 percent in terms of value (U$$), as compared to the same period in the previous year. Thus apart from being one of the largest exporters of tea, jute and tobacco, India is rapidly emerging as one of the biggest players in the international fashion arena, in fabric souring for fashion wear. Most of the leading names in fashion, like next and top shop of UK. Federated Stores, R.M.Macy's, Target, Maryn's, to name a few features among the list of buyers.

FIBRES

Cotton-India is the 3rd largest producer of cotton in the world. In the past, price of cotton would vary, depending upon the success or failure of the crop. In the year 2000-01, the production of cotton yarn is 3160 million kg and filament yarn 920 million kg.

India Yarn Dyed Cotton need no introduction as it has already captured the world markets for years. Slowly but surely weavers are understanding the need to replace the traditional power looms with Auto looms, and the importance of cone dyeing as replacement for bucket dyeing, so that uniformity in color is achieved. In moving away from cotton - the Government is encouraging the promotion of denim and various types of woolen fabrics and polyester staple fabric etc. which have already been shifted to the open general license list. Some washed shirts, embroidered jumpers, dresses in denim are being exported in plenty. Arvind Mills, Ahmedabad is the third largest producer of denim in the world! Other mills of repute are K.G Denin and Ashima.

Rayon Blends like poly/rayon rayon/linen; rayon/cotton/linen are now popular. The cost conscious market is turning to polyester for reasons of price, durability, comfort and drape, linen and linen blends continue to be directional. Besides wovens, Indian has emerged as a viable option, for the manufacture of fine knits and sweaters. The potential centre for knitwear in the millennium are Ludhiana (for sweaters and fine knits) and Tirupur.

MAJOR CUSTOMERS

Gap has emerged as one of the strongest customer in India. Other key US customers in the market are

Ann Taylor, Avenues, Blair Corporation, Dillards, Federation Stores, J.C Penny, K-Mart, Kohls Lane Bryant Liz Claiborne, May Department Stores, Mervyns, Polo Sport, Sag Harbourm Sears, Target Tommy Hilfiger and Wal-Mart.

THE MAJOR CHALLENGES OF THE INDUSTRY

A major gap in Indian industry is its fragmented industry structure with a dominance of small scale. One of the greatest implications is that since most of the companies are small, there are very few clear examples of industry leadership and reference points that can be inspirational for the rest of the industry.

Small scale also brings with it the problem of productivity. Smaller companies often do not have the resources to invest in appropriate technology or retraining, or in the re-engineering of processes. While skilled Indian labor is inexpensive in absolute terms, due to lower productivity levels, much of this advantage is lost by small firms.

The fragmentation of supply base also creates barriers in achieving true integration between the various links in the supply chain. This creates issues of lack of control and lack of consistent or reliable performance.

The government has, in the past, also kept foreign investment out of textile and apparel manufacturing, which restricted its growth.

Labor laws are still seen to be relatively unfriendly to business, with companies having less than ideal flexibility to follow a "hire and fire" policy. To avoid any potential trouble with unionization of labor, companies have often broken their business down into small units, which have, in turn, lost the efficiencies of scale.

It has a global logistics disadvantage due to its geographic location. Unlike Mexico (for the US), and China (for Japan and the US West Coast), India is distant from all the major markets. The cost of shipping is high and time adds to disadvantage.

India also lacks any serious trade pact memberships, and therefore does not receive preferential access to the major markets. This leads to quota and duty disadvantages.

STILL IT COUNTS ON THESE FOLLOWING STRENGTHS

1. India is the third largest producer of cotton in the world, with the second largest spinning capacity in the world it had 17% share in EU during 2000 after Turkey, Indian price was EURO 4.34/kg against Euro 3.49 average for EU as a whole.

2. Diverse textile base - Availability of an unmatched variety of fabrics - a quality conscious mill sector, economic power loom sector and a creative handloom sector. India had a share of 7.3% during 2000 after Pakistan, Turkey, Indonesia. The average price of fabric synthetic stable fibre was Euro 3.54/kg (Euro 4.90/kg)

3. Capabilities in hand and machine embroideries, bead work, appliqus, eyelets, patch work, etc.

4. Flexible infrastructure to produce low minimum or meet high maximum quantities makes India an accommodating market to work in.

5. India is emerging among the 'Bid 4' economies of 2020 - it has large work force talent in this industry e.g. designers. Marketing Experts, Merchandisers and Technologist, India is coming to be seen as an expanding market that is more stable than many East Asian Countries.

6. Competition in prices vis--vis the Pacific Rim Countries due to the comparatively low cost of skilled and semi-skilled labor.

7. Import duties have been brought down for industrial supplies, and are likely to come down even further. For example, while a few years ago the import duty on manufacturing equipment was 25%, this has been reduced to 5%.fabrics can be imported free of duty if they are made up into garments and re-exported. .

8. Opportunities also exist for tertiary suppliers for support products such as labels, software, hardware (e.g. bar code scanning, testing and inspection equipment etc.), with the growing need for improving standardization and quality levels.

9. Services are another area for growth. The immediate opportunities for service providers (logistics, technical, consulting, legal and finance) are arising out of the growing need for improvement of standards, productivity, compliance etc. and an increasing willingness among Indian factories to invest in services.

10. Foreign Direct Investment in the apparel and textile industry has been recently opened up, as liberalization has gathered steam. Manufacturing is a thrust area for the Indian government, as Indian industry and the government see foreign companies more as partners in building domestic manufacturing capabilities rather than a threat.

Other than sourcing liaison offices, a number of companies are already present in India through joint ventures, strategic alliances and other forms of relationship.

11. Indian industry has consistently remained flexible in terms of production quantity and lead-time. India presents the possibility of producing quantities as low as to a few hundred pieces. This capability is especially critical in an unpredictable market where retailers and brands are looking to source smaller quantities, closer to the season.

12. 1990s have seen growth of "fashion management" studies, including marketing and merchandising, garment manufacturing technology, design management, fashion communications management etc. Simultaneous growth of the organized branded market within India, as well as the entry of larger companies sourcing from India, has given fashion management graduates the playing field on which to further hone their skills.

POST 2005 SCENARIO

With January 2005, WTO provisions will come into force, and there will be no quota restrictions in any of the 137 exporting countries. A free-for-all regime will emerge. Then, only garment exporters, who are able to provide the best quality at the cheapest price will succeed.

Keeping the above in mind, and the order to be competitive in a world scenario, the Indian export industry has started emphasizing on the import of textiles, rather that only working with domestic goods. Taiwan has emerged as the leading suppliers ($60 million). South Korea a close second ($ 45 million) and China at position No.3 (3 35 million). The Indian garment manufacturers are using most competitive fabric in export, thus could be domestic or indigenous.

By starting this trend, exporters are hoping that they will be perceived by the West as another production base - not restricted or limited to Indian industry. For example:

Setting up of apparel and design centers, facilities for upgrading technology and ready access for all necessary and better inputs e.g. machinery, raw material, trimmings and embellishments to get higher unit value realization.

Greater focus on eco-friendly chemicals and azo free dyes.

The removal of special fabrics and all types of knitting and sewing machines to the free import list, to enlarge the export supply base.

Setting up of private bonded warehouses to facilitate bulk exports for large departmental stores.

Cheaper pre-shipment credit setting up of Special Economic Zones (SEZ's) for garments.

After China, India is being perceived as the next country with the biggest 'Growth Potential' due to it's manpower and natural resources. The first decade of the 21st century should see us a major player in the apparel business - partly because more industrialized countries like Korea, Taiwan, etc. have moved into other industries and partly because the Indian Government believes in, and wants to grow the apparel export business, since it is a major earner of foreign exchange.

Indian apparel exporters tend to specialize in women's blouses, dresses and skirts; men's trousers and shirts. By tapping export markets, the clothing sector's growth has far exceeded that of the textile industry. Average growth in exports has been around 15% per year, mainly because of the expansion in union woven apparel.

Indian firms' labor productivity levels are considered as low as a quarter of those prevailing in the NICs. Which does to an extent erode the advantage of cheap labor. Moreover, the apparel industry has been characterized by a low capital intensity, as investments in machinery tend to be limited.The competitiveness of the small-scale sector has attracted a number of international clothing manufacturers including Levis, Benetton, Lactose and Pierre Cardin. Cheap, temporary labor provides the flexibility to produce small lots of tailor-made garments. The recent change in policy to allow large scale units to enter the garment industry provided they undertake an obligation to export 50% of their production, is helping the industry diversify its product mix.

Quotas restrict exports nearly 80% of Indian clothing exports go to the US and EU where they face quota restrictions. A similar percentage of total clothing exports are subject to quotas. In some categories the quotas have not been filled. This tends to be the case for products for which there is limited or no demand in quota markets, or those that India does not specialize in such as manmade fibres.

The US argues that quotas do not hurt India, as a number of quotas are grossly under-utilized. However, for products that India does specialize in, the quotas have begun to bite. Take the case of cotton. The bilateral agreements under the Multifibre Arrangement discriminated strongly against cotton products. In addition, these were taxed by 20% more than other fibres in the countries that imposed quotas.

The developed importing countries have not yet removed quotas on cotton imports. "Consequently, the most intensive items like shirts and women's outerwear, in which India has an advantage, will not have their quotas removed until 2005", quota allocations are in huge demand among Indian exporters who specialize in these products.

Moreover, firms exporting to quota markets registered a smaller increase in fabric price of Rs. 4.85 per meter as compared to Rs. 5.24 per meter for firms exporting to non-quota markets. This reflects a substantial difference between returns from quota and non-quota markets.

Export Process In Orient Craft Ltd

Firstly, Orient Craft Ltd. tries to secure an Export order. Export order is a document communicating decision of the foreign buyer to purchase certain items from the exporter. It specifies the description of the item, their quantity and the quality specifications, unit price, delivery terms, shipping marks, insurance requirements, requirements as regards the labeling packaging and packing, payment terms, pre-shipment inspection requirements, documents required and so on.

PROCESS OF SECURING AN EXPORT ORDER

I. Orient craft locates a trade enquiry i.e. it comes across the details of a foreign buyer who is willing to import the items. It gets its details through:

a) Contact with a buying agent in the foreign or own country. It deals with agencies like William E. Conner, Le & Fung Ltd., Triburg etc. established at New Delhi and Gurgaon.

b) Business promotion visit to a foreign country. The CMD and the Directors pay at least two promotional tours an year to US along with product samples.

c) Already established buyers like Tommy Hilfiger, Gap inc., Ann Taylor,

d) Contact with overseas marketing agent

e) Orient crafts own subsidiary firm in US

II. On receipt of the trade enquiry, it sends its company profile, product profile and promotion literature of his product range to know the interest of the buyer

III. The buyer may like to have the details of a certain product of his own choice from the firm.

IV. Orient craft sends the quotation in respect of the product of interest to the buyer. The quotation contains the basic details like the price, mode of payment, sample of the item along with its specification and the likely delivery time.

V. On receipt of the basic information, the buyer puts forward the requirements as regards the design, size, finish, color or other specification of the product. Once the product has been identified, then the process of negotiation of other terms and conditions begin.

VI. Orient craft send the proforma invoice to the foreign buyer setting out in detail the terms and conditions negotiated between the two parties. The proforma invoice represents the offer to sell made to the exporter.

VII. The importer conveys his acceptance of offer of sell to the exporter on the proforma invoice originally sent by the exporter.

TERMS AND CONDITIONS OF AN EXPORT ORDER

The terms and conditions of an export order would vary from order to order depending on the nature of product, parties involved and so on, but following are the standard clauses of an export order

1. Product and its description

The exact size, color, and code of the product are mentioned.

2. Product specification as regard to its quality

Exact quality specification is a vital content of any export order. The goods should conform to the quality specifications as laid by the buyer. Any variation in the quality especially with color fastness could lead to a lot of damage to the company.

3. Price

The terms of delivery i.e. FOB/ CFR/CIF etc. as per INCOTERMS is clearly mentioned as to avoid any later confrontation.

4. Quantity

The detail of the quantity is mentioned in each category of size, color quality etc.

5. Payment terms

Mode of payment- by open account, advance payment or by D/A, D/P, Letter of credit advance payment or any other is mentioned.

6. Delivery schedule time period

It mentions weather the goods have to be dispatched partially / completely. If dispatch is in different lots their date of dispatch are mentioned clearly for each.

7. Mode shipment

It mentions the weather the goods have to be dispatched through sea, air or postal.

8. Type of shipment

It mentions weather there has to be a direct/Transshipment of the final goods.

9. Inspection

Many buyers nominate their own inspectors for inspection. They have fixed schedule for the inspection and its criteria. It is clearly mentioned in the export order. They also bear the right to reject the goods that do not meet their quality standards.

10. Labeling, packing and marketing requirement

The export order clearly mentions the terms regarding the labeling, packing etc. Brands like Tommy Hilfiger, Banana Republic rely heavily labeling. Strict instructions are also given regarding the packing. Packing is normally done the house, store wise, size wise or as per the buyers requirement.

11. Insurance

The export order mentions weather the insurance charges have to be born by the importer or Orient Craft. The pricing or the INCOTERM depends upon this factor.

12. Documents required

If the buyer is in US or Canada then he requires additional documents like visa certificate and commercial Invoice.

Most of the countries require certificate of origin but they are different.

No. of copies of the packing list

Whether cargo insurance is desired

What kind off bill of lading is desired; is it straight or to order; shipped or received for shipment direct or through etc.

13. Escalation clause:

Sharing of increase in cost due to uncertainties is decided in advance.

14. Force majeure clause

Clause providing for excuse of non-performance due to acts of god

15. Arbitration clause

Clause for settlement of dispute

Orient craft and buyer hold negotiation with regard to the above points conclude the business deal.

PLANNING FOR EXECUTION OF THE EXPORT ORDER

Once the buyer places the enquiry, the firm immediately plans for its execution. It involves the following steps:

ACKNOWLEDGEMENT OF THE EXPORT ORDER

First, orient craft sends a letter of thanks to the foreign buyer for placing an order. The idea is the communication stress is laid on building of long-term business relationship based on mutual trust.SCRUTINY OF THE EXPORT ORDER

Before sending the export order, orient craft scrutinizes it that it would be able to supply the goods to the buyer as per the terms in it. It scrutinizes:

i. Items (product)

The order has been received for the product for which quotation/offer was sent and orient craft is still in the position to supply the product. It confirms the sources of supply of the product if it is other than the source where the buyer has recommended.

ii. Sizes and specification

Should be same as per the offer. Even a slight variation especially in size and the color can create problems for the supply of the product.

iii. Payment terms are same as stipulated/negotiated

iv. Special packaging, labeling and marketing requirements is noted for compliance. In case labels, price tags, poly/pack/skin packing etc. would be required, then their supply should be assured.

v. shipment and delivery date is in conformity with the orient crafts production plan

vi. Weather insurance is to be done by orient craft or the buyer.

vii. Documents required by the buyer

It examines weather Orient craft can arrange for the documents required by the buyer.

QUOTA REQUIREMENT

Orient craft should comply with the requirement of the quota before sending the confirmation of the quota to the foreign order. The exporters of ready-made garments under restrained category can send shipment only if they have the valid quota with them. The Apparel Export Promotion Council (AEPC) allots the quota for the ready-made garments.

CONFIRMATION OF THE EXPORT ORDER

If orient craft is satisfied with various aspects referred to above, a formal confirmation of the export order is sent to the buyer. This confirmation of the order is very significant, as the buyer would like to be sure that he would be getting the supplies on the time as per terms of the order. Based on this confirmation, the buyer can draw his own schedule for supply of goods to the customers as per the plan.

DEVELOPING LOGISTICS FOR THE ORDER

Orient Craft formulates the detail plan of action for the implementation of the export order. This involves the identification of the minutest possible activities/ jobs need to be performed to ensure the successful execution of the export order as per its terms and conditions. The team prepares the Activity Profile of the order.

Its contents are:

i. Determination of the materials, fabrics/ supplied required

ii. Making arrangement for the procurement of the materials/ supplies. Orient craft normally have buyer recommended suppliers from the countries like China and Korea.

iii. Arrangement of the fund to execute the shipment i.e. packing credit from the bank. The banks that Orient Craft deal for PCFC are

Corporation Bank

Bank of Baroda

State Bank of Travancore

State Bank of Mysore

ABN Amro Bank

Bank of Nova Scotia

iv. Labeling, Packaging, Packing, Hangers Cartons and Marking of the export consignments.

v. Ensuring the export incentives (i.e. Drawback, DEPB etc.) the firm has to avail. Various export incentive availed by the firm are explained in the next chapter.

vi. Arrangement for pre-shipment inspection of goods for quality control. Normally the inspectors visit from the buying houses or are the buyers representatives.

vii. Managing the risks involved in the export shipment. Orient Craft insures their entire goods from Trial Sundaram- New India Insurance

viii. Appointment of the clearing and the forwarding agents. The agents that Orient Craft deals with are UT Worldwide Pvt. Ltd, Sea link, Freigz, Maersk Logistics Pvt. Ltd..

ix. Preparing the pre-shipment documents for obtaining central excise and customs clearance of the export shipment

x. Compliance with the exchange control requirement

xi. Shipment of the goods

xii. Arranging post shipment finance from the bank

PROCUREMENT OF THE INPUT/SUPPLIES

Once, the export order has been confirmed, Orient Craft plans for procurement of the input required for the supply of the goods to the buyer. The firm decides the method of import between Advance License, Under EOU or against DEPB etc. Its details are discussed in the next chapter.

PRODUCTION OF THE GOODS

Once the raw material is procured, its production starts immediately. The merchandise department passes the production order with its details of size, quantity, color and lead-time to the department. The production planning is done in such a manner that there is enough time for the goods to reach the port of destination. Meanwhile, the merchandise department keeps in touch with the buyers representative.

The logistic plan is drawn up considering the factors such as one, the alternative modes of transport and two, which is optimal from the point of view of total transportation costs. The firm plans the timely dispatch of the goods. This requires decisions as to which airline or shipping should be selected fir transport of the goods from the port of shipment to the port of discharge. The company bears the airfare if the goods are running late or not as per the schedule.

At least one week in advance of packing of the goods, Orient Craft draws up a logistic plan for the distribution of the goods to the importer to ensure their timely delivery. This involves planning for transportation of the goods. The decision as regard the mode of transport to be used is the essence of the distribution logistics.

Since the shipments to US and Canada leave only on Sundays, they have to plan accordingly. The shipping lines that Orient Craft is using are APL logistic, Maersk Logistics Pvt. Ltd.

PRE-SHIPMENT INSPECTION

Before departure from the factory, the goods are inspected. They are properly inspected to ensure that the quality is maintained as desired by the buyer. Goods can be inspected by:

The Orient Craft Itself

Inspection by the buyers representative

Inspection by the buying agent

Inspection by private sector agencies

Buyers like Tommy Hilfiger, Gap inc., have their own offices in Bangalore and Delhi and therefore they occasionally come and inspect their products. While Ann Taylor and Rocca wear has appointed buying houses for it. Tri Burg, Polo has appointed Hope n Glory while Le & Fung inspects for Carre Four.

DESPATCH OF GOODS

Once the goods are properly packed and inspected, they are departed to Bombay by truck. The documents that are sent with the transport are

Invoice copy

ST form

Company Challan

The fair of the transportation is weighed by cubic per meter. Orient craft does not use rail for local transport since they have limited space and are fixed scheduled.

GOODS RECEIVED BY CLEARING AND FORWARDING AGENT

The Agent nominated by Orient Craft in Bombay receives goods. The C&F that Orient Craft is dealing with are Sea Link Frigz.

1. Providing warehouse facility to the exporter for warehousing before their transportation to the docks

2. Transportation of goods to the docks and arrangement of warehousing at the port

3. Arrangement of containers required for shipment of the goods.

4. Booking of shipping space

5. Arranging for shipment of goods to be on board

6. Arranging for marine/ cargo insurance of the shipment

7. Preparation and processing of shipping documents required for custom clearance.

THE DOCUMENTS THAT ARE REQUIRED FOR THE SHIPMENT ARE

Commercial Invoice

It is a document showing the value of the goods exported

Packing List

This document describes the various boxes in which the goods have been exported

Bill of exchange

It is an unconditional written order requesting the buyer to pay a specific sum of money to a specified person at a specified time. This draft could be sight Draft or Usance draft. In case of Sight Draft, the buyer has to pay for the draft at the time of its presentation. It is used for D/P as a mode of payment. If Orient Craft allows credit period to the importer to make the payment, then the draft is known as Usance draft. The draft is to be accepted by the buyer before shipping documents are given to him. It is under D/A as mode of payment.

Certificate of Inspection

In case the goods are not subject to be inspected by the Export Inspection Agency, it has to get it done by the private inspection agency and the certificate has to be submitted

Certificate of Insurance

It is prescribed by the insurance companies for the insurance of the goods

Bill of Lading

It is transport document issued by the shipping line indication the following:

Title of the good

Receipt of the goods shipped

An evidence of the contract of affreightment

Mates Receipt

It is a receipt issued by the Mate of the ship acknowledging the loading of the cargo on the ship. This receipt states the condition in which goods are received on the ship.

Certificate of Origin

It is a certificate submitted to the Chamber of Commerce for the issue of it. In most countries, importers are required to submit a certificate of origin in respect of import consignment for obtaining their custom clearance.

Shipment order

This s a reservation slip issued by the shipping line at the time of reservation of shipping space.

8. After all the formalities, clearing and forwarding agent forwards one copy of the documents to the nominated agent of the buyer (as per his requirement) and the other to the Orient Craft.

COLLECTION/ NEGOTIATION OF DOCUMENT

Having shipped the goods, Orient Craft Ltd. has to take steps to obtain payment from the importer against the shipment. If the method of payment decided was under credit mode then it involves (a) submission of shipping documents to the bank for collection in case of DP/DA mode of payment and

(b) Settlement of payment against shipping documents in the case of Latter of Credit of payment.

The Documents that are submitted to the bank for exchange are:I. BILL OF EXCHANGE

Bill of exchange is defined as an unconditional written order prepared by an exporter (ORIENT CRAFT LTD.) asking the importer to pay a specified person at a specified time. The specified amount is represented by an amount of the invoice; the specified person here refers to the banks and the specified time is a matter of negotiation between the exporter and the importer.

II. COMMERCIAL INVOICE

This document is raised as a bill against the goods that has been shipped to the buyer. After the invoice is prepared it is sent to the buyer so that he can get his goods cleared from the respective customs authority. For this reason, it is also called custom invoice. It principally contains: Name and correct address of the exporter

Name and correct address of the consignee

Invoice no. and date

Buyers order no. and date

Country of origin of goods

Country of final destination

Terms of delivery ad payments

Mode of carriage

Vessel/ flight no.

Place of receipt by pre- carrier

Port of loading

Port of discharge

Place of delivery

Marks and no. /container no.

No. and kind of packages

Description of goods

Quantity

Amount and Rate III. COVERING LETTER

It is a letter to the bank for collection or negotiation of documents .it is a standard letter given by Orient Craft Limited to the bank which gives all the details that can possibly be given to the bank at the time of negotiation of the documents.

IV. SHIPPING BILL

It is the most important document required by the custom authorities for allowing exports. It contains all the details of the goods shipped. The clearing and forwarding agent, or the firm itself fills up the shipping bill.V. EXCHANGE CONTROL DECLARATION FORM

It is form in which Orient Craft Limited declares to the Reserve Bank of India the full export value of the shipment and also submit an undertaking that the full export value shall be realized by them within a period of six months or due date of payment, which ever is earlier.VI. VISA FROM AEPC

A visa is required from Apparel Export Promotion Council showing grant of quota.

VII. PACKING LIST It describes the various boxes in which the goods have been exported .its a vital document as it informs the buyer regarding the contents of the various boxes.

VIII. SINGLE/MULTIPLE COUNTRY DECLARATION FORMThis document certifies that the finished goods comprise of raw materials sourced from a single /multiple countries. It also certifies that the raw material were assembled and processed in the same country or countries leading to the final shape of finished product.IX. ORIGIONAL AIRWAY /SHIPPING BILLIT IS ISSUED BY THE SHIPPING LINE indicating the title of the goods shipped, receipt for the goods shipped and an admission to the apparent condition and quality at he time of shipment. it is an evidence of the contract of afreightment and it is transferable by endorsement and delivery. It is issued against Mates receipt and in sets of negotiable and non-negotiable copies.

X. CERTIFICATE OF ORIGIN

This is to certify the country to which the goods belong. It is issued by chamber of commerce or other competent authority /body as required in the L/C one copy is sent to the advising bank to be finally passed on to the issuing bank. A copy is sent to the issuing bank and one to the buyer.

MEATHODS OF NEGOTIATION

In case the shipment has been under D/A, D/P mode of payment, Orient Craft prepares the set of documents as required by buyer in terms of export order and submit them to his Bank along with the following document

Standardized Letter to the Bank for Collection

SDF Form in duplicate

Orient Crafts bank would check the documents on receipt and forward them to the buyers bank if these are as per the requirement of the buyer. Orient Crafts Banker hands over the documents to the foreign buyer in the following manner:

1. When he makes the payment against Sight Draft in case of Document against payment (D/P): When the buyers bank collects the payment from him, then the buyers bank would remit proceeds to the exporters bank for the credit of the account of exporter.

2. When he accepts the Usance Draft, in case of documents against acceptance (D/A): In case of Usance Draft duly accepted by the buyer, the payment is realized by the exporter on the expiry of period of credit.

In case of Usance bills, the concessinoal rate of interest up to the nominal due date.The nominal due date is calculated by adding the following:

1. Normal transit period

25 days

2. Usance period

as per the bill

3. Grace period

3 days

In case of Sight bills, the post shipment credit at the concessional rates of interest is extended for a period of nominal transit period. In case for over due bills, the rate of interest for the overdue period of up to 180 days is charged at the rate to export credit not otherwise specified. It is as per the directive of the RBI. Their current account is credited after the adjustments in the packing credit taken by the bank.The credit taken in foreign currency is known as Post Shipment Finance in Foreign Currency. A payment advice is sent to the orient craft stating that his account has been credited after making the necessary adjustments.

The export process is complete when the goods reach to the port of destination and Orient Craft claims his drawback, if the export is made from non-EOU unit.

Export Incentives Availed By Orient Craft

A. INCENTIVES LINKED TO EXPORT PERFORMANCE

Duty Drawback

Duty Entitlement Pass Book Scheme

B. FISCAL INCENTIVES

Exemptions from Sales Tax

Exemptions from Income Tax

C. IMPORT FACILITATION FOR EXPORTS

Export Promotion Capital Goods Scheme

100% EOU/ EPZ Unit/SEZ/ STP

Advance License

D. EXPORT FINANCING

Pre-shipment finance at confessional rate of interests

Post-shipment finance at confessional rates of interests

E. RECOGNITION OF EXPORTERS

Export house, trading house, star trading house and super star trading houseF. INCENTIVES FOR MARKETING OF EXPORT GOODS

Marketing Development Assistance

A.INCENTIVES LINKED TO EXPORT PERFORMANCE

DUTY DRAWBACKIt is an internationally accepted principle that goods exported out of a country are relieved of the duties born by them at various stages of their manufacture so that they become competitive in the world markets. This is done through the scheme of duty drawback.

The duty drawback refers to the refund in the respect of central Excise and customs duties pain in respect of the raw materials and other inputs used in the manufacturer of the product prior to its exports.

Orient Craft Ltd. is entitled to claim the amount of duty drawback as soon as export of goods takes place.

Drawback of customs and excise duty paid on inputs - Drawback means the rebate of duty chargeable on any imported materials or excisable materials used in manufacture or processing of goods, which are manufactured in India and exported.

Duty Drawback is equal to (a) customs duty paid on imported inputs including SAD plus (b) excise duty paid on indigenous inputs. Duty paid on packing material is also eligible. However, if inputs are obtained without payment of customs/excise duty, no drawback will be paid.

If customs/excise duty is paid on part of inputs or rebate/refund is obtained, only that part on which duty is paid and on which rebate/refund is not obtained will be eligible for drawback. No drawback is available on other taxes like sales tax and Octroi.

ORIENT CRAFTS LTD. files the drawback claim within three months from date relevant for applicability of amount or rate of drawback in terms of sub-rule (3) of rule 5 i.e. within three months from the date of Let Export Order.

B. FISCAL INCENTIVES

SALES TAX EXEMPTION

Orient Craft Ltd. claims exemption from the levy of sales tax on the supplies taken by them for