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Project report on Logistics Functioning and

Documentation Procedure in International

Business

An internship report submitted in partial fulfillment of requirements for Masters of

Business Administration (International Business)

Under the guidance of Mr. Murari Nair

Internal Mentor: External Mentor:

Dr. Pravin Jadhav Mr. Murari Nair

UPES General Manager (logistics)

Jay chemical industries limited

Submitted by:

SHUBHAM KUMAR

SAP id: 500034829

Enrollment Number: R740214048

MBA International Business

2014-16

College of Management & Economic Studies, UPES

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Student Declaration

I hereby declare that this submission is my own work and that, to the best of my knowledge and

belief, it contains no material previously published or written by another person nor material

which has been accepted for the award of any degree or diploma of the university or other

institute of higher learning, except where due acknowledgment has been made in the text.

Shubham Kumar

SAP id: 500034829

Enrollment number: R740214048

MBA International Business

2014-16

College of Management & Economic Studies, UPES

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Acknowledgement

It is very common to see that a man’s quest of knowledge never ends. Theory and practical

knowledge are essential and complimentary to each other. I am indebted and thankful for the

assistance received from various individuals in making my project a success. Simply put, I could

not have done this work without the lots of help I received cheerfully from the professionals

working in Jay Chemicals Industries Limited.

I would specially like to thank my project guide Mr. Murari Nair for their exemplary guidance,

monitoring and constant encouragement throughout my internship.

I am also highly indebted to my faculty mentor Dr. Pravin Jadhav, who seemed to have solutions

to all my problems.

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Certificate

This is to certify that the summer internship report entitled “Functioning of Logistics and

Documentation Procedure in International Business” submitted by Shubham Kumar to UPES

for partial fulfillment of requirements for Masters of Business Administration (International

Business) is a bonafide record of the internship work carried out by him under my supervision

and guidance. The content of the report, in full or parts have not been submitted to any other

institute or University for the award of any other degree or diploma.

Mr. Murari Nair

General Manager (Logistics)

Jay Chemical Industries Limited

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Certificate

This is to certify that the summer internship report entitled “Functioning of Logistics and

Documentation Procedure in International Business” submitted by Shubham Kumar to UPES

for partial fulfillment of requirements of Masters of Business administration (International

Business) is a bonafide record of the internship work carried out by him under my supervision

and guidance. The content of the report, in full or parts have not been submitted to any other

institute or University for the award of any other degree or diploma.

Dr. Pravin Jadhav

Professor

College of Management & Economic Studies, UPES

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Preface

The objective of the summer internship is to work in an organization and gain the valuable

learning’s as well as the knowledge that will be useful in the future career building.

This report documents the work done during the summer internship at Jay Chemical Industries

Limited, Ahmedabad under the guidance of Mr. Murari Nair, general manager of logistics.

This report has been prepared in partial fulfillment of the requirement for our summer internship

project. Every attempt has been made to discuss the topics as lucidly and clearly as possible

according to my understanding. I have tried my level best according to my capacity regarding the

subject and I am presenting the same with the deal sense that as somebody is interested in

foreign trade would be able to relate the things needed for it from this project.

I have tried my best to keep report simple yet technically correct. I hope I succeed in my attempt.

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Table of Contents Executive summary ........................................................................................................................8

Introduction to study ....................................................................................................................9

Literature review .........................................................................................................................10

Background of the problem ....................................................................................................11

Research objective ..................................................................................................................11

Methodology and Research Design ............................................................................................12

Scope of the study.........................................................................................................................13

a. Industry overview ..............................................................................................................14

b. Company overview ............................................................................................................17

c. Logistics functioning .........................................................................................................18

d. International trade ..............................................................................................................19

e. Major sea routes .................................................................................................................20

f. Tariff and non-tariff barrier……………………………………………………………...21

g. Trading block & FTZ………………………………………………………………….....24

h. Type of containers………………………………………………………………………..27

i. Type of vessels…………………………………………………………………………...29

j. Use of multimodal transport…………………………………………………………….30

k. Logistics service providers………………………………………………………………31

l. Their functions…………………………………………………………………………..32

m. Ten targeted logistics programs …………………………………………………………33

n. Role of ICD ......................................................................................................................34

Export documentation procedure ..............................................................................................38

How to start export firm in India ..............................................................................................39

Ways to locate customers ............................................................................................................41

Documentation procedure ..........................................................................................................43

Container booking process ..........................................................................................................51

Major risks ...................................................................................................................................52

Their solution…………………………………………………………………………………...58

Export procedure flow chat………………………………………………………………………60

Conclusion & recommendations ………………………………………………………………..61

Task performed …………………………………………………………………………………62

References & links………………………………………………………………………………63

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Executive Summary

This project present the ideas about the basic functioning and procedures involve in logistics and

import, export documentation. Also an attempt to know about the feasibility to do international

trade and its hurdles.

The aim of this summer internship project is to highlight the functioning of logistics and export

import procedure in international business in order to know how trade takes place at international

level and to avoid any mis happening related to it.

A brief idea of chemical industry and its major segments are also explained. Then some light is

thrown on dyestuff industry. I have also thrown some light on what, where and how to export.

The factors required to assess a market or a country so that an exporter can avail the benefits out

of it.

Entire functioning of logistics network has been briefly explained in this project. Its objectives,

functions, parties involved, routes are also been discussed.

The project also explain the procedure for excise clearance without this export can take place.

And hence it includes preparing of invoice, registration and other procedures, export marketing,

risks involved in international business and how to solve it, functioning under RMS and

functioning of ICD.

The whole process of export is explained in steps for ease. A brief idea on types of stuffing is

also mentioned which includes ICD stuffing and factory stuffing.

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Introduction to Study

International business comprises all commercial transactions (private and governmental, sales,

investments, logistics, and transportation) that take place between two or more regions, countries

and nations beyond their political boundaries. Usually, private companies undertake such

transactions for profit; governments undertake them for profit and for political reasons.

The term "international business" refers to all those business activities which involve cross-

border transactions of goods, services, resources between two or more nations. Transactions of

economic resources include capital, skills, people etc. for international production of physical

goods and services such as finance, banking, insurance, construction etc.

Importance of International Business

Most companies are either international or compete with international companies.

Modes of operation may differ from those used domestically.

The best way of conducting business may differ by country.

An understanding helps you make better career decisions.

An understanding helps you decide what governmental policies to support.

Areas of study within this topic include differences in legal systems, political systems,

economic policy, language, accounting standards, labor standards, living standards,

environmental standards, local culture, corporate culture, foreign-exchange market,

tariffs, import and export regulations, trade agreements, climate, education and many more

topics. Each of these factors may require changes in how individual business units operate from

one country to the next.

Means of Businesses

Entry Modes: Export/Import, wholly owned subsidiary, merger/acquisition, alliances and

joint ventures, licensing (listed in order of least to most risky)

Modes: importing and exporting, tourism and transportation, licensing and franchising,

turnkey operations, management contracts, direct investment and portfolio investments.

Functions: marketing, global manufacturing and supply chain management, accounting,

finance, human resources

Overlaying alternatives: choice of countries, organization and control mechanisms

International business encompasses a wide range of professions that rely on management,

marketing, business, advertising, logistics, information technology and other skills.

In order to understand international business, it is necessary to have a broad conceptual

understanding of why trade and investment across national borders take place. Trade and

investment can be examined in terms of the comparative advantage of nations.

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Literature Review

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Background of the Problem

It’s an opportunity to do the summer internship in Jay Chemical Industries Limited which is one

of the Top Reactive Dye producers in the world with a global presence in over 40 countries.

As we know, dealing in international trade is a complex and challenging activity in today’s

dynamic world as it involves the performance or operation that determine existing and potential

demand in the market. Learning the step by step process and procedure to be followed in an

international business is critical activity as it involves proper functioning of logistics and

documentation procedures.

So selecting a project on international logistics and documentation procedure is an obvious and

important decision.

Objective of the Study

To know basic aspect of international trade

How logistics function in international trade

Basic components of international logistics

To know the export procedure in detail.

To know how the documentation process is done.

To understand the various essential documents required in:

1. Pre- shipment documents

2. Post-shipment documents.

To know about different problems which arise in international trade

Measures of resolve disputes related with international trade

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Methodology

Our primary objective for doing this project is to get the first-hand knowledge of functioning of

the export house. Since we are not comparing any different entities on the basis of their financial

results, rather we are learning the logistics function and documentation procedure required.

Hence the descriptive research is need of the hour.

Collect data/information about cargo through:

Primary data collection:-

Invoice

Packing List

Secondary data collection:-

Shipping bill

Internet

Previous reports

Books

RESEARCH DESIGN

Research design is the based framework, which provides guidelines for the research process. It is

a map or blue print according to which the research is to be conducts. The research design specifies

the methods for data collection & data analysis determine the source of data. Most specifically it

was a kind of “Descriptive conclusive research” who takes care of who, when, where, what, how

and why aspects of the investigation further the researcher used the statistical method to serve the

purpose of project, it permitted the research to derive more accurate generalization whose

reliability could be measured.

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Scope of the Study

International trade in simple terms is export and import of goods and services and thus selling

goods abroad or export refers to flow of goods and services out of the country in exchange of

foreign exchange. Each country has its own rule and regulations regarding the foreign trade. For

the fulfillment of all the rules and regulations of different countries and exporting company has

to maintain and fulfill different documentation requirements. The documentation procedure

depends on the type of goods, process of manufacturing, type of industry and the country to

which goods is to be exported. In order to complete an order making chemicals many activities

like, communication between different departments, the process of outsourcing raw material,

payment process, quality control, packing and shipment of goods etc. are undertaken. Various

documents are prepared while going through the whole process, list of documents are explained

later in the study. Hence, a single mistake o lack of proper planning can lead to the rejection of

the whole order or can increase the cost.

Today’s world is a global village in which each country is trading with other countries in form of

export and import. This field has a great scope because today each company whether it’s small or

big wants to engage in foreign trade.

It’s very important to study the functioning of logistics and documentation procedure at

international level if we want to do foreign trade.

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Industry Overview

SUMMARY

3rd largest producer in Asia.

3rd largest global producer of agro-chemicals.

6th largest producer of chemicals in the world.

Total production of 19,300 Thousand Metric Tonnes in 2013-14.

70,000 commercial products.

16% of world dye production.

REASONS TO INVEST

India is the third largest producer of chemicals in Asia and sixth by output, in the world.

The chemicals industry is a key constituent of the Indian economy, accounting for about

2.11% of the nation’s GDP.

India is currently the world’s third largest consumer of polymers and third largest

producer of agro-chemicals.

India’s proximity to the Middle East, the world’s source of petrochemical feedstock,

makes for economies of scale.

Strong government support for R&D.

Polymers and agro-chemicals industries in India present immense growth opportunities.

GROWTH DRIVERS

A large population, dependence on agriculture, and strong export demand are key growth

drivers for the industry.

A global shift towards Asia as the world’s chemicals manufacturing hub.

Per capita consumption of chemicals in India is lower as compared to western countries.

Rise in GDP and purchasing power generates huge growth potential for domestic market

A focus on new segments such as specialty and knowledge chemicals.

Low-cost manufacturing.

Skilled science professionals.

World-class engineering and strong R&D capabilities.

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FDI POLICY

100% FDI is allowed under the automatic route in the chemicals sector, subject to all the

applicable regulations and laws.

Certain products such as wax candles, laundry soaps, safety matches, fireworks and

incense sticks fall under items reserved for the MSME sector in which FDI beyond 24%

is permitted under the government route

SECTOR POLICY

Industrial licensing has been abolished for most sub-sectors except for certain hazardous

chemicals.

The government is continuously reducing the list of reserved chemical items for

production in the small-scale sector, thereby facilitating greater investment in technology

up gradation and modernization.

Policies have been initiated to set up integrated Petroleum, Chemicals and Petrochemicals

Investment Regions (PCPIR).

PCPIR will be an investment region spread across 250 square kilometres for the

manufacture of domestic and export-related products of petroleum, chemicals and

petrochemicals.

STATE INCENTIVES:

Apart from the above, each state in India offers additional incentives for industrial

projects.

Incentives are in areas like subsidised land cost and relaxation in stamp duty exemption

on sale/lease of land, power tariff incentives, concessional rate of interest on loans,

investment subsidies/tax incentives, backward areas subsidies, special incentive packages

for mega projects etc.

EXPORT INCENTIVES:

Export promotion capital goods scheme.

Duty drawback scheme.

Focus product scheme, special focus product scheme and focus market scheme.

AREA BASED INCENTIVES:

Incentives for units in SEZ/NIMZ as specified in respective Acts or setting up projects in

special areas like the North-east, Jammu & Kashmir, and Himachal Pradesh &

Uttarakhand.

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INVESTMENT OPPORTUNITIES

AGRO-CHEMICALS:

India is the third largest producer of agro-chemicals globally.

India exports about 50% of its current production and exports are likely to remain a key

component of the industry.

Major Players in India

Top 10 chemical Companies in India

Here is a list of Top 10 chemical companies in India; these chemical manufacturing

companies offers Industrial, agriculture and other chemicals. Ranking process of these

best chemical industries in India is frequently being updated by our expert team.

1. Tata Chemicals Corporate Office – Mumbai, Maharashtra | Establishment – 1939 |

Business – Chemical – Industry, Agriculture | Website – www.tatachemicals.com|

2. UPL Limited Corporate Office – Mumbai, Maharashtra | Establishment – 1969 |Business

– Chemical – Industry, Agriculture | Website – www.uplonline.com|

3. India Glycols Limited Corporate Office – Noida, Uttar Pradesh | Establishment – 1983

|Business – Petrochemical | Website – www.indiaglycols.com |

4. BASF Corporate Office – Mumbai, Maharashtra | Establishment – 1965 |Business –

Chemical – Industry | Website – www.india.basf.com |

5. Pidilite Industries limited Corporate Office – Mumbai, Maharashtra | Establishment –

1959 | Business chemical – adhesive | Website – www.pidilite.com|

6. Vikas WSP Limited Corporate office – Mumbai, Maharashtra | Establishment – 1988 |

Business – Guar Gum | Website – www.vikaswspltd.in |.

7. Phillips Carbon Black Limited Corporate Office Kolkata, West Bangal | Establishment –

1960 | Business – Carbon Black | Website – www.pcblltd.com |

8. Gujarat Heavy Chemicals limited Corporate Office Ahmadabad, Gujarat |

Establishment – 1988| Business – Chemical & textile | Website – www. ghclindia.com |

9. Aarti industries Corporate Office Mumbai, Maharashtra | Establishment –1975|

Business –Chemical | Website – www.aartigroup.com

10. Gujarat fluoro chemical limited Corporate Office – Noida, Uttar Pradesh |

Establishment – 1987 | Business – Chemical | Website – www.gfl.co.in |

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Company Overview

History:

The story of Jay Chemical Industries Limited goes way back to 1967. It started as a small dye

& dye intermediate manufacturing unit in India, trying to make a mark in an industry that had

mostly international players at that time. With unwavering resolve of a visionary in Jayendra

Kharawala, the company has gone on to become India’s leading producer of reactive dyes,

contributing to more than 15% of the nation’s market share. Its organizational strategy of achieving

self-reliance in input raw materials, has helped us achieve backward integration of over 50% of

our present raw material requirements. Today, the group’s business ranges from dyes and dye

intermediates to successful forays in digital textile printing ink, construction chemicals, textile

auxiliaries and garment manufacturing.

Today JCIL is one of the Top Reactive Dye producers in the world with a global presence in

over 40 countries with annual revenues exceeding USD 100 million. Despite its acclaimed

success, JCIL is grounded and adheres to the same values that it did forty years ago; of clean

ethical business practices, continuous innovation, technology upgrades, consistent learning,

selfless environmental concerns, and all this while keeping the customer and his needs at the

center of all it does .

Mission & Vision

Our proactive customer service, excellence in quality and unparalleled economical products will

make us the best and the biggest reactive dyestuff producer in the world. We are totally

committed to upgrading social, economic and environmental conditions of mankind.

Product

COLOR SOLUTIONS - DYES FOR CELLULOSE

COLOR SOLUTIONS FOR POLYESTER

TEXTILE AUXILIARIES

GARMENTS

DIGITAL PRINTING

CONSTRUCTION CHEMICALS

Service

PRODUCTS CERTIFIED BY GOTS

MEMBER ETAD

ISO 9001-2000 CERTIFIED

ISO 14001-2004 CERTIFIED

OHSAS 18001-2007 CERTIFIED

PRODUCTS PRE-REGISTERED WITH REACH

JK KOSHER CERTIFIED

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Functioning

Of

Logistics

In

International Trade

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INTERNATIONAL TRADE

International trade is the exchange of capital, goods, and services across international

borders or territories. In most countries, such trade represents a significant share of gross

domestic product (GDP).

Trading globally gives consumers and countries the opportunity to be exposed to new markets

and products. Almost every kind of product can be found on the international market: food,

clothes, spare parts, oil, jewellery, wine, stocks, currencies and water. Services are also traded:

tourism, banking, consulting and transportation. A product that is sold to the global market is an

export, and a product that is bought from the global market is an import. Imports and exports are

accounted for in a country's current account in the balance of payments.

Major Countries Involve In International Trade

Rank Country Exports Imports Total Trade Percent of Total Trade

--- Total, All Countries 501.8 728.1 1,230.0 100.0%

--- Total, Top 15 Countries 355.2 557.1 912.3 74.2%

1 Canada

94.0 99.1 193.1 15.7%

2 China

37.5 146.3 183.8 14.9%

3 Mexico

77.2 94.4 171.6 13.9%

4 Japan

21.5 45.7 67.1 5.5%

5 Germany

16.8 39.9 56.7 4.6%

6 Korea, South

14.8 24.2 39.0 3.2%

7 United Kingdom

17.8 18.7 36.5 3.0%

8 France

10.3 15.1 25.4 2.1%

9 India

6.9 15.2 22.1 1.8%

10 Taiwan

7.8 13.9 21.7 1.8%

11 Brazil

11.5 9.0 20.5 1.7%

12 Netherlands

14.4 5.8 20.2 1.6%

13 Italy

5.4 14.1 19.5 1.6%

14 Switzerland

8.0 9.7 17.7 1.4%

15 Belgium

11.4 6.2 17.6 1.4%

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Major sea routes followed by INDIA to reach different countries for trade

A trade route is a logistical network identified as a series of pathways and stoppages used for the

commercial transport of cargo. Allowing goods to reach distant markets, a single trade route

contains long distance arteries, which may further be connected to smaller networks of

commercial and non-commercial transportation routes. Among notable trade routes was the

Amber Road, which served as a dependable network for long-distance trade. Maritime trade

along the Spice Route became prominent during the middle Ages, when nations resorted to

military means for control of this influential route. During the middle ages, organizations such as

the Hanseatic League, aimed at protecting interests of the merchants, and trade became

increasingly prominent.

In modern times, commercial activity shifted from the major trade routes of the Old World to

newer routes between modern nation-states. This activity was sometimes carried out without

traditional protection of trade and under international free-trade agreements, which allowed

commercial goods to cross borders with relaxed restrictions. Innovative transportation of modern

times includes pipeline transport and the relatively well-known trade involving rail routes,

automobiles, and cargo airlines.

The modern times saw development of newer means of transport and often controversial free

trade agreements, which altered the political and logistical approach prevalent during the middle

ages. Newer means of transport led to the establishment of new routes, and countries opened up

borders to allow trade in mutually agreed goods as per the prevailing free trade agreement.

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Trading Blocs and Free Trade Zones around the world

The world is increasingly dividing into trade blocs. The world's two most powerful economies,

the United States, and the European Union, have each sought to forge links to neighbouring

countries and deny access to rivals. Other major trading countries, like the fast growing exporters

on the Pacific Rim and the big agricultural exporting nations, have also sought to create looser

trade groupings to foster their interests.

The formation of free trade zones and trade blocs is one of the major issues facing the world

trading system - whether it will lead to increased protectionism, or whether the trade blocs will

promote trade liberalisation. A number of the main trade blocs are described below.

The European Union

Trade Flow:

exports $813bn

imports $801bn

The EU has become the most powerful trading bloc in the world with a GDP now exceeding that

of the United States. The creation of the euro as a single currency for 12 EU members has led to

ever closer economic links. The EU has found it difficult to shed its protectionist past based on

the idea of self-sufficiency in agriculture which limits agricultural exports from the other

countries.

Austria

Belgium

Denmark

Finland

France

Germany

Greece

Ireland

Italy

Luxembourg

Netherlands

Portugal

Spain

Sweden

UK

North American Free Trade Agreement (NAFTA)

Trade Flow:

exports $1,017bn

imports $1,277bn

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The United States has linked with Canada and Mexico to form a free trade zone, the North

American Free Trade Agreement, and now hopes to extend that to the rest of Latin America to

create a Free Trade Area of the Americas. The US is already negotiating with Chile to join

NAFTA, but that has caused controversy with some other South American countries. The

NAFTA agreement covers environmental and labour issues as well as trade and investment, but

U.S unions and environmental groups argue that the safeguards are too weak.

Members:

Canada

Mexico

United States

The Cairns Group

Trade Flow:

exports $577bn

imports $549bn

The Cairns group of agricultural exporting nations was formed in 1986 to lobby at the last round

of world trade talks in order to free up trade in agricultural products. It is named after the town in

Australia where the first meeting took place. Highly efficient agricultural producers, including

those in both developed and developing countries, want to ensure that their products are not

excluded from markets in Europe and Asia. Canada, Brazil and Argentina are other leading

members. Members:

Argentina

Australia

Brazil

Canada

Chile

Columbia

Fiji

Indonesia

Malaysia

New Zealand

Paraguay

Philippines

South Africa

Thailand

Uruguay

Asia-Pacific Economic Cooperation forum

exports $2,592bn

imports $2,581bn

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The Asia-Pacific Economic Cooperation forum is a loose grouping of the countries bordering the

Pacific Ocean who have pledged to facilitate free trade. Its 21 members range from China and

Russia to the United States, Japan and Australia, and account for 45% of world trade. Progress

on free trade initiatives was seriously dented by the Asian crisis, which hurt the economies of the

fast-growing newly industrialised countries like South Korea and Indonesia.

Members:

Australia

Brunei

Canada

Chile

China

Hong Kong

Indonesia

Japan

South Korea

Malaysia

Mexico

New Zealand

Papua New Guinea

Peru

Philippines

Russia

Singapore

Taiwan

Thailand

United States

Vietnam

European Free Trade Association (EFTA)

It was established by the Stockholm Convention in 1960. It is a loose free trade area set up

solely for industrial goods by the UK, Austria, Denmark, Norway, Portugal, Sweden and

Switzerland.

It was set up in response to the EEC, which had closer political and economic ties. EFTA

member countries feared that they would be excluded from the EEC’s market.

As nations joined the EEC they had to leave the EFTA, presently leaving only Iceland, Norway,

Sweden and Liechtenstein. As the EU expands it’s likely that the number of EFTA members

will continue to fall.

European Economic Area (EEA)

Created by the signing of a treaty in Oporto in May 1992. It is a free trade area comprising of 18

nations, 380 million people and is responsible for about 40% of world trade.

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The member states are those of the EU plus Iceland, Liechtenstein and Norway.

The purpose of the treaty is to allow the free movement of goods, persons, services and capital

throughout the EEA.

If a country wishes to join the EU, it must first become a member of the EEA. Member states of

the EFTA have the choice of joining the EEA.

Areas of EU policy that lie outside of the EEA are relations with other countries (trading and

development), fiscal policy, economic and monetary union (EMU) and the common agricultural

policy (CAP).

Tariff and Non-Tariff Barriers

Trade barriers are restrictions imposed on movement of goods between countries. Trade barriers

are imposed not only on imports but also on exports. The trade barriers can be broadly divided

into two broad groups: (a) Tariff Barriers, and (b) Non-tariff Barriers.

TARIFF BARRIERS

Tariff is a customs duty or a tax on products that move across borders. The most important of

tariff barriers is the customs duty imposed by the importing country. A tax may also be imposed

by the exporting country on its exports. However, governments rarely impose tariff on exports,

because, countries want to sell as much as possible to other countries. The main important tariff

barriers are as follows:

1. Specific Duty: Specific duty is based on the physical characteristics of goods. When a

fixed sum of money, keeping in view the weight or measurement of a commodity, is levied as

tariff, it is known as specific duty.

For instance, a fixed sum of import duty may be levied on the import of every barrel of oil,

irrespective of quality and value. It discourages cheap imports. Specific duties are easy to

administer as they do not involve the problem of determining the value of imported goods.

However, a specific duty cannot be levied on certain articles like works of art. For instance, a

painting cannot be taxed on the basis of its weight and size.

2. Ad valorem Duty: These duties are imposed “according to value.” When a fixed percent

of value of a commodity is added as a tariff it is known as ad valorem duty. It ignores the

consideration of weight, size or volume of commodity.

The imposition of ad valorem duty is more justified in case of those goods whose values cannot

be determined on the basis of their physical and chemical characteristics, such as costly works of

art, rare manuscripts, etc. In practice, this type of duty is mostly levied on majority of items.

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3. Combined or Compound Duty: It is a combination of the specific duty and ad valorem

duty on a single product. For instance, there can be a combined duty when 10% of value (ad

valorem) and Re 1/- on every meter of cloth is charged as duty. Thus, in this case, both duties are

charged together.

4. Sliding Scale Duty: The import duties which vary with the prices of commodities are

called sliding scale duties. Historically, these duties are confined to agricultural products, as their

prices frequently vary, mostly due to natural factors. These are also called as seasonal duties.

5. Countervailing Duty: It is imposed on certain imports where products are subsidised by

exporting governments. As a result of government subsidy, imports become cheaper than

domestic goods. To nullify the effect of subsidy, this duty is imposed in addition to normal

duties.

6. Revenue Tariff: A tariff which is designed to provide revenue to the home government is

called revenue tariff. Generally, a tariff is imposed with a view of earning revenue by imposing

duty on consumer goods, particularly, on luxury goods whose demand from the rich is inelastic.

7. Anti-dumping Duty: At times, exporters attempt to capture foreign markets by selling

goods at rock-bottom prices, such practice is called dumping. As a result of dumping, domestic

industries find it difficult to compete with imported goods. To offset anti-dumping effects, duties

are levied in addition to normal duties.

8. Protective Tariff: In order to protect domestic industries from stiff competition of

imported goods, protective tariff is levied on imports. Normally, a very high duty is imposed, so

as to either discourage imports or to make the imports more expensive as that of domestic

products.

Note: Tariffs can be also levied on the basis of international relations. This includes single

column duty, double column duty and triple column duty.

NON-TARIFF BARRIERS

A non-tariff barrier is any barrier other than a tariff that raises an obstacle to free flow of goods

in overseas markets. Non-tariff barriers, do not affect the price of the imported goods, but only

the quantity of imports. Some of the important non-tariff barriers are as follows:

1. Quota System: Under this system, a country may fix in advance, the limit of import

quantity of a commodity that would be permitted for import from various countries during a

given period. The quota system can be divided into the following categories:

(a) Tariff/Customs Quota (b) Unilateral Quota

(c) Bilateral Quota (d) Multilateral Quota

• Tariff/Customs Quota: Certain specified quantity of imports is allowed at duty free or at

a reduced rate of import duty. Additional imports beyond the specified quantity are permitted

only at increased rate of duty. A tariff quota, therefore, combines the features of a tariff and an

import quota.

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• Unilateral Quota: The total import quantity is fixed without prior consultations with the

exporting countries.

• Bilateral Quota: In this case, quotas are fixed after negotiations between the quota fixing

importing country and the exporting country.

• Multilateral Quota: A group of countries can come together and fix quotas for exports as

well as imports for each country.

2. Product Standards: Most developed countries impose product standards for imported

items. If the imported items do not conform to established standards, the imports are not allowed.

For instance, the pharmaceutical products must conform to pharmacopoeia standards.

3. Domestic Content Requirements: Governments impose domestic content requirements to

boost domestic production. For instance, in the US bailout package (to bailout General Motors

and other organisations), the US Govt. introduced ‘Buy American Clause’ which means the US

firms that receive bailout package must purchase domestic content rather than import from

elsewhere.

4. Product Labelling: Certain nations insist on specific labelling of the products. For

instance, the European Union insists on product labelling in major languages spoken in EU. Such

formalities create problems for exporters.

5. Packaging Requirements: Certain nations insist on particular type of packaging materials.

For instance, EU insists on recyclable packing materials, otherwise, the imported goods may be

rejected.

6. Consular Formalities: A number of importing countries demand that the shipping

documents should include consular invoice certified by their consulate stationed in the exporting

country.

7. State Trading: In some countries like India, certain items are imported or exported only

through canalising agencies like MMTC. Individual importers or exporters are not allowed to

import or export canalised items directly on their own.

8. Preferential Arrangements: Some nations form trading groups for preferential

arrangements in respect of trade amongst themselves. Imports from member countries are given

preferences, whereas, those from other countries are subject to various tariffs and other

regulations.

9. Foreign Exchange Regulations: The importer has to ensure that adequate foreign

exchange is available for import of goods by obtaining a clearance from exchange control

authorities prior to the concluding of contract with the supplier.

10. Other Non-Tariff Barriers: There are a number of other non – tariff barriers such as

health and safety regulations, technical formalities, environmental regulations, embargoes, etc.

27

Types of Containers used in International Trade

Container types

There are a number of types of container in common use. They all have basically

the same frame, and the differences relate to what they can be used for and access.

The exterior dimensions of all containers conforming to ISO standards are 20 feet

long x 8 feet wide x 8 feet 6 inches high or 9 feet 6 inches high for high cube

containers.

Some of the most commonly used types are:

1. Ventilated Container

20' Ideal for cargo requiring ventilation .Ventilated containers are also known as passive

(naturally) ventilated or coffee containers. Ventilation is provided by ventilation openings

in the top and bottom side rails. The openings do not let in spray, to prevent depreciation

of the cargo by rain or spray, for example 2. Bulk Container

20'

for bulk cargoes: Shipping container that can hold free-flowing dry cargo such as cement,

grains, and ores. It is loaded from the top and discharged from the bottom.

3. Tank Container

20'

for transportation of liquid chemicals and food stuffs. Tank containers must be at least

80% full, to prevent dangerous surging of the liquids in transit. On the other hand, they

must not as a rule be over 95% full, or there will not be sufficient allege space for thermal

expansion. Tank containers intended for transporting foodstuffs must be labelled "Potable

Liquids only".

4. Dry Freight Container

20' and 40'

General purpose container : Standard dry freight shipping containers are used for multiple

purposes ranging from international trade to domestic on-site storage

5. High Cube Container

40' and 45'

9'6" High

for over height and voluminous cargo .High-cube containers are similar in structure to

standard containers, but taller. In contrast to standard containers, which have a maximum

height of 2591 mm (8'6"), high-cube containers are 2896 mm, or 9'6", tall. High-cube

containers are for the most part 40' long, but are sometimes made as 45' containers.

6. Open top container

20' and 40'

Removable tarpaulin for top loading of over height cargo

the walls of open-top containers are generally made of corrugated steel. The floor is made

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of wood. It has the following typical distinguishing structural features. The roof consists

of removable bows and a removable tarpaulin. The door header may be swivelled out.

7. Flat Rack Container

20' and 40'

for over width and heavy cargo .The container frame can be folded flat for ease of

transportation when empty.

The structure must have equivalent strength to a dry van box.

P&I cover may not extend to cargoes carried on deck in a flat-rack container.

8. Platform Container

20' and 40'

for extra length and heavy cargo

Platforms consist solely of a floor structure with extremely high loading capacity; they

have no side or end walls. This high loading capacity makes it possible to concentrate

heavy weights on small areas. A platform consists of a steel frame and a wooden floor

structure. Platforms are available in 20' and 40' sizes. 40' platforms have a gooseneck

tunnel at each end. Lashing rings, to which the cargo may be secured, are installed in the

side rails. The lashing rings may take loads of up to 3.000 kg.

9. Insulated Container

20' and 40'

for additional insulation of sensitive cargo

this type of container is often referred to not as a refrigerated container but as an insulated

container, as it has no integral refrigeration unit. The lack of a refrigeration unit allows

such containers to have a larger internal volume and payload than integral units

10. Reefer Container

20' and 40'

Integral Unit (Integral Reefer Container, Integrated Unit): For cooling, freezing or

heating of foods or chemicals .General construction as for dry van boxes.

They usually have their own refrigeration unit, with an air or a water-cooled heat

exchanger.

A small number of CONAIR boxes use close-coupled ventilation.

They have their own data logger to record temperature

11. High Cube Reefer Container

40' and 45'

9'6" High

For over height and voluminous cargo requiring cooling or freezing

12. Dry Van Boxes

the most common type

they have corrugated steel walls, timber base, steel or glass reinforced plastic (GRP) top.

Corrugated walls can be made from plate from as little as 1.6mm (1/16 inch) in thickness.

Their frame consists of side and end rails and corner pillars, fitted with corner castings.

The closed end is approximately 4.5 times stiffer, in racking strength, than the door end.

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Type of Vessels used in International Trade

1. Cargo Ships

Cargo ships are generally used to transport cargo safely from one place to another. They will

have a ship with a multi-deck or single-deck hull. There are thousands of cargo ships on the

move around the world, transporting good across the globe. They are crucial to international

trade. Cargo ships can transport things such as food, petroleum, furniture, metals, clothes and

machinery.

2. RoRo (Roll on Roll Off)

Most vehicles that are being transported over water internationally are done on a Roll on Roll off

ship. The reason this ship is so popular to transport vehicles is that it’s safer and much faster to

just drive a car onto the ship than using a crane. Once the cars are aboard, they are braced to the

ship’s deck to keep them from moving around while the ship is at sea.

3. Tankers

Tankers are ships that primarily carry huge quantities of liquid. They can carry a wide range of

liquids such as oil, water, wine and lots of different chemicals that need transporting. They come

in lots of different sizes but some of the larger vessels have the capacity to carry several hundred

thousand tons.

4. Passenger Ships

Passenger ships are officially defined as ships that carry more than 12 passengers. If you own a

passenger ship then you will need to abide by strict safety regulations. There have been several

disasters with passenger ships lately so the rules and regulations have been updated in a bid to try

and improve safety. Passengers should be able to travel in a safe and comfortable environment.

Passenger ships also include cruise and holiday ships.

5. Fishing Vessel

Fishing vessels are boats and ships designed to catch fish and marine wildlife. They are used for

leisure purposes but also for commercial fishing. There are millions of fishing vessels being used

to catch fish around the world. If you are considering working on a fishing vessel then it is

important to know that they are very dangerous. According to the International Maritime

Organisation (IMO) there are around 24,000 deaths on fishing vessels each year.

6. High Speed Craft

High speed crafts are also sometimes called ‘fast ferries’. They are mainly designed for civilian

use as passenger ferries. They also include hovercrafts, catamarans and hydrofoil boats. High

speed crafts are able to go faster because they use air pressure and powerful turbine propellers.

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Use of Multimodal Transport in International Trade

Multimodal transport refers to a combination of at least two means of transport. This

results in an integrated transport chain where the strength of each alternative is utilized.

Main characteristics of multimodal transportation are transhipment terminals that allow efficient

cargo handling between short-distance and long-distance traffic as well as application of

standardized and reusable loading units. However, combined freight transport can be organized

in different ways. In general, trucks cover short distances between the loading area and the

transhipment point respectively between the place of arrival and the recipient. Long-distance

haulage is conducted by other means of transport such as train, ship or even plane.

Regarding combined container transport, standardized loading units are transhipped along

different means of transport. In doing so, various combinations of land, water, and air

transportation are applied in practice. Trailer shipment (rail transport of trailers) refers to a

combination of rail and road haulage. Three different modes can be identified.

The rolling road usually describes carriage of whole trucks – including both tractor and trailer –

on low floor trains. In this regard, the second alternative that contributes to additional cost

savings is forwarding of trailers without the tractor as it reduces transport weight and labour

costs. However, this option requires a second tractor at the place of arrival. Swap body

transport is basically similar to container transport where loading units are handled by overhead

cranes at the transhipment centre.

Multimodal Transport Operator (MTO)

Multimodal transport operator is a person who on his own behalf through another person acting

on his behalf concludes a multimodal transport contract and who assumes responsibility for the

performance of the contract.

In multimodal transport one document and one responsibility party (MTO) for the entire carriage

who might subcontract performance of some.

Therefor in cases of damage and loss, each company will only bear responsibility of its own

stage in line with the rules applicable to the transport contract.

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LOGISTICS SERVICE PROVIDERS

Types:

TRADITIONAL SERVICES

SERVICE PACKAGES

INTEGRATED SERVICES

1. Traditional service providers

LOCAL DISTRIBUTION

LAND/RAIL INTERNATIONAL DISTRIBUTION

INTERNATIONAL SEAFREIGHT

INTERNATIONAL AIRFREIGHT

TRANSHIPMENT

DOCUMENTATION

CUSTOMS SERVICE

2. Service packages

TRANSPORTATION MANAGEMENT

VALUE ADDED SERVICES

LABELLING

PACKING

SEQUENCING

ASSEMBLY

INSTALLATION

WAREHOUSING/DISTRIBUTION

TRACKING

3. Integrated service providers

SOURCING

PRODUCTION

ORDER FULFILMENT

INVENTORY MGMT.

LOGISTICS CONSULTING

IT SERVICES

Others

3PL SERVICE PROVIDERS

4PL SERVICE PROVIDERS

FREIGHT FROWARDERS

NVOCC

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Their functions:

• 3PL SERVICE PROVIDERS - FIRMS EXTERNAL TO THE COMPANY WHICH

PROVIDE ONE OR MORE ASPECTS OF THE ENTIRE LOGISTICS SERVICE

PRODUCT PORTFOLIO.

• 4PL SERVICE PROVIDERS - ASSEMBLE AND MANAGE THE

RESOURCES,CAPABILITIES AND TECHNOLOGY OF ITS OWN ORGANISATION

WITH THOSE OF COMPLIMENTARY SERVICE PROVIDERS TO DELIVER A

COMPREHENSIVE SOLUTION

ENTIRE SUPPLY CHAIN

COLLABORATION BETWEEN 2/MORE PARTIES

ALLIANCES LED BY I.T. (NOT ASSET BASED)

ARRANGEMENT IS FLEXIBLE

• FREIGHT FORWARDERS - AGENT CONCLUDING A CONTRACT FOR

FREIGHT FORWARDING SERVICES RELATING TO CARRIAGE,

CONSOLIDATION, STORAGE, HANDLING, PACKING OR DISTRIBUTION OF

GOODS AS WELL AS ANCILLARY OR ADVISORY SERVICES

• NVOCC - ARRANGES TRANSPORT OF GOODS AS A CARRIER AND ISSUES A

BILL OF LADING BUT DOES NOT OWN OR OPERATE A MEANS OF

TRANSPORT

• MTO - CONCLUDES A MTO CONTRACT AND WHO ACTS AS PRINCIPAL NOT

AS AN AGENT ON BEHALF OF EITHER CARRIER OR CONSIGNOR AND

ASSUMES RESPONSIBILITY FOR PERFORMANCE OF THE CONTRACT

• CHA - THE CUSTOM HOUSE AGENTS CAN AVAIL TRANSACTIONAL

SERVICES FOR IMPORT & EXPORT. THE SERVICE INCLUDES E-FILING OF

IMPORT & EXPORT DOCUMENTS, STATUS OF QUERY REPLY AND REAL

TIME SUMMERY TRACKING.

Basic Supply Chain Process

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Ten targeted programmers that bedrock of the National Integrated Logistics Policy

Rail dedicated freight corridors: This program should have a dual focus. First, accelerating the

special purpose vehicles (SPVs) for the two planned DFCs—Delhi- Kolkata, Delhi-Mumbai—

and simultaneously incorporating SPVs for three additional DFCs. These are on the Kolkata-

Mumbai, Delhi-Chennai, Mumbai-Chennai corridors.

Coastal freight corridors: The objective of this program must be to strengthen the West i.e.,

Kandla to Kochi and East i.e., Kolkata to Chennai coastal freight corridors through integrated

projects that include last-mile rail and road programs, trans- shipment hubs, proactive marketing

and accelerated port development.

National expressways: This includes constructing expressways of 100 to 300 km stretches that

factor in expected increases in traffic by 2020. While currently 5 to 7 expressways are likely to

be built by 2020, ideally, the number of expressways should be increased to over 20 by 2020.

Last-mile roads: Creating a dedicated last mile program with over 750 last-mile links to connect

in particular port and railway terminals to production and distribution centers.

Last-mile rail: This should ensure last mile rail infrastructure in many of the last 750 mile links.

It will include developing track and rail head infrastructure to support 8 to 10 critical coal

corridors in mineral rich states such as Jharkhand, Chhattisgarh and Orissa.

Multi-modal logistics parks: This program will predominantly focus on demarcating land for

logistics parks at 15 to 20 key points where different modes overlap, near major cities, or along

proposed DFC routes. Designed as concessions, these should be equipped with the necessary

infrastructure to ensure the seamless movement of freight across modes.

Roads maintenance: This comprises creating long (e.g. 10 years) annuity-based maintenance

contracts for 400 km to 500 km stretches. The current practice has been to issue contracts for

shorter distances of 50 km to 100 km. Clear commitment to maintenance could also encourage

the participation of more private providers

Technology adoption like national electronic tolling: This entails standardizing technology for

nationwide electronic toll collection (ETC) in future contracts and establishing a nationwide

clearing house with set norms and service standards to facilitate transactions, thereby reducing

waiting time and improving service levels.

Logistics skills development: Adopting a balanced modal approach will increase demand for

requisite skills. In particular, demand for four types of personnel will grow— warehouse

managers, logistics managers, coastal seafarers and truck drivers.

Enabling access to better equipment and setting common standards: This refers to acquiring

access to better equipment such as larger trucks and higher tare load railway wagons and

developing common standards to aid inter-modal transport that ensures consistency in containers,

pallets and cranes.

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Role of Inland Container Depot in Export and Import

The 3 Main Operational Systems

1. The container yard operation

2. The receipt/delivery operation

3. The container freight station (CFS) operation

The Container Yard Operation

Container Storage Operation

In-terminal Container Movement Operation

The Receipt/Delivery Operation

The arrival of inland transport, via the depots security entrance, at a reception facility,

where document-checking and related formalities take place.

Movement of the inland transport to a location where exchange of containers between the

container yard and transport occurs.

Departure of the inland transport from the depot following a further set of security and

other formalities.

The Container Freight Station (CFS) Operation

To receive, sort and consolidate export break-bulk cargoes from road vehicles.

To pack export cargoes into containers ready for loading aboard onward transport.

To unpack import containers, and sort and separate the unpacked cargo into break-bulk

consignments ready for distribution to consignees.

To deliver import cargoes to the consignees transport.

To store import and export cargoes temporarily, between the times of unloading and

loading, while various documentary and administrative formalities are completed (e.g.,

customs inspection, settling of charges for packing, unpacking and storage, arranging

transport).

35

Basic Minimum Functions of Inland Container Depot

Inland Container Depot

Custom Clearance

Warehouse Facilities

Container and Cargo

Handling Office of an Operator

Office of Cargo Handling Agent

Efficient Communication Facilities

Cargo Stuffing and De-stuffing

Shipping line Office

Complete Security

Additional Functions of ICD

To Accommodate the Completion of Administrative and Documentary Procedures and

Warehouse storage including cold storage and reefer storage

Container storage and inventory control

Container maintenance and repair

Offices of shipping line agents

Railway goods office

Road haulage brokerage

Consignment consolidation services

Unit train assembly and booking services

Container clearing services

Computerized cargo-tracking services

Clearing and fumigation services (atmospheric and vacuum)

Refer refrigeration points

Weigh bridges

Cargo packing services

DOCUMENTS REQUIRED AT TIME OF IMPORT

IMPORTER CODE & LICENSE

BILL OF LADING

INVOICE

PACKING LIST

DELIVERY ORDER FACTORY DE-STUFFING PERMISSION (IN CASE OF

FACTORY(DE-STUFFING)

BILL OF ENTRY

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DOCUMENTS REQUIRED AT TIME OF EXPORT

EXPORTER CODE

INVOICE

PACKINGLIST

SHIPPING BILL

CONTRACT COPY

GRANT FOR REVIDANCE (GR)

TRANSFERENCE COPY (TR1 & TR2)

R AIL FORWARDING NOTE (IFCONTAINER WILL MOVE BY TRAIN)

INLAND WAY BILL (IWB)

LETTER OF CREDIT (L/C)

STEPS FOLLOWED IN PRESHIPMENTACTIVITY

First Exporter need, Exporter Code, this can be obtained from DGFT (Directorate

General of Foreign Trade)

Party have to get registered itself in Appropriate ICD.

Submission of Invoice & Packing List.

Shipping Bill* filing:

If export under DEPB Scheme Blue

If export under Duty draw back Green

If export is Duty free White

If 100% EOU Pink

Shipping Bill will be file on the basis of these papers:

GR forms (in duplicate) for shipment to all the countries.

4 copies of the packing list mentioning the contents, quantity, gross and net weight of

each package.

4 copies of invoices which contains all relevant particulars like number of packages,

quantity, unit rate, total f.o.b./ c.i.f. value correct & full description of goods etc.

Contract, L/C, Purchase Order of the overseas buyer.

AR4 (both original and duplicate) and invoice.

Inspection/ Examination Certificate. All these papers sent for Noting to Custom and they

will give a no that is known as Shipping Bill no.

All these papers sent to DA (Dealing Assistance) in Custom for checking, all these papers

must be signed by Exporter.

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Processing of Shipping Bill:

All mentioned information About Export good will be checked by Inspector and signed

by Superintendent.GR is signed only by Superintendent and goods will be permitted for

Custom examination.(If FOB (Freight On Board) value is more than 10 lakh INR then

all these papers will also sent to Assistance Commissioner)

After this, goods can be sent to ICD with ARE1 then Custom will give Goods Received

and now goods can enter into Custom Bounded area.

After this Custom exam will take place and Examination report will prepare and granted

for Stuffing in container and granted for LEO (Let Export Order) with TR1 & TR2.

If cargo comes in container with an Excise Seal then Custom just have to check Excise

Seal no. and grant for LEO (Let Export Order) with TR1 & TR2 and Release Advice.

After showing all these papers to the shipping line agent, he will issue a Forwarding

Note.

Now party need to file TR1, TR2 and forwarding Note into CONCOR to book the

container for rail movement and get issued a RR(Railway Release).

Now party will send Original RR, TR1 and TR2 to the Gateway port for filing EGM

(Export General Manifest).

NOW CONTAINER IS READY TO LOAD IN VESSEL

The Transportation Requirements for the New Business Environment

Short door to door lead time,

High frequency of transport services,

Easy access to a large number of destination terminals for each originating terminal

Great flexibility of services,

Maximum volumes and weight of load units

Opportunities for services for less than container load shipments

Minimizing freight damage vulnerability.

38

Export Documentation Procedure

39

How to start an Export Import firm in India

Government of India amends formalities and procedures to set up an Export /

Import firm time to time.

Registration and documentation procedures in India

Rental agreement / or own property

Once after forming a firm name, you need to have a rental agreement with the premise owner.

This rental agreement may be required for various government authorities to register your

address proof of firm. While drafting rental agreement, please make sure, you have paid

necessary legal charges as stamp duty on your document.

You need to make sure all details furnished in the document are in order including the

authorization and witnesses.

If the premise is your own and your firm is a proprietorship concern, you need not arrange any

separate rental agreement, the sale agreement deed of said premise is treated as a proof of

address. However, if the premise is your own and your firm is a partnership firm involved by

other partners, you need enter in to a rental agreement with other partners.

PAN – Permanent Account Number

PAN is an income tax ID number issued by Income Tax Department. PAN means Permanent

Account Number. You need to provide your required information with supporting documents

with Income Tax Authorities if necessary. Most of the business transactions are now linked with

this 10 digit - alpha numerical - PAN number by government. Separate permanent account

number for individual and firm is required to be registered with income tax department.

Q) Is individual PAN number sufficient for firm name?

How to obtain a PAN number for Proprietor, Partnership or Private limited company?

This is a common question among business men who just entered in to the business. Whether a

business man has to obtain a Permanent Account Number – PAN in his firm name, although he

has already obtained PAN in his individual name from Income Tax Department.

Here, if you are a sole proprietor of your firm, your individual PAN number is sufficient, as

there is/are no other partners on your firm. However, if the firm is a partnership a separate

permanent account number – PAN in the name of firm is required to be obtained from Income

Tax Department. While applying for the said common PAN number in the name of company, a

copy of individual PAN number of each partner has to be mentioned in the application form.

If your firm is a private limited company or public limited company, you need to obtain a

separate PAN number in the name of your firm other than your individual PAN number. While

applying for the said common PAN number in the name of firm, a copy of individual PAN

number of each director, has to be mentioned in the application form.

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PARTNERSHIP agreement

If your firm is engaged in a partnership, you need to a have a partnership agreement between

partners with terms and conditions as per partnership Act. The complete details of terms and

conditions among partners with share of profit are mentioned clearly in the agreement.

I personally suggest you to get the partnership agreement registered with the authorities to settle

dispute among partners if arises in future.

CURRENT ACCOUNT opening.

Open with a bank who got effective export import services who does not delay in crediting

foreign exchange etc…. preferably with a bank with exclusive international business.

How to obtain an IEC number with DGFT with branch code

If you need to export or import from India, you need to obtain an Import export Code IEC from

Director General of Foreign trade within the jurisdiction office of your firm situates. Without an

IEC code, no movement of goods from/to the country to outside is allowed.

DGFT procedures to obtain an IEC number are too liberalized now days. As per the recent

notification, the following documents are required to obtain an Import Export Code. However,

you may cross check for further update with DGFT before applying for import export code.

1. Bank receipt / demand draft against application fee. This fee is INR 1000.00 while writing

this article. You may re-clarify with DGFT before applying.

2. Application form in prescribed format issued by DGFT for issue of Import Export Code

number. This application for is prescribed in Appendix 21B.

3. Please attest the application for IEC with you banker where in you have opened current

account in the name of firm to operate export import activities.

4. Self-attested copy of Permanent Account Number PAN issued by income tax authorities.

5. Two copies of passport size photographs of the applicant. You need to attest the said

passport size photographs with your authorized bank.

6. If any partner or partners are non-resident interest or holding in the firm or company exists

with repatriation benefits, you need to attach a self-certified copy of Reserve Bank of India

approval on the same.

When can an IEC obtained after submitting documents.

Normally, if all documents are in order, Import Export Code is issued by DGFT within two

working days. However, by taking in to consideration of transit time, you can expect to receive

IE code through post office to your official address within 10 days after submitting documents

subjected, all submitted documents for Import Export Code are in order.

AD code - Authorized Dealer Code - registration with customs.

Once you obtained IEC if you intend to do export or import, you need to register your IEC and

Authorized dealer code details with the port through which you are exporting or importing. If

you are going to export by sea, you need to register with sea port customs and if by air, with

41

airport customs also. You can appoint a customs house agent to get the job done on behalf of

you.

What are the formalities for AD code and IEC registration with customs: What CHA does with

your documents for registration.

Along with the Authorized AD code letter received from your bank though which you are going

to transact your foreign trade; you need to attach a copy of IEC with a covering letter on your

letter to be applied with customs officials. The customs officials normally finish these formalities

within an hour.

Registration with central excise department

If your products are fallen under excisable goods, you need to register with nearest central excise

department to claim necessary export excise benefits under your goods exporting.

The registration has to be done within the jurisdiction where your factory is situated.

RCMC registration procedures

Many government agencies supports exporters in various levels to boost the export of the

country and such agencies extends all supports including financial supports to exporters. In order

to avail such benefits, an exporter need to register their product and obtain Registration Cum

Membership Certificate from the respective agencies who deals under specific goods separately.

If you are a manufacturer of a particular product or products, you need to obtain a registration

cum member ship certificate from respective authorities.

.

Registration with sales tax office

Exporters are eligible to claim sales tax benefits against exports. So, once after completion of

necessary IE code procedures, you need to register with Sales Tax authorities under your

jurisdiction area where in you can obtain necessary guidelines to act as an exporter or importer.

I hope, I could you explain in detail about the major procedures and formalities to set up an

export import firm in India. As stated earlier, these details are only for information purpose, as

government of India revise the procedures and formalities to set up an Import Export firm time to

time.

Before setting up of such export import firm in India, you may once again reconfirm the

procedures and formalities with necessary government agencies.

Export Marketing

Getting an export order is the major task of any export business. Every business individual or

firm has their own market strategies to obtain export orders. Without receiving an export order,

the company cannot survive. Beginner of any export firm focuses on the strategies to get export

orders to sell their product.

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How to get export order from overseas buyers

1. Digital world changed each human being in the world widely for the past two decades.

Information technology plays a vital role in all sectors especially in international business.

Before 1990s, getting a contact of foreign buyer was a herculean task. Now world changed like

anything. I will always put you as first tool of international marketing as the utilization of

internet service.

How to use the service of internet in marketing your product?

a) Launching of a quality website is a reflection of your firm and you can update time to

time with necessary information about your product updating. You will get credibility

and initial respect on your product and your firm as well. Uploading images of your

product, manufacturing unit, manufacturing process etc. boost your reliability

in international market.

b) Search Engine Optimization (SEO) plays a vital role in searching the content tags of your

details by anyone looking for a supplier of product similar to yours.

c) Joining with Social media like face book, twitter, Plax, linked in. Do not forget to

regulate false comments by proper administration.

d) You tube; flicker, e-magazines etc. also can be used to increase your export market.

e) Writing articles on your website helps the readers of internet to identify your calibre in

the trade.

2. Effective communication plays an important role in business market. If you can effectively

communicate with the buyer to convince the quality and price of your product, the buyer will

surely take initiation to ask you send sample of your product and later place the order.

3. You can send samples as per buyer’s requirements. While sending export samples, at least

two sets of samples to be drawn properly. One you can send to the buyer and one can be retained

with you. The sample you retained helps you to match with the sample you sent to buyer while

manufacturing or procuring, once you obtained final purchase order from buyer.

4. Attend in Trade fair exhibit your product. There are many International Trade fairs

conducting within the country and abroad, where you can exhibit your product to attract foreign

buyers.

5. Export promotion agencies have different source of contacts in international level. They help

you to guide proper marketing in the trade. They also extend their services in finding buyers for

your product.

6. Commodity Board also plays a vital role in international marketing to help their members to

find a foreign market. You can have a frequent contact with them for necessary sales leads to

communicate.

7. Government Embassies: Respective Government embassies extend their service in helping

exporters to find an international market in their country.

43

8. Personal meet: Once you have a personal contact, you can visit the buyer in person and

generate a good business relationship.

9. Appointing an Agent: Some of the exporters appoint an agent in the targeting country, and

through the said agent exporter orders are procured. All the required services are done by this

agent including the technical problems if any.

10. Through contacts of friends and relatives: Personal relationship of friends and relatives

also helps to generate a good business relationship between buyer and seller for mutual benefits.

Export Documentation Procedures

In almost all countries, a onetime licensing procedure to act as an Exporter/Importer is required

to be completed. In India, IEC number (Import Export Code number) is required to act as an

Importer or Exporter.

IEC Stands for IMPORTER EXPORTER CODE which contains 10 digit number

issued by Director General of Foreign Trade, Department of Commerce,

Government of India.

If you are an exporter, you would have already set up an Export company by following necessary

government rules and regulations. By choosing your export product, you would have sent export

samples to your international buyer if required and got approved. After necessary

communication with your overseas buyer on terms of payment and terms of delivery, you

arrange to issue preform invoice, in turn you receive export order followed by purchase order

from your overseas buyer. The terms of payment for your export contract could be advance

payment, Documents against Acceptance DA, Documents against Payments DAP, or under

Letter of Credit LC. If you as overseas seller require to cover credit risk against your overseas

buyer, you can approach concerned authorities to cover insurance. In India, ECGC is the

authorized agency who covers such credit risks for Indian exporters. Being an exporter, you will

have an idea about other risks involved in export. The terms of delivery could be EX-Works,

FOB, CFR, CIF, DAP, DDP or any other Inco terms. If you would like to arrange finance

against export, you can approach your bank for pre shipment or post shipment finance against

export orders obtained by you.

Based on your communication with the buyer, you are asked to send sample of your

product. If value of your product sample is high, you can request buyer to make

payment on the same. The buyer remits the amount to your bank. If value is

nominal and you can afford the cost, you can supply free of cost. There are

government financial assistances to send sample products to foreign countries. You

can contact your export promotion council or commodity board for further

information. While sending samples, do not forget to retain a set of same sample

with you as you have to meet the specification of product as per the said sample. If

you do not keep a copy of sample, you cannot claim with your buyer against any

disputes on the quality specification of product.

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Payment term in any business is a major part of sales contract. Terms of payment in

exports and imports plays an important role in international business. What are the

different types of mode of payment in exports and imports?

Advance payment

With a seller’s point of view, an advance payment is the safe mode of payment for any business

including export business. Receiving amount of sales in advance helps exporter in various ways

to plan his financial activities smoothly. However with a buyer’s point of view, advance payment

carries little risk, as he advances payment before dispatch of goods.

Letter of credit

Letter of credit is an assurance given by the buyer’s bank to remit the amount to the seller

through seller’s bank on maturity, as per the terms and conditions of document based on the

contractual agreement between buyer and seller.

D.A.P or D/P basis - Documents against Payments

Documents against Payment – DP/DAP is another term of payment in international trade. The

documents under consignment are delivered to buyer/importer only after collecting payment of

goods by buyer’s bank.

D.A terms means Documents against Acceptance

As per D.A terms, once the shipping documents along with bills of exchange received by the

buyer’s bank, the buyer is informed to accept documents by buyer’s bank. The buyer accepts

documents by signing bills of exchange sent by the exporter, agreeing to pay the value of goods

shipped as per agreed period of time.

Inco-terms (terms of delivery)

Performa invoice

Pro-forma invoice as a ‘confirmed purchase order’ from the seller, although the official

purchase order has to be issued by the buyer. The pro-forma invoice is issued before sales

takes place.

ECGC

Export Credit Guarantee Corporation is a central government undertaking body to

provide credit guarantee on the default of payments by the buyer. It works as an

insurance firm who guarantees export payment, if the buyer defaults in making payment.

Procedures with ECGC to cover insurance:

Once after finalizing the order, the buyer execute a purchase order to the seller with the

terms and conditions as agreed by both. The purchase order should contain full details of

buyer and buyer’s bank account details. The exporter approaches Export Guarantee

Corporation to get approval on the buyer with amount of limit. Here, the ECGC with

their available contact with overseas network finds out the credit worthiness of the said

buyer and arrives a figure of creditworthiness and inform the maximum limit of amount

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can be shipped at any point of time. Export Credit Guarantee Corporation collects

premium on the amount of approval and issue insurance policy accordingly.

The exporter can apply with ECGC for insurance on shipment wise order as specific

insurance policy, or at lump sum as comprehensive policy. If an exporter obtain a specific

policy, the contract of insurance is only for that particular shipment. You as an exporter

has to pay premium only against the said shipment. If you prefer to obtain a

comprehensive policy against any buyer, you can get approval from ECGC, the amount

of credit worthiness of the said buyer.

Pre shipment finance

Any advance or loans or any credit extended to exporters by bank for the purpose of

manufacturing, procuring, processing or packing of goods before shipment can be called

Pre-Shipment finance.

Post shipment finance

Once after shipping a consignment on 60 days credit basis. Now you need to send next

shipment. You do not have enough finance to procure goods or to meet other expenses.

Here, Bank provides a short term loan with very concessional rate of interest to safeguard

you to fill the gap of credit period you have extended to your buyer – say 60 days. So you

can avail a shorter loan from bank and proceed with your planning to export next

shipment.

If any international quality check agencies like SGS, BVQI etc. are involved as per the terms

and conditions between you and your overseas buyer, such inspection is arranged. After

completing necessary quality check (QC) formalities, the goods for export are arranged for

proper packing to meet export quality. Palletisation or Crating is arranged for safety of cargo. If

your export goods are shipped by sea mode of transport, you decide whether the export shipment

is by LCL or FCL. Necessary information about shipping of LCL may be collected if sent as

LCL. Type of container is decided based on your nature of export goods.

SGS (Society General Surveillance. )

SGS is an international inspection agency works all over the world in the field of

improving quality and productivity, reducing risk, verifying compliance and increasing

speed to market. SGS has offices worldwide to facilitate exporters to improve best quality

of products exporting

LCL &FCL

Firstly, do not expect the cargo arrival time as faster as an FCL shipment. Because the

goods will be stuffed in to the container, once the freight forwarder receives enough

cargo to make the container ‘full’ at place of receipt. Place of receipt may be near loading

port or container freight station, away from loading port depends up on location of your

factory where the goods to be exported are.

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QUALITY CHECK (QC)

There are many international inspection agencies working on each commodity to confirm

the quality of products before shipment. The overseas buyer can appoint them to

undertake a pre-inspection of goods and certify.

Ok, now the shipment is ready for export. The documentation department prepares export

invoice, export packing list etc. based on the purchased order or LC. Application for

certificate of origin (GSP – Generalized System of Preference) and other required documents

required for importer are also prepared. Necessary documents required for export customs

clearance purpose are forwarded to Customs broker. The export process at customs

completes either by customs broker or your representative directly. You as an exporter decide

whether your export shipment is FCL or LCL. Pre shipment inspections like Phyto sanitary,

Fumigation etc. if required have to be completed before export of goods.

Export invoice (its content)

1. Exporter /Consigner

2. Consignee

3. Buyer

4. Invoice Number and date

5. Buyer’s order number and date

6. Country of Origin

7. Country of final destination

8. Vessel / Flight

9. Pre carriage by

10. Place of Receipt

11. Port of Loading

12. Port of Discharge

13. Place of Delivery

14. Terms of Delivery & Terms of Payment

15. Marks and number

16. Number and kind of packages

17. Description of Goods

18. Quantity

19. Rate

20. Amount

21. Total

22. Amount in words

23. Declaration

24. Authorized signatory, rubber stamp and Date

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Export packing list (its content)

1. Exporter /Consigner

2. Consignee

3. Buyer

4. Invoice Number and date

5. Buyer’s order number and date

6. Other reference if any

7. Country of Origin

8. Country of final destination

9. Vessel / Flight

10. Pre carriage by

11. Place of Receipt

12. ‘Port of Loading

13. Port of Discharge

14. Place of Delivery

15. Terms of Delivery & Terms of Payment

16. Marks and number

17. Number and kind of packages

18. Description of Goods

19. Remarks

20. Dimension

21. Net weight

22. Gross weight

23. Declaration

24. Authorized signatory, rubber stamp and Date

GSP (Generalized system of preference)/Certificate of origin

There are two types of certificates of origin in India - Certificate of origin issued by Chamber of

commerce and Certificate of origin issued by Export Inspection Agency. Customs of some

importing countries insist either of them to certify the country of origin of goods. GSP which is

issued by Export Inspection Agency. Export Inspection Agency has offices in all major cities to

serve exporters in maintaining best quality to meet the specification of buyer to have best quality

management system for exporters. In order to get certificate of origin (GSP), before physical

movement of goods, you need to apply with export inspection agency as per their specified

request form along with copy of commercial invoice duly signed by the authorized signatory.

After verifying properly and collecting necessary charges, export inspection agency certifies the

document and issues GSP Certificate of origin along with attested copy of commercial invoices.

GSP can be obtained by filing online. You may find the procedures to file electronically. Once

after filing electronically, the required hard copies of documents can be submitted with

respective offices of export inspection council and obtain GSP certificate after paying necessary

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charges. Certificate of Origin is one of the required documents for import customs

clearance in most of the importing countries

Export custom clearance

Once after preparing invoice and packing list, based on purchase order or Letter of credit, you

need to arrange export customs clearance procedures, well in advance of time of shipment

mentioned in export order. You can appoint a Customs broker or you your self can complete

export customs clearance formalities. Normally, a customs house agent is appointed for smooth

and fast clearance procedures under export. Invoice, Packing list, SDF declaration and other

specific required documents are sent to customs house agents for completion of necessary export

customs formalities.

After receiving documents from exporter, Customs broker files shipping bill through customs

online software system electronically. This can be done at home, office or private EDI

(electronic data information) centres appointed by government, as the filing software can be

downloaded from ICEGATE electronically. The generation of shipping bill number is as per

serial order all over the country, as the said software is a centralized one. ICE GATE is the

software service provider for Customs department of Government of India for import and export

customs clearance procedures and formalities. ICE GATE opens their software system 24 hours

a day to support export import trade for smooth clearance procedures in India. So the shipping

bill number – the serial number of export shipping bill - generated by software is obtained by

customs broker or exporter who files online on a queue basis.

The goods read for export is moved to airport, sea port or container freight station and unloads in

to the respective yard of shipping carrier. The location yard is decided by carrier who places the

vessel/aircraft at the allocated place where in loading of goods makes easier. After goods are

completed with customs officials and enter the details of examination of goods in to software

system online for the approval of higher officials of customs. The assessment of value of goods

and other information are verified by the customs officials with necessary documentary supports

if required. Customs department is also alert on the export benefits schemes filed by you

(exporter) for claim by verifying with necessary supporting documents if required.

Let Export Order under export customs clearance procedures

After verifying all required information, customs authorize the assessment and inspection

procedures and issue ‘Let Export Order’ as a proof of completion of export customs

procedures and formalities. Then, the prints of shipping bill are generated. There are three

type copies of shipping bills release this time, one for exporter’s copy, second one

exchange control copy which has to be submitted with Reserve Bank of India through

exporter’s bank, and third one for shipping carriers to move the cargo to port of final

destination.

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Export General Manifest – EGM

After obtaining the prints – hard copy - of said original shipping bills, the respective

customs officials involved in the said process signs on the shipping bills and return to the

exporter or their appointed Customs House Agent. Once after movement of goods from

exporting country, the shipping carrier files necessary export general manifest (EGM)

with customs and based on the same, customs department issue proof of export – Export

promotion copy of shipping bill.

EP copy of shipping bill is taken as ‘proof of export’ by all government authorities for claiming

any financial assistance from various government agencies. EP copy of shipping bill is taken as a

proof of export of goods to fulfil export obligation against the benefits already obtained before

exports. Another major document proof of export is ‘On board Bill of Lading’ issued by carrier

of goods.

Once after releasing shipping bills duly signed by customs authorities, customs house agents

delivers the respective shipping bill to carrier to move the cargo to destination. Exchange control

copy of shipping bill is submitted with bank along with other shipping documents. The

authorized dealer of exporter sends the said exchange control copy of shipping bill to Reserve

Bank of India. RBI requires exchange control copy for regulating inward and outward remittance

of foreign exchange. Exporter’s copy of shipping bill is retained by exporter for their future

reference.

Manual shipping bills are filed at a customs location where in no facility to file electronically to

complete necessary export customs clearance procedures and formalities. Such shipping bills are

filed in 6 copies. Original and duplicate for customs, Triplicate and EP copy for Exporter and

next two copies for carrier to load goods at port of loading.

Custom broker

Customs House Agents act on behalf of you with customs officials to undergo necessary

export and import clearance procedures and formalities. In an export, a customs broker

delivers documents to exporter after completing necessary export formalities with customs.

In an import trade, goods are delivered to importer by customs broker after completing

necessary import customs clearance procedures and formalities with custom department.

Bill of Lading or AWB is issued by carrier of goods. If consolidator involved, HAWB or HBL

is issued accordingly. If On Board Bill of Lading required as per buyer’s requirement, you have

to wait to get the export shipment go ‘on board’ the vessel. If you export your goods from a dry

port, you have to wait till the cargo to go on board the vessel, if you need On board bill of lading

from shipping carrier.

Bill of lading

In an export trade, once after completion of necessary customs export formalities at exporter’s

country, the goods are handed over to Carrier for transportation to buyer’s destination. If cargo

is moved by sea, the carrier issues a receipt of goods to the shipper which is called Bill of

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Lading. If said goods have not been gone on board the vessel, the bill of lading shows ‘Received

for shipment’, without mentioning ‘Shipped On Board’. If the shipper needs to mention

‘Shipped On Board’ on Bill of Lading, such bill of lading is issued once after the shipment gone

‘On Board’ the vessel. Shipped On Board bill of lading may be demanded by buyer as per

mutually agreed contract of sale or it may be required for the exporter to claim different export

benefits from various government agencies.

HAWB & MAWB

MAWB is Master airway bill issued by main carrier of goods on receipt of goods from a

freight forwarder to deliver at destination as per agreed terms. HAWB means House airway

bill issued by a freight forwarder on receipt of goods from shipper agreeing to deliver goods

at destination.

Dry port

Container Freight Station situated away from sea port where customs supervision is available

is called Dry port.

If the importer or exporter is far away from sea port, it will be an inconvenience to co-ordinate

and handle the goods properly. So government has allowed CFS (container freight station) to

handle export and import formalities under customs supervision. The cargo will be moved by rail

or road from the sea port to CFS.

After completion of export customs clearance procedures and collection of AWB or Bill of

Lading, necessary documents for bank and overseas buyer are prepared. The export bill can be

discounted, arrange for collection of payment if on credit basis or negotiated if export shipment

is on Letter of Credit basis. If you have availed packing credit from bank, the amount of

discounted/negotiated export bill amount will be adjusted once bank receives export proceeds

from your overseas buyer. If bank does not receive such export proceeds from your overseas

buyer, your bank may crystalize such export bills, you/bank can approach credit insurance

company (like ECGC in India) for claim, if such cover done by you or your bank.

Crystallization of export bill

Once after shipping of goods, most of the exporters discount or negotiate the export bills with

bank by submitting necessary export documents like Bill of Lading / Airway Bill, Invoice,

Packing list and other required export documents. Most of the government supports exporters by

extending financial assistance by providing them loan against export documents with very low

rate of interest. Bank is expected to receive amount of such exports from overseas buyer on due

date agreed mutually between buyer and seller. However, if export bills are not realized even

after 30 days of its maturity, bank withdraws the facility of low interest rate by delinking the bills

by converting commercial rate of interest. This is called crystallization of export bills.

Crystallization of bills is also called delinking of export bills.

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Negotiation of Export documents

While negotiating documents, you submit all required documents as per letter of credit terms and

conditions to bank to send to your overseas buyer though LC opening bank.

When shipment is under Letter of Credit, documentation is a crucial part as the opening bank

debits you against any discrepancy found on documents. So once you received Letter of Credit,

make a copy of the same and read carefully twice. Mark each and every point where ever

necessary. Whether any international inspection required, clean on board bill of lading, factory

inspection certificate, certificate of origin, legalized documents, consulate attestation, SGS,BVQI

inspection, Phyto sanitary certificate, chemical analysis certificate, shipped on board certificate,

freight certificate, etc. List out the documents required to submit while negotiating bills. Go

through each document minimum twice, whether each document is as per LC requirements.

Make sure, all documents are there as per LC terms and not found any discrepancy in each of

document. This is very important while submitting documents with bank to send to overseas

buyer through buyer’s bank.

Once after receipt of export documents, your bank arranges to negotiate bill as per Letter of

credit terms and conditions after proper verification of each and every clause. If your export

order is in US Dollar currency, you can either convert the amount in your currency or you can

open a dollar account and transfer the amount accordingly.

Risk Management System (RMS)

Risk Management System – RMS – is a great change in traditional approach of import customs

clearance procedures. Scrutinizing each document, examining every consignment etc. do not

work in global security scenario after globalization of trade. Routine assessment, concurrent

audit, inspection procedures etc. kills the time of process. Self-assessment method not only

reduce dwell time, but provides quality management in assessment, inspection and post clearance

audit etc. on the other side.

In a self-assessment scheme, importer can appraise the value by classifying and entering details

of chapter, benefits, value etc. No assessment or inspection is carried out under this system. This

method of clearance is under Risk Management System (RMS). If the importer filed wrong entry

in Risk Management System, re-assessment and inspection are carried out at later stage,

sometimes even after customs clearance at customs station or at importer’s premises depends up

on the nature of audit.

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Empty container booking procedures with shipping lines

Once the cargo packed and ready for export, shipper makes arrangements to ship the said goods

to buyer’s place as per his purchase order or Letter of Credit. He enquires with shipping lines or

freight forwarders to get the best ocean freight and services, if the freight terms are on ‘Pre Paid’

basis. He finalizes a carrier and confirms his acceptance of freight.

The carrier requests the shipper to book the container either online or by e-mail by providing

details required by the carrier. After completion of booking procedures, carrier provides a

booking confirmation to the shipper, by issuing a ‘deliver order’ to pick up the container from

their empty container yard. Means, each shipping line has their own or hired location/yard to

park their empty containers. The booking confirmation/delivery order to pick up empty container

is mentioned the place of yard/location where the empty container lies.

The shipper or his customs broker arrange a transport truck to move the said empty container

from carrier’s yard to his factory for stuffing. A stack period is given to shipper by carrier to

return back the stuffed container. ‘Stack period’ is the period allotted to ship authorities to return

all stuffed containers to port terminal for loading in to a particular vessel. The empty container is

moved to exporter’s factory for factory/CFS/ICD/port stuffing.

‘CFS Stuffing’ / ‘Direct stuffing’ / ‘Factory stuffing’

CFS Stuffing, Factory Stuffing and Direct Stuffing are used at an export CFS stations / Inland

Container Depot in related to stuffing of goods in to container. These terms are different types of

loading at ICD/CFS. These terms CFS Stuffing, Direct Stuffing and Factory stuffing are used to

account different types of stuffing goods.

Factory Stuffing, Direct Stuffing and CFS stuffing are the general terms used by Container

Freight Stations in terms of loading goods in to the container. The CFS authorities handling job

varies in all the three in turn, their charges to exporters also.

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Major risks and solutions in Imports and Exports

Business always has risk. Right? Risk is one of the hindrances under business. I believe, removal

hindrances is success of business. Risk is one of the hindrances in Business.

Are there risks involved in international trade? If yes what are they? How many types of

risks involved in an international trade? How to overcome each risk in import export

trade?

We are discussing about different categories of risks such as

Commercial risks in export import,

Political risks involved in international business,

Risks arising out of foreign laws under import export business,

Cargo risks in international trade,

Credit risks under export import business and types of policies to cover credit risks in

import export trade.

Foreign exchange fluctuations risk and solution in import export business.

Commercial Risks and its solution in International Trade.

One of the major commercial risks is lack of knowledge about the international market. If an

exporter who does not have proper knowledge about the area of sales where he markets his

product, no doubt, he may fail in international business. So, an exporter should have studied

thoroughly about the foreign market about selling of his export product.

Adaptability of your export product in foreign market plays a vital role in international market.

Means, if your product can not have adaptability to change to the conditions of foreign market

requirements, you may fail in exporting such product.

In a nutshell, most of the commercial risks are not predictable. The changes in international

market are hazardous and difficult to anticipate. Suitability and acceptability of the product in

international market is rather difficult to gauge. Variations in demand and supply conditions are

more unpredictable. A good business man untie such knots and succeed.

Political Risks in Import Export Business

One of the major factors under political risks is the change of policy of new government in each

country. As we know, in most of the countries have ruling and opposition parties. When a new

government is elected and the opposition party comes in to force, the policies of opposition party

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could be changed. These changes include import export policy and foreign business relationship

with other countries.

Many countries have cold war with other country, either with neighbouring country or with other

countries. There could also be a war (other than cold war) which seriously affect the trade

relationship due to heavy risk in trade.

Other than war between countries, there are chances of coups, rebellions and civil wars. Civil

wars, coups and rebellions also leads to disturb peace of a country which affects trade between

countries.

Apart from policy related issues and risks, there could be chance of capturing international cargo

by enemies during war season. This is another cause to political risks under import export of

international business.

Risks Arising out of Foreign Laws under international business

Every country has its own commercial law. So, different laws prevail both in exporting and

importing countries. Legal proceedings are complex as well as expensive. In every relationship,

however cordial and long-standing maybe, differences are likely to arise. Legal risks can be

avoided to a great extent by incorporating the provision for appointment of an arbitrator, in case

of dispute about contractual terms.

Cargo Risks

Transportation of cargo has undergone radical improvements over a period. Most of the goods

are transported by sea .transit risks are a common hazard for those engaged in export or import

business. The list of dreary and hazardous risks in transit is long viz. Storms, collisions, theft,

leakage, explosion, spoilage, fire, and high sea robbery. Every exporter should have working

knowledge of marine insurance so the he knows whether he is getting the required risk protection

at the minimum cost.

Credit Risks

Credit risk is another important factor in any business especially in international business.

Compared to domestic market, credit risk is very high in export import business. Risks are

inherent in credit transactions, more so in international business. Credit risk is not the same

whether one sells the goods in domestic market or in foreign market. Success in international

business depends, largely, on the ability of the exporters to give credit to importers on the most

competitive and favourable terms.

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What are the risks not covered under standard policies of Export Credit Guarantee

Corporation ECGC?

Commercial disputes including the quality disputes raised by the buyer, unless the

exporter obtains a decree from a competent court in the importer’s country in his favour;

Causes inherent in the nature of the goods;

Buyer’s failure to obtain import license or exchange authorization in his country;

Insolvency or default of an agent of the exporter or the collecting banks;

Losses or damages which can be covered by commercial insurers;

Foreign Exchange fluctuations.

ECGC does not cover those risks that are covered by the commercial insurers. Exporter can take

comprehensive policy that covers both commercial and political risks. If the exporter wants, he

can take only policy that covers political risks, depending on the requirements. However, it is

important to note ECGC does not issue the policy covering only commercial risks.

If the goods are confiscated by the customs on charges of smuggling, then insurance does not

cover.

Four Categories of risk cover policies

The main types of insurance covers are standard policies, specific policies, financial guarantee

and special schemes.

Standard Policies: They are ideally suitable to exporters to cover payment risks involved

in export on short- term credit basis.

Specific Policies: These policies are specifically designed to protect Indian exporters

from the risks involved in Export on deferred payment contracts, Services rendered to

foreign parties and Construction works and turnkey projects undertaken abroad.

Special policies, beside the risks covered under Standard policies, are issued to meet the

specific requirements of export transactions.

Financial Guarantee: They are the policies issued to banks for covering risks in extending

credit at pre-shipment as well as post shipment stages.

Special Schemes: They are meant to cover risks involved in confirmation to letter of

credit opened by foreign banks, insurance cover of Buyers Credit, Line of Credit and

exchange fluctuations risks.

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Foreign Exchange Fluctuations Risks in International Business

Normally export invoices are made in foreign currencies. If the exporter has invoiced as buyer’s

currency, he will be subjected to risk of foreign exchange fluctuations. If the foreign currency

depreciates in terms of currency of domestic country of exporter, exporter will receive lesser

amount in terms of such currency of exporter’s country. In the same circumstances, if the

exporter’s currency depreciates, exporter stands to gain.

If the exporter negotiated his documents with bank under Letter of Credit, the bank will be

bearing the risk. However, if the exporter has sent the bill for collection, the exchange rate on the

date of receipt of foreign currency in India will be given to the exporter. If export bill has

discounted (purchased) also bank absorbs such exchange rate fluctuation as exporter already

received his amount immediately up on such purchase. If there is intervening difference in the

exchange rate between the date of giving the bill for collection and the date of realization,

exporter stands to lose or gain, depending on the trend in fluctuation.

There will be no foreign exchange risk in case the invoice is made in Indian rupees. In such a

case, the importer will be subjected to foreign exchange fluctuation risk.

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Dispute Settlement In Export And Import Business

Reasons for disputes in international trade between exporter and importer can be many.

But the primary reason for disputes is quality of the goods exported. Under contractual terms

in many export contracts, importer gets the opportunity to inspect the quality of goods only when

the consignment reaches him. In many cases, by that time, the exporter would have got money.

Even if the consignment is sent on collection basis, importer can check the quality only after

retiring the documents. Other reasons for the disputes can be delayed shipment or non-shipment

due to change in government regulations or market conditions, restricting exports, etc.

What are the methods of settling dispute?

In any business there are two basic methods for dispute settlement.

Litigation and Arbitration.

Litigation is highly suitable due to the proverbial delayed process, prohibition costs and

uncertainty of decision.

But what are the basic Limitations of Litigation? How fast a litigation can be in export import

business? Is it easy to educate and convince on judgments with proper documentary proof? How

convenient to both exporter and importer under Litigation in international business? Will it affect

both importer and exporter on their business due to bad image among public? How to effect trade

relationship for both seller and buyer under litigation? Are international laws and procedures

simple to handle? Let discuss these area also here:

Slow Process: As you know, almost all civil process of litigation is slow. Court process

proverbially takes huge time consuming and formalistic.

Avoidable Necessity of Export Witness and other Evidence: In international contracts,

practices, procedures and customs are different. A judge however well versed may be, in law,

cannot be expected to know all these intricate matters. So, in courts, to educate the judge about

these practices, witnesses who are experts and having knowledge in the field have to be produced

to prove the practices, even before the evidence is established.

Inconvenience to the Parties: Court timing and date of hearings may not be convenient to

litigants. Most of the time, cases are postponed and in that process months drag on even for

completion of one witness. Even after day’s long waiting for hearing, one may know, at the end

of the day that the case is adjourned for two months due to non-availability of the other

advocate!

Adverse Public Image: Court proceedings are never secret. Media always covers the

developments in important cases. Even the superior court judgments are published. Matters,

which have been confidential till the case is brought to a court of law, become topics for public

discussion that may bring notoriety, loss of goodwill and long-standing reputation.

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Bitterness and Disruption of Trade Relationships: When a matter goes to a court of law, it is

immaterial which party may win as the age old established relationship, after the case is brought

to litigation in a court, comes to an end with only acrimony ad bitterness.

Different Laws and Procedures: International trade laws and procedures are more complicated.

Litigation in foreign courts is more expensive and difficult in comparison to the domestic courts.

Now let us discuss about Arbitration under Imports and Exports.

How arbitration does helps exporters and importers if dispute arises? How fast arbitration can

take place under a dispute between buyer and seller in export import business? How expensive

compared to litigation under export import dispute between seller and buyer? How does an

arbitration under international business effect Goodwill of both exporter and importer? What

about the confidentiality about the dispute between importer and exporter in an international

trade?

What are the basic Advantages of Arbitration under a dispute between seller and buyer in

export import business of international trade?

Let me explain basic advantages of arbitration in Export Import dispute compared to Litigation:

Quickness: Definitely, arbitration is quicker than litigation. Process of arbitration can be

completed as fast as the concerned party’s desire. Under Arbitration Act, the arbitrators have to

make the award within four months from the date of completion of all proceedings. Usually,

arbitration is settled within a period of four months to one year.

Inexpensiveness: Total incidental expenditure in arbitration is always much lower than

litigation. Arbitration fees is around 2% of the claim value or less in institutional arbitration.

Promotes Goodwill: As the arbitrator is chosen by both the parties, based on their faith and his

competence, arbitration becomes a normal process of goodwill. Arbitration proceedings and its

outcome do not disturb the existing friendly relations between the exporter and importer.

Choice of Appropriate Arbitrator: As the arbitrator is chosen by both the parties and name

incorporated in contract, who has the knowledge of customs and procedures of international

trade, so separate expert witness for educating the judge does not arise.

Privacy: Arbitration proceedings are not open to public. Arbitrator’s award is not published in

any newspapers. This preserves privacy of the parties. So, trade secrets as well as disputes

arising from the contracts do not become public.

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CONCLUSION

As we read in the preceding pages that doing international business is a very wide field/process

and lot of related activities, procedures, etc. are to be performed throughout in the business of

export.

The proper analysis of product and target market followed by the selection of feasible channels

of entering into an international business should be dealt with sincerely and genuinely. Decisions

regarding incentives and their applicability should be made effectively so as to avail maximum

benefits while doing international business. Developing international relations and also creating a

reputation in the export business is the key to becoming a successful exporter. Apart from that

insuring of possible risks so as to reduce unwanted losses.

Thus according to my opinion all the above mentioned ways of improving the international

business scenario in India should be followed and initiatives should be taken for the same.

Hence, it would help India to become one of the strongest and leading countries in the world,

with the perspective of its economic condition.

RECOMMENDATIONS

Paper work should be reduced.

Innovative methods should be used for various procedures so as to save time and money.

New policies should be formulated time to time which can assist the exporters in the long

run and also help new exporters excel in the international business rapidly.

Smooth and easy ways of carrying out export related activities and procedures should be

adopted.

Awareness should be increased so as to enhance knowledge of people interested in doing

business.

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Task Performed

Study of basic export process is completed.

Study all previous report of JCIL is completed.

Know the export producers is done in JCIL is completed.

Completed to all Export producers.

Foreign trade policy 2015-20 is completed.

Then I visited IDC khodiyar (Ahmedabad)

Completed ICD how they manage documents & stuffing.

SIP learning

Knowledge about whole export process.

Knowledge about New Trade policy 2015-20.

Got the opportunity to visit the ICD, Dry port.

Got the opportunity to meet with ICD khodiyar superintendent officer.

Meet with the inspector of ICD who also taught the primary process after that the file send to

superintendent officer.

To meet with both department head.

Understand the super vision of Prakash sir I understand the ICD process and jay chemicals

export process.

In that I also experienced that if accident occur during loading or unloading of container. What is

whole process to resolve it .

Practically saw the different kind of container which are used in international trade.

Got to know about the security measure for containers to ensure safety from thefts, one lock is

provided by the company and the other is provided by customs.

Learned that these seal locks cannot be easily break down, you need special cutter to break it.

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Limitation

There was less amount of practical knowledge .It was all dependent on theoretical fundamentals

and documents.

Limitation of time .

Bibliography

Books Referred

R.K.Jain’s Foreign trade policy

International marketing & export management

Links:

www.jaychemical.com

www.iexport.com

www.commerce.nic.in

http://www.india-exports.com/chemical.html

http://top10companiesinindia.co.in/2013/10/24/top-10-chemical-companies-in-india/

www.dgft.in

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ANNEXTURE

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