Introduction on paper industry

The new millennium is going to be the millennium of the

knowledge. So demand for paper would go on increasing in

times to come. In view of paper industry’s strategic role for

the society and also for the overall industrial growth it is

necessary that the paper industry perform well.

Government has completely delicensed the paper industry

with effect from 17th July, 1997.the entrepreneurs are now

required to file an Industrial Entrepreneur Memorandum with

the secretariat for industrial assistance for setting up new

paper mill or substantial expansion of the existing mill is

permissible locations.

The paper industry is a priority sector for foreign collaboration

and foreign equity participation up to 100% receives

automatic approval by Reserve Bank of India. Several fiscal

incentives have also been provided to the paper industry,

particularly to those mills which are based on non-

conventional raw material. The demand for upstream market

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of paper products, like , tissue paper, tea bags , filter

paper ,light weight online coated paper, medical grade coated

paper ,etc.,is growing up. These developments are expected to

give fillip.

Indian Paper IndustryPaper industry in India is the 15th largest paper industry in the world. It provides employment to nearly 1.5 million people and contributes Rs 25 billion to the government`s kitty. The government regards the paper industry as one of the 35 high priority industries of the country.

Paper industry is primarily dependent upon forest based raw materials. The first paper mill in India was set up at Sreerammpur, West Bengal, in the year 1812. It was based on grasses and jute as raw material. Large scale mechanized technology of papermaking was introduced in India in early 1905. Since the raw material for paper industry underwent number of changes and over a period of time, besides wood and bamboo, other non-conventional raw materials has been developed for use in paper making. The Indian pulp and paper industry at present is very well developed and established. Now the paper industry is categorized as forest based, agro-based and others (waste paper, secondary fibre, bast fibre and market pulp).

In 1951, there were 17 paper mills, and today there are about 515 units engaged in the manufacture of paper and

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paperboards and newsprint in India. The pulp and paper industries in India have been categorized into large scale and small scale. Those paper industries, which have capacity above24, 000 tonns per annum, are designated as large-scale paper industries. India is self sufficient in manufacture of most varieties of paper and paper boards. Import is confined only to certain specialty papers. To meet part of its raw material needs the industry has to rely on imported wood pulp and waste paper. Indian paper industry has been delicensed under the industries (Development and regulation) Act, 1951 with effect from 17th july, 1997. The interested entrepreneur are now required to file an industrial entrepreneur`s memorandum (IEM) with the secretariat for industrial assistance (SIA) for setting up a new paper unit or substantial expansion of the existing unit in permissible locations. Foreign Direct Investment (FDI) up to 100% is allowed on automatic route on all activities except those requiring industrial licenses’ where prior government approval is required.

Growth of paper industry in India has been constrained due to high cost of production caused by inadequate availability and high cost of raw material, power cost and conc. Of mills in one particular area. Government has taken several policy measures to remove the bottlenecks of availability of raw materials and infrastructure development. For example, to overcome short supply of raw materials, duty on pulp and waste paper and wood logs/chips has been reduced.

Following measures need to be taken to make Indian paper industry more competitive:

Improvement of key ports, roads and railways and

communication facilities.

Revision of forest policy is for wood based paper industry

so that plantation can be raised by industry, cooperatives

of farmers, and state government. Degraded forest land

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should be made available to the industry for raising

plantation.

Import duty on waste paper should be reduced.

Duty free imports of new & second hand

machinery/equipment should be allowed for technology

up gradation.

Sustained availability of good quality of raw materials

(forest based) and bulk import of waste paper to

supplement the availability of raw materials.

Adequate modernisation of the manufacturing assets.

Improvement of the infrastructure.

Quality improvement and reduction in cost of production.

Import policy and conducive for import of material,

equipments, instruments, raw materials and technologies

which are the bearing of the quality and environment.

Based on the recommendation made in the report and in

consultant with the industry associations, action plans are

being finalised in consultation with others

ministries/departments concerned.

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Introduction of the company

Yash Papers (located in Faizabad, India) is synonymous with

machine-glazed varieties of paper. Our brand revolves around

the manufacture of the best wrapping grades of papers in

India. The Company manufactures MG wrapping papers in both

brown and white varieties.

Established in 1981, by entrepreneur-promoter KK

Jhunjhunwala - with an installed capacity of 1940 MT per

annum in 1983, Yash Papers started production of low

grammage Kraft grades. Once this first paper machine became

stable, additional capacity of about 2000 MTPA was created on

this machine.

In the year 1991, the Company set up its Paper Machine II,

with a capacity of up to 6000 MTPA, taking the overall capacity

to 10,000 MTPA. This machine also specialized in low

grammage Kraft varieties. This new machine, along with the

enhanced capacity of the old one, helped to create dominance

over the low grammage Kraft market for the Company.

In the year 1995, Yash Papers set up its own 2.5 MW Power

Plant, with an Extraction-cum-Condensation Turbine. This was

a revolutionary step for a mill of its size at that time. This

lower cost of power gave it an added advantage over other

mills, and further helped brand Yash to become established in

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the market. At the same time, the Company set up further

capacity enhancements to its Paper Machine II, and boosted

total production to 16,000 MTPA.

In 2007, Yash Papers, grew to more than double of its

capacity, by installing a totally new integrated plant, setting

up a pulp mill, producing 130 TPD, Paper Machine III, to

produce bleached MG grades of papers with a total capacity of

70 TPD, a chemical recovery unit, and a 6 MW Power Plant.

This plant is running at full capacity from 2008. 

At the present time, Yash Papers has grown into the largest

manufacturer of wrapping grades in India, with a present

installed capacity of 39,100 MT per annum. Yash Papers

practices a singular discipline, focus on specialty products and

quality and has a culture of ploughing back surpluses into

additional capacity.

The consistent feature of our business strategy has been

value-addition. We invested periodically in the manufacture of

specialized grades – a distinctive preference for the value

approach over a volume one.

This preference for the value-approach is reflected in the

Company’s product mix - hard tissue, wrapping grades,

packaging, and stationery grades. These varieties are used in

specialized downstream applications like soap wrapping, food

wrapping, pharmaceutical covers, interleaving sheets,

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laminating sheets, paper bag, bidi wrapping, gum tape,

notebook covering paper, PE coating in mattress, tube light

packaging among others.

So even as they are based in India, our products find loyal

customers in countries across the globe.

Products

1. UN-BLEACHED KRAFT PAPER

GenericDEP - Deluxe PlainDER - Deluxe RibbedSDP - Super Deluxe PlainSDR - Super Deluxe Ribbed

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SpecializedMSP - Malpani Super Deluxe PlainKGT - Kraft Gum Tape BaseKBP - Kraft Bag PlainLSR - Light Shade RibbedKFR - Kraft Firework Ribbed

2. BLEACHED KRAFT PAPER

GenericREP - Regular PosterRPR - Regular Poster RibbedNSP - Natural Shade PosterNSR - Natural Shade RibbedSpecializedPFB- Poster Foil BasePCB - Poster Chromo BasePTB - Poster Thermal BaseSWB - Soap Wrapper BasePBP - Poster Bag Plain

3. COLOURED KRAFT PAPER

POR - Poster Orange RibbedPYR - Poster Yellow RibbedPYP - Poster Yellow PlainPPP - Poster Pista Plain

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PPR - Poster Pista RibbedGDP - Golden Deluxe PlainGSP - Golden Super Deluxe PlainGDR - Golden Deluxe RibbedGSR - Golden Super Deluxe Ribbed

4. PULP

UAP – Unbleached Agro PulpBAP – Bleached Agro PulpBLA - Bleachable Agro Pulp

SWOT ANALYSIS OF YASH PAPER LIMITED

On the basis of market survey the major strengths, weakness, opportunities and threats of Yash paper limited are as follows:-

S-STRENGTHS

W-WEAKNESSES

O-OPPURTUNITIES

T-THREATS

STREGHTS:-

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Yash have a brand name which is popular world wide.

Yash have faith of millions of peoples.

Own captive power plant 8.5MW based on extraction cum

condensing turbine.

Reduction in power & fuel cost.

Having niche market of lower GSM Kraft paper. Market

leaders in this segment in India and Bangladesh.

Dedicated distributor network all over India.

Duly engaged in exporting paper.

Dedicated efforts for quality improvement, established

brand in the market.

Production based incentives scheme covering all

employees including managers.

Cordial relation in the organisation, open communication

channels, no hierarchy, no strike since inception,

dedicated and skilled employees.

Knowledge updating by regular training programmes, by

arranging visit of Indian as well as foreign consultants

and participation in seminars.

Location advantages, as baggase and rice husk is

available in plenty.

Pioneer in many fields like power project, acceptance of

order through online automation of plant, technology

adaptation, computer, internet, website in spite of being

in “B” class backward district

WEAKNESSES:- Distribution channel is not so effective.

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It gives emphasis on national and international market,

does not give more attention on local market.

Aggressive promotional activities are not undertaken.

Less personal contacts with retailers.

Services are not good.

Company officials do not visits outlet regularly.

Less advertisement channels.

Bad and delay in claim settlements

OPPURTUNITIES:-

Being a big organisation Yash paper has ample of

opportunities in the field of kraft paper,

Poster paper, and thermal paper and release paper.

Yash paper can be major player in the paper industry of

India among Star paper mill,

The Mysore paper mills limited, Rajalakshmi paper mills

limited, and Deoria paper mills because of their world

class service.

Yash paper becoming the major player in paper industry

it covers all remote all remote areas of state.

Yash paper will be entering in businesses like Thermal

paper and Release paper.

Investors of Yash Papers rely on organisation so they will

provide finance whenever they want to expand their

businesses this is a unique opportunity with Yash papers.

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THREATS:-

High growth of competitor’s products.

Better facilities provided y the competitor to their

distribution this might lead to switch over to slice

distribution towards competitors.

Indifference among distributor and fat dealers.

Different effective promotion schemes of competitors.

The entry of new competitors in paper industry may be

hurdles.

Like Star paper mill, Working at high fixed costs and

unable to utilize the economy of scale.

Vision

• We will create the largest Specialty Paper Manufacturing Company in the World by 2025.

Mission

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Ensure higher profitability than industry average year on

year for continuous growth.

Create working environment for freedom of thought and

Innovations. Hire and cultivate the best people and

provide work conditions that energies.

Find solutions for customers and add value to their

process.

Create a dedicated customer base.

Work as partners with vendors. Ensure integrity and

create processes that provide them with ease in dealing

with us.

Provide optimum ROI to our stakeholders and ensure

continuous support.

Invest Time, effort and resources to improve the

environment continuously Ensure ‘Clean and Green’

surroundings for the future generations.

Develop the community around us by encouraging

entrepreneurship.

Spread the goodwill of our nation around the world.

EXPORT

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India has a mission to capture 2% of the global share of trade by 2012, up from the present level of less than 1%. Export is one of the lucrative business activities in India. The government also provides various promotional schemes to the exporters for earning valuable foreign exchange for the country and for meeting their requirements for importing modern technology and essential inputs. Besides, the income from export business is also exempted to the specified extent under the Income Tax Act, 1961, Refund of Central Excise and Custom Duty on export is also made under the Duty Drawback Scheme of the Government. There is no Sales Tax on products meant for exports.

Exports can be of goods which can be moved physically from one country to another or can be of service rendered. Detailed list of services are given in the Foreign Trade Policy covering more than 160 items e.g. Insurance, Hospital, Postal and Telecommunication etc.

TWO CLASSES OF EXPORTS:

Physical Exports: If the goods physically go out of the country or services are rendered outside the country then it is called as physical export. Deemed Exports: Where the goods do not go out of the country physically they can be termed as deemed exports. This will be subject to certain conditions as prescribed by the DGFT. Under Deemed Exports, the goods may be supplied to the manufacturer exporter who ultimately export a finished product of which this supply forms a part and ultimately go out of the country. E.g. Supply of fabrics to the garment exporter who exports the garments made out of the said fabric.

The government may announce from time to time the types of supplies that may be considered as deemed export. The Foreign Trade Policy gives the list of supplies considered under

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the Deemed Export Category. The policies and procedures are different for Physical Exports and Deemed Exports as also the benefits available. In a nutshell, Deemed Exports do not enjoy all the benefits that are available under Physical Export. The Foreign Trade defines exports as taking out of India any goods by land, sea, air. Although the act does not term them as “Physical Exports”, we have to put phrase to distinguish it from “Deemed Exports” which is sales in India but considered as exports for limited purpose.\

TYPES OF EXPORTERS:

Exporters can be basically classified into two groups

Manufacturer Exporter: As the exporter has the facility

to manufacturer the product he intends to export and

hence he exports the products manufactured by him.

Merchant Exporter: An exporter who does not have the

facility to manufacture an item. But, he procures the

same from other manufacturers or from the market and

exports the same.

An exporter can be both a manufacturer exporter as well as a

merchant exporter, he can export product manufactured by

him or he can export items bought from the market.

Once it is decided to export, it is mandatory on your part to

follow certain procedures, rules and regulations as prescribed

by various regulatory authorities such as DGFT, RBI, and

Customs. These procedures, rules and regulations are laid

down in the Exim Policy 2004-09, Exchange Control Manual,

Customs Act etc. Accordingly Export documents are required

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to be prepared keeping in view of the requirement of the

foreign buyers and our regulatory authorities.

EXPORT PROCEDURE

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Obtaining IEC Number

Entering into export contract

Processing an export order

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To examine the export contract

Instruction to the factor/ supplier

Instruction to the factor/ supplier

Instruction to the factor/ supplier

Quality control inspection

Dispatch of the documents to the export

department of the firm by the factory office

Central Excise Clearance

Proof of offsetting to CAPEXIL,

Certificate of origin

Shipment advice to the importer

Preparation of various sets of

documents

Presentation of document to bank

At the bank, these documents are

processed in the following manner

COMPLETE EXPORT PROCESS AND

DOCUMENTATION IN

YASH PAPER LIMITED

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Dispatch of the documents to the export

department of the firm by the factory office

Summation of an dosed documents

At the bank, these documents are

processed in the following manner

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SET UP OF AN EXPORT ORGANISATION

The proper selection of organization depends upon

Ability to raise finance.

Capacity to bear the risk.

Desire to exercise control over the business.

Nature of regulatory framework applicable to anyone

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

form a sole proprietary business organization. It can be set up

easily without much expenses and legal formalities. It is

subjected to only few governmental regulations. However, the

biggest disadvantage of sole proprietorship business is limited

ability to raise funds which restricts the growth. Besides the

owner has unlimited personal liabilities. In order to avoid this

disadvantage, it is advisable to form a partnership firm.

The partnership firm can also be set up with ease and

economy. Business can take benefit of the varied experiences

and expertise of the partners. The liability of the partners

though joint and several, is practically distributed amongst the

various partners, despite the fact that the personal liability of

the partner is unlimited. The major disadvantage of

partnership firm of business organization is that conflict

amongst the partners is a potential threat to the business. It 26

will not be out of place to mention here that partnership firms

are governed by the Indian Partnership Act, 1932 and,

therefore they should be formed within the parameters laid

down by the Act. Company is another form of business

organization, which has the advantage of distinct legal identity

and limited liability to the share holders.

It can be a private limited company or a public limited

company. A private limited can be formed by just two persons

subscribing to its share capital. However, the number of its

shareholders cannot exceed 50, public cannot be invited to

subscribe to its capital and the members right to transfer their

share is restricted. On the other hand, a pubic limited

company has a minimum of seven members. There is no limit

on the maximum number of its members. It can invite the

public to subscribe to its capital and permit the transfer of

share. A public limited company offers enormous potential for

growth because of access to substantial funds. The liquidity of

investment is high because of easiness of transfer of shares.

However its formation can be recommended only when the

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

proprietary concern or a partnership firm will be the most

suitable form of business organization. In case it is decided to

incorporate a private limited company, the same is to be

registered with the Registrar of Companies.

CHOOSING APPROPRIATE MODE OF OPERATIONS:

You can choose any of the following modes of operations

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

or from the manufacturer and then selling it to foreign

buyers.

Manufacturer Exporter i.e. manufacturing the goods

yourself for export.

Sales Agent / Commission Agent / Indenting Agent i.e.

acting on behalf of the seller and charging the

Commission.

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

charging Commission.

Service provider i.e. providing service from India to

another country.

NAMING THE BUSINESS

Whatever form of business organization has been finally

decided, naming the business is an essential task for every

exporter. The name and style should be soft, attractive, short

and meaningful. Open a current account in the name of the

organisation in whose name you intend to export. It is

advisable to open the account with a bank which is authorised

to deal in Foreign Exchange.

STRUCTURE OF AN EXPORT ORGANISATION

Marketing manager for generating sales

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Commercial manager for looking activities of the

execution of the orders.

Staff personnel for carrying out the day-to-day activities

namely

Preparation of pre - shipment documents.

Co-ordinating with clearing agents on the progress of the

shipment to be made.

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

regarding packing and clearance of the goods for export.

Preparation of post shipment documents foe banks.

Follow-up with the bank on dispatch of documents,

receipt of payment, availment of bank loans etc.

To look into the requirement of licenses, claiming of

export benefits fiiling of documents with the Government

Authorities in Discharge of Export Obligations, if any,

filing of returns to the various Government Agencies

which are mandatory, prepare and keep an information

bank of various transaction of the company, their

domestic as well as international competitors.

An office boy for doing leg work.

A clearing and forwarding agent to handle the documents

and the goods in the customs premises\ in the ports of

lading.

Depending upon the size of the business the numbers of

personnel under each category may increase. For example if a

company is transacting substantial volume of business in more

than one product. Then it is necessary to have marketing 29

manager for each product so that the person can concentrate

on a particular trade to enhance the business.

IMPORTER EXPORTER CODE

(IEC) NUMBER.

The Customs Authorities will now allow the exporter to export or import goods into or from India unless he holds a valid IEC number. Before applying for IEC number it is necessary to open a bank account in the name of the company with any commercial bank authorized to deal in foreign exchange. The duly signed application form should be supported by the following documents.

Bank receipt ( in duplicate ) / Demand Draft for payment

of the fees of Rs. 1000/-

Certificate from the banker of the applicant firm as per

Annexure 1 to the form given.

One copy of PAN number issued by Income Tax

Authorities duty attested by the applicant.

One copy of Passport Size photographs of the applicant

duly attested by the banker to the applicant.

Declaration by the applicant that the

proprietor/partners/directors as the case may be of the

applicant company, are not associated as

proprietor/partners/directors in any other firm, which has

been caution, listed by the RBI. Where the applicant

declares that they are associated as

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proprietor/partners/directors in any other firm, which has

been caution, listed by

the RBI, they will be allotted IEC No. but with an additional

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

and they should approach RBI for the purpose.

Each importer/exporter shall be required to file

importer/exporter profile once with the licensing authority

shall enter the information furnished in Appendix 2 in

their database so as to dispense with changes in the

information given in Appendix-2, importer/exporter shall

intimate the same to the licensing authority.

IEC EXEMPT CATEGORIES.

The following importer exporter is exempted from the

requirement of IEC code number.

Ministries \ Department of Central or State Government.

Person importing or exporting goods for their personal

use not connected with trade or manufacture or

agriculture.

Persons importing\exporting goods from\to Nepal &

Myanmar provided the CIF value of single consignment

does exceed Indian Rs. 25000\-.

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RCMC (Registration-Cum-Membership Certificate) – REGISTRATION WITH EXPORT PROMOTION COUNCILS –

In order to enable the exporter to obtain benefits/concessions under the Foreign Trade Policy, the exporter is required to register himself with an appropriate export promotion agency by obtaining registration-cum-membership certificate. (RCMC). If the export product is that it is not covered by any EPC, RCMC in respect thereof may be issued by FIEO. An application for registration should be accompanied by a self certified copy of the Importer-Exporter Code number issued by the regional

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licensing authority concerned and bank certificate in support of the applicants financial soundness. The RCMC shall be valid for 5 years ending 31st March of the licensing year.

REGISTRATION WITH SALES TAX AUTHORITIES:

Goods that are to be shipped out of the country for export are eligible for exemptions from both Sales Tax and Central Sales Tax. For this purpose, exporter should get himself registered with the Sale Tax Authority of is state after following the procedures prescribed under the Sales Tax Act applicable to his state.

HOW ONE BEGINS TO DO EXPORT:

Before entering into the venture of exports, one must look for the product to be exported and the market where he intends to export.

In case of a manufacturer, obviously he would like to export the product he manufactures as is or with possible modification as may be required by the market. However, in case of a merchant exporter or a trader, one has to identity the product to export. If the exporter is already in the trade in the domestic market and is familiar with the product it would be an advantage to export the said product of which he has reasonable knowledge.

Before selecting a product, one must simultaneously made a

study and find out the prospective market. For finding out the

market for the selected product, the following methods will

help.

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Get statistical information as to imports of the product by

various countries and their growth prospects in the

respective countries

Approach the chamber of commerce for their guidance to

find out the market.

Approach the Export Promotion Council dealing in the

product of selection to get more information.

The Preliminary

Once you are ready with the product you wish to export and have found the market for the same, you are ready to proceed further. Following sequences can be followed:

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

Importer Exporter Code Number (IE Code).This can

be obtained by making a formal application to the office

of the Regional Directorate General of Foreign

Trade (DGFT).

Get yourself registered with the related Export

Promotion Council and become a member. Also

arrange to obtain Registration-Cum-Membership

Certificate (RCMC) from the council. This has twin

objectives:

Under the Foreign Trade Policy, it is mandatory that an

exporter gets him registered with the Export Promotion

Council to avail of various export facilities.

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Being a member, you will have access to all the

information relating to the product that could be made

available by the council

Many foreign buyers send their enquiries for the imports

to the Export Promotion Council. Hence you will have few

customers interested in your product.

If you are a manufacturer, find out the provisions under

the EXIM Policy of getting the raw materials duty free.

Get familiar with the excise formalities as goods meant

for export can be cleared without payment of C. Excise

duty on the finished product subject to compliance of

certain formalities.

Understand the local government regulations in relations

to the export of the product.

Get information of the government’s regulations of the

importing country as to restrictions on the quantity,

product specification, packing regulations, customs

regulations, requirement of specific

documents/information etc.

Availability of Vessels/Airlines, the transport charges,

frequency of operation etc.,

To look for a Custom House Agent (CHA) (also know as

freight forwarders or clearing agents) for handling the

documents/cargo in the customs.

If the product is covered under any quota regulation, find

out the agency/council who are handling the quota

distribution for the product and the availability of quota

for exports.

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FINDING THE CUSTOMER

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

From the directory of importers of the country

Identify customers through business magazines, B2B

portals and other sources.

By writing to the Embassy of India in that country for

assistance

By writing to the chamber of commerce of that country

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By means of participation in a Fair/Exhibition abroad

either directly or through the Export Promotion Council

By participating in international fair if organized locally

Through the personal contacts in that country. By these

processes one can only have the list of customers. One

has to dialogue or correspond with these customers by

sending samples, getting feedback from the customers

etc. to ultimately select the customer with whom to deal

with. It is necessary to know the financial standing of the

company which can be obtained through the bank

channel or through the office of ECGC.

NEGOTIATING CONTRACT:

Once the prospective customer is found, the business

deal has to be concluded. The following aspects may be

considered before entering into a final contract with the

buyer.

Credit Worthiness of the Customer.

Availability of the Steamer/Airlines and the frequency

The freight charges37

The full product specification

The quantity, Price

Terms of Payment

Type of packing and markings on the packages

Mode of shipment & Shipment schedule

Tolerance of quantity to be shipped

Documentation requirement for the customer

Documentation requirement of the government of

importing country

Compliance of the local governmental rules and

regulations

Before entering into contract one should take note of the

above factors. While these are indicative, the requirements will

vary from country to country, product to product and buyer to

buyer.

EXPORT SALES & CONTRACT TERMS & CONDITIONS

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Very often exporters do not enter into any formal contract and finalize the trade deal through the exchange of letters, cable, telex etc. It is, however, expedient that the parties (exporters & importers) incorporate all important terms & conditions of their trade deal in a separate document or contract that will avoid disputes arising out of uncertainty or ambiguity. Export contract may be sent in duplicate along with the Proforma Invoice to the overseas buyer.

NATURE OF INTERNATIONAL TRADE CONTRACTS.

There are certain, peculiar characteristics of international trade contract which are not present in those for sales of goods in the domestic market

Whereas the parties to a domestic trace contract normally needs only agree on the elements which are necessary for their particular trade transactions like price, description, quality and quantity of goods, delivery terms etc the situation will be quite different when the buyer and the seller to sale/purchase contract belong to different countries. The parties to all international trade contracts provide all their relative rights and obligations in several ways

For example, they may agree to adopt either the Law of the country of the buyer or that of the seller. The traders are normally reluctant to leave the determination of the rights and obligations by implications under the legal system of either’s country. They prefer to make explicit provisions regarding the rights and obligations by including a set of detailed and precise terms and conditions in their contract.

EXPORT OF SAMPLES\GIFTS.

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In Yash Paper sample reels and sheets are being sent to the enquiry of prospective buyers. Exports of bonafide trade and technical samples of freely exportable items shall be allowed without any limit.

STANDARD CONTRACT FORMS:

Notwithstanding the efforts made by various national/international organizations like the United Nations Commission on the International Trade Law, there is still no perfection or a device which would give the parties an accurate and complete idea of each others understanding of various trade terms, the commercial practices and the rights and the obligations vis-à-vis each other so that the misunderstandings are practically eliminated.

Nevertheless, the Indian Council of Arbitration published in 1966 a booklet on “Standard Contract Forms and Model Arbitration Clause for use in Foreign Trade Contracts”. It was revised and reprinted in 1969 and 1977. It can be referred to by exporter for various clause to be incorporated in the Export Contract.

ENTERING INTO AN EXPORT CONTRACT:

In order to avoid disputes, it is necessary to enter into an export contract with the overseas buyer. For this purpose, export contract should be carefully drafted incorporating comprehensive but in precise terms, all relevant and important conditions of the trade deal.

There should not be any ambiguity regarding the exact

specifications of goods and terms of sale including export

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price, mode of payment, storage and distribution methods,

type of packaging, port of shipment, delivery schedule etc. The

different aspects of an export contract are enumerated as

under:

Product, Standards and Specifications

Quantity

Inspection

Total Value of Contract

Terms of Delivery

Taxes, Duties and Charges

Period of Delivery/Shipment

Packing, Labeling and Marking

Terms of Payment-- Amount/Mode & Currency

Discounts and Commissions

Licenses and Permits

Insurance

Documentary Requirements

Guarantee

Force Majeure of Excuse for Non-performance of contract

Remedies

Arbitration clause

It will not be out of place to mention here the importance of

arbitration clause in an export contract Court proceedings do

not offer a satisfactory method for settlement of commercial

disputes, as they involve inevitable delays, costs and

technicalities. On the other hand, arbitration provides an

economic, expeditious and informal remedy for settlement of

commercial disputes. Arbitration proceedings are conducted in 41

privacy and the awards are kept confidential. The Arbitrator is

usually an expert in the subject matter of the dispute. The

dates for arbitration meetings are fixed with the convenience

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

settlements of commercial disputes and it may invariably be

used by businessmen in their commercial dealings.

ARBITRATION:

Arbitration clause recommended by the Indian Council

of Arbitration:”All disputes or differences whatsoever arising

between the parties out of / relating to the meaning,

construction and operation or effect of this contract or the

breach thereof shall be settled by arbitration in accordance

with the rules of Arbitration of the Indian Council of Arbitration

and the award made in pursuance thereof shall be binding on

the parties” (or any other arbitration clause that may be

agreed upon between the parties).

TERMS OF SHIPMENTS – INCOTERMS

The INCOTERMS (International Commercial Terms) is a universally recognized set of definition of international trade terms, such as FOB, CFR & CIF, developed by the International Chamber of Commerce (ICC) in Paris, France. It defines the trade contract responsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving tool. The exporter and the importer need not undergo a lengthy negotiation

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about the conditions of each transaction. Once they have agreed on a commercial terms like FOB, they can sell and buy at FOB without discussing who will be responsible for the freight, cargo insurance and other costs and risks.

The purpose of Incoterms is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree. The scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods. Incoterms deal with the number of identified obligations imposed on the parties and the distribution of risk between the parties.

In international trade, it would be best for exporters to refrain, wherever possible, from dealing in trade terms that would hold the seller responsible for the import customs clearance and/or payment of import customs duties and taxes and/or other costs and risks at the buyer’s end, for example the trade terms DEO (Delivery Ex Quay) and DDP (Delivered Duty Paid)

Quite often, the charges and expenses at the buyer’s end may cost more to the seller than anticipated. To overcome losses, hire a reliable customs broker or freight forwarder in the importing country to handle the import routines.

Similarly, it would be best for importers not to deal in EXW (Ex Works) which would hold the buyer responsible for the export customs clearance, payment of export customs charges and taxes, and other costs and risks at the seller’s end.

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MORE CLARIFICATION ON INCOTERMS:

EXW {+the named place}

Ex Works: Ex means from. Works means factory, mill or warehouse, which are the seller’s premises. EXW applies to goods available only at the seller’s premises. Buyer is responsible for loading the goods on truck or container at the sellers premises and for the subsequent costs and risks. In practice, it is not uncommon that the seller loads sthe goods on truck or container at the sellers pre4mises without charging loading fee. N the quotation, indicate the named place (sellers premises) after the acronym EXW for example EXW Kobe and EXW San Antonio.

The term EXW is commonly used between the manufacturer (seller) and export-trader(buyer), and the export-trader resells on other trade terms to the foreign buyers. Some manufacturers may use the term Ex Factory, which means the same as Ex Works.

FCA {+the named point of departure}

Free Carrier: The delivery of goods on truck, rail car or container at the specified point(depot) of departure, which is usually the sellers premises, or a named railroad station or a named cargo terminal or into the custody of the carrier, at sellers expense. The point(depot) at origin may or may not be a customs clearance centre. Buyer is responsible for the main carriage/freight, cargo insurance and other costs and risks.

In the air shipment, technically speaking, goods placed in the custody of an air carrier are considered as delivery on board the plane. In practice, many importers and exporters still use

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the term FOB in the air shipment. The term FCA is also used in the RO/RO (roll on/roll off) services

In the export quotation, indicate the point of departure (loading) after the acronym FCA, for example FCA Hong Kong and FCA Seattle. Some manufacturers may use the former terms FOT (Free on Trucks) and FOR (Free on Rail) in selling to export-traders.

FAS {+the named port of origin}

Free Alongside Ship: Goods are placed in the dock shed or at the side of the ship, on the dock or lighter, within reach of its loading equipment so that they can be loaded aboard the ship, at seller’s expense. Buyer is responsible for the loading fee, main carriage/freight, cargo insurance, and other costs and risks In the export quotation, indicate the port of origin(loading)after the acronym FAS, for example FAS New York and FAS Bremen. The FAS term is popular in the break-bulk shipments and with the importing countries using their own vessels.

FOB {+the named port of origin)

Free on Board: The delivery of goods on the board the vessel at the named port of origin (Loading) at seller’s expense. Buyer is responsible for the main carriage/freight, cargo insurance and other costs and risks. In the export quotation, indicate the port of origin (loading) after the acronym FOB, for example FOB Vancouver and FOB Shanghai.

Under the rules of the INCOTERMS 1990, the term FOB is used for ocean freight only. However, in practice, many importers and exporters still use the term FOB in the air freight. In North America, the term FOB has other applications. Many buyers

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and sellers in Canada and the USA dealing on the open account and consignment basis are accustomed to using the shipping terms FOB Origin and FOB destination.

FOB Origin means the buyer is responsible for the freight and other costs and risks. FOB Destination means the seller is responsible for the freight and other costs and risks until the

goods are delivered to the buyer’s premises which may include the import custom clearance and payment of import customs duties and taxes at the buyer’s country, depending on the agreement between the buyer and seller. In international trade, avoid using the shipping terms FOB Origin and FOB Destination, which are not part of the INCOTERMS (International Commercial Terms).

CFR {+the named port of destination}

Cost and Freight: The delivery of goods to the named port of destination (discharge) at the sellers expenses. Buyer is responsible for the cargo insurance and other costs and risks. The term CFR was formerly written as C&F. Many importers and exporters worldwide still use the term C&F.

In the export quotation, indicate the port of destination (discharge) after the acronym CFR, for example CFR Nahava sheva (Mumbai) and CFR Cat Lai (Ho Chi Minh). Under the rules of the INCOTERMS 1990, the term Cost and Freight is used for ocean freight only. However, in practice, the term Cost and Freight (C&F) is still commonly used in the air freight.

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CIF {+named port of destination}

Cost, Insurance and Freight: The cargo insurance and delivery of goods to the named port of destination (discharge) at the seller’s expense. Buyer is responsible for the import customs clearance and other costs and risks.

In the export quotation, indicate the port of destination (discharge) after the acronym CIF, for example CIF Mumbai and CIF Singapore. Under the rules of the INCOTERMS 1990, the term CIFI is used for ocean freight only. However, in practice, many importers and exporters still use the term CIF in the air freight.

CPT {+the named place of destination}

Carriage Paid To: The delivery of goods to the named port of destination (discharge) at the sellers expenses. Buyer assumes the cargo insurance, import custom clearance, payment of custom duties and taxes, and other costs and risks. In the export quotation, indicate the port of destination (discharge) after the acronym CPT, for example CPT Los Angeles and CPT Osaka.

CIP {+ the named place of destination)

Carriage and Insurance Paid To: The delivery of goods and the cargo insurance to the named place of destination (discharge) at seller’s expense. Buyer assumes the importer customs clearance, payment of customs duties and texes, and other costs and risks.

In the export quotation, indicate the place of destination (discharge) after the acronym CIP, for example CIP Paris and CIP Athens.

DAF {+ the names point at frontier}

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Delivered At Frontier: The delivery of goods to the specified point at the frontier at sellers expense. Buyer is responsible for the import custom clearance, payment of custom duties and taxes, and other costs and risks.

In the export quotation, indicate the point at frontier (discharge) after the acronym DAF, for example DAF Buffalo and DAF Welland.

DES {+named port of destination}

Delivered Ex Ship: The delivery of goods on board the vessel at the named port of destination (discharge) at sellers expense. Buyer assumes the unloading free, import customs clearance, payment of customs duties and taxes, cargo insurance, and other costs and risks.

In the export quotation, indicate the Port of destination (discharge) after the acronym DES, for example DES Helsinki and DES Stockholm.

DEQ {+ the named port of destination

Delivered Ex Quay: The delivery of goods to the Quay (the port) at the destination at buyers expense. Seller is responsible for the importer customs clearance, payment of customs duties and taxes, at the buyers end. Buyer assumes the cargo insurance and other costs and risks. In the export quotation, indicate the Port of destination (discharge) after the acronym DEQ, for example DEQ Libreville and DEQ Maputo.

DDU {+ the named point of destination}

Delivered Duty Unpaid: The delivery of goods and the cargo insurance to the final point at destination, which is often the project site or buyers premises at sellers expense. Buyer assumes the import customs clearance, payment of customs duties and taxes. The seller may opt not to insure the goods at his/her own risks.

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In the export quotation, indicate the point of destination (discharge) after the acronym DDU for example DDU La Paz and DDU N’djamena.

DDP {+ the named point of destination)

Delivered Duty Paid: The seller is responsible for most of the expenses which include the cargo insurance, import custom clearance, and payment of custom duties, and taxes at the buyers end, and the delivery of goods to the final point of destination, which is often the project site or buyers premise. The seller may opt not to insure the goods at his/her own risk. In the export quotation, indicate the point of destination (discharge) after the acronym DDP, for example DDP Bujumbura and DDP Mbabane

“E”-term,”F”-term, “C”-term &”D”-term: Incoterms 2000, like its immediate predecessor, groups the term in four categories denoted by the first letter in the three-letter abbreviation.

Under the “E”-TERM (EXW), the seller only makes the

goods available to the buyer at the seller’s own premises.

It is the only one of that category.

Under the “F”-TERM (FCA, FAS, &FOB), the seller is

called upon to deliver the goods to a carrier appointed by

the buyer.

Under the “C”-TERM (CFR, CIF, CPT, & CIP), the seller

has to contract for carriage, but without assuming the

risk of loss or damage to the goods or additional cost due

to events occurring after shipment or discharge.

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Under the “D”-TERM (DAF, DEQ, DES, DDU & DDP), the

seller has to bear all costs and risks needed to bring the

goods to the place of destination.

All terms list the seller’s and buyer’s obligations. The respective obligations of both parties have been grouped under up to 10 headings where each heading on the seller’s side “mirrors” the equivalent position of the buyer. Examples are Delivery, Transfer of risks, and Division of costs. This layout helps the user to compare the parties respective obligations under each Incoterms.

PROCESSING AN EXPORT ORDER

You should not be happy merely on receiving an export order. You should first acknowledge the export order, and then proceed to examine carefully in respect of

Items Specification Application for Packing credit Pre-shipment inspection Payment conditions Special packaging Labeling and marketing requirements Shipment and delivery date Marine insurance Documentation requirement etc.

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If you are satisfied on these aspects, a formal confirmation should be sent to the buyer, otherwise clarification should be sought from the buyer before confirming the order. After confirmation of the export order immediate steps should be taken for procurement/manufacture of the export goods. In the meanwhile, you should proceed to enter into a formal export contract with the overseas buyer.

Before accepting any order necessary homework should have been done as to availability of the production capacity, raw material e.t.c. It would be in the interest of the exporter to look into entering into forward contract to safeguard against exchange rate fluctuations. Ensure that the mode of payment is also agreed upon. In case of shipment against letter of credit, the buyer should be advised to open the credit well in advance before effecting the shipment.

EXPORT DOCUMENTS

Any export shipment involved various documents required by various authorities such as customs, excise, RBI, Inspection and according depending upon the requirements, there are categorized into 2 categories, namely commercial documents and regulatory documents.

A. Commercial Documents. : - Commercial documents are required for effecting physical transfer of goods and their title from the exporter to the

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importer and the realisation of export sale proceeds. Out of the 16 commercial documents in the export documentation framework as many as 14 have been standardised and aligned to one another. These are proforma invoice, commercial invoice, packing list, shipping instructions, intimation for inspection, certificate, of inspection of quality control, insurance declaration, certificate' of insurance, mate's receipt, bill of lading or combined transport document, application for certificate origin, certificate of origin, shipment advice and letter to the bank for collection or negotiation of documents. However, shipping order and bill of exchange could not be brought within the fold of the Aligned Documentation System.

1. Commercial Invoice: Commercial invoice is an important and basic export document. It is also known as a 'Document of Contents' as it contains all the information required for the preparation of other documents. It is actually a seller's bill of merchandise. It is prepared by the exporter after the execution of export order giving details about the goods shipped. It is essential that the invoice is prepared in the name of the buyer or the consignee mentioned in the letter of credit. It is a prima facie evidence of the contract of sale or purchase and therefore, must be prepared strictly in accordance with the contract of sale.

Contents of Commercial Invoice

Name and address of the exporter. Name and address of the consignee. Name and the number of Vessel or Flight. Name of the port of loading. Name of the port of discharge and final destination. Invoice number and date. Exporter's reference number. Buyer's reference number and date. Name of the country of origin of goods. Name of the country of final destination. Terms of delivery and payment. Marks and container number.

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Number and packing description. Description of goods giving details of quantity, rate and

total amount in terms of internationally accepted price quotation.

Signature of the exporter with date.

Significance of Commercial Invoice

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

It is used in various export formalities such as quality and pre-Shipment inspection excise and customs procedures etc.

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

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

2. Inspection Certificate: The certificate is issued by the inspection authority such as the export inspection agency. This certificate states that the goods have been inspected before shipment, and that they confirm to accepted quality standards.

3. Marine insurance policy: Goods in transit are subject to risk of loss of goods arising due to fire on ship, perils of sea, theft etc. marine insurance protects losses incidental to voyages and in land transportation. Marine insurance policy is one of the most important document used as collateral security because it protects the interest of all those who have insurable interest at the time of loss. The exporter is bound to insure the goods in case of CIF quotation, but he can also insure the goods in case of FOB contract, at

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the request of the importer, but the premium payment will be made by the exporter. There are different types of policies such as

Specific Policy: This policy is taken to cover different risks for a single shipment. For a regular exporter, this policy is not advisable as he will have to take a separate policy every time a shipment is made, so this policy is taken when exports are in frequent. Floating Policy: This is taken to cover all shipments for some months. There is no time limit, but there is a limit on the value of goods and once this value is crossed by several shipments, then it has to be renewed. Open Policy: This policy remains in force until cancelled by either party i.e. insurance company or the exporter. Open Cover Policy: This policy is generally issued for 12 months period, for all shipments to one or more destinations. The open cover may specify the maximum value of consignment that may be sent per ship and if the value exceeded, the insurance company must be informed by the exporter. Insurance Premium: Differs upon product to product and a number of such other factors, such as, distance of voyage, type and condition of packing, etc. Premium for air consignments are lowered as compared to consignments by sea.

4. Consular Invoice: Consular invoice is a document required mainly by the Latin American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This invoice is the most important document, which needs to be submitted for certification to the Embassy of the importing country concerned. The main purpose of the consular invoice is to enable the authorities of the importing country to collect accurate information about the volume, value, quality, grade, source, etc., of the goods imported for the purpose of assessing import duties and also for statistical purposes. In order to obtain consular invoice, the exporter is

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required to submit three copies of invoice to the Consulate of the importing country concerned. The Consulate of the importing country certifies them in return for fees. One copy of the invoice is given to the exporter while the other two are dispatched to the customs office of the importer's country for the calculation of the import duty. The exporter negotiates a copy of the consular invoice to the importer along with other shipping documents.

Significance of Consular Invoice for the Exporter

It facilitates quick clearance of goods from the customs in

exporter's as well as importer's country.

Certification' of goods by the Consulate of the importing

country indicarer that the importer has fulfilled all

procedural and licensing formalities for import of goods.

It also assures the exporter of the payment from the

importing country.

Significance of Consular Invoice for the Importer

It facilitates quick clearance of goods from the customs at the port destination and therefore, the importer gets quick delivery of goods.

The importer is assured that the goods imported are not banned for imported in his country.

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Significance of Consular Invoice for the Customs Office

It makes the task of the customs authorities easy.

It facilitates quick calculation of duties as the value of

goods as determine by the Consulate is considered for

the purpose.

5. Certificate of Origin: The importers in several countries require a certificate of origin without which clearance to import is refused. The certificate of origin states that the goods exported are originally manufactured in the country whose name is mentioned in the certificate. Certificate of origin is required when:-

The goods produced in a particular country are subject to’ preferential tariff rates in the foreign market at the time importation.

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

Contents of Certificate of Origin

Name and logo of chamber of commerce.

Name and address of the exporter.

Name and address of the consignee.

Name and the number of Vessel of Flight

Name of the port of loading.

Name of the port of discharge and place of delivery.

Marks and container number.

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Packing and container description.

Total number of containers and packages.

Description of goods in terms of quantity.

Signature and initials of the concerned officer of the issuing

authority.

Seal of the issuing authority.

Significance of the Certificate of Origin

Certificate of origin is required for availing of concessions

under Generalised System of Preferences (GSP) as well as

under Commonwealth Preferences (CWP).

It is to be submitted to the customs for the assessment of

duty clearance of goods with concessional duty.

It is required when the goods produced in a particular

country are banned for import in the foreign market.

It helps the buyer in adhering to the import regulations of

the country.

Sometimes, in order to ensures that goods bought from

some other country have not been reshipped by a seller,

a certificate of origin IS required.

6. Bill of Lading: The bill of lading is a document issued by the shipping company or its agent acknowledging the receipt of goods on board the vessel, and undertaking to deliver the goods in the like order and condition as received, to the consignee or his order, provided the freight and other charges as specified in the bill have been duly paid. It is also a

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document of title to the goods and as such, is freely transferable by endorsement and delivery.

Bill of Lading serves three main purposes:

As a document of title to the goods;

As a receipt from the shipping company; and

As a contract for the transportation of goods.

Types of Bill of Lading

Clean Bill of Lading: - A bill of lading acknowledging

receipt of the goods apparently in good order and

condition and without any qualification is termed as a

clean bill of lading.

Claused Bill of Lading: - A bill of lading qualified with

certain adversere marks such as, "goods insufficiently

packed in accordance with the Carriage of Goods by Sea

Act," is termed as a claused bill of lading.

Transhipment or Through Bill of Lading: - When the

carrier uses other transport facilities, such as rail, road, or

another steamship company in addition to his own, the

carrier issues a through or transhipment bill of lading.

Stale Bill of Lading: - A bill of lading that has been held

too long before it is passed on to a bank for negotiation

or to the consignee is called a stale bill of lading.

Freight Paid Bill of Lading: - When freight is paid at

the time of shipment or in advance, the bill of landing is

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marked, freight paid. Such bill of lading is known as

freight bill of lading.

Freight Collect Bill of lading :- When the freight is not

paid and is to be collected from the consignee on the

arrival of the goods, the bill of lading is marked, freight

collect and is known as freight collect bill of lading.

Contents of Bill of Lading

Name and logo of the shipping line.

Name and address of the shipper.

Name and the number of vessel.

Name of the port of loading.

Name of the port of discharge and place of delivery.

Marks and container number.

Packing and container description.

Total number of containers and packages,

Description of goods in terms of quantity.

Container status and seal number.

Gross weight in kg. and volume in terms of cubic meters.

Amount of freight paid or payable.

Shipping bill number and date.

Significance of Bill of Lading for Exporters

It is a contract between the shipper and the shipping

company for carriage of the goods to the port of

destination.

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It is an acknowledgement indicating that the goods

mentioned in the document have been received on board

for the Purpose of shipment.

A clean bill of lading certifies that the goods received on

board the ship are in order and good condition.

It is useful for claiming incentives offered by the

government to exporters

The exporter can claim damages from the shipping

company if the goods are lost or damaged after the issue

of a clean bill of lading.

Significance of Bill of Lading for Importers

It acts as a document of title to goods, which is transferable endorsement and delivery.

The exporter sends the bill of lading to the bank of the importer so as to enable him to take the delivery of goods.

The exporter can give an advance intimation to the foreign buyer about the shipment of goods by sending him a non-negotiable copy of bill of lading.

Significance of Bill of Lading for Shipping Company

It is useful to the shipping company for collection of transport charges from the importer, if not collected from the exporter. Shipment Advice to Importer:- After the shipment of goods, the exporter intimates the importer about the shipment of goods giving him details about the date of shipment, the name of the vessel, the destination, etc. He should also send one copy of non-negotiable bill of lading to the importer.

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7. Packing List: The exporter prepares the packing

list to facilitate the buyer to check the shipment. It contains the detailed description of the goods packed in each case, their gross and net weight, etc. The difference between a packing note and a packing list is that the packing note contains the particulars of the contents of an individual pack, while the packing list is a consolidated statement of the contents of a number of cases or packs.

8. Bill of Exchange: The instrument is used in

receiving payment from the importer. The importer may prefer Bill of Exchange to LC as it does not involve blocking of funds. A bill of exchange is drawn by the exporter on the importer, to make payment on demand at sight or after a certain period of time.

B/E is a means to collect payment.

B/E is a means to demand payment.

B/E is a means to extent the credit.

B/E is a means to promise the payment.

B/E is an official acknowledgement of receipt of payment.

Financial documents perform the function of obtaining the

finance collection of payment etc.

2 sets. Each one bearing the exclusion clause making the

other part of the draft invalid.

Sight B/E.

Usance B/E.

It is known as draft.

Immediate payment – Sight draft.

There are two copies of draft. Each one bears reference to

the other part A&B. when any one of the draft is paid, the

second draft becomes null and void.

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Parties to bill of exchange.

1. The drawer: The exporter / person who draws the bill.

2. The drawee: The importer / person on whom the bill is

drawn for payment.

3. The payee: The person to whom payment is made,

generally, the exporter / supplier of the goods.

B. Auxiliary Documents: These

documents generally form the basic documents based on which the commercial and or regulatory documents are prepared. These documents also do not have any fixed formats and the number of such documents will wary according to individual requirements.

1. Proforma Invoice: The starting point of the

export contract is in the form of offer made by the exporter to the foreign customer. The offer made by the exporter is in the form of a proforma invoice. It is a quotation given as a reply to an inquiry. It normally forms the basis of all trade transactions.

Contents of Proforma Invoice

Name and address of the exporter.

Name and address of the importer.

Mode of transportation, such as Sea or Air or Multimodal

transport.

Name of the port of loading.

Name of the port of discharge and final destination.

Provisional invoice number and date.

Exporter's reference number.

Buyer's reference number and date.

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Name of the country of origin of goods.

Name of the country of final destination.

Marks and container number. .

Number and packing description.

Description of goods giving details of quantity, rate and

total amount in terms of internationally accepted price

quotation.

Signature of the exporter with date.

Intimation for Inspection: Whenever the consignment requires the pre-shipment inspection, necessary application is to be made to the concerned inspection agency for conducting the inspection and issue of certificate thereof.

2. Declaration of Insurance: Where the

contract terms require that the insurance to be covered by the exporter, the shipper has to give details of the shipment to the insurance company for necessary insurance cover. The detailed declaration will cover:

Name of the shipper \ exporter.

Name & address of buyer.

Details of goods such as packages, quantity, value in

foreign currency as well as in Indian Rs. Etc.

Name of the Vessel \ Aircraft.

Value for which insurance to be covered.

3. Application of the Certificate Origin: In case the exporter has to obtain Certificate of Origin from the concerned authorities, an application has to be made to the concerned authority with required documents. While the

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simple invoice copy will do for getting C\O from the chamber of commerce, in respect of obtained the same from the office of the Textile Committee or Export Promotion Council, the documents requirement are different.

4. Mate's Receipt: Mate's receipt is a receipt issued by the Commanding Officer of the ship when the cargo is loaded on the ship. The mate's receipt is a prima facie evidence that goods are loaded in the vessel. The mate's receipt is first handed over to the Port Trust Authorities. After making payment of all port dues, the exporter or his agent collects the mate's receipt from the Port Trust Authorities. The mate's receipt is freely transferable. It must be handed over to the shipping company in order to get the bill of lading. Bill of lading is prepared on the basis of the mate's receipt.

Types of Mate's Receipts

Clean Mate's Receipt: - The Commanding Officer of the

ship issues a clean mate's receipt, if he is satisfied that

the goods are packed properly and there is no defect in

the packing of the cargo or package.

Qualified Mate's Receipt: - The Commanding Officer of

the ship issues qualified mate's receipt, when the goods

are not packed properly and the shipping company does

not take any responsibility of damage. to the goods

during transit.

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Contents of Mate's Receipt

Name and logo of the shipping line.

Name and address of the shipper.

Name and the number of vessel.

Name of the port of loading.

Name of the port of discharge and place of delivery.

Marks and container number.

Packing and container description.

Total number of containers and packages.

Description of goods in terms of quantity.

Container status and seal number.

Gross weight in kg. and volume in terms of cubic meters.

Shipping bill number and date.

Signature and initials of the Chief Officer.

Significance of Mate's Receipt

It is an acknowledgement of goods received for export on

board the ship.

It is a transferable document. It must be handed over to

the shipping company in order to get the bill of lading.

Bill of lading, which is the title of goods, is prepared on

the basis of the mate's receipt.

It enables the exporter to clear port trust dues to the Port

Trust Author

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Obtaining Mate's Receipt

The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mate's Receipt to the Port Superintendent.

5. Shipping order: it is issued by the

Shipping/Conference Line intimating the exporter about the reservation of space for shipment of cargo which the exporter intends to ship. Details of the vessel, poet of the shipment, and the date on which the goods are to be shipped are mentioned. This order enables the exporter to make necessary arrangements for customs clearance and loading of the goods.

6. Shipping Instructions: at the pre-

shipment stage, when the documents are to sent to the CHA for customs clearance, necessary instructions are to be give with relevance to

The export promotion scheme under which goods are to be

exported.

Name of the specific vessel on which the goods are to be

loaded.

If goods are to be FCL or LCL.

If freight amount are to be paid / collected.

If shipment are covered under A.R.E.-1 procedure.

Instructions for obtaining Bill of Lading etc.

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7. Bank letter for negotiation of documents: at the post shipment stage, the exporter

has to submit the documents to a bank for negotiation or discounting or collection for forwarding the same to the customer and also for realization of export proceeds. The bank letter is the set of instruction for the bank as to how to handle the documents by them and by the bank at the buyer’s country which may include

Name and address of the buyer.

Details of various documents being sent and the number

of the copies thereof.

Name and address of the buyer’s bank if available.

If the documents are sent L/C or on open terms.

If the proceeds are to adjusted against any pre-shipment

packing credit loan.

If the bill amount is to be adjusted against any forward

exchange cover.

In case of credit bill who has to bear the interest, either

exporter or if the same is to be collected from the buyer.

Instructions in case non-acceptance/non-payment by the

buyer.

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C. Regulatory Document: Regulatory

pre-shipment export documents are prescribed by the different government departments and bodies in order to comply with various rules and regulations under the relevant laws governing export trade such as export inspection, foreign exchange regulation, export trade control, customs, etc. Out of 9 regulatory documents four have been standardised and aligned. These are

shipping bill or bill of export, exchange control declaration (GR from), export application dock challan or port trust copy of shipping bill and receipt for payment of port charges.

1. Shipping Bill: Shipping bill is the main customs document, required by the customs authorities for granting permission for the shipment of goods. The cargo is moved inside the dock area only after the shipping bill is duly stamped, i.e. certified by the customs. Shipping bill is normally prepared in five copies :-

Customs copy.

Drawback copy.

Export promotion copy.

Port trust copy.

Exporter's copy.

Types of Shipping Bill

Based on the incentives offered by the government, customs authorities have introduced three types of shipping bills:-

Drawback Shipping Bill: - Drawback shipping bill is useful for claiming the customs drawback against goods

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exported. Dutiable Shipping Bill: - Dutiable shipping bill is

required for goods which are subject to export duty. Duty-free Shipping Bill: - Duty-free shipping bill is

useful for exporting goods on which there is no export duty.

In order to facilitate easy recognition and quick processing, following colours have been provided to different kinds of shipping bills :

Types of goods By Sea By AirDrawback shipping bill

Green Green

Dutiable shipping bill

Yellow Pink

Duty-Free shipping bill

White Pink

Contents of Shipping Bill

Name and address of the exporter.

Name and address of the importer.

Name of the vessel, master or agents and flag.

Name of the port at which goods are to be discharged.

Country of final destination.

Details about packages, description of goods, marks and

numbers, quantity and details of each case.

FOB price and real value of goods as defined in the Sea

Customs Act.69

Whether Indian or foreign merchandise to be re-exported

Total number of packages with total weight and value.

2. A.R.E. 1 form (Central excise): this

form ARE-1 is prescribed under Central Excise rules for export

of goods. In case goods meant for export are cleared directly

from the premises of a manufacturer, the exporter can avail

the facility of exemption from payment of terminal excise

duty. The goods may be cleared for export either under claim

for rebate of duty paid or under bond without payment of duty.

In both the events the goods are to be cleared under form

A.R.E-1 which will show the details of the goods being

exported, the relevant duty involved and if the duty is paid or

goods being cleared under bond, details of goods being sealed

either by the exporter or Central Excise officials etc.

3. Exchange Control declaration

Form (GR/PP/SOFTEX): under the exchange

control regulations all exporters must declare the details of

shipment for monitoring by the Reserve Bank of India. For this

purpose, RBI has prescribed different forms for different types

of shipments like GRI, PP forms etc. These declaration forms

must be presented to the customs officials at the time of

passing of export documentation. Under the EDI processing of

shipping bill in the customs, these forms have been dispensed

with and a new form SDF has to be submitted to the customs

in the place of above forms.70

4. Export Application: this is the application

to be made to the customs officials before shipment of goods.

The prescribed form of the application is the Shipping Bill/Bill

of Export. Different types are required for shipment like ex-

bond, duty free goods, and dutiable goods and for export

under different export promotion schemes such as claims for

duty drawback etc.

5. Vehicle Ticket/Gate Pass etc: before the goods are being taken inside the port for loading,

necessary permission has to be obtained for moving the

vehicle into the customs area. This permission is granted by

the Port Trust Authority. This document will contain the detail

of the export cargo, name and address of the shippers, lorry

number, marks and number of the packages, driver’s licence

details etc.

6. Bank Certificate of Realisation: this is the form prescribed under the Foreign Trade Policy,

wherein the negotiating bank declares the fob value of exports

and for the date of realisation of the export proceeds. This

certificate is required fore obtaining the benefit under various

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schemes and this value of fob is reckoned as fob value of

exports.

D. Other Document:

1. Black List Certificate: it certifies that the

ship/aircraft carrying the cargo has not touched the particular

country on its journey or that the goods are not from the

particular country. This is required by certain nations who

have strained political and economical relations with the so

called “Black Listed Countries”.

2. Language Certificate: Importers in the

European Community require a language certificate along with

the GSP certificate in respect of handloom cotton fabrics 72

classifiable under NAMEX code 55.09. Generally four copies of

language certificate are prepared by the concerned authority

who issues GSP certificate. Three copies are handed over to

the exporter. A copy is sent along with the other documents

for realisation of export proceeds.

3. Freight Payment Certificate: in most of

the cases, the B/L or AWB will mention the transportation and

other related charges. However if the exporter does not want

these details to be disclosed to the buyer, the shipping

company may issue a separate certificate for payment of the

freight charges instead of declaring on the main transport

documents. This document showing the freight payment is

called the freight certificate.

4. Insurance Premium Certificate: this is the certificate issued by the Insurance Company as

acknowledgement of the amount of premium paid for the

insurance cover. This certificate is required by the bank for

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

bank certificate of realisation.

5. Combined Certificate of Origin and Value: this certificate is required bythe Commonwealth Countries. This certificate is printed in a special way by the Commonwealth Countries. This certificate should contain special details as to the origin and value of goods, which are useful for determining import duty. All other details are generally the same as that of Commercial Invoice,

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such as name of the exporter and the importer, quality and quantity of the goods etc.

6. Customs Invoice: this is required by the

countries like Canada, USA for imposing preferential tariff

rates.

7. Legalized Invoice: this is required by the

certain Latin American Countries like Mexico. It is just like

consular invoice, which requires certification from Consulate or

authorised mission, stationed in the exporter’s country.

Pre-Shipment Documents:

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Shipping bill.

Export order/Sales contract/Purchase order.

Letter of Credit

Commercial invoice.

Packing list.

Certificate of origin.

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

Certificate of Inspection.

Various declarations required as per custom procedure.

Exchange Control Declaration Form: all

exports to which the requirement of declaration apply must be declared on appropriate forms as indicated below unless the consignment is of samples and of ‘No Commercial Value’

GR FORM: to be completed in duplicate for exports

otherwise than by post including export of software in

physical form i.e. magnetic tape/discs and paper media.

SDF FORM: to be completed in duplicate and appended

to the Shipping Bill for export declare to the customs

offices notified by the Central Government which have

introduced EDI system for processing Shipping Bill.

PP FORM: to be completed in duplicate for export by

post.

SOFTX: to be completed in triplicate for export of

software otherwise than in the physical form i.e.

magnetic tapes/discs and paper media.

Export declaration forms have utmost importance and are binding on the exporters. It is, therefore, necessary that enough care is taken while declaring exports on these forms, with special reference on the following points.

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Name and address of the authorised dealer through

whom proceeds of exports have been or will be realized

should be specified in the relevant column of the form.

Details of commission and discount due to foreign agent

or buyer should be correctly declared otherwise

difficulties may arise at the time of remittance of such

commission.

It should be clearly indicated in the form whether the

export is on ‘outright sale basis’ or ‘on consignment

basis’ and irrelevant clauses must be stuck out

Under the term ‘analysis of full export value’ a break up

of full export value of goods under F.O.B value, freight

and insurance should be furnished in all cases,

irrespective of the terms of contract.

All documents relating to the export of goods from India

must pass through the medium of an authorised dealer in

foreign exchange in India within 21 days of shipment.

The amount representing the full export value of goods

must be realized within six months from date of

shipment.

Disposal of Copies of Export Documentation Form

GR forms covering export of goods other than jewellery should be completed by the exporter in duplicate and both the copies should be submitted to customs at the port of Shipment. Customs will give their running serial number on both the copies of the GR forms after verifying the particulars and

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admitting the corresponding shipping bill. The value declared by the exporter will also be verified by the customs and they will also record the assessed value. Duplicate copy will be returned to the exporter and the original will be remained by the customs for onward submission to the Reserve Bank. Duplicate form of the GR form will again be presented to the customs at the time of actual shipment. After examination of goods and certifying the quantity passed for shipment the duplicate copy will again be returned to exporter for submission to an authorised dealer. However, an exception to submission of GR forms to the Customs authorities have been made in case of deep sea fishing.

(a) PP forms are to be first presented to an authorised dealer for countersignature. The form will be countersigned by the authorised dealer only if the post parcel is addressed to his branch or correspondent bank in the country or import. The concerned overseas branch or correspondent is to be instructed to deliver the post parcel against payment or acceptance of relevant bill, as the case may be.

For post parcel addressed directly to the consignee, the authorised dealer will countersign the form, provided —

(i)an irrevocable letter of credit for the full value of export

has been opened in favour of exporter and has been

advised through authorised dealer concerned; or

(ii) the full value of shipment has been received in

advance by the exporter through an authorised dealer; or

(iii) On receipt of full value of shipment declared on

this form the authorised dealer will forward to RBI the

duplicate copy along with the certified copy of shipper’s

invoice.

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(iv) The authorised is satisfied on the basis of

standing and track record of the exporter and

arrangements made for realisation of the export proceed

that he cold do so. If the authorised dealer is not satisfied

about standing etc. of the exporter, the application is

rejected. No reference is entertained by the Reserve Bank

in such cases.

(b) The original PP form countersignature will be returned to the exporter by the authorised dealer and the duplicate will be retained by him. Original PP form should then be submitted to the post office along with the parcel. The post office through the goods have been dispatched will forward the original to RBI.

The export of computer software may be undertaken in physical form i.e. software prepared on magnetic tape and paper media as well as in non-physical form by direct data transmission through dedicated earth stations/satellite links. The export of computer software in physical form is subject to normal declaration on GR/PP form and regulations applicable there to will also be applicable to such exports. However, export of non-physical form should be declared on SOFTEX Form. Besides computer software, export of video / T.V. Software and all other types of software products / packages should also be declared on the SOFTEX forms. Since export of software is fraught with many risks and special guidelines have been framed for handling such exports.

MARINE INSURANCE POLICY

Goods in transit are subject to risks of loss of goods arising

due to fire on the ship, perils of sea, thefts etc. Marine

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insurance protects losses incidental to voyages and in land

transportation.

Marine Insurance Policy is one of the most important

document used as collateral security because it protects the

interest of all those who have insurable interest at the time of

loss. The exporter is bound to insure the goods in case of CIF

quotation, but he can also insure the goods in case of FOB

contract, at the request of the importer, but the premium

payment will be made by the exporter.

There are different types of policies such as

Specific Policy: This policy is taken to cover different risks for a single shipment. For a regular exporter, this policy is not advisable as he will have to take a separate policy every time the shipment is made, so this policy is taken when exports are infrequent.

Floating Policy: This policy is taken to cover all shipments for same months. There is no time limit, but there is a limit on the value of goods and once this value is crossed by several shipments, then it has to be renewed.

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

Open Cover Policy: This policy is generally issued for 12 months period, for all shipments to one or all destinations. The open cover may specify the maximum value of consignment that may be sent pre ship and if the value exceeded, the insurance company must be informed by the exporter.

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Insurance Premium: Differs upon from product to product and a number of other such factors, such as, distance of voyage, type and condition of packing etc. Premium for air consignments are lower as compared to consignments by sea.

QUALITY CONTROL AND PRE-SHIPMENT INSPECTION

Realizing the importance of the need for supplying quality

goods as per international standards, the Government of India has introduced Compulsory Quality Control and Pre-Shipment Inspection of over 1050 items of export under Export (Quality Control and Pre-Shipment Inspection) Act 1963.

At present, the export items that are subjected to compulsory inspection includes food and agricultural products, chemicals, engineering, coir, jute and footwear.

Systems of Quality Control:

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

Self-Certification

In-Process Quality Control

Consignment Wise Inspection

Self-Certification:

Under this system, complete authority is given to the manufacturing units to certify their own products and issue certificates for export. The manufacturing units which have been recognized under this scheme have to pay a nominal yearly fee at the rate of 0.1% of FOB price subject to minimum

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of Rs.2,500/- and maximum of Rs.1 lakh in a year to the concerned EIA

In-Process Quality Control (IPQC):

In this system, companies/units adjusted as having adequate level of quality control right from raw material stage to the finished product stage including packaging are eligible to get the inspection certificate on a formal request by the exporter. Over 800 units all over India are operating under this system.

Constant vigil and surveillance are kept on units approved under IPQC and self-certification system. Units approved under the above two systems are often known as “Export worth Units”, because of their consistent standards of quality.

Consignment wise Inspection:

Under this system, each and every consignment is subject to compulsory inspection. The exporter has to follow a certain procedure such as:

He has to make an application to Export Inspection

Agency with certain documents.

The EIA deputes inspector to inspect the goods

After the inspection, the goods are repacked with EIA seal

The inspector then makes a report to Deputy Director of

EIA

The Dy. Director of EIA then issues Inspection Certificate

in triplicate if the inspection report is favorable

If the inspection report is not favorable, a rejection note is

issued.

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It is to be noted that goods marked with

ISI/AGMARK/BIS14000/ISO 9000 are not required to be

inspected by any agency

Overseas buyer may depute his own inspection team to

inspect the goods

SHIPPING AND CUSTOMS FORMALITIES

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

The shipment of export cargo has to be made with prior permission of, and under the close supervision of the custom authorities. The goods cannot be loaded on board the ship unless a formal permission is obtained from the custom authorities. The custom authorities grant this permission only when it is being satisfied that the goods being exported are of the same type and value as have been declared by the

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exporter or his C&F agent, and that the duty has been properly determined and paid, if any.

The custom procedure can be briefly explained as follows:

Submission of Documents: The exporter or his agent submits the necessary documents along with the shipping bill to the Custom House. The documents include:

o ARE-1 (Original and duplicate)

o Excise gate pass (Original and duplicate transporters’

copy

o Proforma Invoice

o Packing List

o GRI form (Original and duplicate)

o Customs Invoice (where required in the importing

country)

o Original letter of credit/contract

o Declaration form in triplicate

o Quality Certificate

o Purchase memo

o Labels

o Licence (if any required) including advance licence copy

o Railway receipt/lorry way bill

o Inspection Certificate by Export Inspection Agency.

Verification of Documents: The Customs Appraiser verifies the documents and appraises the value of goods. He then makes an endorsement of “Examination Order” on the duplicate copy of shipping bill regarding the extent of physical examination of the goods at the docks. All

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documents are returned back to the agent or exporter, except

o Original Copy of GR to be forwarded to RBI

o Original copy of shipping bill

o One copy of commercial invoice

Carting Order: The exporter’s agent has to obtain the carting order from the Port Trust Authorities. Carting Order is the permission to bring the goods inside the docks. The carting order is issued by the superintendent of Port Trust. Carting Order is issued only after verifying the endorsement on the duplicate copy of shipping bill. The Carting Order enables the exporter’s agent to cart goods inside the docks and store them in proper sheds.

Storing the Goods in the Sheds: After securing the carting order, the goods are moved inside the docks. The goods are then stored in the sheds at the docks.

Examination of Goods: The exporter’s agent then approaches the customs examiner to examine the goods. The customs examiner examines the cargo and records his report on the duplicate copy of the shipping bill. The customs examiner then sings the “Let Export Order”

Let Export Order: The Let Export Order is then shown to the Customs Preventive Officer, along with other documents. The CPO is in charge of supervision of loading operations on the vessel. If CPO finds everything in order, he endorses the duplicate copy of shipping bill with the “Let Ship Order” This order helps the exporter/shipper to load the goods on the ship.

Loading Goods: The goods are then loaded on the ship. The CPO supervises the loading operations. After loading is completed, the Chief Mate (Cargo Officer) of the ship issues the “Mate’s Receipt”. The Mate’s Receipt is sent to the Port Trust Office. The C&F agent pays the port trust dues and collects the mate’s receipt. The C&F agent

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then approaches the CPO and gets the certification of shipment of goods on AR Forms and other documents

Obtaining Bill of Lading: The Mate’s Receipt is then handed over to the shipping company (on whose vessel the goods are loaded). The shipping company issues bill of lading. The Bill of Lading is issued in:

o 3 negotiable copies of Bill of Ladingo 10 to 12 Non-negotiable copies of Bill of Lading.

The negotiable copies have title to goods; whereas non-negotiable copies do not have title to goods but are used for record purpose.

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PROCEDURE OF EXCISE CLEARANCE:

The common procedure of excise clearance under “bond” and

under “rebate” is discussed as follows:

Preparing of Invoice: The export goods have

to be cleared from the factory under invoice. The invoice

contains details like name of the exporter, value of

goods, excise duty chargeable, etc. The invoice is to be

prepared in triplicate. In case of export under Bond, the

invoice should be marked as “For Export without

payment of duty”. In addition to the invoice, a

prescribed for ARE 1 has to be filed in by exporter.

Filling up of ARE-1 form: The ARE-1 form

needs to be filled in four copies. A fifth (Optional) may be

filled in by the exporter, which can be used at the time of

claiming other export incentives. The ARE-1 copies have

distinct color for the purpose of verification and

processing.

Application to Assistant

Commissioner of Central Excise

(ACCE): The exporter has to make an application to

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ACCE regarding the removal of goods from the

factory/warehouse for export purpose.

Information to Range

Superintendent of Central Excise

(RSCE): The ACCE will inform the RSCE under whose

jurisdiction the goods are intended to be cleared for

export.

Deputation of Inspector: The RSCE will

then depute an inspector to clear the goods, either at the

factory or warehouse, or in certain cases at the port.

Processing of ARE-1 Form: The Excise

Officer/Inspector will make endorsement on all copies of

ARE-1. The handling of ARE-1 Form is done as follows:

o The inspector returns the original and duplicate copies to

the exporter

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

Commissioner (MCCE) to whom bond was executed or

letter of undertaking (LUT) was given. This copy can also

be handed over to the exporter in a tamper proof sealed

cover to be submitted to ACCE/MCCE.

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

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

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

(optional) will be submitted to customs officer. The

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customs officer will examine these copies and then

export will be allowed.

o The customs officer will then make endorsement of

export on all copies of ARE-1. He will cite shipping bill

number and date and other particulars of export on ARE-

1.

The original copy and quintuplicate (optional) will be

returned to the exporter. The duplicate copy will be sent

directly to the ACCE\MCCE i.e. excise officer with whom

bond was executed will get 2 copies, one from RSCE (or

excise inspector) when goods are cleared from factory

and other Custom Officer after export. This will enable

him to keep track to ensure that all goods cleared from

factory or warehouse without payment of duty are

actually exported. In case of export after payment of

duty, under claim of rebate, the basic procedure is same

as above, except that the triplicate copy (by excise

inspector) and duplicate copy(by customs officer)will be

sent to the officer to whom rebate claim is filed. If claim

of rebate is by electronic submission, these copies well be

sent to excise rebate audit section at the place of export.

Refund or Release of Bond: The exporter should make an application to the excise officer for refund or release of bond. The application must be supported by original copy of ARE-1 form. The excise officer crosschecks the

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original copy of ARE-1 form and the duplicate and triplicate copies of ARE-1 form, which he had received earlier. If the copies match, then refund is given or the bond is released.

FACTORY STUFFING OF CARGO

Clearance of goods to docks: If the goods meant for export

is of a small quantity which may not be sufficient to make one

full container, the cargo is said to be less than container load

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

the goods will be consolidated (combining the cargo of other

exporters to make up quantity for a full container) by the

agent and loaded into a container. Here the examination of the

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

depots approved by the customs where the goods can be

consolidated and stuffed into the container by the agent under

the supervision of the customs officer)

If the goods meant for export is of sufficient quantity to make

up a full container, the exporter has the option to take the

goods to the docks and get them examined and stuffed into a

separate container. An exporter gets the benefit on the freight

amount for a full container. (Generally called box rate)

Alternatively, he can have a container allotted to him and get

the same to his Mills Premises. The goods meant for exports

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can be stuffed into the container under the supervision of the

regional Central Excise Authority. Here the exporter has to

Obtain permission from the Customs for getting the

container to his mills premises for stuffing (House

Stuffing)

Inform the C.Excise Authorities at least 24 hours before

bringing the container for loading.

The C.Excise Authority will supervise the loading, seal the

container and certify the invoice as directed in the permission

given by the custom authorities. A special Lock is used to lock

the doors of the container. Samples from the goods will be

drawn, if necessary, as required under the customs

permission. Such samples will be sealed and forwarded along

with the container. The examiner in the docks may arrange to

send the sample for testing. Then the container is moved to

the dock for loading. Generally, such containerized goods are

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

directly taken for loading.

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PACKING CREDIT

Export Packing Credit are of 2 forms

1. Pre-shipment Credit (Packing Credit)

2. Post-Shipment Credit

These are available to the exporters, for financing purchase,

processing, manufacturing or packing of goods prior to

shipment.

This would mean any loan or advance extended to you by the

bank on the basis of:

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Letter of Credit opened in your favor or in favor of some

other person, by an overseas buyer;

a confirmed and irrevocable order for the export of goods

from India;

any other evidence of an order or export from India having

been placed on the exporter or some other person, unless

lodgment of export order or Letter of Credit with the bank has

been waived.

Packing Credit is granted for a period depending upon the

circumstances of the individual case, such as the time required

for procuring, manufacturing or processing (where necessary)

and shipping the relative goods. Packing credit is released in

one lump sum or in stages, as per the requirement for

executing the orders/LC.

The pre-shipment / packing credit granted has to be liquidated

out of the proceeds of the bill dawn for the exported

commodities, once the bill is purchased/discounted etc.,

thereby converting pre-shipment credit into post-shipment

credit.

Post Shipment Packing Credit

It runs from the date of extending credit, after shipment of

goods to the date of realization of export proceeds and

includes any loan / advance granted on the security of any

duty drawback allowed by the Govt. from time to time. Post-

shipment credit has to be liquidated by the proceeds of export

bills received from abroad in respect of goods exported. 92

The exporter has the following options at post-shipment stage:

i. to get export bills purchased /discounted / negotiated;

ii. To get advances against bills for collection;

iii. To receive advances against duty drawback receivable

from Govt.

The exporter has the option to avail of pre-shipment and post-

shipment credit either in rupee or in foreign currency.

However, if the pre-shipment credit has been availed in foreign

currency, the post-shipment credit has necessarily to be under

EBR Scheme since foreign currency pre-shipment credit has to

be liquidated in foreign currency. The details of pre-shipment

and post-shipment credit in foreign currency are mentioned

below.

METHODS OF RECEIVING PAYMENT AGAINST EXPORTS

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Before we proceed to understand the concept of Letter of Credit, let us understand the various types of payment methods available against export.

METHODS OF PAYMENT

There are three methods of payment depending upon the terms of payment, and each method of payment involves varying degrees of risks for the exporter. The methods are:

Payment in advance

Documentary Bills

Letter of Credit

A. PAYMENT IN ADVANCE

This method does not involve any risk of bad debts,

provided entire amount has been received in advance. At

times, a certain per cent is paid in advance, say 50% and

the rest on delivery. This method of payment is desirable

when:

The financial position of the buyer is weak or credit

worthiness of the buyer is not known.

The economic/ political conditions in the buyer’s country

are unstable.

The seller is not willing to assume credit risk, as un the

case of open account method.

However, this is the most unpopular methods as a foreign

buyer would not be willing to pay advance of shipment

unless:

The goods are specifically designed for the customer, and

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There is heavy demand for the goods (a seller’s market

situation).

B. DOCUMENTARY BILLS:

Under this method, the exporter agrees to submit the documents to his bank along with the bill of exchange. The minimum documents required are

full set of bill of lading

commercial Invoice

Marine Insurance policy and other document, if required.

There are two main types of documentary bills:

Documents against Payment,

Documents against Acceptance.

Documents against payment (D/P): The documents are released to the importer against payment. This method indicates that the payment is made against Sight Draft. Necessary arrangements will have to be made to store the goods, if a delay in payment occurs.

The risk involved that the importer may refuse to accept the documents and to pay against them. The reason for non-acceptance may be political or commercial ones. In India, ECGC covers losses arising out of such risks. Under this system, as compared to D/A, the exporter has certain advantages:

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The document remain in the hands of the bank and the

exporter does not lose possession or the ownership of

goods till payment is made,

Other reason may include that the exporter may not be

able to allow credit and wait for payment.

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

released against acceptance of the Time Draft i.e. credit

allowed for a certain period, say 90 days. However, the

exporter need not wait for payment till bill is met on due date,

as he can discount the bill with the negotiating bank and can

avail of funds immediately after shipment of goods.

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

much grater, as the importer has already taken possession of

goods which may or may not be in his custody on the maturity

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

exporter, will have to start civil proceedings to receive his

payment, if all other alternatives fails. The risk involved can be

insured with ECGC.

C. LETTER OF CREDIT (L/C):

This method of payment has become the most popular form in

recent times, it is more secured as company to other methods

of payment (other than advance payment).

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A letter of credit can be defined as “ an undertaking by

importer’s bank stating that payment will be made to the

exporter if the required documents are presented to the bank

within the variety of the L/C”.

THE LETTER OF CREDIT

Introduction

The cycle of a business transaction can be said to be complete prima facie when the buyer has received the product he desires to buy and the seller gets his payment in due consideration of the product supplied.

While the seller is keen to receive the payment for his supplies, the buyer is equally keen that he gets what he wants by the paying for the same.

Tough there are many merit and demerits in each of the different mode of payments we have discussed earlier, in

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relation either to the buyer or to the seller, we shall now deal in detail about the mode of payment under the Documentary Credit.

Generally, though exporters are complacent once they get the letter of Credit on hand feeling that their payment is secured, let me say it is as much a dubious instrument as is a safe instrument.

If one does not understand the implications of the terms and condition of a letter of credit, the provisions under UCP 500, how co-operative are the exporter’s bank and how good are the L/C opening bank and the reimbursement bank, he is sure to land in trouble at once stage or another.

There are ample cases of frauds under the Letter of Credit. More and more ingenious methods are adopted to circumvent the provisions of UPC 500 by fair or foul means. Hence, even the safety and security under the Letters of Credit may prove to be no better than a mirage for a man in the desert.

Hence, sufficient care is to be taken by the exporter to ensure that instrument is received in order and the conditions of the L/C can be well complied with, and there are no clauses of ambiguity.

What is a Documentary Credit?

To say in simple language, this is an Undertaking by a Bank associated with the buyer to make the payment for the supply

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of goods by a seller subject to compliance of various requirements that may be specified in the document of undertaking by the Bank. This document is known as Documentary Credit. A Documentary Credit is also called a Letter of Credit (L/C).

CONTENTS OF A LETTER OF CREDIT

A letter of credit is an important instrument in realizing the payment against exports. So, needless to mention that the letter of credit when established by the importer must contain all necessary details which should take care of the interest of Importer as well as Exporter. Let us see shat a letter of credit should contain in the interest of the exporter. This is only an illustrative list.

o Name and address of the bank establishing the letter of

credit

o letter of credit number and date

o The letter of credit is irrevocable

o Date of expiry and place of expiry

o Value of the credit

o Product details to be shipped

o Port of loading and discharge

o Mode of transport

o Final date of shipment

o Details of goods to be exported like description of the

product, quantity, unit rate, terms of shipment like CIF,

FOB etc.

o Type of packing

o Documents to be submitted to the bank upon shipment

o Tolerance level for both quantity and value

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o If L/C is restricted for negotiation

o Reimbursement clause

PROCEDURE INVOLVED IN THE LETTER OF CREDIT

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

o Exporter’s Request: The exporter requests the importer

to issue LC in his favor. LC is the most secured form of

payment in foreign trade.

o Importer’s Request to his Bank: The importer requests his

bank to open a L/C. He May either pay the amount of

credit in his current account with the bank.

o Issue of LC: The issuing bank issues the L/C and forwards

it to its correspondent bank with also request to inform

the beneficiary that the L/C has been opened. The issuing

bank may also request the advising bank to add its

confirmation to the L/C, if so required by the beneficiary.

o Receipt of LC: the exporter takes in his possession the

L/C. He should see it that the L/C is confirmed.

o Shipment of Goods: Then exporter supplies the goods and

presents the full set of documents along with the draft to

the negotiating bank.

o Scrutiny of Documents: The negotiating bank then

scrutinizes the documents and if they are in order makes

the payment to the exporter.

o Negotiation: The exporter’s bank negotiates the

document against the letter of credit and forwards the

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

instructions.

o Realization of payment: The issuing bank will reimburse

the amount (which is paid to the exporter) to the

negotiating bank.

o Document to Importer: the issuing in turn presents the

documents to the importer and debits his account for the

corresponding amount.

In order to have uniformity and to avoid disputes, the ICC Paris has evolved uniform customs and practices of documentary credit (UCPDC), in short known as UCP 500 effective from 1-1-96. These are rules have been adopted by more than 150 countries. They provide the comprehensive and practical working aid to banker, lawyer, importers, exporters, Exporters, transporters, executives involved in international trade.

Note: as soon as an L/C is received ensure that the same is authenticated. Meaning that the genuineness of the L/C is certified by the Advising Bank by an endorsement with the marking ‘AUTHENTICATED’ OR ELSE THE L/C IS OF NO USE.

Different Type of Documentary Credits.

There are various types of Documentary Credit opened by a

bank in favour of it’s customer depending upon the

requirement. Let us talk about few types of Documentary

Credit which are in common use.

Revocable / Irrevocable Documentary Credit :

Restricted/ Unrestricted Documentary Credit:

Confirmed/Unconfirmed Documentary Credit:

Transferable/Non-transferable Documentary Credit:

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Revolving Documentary Credit:

Assignable Documentary Credit

Stand by Letter of Credit:

Documentary Credit is generally common on open account trading where the seller may expect some security for getting his payment. This is not permitted in India.

Red Clause LC:

Green Clause LC:

Back LC:

Documentary LC: Most of the L\C is documentary L\C. Payment is being made by the bank against delivery of the full set of documents as laid down by the terms of credit. The important documents required to be submitted by the exporter under documentary LC includes the following:

o Bill of Lading /Airway Bill or any other transport document

o Commercial Invoice

o Insurance Policy

o Shipping Bill

o Certificate of Origin

o Combined Invoice and Certificate of Value and Origin

o GSP/CWP certificate

o Packing List

o Certificate of Quality Inspection

o Bill of Exchange

o Any other document if required.

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A letter of credit may call for some or most of the above documents and may also call for some other documents specific to the shipment.

Traveler’s LC: Traveler’s LC is issued to the person who intends to make a journey abroad. The correspondent/ agent of the bank honors all the cheques drawn on this credit by its holder up to the amount mentioned in LC. Traveler’s LC has more advantages as compared to traveler’s cheques. In case of cheque, the holder can withdraw up to the amount of the cheque. Again, he has to carry a number of cheque. In case of traveler’s LC, the holder can draw any amount up to the limit mentioned in the LC, and he need to carry only one paper of LC.

Types of Payments under a Documentary Credit

Payment under a documentary credit can be of the following

types:

Payment at Sight: In this mode, the payment is

made by the L/C opening bank or its nominated bank or

by a confirming bank on presentation of the documents in

full conformity with the L/C. The L/C may or may not call

for draft at sight for the full value of the documents.

Deferred Payment Scheme: In this case the payment is to be made at a future date as stipulated in the L/C. Here, generally NO draft is required as the due date of payment is defined in the L/C. In case of a confirmed L/C, the final payment is made by the confirmed bank on due date and by the issuing bank or its nominated bank if the L/C is not confirmed.

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Acceptance Credit : This type of credit

requires a usance draft to be drawn on a nominated or

accepting bank. The payment is made by the

nominated/accepting bank on the due date as per

instructions of the negotiating bank. In case of a

confirmed L/C the payment on due date is made by the

negotiating bank (confirming bank).

Negotiation Credit: Here the payment is made

by the negotiating bank upon negotiation of the

documents if it prepares to take the risk and will recourse

to the beneficiary. If the credit is confirmed, then the

negotiation bank is obliged to make the payment upon

submission of a clean document by the beneficiary.

Expect in the case of confirmed L/C there is always a time lag

between the date of negotiation of the document and the date

of receipt of the payment. This is a grey area. If the bank acts

swiftly and without prejudice, one gets payment within a

week’s time. If the payment is delayed beyond this time,

though an exporter has every right to ask for compensation, in

actual practice, no justice is done to the exporter for the

delayed payment. Very rarely, on persistent approach by the

exporter/their banker, does a defaulting bank comes forward

to compensate for the delayed payment. Generally the

exporter has to forego lot of money in correspondence through

the negotiating bank because every communication of the

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bank is charged to the exporter. It is no surprise many

exporter suffer this loss silently.

Feature of a Documentary Credit

A documentary credit is a document in writing issue by the bank on behalf of its customer (The Buyer). Documentary Credit must stipulate the Type of Credit as detailed above and inter alia will also stipulate the

Following details :

The name of the Bank issuing the Documentary Credit.

(The L/C Opening Bank)

The name and address of the buyer on whose behalf the

credit is Issued.(The Applicant)

The name and address of a bank in the country of the

seller the credit through Whom the L/C is to be advised to

the seller.

The name and address of the Seller (Beneficiary)

The Maximum Value the opening bank undertakes to pay

to the Beneficiary.

The date of issue of the credit.

The Expiry Date of the L/C

The Validity Date for shipment.

The Details of the product to be shipped.(Description)

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Details of document required for claiming the payment

from the Opening bank.

The name and address of the bank authorized to

negotiate the documents.

The Reimbursement Clause.

As soon as an L/C is received ensure that the L/C is authenticated. If the L/C received in mail the signatures are got to be verified by the advising bank. In case of telex/swift the bank should endorse on the document authenticated and then only the L/C is a valid document.

While the above details are the minimum that a Documentary Credit may have in actual practice there can be other stipulations mutually agreeable to the buyer, seller and the opening bank as also the negotiating bank.

AMENDMENTS TO THE CREDIT

On scrutiny of the letter of credit, if the exporter finds that some change are required to be made in the credit, he should immediately request the buyer to make necessary change in the letter of credit and the opening bank issued necessary amendment in this respect. Any oral and written agreement by the importer about change in the credit directly to the exporter should not be accepted as it is not valid under the credit. Any change must be advised by the importer through the opening bank only as a sort of amendment to the original credit.

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PARTIES TO LETTER OF CREDIT

Applicant: the buyer or importer of goods.

Issuing Bank: importer’s bank who issues the L/C.

Beneficiary: the party to whom the L/C is addressed. The

seller or supplier of goods.

Advising Bank: issuing bank’s branch or correspondent

bank in the exporter’s country to which the L/C is sent for

onward transmission to the beneficiary.

Confirming Bank: the bank in beneficiary’s country which

guarantees the credit on the request of the issuing bank.

(Many a times the advising bank and confirming bank are

one and the same).

Negotiation Bank: the bank to whom the beneficiary

present his documents for Payment u Under L/C.

Reimbursing Bank: the bank which will reimburse the

negotiating bank for the value of the credit.

Where an L/C stipulates that the Negotiation is restricted to a specific bank which is not the Advising Bank or Where the L/C is not restricted, and the seller desires to negotiate the document which is not the advising bank, then we have a separate Negotiating Bank.

Where the opening bank prefers to advise the L/C through its own branch in the beneficiary country or through another bank of its choice, then the L/C may be advised to the beneficiary directly by this bank or if it instructed to advise the L/C

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through the buyer’s nominated bank then it does so. Here, we have two advising bank.

As far as possible, one should restrict the involvement of the number of the banks to the minimum. More the number of the banks, more the time in the transmission of the L/C, in addition to multiplicity of bank charges.

TOTAL OPERATION UNDER THE LETTER OF CREDIT.

The Unconfirmed L/C.

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The Buyer makes an application to his bank to open an

L/C.

Opening bank establishes the L/C.

Opening bank advises the L/C through his associate or

through the bank. Nominated by the beneficiary.

The Bank in the beneficiary country which receives the

L/C sends the Original L/C to the customer either directly

or through the bank Specified in the L/C.

The buyer complies with the L/C requirements and

submits the relevant documents. To the bank for claiming

reimbursement.

The negotiating bank negotiates and sends the

documents to the opening bank or as Directed. Meantime

pays the beneficiary.

Advises the opening bank or the reimbursement bank the

details of his Accounts and the nominated bank where

the proceeds are to be credited.

Once the credit is received, the nominated bank advises

the negotiating bank of the credit. Thus the negotiating

bank gets the credit for the L/C documents.

The Confirmed L/C.

All the steps from 1to6 as far as the beneficiary are concerned

since the payment is made to the beneficiary without

recourse. However, the negotiating bank may have to follow

the subsequent steps since he has to receive his money from

the opening bank.

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PREPARATION AND SUBMISSION OF DOCUMENTS

FOR BANK NEGOTTIATIONDocument against exports should normally be realized through an authorized dealer foreign exchange. However payment of export can be received directly from the overseas buyer in the form of bank draft, pay order, banker’s cheque, personal cheque foreign currency notes, foreign currency traveler’s cheque, etc. Without any monetary limit provided the exporter’s track record is good, he is a customer of the authorized dealers through whom documents are to be negotiated and prima facie the instrument of payment represents export proceeds realization. Take care to submit various documents in a proper manner and within the prescribed time schedule. Apply to the Reserve Bank for extension of time in case you feel there is likely to be a delay in realizing export proceeds.

The following are the steps in realizing export proceeds:

Approaching a Bank: After dispatch of the goods, either by sea, or by air, the exporter should approach his bank (authorized dealer) with a formal request to realize sale proceeds from the foreign buyer. It is obligatory to submit the shipping documents to an authorized dealer within 21 days of the date of shipment (subject to certain exceptions). In India, the exporters have to realize the full value of exports within 180 days from the date of shipment, (unless the payment terms offered are “deferred payment terms”). Where it is not possible to realize the sale proceeds within

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the prescribed period, the exporter should apply for extension in prescribed form ETX (in duplicate) to RBI.

Submission of Documents to the Bank: The exporter should submit the following documentso Bill of Exchange

o Full set of Bill of Lading

o Commercial Invoice Copies

o Certificate of Origin

o Insurance Policy

o Inspection Certificate

o Packing List

o GR (duplicate copy to forward it to RBI)

o Bank Certificate

o Other relevant documents.

The above documents need to be submitted in two complete sets, because it is customary to dispatch two sets of documents, one after the other. This is because, if one set is misplaced or delayed in transit, the importer can get at least the other set and clear the goods.

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

o Whether the required documents are in order.o Whether the required documents are attested by customs

and other authorities.

Letter of Indemnity: If the exporter wants immediate payment from his bankers, then his bankers may provide advance payment only when the exporter signs an indemnity letter. The implications of an indemnity letter is

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that in the event of refusal of payment by the issuing bank in respect of LC, then the negotiating bank can ask the exporter to pay back the money advanced along with necessary charges.

Common Document Discrepancies

o Credit Expired

o Late shipment

o Presented after permitted time from date of issue of shipping documents

o Short Shipment

o Credit Amount Exceeded

o Underinsured

o Description of goods on invoice differ from that of credit

o Mark and numbers differ between documents

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

o Absence of Documents called for under credit.

o Insurance certificate submitted instead of policy.

o Weight in different document differs.

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

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

o Absence of signature, where required on documents.

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

o Bill of exchange drawn on wrong party.

o Insurance risks covered not being those specified in credit.

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

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

o Amount shown on invoice and bill of exchange differ.

o Shipment not make to port specified.

o Transshipment/part shipment undertaken where expressly forbidden.

Discounting of bills: the bank may discount or negotiate the bills drawn against LC, and make immediate payment to the exporter, if so required.

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Dispatch of documents: before the submission of documents for negotiation/collection, the bank examines them thoroughly with reference to the terms and conditions of the buyer’s order. Letter of credit and the laws relating to foreign exchange control. If any scrutiny, the documents are in order, the bank dispatches them to its overseas branch/correspondent branch as early as possible. The overseas branch of the bank then submits the document to the importer’s bank, and the importer’s bank hands it over to the importer.

FINANCIAL RISKS INVOLVED IN FOREIGN TRADE

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

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risks which you have to undergo are as follows:

Credit Risk Currency Risk Carriage Risk Country Risk

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

Credit Risks :

You can cover your credit risk against the foreign buyer by insisting upon opening a letter of credit in your favour. Alternatively one can avail of the facility offered by various credit risk agencies. A specific insurance cover can also be obtained from ECGC (Exports Credit & Guarantee Corporation) to cover your country risk besides covering credit risk.

Currency Risks:

As regards covering the currency risk, due to the exchange rate fluctuations, you can request your banker to book a forward contract.

Carriage Risk:

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

Country Risk:

ECGC provides cover to protect the exporter from country risks. A detailed procedure how an exporter can get himself protected against the above risks are given in separate chapters later.

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CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM

It is brought to the notice of all exporters, importers, CHAs, Trade and General Public that the computerized processing of Shipping Bills under the Indian Customs EDI (Electronic Data Interchange) System – (Exports), will commence w.e.f.1`5-09-2004. The computerized processing of shipping bills would be in respect of the following categories:

EPCG Shipping Bills DEPB Shipping Bills PROCESSING OF SHIPPING BILLS

The S/B shall be processed by the system on the basis of declaration made by the exporter. However, the following S/B shall require clearance of the Assistant Commissioner/Dy. Commissioner (AC/DC Exports):

Duty free S/B for FOB value above Rs.10 lakh Free Trade Sample S/B for FOB value above Rs.25,000 Drawback S/B where the drawback exceeds Rs. One lakh

Subject to the provisions of para 20.3 of this PN the following categories of S/Bills shall be processed buy the Appraiser (Export Assessment) first and then by the Asstt/Dy. Commissioner:

DEEC DEPB DFRC EOU

1. CUSTOMS EXAMINATION OF EXPORT CARGO

On receipt of the goods in the Export Shed in the CFS, the exporter will contact the system examining officer (SEO)and

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present the checklist with the endorsement of CONCOR on the declaration, along with all original documents such as Invoice, Packing List, ARE-1(AR-4)etc. He will also present additional particulars in the prescribed form.

SEO will verify the quantity of the goods actually received against that entered in the system. He will enter the particulars in the system. The system would identify the Examining Officer (if more than one are available)who would be carrying out physical examination of goods. The system would also indicate the packages(the quantity and the serial numbers) to be subjected to examination. SEO would write this information on the checklist and hand it over to the exporter. He would hand over the original documents to the Examining Officer. No examination order shall be given unless the goods have been physically received in the Export Shed. It may, however, be clarified that Customs may examine all the packages/goods in case of any discrepancy.

The Examining Officer may inspect and/or examine the shipment, as per instructions contained in the checklist and enter the examination report in the system. There will be no written examination report. He will then mark the Electronic S/B and forward the checklist along with the original documents to the Appraiser/Supdt. in Charge. If the Appraiser/Supdt. is satisfied that the particulars entered in the system conform to the description given in the original documents (including AEPC quota and other certifications) and the ;physical examination, he will proceed to give “:Let Export” order for the shipment and inform the exporter. The Appraiser/Supdt. would retain the checklist, the declaration and all original documents with him.

In case of any variation between the declaration in S/B and the documents or physical examination report, the Appraiser/Supdt. will mark the electronic S/B to AC/DC Exports. He will also forward the documents to AC/DC and advise the exporters to meet the AC/DC for further action regarding

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settlement of dispute. In case the Exporter agrees with the views of the Department, the S/B would be processed finally. Where the exporter disputes the views of the Department, the case would be adjudicated following the principles of natural justice.

2. GENERATION OF SHIPPING BILLS

As soon as the Shed Appraiser/Supdt.gives “Let Export” order, the system would print 6 copies of the S/B in case of Free and scheme S/B. In case of DEPB there are 7 S/B. If the S/B (DEPB) is assessed provisionally, then EP copy will be generated only after AC/DC finalises the assessment. On the examination report the Appraiser/Shed Supt.will sign. On all the copies, the Appraiser/Shed Supdt., Examination Offer as well as exporter’s representative/CHA will sign. Name and ID Card number of the Exporters representative/CHA should be clearly mentioned below his signature.

The distribution of S/Bills is as follows:

DEPB Scheme S/Bills Other Scheme S/Bills

1. Exporter’s copy 1. Exporters copy

2. Custom’s Copy 2. Customs copy

3. Exchange Control Copy 3. ExchangeControl Copy

4. Scheme Bill Copy 4. E.P.Copy

5. E.P.Copy 5. TR-1. TR-2 Copies

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TR-1, TR-2 Copies

The original AEPC quota and other certificates will be retained with the S/Bills and recorded in the Export Shed.

3. DRAWAL OF SAMPLES

Where the Appraiser of Customs orders for samples to be drawn and tested, the Examining Officers will proceed to draw two samples from the consignment and enter the particulars there of along with name of the testing agency in the system. No registers will be maintained for recording dates of samples drawn. Three copies of the test memo will be speared and signed by the Examining Officer, the Appraiser and Exporter. The disposal of the three copies would be as follows:

Original to be sent along with the sample to the testing agency

Duplicate copy to be retained with the second sample Triplicate to be handed over to the exporter.

AC/DC may, if he deems necessary, order for sample to be drawn for purposes other than testing such as visual inspection and verification of description, market value enquiry etc.

EXPORT OF GOODS UNDER DEPB

While filing information as per the format, exporters are required to ensure that correct Group Code No. of the goods being exported and the item No. of relevant Group is clearly mentioned (item-wise details). The exporters/CHAs are advised to fill Item No, in the same manner as given in the Public Notices issued by DGFT.

EXPORT OF GOODS UNDER EPCG SCHEME

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All the exporters intending to file shipping bills under the EPCG scheme should first get their EPCG licence registered with the Export section. For registration of EPCG licence, the exporter/CHA shall produce the Xerox copy of EPCG licence to the service centre for data entry. A printout of the relevant particulars entered will be given to the exporter/CHA for his confirmation. After verifying the correctness of the particulars entered, the said printout will be signed by the exporter. Thereafter, the original EPCG licence along with the attested copy of the licence and the signed printout of the particulars shall be presented to the Appraiser/Supt (EPCG Cell)The Appraiser/Supdt. (EPCG Cell) would verify the particulars entered in the computer with original licence and register the same in EDI system. The registration number of the EPCG Licence would be furnished to the exporters/CHA, who shall note the same carefully for future reference. The said registration number would need to be mentioned against respective item on the declaration form filed for data entry of the s/bill, at the time of export of goods. All the EPCG S/Bill would be processed on screen by the Appraiser/Supdt.(EPCG Cell) and the AC/DC (Export). After processing of the EPCG S/Bill by the Appraiser EPCG Cell and AC/DC Export, the goods can be presented at the Customs warehouse for registration, examination and “Let Export” as in the case of other export goods. After train summary is submitted to CONCOR, the S/Bill will be put to Appraiser queue for logging/printing of ledger. After logging/printing of ledger, the EPCG bill will be moved to history tables.

GRIEVANCE HANDLING

The Asstt. Commissioner/ Dy. Commissioner of Customs, CFS-Mulund may be approached by exporters or their CHAs for settlement of any problems faced at any stage of the export clearance.

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THE ECGC COVER

The abbreviated form for Export Credit and Guarantee Corporation is ECGC. As the name indicates this is a sort of guarantee or a sort of cover for the exporter. Let us now see what this is all about.

Needless to say that an exporter before entering into a contract with the overseas buyer for making any supply, takes care to ensure that the customer with whom he is dealing have some credit worthiness. This he may be able to do either through the local agent who is in a better position to know about the customer or through a bank or through any of the exporter’s associates if happens to be in the area of the customer etc., But, in a business things may change. The financial status of a customer may take drastic turn and an established customer may go bankrupt within a short period of time.

Moreover, the buyer may be willing to make the payment, but there are other environment which prevents him from effecting the transfer of funds through the bank. For e.g., there could be break out of war, the balance of payment position of the country may become unfavourable, there may be some coup of the government etc., and all transactions could be sealed.

These are the risk factors for the exporters. What is the guarantee that he will get paid for the supplies he has made?

With a view to provide support to Indian exporters, the Govt. of India set up the Export Risk Insurance Corporation (ERIC) in 1957. This was transformed into Export Credit & Guarantee Corporation Ltd. in 1964. In order to give the Indian identity a sharper focus the name was again changed to Export Credit & Guarantee Corporation of India Ltd., in 1983. This is a

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company wholly owned by the Govt. of India and functions under the administrative control of the Ministry of Commerce and managed by the Board of Directors representing Government, Banking, Insurance, Trade, Industry etc.

Though one may insist for a Letter of Credit, still there could be some elements of risk which we will study later here. Except getting an advance payment for the full value of the supplies, any other mode of payment will have some risk.

Take the case of an exporter who has made supplies and before the payment is received the buyer goes bankrupt or there comes some new provision or policy of Government of the importing country preventing repatriation of the funds to other countries what recourse the exporter has to recover his dues. The litigation procedure might be time consuming and the exporter can never be sure of getting his full payment. An ECGC cover a safeguard his interest to a great extent.

An exporter can either agree for sight payment or can made shipment on credit terms for say 60 days, 90 days etc., In project exports the period of payment may extend to some years. Longer the period of cre3dit given to the customer, more will be the risk factor for the exporter.

In respect of sight bill, there is almost no risk because the customer has to make payment first before he retires the documents. Therefore, before the title of the goods is passed on to the customer, the importer makes the3 payment. However, in respect of usance bill (credit bills) the buyer retires the documents by accepting the usance draft and takes delivery of the goods. In case the customer goes bankrupt or become insolvent, before the due date of payment, the exporter is totally at a loss. While big units may be able to absorb the one time loss, small exporters will get broke even with one such transaction. Here the ECGC comes into picture. It takes up the responsibility of paying the funds to the exporter and makes all efforts including legal proceedings to

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recover the dues from the customer, provided the exporter has taken an ECGC cover.

WHAT ECGC OFFERS FOR PROTECTION OF EXPORTER’S INTEREST ?

ECGC offers various types of insurance cover to protect the exporter’s interest. For each type of cover an exporter has to take Policy specific to the respective requirements. The Policy that is most commonly taken by the exporters is the Standard Policy or otherwise called the Shipments (Comprehensive Risks) Policy.

SHIPMENTS (COMPREHENSIVE RISKS) POLICY ALSO CALLED STANDARD POLICY

For exporters with an annual export turnover in excess of Rs.50 lakhs, the Shipments (Comprehensive Risks) Policy is the one intended for covering shipments on cash basis or on short-term credit basis. (Credits not exceeding 180 days)

The risks covered this Policy is as follows effective from the date of shipment.

Commercial Risks

Insolvency of the buyer

Failure of the buyer to make payment within a specified

period.

Buyer’s failure to accept the goods subject to certain

conditions.

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Political Risks

Imposition of restrictions by the Govt. of the buyer’s

country or any government action which may block or

delay the transfer of payment made by the buyer.

War, civil war, revolution or civil disturbances in the

buyer’s country

New import restrictions or cancellation of a valid import

licence

Interruption or diversion of voyage outside India resulting

in payment of additional freight or insurance charges

which cannot be recovered from the buyer.

Any other cause of loss neither occurring outside India

nor normally insured by general insurers and beyond the

control of both the e porters and the buyer.

Risks not covered under the Policy

The Standard Policy does not cover losses on account of following risks:

Commercial disputes including quality disputes raised by

the buyer unless the exporter obtains a decree from a

competent court of law in the buyer’s country in his

favour

Causes inherent in the nature of the goods

Buyer’s failure to obtain necessary import or exchange

control clearance from authorities concerned

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Insolvency or default of the agent of the exporter or of

the collecting bank

Loss or damage to goods which can be covered by

general insurers.

Exchange rate fluctuations

Failure of the exporter to fulfill the terms of the export

contract or negligence on his part.

Shipments Covered

The Standard Policy is meant to cover all the shipments that

may be made by an exporter during a period of 24 months

ahead. The policy cannot be issued for selected shipments,

selected buyer or selected markets. For specific requirements

an exporter can opt for different policy from the various

services offered by the corporation

Exclusions:

Shipments made against advance payments received or

shipments against confirmed letters of credit which has the

confirmation from the bank in India may be excluded.

However, shipments against confirmed L/C may be covered for

political risks only. The premium for cover under political risks

will be less than that under the comprehensive policy. ECGC

may also agree to exclude certain items if the exporter is

dealing in different distinct products.

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CAPEXIL

CAPEXIL, a non-profit making organization, was setup in March 1958 by the Ministry of Commerce, Government of India to promote export of Chemical and Allied Products from India. CAPEXIL is an ardent advocate of exporters to the Government and the primary focus is to provide export assistance to its member exporters.

CAPEXIL sends trade delegation to all major and developing markets around the world, showcases Indian exports all over the world through exhibitions, fairs.

Capexil can help the sourcing needs of an importer anywhere in the world, and also the selling needs of Indian exporters.

CAPEXIL is an ISO 9001 : 2000 certified organization.

Services Offered:

Indispensable information gateway and helping hand for

exporters. 126

An interface between the government and the members

regarding trade and policy related matters such as

DEPB, Duty Drawback, Banking etc.

Organizing Buyer Contact Programmes

Participation in National and International Trade Fairs

and Exhibitions

Financial Assistance to members through Market

Development Assistance (MDA) Scheme and Market

Access Initiative (MAI) Scheme for participation in

international exhibitions, buyer-seller meets

Organizing export awareness programmes, seminars

and workshops

Excellent liaison with government and quasi government

agencies including Indian diplomatic missions abroad

Dissemination of trade contacts and enquiries

Promotional Activities:

CAPEXIL in its continuous endeavor to promote the business activities of its members, undertake the following activities throughout the year:

Participates in general and product specific international

trade fairs

Organizes Buyer Seller Meets and Trade Delegations

abroad

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Organizes buyer contact programmes in India popularly

termed as Reverse buyer Seller Meets

Awareness Programmes, Seminars and other activities in

India to build awareness and to boost entrepreneurs in

the area of exports

Acts as a forum for representation of the trade related

issues and acts as a liaison between the exporting

community and the government, policy planners, quasi

government organizations

Liaisons with Indian Diplomatic Missions abroad and

Foreign Diplomatic Missions in India for promotion of

business events and other activities

Facilitates short term training courses on International

Marketing

Flow Chart Showing Documents

Required for ExportIMPORTER

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PURCHASES ORDER / L/C

EXPORTER

CERTIFICATE OF

INSPECTION

INVOICE

PACKING LIST

GR

FORM

ARE1

FORM

MARINE

INSURANCE

POLICY

CUSTOMS

ATTESTED

INVOICE

SHIPPING

BILLS

FULL SET OF

ON BOARD

BILL OF

LADING

COPY OF L/C

DUPLICATE

COPY ARE

FORM

DUPLICATE

COPY GR

FORM

C & F AGENT

EXPORTER

COMMERCIAL

INVOICE

PACKING

LIST

DUPLICATE

COPY

NEGOTIABLE

COPIES

ORIGINAL

CERTIFICATE OF

BILL OF EXCHA

129

GR FORM

OF B/L L/C ORIGIN NGE

NEGOTIATING BANK

L/C AMOUNT SHIPPING DOCUMENT

EXPORTER IMPORTER

Bibliography

Reference Site

130

http://www.yash-papers.com as retrieved on June 31, 2010 http://www.exim.com as retrieved on July 5, 2010 http:// www.capexil.com as retrieved on July 5, 2010

Reference book

Puri, V. K., Exporters’ Guidelines, A Basic Book on How to Export as per Govt. Policy & Procedures, 2nd Edition, JBA Publishers, 2008-09.

Paul, Justin & Aserkar, Rajiv, Export Import Management, 2nd Edition, Oxford University Press, 2009, Chapter – 2, pp. 17-29.

131

ANNEXURE

132