1

1. INTRODUCTION
1.1 Objectives
o Collecting information concerning apparel industry. o Finding process of export and import in apparel industry. o To gather practical knowledge about export and import apparel industry. o To know about export and import system. o Get an experience of import procedure. o Collecting information from export promotion bureau. o To take practical knowledge of export-import management. o To be an expert of EXIM system. o Search for the rules and regulation of export and import. o Find out the maintenance process of imported machineries. o To collect practical information of export-import policy. o To know the processes of export. o Practical searching for Shipment information. o Know about, how to apply technology in export-import procedure. o Collection of data from export-import procedure.

1.2 Methodology
o First Method type is exploration of Research. o By taking interview of responsible person. o Visiting Export-Import agencies. o Search of the internet. o Data collection method: Primary data is usually gathered by research survey & observation. o Survey method: Frequent discuss with individuals from export import agencies. o Observation method: It covers observation of peoples activities related with EXIM job.

1.3 Scope
We are four students of MBA in product and Fashion merchandising have done this project together. Among of us Austin Brotin Halder is working in Chaity group an export oriented apparel manufacturing factory is handling buyers from UK, Sweden, France, Germany, Canada & USA. Austin Brotin Halder handles the world famous buyer H&M.

Among of us Atiqual Alam Siddique is doing job in a buying house named Ray Studio. He is a merchandiser of that company and he maintains an US buyer called ZeroXposur.

Then our another member MD. Monir Hossain is controlling his own business of cartoon manufacture factory. And Khandaker Rafiul Amin is just studying now without doing any job. Thats why he has went to other members work place to gather raw data. And he was involved to communicate with all group members and collect information from them to give the real figure of this project.

1.4 Limitation
First of all, I did not find any secondary data specifically on the EXIM procedure. For this reason, to get the answer of certain questions I had gone through people's opinion. While doing the survey lots of people did not want to respond to many questions. Sometimes they even did not fill out the questionnaire properly for the busy schedule. For this reason, sometimes I had to ask them questions from my questionnaire instead of giving them hard copy.

2. CONCEPT AND IDEA

2.1 Idea about Export and Import
If we export a product from a country of origin we are exporting. If were bringing a product from another country were importing. Basically we are most likely going to do one or the other, and not both. If we want to export we could also for example setup our own company in another country and become involved in exporting from there and at the same time be also an importer of our own products in a country. But here we are only hinting at the subject of how we can run our business these days for example, do we want to run our business with our company being based in the US, or would we like to entertain a scenario where we would establish a permanent residency in another country and start and base our business over there? Obviously there can be many advantages to doing something like that. There may be new business opportunities with this kind of setup but specific pros and cons will differ depending on where, which country we locate our business in and discussing details here is beyond the scope of this post and best left for another time. To learn how to start an import export business we first need to realize that this is a two-part business. First we need to find the right product, get it out of the country of origin, ship it to destination, a country we import the product into, clear the customs. Some even get an invitation from the supplier they found and board a flight to China. They get a VIP welcome, a limo ride to a 5-start hotel their supplier is treating them to, at his expense. Impressive! And they get down to business, the supplier sends a plush car to bring them to a board room to discuss the product, the size of their order, they negotiate quantity discount, delivery times, things are moving right along. They are ready to place an order and pay upfront to get the best price and fastest delivery time. They shake hands, see a bit of China on a one-day quickie tour, overeat in a fine Chinese restaurant and they get an impressive escort back to the airport to catch their flight back home. There are financial instruments how to do it, and there are other ways to do it. Above all, there are ways how not to go about starting in import export business. Many prospective Americans importers just naively believe that things work the same way overseas as they do back home. Even if they get the motivation to take a trip and visit the country they want to import from and meet their supplier or suppliers in person at the country of products origin they often make a quick trip to inspect the supply side, may be few days to a week, and feel

that did it. Try that in Bali, Bangkok or Bombay (Mumbai), and we just may find a great recipe for getting ripped off. Although we may strike it rich with just an email, the likelihood of developing the right relationship, especially on a start up level and above all if you are but a small to medium size business, in particular if you wish to be importing from the Third World, are slim, miss and hit at best. On another hand, if were a big business, like Gap or Wal-Mart, no worries, should we orders get messed up, our problems will likely get handled by government-backed arbitration committees. But being a little guy, having a problem in China or India, Thailand or Indonesia, best we eat your losses, regroup and start from scratch, if well still find the stamina to continue in this business. Bottom line, best learn how to get started in import export business the right way rather than just be muddling through. Following are some of the subjects and issues that you need to consider and become well-versed in if you expect not only to get started right and to survive but to ultimately become successful in import export business: Where to go and what to buy Different levels of involvement in import export Who will be your customer, how will you sell your imports How to find overseas suppliers and whom to buy from Product design and development Sourcing How much should you pay for the product you want to import Product price in country of origin vs. landed price after customs clearance at destination Customhouse Brokers, who are they, how they work and what information you can and need to get from them before you buy Freight forwarders, your purchases and shipping logistics Packing practices and shipping process Shipping documents Freight insurance Import export financing and alternatives how to pay for your purchases Letter of Credit Documentary Draft for Collection US Customs Entry process Formal Entry and Informal Entry Hand carrying your commercial purchases across international borders and into the US

Harmonized Tariff Schedule and the classification process Marking requirements on goods Liquidated entry Tax issues

Each of the above categories can be subdivided into smaller units, so there is indeed a lot of material to cover. Over and above gaining an inherent understanding of how to start an import export business there is an issue of where really are the opportunities in this business, whether in the current economic situation, or any situation anywhere. To truly understand what the opportunities in this business are we need to realize that the entire world is your marketplace. We need to think globally, because once we understand how the process works; we can import our product into scores of different countries, not only into the United States. Provided we have the necessary knowledge of the culture and the business climate in whatever the country, our opportunities for success begin to grow. Get started in import export business by taking that first step knowing we took it in the right direction.

2.2 Export & Import policy

Export-Import Policy 2009-12

Trade and commerce are important driving forces of socio-economic development. The Government has set objectives of creating jobs and generating income for the majority people of Bangladesh, and to cutting poverty in half by the year 2015. Globalization and ever growing free market economy have led the world trading system to change expand rapidly. The main objective of the Export Policy is to bring dynamism to the economic activities of Bangladesh and to make these activities outward-looking so as to enable Bangladesh to keep pace with the rapidly changing and competitive world trading system. In this respect, it is necessary to reduce the disparity between men and women, and to integrate more and more women in business development activities. This will result in strengthening our economic base, enable the producers/ exporters attain more strength and ability to compete for facing the challenges of the changing world trading system. This will play a positive role in Bangladeshs economic development. In this backdrop, the government is playing the role of a facilitator to expand trade, and it has taken necessary steps to modernize and simplify the countrys trade policy in accordance with the obligations of the WTO.

Of late, our exportable are facing an increasing pressure from the buyers for improvement of quality, ensuring prohibited item-free export and prohibition of child labor as well as for fulfilling other standards and compliance-related conditions. Comprehensive efforts are given not only for product development, but also for quality improvement and meeting the compliance requirements. Besides, on account of globalization our export markets are being factored by the phenomenon of global economy. Therefore, necessary steps will have to be taken to monitor the phenomena of global economy and international trade and Bangladesh Missions abroad will have to play more proactive and effective role in this regard. Parallel to these, efforts will also be taken to increase the knowledge of the exporters on rule-regulation of international trade.

It is undeniable that, in the present trading system especially in export business, the use of modern technology is increasing day by day and by using modern technology, the exporters are enabling

their products to be more competitive. In this backdrop, by applying modern technology the cost of doing business will have to be reduced along with increasing the efficiency of the exporters. For this reason the government is firmly committed to ensure e-Commerce and the use of modern technology. Most importantly, the government is giving priority on utilizing our manpower(cheap labor) and convert its Comparative Advantage into Competitive Advantage.

In order to maintain our current export growth, we have to increase the production capacity of local export-oriented industries, give more emphasis on production environment of the factories and on meeting the compliance requirements, improve the quality of the products, and most importantly, we have to strengthen our efforts to diversify products and their markets. All these objectives can be attained only when we can utilize our cheap labor and convert its comparative advantage into competitive advantage. In doing so, efforts will be given on encouraging the establishment of laborintensive export-oriented industries, encouraging training programs for the skills development of the workers, providing incentives for the diversification and encouragement of exports, low-interest loan facilities, infrastructural development, establishment of backward and forward industries, development of utility services, establishment of modern laboratories for controlling the quality of export products, establishment of product-based clusters, ensuring easy access to the raw materials for export products, ensuring regular supply of updated information on market and technology to producers, and on the overall development of the Chittagong and Mongla Port including the simplification of goods unloading procedures.

The Export Policy 2009-12 emphasized on expanding export, increasing the productivity of exportoriented industries and the overall development of the export sector through capacity building of local export-oriented industries. Five sector-based Public-Private Partnership Business Promotion Councils are working for improving awareness and capacity of the exporters so as to maintain the continuous increase in supply of export goods. The scope of these councils will be increased in future. According to last few years statistics on export growth, Bangladeshs export earnings increased, in comparison with previous years earnings, by 15.69%, 15.87% and 10.23% during the export years 2006-07, 2007-08 and 2008-09 respectively. The Export Policy 2009-12 has been formulated on the basis of recommendations of a Consultative Committee comprising representatives from the main industry/trade associations, chambers, research organizations, respective government Ministries, Divisions and organizations so as to ensure the sustainability of the stated export growth during the application period of the Export Policy. It is expected that this

10

Export Policy will play an important role in job creation and poverty reduction by fostering progressive growth of our exports.

Rules and Regulations Related to the Export of Products: While exporting goods from Bangladesh, the conditions stipulated in this Policy or in some other related law, the rules and regulations related to foreign currency exchange issued from time to time by the Bangladesh Bank has to be followed. Also, relevant documents within the scope of the above-mentioned conditions and rules and regulations have to be submitted.

Control of Export of Products: Under this Policy, export of products will be controlled in the following way, such as:Export Prohibited Products: If not referred to differently, products that are prohibited from

exporting under this Export Policy cannot be exported. The list of Export Prohibited Products can be found in Annex -1.

Products under Conditional Export: The products that may be allowed to export subject to fulfillment of some certain conditions can be exported only after fulfilling those conditions. The list of such products can be found in Annex-2.

Exportable Products: If not referred to differently, and except the products enlisted in Annex-1 & Annex-2, i.e. export prohibited products and the products for which the export is contingent to certain conditions, all other products shall be freely exportable. Nothing in the policy shall be applicable to the following:

The foreign-bound ships, vehicles or stores of aircrafts, their equipments or spare parts and products declared as their kitchen items, or the baggage accompanied by the crew and passengers of those ships, vehicles or aircrafts.

Export of sample products shall be conducted upon the fulfillment of the following conditions: When the export of the product is not prohibited; A maximum of US$ 5,000 worth of products (except medicine) per exporter per year, valued in FOB (free on board); Products sent as sample on free of cost; but for medicine the conditions are: (1) maximum US$ 30,000 if there is no export L/C (letter of credit), or (2) against each L/C, medicine worth of 5% of

11

the total value of the L/C or US$ 5000, whichever is the lesser. If necessary Bangladesh Bank can increase these limits examining case to case. For 100% export-oriented garments industries, a maximum of US$ 7,500 worth of sample of ready made garments products per year; The diamond processing farms holding bond license from Customs bond Commissioner-ate or diamond producing/diamond-mixed jewelry processing farms registered as producer at VAT Commissioner-ate, under National Board of Revenue can sent abroad cut and polished diamond/diamond mixed jewelry worth of US$ 50,000 annually with a view to participate international trade fair or for showcasing in export market development purposes but after showcasing the sample must be brought back to country .However, if the sample is for some reason sold in the fair, the sold money must repatriate through legal banking channel and the amount of that money cannot be lesser than the value of the sample; f) Promotional materials (brochure, poster, leaflet, banner etc.) of any price or weight; g) Gift parcel worth of US$ 1,000 or equivalent in Bangladeshi Taka; h) Bonafide baggage of traveler traveling outside Bangladesh; and Relief materials exported by the Government. Sample will refer to limited amount of goods which are easily identifiable and which do not have any commercial value. Gift parcel will refer to gift materials sent by courier service.

Authority to relax export control:- the Government can, upon providing appropriate reasons, authorize the export of prohibited goods listed in Annex-1. Moreover, the Government can authorize, under special considerations, the export, export-cum-import or re-export of certain products.

Entre-pt and Re-export:- Entre-pt trade and re-export will have to be conducted under the procedures stipulated in the Public Notice No. 42 (2003-2006)/import dated June 28, 2005 (14 Ashar 1412 Bangla) issued by the Office of the Chief Controller of Import and Export .

Entre-pt trade will refer to the export of an imported product at a price at least 5% higher than the import price. No change whatsoever in the quality, quantity, shape or any other aspect is necessary

12

in this respect. Products under entre-pt trade shall not come out of the port boundary. However, the products can be brought out of the port boundary under special authorization. Import price under entre-pt trade will refer to the C&F price of the imported product as declared at the port of Bangladesh. Re-export will refer to the export of an imported product within a specific period of time with a value addition of at least 10% over the imported price by changing the quality or shape or both, of the product by means of local re-processing.

Import price in this case will refer to the C&F price of the imported product as declared at the port of Bangladesh.

Export opportunities without L/C:- Upon the submission of EXP Form and Shipping Bill, exports without L/C can be done through buying contract, agreement, purchase order or advance payment. In case of Advance Cash Payemnt, export without L/C will allowed on consignment basis. Buying Contract will refer to a signed agreement for the purpose of exporting a product between an exporter and an importer.

Export-cum-Import:

Cylinder and ISO tanks can be exported on a temporary basis only for the purpose of repairing, replacement or refilling of the imported products. However, this provision is conditional to the submission, at the time of export, of an Indemnity Bond to the Customs Authorities stating that the products will be imported back once the necessary tasks will be completed.

In case that an exported product is found to have faults as per the sales agreement, then the Bangladeshi exporter will be granted the authorization to export replacement products. But the exporter will have to submit the following papers to the Customs Authorities: Copy of the Sales Agreement; Letter from the buyer with details of the faulty product; and Any other condition that has to be met according to the Customs Law.

13

A person traveling in a foreign country can bring his or her vehicle along with himself or herself if authorized under the carnet de passage by the Customs Authorities or any other appropriate authority, or authorized against the indemnity bond submitted to the Customs Authorities with the condition to re-import.

Re-exportation of Frustrated Cargo:- A frustrated cargo can be re-exported by maintaining the rules and regulations of the Customs Act 1969.

Temporary export-cum-import of machinery and other equipments, which are necessary to fulfill the purpose, is permissible under the construction, engineering and electrical company agreement, but following conditions apply: Relevant agreement and copy of award have to be submitted to the Customs Authorities; and An indemnity bond stating that the machinery will be returned after the completion of the task has to be submitted.

Pre-shipment Obligations:- If no other conditions apply, then a pre-shipment certificate for the purpose of export of products is not obligatory.

Quality Control Certificate:- While exporting products for which quality control certificate is obligatory, the exporter will have to submit, to the Customs Authorities, a quality control certificate issued by the appropriate authority.

14

Steps toward Export Diversification

Establishment of the Product and Service specific Business Promotion Council:

Several sector/ product and service specific business promotion councils have been created by the Ministry of Commerce with both government and non-government initiatives under the Company Act 1994 for the purpose of export diversification, improving and ensuring the product quality, acquiring appropriate technology, maintenance of compliance requirements, product marketing etc. The Export Policy 2009-12 will take adequate initiatives to strengthen and organize the activities of these councils, and also encourage the creation of more such councils. If necessary, joint development projects will be initiated with the development partners so as to accelerate product/service/sector-based development activities. The stated initiative of the Ministry of Commerce will be considered as complementary to the export promotion and export expansion activities of the Export Promotion Bureau.

Classification of Product and Service Sectors

In consideration with the level of production and supply, potential contribution to the export sector, demand in the international market and above all the capacity to contribute to the socio-economic development, some product sectors will be identified as highest priority sectors while some others will be identified as special development sectors. The government will regularly modify this list, and provide special privileges to encourage the export of these products.

Highest Priority Sectors

Highest priority sectors will refer to those product-sectors which have special export potentials, but such potentiality could not be utilized properly due to certain constraints, and more success is attainable if adequate support is rendered to them. For example: Agro-products and agro-processing products; Light engineering products (including auto-parts and bicycles); Footwear and leather products; Pharmaceutical products; Software and ICT products; Home textile;

15

The Sea-bound Ship Building Industries; and Toiletries Products.

Benefits and Facilities to be provided to the Highest Priority Sectors

Project loans with reduced interest rates on a priority basis;

Income tax exemptions;

Possible financial benefits or subsidies with special concession for utility services such as electricity, water and gas, provided that they are compatible with WTO Agreement on Agriculture, and WTO Agreement on Subsidies and Countervailing Measures;

Export loans with soft terms and lesser interest rates;

Reduced air travel fares;

Duty draw back/ bond facilities;

Privileges for the establishment of backward linkage industries including infrastructural development so as to reduce production cost;

Expansion of institutional and technical facilities to improve and control product quality;

Assistance in production and marketing;

Assistance in foreign market search; and

Taking necessary initiatives to attract foreign investments.

Special Development Sectors

16

Product sectors which have export potentials but whose production, supply and export base are not well organized will be included in special development sectors so as to strengthen their export base. The following product sectors will be included in the special development sectors:

crushed and finished leather production; frozen fish production and processing; handicraft products; electric and electronic products; fresh flower and foliage; jute and jute products; hand-woven textiles from hill areas (pahari taat bostro); uncut diamond; and producing herbal plants, medicine and medicinal products; ceramic products and melamine; plastic products; and furniture industries. Benefits and Facilities to be Rendered to the Special Priority Sectors

Project loans with general interest rates on a priority basis;

Consideration for export loans with soft terms and lesser interest rates;

Subsidies which are compatible with WTO Agreement on Agriculture, and WTO Agreement on Subsidies and Countervailing Measures;

Reduced air fare for shipment of products;

Duty draw back/ bond facilities;

Privileges for the establishment of backward linkage industries including infrastructural development so as to reduce production cost;

Expansion of technical facilities to improve product quality;

17

Assistance in product marketing;

Assistance in foreign market search;

Possible financial benefits for utility services such as electricity, water and gas; and

Taking necessary initiatives to attract foreign investments (FDI).

Inter-Sector Project for Product Diversification

Inter-sector project will be initiated with an objective of product diversification. Under this project, certain issues such as bond system, duty-draw-back, subsidies etc. will be reviewed to keep export price at a competitive level. Similarly, the project will assess and take necessary steps regarding issues such as product development and market expansion, trade cooperation and infrastructural difficulties towards export trade. A project to acquire modern technology promoting export trade expansion will also be initiated.

18

General Export Facilities

Use of Foreign Exchange Earned from Export

Exporters can deposit a certain amount of their export earning in foreign currency under retention quota in their foreign currency account. The amount of the retention is to be fixed from time to time by the Bangladesh Bank. Exporters can use this foreign currency for only real business purposes, such as business-related foreign trips, participation in export fair and seminars abroad, importing raw materials, equipments or spare parts, and setting up offices abroad.

Export Promotion Fund - There shall be an Export Promotion Fund (EPF) at following facilities will be provided from this fund:

the EPB. The

Providing venture capital with lower interest rates and soft terms for production;

Assisting the producers/ exporters to receive foreign technical assistance, service and technology for the purpose of product development and diversification;

Assisting exporters to send marketing missions abroad and to participate in international trade fairs;

When necessary, assisting exporters to set up sales and display centers as well as warehousing facilities abroad;

Assisting exporters to participate in training programs abroad on product development and marketing, so as to enable them to improve their technical and marketing skills; and

Providing assistance in other activities related to product/service and market expansion as well as development

Other Financial Facilities

The possibility to provide tax exemption and subsidy in service sectors such as electricity, water and gas, instead of cash benefits, will be considered;

19

Initiatives will be taken to develop necessary infrastructure to ensure seamless supply of electricity, gas and water for all export-oriented industries on priority basis;

Initiatives will be taken to fix the electricity, water and gas charges for industrial use at a reasonable level; and

In line with the provisions of WTO, cash incentive may be provided to potential export-oriented emerging sectors (i.e. the sectors which are capable of producing products and also for which demand has been created in international market).

Providing Fund for Export

Import of raw material and related products will be made under the Export Promotion Fund (EPF);

Possibility to provide back-to-back Letter of Credit to other export items besides readymade garments will be reviewed;

To promote export, loans with lower interest rates and soft terms will be made available for import of capital machineries and raw materials.

Export Loan

Commercial banks will consider, on a priority basis, the issue that exporters get a credit of 90 percent of the amount mentioned in the irrevocable letter of credit or in the confirmed contract;

Initiatives will be taken to introduce online system in the banking sector for the quick completion of export related activities and for making the banking sector more transparent;

Bangladesh Bank will take necessary steps to keep the flow of normal credit flow seamless for the export sector; The bank will fix the exporters cash credit limit based on the achievements of export earning of previous years;

20

If products are exported on the basis of site-payment under irrevocable letter of credit, then commercial banks will not impose overdue interest provided that the exporter submits necessary export documents; Bangladesh Bank may open up an Export Credit Cell for export financing for the development of this sector. Similarly, commercial banks will create Special Credit Unit for export financing; There will be a highly empowered Export Credit Monitoring Committee to fix the demand of export credit, and to review and monitor the flow of credit. The activities of the Credit Monitoring Committee will be run under the leadership of Bangladesh Bank;

Banks will take necessary steps to fix service charges at a reasonable level;

If necessary, initiatives will be taken to establish/ strengthen banking facilities in order to expand trade relations with Russia, other CIS countries, Myanmar and north-eastern states of India;

Under the Export Credit Guarantee Scheme, initiatives will be taken to compensate (ECGS) to those exporters who incurred losses for the reasons beyond their control;

Authorized dealers will be able to open internal back-to-back L/C under main letter of credit in favor of local raw material suppliers; and

In case of export, matters rate of interest, LC commission, miscellaneous service charges, Bank guarantee commission etc will be kept minimum as directed by Bangladesh Bank.

Exemption in Insurance Premium

Provisions will be made available for fire and naval insurance premiums under exempted rates for export-oriented industries in the non-traditional sectors. Under this system, the exporter may be exempted from paying premium after shipment is made.

Incentives for Export of Non-traditional Industrial Products

21

Incentives will be given to non-traditional and new industrial product export. In this respect, value addition during the first two years will have to be at least 40 percent and then onwards at least 50 percent;

At special concession rate fire and shipping insurance will be fixed for export-oriented industries.

Bond Facilities for Export Oriented Industries

The National Board of Revenue will consider the possibility of providing bonded warehouse facilities to import-dependent export industries. Mainly it will be reviewed whether bonded warehouse facilities can be extended to all export-oriented industries. Also it will be reviewed if trading houses and export houses can be granted additional bonded facilities under certain conditions.

Encouragement will be given to initiate brand names to attain higher price.

Providing alternative incentives, instead of duty bond or duty-draw-back to export-oriented local textiles and readymade garments industries.

Government can provide subsidies (cash incentives) as alternative incentives instead of duty bond or duty-draw-back to export-oriented local textiles and readymade garments industries. The rate of incentive will be decided by the government. This incentive can be extended to other sectors too.

Easing VAT return on Export-Facilitating Services

Simplified procedure will be created for the withdrawal of paid VAT on export-facilitating services such as C&F services, telephone, telex, fax, electricity, insurance premium and shipping agent commission/ bill.

General Facilities for Export-Oriented Industries

Industries exporting at least 80% of their production will be considered as export-oriented industries and they will be entitled to receive bank loans and other financial benefits; and

22

Industries exporting at least 80% of their production will be permitted to sale their remaining 20% products in the domestic market subject to due payment of duties and taxes;

Assistance will be provided to exporters in order to be more compliant;

Assistance will be provided to establish Effluent Treatment Plant(ETP);

At every two years, retail machineries up to10 % of total capital machineries will be allowed to import duty free for mainly export oriented industries; ????

The connection of utility services including electricity, gas will be provided on priority basis in export-oriented industries.

Reduced Air Fare for the Export of Special Privileged Products including Fruits and Vegetables

Biman Bangladesh Airlines will consider measures for reduced air fare for the export of fruits and vegetables, ornamental plants etc. by air.

Withdrawal of Royalty for the Expansion of Cargo Facilities of Foreign Airlines for Export Purposes

No royalty is applied for transporting vegetables. Initiatives will be taken to provide similar privileges for special privileged products including fruits; and Initiatives will be taken for increasing the space in foreign airlines cargo services, and for transporting fruits, vegetables etc. at a reasonable fare.

Venture Capital Facilities for Small and Medium Enterprises

Agricultural farms with at least 5 acre size will be given venture capital facilities to encourage the production and export of vegetables, fruits, fresh flowers, orchids etc.;

Establishment of cool chains will be encouraged to avoid quick putrefaction of the products. In this regard, import of reefer vans and reefer containers will be encouraged;

23

Initiatives will be taken to introduce SME credit Guarantee Scheme for increasing export in exportoriented industries.

Research and Development

The National Board of Revenue will consider the possibility of permitting the duty-free import of machineries and equipments for research and development purposes by the exporting institutions. Research institutes may be considered to enjoy this facility upon recommendation from the Export Promotion Bureau.

Encouragement and Facilities for Exports Based on Sub-Contracting

An institution can spend, before acquiring the actual work order, a maximum of US$ 10,000 for communication, sending representatives, travel abroad, purchase of tender document etc. An authorization from the Bangladesh Bank will be required if more foreign currency expenditure is needed;

Permission for establishing offices abroad, and for recruiting officials; and

Individual professional guarantee/ insurance will be provided in favor of project specialists by Sadharan Bima Corporation (SBC).

Issuance of Multiple-Entry Visa

Foreign investors and importers of Bangladeshi products will be issued multiple entry visas. For this purpose, the Ministry of Commerce may send recommendations to the commercial officials of Bangladeshi Missions abroad and to the Ministry of Foreign Affairs.

Foreign Trade Related Training

The Bangladesh Foreign Trade Institute has been established for the purpose of providing training on foreign trade. Through this Institute, adequate number of workshops and seminars will be arranged on different trade related issues, especially on WTO issues.

24

Arrangement and Participation in International Trade Fairs, Single Country Exhibitions and other Market Promotion Activities Abroad.

Participation in international trade fairs, organizing single country exhibitions and other market promotion activities in foreign countries, and single country trade fair jointly organized by government and non-government initiatives will be encouraged.

Strengthening on Export Related Training

The Export Promotion Bureau will organize trainings, seminars and workshops in different parts of the country to inform the exporter of the rules and regulations regarding exports.

Setting up of the Permanent Fair Complex and World Trade Center

In order to expand export trade, initiatives have been taken to establish Permanent Fair Complex and World Trade Centers in Dhaka and Chittagong. The process will be accelerated; and

Assistance will be provided from the World Trade Centers to expand and integrate export trade through market investigation and development of marketing skills.

Both regular and product-specific international standard trade fairs will be organized in Bangladesh so as to invite foreign buyers, popularize export products among them and thus to connect buyers and sellers.

Shipment of the Products

Initiatives will be taken to simplify shipment/ transportation of products. Government will provide necessary support if any exporter wants to charter an aircraft The best use of modern technology and automation system including one stop service will be expanded in order to tariff related services for releasing import and export products.

25

Direct Air-Booking System

In order to ensure that fresh vegetables and other perishable items from the northern part of the country reach their destinations easily without losing their quality, direct air booking facilities for these products from Rajshahi and Syedpur Airport will continue to exist.

Encouragement of Increased Use of Local Raw Materials In order to encourage the increased use of local raw materials by composite knit/ hosiery textile and clothing manufacturing units, bonded warehouse facilities will be progressively reduced.

Establishment of Management Information System (MIS)

An MIS will be initiated at the Ministry of Commerce. All officials have been provided with computer with internet facilities. The Ministry of Commerce has taken the initiative to install a National Trade Portal. All business and trade related websites will be connected to this Portal.

Facilities for Deemed Exports

Deemed exporters will enjoy, like direct exporters, all export facilities including duty-draw-back. Local raw materials used for producing export products, and local raw materials used in industries/ projects funded by foreign investments will be considered as "deemed export; and Initiatives will be taken to consider direct sales in foreign currency without tender as deemed export, and to increase their necessary facilities.

Miscellaneous

A Trade Facilitation Center will be established in Dhaka;

Establishment of special types of warehouse, trading house, export house and trade center will be encouraged;

Initiatives will be taken to increase the capacity and efficiency of Export Promotion Bureau in order settle the export related trade disputes;

26

Product and Service specific Development Institute will be established;

Initiatives will be taken to allow exporters to recruit foreign agencies without prior authorization from Bangladesh Bank;

Initiatives will be taken to identify the benefits for least developed countries as provided by the WTO, and to create awareness about them among the stakeholders;

Exporting institutions will be encouraged to acquire ISO 9000 for quality assurance as well as environmental regulations-related ISO 14000;

A code with details of the export products will be introduced in the import and export related L/C form so as to ensure the use of Harmonized Code as followed by the World Trade Organization; and Financial and revenue related incentives and facilities will be reviewed from time to time and will be updated when needed. Readymade Garments Industry Steps will be taken to shorten the "lead time for export of readymade garments by means of development of port management, simplification of goods unloading, resolving the electricity problem and similar activities; Initiatives will be taken to establish textiles villages in more than one place with adequate infrastructural and utility-related facilities;

Steps will be taken to establish waste water treatment plants in textile villages;

Assistance will be given to improve the work environment in the readymade garments factories, to reduce risks of accident and to fulfill the compliance requirements at the factory level. Besides, an integrated and reasonable compliance regulation will be prepared with the help of all stakeholders;

In order to increase the productivity of the worker and staff of the textile industry, and to diversify products, initiatives will be taken to provide trainings of different tenures to the workers and staff;

27

Emphasis will be given on product diversification by improving the skills of workers and staff, and by providing information and technology of the product markets to the entrepreneurs;

Steps will be taken to send marketing missions abroad, to organize single country textiles and readymade garments fairs, to organize and participate in international trade fairs at home and abroad so as to expand and integrate the markets for readymade garments;

Establishment of backward and forward linkage industries will be encouraged; and

Provisions will be given to produce hand-woven sweaters for export from natural and artificial wool outside the bond areas, subject to the payment by the concerned institution (even if it is without bond license) of an amount of bank-guarantee equivalent to the amount of duty for the imported raw material.

28

Frozen Fish Industry

Cultivation of shrimp and increasing the production of shrimp while maintaining ecological balance will be encouraged;

Venture capital will be given for value added production, processing and export in the frozen food sector;

Initiatives will be taken, with partnership of governmental and non-governmental organizations, to establish seal of quality organization or similar organizations so as to ensure the quality of shrimp and shrimp products;

Necessary steps will be taken to establish Accredited Testing Laboratory with sufficient quality ensure product quality and SPS (Sanitary and Phyto-sanitary) related issues;

In order to improve the quality of shrimps and to protect diseases, steps will be taken for research and for adopting remedial measures, and permission will be granted to establish laboratories at the non-governmental level;

Import of indispensable machinery for quality control will be encouraged so as to strengthen the efforts towards controlling the quality of frozen food. Department of Fisheries and BCSIR will take initiatives to improve their accredited testing laboratory;

In order to reduce the risk of exporting contaminated frozen food, a special traceability system will be developed for all the steps from hatching, production of fish, processing and packaging;

Steps will be taken to send marketing missions abroad, to organize single country frozen food fairs, to organize and participate in international trade fairs at home and abroad so as to expand and integrate the markets for frozen food; All possible steps will be taken to implement the Vision-2015 prepared by Bangladesh Frozen Food and Exporters Association (BFFEA);

A monitoring cell will be formed to control the quality of exportable shrimps;

29

Assistance will be given to diversify fish and frozen fish products; and

Customs Authorities will ensure, before the release of the goods, whether the imported fish-feed is usable or whether there is any contaminated or prohibited substance in it. The Department for Fisheries or the Ministry of Fisheries and Livestock will send the updated list of prohibited substances to the Customs Authorities from time to time.

Handicrafts Made from Bamboo, Cane and Coconut Fibre

Steps will be taken to set up several artisan villages in Dhaka and other places;

Commercial production of bamboo, cane and wood will be encouraged in order to make raw materials for handicrafts easily available;

Export of value added products made from bamboo, cane, water hyacinth and coconut will be encouraged;

Support will be given for design development to bring novelty and diversity to handicraft products. BSIC can take initiatives to introduce a Design Center;

Steps will be taken to send marketing missions abroad, to organize single country handicrafts fairs, to organize and participate in international trade fairs at home and abroad so as to expand and integrate the markets for handicraft products; and

Banglacraft will take necessary steps to improve the quality of handicraft products.

30

Tea Industry

Initiatives will be taken to make non-cultivable lands within the tea estates cultivable;

Steps will be taken to rehabilitate sick tea gardens;

Steps will be taken to provide gas connection in the tea estates to bring about price competitiveness;

All cooperation will be provided for faster completion of leasing procedures for tea estates which have not yet completed such procedures;

Banks will be encouraged to provide loans with soft terms for the modernization of tea factories so as to improve the quality of tea and to increase tea production and thus to maintain existence in the international market;

As a means to reduce poverty, credit as well as other facilities will be provided for the production of tea in small farms;

To encourage the export of packet-tea, duty-draw-back/ bond facilities on FOB price in accordance with the regulations will be given to imported packaging products. Moreover, provisions will be made to allow duty-free import of packaging products through bank guarantee;

Steps will be taken to send marketing missions abroad, and to participate in international trade fairs at home and abroad so as to expand and integrate the markets for Bangladeshi tea;

The possibility of popularizing brand name for marketing Bangladeshi tea will be reviewed. Blending and distribution agencies will be contacted in this regard.

31

Jute Industry For the development and diversification of jute products, an integrated plan of action will be taken to increase the productivity of the jute industry by strengthening research activities and undertaking certain activities such as BMRE for some jute factories.

Necessary steps will be taken to identify the obstacles in exporting jute and jute products to different countries, and to find remedy to this problem;

Initiatives will be taken to popularize, through Bangladeshi Missions abroad, the use of jute by emphasizing the environment-friendly qualities of jute;

To create markets, cooperation will be provided to entrepreneurs for participation in international fairs and exhibitions; and

Government support will be provided in establishing design development sector so as to bring diversity to jute products.

Leather Industry Weak leather industries will be given credit rescheduling facilities through policy support;

Initiatives will be taken to increase export through increased competitiveness of leather and leather products in the international market by introducing productivity increase and product development activities;

Local production of import-substitute necessary chemicals for leather processing, different components for footwear and different accessories for leather industry will be encouraged. Foreign investment or joint investment will be encouraged in this regard;

In order to reduce losses during leather collection, preservation and processing levels, different awareness building initiatives will be taken regarding the removal of the skin from the animal, preservation, transportation etc. Separate training courses and workshops for butchers and leather traders will continue to take place.

32

Several steps will be taken by the Leather Sector Business Promotion Council for the overall development of this sector , and business entrepreneurs and exporters will be affiliated to these activities;

Foreign investments and joint venture investments in leather products and footwear industry will be encouraged;

The existing bond facilities will be further simplified and updated for 100% export-oriented leather industries;

Existing duty and tax return procedures will be simplified; For the development and diversification of leather products, an integrated plan of action will be taken to increase the productivity of the leather industry by strengthening research activities and undertaking certain activities such as BMRE for sick leather industries.

To create markets, cooperation will be provided to entrepreneurs for participation in international fairs and exhibitions;

Initiatives will be taken to establish slaughter houses in the major cities of the country with the help of divisional municipalities;

All possible cooperation will be rendered for transferring the factory unit in the under-construction Tannery Village in Savar;

Initiatives will be taken to establish a centralized waste management plant in the Tannery Village in Savar, and installation of clean technology will be encouraged;

The initiative to establish modern chemical laboratory and service centers to ensure the quality of leather and leather products will be implemented;

Steps will be taken to provide trainings for entrepreneurs at home and abroad so as to get rid of the management crisis in the leather industry;

33

Cattle farming and import of raw hide/ skin during lean season will be encouraged to make raw hide/ skin easily available;

Lower use of nitrogen and sodium chlorate in the leather industry will be encouraged;

In order to increase the sales negotiation and marketing capacity of tannery owners, cooperation will be rendered to improve the business relations between tannery owners and agents;

While transferring factory units from Hajaribag to Savar Tannery Village, tannery owners will be cooperated in their plans to produce finished leather from crust leather.

Initiatives will be taken to make the design development center more dynamic so as to bring diversity to footwear and leather products;

For the development and betterment of export-oriented leather products, several steps including the establishment of design and fashion institutes and modernization of the Leather Technology College will be taken;

Necessary steps will be taken to establish backward/ forward linkage industries for the production of spare parts used in the production of leather products including footwear; and

Necessary measures will be taken to ensure the easy availability of chemicals and other materials for the leather industry.

Other Sectors

Contract farming will be encouraged for the production of exportable vegetables;

Governmental Khas (Government owned) land, if available, will be allotted to interested exporters for the production of vegetables and fruits, and establishment of export villages will be encouraged;

Production of modern and scientific packaging materials necessary for the export of vegetables, foliage and fruits will be encouraged;

34

Cultivation, production and exportation of potato will be encouraged;

Training system for the producers and exporters of vegetables, flowers-foliage and fruits will be continued;

Efforts will be made to commercialize the agricultural sector by assisting the production of exportable agricultural production, processing, marketing and other related activities;

Optimal use of ICT will be ensured in the country for the development of information and communication system;

In order to expand exports from the IT sector, communication with Bangladeshis living abroad will be strengthened, and the possibility to set up marketing center abroad will be reviewed; Efforts towards the establishment of an IT Village for the purpose of software production and export will be strengthened;

Necessary measures will be taken to connect the sub-marine fiber optic cable with the national IT backbone, to make high speed data transmission line easily available, and to strengthen the regional base of the IT sector;

Measures will be taken to provide facilities to develop the ICT sector through the ICT Business Promotion Council;

The possibility to introduce passbook/ alternative system for the import of raw materials for the pharmaceutical sector will be reviewed;

Considering the export potentials of the pharmaceuticals sector, initiatives will be taken to establish Active Pharmaceutical Ingredient Park and Common Lab in Dhaka and Chittagong; A Light Engineering Cluster Village will be established near Dhaka for the development of the light engineering sector;

35

A modern laboratory and common facilities center will be established for the development of the light engineering sector; An Agro-Products Business Promotion Council will be formed to improve and control the quality of agriculture and agricultural products;

Production and export of herbal plants, medicine and herbal products will be encouraged and with a view to this steps will be taken to establish necessary accredited laboratory;

Herbal Product Development Council will be constituted for over all development of herbal product sector;

For ship building industries service charges including bank guarantee will be kept minimum as directed by Bangladesh Bank;

Initiatives will be taken to establish appropriate laboratory for testing the plastic products and issuing certificate thereby;

Import of raw materials for jewelleries will be encouraged for the expansion of export of gold and silver jewelleries;

In accordance with the SRO No. 18/Law/2006 dated 7 February 2006, business entrepreneurs and exporters will be given necessary co-operation with regard to encouraging them to export diamond after processing the imported uncut diamond;

Assistance and encouragement will be provided to produce and export of toys and jewelleries.

36

List of Export-Prohibited Products

All petroleum and petroleum products except the ones produced from natural gas (such as naphtha, furnace oil, lubricant oil, bitumen, condensate, MTT and MS). However, this prohibition will not apply if foreign investment companies want to export their share of petroleum and LNG under the Product Sharing Contracts. A foreign country-bound passenger can carry, in excess of his or her personal goods, US$ 200 worth of goods, which are not export-prohibited or belonging to the conditional export products, as accompanied baggage. In this case, facilities/incentives like duty draw back adjustment, subsidy etc. will not be awarded. Jute and `Shan seeds Wheat Any kind of live animal, animal organs or hide/ skin of wild animals as mentioned in the Wildlife (Protection) Ordinance 1973 (Presidents Ordinance No. 23, 1973, Revised in 1974), except the species mentioned in the first list of the Ordinance.

Fire arms, ammunition and related materials.

Radioactive materials.

Archeological Relics.

Human skeleton, blood plasma, or any product produced from human or human

blood.

All types of pulses, except processed ones.

All shrimps except chilled, frozen and processed ones (SRO No. 60-L/76 date 14- 2-76).

Onion (SRO No. 250-L/77, date 13-8-77).

Seawater shrimps of 71/90 count or smaller, except the species Harin/ harina and Chaka including sea species PUD, Cooked shrimp (SRO No. 345-L/83, date 20-10-83)

37

Cane, wood, wood logs/ thick pieces of wood (except handicrafts made from these materials).

All types of frogs (alive or dead) and frog legs.

Raw and wet blue Leather.

List of Conditional Export Products

Urea Fertilizer:- Upon permission from the Ministry of Industry, Urea fertilizer produced in all factories except KAFCO can be exported.

Upon no objection from the Ministry of Information, entertainment programs, music, drama, films, documentary films etc can be exported in the form of audio cassettes, video cassettes, CDs, DVDs etc;

Upon no objection from the Energy and Mineral Resource Division, petroleum and petroleum products which are produced from natural gas (such as naphtha, furnace oil, lubricant oil, bitumen, condensate, MTT and MS) can be exported;

Chemical products enlisted in schedule 1, 2, 3 of Chemical Weapons (Control) Act-2006 will be controlled (exported or prohibited to export) by section-9 of the act.

38

2.3 Import Procedure

With the globalization of world economy and consequent upon comfortable balance of payment position Government of Bangladesh has liberalized the Import Policy and practically all Controls on imports have been lifted. Imports may be made freely except to the extent they are regulated by the provisions of Import Policy or by any other law for the time being in force.

Foreign Trade(Regulation)Rules, 1993, which inter alia, provide for grant of special licence, application for grant of licence, fee, conditions for licences, refusal of licence, amendment of licence, suspension of a licence, cancellation of licence, declaration as to the value and quality of imported goods, declaration as to the Importer- Exporter Code number, utilization of imported goods, provisions regarding making, signing of any declaration/statement or documents, power to enter the premises and inspect, search and seizure of goods, documents, things and conveyance, settlement, confiscation and redemption and confiscation of conveyance.

The IEC is likely to be granted within 3 days of the receipt of the complete application and requisite documents.

39

How to fill up IEC application: Application form should be made in the prescribed form in duplicate along with the above enclosures, mentioned against serial 1 to 8 of above paragraph, also in duplicate. The form should be neatly typed/handwritten in bold capital letters only. Each copy of the application form should be signed in ink by the authorized person. Items of information relevant to applicant should only be filled and remaining items may be marked not applicable. Modification of particulars of the applicant should also be furnished on this form by filling the relevant items.

However, in case an IE Code holder no longer wishes to operate under the allotted code number, the matter should be brought under the notice of the Regional Licensing Authority to make the Code number inoperative.

Procedure to be followed for grant of import license: An application for grant of an import license or CCP for import of the items mentioned as restricted for import in ITC(HS) Classification of Export and Import items may be made to the regional licensing authority concerned.

Fees for License Application: Every application for import license or CCP should be accompanied by 2 copies of a bank receipt from the Central Bank of India or a Bank Draft from any Bank indicating the deposit in accordance with the prescribed scale of fees.

The application fee shall be deposited: By way of deposit in an authorized branch of Central Bank of India indicating the Head of Accounts 1453 Foreign Trade and Export Promotion Minor Head 102, Import License Application Fee. The Bank receipt must show the name of the department viz. "Director General of Foreign Trade". The bank receipt should be drawn in favour of Pay & Accounts Officer concerned. Such fees can also be deposited with Indian Missions abroad.

Or, Crossed DD on a scheduled bank for the requisite amount should be made in favour of the concerned licensing authority.

40

Validity of License: Export Promotion Capital Goods License validity 24 months Customs Clearance Permit " 12 months DEPB months Advance License/Special Imprest License For Project/Turnkey Project "18 months or co-terminus with the contracted duration of the Project " 12

Disposal period for import application: Provided the application is complete in all respects along with prescribed documents, the applicant-importer can expect the disposal in:

IEC No. - 3 working days Duty free license where input-output norms are notified - 5 working days Duty free license where input-output norms are notified but cases are to be placed before ALC -15 working days Duty free license where input-output norms are not notified, EPCG licenses/export licenses/export licenses/specific import licenses - 15 working days Revalidation of license and extension of export obligation period by RLA - 5 working days Acceptance of Bank Guarantee/Legal undertaking - 3 working days Redemption of Bank Guarantee/Legal undertaking/Endorsement of Transferability - 10 working days

Issuance/renewal of Export House/Trading House/Star Trading House/Super Star Trading House - 15 working days

41

Amendment of any category of license - 5 working days SIL - 7 working days Fixation of Standard input-output norms - 45 working days DEPB - 5 working days All licenses falling under Chapter 8 - 5 working days Miscellaneous - 15 working days Fixation of deemed exports drawback rate - 45 working days

Counter Assistance may also be availed of, for amendments of minor nature/enquiries. Applications in such cases will be received in the licensing offices at the counter.

Importer's own Identity Card: An application for issuance of an Identity Card may be made in the prescribed form. In case of loss of an Identity Card, a duplicate card is issued.

Export Promotion Capital Goods Schemes: Capital goods including jigs, fixtures, dies and moulds may be imnported at a concessional rate of customs duty as per table given below. Subject to an export obligation to be fulfilled over a period of time. In addition spares up to 20 per cent of the cost insurance and freight (CIF) value of the capital goods may also be imported under the scheme.

Under this scheme Customs duty is 5% if the export obligation is 5 times the CIF value of the capital goods or 4 times the CIF value of capital goods on NEF basis. The period of fulfillment of the export obligation is 8 years reckoned from the date of issuance of licence.

42

Advance Release Order: A duty free license holder except Advance Intermediate License Holder intending to source the inputs from indigenous sources/canalising agencies/EOUs/EPZ/EHTP/STP units in lieu of direct imports has the option to source them against Advance Release Order denominated in foreign exchange. In such cases, the license is invalidated for direct import and permission in the form of ARO is issued which will entitle the supplier to the benefits of deemed exports.

Back to back inland letter of credit: This is an alternative to ARO. For this the duty free license holder intending to avail such facility may approach a bank for opening an inland L/C in favour of an indigenous supplier. Before this the bank will ensure that necessary bank guarantee or Letter of Undertaking has been executed by the license holder and endorsement to this effect has been made on the License. The indigenous supplier may supply the goods on the strength of L.C. opened in his favour . For the purpose of claiming Deemed Export benefits, an indigenous supplier shall produce the copy of the L/C together with a photocopy of the Duty Free License, duly endorsed by the bank concerned and the said documents shall for all purposes be deemed to be an ARO.

Duty Entitlement Pass Book scheme: It aims at neutralising the incidence of customs duty and surcharge thereon on the import content of the export product. This neutralisation is provided by way of grant of duty credit on the deemed import content in the export product as per Standard input output norms and considering the value addition achieved. This scheme is allowed to be operated on pre and post export basis by a manufacturer exporter and merchant exporter. The scheme allows exporter to claim credit of customs duty at a specified percentage of the f.o.b. value of the exports made in freely convertible currency. DGFT issues public notice featuring eligible products along with the credit rates under this scheme. Although items outside the restricted list can be exported without

43

Customs duty, DEPB holder may pay additional customs duty in cash, if any. (vide MoF Customs Notification No. 34/97 - Cus. Dated 7.4.1997 and Circular No. 10/97-Cus. Dt.17.4.1997). Third party exports are also permissible for grant of credit under this scheme and DEPB is valid for 12 months from the date of issue.

Special Import License(SIL): issued to Export/Trading/Star Trading/Super Star Trading houses; Manufacturers/processors with the quality certification from ISO,HACCP,WHO- GMP or SSI CMM level 2 and above certification; EOUs/EPZs ; Deemed exporters; exporters of telecom and electronic equipments; small scale exporters(certified); service providers and other exporters. This provision has been withdrawn from 31.03.2000. No SIL licenses will be issued for exports made after 31.03.2000.

Diamond, Gem & Jewellery Export Promotion Scheme: Exporters of gem and jewellery are eligible to import their inputs by obtaining Rep. License and diamond imprest license from the licensing authority. Exporters of gold/silver/platinum jewellery and articles thereof may import their essential inputs e.g. precious metals and stones in accordance with the procedure specified in this regard.

100% EOU/EPZ/FTZ Scheme -This means an industrial unit offering its entire production, excluding rejects and items otherwise specifically permitted to be supplied to the domestic tariff area(DTA), for exports. Such units may be set up under the EOU/EPZ scheme. While EOUs can be set up anywhere in India subject to certain locational conditions, units in EPZ/FTZ can be set up in specific areas separated from the DTA by physical barriers.

44

Hints/Suggestion for finalization of import order/contract: Proper selection of the Commodity will depend up on Various Commercial and legal Considerations including the regulations Contained in the Current Import Export Policy, Procedure, while selecting the product, particularly for Commercial purposes one should know the export regulations in the exporting Countries.

Role of Overseas Suppliers' Agents in Bangladesh Some overseas suppliers have appointed their agents in Bangladesh. These agents procure orders from the Bangladeshi parties and arrange for the supply of goods from their principal abroad. It is advisable to import through such agents as they can be readily contacted in case of any difficulty with regard to quality of goods, payment and documentation, etc.

Finalising the Terms of Import This is an important subject and should be handled with extreme care and caution. It is advisable that before finalising the terms of Import Order, you should call for the samples or catalogue and other relevant literatures and the specification of the items to be imported. Import of samples of goods is exempt from import duties under 'Geneva' Convention of 7th November, 1952. Samples are subject to re-export and other conditions as specified in the Geneva Convention. Besides, vide Customs Notification No. 154/94 dated 13.07.1994, commercial samples brought into India as personal baggage by bona fide commercial travellers and businessmen or imported into Into India by post or by air are exempt from the customs duty. Similarly, vide Notification No. 154/94 dated 13.07.1994, prototype of engineering goods when imported into India as samples for executing or for use in connection with-export orders are exempt from customs duty. Likewise, the Central Government has exempted bona fide commercial samples and prototype of engineering goods when imported into India by post or by air or by courier service by manufacturers of export goods.

45

Import Contract should be carefully and comprehensively drafted incorporating therein precise terms, all relevant conditions of the trade deal. There should not be any ambiguity regarding the exact specifications of the goods and terms of the purchase including import price, mode of payment, type of packaging, port of shipment, delivery schedule, etc. The different aspects of an import contract are enumerated as under some of which may be relevant and other may not be:

Product, Standards and specifications. Quantity. Inspection. Total value of the Contract. Terms of Delivery. Taxes, Duties and Charges payable at Exporting Country and payable in India on importation. Period of Delivery/Shipment. Packing, Labelling and Marking. Terms of Payment-Amount, Mode & Currency. Discounts and Commissions. Licenses Insurance. Documentary Requirements. Guarantee. Force Majeure or Excuse for Non-performance of Contract. Remedies. Arbitration. and Permits.

46

Mode of Pricing and INCO TERMS While finalising the terms of import contract, the Importer, should, inter alia, be fully conversant with the mode of pricing and the manner of payment for the imports. As regards mode of pricing, the overseas supplier normally quote the terms prevailing in international trade.

The importer for his benefits should know the meaning of the technical terminology. To avoid ambiguity in interpretation of such terms, International Chamber of Commerce, Paris, Has give detailed definition of a few standard terms popularly known as 'INCO TERMS'. These terms have almost universal acceptance and are explained below:

Ex-work 'Ex-work' means that the seller's responsibility is to make the goods available to the buyer at works or factory. The full cost and risk involved in bringing the goods from this place to the desired destination will be borne by the buyer. This terms thus represents the minimum obligation for the seller. It is mostly used for sale of plantation commodities such as tea, coffee and cocoa.

Free on Rail (FOR)/Free on Truck (FOT) These terms are used when the goods are to be carried by rail, but they are also used for road transport. The seller's obligations are fulfilled when the goods are delivered to the carrier.

Free Alongside Ship (FAS) Once the goods have been placed alongside the ship, the seller's obligations are fulfilled and the buyer notified. The buyer has to contract with the sea carrier for the carriage of the goods to the destination and pay the freight. The buyer has to bear all costs and risks of loss or damage to the goods hereafter.

47

Free on Board(FOB) The sellers's responsibility ends the moment the contracted goods are placed on board the ship, free of cost to the buyer at a port of shipment named in the sales contract. 'On board' means that a Received for Shipment' Bill of Lading is not sufficient. Such B/L if issued must be converted into 'Shipped on Board B/L' by using the stamp 'Shiped on Board' and must bear signature of the carrier or his authorised representative together with date on which the goods were 'boarded'.

Cost and Freight (C & F) The seller must on his own risk and not as an agent of the buyer, contract for the carriage of the goods to the port of destination named in the sale contract and pay the freight. This being a shipment contract, the point of delivery is fixed to the ship's rail and the risk of loss or of damage to the goods is transferred from the seller to the buyer at that very point. As will be seen though the seller bears the cost of carriage to the named destination, the risk is already transferred to the buyer at the port of shipment itself.

Cost Insurance Freight (CIF) The term is basically the same as C & F but with the addition that the seller has to obtain insurance at his cost against the risks of loss or damage to the goods during the carriage.

Payment against imports Payment under better of Credit is a universally accepted mode of payment. A Letter of Credit is a Signed instrument and an undertaking by the banker of the buyer to pay the seller a certain sum of money on presentation of documents evidencing Shipment of Specified goods subject to Compliance with the stipulated terms and Conditions.

Letter of Credit vs Bank Gaurantee A letter of credit differs from a bank guarantee. An issuing or confirming bank's obligation is independent of, and unqualified by, the contract of sale under the transaction. A commercial credit is neither a performance bond, nor it is a guarantee of the quantity or quality of the goods shipped.

48

Parties to a Letter of Credit:

Following persons are generally parties, to a letter of Credit:

Benificiary : The exporter of goods in whose favour the L/C has been established. Customer/importer : The person we intends to import the goods and instructs bank to established Letter of Credit.

Issuing Bank: The Banker in the importers Country who opened the L/C. Correspondent Bank or Advising Bank: The banker in the exporters country, who is authorised by the issuing bank to advise the beneficiary of the Credit and to effect such payment or to accept and pay such bills of exchange or to negotiate against Stipulated documents and on Compliance of Stipulated terms and condition specified by the importer on the exporter.

Confirming Bank: The banker in the exporters(beneficiary) country, who at the desire of the beneficiary adds confirmation to the letter of Credit so that beneficiary can get payment without recourse from the Confirming bank. The Confirming bank may be correspondent bank itself or some other bank. Generally following types of Letter of Credit are in operation. Revocable or Irrevocable Letters of Credit Confirmed Credit Transferable Credit With or without Recourse Credit Revolving Letter of Credit Transit Credit

49

Checklist for Document (received under L/C) scrutiny:

General-check whether all documents in full sets as per L/C terms have been received Documents had been presented before the expiry date All the documents are dated subsequent to the date of issue of the L/C Cancellation/overwriting in all documents are authenticated Bills of Exchange-check whether drawn on the person indicated in the L/C and duly signed up by the beneficiary of the credit Drawing is within L/C amount and in the same currency as per the L/C The amounts in words and figures are the same and identical with the amount stated in the invoice

Superscription, regarding drawing under L/C has been made and the Bill must have been issued stamped.

Invoice- check whether invoice: Is made out in the name of the person who had opened the L/C Quantity, unit price and value are quoted as per L/C Whether unit price and value are quoted as per L/C The description of the merchandise corresponds to the description in the L/C The arithmetical calculations are correct Import license/OGL/Contract No./Order No./Indent No. mentioned as per L/C No charge other than stipulated in L/C in included Additional copy for Exchange Control purposes is submitted The date and no. of the License/OGL indicated

Bill of lading is submitted within 21days from the date of shipment, if no specific time is between the date of issue and expiry of L/C

50

Certificate of origin It is issued by the authority stipulated in the L/C The description of goods agrees with that in the invoice

Checking other documents All other documents stipulated in the L/C are verified

Time limit for import remittance: The remittance against imports should be completed not later than 6 months from the date of shipment. Accordingly, deferred payment arrangements involving payments beyond 6months are not permissible without approval of RBI/Gol.

Postal Imports Remittances against bills received for collection in respect of imports by post parcel may be made by authorised dealers, provided the goods imported are such as are normally despatched by post-parcel. In these cases the relative parcel receipts must be produced as evidence of dispatch through the post and on undertaking to submit importers should furnish post parcel wrappers within three months from the date of remittance.

If the parcel has already been received in India, the parcel wrapper should be produced in support of the remittance application. Where goods to be imported are not of a kind normally imported by post parcel or where authorised dealer is not satisfied about the bona fides of the applications the case should be referred to RBI for prior approval with full particulars together with relative parcel receipts/or wrappers.

Customs Clearance of imported goods Customs Authorities and the Clearing agents play the key role in the import of goods. All goods imported into India have to pass through the procedure of Customs clearance as they cross Indian border. The goods are examined, appraised, assessed, evaluated and then allowed to be taken out of charge of the Customs for use by the importer. The entire process of customs clearance is complex and to carry out this procedure smoothly, the help of accredited customs clearing agents has to be taken.

51

Custom Authorities The customs administration vests in CBEC for implementing the provisions of the Customs Act.1962. There are two main wings of Customs House. In the 'Appraisement' wing the job of collection of revenue is assigned, while the 'Preventive' one aims at prevention of smuggling.

The Customs authority functions under the Ministry of Finance (MoF) with the Central Board of Excise & Customs at the apex. The board is headed by a Chairman and assisted by Members. The Member (Customs) looks after the following matters:

Customs Law and its interpretation and application, policy and broad procedures(Other than those concerning anti-smuggling) Enforcement of Import Export prohibitions Foreign Travel and Cases on imports and exports Baggage concessions and rules; Customs Valuations; Tariff Classification and Tariff advices;Customs procedures, Customs House Agents Regulations; Warehousing, inland Bonded Warehouses; FTZs, EPZs, 100% EOUs etc. Matters relating to Drawback; Customs Co-operations Council, GATT and ESCAP and international talks and agreements, organisations concerning customs;

52

Customs Duty Assessment: The assessment of goods to duty is done on the basis Whether the goods covered by the B/E are such as are regularly imported, or are required to be tested by the customs house laboratory for fulfilment of license conditions, or The appeaiser desires to see the representative sample before completing the bill of entry for the purpose of verification of the value/description, etc. or The required document is not forthcoming.

Customs Duty Rates: When the import invoice is in any currency customs fix the exchange rate for conversion into the Indian rupees at a predetermined rate which is published in customs houses on a daily basis.

Imports from specified countries enjoy preferential duty. This is generally the result of special status accepted under bilateral trade agreements or otherwise. However, the incidence of customs duties on various goods imported are obtained as follows:

Total duty payable=(Landed cost including CIF of the item concerned + Basic customs duty under the Customs Tariff Act + Surcharge thereon + Additional duty + Special Additional duty as per Finance Act).

Getting Import License checked-The appraising official checks the license for their description, value, validity period, importers name, etc. It is for the importer to establish that the goods satisfied the description in the license unless he is able to establish the fact he would not be entitled to lawful import thereof. If the appraising official is satisfied that the license is in order, he will send the license with B/E to license section for registration and audit. The department maintains a register for every license accepted and debited showing the last balance on the license.

53

Bill of Entry-This is a document on the strength of which clearance of imported goods can be effected. Its form has been standardised by the Central Board of Excise and Customs. All goods discharrged from a vessel, from foreign or coastal Ports, are cleared on this prescribed forms presented under the B/E Regulations, 1971.

It should be presented for 'noting' in the import dept. of the customs house after theimport General Manifest which gives a detailed description item wise of the goods brought by the concerned vessel is filed by the steamer Agent.

Procedure to be followed for grant of import license: An application for grant of an import licence or CCP for import of the items mentioned as restricted for import in ITC(HS) Classification of Export and Import items may be made to the regional licencing authority concerned.

Warehousing of Imported goods An importer may not like to clear or may have certain problems in clearing the imported goods immediately on payment of duty for home consumption. In that case the importer can deposit the goods in a Public or Private Bonded Warehouse, provided he is satisfied with the arrangement. Thus, the importer can avail the facility of deferring payment of duty on imported goods pending their actual clearance. Towards this the importer should file a set of yellow coloured B/E known as warehousing B/E.

54

Self-Assessment Scheme: Applicable to goods without any ITC license/CCP or any restrictions thereof. The objective is to enable importers effecting repetitive imports of some commodities to assess their own B/E and determine their duty liability and pay the duty accordingly. Any importer, including Govt. bodies and PSUs, with proven identity and track record can avail of this.

This process does away with the procedure of processing, and the time consumed by the appraising and licensing sections.

When the duty is paid, the goods would be cleared in the docks, provided the goods are partly examined and payment of duty verified.

Green Channel : This fast-track facility has been introduced to simplify and expedite the process of cargo clearance. Instead of going in for a hundred per cent examination only a part of the cargo is checked. Bulk importers, Govt. Depts. & PSUs, consignment of a single product of well known brand name and importers with identified and unblemished track record are allowed to avail this facility.

55

Facility of import of restricted items by service providers: Service providers shall be entitled to import restricted items up to 10% of the foreign exchange earned by them during the preceding licensing year for import of essential goods related to their line of business, including office and other equipment required for their own professional use.

Import of Samples Bona fide technical and trade samples of items, even those in the restricted in ITC(HS)Classifications of Export and Import items is allowed without a license for a value notmore than Rs. 1 lakh(CIF) in one consignment save vegetable seeds, bees and new drugs by any importer. Tea samples not above Rs.2000 (CIF) in one consignment is allowed without a license by any person connected with Tea industry.

Prototype import This may be allowed on payment of duty without a license to an actual user, industri;al ecgaged in the production of or hgaving industrial license/LoI or research, as the case may be, provided the number of items imported does not exceed 10 in number in a year.

Passenger Baggage Under the Rules various kinds of articles can be imported upto certain value limit depending upon the duration of stay of the passenger abroad and on the basis of Resident and Non-Resident Status of the passenger.

56

2.4 Export and Import Procedure in apparel industry

It is essential that a person engaged in international trade be aware of the various procedures involved. The business of exports is heavily document-oriented & one must get acquainted with the entire procedure. Failure to comply with documentary requirement may lead to financial loss.

Pre-Shipment Procedure

On receiving the requisition & purchase order from merchant, documentation department issues an invoice. Two invoices are prepared i.e. commercial invoice & custom invoice. Commercial invoice is prepared for the buyer & Custom invoice is prepared for the Custom authorities of both the countries. Packing list is prepared which details the goods being shipped.

GSP certificate is prepared if the consignment is exported to EU or countries mentioned in the GSP list. Buying house inspects the goods & issues an inspection certificate.

Certificate of origin is also issued and attached, if required.

Following documents are given to Customs for their reference:

Custom Invoice

Packing list

IEC certificate

57

Purchase Order or L/C, if required.

Custom annexure On receipt of above documents, customs will issue clearance certificate. After custom clearance a set of documents with custom clearance receipt are sent along with the consignment to the forwarder. Forwarder books the shipment & as per the size of the cartons calculates CBM & decides which container to be used. Following documents are sent to buying house for their reference, as per buyers

requirement: Invoice

Packing List

GSP (if exports to Europe)

Certificate of Origin (if required)

Wearing Apparel sheet

A copy of FCR/ Airway Bill/ Bill of Lading

Buying house then intimates the buyer about the shipment & gives the details regarding it. Buying house will send a set of these documents to the buyer. Buyer collects the consignment from the destination port by showing the following documents: o Invoice o Packing List o Bill of lading/ FCR/ Airway Bill On shipment of goods, exporter will send the documents to the importers bank.

58

Post-Shipment Procedure

A foreign buyer will make the payment in two ways: TT ( telegraphic transfer) i.e. Wire Transfer (Advance payment, as per the clause 50% advance & remaining 50% on shipment) Letter of Credit

If the payment terms are a confirmed L/C then the payment will be made by the foreign bank on receiving the following documents: Invoice

Packing list

B/L

Any other required by the buyer or the country of import.

The payment terms can be: At Sight

Within 15 days from Bill of Lading or Airway Bill date.

Within 30 days from Bill of Lading or Airway Bill date.

Within 60 days from Bill of Lading or Airway Bill date.

Within 90 days from Bill of Lading or Airway Bill date.

59

After shipment, exporter sends the documents to the buyers bank for payment. As the buyers bank receive the documents it will confirm with the buyer for release of payment. On confirmation, it will make the payment in the foreign currency. The transaction will be Bank to Bank. The domestic branch will credit the exporters account, as against the respective purchase order or invoice, in Indian rupees by converting the foreign currency as per the current bank rate. If the payment is through wire transfer, the payment will be made as per the terms agreed by the exporter (Advance payment, as per the clause 50% advance & remaining 50% on shipment).

60

Export Documents: An export trade transaction distinguishes itself from a domestic trade transaction in more than one way. One of the most significant variations between the two arises on account of the much more intensive documentation work. The documents mentioned in the pre & post shipment procedure are discussed below: 1. Invoice: It is prepared by an exporter & sent to the importer for necessary acceptance. When the buyer is ready to purchase the goods, he will request for an invoice. Invoice are of 3 types: a. Commercial invoice: It is a document issued by the seller of goods to the buyer raising his claim for the value of goods described therein, it indicates description of goods, quantity, value agreed per unit & total value to be paid. Normally, the invoice is prepared first, & several other documents are then prepared by deriving information from the invoice. b. Consular invoice: It is certification by a consul or Government official covering an international shipment of goods. It ensures that exporters trade papers are in order & the goods being shipped do not violate any law or trade restrictions. c. Customs invoice: It is an invoice made on specified format for the Custom officials to determine the value etc. as prescribed by the authorities of the importing country.

2. Packing list: It shows the details of goods contained in each parcel / shipment. Considerably more detailed and informative than a standard domestic packing list, it itemizes the material in each individual package and indicates the type of package, such as a box, crate, drum or carton. Both commercial stationers and freight forwarders carry packing list forms. 3. Certificate of Inspection: It is a type of document describing the condition of goods and confirming that they have been inspected. It is required by some purchasers and countries in order to attest to the specifications of the goods shipped. This is usually performed by a third party and often obtained from independent testing organizations.

61

4. Certificate of Origin: 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. 5. GSP: It is Generalized System of Preference. It certifies that the goods being

exported have originated/ been manufactured in a particular country. It is mainly useful for taking advantage of preferential duty concession, if available. It is applicable in countries forming European Union. 6. IEC Certificate: It is an Import-Export Code Certificate issued by DGFT, Ministry of Commerce, Government of India. It is a 10 digit code number. No exports or imports will be effected without the IEC code. It is mandatory for every exporter. 7. Wearing Apparel Sheet: It is like a check list which gives the detail regarding the content & design of the garment packed.

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

9. Airway Bill: An airway bill, also called an air consignment note, is a receipt issued by an airline for the carriage of goods. As each shipping company has its own bill of lading, so each airline has its own airway bill. Airway Bill or Air Consignment Note is not treated as a document of title and is not issued in negotiable form.

62

10. 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.

11. 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.

12. Letter of Credit: 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). A letter of credit can be defined as an undertaking by importers 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.

63

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.

Name and address of the bank establishing the letter of credit

letter of credit number and date

The letter of credit is irrevocable

Date of expiry and place of expiry

Value of the credit

Product details to be shipped

Port of loading and discharge

Mode of transport

Final date of shipment

Details of goods to be exported like description of the product, quantity, unit rate, terms of shipment like CIF, FOB etc. Type of packing

64

Documents to be submitted to the bank upon shipment

Tolerance level for both quantity and value

Steps in an Import Transaction with Letter of Credit

The importer includes a purchase contract for the buying of certain goods. The importer requests this bank to open a LC in favor of his supplier. The importers bank opens the LC as per the application. The opening bank will forward the original LC to the advising bank. The advising bank, after satisfying itself about the authenticity of the credit, forwards the same to the exporter. The exporter scrutinizes the LC to ensure that it confirms to the terms of contract. In case any terms are not as agreed, the importer will be asked to make the required amendments to the LC. In case the LC is as required, the exporter proceeds to make arrangements for the goods. The exporter will effect the shipment of goods. After the shipment is effected, the exporter will prepare export documents, including

65

Bills of Exchange. The exporters bank (negotiation bank) verifies all the documents with the LC. If the documents are in the conformity with the terms of LC and all other conditions are satisfied, the bank will negotiates the bill. The exporter receives the payment in his bank account. The LC Opening bank (Importers Bank) receives the bill and documents from the exporters bank. The importers bank checks the documents and informs the importer. The importer then accepts/pays the bill (This would depend on the terms, Delivery against Acceptance or Delivery against Payment). On acceptance/ payment, the importer gets the shipping documents covering the goods purchased by him. The LC issuing bank reimburses the negotiating bank, the amount, if the documents are found in order.

Terms of Shipments Incoterms

The INCOTERMS (International Commercial Terms) is a universally recognized set of definition of international trade terms, such as FOB, CFR & CIF, developed by the International Chamber of Commerce (ICC) in Paris, France. It defines the trade contract responsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving tool. The exporter and the importer need not undergo a lengthy negotiation about the conditions of each transaction. Once they have agreed on a commercial terms like FOB, they can sell and buy at FOB without discussing who will be responsible for the freight, cargo insurance and

66

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.

More Clarification on Incoterms

EXW (At the named place)

Ex Works: Ex means from. Works means factory, mill or warehouse, which are the sellers premises. EXW applies to goods available only at the sellers premises. Buyer is responsible for loading the goods on truck or container at the sellers premises and for thesubsequent costs and risks. In practice, it is not uncommon that the seller loads the goods on truck or container at the sellers premises without charging loading fee. 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 (At 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.

67

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 the term FOB in the air shipment.

FAS (At 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 sellers 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 (At 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 sellers 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 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

68

goods are delivered to the buyers premises which may include the import custom clearance and payment of import customs duties and taxes at the buyers 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 (At 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.

CIF (At named port of destination) Cost, Insurance and Freight: The cargo insurance and delivery of goods to the named port of destination (discharge) at the sellers 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 Pusan 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 (At 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 (At the named place of destination)

69

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

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

DES (At 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. DEQ (At the named port of destination Delivered Ex Quay: The delivery of goods to the Quay (the port) at the destination on the 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. DDU (At the named point of destination) Delivered Duty Unpaid: The delivery of goods and the cargo insurance to the final point of destination, which are 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.

DDP (At 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.

70

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 sellers 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.

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 sellers and buyers obligations. The respective obligations of both parties have been grouped under up to 10 headings where each heading on the sellers 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 partys respective obligations under each Incoterms.

71

2.5 Import and Export Documentation:

Unless otherwise specified, all imports transacted through a bank require a Letter of Credit Authorization (LCA) Form. Obtaining an LCA is not onerous, and many of the documents required for submission by importers can be kept on file with their banks. At present, there is no lack of foreign currency for import transactions. However, as a safety cushion against currency fluctuation, banks prefer to source foreign currency for L/Cs over $ 500,000 from the central bank. Typically, 1-2 days is required to obtain registration from the central bank. Unless otherwise specified, all imports must be made by opening an Irrevocable letter of credit. Import against an LCA may be made without opening an L/C in the following areas: --import of books, journals, magazines, and periodicals on sight draft of issuance bill basis; --import of any permissible item for an amount not exceeding $5,000 only during each local fiscal year against remittances made from Bangladesh; --imports under commodity aid, grant or such other loan for which there are specified procurement procedures for import of goods without an L/C; --imports of "International Chemical References" through bank drafts by recognized pharmaceutical (allopathic) firms on the approval of the Director, Drug Administration, for the purpose of quality control of their products. Importers must submit to their nominated banks the following documents along with the LCA: --L/C application form duly signed by the importer; --indents for goods issued by indentor or a proforma invoice obtained from the foreign supplier; --insurance cover note. Foreign firms are allowed to import permissible commercial items against prior permission from the Chief Controller of Import and Export and need to provide following documents: --photocopy of the valid Import Registration Certificate; --photocopies of invoices, bill of lading, and import permit duly certified by the bank;

72

--original or copy General Index Register (GIR) certificate from Income Tax Authority; --certified copy of the last income tax assessment order; and --name and description of each item to be imported with quantity and approximate C&F value. Public sector importers also need to provide the following documentation: --attested photocopy of allocation letter issued by the allocating authority in favor of the concerned public sector agency specifying the source, amount, purpose, validity, and the terms and conditions; --attested photocopy of sub-allocation letter, if any, issued in favor of the importing agency or unit; --attested photocopy of sanction letter from the administrative ministry or authority where applicable; and --a declaration by the authorized officer of the importing agency indicating the amount of utilized/unutilized government funds and that imported raw materials will not be sold. Private sector importers need to furnish the following additional documents: --valid membership certificate from the registered local chamber of commerce and industry or any trade association, established on an all-Bangladesh basis, representing any special trade or business; --proof of payment of renewal fees for the Import Registration Certificate (IRC) for the concerned fiscal year; --copy of a "TIN Certificate" issued by the tax authority. The TIN (Tax Identification No.) Certificate is a new requirement aimed at ensuring collection of income tax, VAT and other revenues from importers. --a declaration, in triplicate, that the importer has paid income tax or submitted an income tax return for the preceding year; and --any such documents as may be required by import policy order or public notice, or instruction issued by the Chief Controller of Imports and Exports. In the following case, neither an LCA nor the opening of an L/C will be necessary, but an import permit (IP) or clearance permit (CP) will have to be obtained by the importer:

73

--import of books, magazines, journals, periodicals and scientific and laboratory equipment against surrender of UNESCO coupons; --imports under pay-as-you-earn scheme for a limited number of cars, fishing vessels, cargo or passenger vessels, and new machinery on the basis of clearance from the Bangladesh Bank; --import of items by passengers coming from abroad in excess of the permissible limits as per permitted allowance; and --import of free samples, advertising materials, and gift items above prescribed ceilings.

DOCUMENT REQUIRE FOR IMPORT: I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. Bangladesh custom import declaration form. Latter of authority for clearing Agents to act on behalf of the importer. Air way bill. Performa Invoice. Packing list. Certificate of origin Certificate of Insurance Policy. Foreign Exchange Declaration Form of Bangladesh Bank. Certified copy of L/C. Company Registration Certificate. VAT/TIN registration certificate. Import license if applicable.

74

Bangladesh custom import declaration form: Section 7 of FEMA 1999, lays down the statutory control concerning exports. Under FEMA regulations ( number 3), every exporter of goods or software in physical form or through any other form, either directly or indirectly, to anyplace outside India ( other than Nepal & Bhutan) shall furnish to the specified authority a declaration in prescribed form & supported by such evidence as may be specified. Certain goods & services like trade samples, personal effects, personal gifts, goods being sent for testing, defective goods being sent outside for repair etc are exempted from the above. The appropriate declaration forms are : GR Forms : To be completed in duplicate for all exports (other than by post) including export of software in physical form. SDF Form : In duplicate and appended to the shipping Bill for exports declared to customs offices notified by Central Government which have introduced EDI system for processing Shipping Bill. PP Form : for exports by post SOFTEX : To be completed in triplicate for export of software otherwise than in physical form ie. Magnetic tapes, disks & paper media. Airway Bill or Air Consignment Note The receipt issued by an airline company or its agent for carriage of goods, is called airway bill (AWB) or air-consignment note. It is not a document of title and it is not issued in a negotiable form. The goods are delivered to the consignee mentioned in the AWB, after identifying himself as the party named in the AWB as the consignee / receiver, against payment of charges if any.

75

It is therefore desirable to cosign the goods in the name of the foreign corresponding bank, as it will enable us to retain the control of the goods, till payment is made/ documents are accepted for payment.

Bill of Lading Bill of Lading (B/L) 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 & other charges as mentioned have been duly paid. It is also a document of title to the goods & as such is freely transferable by endorsement & delivery. B/L serves three main purposes : Types As a document of title to the goods As a receipt from the shipping company As a contract for the transportation of the goods. Of Bill of Lading

76

Contents Of The Bill Of Lading Name & logo of the Shipping Line Name & address of the shipper Name & number of vessel Name of the port of lading, port of discharge & place of delivery Marks & container number, container seal number Packing & container description Total number of packages & containers Description of goods, gross weight, volume Amount of freight paid or payable Shipping Bill number & date Signature & initials of the Chief Officer

Documents for customs clearance: The Shipping Bill is the main document required by customs for clearance of goods for shipment. Where the goods are to be cleared by Land Customs, Bill Of Export is prepared instead of the Shipping Bill. Bill Of Exports are also of four types White for export of duty free goods Green for export of goods under claim for duty drawback Yellow for export of dutiable goods

77

Shipping Bill

Pink for export of duty free goods ex-bond.

Shipping Bill is an important document required by the customs authorities for allowing shipment.

It is prepared by the exporter & it contains the name of the vessel, name of port of discharge, country of final destination, , exporters name & address, details about packages, number & description of goods, marks & numbers, quantity & details about each case, FOB price, total number of packages with the weight & value and the name & address of the importer.

The shipping Bills are of following types: Duty Free Shipping Bill : No duty or cess applicable Dutiable Shipping Bill : Goods subject to export duty / cess Drawback Shipping Bill : Shipping Bill for shipment Ex-bond.: For goods imported for re-export.

Documents Required For Processing Of Shipping Bill: The following documents are required for the processing of the Shipping Bill: GR forms (in duplicate) for shipment to all the countries. 4 copies of the packing list mentioning the contents, quantity, gross and net weight of each package. 4 copies of invoices which contains all relevant particulars like number of packages, quantity, unit rate, total f.o.b./ c.i.f. value, correct & full description of goods etc. Contract, L/C, Purchase Order of the overseas buyer. AR4 (both original and duplicate) and invoice.

78

Packing List

Inspection/ Examination Certificate.

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 & net weights etc.

The packing list also contains all basic information about the export order like name & address of the buyer & the exporter, purchase order number & date etc.

The packing order is the basic document used in the preparation of further documents like proforma invoice & so on.

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 customer is in the form of the Proforma Invoice. It is a quotation given as a reply to an enquiry. It normally forms the basis of all trade transactions & enables importer to obtain import license, if required. Contents of Proforma Invoice are generally the following: Name & addresses of exporter & importer Mode of transportation, port of discharge, final destination Buyers & seller's reference numbers / dates Description of the goods, mode of packing, total number of packages, expected total weight etc. Origin of goods

79

Price offer on FOB & CIF Basis

Commercial Invoice Commercial invoice is the basic export document & contains all information required for making other documents. It is prepared by the exporter after the execution of the export order giving details about the goods shipped It should be addressed to the consignee as per the letter of credit. It is the basic evidence of the contract of sale or purchase & therefore must be prepared strictly in accordance to the terms 7 conditions mutually agreed between the buyer & seller. It should contain basic details as in the proforma invoice, the detailed description of goods, as well as the final packing lists and the markings on packages plus details of shipment of goods, name & number of vessel/ voyage. This document is used for various export formalities, incentive claims, negotiation of documents , accounting etc.

Certificate Of Origin The importers in several countries require a Certificate Of Origin without which clearances 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. Certificates of origin are required when: Goods produced in a particular country are subject to preferential tariff rates in the foreign market at the time of importation

80

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

Types Of Certificate Of Origin (1) Certificate Of Origin for Availing Concessions under GSP : Required by countries like France,Germany, Italy, Benelux countries,UK, Australia, Japan, USA etc., which extend GSP benefits & are issued by specialized agencies like: Export inspection agencies Joint DGFT, Commodity Boards & their regional offices Development Commissioner, Handicrafts Textile Committee for textiles Marine product export development authority for marine products Development Commissioner for EPZs

(2) Non-preferential Certificate Of Origin: These are normally required for clearance of goods by all importers & are issued by the Chamber of Commerce of the exporting countries or by Trade Association of the importing country.

(3) Certificate For availing concessions Under Commonwealth Preferences: This is also known as Combined Certificate Of origin & value & is required by two commonwealth countries, Canada & New Zealand for concessions under Commonwealth preferences. These have to be obtained from the High commission of the country concerned.

(4) Certificate For Availing Concessions Under Other System Of Preferences

81

Certificates of Origin are also required for tariff concessions under the Global system Of Trade Preferences (GSTP), Bangkok agreement (BA), SAPTA,

Export Inspection Councils have the authority to print blank Certificates of Origin & these are issued by EPCs, DCs of EPZs, EIC, FIEO etc.

Customs Invoice Countries like USA, Canada etc need customs invoice It is generally made out on a special form presented by the customs authorities of the importing country & helps for allowing entry of goods in the importing country at preferential tariff rates. The invoice forms are generally available at the consular office of the importing country and are required to be signed and witnessed after duly filling the same.

Bill Of Exchange A Bill Of Exchange also known as Draft contains an order from the creditor to the debtor to pay a specified amount to a person mentioned therein. The maker of the Bill is known as Drawer & the person who is directed to pay is called the Drawee The person who is entitled to receive the amount is called Payee A Bill Of Exchange is of two types: (i) Sight draft (immediate payment) & (ii) Usance Draft ( Credit Usance 30 days or usance 60 days) Unless & until the draft is retired, the negotiating collecting bank does not hand over the shipping documents & the buyer can not take delivery of goods.

82

2.6 Documents flow through the bank for export garment

These all documents are generally go through the bank are given bellow: Bangladesh custom import declaration form. Latter of authority for clearing Agents to act on behalf of the importer. Air way bill. Performa Invoice. Packing list. Certificate of origin Certificate of Insurance Policy. Foreign Exchange Declaration Form of Bangladesh Bank. Certified copy of L/C. Company Registration Certificate. Import license if applicable. Bill of lading.

83

2.7 Banking procedure for cash intensive

Assess the adequacy of the banks systems to manage the risks associated with cash-intensive businesses and entities, and managements ability to implement effective due diligence, monitoring, and reporting systems.

Review the policies, procedures, and processes related to cash-intensive businesses. Evaluate the adequacy of policies, procedures, and processes given the banks cash-intensive business activities in relation to the banks cash-intensive business customers and the risks that they represent. Assess whether the controls are adequate to reasonably protect the bank from money laundering and terrorist financing.

From a review of MIS and internal risk rating factors, determine whether the bank effectively identifies and monitors cash-intensive businesses and entities.

Determine whether the banks system for monitoring cash-intensive businesses for suspicious activities, and for reporting of suspicious activities, is adequate given the banks size, complexity, location, and types of customer relationships.

84

On the basis of the banks risk assessment of its cash-intensive business and entity relationships, as well as prior examination and audit reports, select a sample of cash-intensive businesses. From the sample selected, perform the following examination procedures:

Review account opening documentation including CIP information, if applicable, and a sample of transaction activity.

Determine whether actual account activity is consistent with anticipated account activity. Look for trends in the nature, size, or scope of the transactions, paying particular attention to currency transactions.

Determine whether ongoing monitoring is sufficient to identify potentially suspicious activity.

On the basis of examination procedures completed, including transaction testing, form a conclusion about the adequacy of policies, procedures, and processes associated with cashintensive businesses and entities.

85

3. CONCLUSION
In conclusion we would like to say this project was too much helpful for us to know about export import system. I found the Bangladesh government policy for EXIM business. We also had the chance to know about the EXIM procedure from the first stage to last stage. To do that project we detect some lack of our exporters which they should recover. We went to BGMEA, FBCCI and BKMEA to collect information and in that chance we talked with so many people whom are related with EXIM business.

86

4. BIBILOGRAPHY
Books: 1. L/C Merchant By: Ashrafuzzan Murad

2. Garments & Technology By: M. A. Kashem

3. Apparel Manufacturing Management By: Ruth E. Glock & Grace I. Kunz

4. Smart Merchandiser By: Conway Liu

5. Fashion Marketing By: Mike Easey

Website: 1. www.mincom.gov.bd 2. www.bgmea.com 3. www.scribebd.com 4. www.fbcci-bd.org 5. www.bkmea.com 6. www.associations.com.bd

87

5. APPENDIX