PROJECT REPORT ON EXPORT PROCEDURE & DOCUMENTATION

Prepared By Rohit A. Mistry

UNDER THE GUIDANCE OF PROJECT GUIDE : Prof. N.S.Trivedi

Submitted To H.K.Center of Professional Training Gujarat UniversityAhmedabad

ACADEMIC YEAR 2012 - 2013

CERTIFICATE

THIS IS CERTIFY THAT ROHIT A. MISTRY STUENDT OF POST GRADEUATE DIPLOMA IN EXPORT IMPORT MANAGEMENT AND INTERNATIONAL FINANCE OF H.K.CENTER FOR PROFESSIONAL TRAINING. GUJARAT UNIVERSITY, HAS

COMPLETED THE PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THE ACADEMIC YEAR 2012 2013.

PREPARED BY: Rohit A. Mistry

PROJECT GUIDE: PROF. : MR. N.S.TRIVEDI

ACKNOWLEDGEMENT
IT IS THE MATTER OF GREAT PLEASURE AND PRIVILEGE TO BE ABLE TO PRESENT THIS PROJECT REPORT ON EXPORT PROCEDURE AND DOCUMENTATION THE COMPILATION OF THE PROJECT IS A MILESTONE IN THE LIFE OF THE MANAGEMENT STUDENT AND ITS EXECUTION IS INEVITABLE WITH THE CO-OPERATION OF THE PROJECT GUIDE. I WISH TO RECORD A DEEP SENSE OF RESPECT AND GRATITUDE TO MY PROJECT GUIDE, PROF.N.S.TREVEDI FOR HER ENCOURAGEMENT TO COURSE OF MY WORK. IT IS DUE TO THE ENDURING EFFORT AND GUIDANCE OF MY GUIDE THAT ULTIMATELY MADE IT SUCCESS. I ALSO THANKFULL OF H.K.CENTER FOR PROFESSIONAL TRAINING GUJARAT UNIVERSITY, MR.DARSHAN MASHROO, OTHERS STAFF MEMBERS OF COMPLETE THE COURSE. MR. SHAIR BHATT AND CENTER WHO HAD ENCOURGE US FOR

Rohit A. Mistry Roll No. 18

INDEX
SR.NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 CONTENT INTRODUCTION HOW TO SET UP AN EXPORT ORGANISATION HOW ONE BEGINS TO DO EXPORT EXPORT SALES & CONTRACT TERMS & CONGITIONS TERMS OF SHIPMENT INCOTERMS. PROCESSING AN EXPORT ORDER FINANCIAL RISK INVOLVED IN FOREIGN TRADE EXPORT DOCUMENTS OCTROI QUALITY CONTROL & PRE-SHIPMENT INSPECTION SHIPPING ANG CUSTOMS FORMALITIES SALES TAXES EXEMPTION PROCEDURE METHODS OF RECEIVING PAYMENTS AGAINST EXPORTS THE LETTER OF CREDIT PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK NEGOTIATIONOR PURCHASE SHIPMENT THROUGH COURIERS CUSTOM PROCEDURE FOR EXPORT SYSTEM THE ECGC COVER. PAGE NUMBER 6 8 14 17 20 27 28 29 53 57 60 66 68 71 88 91 92 112

UNDER

EDI

INTRODUCTION

India has a mission to capture 2% of the global share of trade by 2010, up from the present level of less than 1%. Export is one of the lucrative business activities in India. The government also provides various promotional schemes to the exporters for earning valuable foreign exchange for the country and for meeting their requirements for importing modern technology and essential inputs. Besides, the income from export business is also exempted to the specified extent under the Income Tax Act, 1961, Refund of Central Excise and Custom Duty on export is also made under the Duty Drawback Scheme of the Government. There is no Sales Tax on products meant for exports. Exports can be of goods which can be moved physically from one country to another or can be of service rendered. Detailed list of services are given in the Foreign Trade Policy covering more than 160 items e.g. Insurance, Hospital, Postal and Telecommunication, Retail, Cable Service etc. TWO CLASSES OF EXPORTS: Physical Exports: If the goods physically go out of the country or services are rendered outside the country then it is called as physical export. Deemed Exports: Where the goods do not go out of the country physically they can be termed as deemed exports. This will be subject to certain conditions as prescribed by the DGFT. Under Deemed Exports, the goods may be supplied to the manufacturer exporter who ultimately export a finished product of which this supply forms a part and ultimately go out of the country. E.g. Supply of fabrics to the garment exporter who exports the garments made out of the said fabric. The government may announce from time to time the types of supplies that may be considered as deemed export. The Foreign Trade Policy gives the list of supplies considered under the Deemed Export Category. The policies and procedures are different for Physical Exports and Deemed Exports as also the benefits available. In a nutshell, Deemed Exports do not enjoy all the benefits that are available under Physical Export. The Foreign Trade defines

exports as taking out of India any goods by land, sea, air. Although the act does not term them as Physical Exports, we have to put phrase to distinguish it from Deemed Exports which is sales in India but considered as exports for limited purpose. TYPES OF EXPORTERS: Exporters can be basically classified into two groups Manufacturer Exporter: As the exporter has the facility to manufacturer the product he intends to export and hence he exports the products manufactured by him. Merchant Exporter: An exporter who does not have the facility to manufacture an item. But, he procures the same from other manufacturers or from the market and exports the same. An exporter can be both a manufacturer exporter as well as a merchant exporter, he can export product manufactured by him or he can export items bought from the market. Once it is decided to export, it is mandatory on your part to follow certain procedures, rules and regulations as prescribed by various regulatory authorities such as DGFT, RBI, and Customs. These procedures, rules and regulations are laid down in the Exim Policy 2010-14, Exchange Control Manual, Customs Act etc. Accordingly Export documents are required to be prepared keeping in view of the requirement of the foreign buyers and our regulatory authorities.

HOW TO SET UP AN EXPORT ORGANISATION

The proper selection of organization depends upon Ability to raise finance. Capacity to bear the risk. Desire to exercise control over the business. Nature of regulatory framework applicable to anyone If the size of the business is small, it would be advantageous to form a sole proprietary business organization. It can be set up easily without much expenses and legal formalities. It is subjected to only few governmental regulations. However, the biggest disadvantage of sole proprietorship business is limited ability to raise funds which restricts the growth. Besides the owner has unlimited personal liabilities. In order to avoid this disadvantage, it is advisable to form a partnership firm. The partnership firm can also be set up with ease and economy. Business can take benefit of the varied experiences and expertise of the partners. The liability of the partners though joint and several, is practically distributed amongst the various partners, despite the fact that the personal liability of the partner is unlimited. The major disadvantage of partnership firm of business organization is that conflict amongst the partners is a potential threat to the business. It will not be out of place to mention here that partnership firms are governed by the Indian Partnership Act, 1932 and, therefore they should be formed within the parameters laid down by the Act. Company is another form of business organization, which has the advantage of distinct legal identity and limited liability to the share holders. It can be a private limited company or a public limited company. A private limited can be formed by just two persons subscribing to its share capital. However, the number of its shareholders cannot exceed 50, public cannot be

invited to subscribe to its capital and the members right to transfer their share is restricted. On the other hand, a pubic limited company has a minimum of seven members. There is no limit on the maximum number of its members. It can invite the public to subscribe to its capital and permit the transfer of share. A public limited company offers enormous potential for growth because of access to substantial funds. The liquidity of investment is high because of easiness of transfer of shares. However its formation can be recommended only when the size of the business is large. For small business, a sole proprietary concern or a partnership firm will be the most suitable form of business organization. In case it is decided to incorporate a private limited company, the same is to be registered with the Registrar of Companies. CHOOSING APPROPRIATE MODE OF OPERATIONS: You can choose any of the following modes of operations Merchant Exporter i.e. buying the goods from the market or from the manufacturer and then selling it to foreign buyers. Manufacturer Exporter i.e. manufacturing the goods yourself for export. Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the seller and charging the Commission. Buying Agent i.e. acting on behalf of the buyer and charging Commission. Service provider i.e. providing service from India to another country.

NAMING THE BUSINESS

Whatever form of business organization has been finally decided, naming the business is an essential task for every exporter. The name and style should be soft, attractive, short and meaningful. Open a current account in the name of the organisation in whose name you intend to export. It is advisable to open the account with a bank which is authorised to deal in Foreign Exchange.

STRUCTURE OF AN EXPORT ORGANISATION marketing manager for generating sales Commercial manager for looking activities of the execution of the orders. staff personnel for carrying out the day-to-day activities namely o Preparation of pre - shipment documents. o Co-ordinating with clearing agents on the progress of the shipment to be made. o Co-ordinating with the ware house\C. excise department regarding packing and clearance of the goods for export. o Preparation of post shipment documents foe banks. o Follow-up with the bank on dispatch of documents, receipt of payment, availment of bank loans etc. To look into the requirement of licenses, claiming of export benefits fiiling of documents with the Government Authorities in Discharge of Export Obligations, if any, filing of returns to the various Government Agencies which are mandatory, prepare and keep an information bank of various transaction of the company, their domestic as well as international competitors. An office boy for doing leg work. A clearing and forwarding agent to handle the documents and the goods in the customs premises\ in the ports of lading.

Depending upon the size of the business the numbers of personnel under each category may increase. For example if a company is transacting substantial volume of business in more than one product. Then it is necessary to have marketing manager for each product so that the person can concentrate on a particular trade to enhance the business.

REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING IMPORTER EXPORTER CODE (IEC) NUMBER. The Customs Authorities will now allow the exporter to export or import goods

into or from India unless he holds a valid IEC number. Before applying for IEC number it is necessary to open a bank account in the name of the company with any commercial bank authorized to deal in foreign exchange. The duly signed application form should be supported by the following documents. Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. 1000/Certificate from the banker of the applicant firm as per Annexure 1 to the form given. One copy of PAN number issued by Income Tax Authorities duty attested by the applicant. One copy of Passport Size photographs of the applicant duly attested by the banker to the applicant. Declaration by the applicant that the proprietor/partners/directors as the case may be of the applicant company, are not associated as proprietor/partners/directors in any other firm, which has been caution, listed by the RBI. Where the applicant declares that they are associated as proprietor/partners/directors in any other firm, which has been caution, listed by the RBI, they will be allotted IEC No. but with an additional

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condition that they can export only with RBIs prior approval and they should approach RBI for the purpose. Each importer/exporter shall be required to file importer/exporter profile once with the licensing authority shall enter the information furnished in Appendix 2 in their database so as to dispense with changes in the information given in Appendix-2, importer/exporter shall intimate the same to the licensing authority.

IEC EXEMPT CATEGORIES. The following importer exporter is exempted from the requirement of IEC code number. Ministries \ Department of Central or State Government. Person importing or exporting goods for their personal use not connected with trade or manufacture or agriculture. Persons importing\exporting goods from to Nepal & Myanmar provided the CIF value of single consignment does exceed Indian Rs. 25000\-. APPLICATION FOR OBTAINING AN IEC NUMBER For obtaining IEC number apply in the prescribe form along with the documents listed above to Regional Licensing Authority (Office of the Regional DGFT). The registered office or the head office may apply for allotment of IEC No. Whenever, there is a change in the name, address or constitution of the holder of IEC No., such change should be intimated within 30 days to the concern authorities.

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IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is also endorsed to the concerned banker. VALIDITY: The IEC No allotted to a firm/company will be valid for all its branches/divisions units/factories as indicated in the IEC No. Import/Export of any commodity by that firm/company. There being no date of expiry, the IEC once allotted is valid till it is revoked. But, if no import or export is effected in the previous financial year, the same will be made inoperative. However, this can be made operative by a formal request to the DGFT.

IDENTITY CARD (For conducting transactions with the office of DGFT): As it is not always possible for the top man or directors, promoters of the company to visit DGFT frequently. There is a provision of issuance of identity cards to the proprietors/partners/directors and their authorized representatives. An application of Issuance of an identity card may be made in the form The document/ License/Certificate/Permissions may be delivered to the identity card holder and officials of the Licensing Authority (DGFT)shall not be responsible for any loss etc. In case of loss of an identity card a duplicate card may be issued on the basis of an FIR & affidavit. In addition to obtaining the IEC No. the exporter is also required to obtain Business Identification No(BIN). For this exporter is required to contact DGFT online on web site. The licensing authority issues BIN in coordination with customs authorities. This BIN is required to be mentioned on the shipping bills at the time of customs clearance of the export cargo.

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RCMC (Registration-Cum-Membership Certificate) REGISTRATION WITH EXPORT PROMOTION COUNCILS In order to enable the exporter to obtain benefits/concessions under the Foreign Trade Policy, the exporter is required to register himself with an appropriate export promotion agency by obtaining registration-cum-membership certificate. (RCMC). If the export product is that it is not covered by any EPC, RCMC in respect thereof may be issued by FIEO. An application for registration should be accompanied by a self certified copy of the Importer-Exporter Code number issued by the regional licensing authority concerned and bank certificate in support of the applicants financial soundness. The RCMC shall be valid for 5 years ending 31st March of the licensing year. REGISTRATION WITH SALES TAX AUTHORITIES: Goods that are to be shipped out of the country for export are eligible for exemptions from both Sales Tax and Central Sales Tax. For this purpose, exporter should get himself registered with the Sale Tax Authority of is state after following the procedures prescribed under the Sales Tax Act applicable to his state.

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HOW ONE BEGINS TO DO EXPORT

Before entering into the venture of exports, one must look for the product to be exported and the market where he intends to export. In case of a manufacturer, obviously he would like to export the product he manufactures as is or with possible modification as may be required by the market. However, in case of a merchant exporter or a trader, one has to identity the product to export. If the exporter is already in the trade in the domestic market and is familiar with the product it would be an advantage to export the said product of which he has reasonable knowledge. Before selecting a product, one must simultaneously made a study and find out the prospective market. For finding out the market for the selected product, the following methods will help. Get statistical information as to imports of the product by various countries and their growth prospects in the respective countries Approach the chamber of commerce for their guidance to find out the market. Approach the Export Promotion Council dealing in the product of selection to get more information. The Preliminary Once you are ready with the product you wish to export and have found the market for the same, you are ready to proceed further. Following sequences can be followed: Any one, who wishes to export, must first of all get an Importer Exporter Code Number (IE Code).This can be obtained by making a formal application to the office of the Regional Directorate General of Foreign Trade (DGFT).

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Get yourself registered with the related Export Promotion Council and become a member. Also arrange to obtain Registration-CumMembership Certificate (RCMC) from the council. This has twin objectives: o Under the Foreign Trade Policy, it is mandatory that an exporter gets him registered with the Export Promotion Council to avail of various export facilities. o Being a member, you will have access to all the information relating to the product that could be made available by the council o Many foreign buyers send their enquiries for the imports to the Export Promotion Council. Hence you will have few customers interested in your product.

If you are a manufacturer, find out the provisions under the EXIM Policy of getting the raw materials duty free. Get familiar with the excise formalities as goods meant for export can be cleared without payment of C. Excise duty on the finished product subject to compliance of certain formalities.

Understand the local government regulations in relations to the export of the product. Get information of the governments regulations of the importing country as to restrictions on the quantity, product specification, packing regulations, customs regulations, requirement of specific documents/information etc.

Availability of Vessels/Airlines, the transport charges, frequency of operation etc., To look for a Custom House Agent (CHA) (also know as freight forwarders or clearing agents) for handling the documents/cargo in the customs. If the product is covered under any quota regulation, find out the agency/council who are handling the quota distribution for the product and the availability of quota for exports.

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FINDING A CUSTOMERS Once you have selected the market, the next step is to find a prospective customer. This you can get From the directory of importers of the country By writing to the Embassy of India in that country for assistance By writing to the chamber of commerce of that country By means of participation in a Fair/Exhibition abroad either directly or through the Export Promotion Council By participating in international fair if organized locally Through the personal contacts in that country. By these processes one can only have the list of customers. One has to dialogue or correspond with these customers by sending samples, getting feedback from the customers etc. to ultimately select the customer with whom to deal with. It is necessary to know the financial standing of the company which can be obtained through the bank channel or through the office of ECGC. NEGOTIATING CONTRACT. Once the prospective customer is found, the business deal has to be concluded. The following aspects may be considered before entering into a final contract with the buyer. Credit Worthiness of the Customer. Availability of the Steamer/Airlines and the frequency The freight charges The full product specification The quantity, Price Terms of Payment Type of packing and markings on the packages Mode of shipment & Shipment schedule Tolerance of quantity to be shipped Documentation requirement for the customer

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Documentation requirement of the government of importing country Compliance of the local governmental rules and regulations

Before entering into contract one should take note of the above factors. While these are indicative, the requirements will vary from country to country, product to product and buyer to buyer.

3. Export Procedure
3.1 INTRODUCTION
Export procedure consists of several commercial and regulatory formalities, which an exporter is required to complete during the course of export trade transactions. These formalities are very complex and time-consuming and involve considerable documentation. Hence, the exporters must possess adequate knowledge of such formalities. At the same time, it should be ensured that the rules- and regulations. of not only exporting country but also of importing Country are duly complied with. Last but not least, it should be ensured that all the required documents, whether commercial or regulatory, are prepare and filed with the appropriate authorities.

3.2 REGISTRATION STAGES

The exporter is required -to register his organisation with a number of institutions and authorities, which directly or indirectly help him in the smooth conduct of export, trade.

The registration stage includes: 1. Registration of the Organization: The form of organization selected by the exporter must. Be registered under the appropriate Act of. the country.) A joint stock company under the Companies Act, 1956.;
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 A partnership firm under the Indian Partnership Act, 1932.; A sale trader should seek permission from the local authorities as required.

2.Opening-Bank Account: The' exporter should open a current account in the name of the firm or company with a commercial bank which is authorised by the Reserve Bank of India (RBI) to deal in foreign exchange. Such bank also serves as a source of pre-shipment and post-shipment finance for the exporter.

3.Obtaining Importer Exporter Code Number (lEC No.):Prior to 1.1.1997, it was obligatory for every exporter to obtain CNX number from the RBI. However, since then, IEC number issued by the Director General for Foreign Trade (DGFT) has replaced the CNX number. The application form for obtaining IEC number should be accompanied by fee of Rs. 1000.

4.Obtaining Permanent Account Number(PAN):Export income is subject to a number of exemptions and deductions under different sections of the Income Tax Act. For claiming such exemptions and deductions, the exporter should register his organisation with the Income Tax Authorities and obtain the Permanent Account Number (PAN).

5.Obtaining Sales Tax Number: Exportable goods are exempted from sales tax, provided, the 'exporter or his firm is registered with the Sales Tax Authorities. , For this purpose, the exporter is required to make an application in the prescribed form to the' Sales Tax Office (STO) in whose jurisdiction his {exporter's). Office is situated

5.Registration with, Export Promotion Council (EPC) :It is obligatory for every exporter to ,register with the appropriate Export Promotion Council (EPC) and obtain the 'Registration-cum-Membership

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Certificate' (RCMC). The benefits provided in the current EXIM Policy are extended only to the registered exporters having valid RCMC.

6.Registration with ECGC: The exporter should also register with the Export Credit and Guarantee Corporation of India (ECGC) in order to secure overseas payments against political and commercial risks. It also helps the exporters in obtaining the financial assistance from commercial banks and other financial institutions.

7.Registration with other Authorities: The exporter should also register with various other authorities, such as: Federation of Indian Export Organisation (FIEO), Indian Trade Promotion Organisation (ITPO) Chambers of Commerce (COC), Productivity Councils, etc.

3.3 SHIPMENT STAGES

Export, cargo can be exported to the overseas buyer by sea, air or land. However, shipment by sea is the most popular and generally resorted to, as it is comparatively cheaper. Besides, the ship's capacity is far greater than other modes of transportation. Nevertheless, transportation by air is utilized for export of expensive items like, diamonds, gold, etc. The shipment stage includes the following steps.: a. Reservation of Shipping Space: Once the export contract is finalised, the I exporter reserves the required space in the vessel for shipment. On accepting the exporter's request, the shipping company issues a Shipping Order. The original copy of the shipping order as given to the exporter and the duplicate instruction by the shipping company to the commanding officer of the ship that the goods as per the details given should be received on board.

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b.Arrangement of Internal Transportation up to the Port of Shipment :The exporter makes necessary arrangements for transportation of goods to the port either by road or railways. On loading goods into the railway wagon, the railway authorities issue a 'Railway Receipt', which may be either 'freight paid' or 'freight to pay'. It serves as a title to the goods. The exporter doses the railway receipt in favour of his agent to enable him to take delivery of the goods at the port of shipment. c. Preparation and Processing of Shipping Documents :As the goods reaches the port of shipment, the exporter should issue detailed instructions to the C&F agent for the shipment of cargo along with a complete set of the documents listed below: Letter of Credit along with the export contract or export order Commercial Invoice (2 copies) Packing List or Packing Note. Certificate of Origin. GR Form (original and duplicate) ARE-I Form. Certificate of Inspection, where necessary (original copy) Marine Insurance Policy. d.Customs Clearance: The cargo must be cleared from the Customs before it is loaded on the ship. For this, the above mentioned documents, along with five copies of shipping bill, are to be submitted to the Customs Appraiser at the Customs House. The Customs Appraiser ensures that all the formalities relating to exchange control, quality control, pre-shipment inspection and licensing have been complied with by the exporter. After verification, all documents, except the original GR, original copy of Shipping Bill and one copy of Commercial Invoice, are returned to the C&F agent. e.Obtaining 'Carting Order' from the Port Trust Authorities: The C&F agent, then, approaches the Superintendent of the concerned Port Trust for obtaining the 'Carting Order' for moving the cargo inside the dock. After obtaining the Carting Order, the cargo is physically moved into the port area and stored in the appropriate shed.

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f.Customs Examination and Issue of 'Let Export Order: The Customs Examiner at the port of shipment physically examines the goods and seals the packages in his presence. The same can be arranged for at the factory or warehouse of the exporter by making an application to the Assistant Collector of Customs. The Customs Examiner, if satisfied, issues a formal permission I' for the loading of cargo on the ship in the form of a 'Let Export Order'. g.Obtaining 'Let Ship Order' from the Customs Preventive Officer: Let Export Order' must be supplemented by a 'Let Ship Order' issued by the Customs Preventive Officer. The C&F agent submits the duplicate copy of Shipping Bill, duly endorsed by the Customs Examiner, to the Customs Preventive Officer who endorses it with the 'Let Ship Order'. h.Obtaining Mate's Receipt and Bill of Lading: The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mate's Receipt to the Port Superintendent The Port Superintendent, on receipt of port dues, hands over the Mate's Receipt to the C&F Agent. The C&F Agent surrenders the Mate's Receipt to the Shipping Company for obtaining the Bill of Lading. The Shipping Company issues two to three negotiable and two to three non-negotiable copies of Bill of Lading.

3.4 PRE- SHIPMENT STAGE

Pre-shipment stage consists of the following steps: a.Approaching Foreign Buyers: In order to secure an export order, a new exporter can make use of one or more .of the techniques, such as,' advertising in international media, sales promotion, public relation, personal selling, publicity and participation in trade fairs and exhibitions. b.Inquiry and Offer: An inquiry is a request from a prospective importer about description of goods, their standard or grade, size, weight or quantity, terms of payments,

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etc. On getting an inquiry, the exporter must process it immediately by making an offer in the form of a Performa invoice. c.Confirmation of Order: Once the negotiations are completed and the terms and conditions are finalised, the exporter sends three copies of Performa Invoice to the importer for the confirmation of order. The importer signs these copies and sends back two copies to the exporter. d.Opening Letter of Credit:The documentary credit or letter of credit is the most appropriate and secured method of payment adopted to settle international transactions. On finalization of the export. Contract, the importer opens a letter of credit in favour of the exporter, if agreed upon in the contract. e.Arrangement of Pre-shipment Finance:On securing the letter of credit, the exporter procures a pre-shipment finance from his bank for procuring raw materials and other components, processing and packing of goods and transfer of goods to the port of shipment. f.Production or Procurement of Goods: On securing the pre-shipment finance from the bank, the exporter either arranges for the production of the required goods. or procures them from the domestic market as per the specifications of the importer. g. Packing and Marking: Then the goods should be properly packed and JXl8.rkedwith necessary details such as port of shipment and destination, country of origin, gross and net weight, etc. If required, assistance can be taken from the Indian Institute of Packing (IIP). h.Pre-shipment Inspection:If the goods to be exported are subject to compulsory quality control and pre-shipment inspection then the exporter should contact the Export Inspection Agency (EIA). For obtaining an inspection certificate i.Central Excise Clearance: 22

The exporters are totally exempted from the payment of central excise duty. However, the exemption should be claimed in one of the following ways: Export under Rebate. Export under bond. j.Obtaining Insurance Cover: The exporter must take appropriate policies in order to insure risks: ECGE policy in order to cover credit risks. Marine policy, if the price quotation agreed upon is CIF. k.Appointment of C&F Agent: Since exporting is a complex and time consuming process, the exporter should appoint a Clearing and Forwarding (C&F) agent for the smooth clearance of goods from the customs and preparation and submission of various export documents.

3.5 POST SHIPMENT STAGE

The post-shipment stage consists of the following steps:Submission of Documents by the C&F Agent to the Exporter: On the completion of the shipping procedure, the C&F agent submits the following documents to the exporter: A copy of invoice duly attested by the Customs Drawback copy of the shipping bill. Export promotion copy of the shipping bill. A full set of negotiable and non-negotiable copies of bill of lading. The original L/C, export order or contract. Duplicate copy of the ARE-I form. b.Shipment Advice to Importer: -

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After the shipment of goods, the exporter intimates the importer about the shipment of goods giving him details about the date of shipment, the name of the vessel, the destination, etc. He should also send one copy of nonnegotiable bill of lading to the importer. Presentation of Documents to Bank for Negotiation: Submission of relevant documents to the bank and the process of getting the payment from the bank is called "Negotiation of the Documents" and tile documents are called Negotiable Set of Documents. The set normally contains: Bill of Exchange, Sight Draft or Usance Draft. Full set of Bill of Lading or Airway Bill. Original Letter of Credit. Customs Invoice. Commercial Invoice including one copy duly certified by the Customs. Packing List. Foreign exchange declaration forms, GR/SOFTEX/PP forms in duplicate. Exchange control copy of the Shipping Bill. Certificate of Origin, GSP or APR Certificate, etc. Marine Insurance Policy, in duplicate.

d.Dispatch of Documents :The bank -negotiates these documents to the importer's bank in the manner as specified in the L/C. Before negotiating documents, the exporter's bank scrutinises them in order to ensure that all formalities have been complied with and all documents are in order. The bank then sends the Bank Certificate and attested copies of commercial invoice to the exporter. e.Acceptance of the bill of exchange: Bill of Exchange accompanied by the above documents is known as the Documentary Bill of Exchange. It is of two types: Documents against Payment (Sight Drafts): -

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In case of sight draft, the drawer instructs the bank to hand over the relevant documents to the importer only against payment.

Documents against Acceptance (Usance Draft): In case of usance draft, the drawer instructs the bank to hand over the relevant documents to the importer against his 'acceptance' of the bill of exchange. (d).Letter of Indemnity: The exporter can get immediate payment from his bank on the submission of documents by signing a letter of indemnity. By signing the letter of indemnity the exporter undertakes to indemnify the bank in the event of nonreceipt of payment from the importer along with accrued interests. (e) Realization of Export Proceeds :On receiving the documentary bill of exchange, the importer releases payment in case of sight draft or accepts the usance draft undertaking to pay on maturity of the bill of exchange. The exporter's bank receives the payment through importer's' bank and is credited to exporter's account. (f) Processing of GR Form: On receiving the export proceeds, the exporter's bank intimates the same to the RBI by recording the fact on the duplicate copy of GR. The RBI verifies the details in duplicate copy of GR with, the, original copy of GR received from the Customs. If the details are found to be I in order then the export transaction is treated to be completed. (g) Realizations, of Export Incentives: If the exporter is eligible for export incentives, then he should submit claim for the same accompanied by the bank certificate to the appropriate authority.

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3.6 QUALITY CONTROL AND PRE-SHIPMENT INSPECTION CONCEPT OF QUALITY

Quality of a product is defined as a set of attributes or specifications including packaging specifications in relation to a given product. It is the manufacturer who first decides the quality of a product before introducing it in the market. This may be done keeping in view the national or the international standards of quality as laid down by the respective national or international standards bodies. The level of quality - high medium or lowdepends upon how rich or poor these specifications are. It the specifications are of very high order, the level of quality would be high; on the other hand, if the specifications are poor or weak, then the quality would be termed as low quality. Between the high and low quality lies the medium range of the quality. These quality specifications may then be modified during negotiations with the foreign buyer to suit his/ her requirements. Finally, the quality of the export product is determined with reference to the specifications as laid down by the buyer. Thus, quality should be understood in its relative sense and not in the absolute sense of the term. NEED FOR PRE SHIPMENT INSPECTION An exporter faces competition not only from the fellow exporters from his own country but also from other Countries. He should formulate a proper quality strategy to gain a competitive edge over others in the market. The goods should be properly inspected to ensure that the quality of the export goods is maintained as desired by the buyer. Goods of poor quality spoil not only their own market but also bring bad name to the image of the country itself. I t is, thus, in the business interest of the exporter to send shipment of the right quality to the buyer. This would also facilitate effective penetration and sustenance in the export markets by improving the brand image of the goods. The Government of India had also recognized the need for effective pre-shipment inspection long back in 1963 itself when the Export (Quality Control and Inspection) Act, 1963 was enacted to provide for sound development of the export trade through quality control and pre-shipment inspection. TYPES OF PRE-SHIPMENT INSPECTION

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There are primarily two different types of pre-shipment inspection namely: I. Voluntary Inspection II. Compulsory Inspection

1.Voluntary Inspection The following are the different forms of voluntary pre-shipment inspection of the export shipments:1. By the exporter himself. 2. By the buyer's representative. 3. By the buying agent in the exporter's country. 4. By the inspection agencies in the private sector. 2.Compulsory Inspection Compulsory pre-shipment inspection is conducted by the following agencies of the Government of India: Export Inspection Council through its Export Inspection Agencies Textile Committee Development Commissioner (Handicrafts) Central Silk Board

3.7 CENTRAL EXCISE FORMALITIES:It is common practice all over world that the exports are not to bear the burden of indirect taxes export goods are either exempted from such taxes or these taxes are levied at the central, state and local levels on the inputs as well as on the final products. Import and excise duties levied on production and packing inputs are refunded under the Drawback Rules. Central Excise duties on the inputs used in manufacturing export products as well as on
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final export products is either exempted through production under bond or is refunded after export. The Government of India has laid down procedure for either getting the duty refunded or exemption from payment of duty.

EXCISE DUTY REFUND

Excise duty is a tax imposed by the Central gO\1ermnent on goods manufactured in India. This duty is collected at source, Le., before removal of goods from the factory premises. The' exporters are totally exempted from the central excise duty. However, necessary clearance must be obtained by the exporter in one of the following ways:(a)Export under Rebate :Under this system, an exporter is required to pay excise initially and can claim it from the Central Excise department after the shipment of goods. However, this leads to blockage of finance. (b) Export under Bond :Under this system, an exporter is required to execute a bond, in favour of excise authorities, for a sum equivalent to the amount of excise chargeable on such goods. Such bond should be supported by an appropriate bank guarantee to safeguard excise departments financial interest against nonsanctioning of excise refund.

PROCEDURAL FORMALITIES
Let us now discuss various procedural formalities of excise rebate. Refund Procedure under Rule 12: The authorities involved in the Rule are i) Jurisdictional Central Excise Authority known as Central Excise Range Superintendent under whose jurisdiction the manufacturing unit is located; ii) Maritime Central Excise Authority located at the port. Rebate may be either claimed from Jurisdictional Assistant Collector of Central Excise or Maritime collector. The documents required under Rule 12 are:28

1. Invoices to be filled in four copies. 2. AR 4/AR 5 Form to be filled in six copies. The procedure followed is as under:i)The exporters prepare four copies of Invoices giving all detail of the consignment. ii)The excisable goods, which are to be exported under claim for rebate, are to be marked as export cargo 'in individual packages. iii) These marks and numbers are to be specified on AR4/AR5 Forms, all the 6 copies. Personal Ledger Account (PLA) is to be filled in specifying the amount of duty applicable to the export consignment as debit. In PLA the credit balance of the deposit account spent by the individual manufacturer with the central excise authority is shown. Each time when goods are cleared, the amount of duty applicable to the goods to be cleared is debited and the balance is shown in the balance column. iv) All 6 copies of AR4/ AR5 Form are to be presented to the Range Superintendent before clearance of the cargo. Under the Self-Removal Procedure (SRP) Presence of the central excise officer at the factory at the time of clearance is not necessary. But in those cases where physical examination by the central excise officer is solicited before the clearance of the cargo, 6 copies of AR4/AR5 Forms should be presented to the Range Superintendent at least 24 hours before the goods are to be removed from the factory. v) After verifying the details given in the afore-mentioned documents, the Range superintendent allows clearance of the cargo from the factory for onward transmission to the port of shipment. Following endorsement are to be given in all the 6 copies of AR4/ AR5 Forms. "Allowed to export under claim for Central Excise Rebate". vi) The original and duplicate copies of AR4/ AR5 Forms are handed over to the exporter; the triplicate copy is sent to the Maritime Central Excise Collectorate-Refund section, having jurisdiction over the port wherefrom the goods are to be shipped; the fourth copy is sent to the Chief Accounts officer
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(CAD) of the Maritime Central Excise Collectorate concerned; the 5th copy is retained by Range Superintendent for his record and future reference. The sixth copy is also to be given to exporter or his authorized agent. vii)The original, duplicate, and sixtuplicate copies of AR4/AR5 Forms are to be submitted to the Export Department of Customs House alongwith other shipping documents to prove that formal central excise clearance has been obtained from the jurisdictional Central Excise Authority. viii)If custom officer is satisfied, he would make endorsements in the original, duplicate and sixtuplicate copies of AR4/AR5 Forms. The officer returns original and sixtuplicate copies to the exporter and sends duplicate copy to the Rebate sanctioning Authority. ix) Rebate claim may be filed either from Maritime Collector or Jurisdictional Assistant Collector of Central Excise. x) Following documents should be filed for claiming rebate: a) Application in prescribed form. b) Original copy of AR4/AR5 Form. c) Duplicate copy of AR4 in sealed cover received from customs officer, if required d) Duly attested (copy of Bill of lading e) Duly attested copy of shipping Bill (Export promotion copy) f)Disclaimer certificate in case where claimant is other than exporter.

CONDITIONS FOR CENTRAL EXCISE CLEARANCE

As a part of further simplifications and rationalisation of excise rules announced by the Finance Minister, a new set of Central Excise Rules, 2001 has come into effect from 1 st March 2002. The procedure for export of excisable goods (Except to Nepal and Bhutan) is subject to certaiI1) conditions and limitations :
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CONDITIONS AND LIMITATIONS :- (UNDER PAYMENT OF EXCISE DUTY)

(a) The excisable goods can be exported directly from a factory or warehouse after the payment of excise duty. (b) The excisable goods must be exported within 6 months from the date on which they were cleared for export from the factory of manufacturer or his warehouse. (c) The market price of the excisable goods at the time of exportation is not less than the amount of rebate of duty claimed. The amount of rebate of duty admissible is not less-than Rs. 500.

CONDITIONS AND LIMITATIONS :- (WITHOUT PAYMENT OF EXCISE DUTY)

(a) The exporter is required to furnish a General Bond (Surety or Security) to the Assistant Commissioner of Central Excise or the Maritime Commissioner for a sum equivalent to the duty chargeable on the goods. (b) The excisable goods must be exported within 6 months from the date on which they were cleared for export from the factory of manufacturer or his warehouse.

PROCEDURE FOR CENTRAL EXCISE CLEARANCE:The following is the procedure for obtaining central excise clearance :(a) Application to the Assistant Collector of Central Excise (ACCE) :- . "The exporter is required to make an application to the Superintendent or the Inspector of Central Excise, having jurisdiction over the factory of production or warehouse of the exporter, by filling up four copies of ARE-I form having the following distinctive colours for easy verification and processing :

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1.Original-White. 2.Duplicate-Buff. 3. Triplicate - Pink. 4.Quadruplicate - Green. 5. Extra Copy - Blue. (b)Information to the Range Superintendent :The ACCE informs the range superintendent, in whose area the exporter's factory or warehouse is located. On receiving instructions from the ACCE the range superintendent deputes an inspector for clearance of goods for exports. (c)Sealing of Goods :The inspector verifies the goods mentioned in the application and the particulars of duty paid or payable. If satisfied, he seals each package or the container in the manner as m9:Y be specified by the Commissioner of Central Excise and endorses each copy of the application. (d)Processing of ARE-I Forms:ARE-I as endorsed by the inspector are processed as under:- ARE-I (Original) (Duplicate)(Triplicate) (Quadruplicate) (Quintuplicate) retained by the Retained by the exporter for Return to the exporter Range claiming other export incentives Superintendent Submitted to he Commissioner of Custom at the port of shipment Sent to the Maritime Commission Returned to the Returned to or Exporter The Exporter sent to the excise Rebate Audit Section In case rebate is to be claimed by EDI Claim of Excise refund AREI (Original) ARE-I (Duplicate) The superintendent or Inspector of Central Excise returns the original and duplicate copy of ARE-I to the exporter. ARE-I (Triplicate) The triplicate copy of ARE-I is sent to the Maritime Commissioner at the port of shipment or to the excise Rebate Audit section in case rebate is to be claimed by electronic declaration on Electronic data Inter-change (EDI) system of customs. ARE-I (Quadruplicate) The
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quaruplicate copy of ARE-I is retained by the superintendent or Inspector of Central Excise. ARE-I (quintuplicate) Th quintuplicate copy of ARE-I is returned to the exporter for claiming any other incentive. (e)Examination of Goods at the place of Export:At the port of shipment the exporter presents goods together with original ,duplicate and quintuplicate copy of the ARE-I to the Commissioner of Customs. The Commissioner of Custom examines the Consignments. If satisfied he certifies the goods for export by an endorsement on all the copies of ARE-I. The original and quintuplicate copies are returned to the exporter while the duplicate copy is sent to the Maritime Commissioner. (f) Submission of the claim :For claiming rebate, the exporter is required to submit the following documents along with the prescribed application in form C to the assistant or Dupty Commissioner of Central Excise or Maritime Commission of Central excise: Original copy of ARE-I duly endorsed by the Customs officer; Duplicate copy of ARE-I received from the custom officer in a sealed cover; Duly attested copy of Shipping bill. Duly attested copy of Bill of Lending or Airway Bill; Duplicate copy of Central Excise Invoice under which Central Excise was paid on goods cleared for exports. g) Verification of the Application :Assistant or Deputy.Commissioner of Central Excise compares details listed in the different copies of ARE-I *The original copy received from the exporter; *The duplicate copy received from the Customs officer;

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*The triplicate copy received from the Central Excise officer. If he is satisfied that the exports are not under claim for duty drawback, he sanctions the rebate. . ' (h) Refund of Duty:lf any refundable amount is not paid to the applicant within three months from the date of filing the claim, interest at a rate of 20% p.a. is paid for the period between the expiry of three months and date of refund. 1)Under rebate on excise duty, the Chief Excise Accounts Officer issues a cheque. 2)When export is under bond, the Chief Excise Accounts Officer issues a letter Confirming credit given in the exporter's bond account. The rebate claim can also' be claimed by electronic declaration on Electronic Data' Inter-change (EDI) System. (i) Cancellation of Documents :If the excisable goods are not exported, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise cancels the export documents on request of the exporter.

CUSTOMS CLEARANCE FORMALITIES:- .

According the Section 40 of, the Customs Act, the person in-charge of the conveyance vessel, vehicle, aircraft, etc., cannot permit loading of export cargo at the Customs Station unless and until a. formal permission to the export given by the authorised Customs Officer is presented. Before granting the permission, 'the Customs Officer ensures that the goods being exported are in accordance with different regulations, particularly in terms of the following :(a)The goods are of the same type, sort and value as have been declared by the exporter. (b)The duty or success leviable thereon has been properly determined and paid (c) Provisions of Export (Control) .Order, Export . (Quality \ Control and Inspection) Act and Foreign Exchange (Regulation) 'Act are complied with.
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LEGAL FRAMEWORK:Section 50 of the Indian Customs Act requires the exporter to file a declaration in a prescribed form and submit supporting documents to enable the customs authorities to check declarations made by the exporter. The objectives of the customs control are:i) to ensure that nothing goes out of the country against the laws of the land and that prohibitions and restrictions regarding outward cargo are duly enforced by the. customs- authorities; ii) to ensure authenticity of the value of outward cargo according to the customs valuation rules to check over and under invoicing; iii) to assess and realize export duty/cess/charge according to the customs Tariff Act and any other fiscal legislation; iv) to check that all the relevant regulatory provisions enforced by various authorities in the country have been duly complied with in respect of export; and v) to provide export data through the customs returns.

CUSTOMS CLEARANCE STAGES:There are four stages of customs involvement. These are: 1.Processing of documents at the Customs House i.e. die main office. This stage involves: i) checking up of documents to ensure that all relevant documents have been submitted; ii) verification of quantity and value of goods; iii) verification and determination of rate of duty and collection of the duty amount;

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(iv) direction for the customs officer in the docks for physical examination of goods; 2.Physical examination of goods in the docks in accordance with the examination' order given at the Customs House; 3.Supervision of loading by the Customs Preventive Officer; and 4.Post-shipment endorsements by the Customs Preventive Officer.

DOCUMENTARY REQUIREMENTS:For movement of goods by air or by sea, the customs permission for shipment is given on a prescribed document, known as Shipping Bill. In other cases (Le. by road/rail) the document is known as Bill of Export. There are four types of Shipping Bill/Bill of export. These are:i)Dutiable Shipping Bill/Bill of Export for those goods which attract export duty/ cess; ii)Drawback Shipping Bill/Bill of Export for those goods which are covered by the Duty Drawback scheme; iii) Free Shipping Bill/Bill of Export for those goods which neither attract export duty/ cess nor are covered by the Duty Drawback scheme; iv)EX-bond Shipping Bill/Bill of Export for those goods, which are shipped from ,the customs, bonded warehouse. Exporter or his agent submits the following documents to the customs department. i) Shipping Bill (in duplicate, triplicate or quadruplicate) duly filled in and signed. ii) Declaration regarding truth of statement made in the Shipping Bill iii) Invoice copy G

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iv) R Form v) Export Licence (wherever required) vi) Quality Control Inspection Certificate (wherever required) vii) Original Contract wherever available or correspondence leading to contract viii) Contract registration certificate (wherever applicable) ix) Letter of credit (wherever applicable) x) Packing List xi) AR4/AR5 Forms (original and Duplicate) xii) Any other documents

3.8 SHIPPING AND CUSTOMS FORMALITIES:The following is the procedure for shipping and customs clearance:(a) Preparation and Submission of Export Documents :For the clearance of cargo from customs, the exporter 01' his agent is required to submit the following set of documents alol1gwithwith five copies of shipping bill to the Customs Appraiser at the Custom House * Letter of Credit along with the export contract or export order * Commercial Invoice (2 copies * Packing List or Packing Note * Certificate of Origin.

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* GR Form (original and duplicate) * ARE-I Form. * Original copy of Certificate of Inspection, where necessary. * Marine Insurance Policy. (b)Verification of Documents :The Customs Appraiser verifies the details listed in each document and ensures that all the formalities relating to exchange control, quality control, pre-shipment inspection and licensing have been complied with by the exporter. If satisfied, he issues a 'Shipping Bill Number', which is very important from exporter's point of view. (c)Valuation of the Goods :The Customs Appraiser assesses the shipping bill and values the goods. The value of goods as determined by the Customs Appraiser is considered for all future transactions, especially for the claim of incentives. All documents are returned to the exporter or his agent, except : *Original copy of GR to be forwarded to the RBI. *Original copy of Shipping Bill. *One copy of Commercial Invoice: The validity of assessed shipping bill is for one month only. If the exporter fails to deliver the goods in that period; he will have to undergo the above procedure again.
(d)Obtaining 'Carting Order' from the Port Trust Authorities :-

The C&F agent, then, approaches the Superintendent of the concerned Port Trust for obtaining the 'Carting Order' for moving the cargo inside the dock. After obtaining the Carting Order, the cargo is physically moved into the port area and stored in the appropriate shed. (e)Customs Examination and Issue of Let Export Order' :The Customs Examiner at the port of shipment physically examines the goods and seals the packages in his presence. The same can be arranged for at the factory or warehouse of the exporter by making an application to the. Assistant Collector of Customs. The Customs Examiner, if satisfied, issues a
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formal permission for the loading of cargo on the ship in the form of a 'Let Export Order'. The above procedure is now processed through Electronic Data Interchange (EDI) System.
(f)Obtaining 'Let Ship Order' from the Customs Preventive Officer :-

'Let Export Order' must be supplemented by a 'Let Ship Order' issued by the Customs Preventive Officer. The C&F agent submits the duplicate copy of Shipping Bill, duly endorsed by the Customs Examiner, to the Customs Preventive Officer who endorses it with the' 'Let Ship Order'. (g)Obtaining Mate's Receipt and Bill of Lading :The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mate's Receipt to the Port Superintendent. The Port Superintendent, on receipt of port dues, hands over the Mate's Receipt to the C&F Agent. The II C&F Agent surrenders the Mate's Receipt to the Shipping Company for obtaining the Bill of Lading. The Shipping Company issues two to three negotiable and two to three non-negotiable copies of Bill of Lading.

4. EXPORT DOCUMENTATION
4.1.INTRODUCTION:At the outset it must be mentioned that improved system of documentation for exports announced by the government of India on 31 March , 1991 is fine and should be adopted by the exporters as far as possible. However a word of caution would be in order. To date we have arrangements with only 80 countries around the word where UN key Layout(Master documents) are followed. With these countries Indian exporter could jolly well use the improved version of documents announced by the government of India as per the New Exim policy 1992-97. For the remaining countries (other than 80 countries where UN key Layout (Master Documents) is not in use, the Indian exporter has to ascertain from the importer of his requirements and must comply to his dictates for documentation. The basic dictum for the exporters comply 100% the Letter of Credit requirements for
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Documentation, otherwise exporter could be in problem and his payment may be stopped. Moreover exporter prepares export documents not for his own convenience but largely to meet the requirements of the overseas importer who largely conveys it through the Letter of Credit. Treatment in this chapter is therefore slightly exhaustive of documents where the old requirements have also been kept in view while introducing master documents. Export documentation work constitutes a heavy charge on our export activity. It is complex cumbersome and costly. This is partly due to the nature of export trade itself involving as it does a number of intermediary organizations and authorities at different stages of export activity between the seller and the buyer. All these, in turn, generate a lot of paperwork and procedural formalities. The documents material to an export sales contract are not many in number. However the problem is complicated due to the heavy paper work and the procedural formalities that are required to be complied with before the essential documents can be procured. The procedural and documentary formalities associated with exports have been evolved and practiced over the years by different authorities/organizations to suit their own convenience without much regard to the repercussions they might have on the total export activity. The resultant mass of paperwork caused much inconvenience and inordinately long delay in the movement of goods. There was a need for a total approach to the problem. This meant evolving not only simple export documents and procedures in each of the individual areas of export activity but also ensure their compatibility and harmony in the totality of export operation. Notwithstanding the need for such an approach to the procedure generated problems, it has been appreciated that the task of procedural simplification is a containing an longterm one requiring. In some cases prior amendment of the statutes, policies and regulations they stem from One of the ways in which this has been done is through the use of standardized document in our export trade. The documents use differed in size and layout, despite the fact that most of the information requirements are common to a number of them Because of the difference in their sizes and designs, these documents has to be completed individually. This method of preparation of documents was susceptible to errors and discrepancies, which, even through minor, caused delays at different stages in the processing of documents, costly, hold up of consignments at checkpoints and terminals, and ultimately in the realization of export proceeds.

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4.2.STANDARISED PRE-SHIPMENT EXPORT DOCUMENTS:The Government of India has made it mandatory for every exporter to use standardized preshipment export documents w.e.f September 1, 1991. This is popularly known as Aligned Documentation System (ADS), based on UN Layout Key. The ADS Methodology involves the preparation of documents on a uniform and standardA4 size of paper. The documents are aligned to one another in such a way that, the common items of information are given the same relative slots in each of the documents included in the System. This makes it possible to prepare one Master document embodying the information common to all the documents included in the aligned series and to run off all the aligned documents from the same Master document with the help of suitable marking reproduction techniques. The Pre-shipment documents on a Standard Layout were first introduced by Sweden in 1956 followed by Denmark, Finland and Norway. It was later that most of the European countries, USA, Australia, etc, have adopted this ADS system. Advantages:The ADS system offers the following advantages:1. Dispenses with the conventional documentation practices. 2. Brings in uniformity in documentation. 3. Ensures economy, speed, accuracy and convenience. 4. Facilitates expeditious checking and processing of documents at different stages. 5. Generates as many copies as required of Commercial and Regulatory Documents from their respective Master Copies through Photocopying Machines.

4.3.MASTER DOCUMENTS:-

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All these problems of late have been avoided by following a system which provides an alternative to the repetitive, unproductive and time consuming work necessitated by the exporter compulsion to prepare separately a number of documents all containing practically the same information. This system is known as the Aligned Documentation System. Already in use in a number of countries, this system is reported to have made for simplicity, convenience, speed, accuracy and economy in documentation work. United Nations key Layout has mace it possible to many countries to reproduce in one run the repetitive information on all the export documents from just one document called the Master Document. As a result, exports in these countries have been able to reduce the documentation costs by 50 to 70%. The documentation of simplified export documents has reduced the burden of the exporters and has given a push to the countrys ongoing export drive. The exporters now can save at least 50% of the time and cost on documentation. It will thus help in expediting decision-making process. Virtually eliminate the chances of errors and facilitate electronic transmission of export documentation and data. Therefore simplification of export documentation and procedures are key measures to promote exports. Earlier Indian exporters were required to submit 25 documents to various agencies and authorities merely to ship the goods. Each document had to be individually prepared. The news system standardized these documents and aligned then to each other on basis of United Nations key layout which has already been adopted by most of Indians trading partners. Thus now instead of typing out 25 documents, exporters prepare only two master documents. The new system also includes simplification and relaxation of related procedures, which will further reduce the delays and time component currently involved in export effort. It is expected that as fallout of the introduction of the new system, a self propelling process towards further rationalization of documentation and procedural requirements would get in motion in all the conceived organizations. And at the end of it the exporter should be able to spend his resource and energy more on export production and marketing than on meeting the demands of archaic export procedures. In the new set up attempts have been made first to standardize and simplify each document and secondly to align them to each other using as far as possible the UN Key Layout. These aligned documents are in time with the pro forma used by countries with whom more than 80% of Indias foreign trade is transacted. The two master documents- one for commercial use and the other for regulatory documents meant for customs, RBI and port trust-have
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maximum advantage of alignment and minimum cost and time for preparing individual documents. The two- master documents contain all the information that was common to individual documents. Earlier, there were a plethora, of commercial document which include among others, invoice, packing, list intimation for inspection insurance declaration form, shipment advice and the exchange control declaration form. Thus the one run method of preparation of Documents involves the use of standardized and aligned documents. Aligned Documentation System (ADS) is based on the UN layout key. Under this system, different forms used in the international trade transaction are printed on paper of the same size and in such way that the. Common items of information are given .the, same relative slots in each of the documents. For the purpose of Aligned Documentation System documents, have been, classified as under (a) Commercial Documents :Commercial .documents are required for effecting physical transfer of goods and their title from the exporter to the importer and the realization Of export sale proceeds. Out of the 16 commerce documents in the export documentation framework as many as 14 have been standardized and aligned to one another. These are performance invoice, commercial invoice, packing list, shipping instructions, intimation for, inspection, certificate, of inspection of quality control, insurance declaration, certificate of insurance, mate's receipt, bill of lading or, combined transport document, application for certificate origin, certificate of origin, shipment advice and letter to the bank for collection or negotiation However, shipping order and bill of exchange could not be brought within the fold of the Aligned Documentation System. The following are the 16 Commercial documents generally involved at the pre- shipment stage:1. Pro forma invoice 2. Commercial Invoice 3. Packing List 4. Shipping Instruction

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5. Intimation of Inspection 6. Certificate of Inspection 7. Insurance Declaration 8. Certificate of Insurance 9. Shipping Order 10. Mate's Receipt 11. Bill of Lading/Combined Transport Document 12. Application for Certificate of Origin 13. Certificate of Origin 14. Bill of Exchange 15. Shipment Advice 16. Letter to the Bank for Collection/Negotiation of Documents (b) Regulatory Documents: Regulatory pre-shipment export documents are prescribed by the different government departments and bodies in order to comply with various rules and regulations under the relevant laws governing export trade such as export inspection, foreign exchange regulation, ex port trade control, customs, etc. Out of 9 regulatory documents four have been standardised and aligned. These are shipping bill or bill of export, exchange control declaration (GR from), export application dock challan or port trust copy of shipping bill and receipt for payment of port charges. It is proposed to conduct training and orientation programmes at all export centers to familiarize the exporting community with the new system. The regulatory documents associated with the pre- shipment stage of an Export Transaction are given below:-

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1. Gate Pass-I/Gate Pass-II (now deleted) 2. AR-4 Form 3. Shipping Bill/Bill of Export 4. Export Application/Dock Challan/Port Trust Copy of Shipping Bill 5. Receipt for Payment of Port charges 6. Vehicle Chit 7. Exchange Control Declaration (GRIPP) Forms 8. Freight Payment Certificate' 9. Insurance Premium Payment Certificate Out of the above 9 Regulatory documents, four have been standardized. In fact, these four documents have been reduced to only three. The receipt for payment of Port Charges has been incorporated in the Export Application/ Dock Challan/Port Trust Copy of Shipping Bill, thus one document has been completely eliminated. NEED FOR PREPARING EXPORT DOCUMENTS:Export documents have to be prepared for various purposes, viz. 1. Declaration of Exports as per Exchange Control Regulations of the country. 2. Transportation of the goods. 3. Customs clearance of the goods. 4. Other purposes. Some of the forms for preparing documents have been standardized under the Aligned Documentation System introduced w.e.f. 1.10.1991. Declaration forms:45

There are four main declaration forms which are prescribed. These are called GR, PP, VP/COD and Softex Forms. All exports to which the requirement of declaration applies must be declared on appropriate forms as indicated below: GR Form :Used for exports to all countries made otherwise than by Post. PP Form:Used for exports to all countries by Parcel Post, except when made On ''Value Payable" or "Cash on Delivery" basis . VP COD FORM:Used for exports to all countries by Parcel Post under arrangements to realise proceeds through Postal channels on "Value Payable" or Cash on Delivery" basis. Used for export of Computer Software in non-physical form. SOFTEX :While Export Declaration are to be made in a set of to copies (original and duplicate) of GR or PP form, VP/COD forms are to be submitted in a single copy. GRIPP forms are printed in distinctive colours and each set bears a printed number which appears on both copies of the Form. They are avail. able for sale with Reserve Bank of India. However, exporters can get these forms through Authorized Dealers also. VP/COD Forms are sold directly to exporters by Reserve Bank of India. Export Declaration Forms have utmost importance and are binding on the exporter. It is therefore necessary, that enough care is taken while declaring exports on these forms with special reference on the following points: (i) Name and address of Authorized Dealer through whom proceeds of exports have been or will be realized should be specified in the relevant column of the form.

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(ii) Details of commission and discount due to foreign agent or buyer should be correctly declared otherwise difficulties may arise at the time of remittance of such commission. (iii) It should be clearly indicated in the form whether the export is on 'Outright sale basis' or 'on Consignment basis' and irrelevant clauses must be struck out. (iv) Under the item 'Analysis of Full Export value', a break up of the full export value of goods under FOB value, freight and insurance should be furnished in all cases, irrespective of the terms of the contract.

4.4.EXPORT INVOICE
Invoice is a document of content. Its the exporters bill for goods and sets forth the terms of sale. The invoice is a basic document. As a document of contents it must fully identify the overseas shipment and serve as a basis for the preparation of all other documents, which in greater or lesser detail reproduce information from it. The exporter should strictly follow the requirements of the importer in regard to invoicing. The standard document in respect of the invoice based on the United Nations Key Layout, which has been accepted as the basis of this document in many entries. The information requirements of the document have been determined after examining a number of forms of invoices used by leading export organizations and after series of discussions with the representatives of the Department of Customs and Central Excise and the Federation of Custom House Agents Associations in India. Invoices based on the suggested design will be acceptable not only in many countries but will also help facilitate processing of documents at various stages. The Declaration given at the bottom (left hand) of the Invoice follows the UN recommendation. The standard Invoice can be reproduced from the master by masking only three columns, i.e. Notify Party, Insured Value and No. of Original Bs/L No, and Date on the invoices. But under the present procedure for customs clearance and shipment of export cargo, this information, and particularly in respect of the B/L No. and Date, will be available to exporters only after shipment has been effected.

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Where required under letter of credit, such information will need to the banks for negotiation. But for this, the rest of the information can be reproduced from the master The information referred to in the preceding lines can be given above the columns for Country of Origin and Final Destination in the order of name of shipping line, ETD (port of shipment), ETA (destination port) and B/L No. and Date. Unused space, in the Buyers column and below the Consignees Column can be utilized for incorporation of any other information which may be special to a transaction. Value and Origin Clauses can be printed on the back side of the Standard Invoice. There may be cases when exports are required to give detailed descriptions or specifications of the various items forming part of the consignment exported in one lot. In such cases, exporters are advised to use Continuation sheets to the Invoice.

4.5.PRO FORMA INVOICE

The starting point of the export contract is in the form of offer made 'by the exporter to the foreign customer. The offer made by the exporter is in the form of a Pro forma invoice. It is a quotation given as a reply to an inquiry. It normally forms the basis of all trade transactions. It is proposed to conduct training and orientation programmes at all export centers to familiarize the exporting community with the new system. CONTENTS OF PROFORMA INVOICE (a) Name and address of the exporter. (b) Name and address of the importer. (c) Mode of transportation, such as Sea or Air or Multimodal transport. (d) Name of the port of loading, (e) Name of the port of discharge and final destination. (f) Provisional invoice number and date. (g) Exporter's reference number. .

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(h) Buyer's reference number and date. (i) Name of the country of origin of goods. (j) Name of the country of final destination. (k) Marks and container number. (l) Number of packing descriptions. (m) Description if goods given details terms of internationally accepted price quotation, (n) Signature of the exporter with date. IMPORTANCE OF PRO FORMA INVOICE (a) It forms the basis of all trade transactions. (b) It may be useful for the importer in obtaining import license or foreign exchange.

4.6.COMMERCIAL INVOICE :Commercial invoice is an important and basic export document. It is also known as a Document of Contents as it contains all the information required for the preparation of other documents. It is actually a sellers bill of merchandise. It is actually a sellers bill of merchandise. It is prepared by the exporter after the execution of export order giving details about the goods shipped. It is essential that the invoice is prepared in the name of the buyer or the consignee mentioned in the letter of credit. This is the first basic and the only complete document among all commercial documents for the shipment. Besides fulfilling the obligation under the export contract, the exporter needs this document for a number of other purposes including: i) Obtaining export inspection certificate ii) Getting excise clearance iii) getting customs clearance and

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iv) Securing incentives. CONTENTS OF COMMERCIAL INVOICE (a) Name and address of the exporter. (b) Name and address of the consignee. (c) Name and the number of Vessel or Flight. (d) Name of the port of loading. (e) Name of the port of discharge and final destination. (f) Invoice number and date. (g) Exporter's reference number. (h) Buyer's reference number and date. (i)Name of the country of origin of goods. (j) Name of the country of final destination. (k) Terms of delivery and payment. (l) Marks and container number. (m) Number and packing description. , (n) Description of goods giving details of quantity, rate and total amount in terms of internationally accepted price quotation. (o) Signature of the exporter with date. SIGNIFICANCE OF COMMERCIAL INVOICE (a) It is the basic document useful in preparation of various other shipping documents.
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(b) It is used in various export formalities such as quality and preshipment inspection, excise and customs procedure etc. (c) It is also useful in negotiation of documents for collection and claim of incentives. (d) It is useful for accounting .purposes to both exporters as well as importers.

4.7.PACKING LIST
This may be shown on invoice or separately, and should contain item by item, the contents of cases or containers or of a shipment with its weight and description set forth in such a manner as to permit checks of the contents by the customs on arrival at the port of destination as well as by the recipient. The packing list is a relatively simpler document and the whole of the information can be reproduced from the master by masking information not desired on the packing list. Special information, if any, can be given in the blank space in the lower third portion of the document. The exporter prepares the packing list to facilitate the buyer to check the shipment. It contains the detailed description of the goods packed in each case, their gross and net weight, etc. The difference between a packing note and a packing list is that the packing note contains the particulars of the contents of an individual pack, while the packing list is a consolidated statement of the contents of a number of cases or packs. CONTENTS OF PACKING LIST (a) Name and address of the exporter. (b) Name 'and address of, the consignee. (c) Name and the number of Vessel or Flight. (d) Name of the port of loading. (e) Name of the port of discharge and final destination. (f) Invoice number and date.

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(g) Name of the country of origin of goods. (h) Name of the country of final destination. (i) Marks and container number. (j). Number and packing description. (k) Description of goods in terms of quantity and special remarks, if any. (1) Signature of the exporter with date. Normally, ten copies of the packing note/list should be prepared. The first is to be sent with the shipping documents, two copies in advance to the buyer, one to the shipping agent and the remaining retained by the exporter.

4.8.MATES 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 fade evidence that goods are loaded in the vessel. The mate's receipt is first handed over to the f Port Trust Authorities. After making payment of all port dues, the exporter or his agent collects the mate's receipt from the Port Trust Authorities. The mate's, receipt is freely transferable. It must be handed over to the shipping company in order to get the' bill of lading. Bill of lading is prepared on the basis of the mate's receipt. TYPES OF MATE'S RECEIPTS (a) Clean Mate's Receipt :The Commanding Officer of the ship issues a clean mate's receipt; if he is satisfied that the goods are .packed properly and there is no defect in the packing of the cargo or package. (b) Qualified Mate's Receipt :The Commanding Officer of the ship issues a qualified mate's receipt, when the goods are not packed properly and the shipping company does not take any responsibility of damage to the goods during transit.

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CONTENTS OF MATE'S RECEIPT (a) Name and logo of the shipping line. (b) Name and address of the shipper. (c) Name and the number of vessel. (d) Name of the port of loading. (e) Name of the port of discharge and place of delivery. (f) Marks and container number. (g) Packing and Container description. (h) Total number of containers and packages. (i) Description of goods in terms of quantity. (j) Container status and seal number. (k) Gross weight in kg. and volume in terms of cubic meters. (l) Shipping bill number and date. (m) Signature and initials of the Chief Officer. SIGNIFICANCE OF MATE'S RECEIPT (a) It is an acknowledgement of goods received for export on board the ship. (b) It is a transferable document. It must be handed over to the shipping company in order to get the bill of lading. (c) Bill of lading, which is the title of goods, is prepared on the basis of the mate's receipt. (d) It enables the exporter to clear port trust dues to the Port Trust Authorities.

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4.9.BILL OF LADING .
Bill of lading is issued by the shipping company or its agents stating that goods are either being shipped or have been shipped. Essentially a transport document. it serves many purposes in international commerce. 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. A bill of lading serves three main purposes:i) This document evidences the contract of affreightment (transport) between the shipping company and the shipper (exporter or importer). ii) It is a receipt given by the shipping company for cargo received by it. iii) It is a document of title (This is the most significant function of the bill of lading For the bill of lading to be negotiable in fact three requirements must be fulfilled: 1) it must be made out to the order to the shipper. 2) It must be signed by the steamship company. 3) It must be endorsed in blank by the shipper. TYPES OF BILL OF LADING (a) Clean Bill of Lading :- A bill of lading acknowledging receipt of the goods apparently in good order and condition and without any qualification is termed as a clean bill of lading.

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(b) Claused Bill of Lading :- A bill of lading qualified with certain adverse remarks such as, "goods insufficiently packed in accordance with the Carriage of Goods by Sea Act," is termed as a claused bill of lading. (c) Through Bill of Lading :- It covers goods being transshipped enroute but where the first carrier has the responsibility as the principal carrier for all stages of the journey. For example, goods may be shipped from Bombay to Dubai and transshipped from Dubai to a port in Latin America. (d) Trans-shipment B/L:- It has similar characteristic as the Through B/L except that in this case the first carrier acts only as an agent for effecting Trans-shipment of cargo. (e) Stale Bill of Lading :- A bill of lading that has been held too long before it is passed on to a bank for negotiation or to the consignee is called a stale bill of lading. (f) Freight Paid Bill of Lading :- When freight is paid at the time of shipment or in advance, the bill of landing is marked, freight paid. Such bill of lading is known as freight bill of lading. (q) Freight Collect Bill of lading: - When the freight is not paid and is to be collected from the consignee on the arrival of the goods, the bill of lading is marked, freight collect and is known as freight collect bill of lading. CONTENTS OF BILL OF LADING (a) Name and logo of the shipping line. (b) Name and address .of the shipper. (c), Name and the number of vessel. (d) Name of the port of loading. (e) Name of the port of discharge and place of delivery. (f) Marks and container number.

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(g) Packing and container description. (h) Total number of containers and packages. (i) Description of goods in terms of quantity. (j) Container status and seal number. (k) Gross weight in kg. and volume in terms of cubic metres. (l) Amount of freight paid or payable. (m) Shipping bill number and date. (n) Signature and initials of the Chief Officer. ENDORSEMENT ON BILL OF LADING By practice and custom he bill of lading has been transferable. If however, the bill requires the goods to be delivered to a particular named person and does not include a reference to his assignees, the bill of lading is not transferable. It is only rarely that a bill of lading would be drawn this way. The consignee or consignor as the case may be, can transfer the B/L either by a special endorsement, i.e. an endorsement which names the transferee to whom delivery is to be made or by an endorsement in blank to be bearer. The holder may, however, convert the blank endorsement into a special endorsement by inserting, the name of a person to whom delivery is to be made. It is then called the endorsement in full SENDING OF BILL OF LADING TO IMPORTER B/L is made out in sets and any number of copies may constitute the set according to the requirements of the particular transaction and the importer. The number of copies to be made out will be indicated by the importer before the shipment takes place. In case there is no such indication, normally, two copies. One set of documents is sent by the first class airmail and the second by the following mail, so that if one is lost. Delivery of the goods can be taken by the importer because of the second set. SIGNIFICANCE OF BILL OF LADING FOR EXPORTERS

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(a) It is a contract between the shipper and the shipping company for the carriage of the goods to the port of destination. . (b) It is ari acknowledgement indicating that the goods mentioned in the document have been received on board for the purpose of shipment. (c) A clean bill of lading certifies that the goods received on board the ship are in order and good condition. ' (d)It is useful for claiming incentives offered by the government to exporters. (e) The exporter can claim damages from the shipping company if the goods are lost or damaged after the issue of a clean bill of lading. SIGNIFICANCE OF BILL OF LADING FOR IMPORTERS (a) It acts as a document of title to goods, .which is transferable by endorsement and delivery. (b) The exporter sends the bill of lading to use bank of the importer so as to enable him to take the delivery of goods. (c) The exporter can give an advance intimation to the foreign buyer about the' shipment of goods by sending him a non-negotiable copy of bill of lading. SIGNIFICANCE OF BILL OF LADING FOR SHIPPING COMPANY It is useful to the shipping company for collection of transport charges from the importer if not collected from the exporter.

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

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(a) The goods produced in a particular country are subject to preferential tariff rates in the foreign market at the time importation. (b) The goods produced in a particular country are banned for import in the foreign market. TYPES OF THE CERTIFICATE OF ORIGIN (a) Non preferential Certificate of Origin :- Non-preferential certificate of origin is required in general by all countries for clearance of goods by the importer, on which no preferential tariff is given. It is issued by The authorized Chamber of Commerce of the exporting country. Trade Association of the exporting country. (b) Certificate of Origin for availing Concessions under GSP:- Certificate. of origin required for availing of concessions under Generalized System of Preferences (GSP) extended by certain countries such as France, Germany, Italy, BENELUX countries, UK, Australia, Japan, USA, etc. This certificate can be obtained from specialized agencies, namely Export Inspection Agencies. Director General of Foreign Trade, Commodity Boards, and their regional offices. Development Commissioner, Handicrafts, Textile Committees for textile products. Marine Products Export Development Authority for marine products. Development Commissioners of EPZs. (e) Certificate for availing Concessions under Commonwealth Preferences (CWP) :- Certificate of origin for the purpose of Commonwealth Preference is also known as 'Combined Certificate of Origin and Value'. Two member countries, Le, require it Canada and New Zealand of the Commonwealth. For concession under Commonwealth preferences, the certificates or origin have to be submitted in special forms obtainable from the High Commission of the country concerned. (d) Certificate for availing Concessions under other Systems of. Preference:Certificate of origin is also required for tariff concessions under the Global System of Trade Preferences (GSTP), Bangkok Agreement (BA) and SAARC Preferential Trading Arrangement (SAPTA) under which India grants and receives tariff concessions on imports and exports. Export Inspection Council (EIC) is the sole authority to print blank Certificates of . Origin under BA, SAARC and SAPTA which can be issued by such agencies as EPCs, DCs of EPZs, EIC, APEDA, MPEDA, FIEO, etc.
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CONTENTS OF CERTIFICATE OF ORIGIN (a) Name and logo of chamber of commerce. (b) Name and address of the exporter. (c). Name and address of the consignee. (d). Name and the number of Vessel of Flight. (e). Name of the port of loading. (f). Name of the port of discharge and place of delivery. (g) Marks and container number. (h) Packing and container description. (i) Total number of containers and packages. (j) Description of goods in terms of quantity. (k) Signature and initials of the concerned officer of the issuing authority. (l) Seal of the issuing authority. SIGNIFICANCE OF THE CERTIFICATE OF ORIGIN (a) Certificate of origin is required for availing of concessions under Generalized System of Preferences (GSP) as well as under Commonwealth Preferences (CWP). (b) It is to be submitted to the customs for the assessment of duty and clearance of goods with concessional duty. (c) It is required when the goods produced in a. particular country are banned for import in the foreign market. (d). It helps the buyer in adhering to the import regulations of the country.
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(e). Sometimes, in order to ensures that goods bought from some other country have not been reshipped by a seller, a certificate of origin is required.

4.11.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 : (a) Customs copy. (b) Drawback copy. (c) Export promotion copy. (d) Port trust copy. (e) Exporter's copy. Free Shipping Bill is used for export of goods which neither attracts any Duty/Cess nor is entitled to Duty Drawback on their exportation. Dutiable Shipping bill is used in case of goods subject to Export Duty/Cess but mayor may not be entitled to Duty Drawback. Drawback Shipping Bill or Bill of Exports is used in the case of goods which are entitled to Drawback. Ship. ping Bill for Shipment Ex-bond is for use in case of imported goods for Re. exports and which are kept in Bond. Following documents are required for the processing of a Shipping Bill: (a) GR Forms in duplicate for shipments to all countries. (b) Four copies of Packing list giving contents, quantity, gross and net weight of each Package.

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(c) Four copies of Invoices indicating all relevant particulars such as no. of packages, quantity, unit rate, total FOB/CIF value, correct and full description of goods, etc. (One copy of this Invoice is to be pasted on the duplicate copy of Shipping Bill). (d) Contract, Letter of Credit, Purchase Order (e) Inspection/Examination Certificate. The Formats presented for the Shipping Bill are as under: 1. White Shipping Bill for export of Duty Free goods prepared in triplicate in the Standardized Format. 2. Green Shipping Bill for export of goods under claim for Duty Draw back prepared in quadruplicate in the prescribed Form. 3. Yellow Shipping Bill for export of dutiable goods prepared in triplicate in the prescribed Form. 4. Pink Shipping Bill for export of Duty Free goods ex-Bond prepared in triplicate in the prescribed Form. Where the goods are to be cleared by the Land Customs, Bill of export is prepared instead of Shipping Bill. Bill of Export is also of four types i.e. white, green, yellow and pink for the purpose stated above. Standardized Formats of the Bill of Export are also available with the booksellers who deal with Exim publications. TYPES OF SHIPPING BILL Based on the incentives offered by the government, customs authorities have introduced three types of shipping bills:(a) Drawback Shipping Bill :- Drawback shipping bill is useful for claiming the customs drawback against goods exported. (b) Dutiable Shipping Bill :- Dutiable shipping bill is required for goods which are subject to export duty. (c) Duty-free Shipping Bill :- Duty-free shipping bill is useful for exporting the goods on which there is no export duty.
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Application for export is used for seeking customs permission of export goods to the neighboring countries like Bangladesh by road, river or rail. This is of Three Types, namely, for export of "Free", "Dutiable" and "Drawback" cargos. Customs declaration form for goods sent by post parcel is a standard form for all types of cargo. However, for claiming duty drawback, the exporter has also to file another document known as "Form D". Port authorities in India have specified documents for bringing the cargo into the shed for shipment as well as for payment of port charges. This document is called port - trust copy of shipping bill in Bombay dock challan in Calcutta and Export application in Madras and Cochin. Like the shipping bill, the clearing and forwarding agent of the exporter prepare this document. In order to facilitate easy recognition and quick processing, following colours have been provided to different kinds of shipping bills Types of goods By Sea By Air Drawback Shipping Bill Green Dutiable shipping Bill Yellow Pink Duty free Shipping Bill White Pink CONTENTS OF SHIPPINING BILL (a) Name and address of the exporter. (b) Name and address of the importer. (c) Name of the vessel, master or agents and flag. (d) Name of the port at which goods are to be discharged. (e) Country of final destination. (f) Details about packages, description of goods, marks and numbers, quantity and details of each case. (g) FOB price and real value of goods as defined in the Sea Customs Act. (h) Whether Indian or foreign merchandise to be re-exported (i) Total number of packages with total weight and value. SIGNIFICANCE OF SHIPPING BILL
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(a) Shipping bill is the main customs document, required by the customs authorities for granting permission for the shipment of goods. (b) The cargo is moved inside the dock area only after the shipping bill is duly stamped, i.e., certified by the customs. (c) Duly endorsed shipping bill is also necessary for the collection of export incentives offered by the government. (d) It is useful to the Customs Appraiser while determining the actual value of goods exported.

4.12.CONSULAR INVOICE
Consular invoice is a document required mainly by the Latin American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This invoice is the most important document, which needs to be submitted for certification to the Embassy of the importing country concerned. The main purpose of the consular invoice is to enable the authorities of the importing country to collect accurate information about the volume, value, quality, grade, source, etc., of the goods imported for the purpose of assessing import duties and also for statistical purposes. In order to obtain consular invoice, the exporter is required to submit three copies of invoice to the Consulate of the importing country concerned. The Consulate of the importing country certifies them in return for fees. One copy of the invoice is given to the exporter while the other two are dispatched to the customs office of the importer's country for the calculation of the import duty. The exporter negotiates a copy of the consular invoice to the importer alongwith other shipping documents. Significance of Consular Invoice for the Exporter . (a) It facilitates quick clearance of goods from the customs in exporter's as well as importer' country.

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(b) Certification of goods by the Consulate of the importing country indicates that the importer has fulfilled all procedural and licensing formalities for import of goods. (c). It also assures the exporter of the payment from the importing country. SIGNIFICANCE OF CONSULAR INVOICE FOR THE IMPORTER (a) It facilitates quick clearance of goods from the customs at the port of destination and therefore, the importer gets quick delivery of goods. (b) The importer is assured that the goods imported are not banned for imports in his country. SIGNIFICANCE OF CONSULAR INVOICE FOR THE CUSTOMS OFFICE (a) It makes the task of the customs authorities easy. (b) It facilitates quick calculation of duties as the value of goods as determined by the Consulate is considered for the purpose.

4.13.GR FORM
GR Form is an exchange control document required by the Reserve Bank of India (RBI). As per the exchange control regulations, an exporter has to realize the proceeds of the goods he has exported within 180 days of their shipment from India. In order to ensure this, the RBI has introduced the GR procedure. GR form is to be submitted in duplicate to the Customs at the port of shipment along with the shipping bill. Customs will give their running serial number on both the copies after admitting the customs shipping bill. Customs authorities will certify the value declared by the exporter on both the copies of the GR form at the space earmarked and will also record the assessed value. They will then return the duplicate copy of the form to the exporter and retain the original for transmission to the RBI. Within 21 days from the shipment of goods, exporter must lodge the duplicate copy of GR together with relative shipping documents with the authorized dealer named in the GR form for negotiation of export bills. After the documents have been negotiated, the authorized dealer will report the transaction to the RBI. The duplicate- copy 'of GR form together with a copy of invoice will be retained by the authorized dealer till full export proceeds
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have been realized and thereafter submitted to the RBI. On account of introduction of Electronic Data Interchange (EDI) System at certain customs offices where shipping bills are processed electronically, the existing declaration in GR form has been replaced by a declaration in form SDF (Statutory Declaration Form).

4.14.OTHER DOCUMENTS:Customs Invoice Countries like U.S.A., Canada, etc., need Customs Invoice. It is generally made out on a special form prescribed by the Customs Authorities of the importing country and helps for allowing entry of goods in the importing country at preferential tariff rates. The Invoice Forms are generally available at the Consular Officer of the importing country and are required to be signed and witnessed after duly filling out the same. Legalised/visaed Invoice these are the Invoices sworn for their genuineness by the seller as being correct, before the appropriate Consulate/Chamber of Commerce Embassy as the case may be, and they bear the stamp and authentication of the Consulate/Chamber of Commerce Embassy as being in order. A nominal charge is collected by them from the seller for doing this. These Invoices are required by some of the Latin American Countries. There is no prescribed form of this Invoice. Certified invoice At times the exporter is called upon to certify on the Invoice, that the goods are of particular origin or manufactured/packed at a particular place and in accordance with specific contract. When Certificates as such appear on the Invoice, it is called as a Certified Invoice. Bill of exchange/draft A Bill of Exchange also known as Draft contains an order from the credit to the debtor to pay a specified amount to a person mentioned therein. The maker of a Bill is called the "Drawer", the person who is directed to pay is called the "Drawee" and the person who is entitled to receive payment is called the "Payee." When it is drawn on a foreign firm it is termed as a Foreign Draft or Bill of Exchange. It is prepared either in an international currency or Indian Rupees depending on the terms of the contract. Accordingly, the Bill is known by the name of currency in which it is drawn. For example, a Bill drawn in US dollars is known as 'Dollar Bill'

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and when prepared in rupees, being termed as 'Rupees Bill'. When the goods are shipped by Sea, the bills are drawn in sets and two sets of documents, including drafts are mailed to the foreign correspondent through an authorized dealer for presentation to the Drawee (importer). Each one bears a reference to the other. A Bill of Exchange or Draft is of two types: (I) 'Sight Draft' or 'Draft at Sight' and (ii) "Usance Draft" or "Usance Bill". When the Drawer i.e. exporter expects the Drawee i.e. importer to make; payment immediately after the Draft is presented to him, it is called a Sight: Draft'. Unless and until the Draft is received, the Negotiating/Collecting Bank does not hand over the Shipping documents and the buyer cannot take delivery of goods. As there is no Aligned document for Draft the same can be prepared by the Exporter in the usual format Certificate of inspection Inspection Certificate, indicating that goods have been inspected before shipment, is needed under some contracts or by some countries. This Certificate is generally required to be issued by one of the authorized independent Inspection Agencies/Surveyors in the exporter's country. The Certificate is issued in the Aligned document Form. Black list certificate This is to certify that the ship/aircraft carrying the goods has not touched a particular country on its journey or that the goods are not of a particular country. This certificate is usually called for when countries have strained political relations with another. Weight note This document is used to confirm that the Packets/Bales, etc., are of a particular weight and not more than the stipulated weight as per contract. It may at times give gross weight and net weight of the whole consignment. Manufacturer's/supplier's quality/inspection certificate This is a Certificate to the effect that the goods which have been manufactured/supplied are as per the requirement of the Contract of Sale. Languages certificate Importers in the European Economic Community Countries require Languages Certificate along with the GSP Certificate in respect of hand loom cotton fabrics classifiable under NEMEX Code 55.09.
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Indian exporters should apply for this certificate simultaneously or separately. The Language Certificate is issued in quadruplicate, three copies of which are given to the exporter. He should transit one copy to his overseas importer, along with other documents, for realization of export proceeds. The Languages Certificate is issued by the Textile Committee against a small fee. Manufacturer's certificate In addition to the Certificate of Origin, some countries require a Manufacturer's Certificate to the effect that goods shipped have actually been manufactured and are available. Certificate of chemical analysis To ensure that the quality and grade of items like metallic ores, pigments, etc., is the same as specified in the Sale Contract, importers may require the exporter to send a Certificate of Chemical Analysis from a recognized analyst. Certificate of shipment This Certificate is issued by the Shipping Agent and ensures that a certain lot of goods have been shipped. Health/veterinary/sanitary certificates when the goods that are exported are foodstuffs, marine products, hides, live stocks, etc., usually depending upon the goods which are being imported, a certificate from the Health /veterinary/ Sanitary Authorities is called for by the overseas buyers. This is because the importer desires to know if the goods are fit for human consumption. Certificate of conditioning Certificate issued by a Competent Office in which, on the basis of the ascertained humidity factor, the dry weight of wool or silk is reckoned and certified. Antiquity certificate This Certificate is required in the case of export of antiques. It is issued by the Archaeological Survey of India. Certiflcate of measurement Freight can be charged either on the basis of weight or measurement. When it is charged on weight basis, the weight declared by exporter is accepted. However, Certificate of measurement from the Indian Chamber of Commerce or any other approved organization may be obtained by the exporter and given to the shipping company for calculation of necessary freight. This Certificate contains the name of vessel, the Port of destination, description of goods, quantity, length, breadth, depth, etc. of packages.
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Car/Lorry ticket This Ticket is prepared for admittance of cargo through the Port gate. This is also known as 'Vehicle Ticket or Gate Pass'. This includes the details of export cargo, i.e. shipper's name, car/lorry numbers, marks on packages, quantity and description. Shut out advice It is a statement packages shut out by a ship and is prepared by the shed concerned and sent to the exporter showing the particulars of packages, for disposal arrangement. Short shipment form Short Shipment Form is an application to the Customs Authorities at Port advising the short shipment of goods and for claiming the return of the Duty and/or Cess paid on such short shipping goods. Shipping advice A Shipping Advice is used to inform the overseas customer about the shipment of goods. The Shipping Advice is prepared in Aligned document. The Exporter only advises );his importer about the Invoice number, Bill of Lading/Airway Bill number and date, name of the vessel with date, the port ,of export, description of goods and quantity and the date of sailing of the vessel. Aligned Documentation System' has been developed. In line with system, Government of India has also developed Standardized Pre- shipment Export Documents. With the help of this system, Several documents can be prepared from a Master document. Import documents include IEC No and Bill of Entry.

5. LETTER OF CREDIT
A letter of credit is a document issued mostly by a financial institution which usually provides an irrevocable payment undertaking (it can also be revocable, confirmed, unconfirmed, transferable or others e.g. back to back: revolving but is most commonly irrevocable/confirmed) to a beneficiary against complying documents as stated in the Letter of Credit. Letter of Credit is abbreviated as an LC or L/C, and often is referred to as a documentary credit, abbreviated as DC or D/C, documentary letter of credit, or simply as credit (as in the UCP 500 and UCP 600). Once the beneficiary or a presenting bank acting on its behalf, presents to the issuing bank or confirming bank, if any, on or before the expiry date of the LC, documents complying with the terms and conditions of the LC, the applicable UCP and international standard banking practice, the issuing bank

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or confirming bank, if any, is obliged to honour irrespective of any instructions from the applicant to the contrary. In other words, the obligation to honour (usually payment) is shifted from the applicant to the issuing bank or confirming bank, if any. Non-banks can also issue letters of credit, however beneficiaries must balance the potential risk of payment default. The LC can also be the source of payment for a transaction, meaning that an exporter will get paid by redeeming the letter of credit. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, stormwater ponds, etc.) will be built. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any. In executing a transaction, letters of credit incorporate functions common to giros and Traveler's cheques. Typically, the documents a beneficiary has to present in order to receive payment include a commercial invoice, bill of lading, and documents proving the shipment was insured against loss or damage in transit. However, the list and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped, or their place of origin.

5.1 KINDS OF LETTER OF CREDIT

There are various kinds of Letter of Credit depending upon the features added to it as desired by the applicant. The different kinds of the Letter of Credit are as follows: 1.Sight or Usance Letter of Credit A Letter of Credit is known as Sight Letter of Credit or the Letter of Credit at sight if it involves payment to the exporter against sight draft. On the other hand, if the payment is to be made against usance draft, then the Letter of Credit is known as Usance Letter of Credit. In this case, the usance draft is accepted jointly by the issuing bank and the importer. Once, the draft is jointly accepted by the bank and the importer, it becomes the first class
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commercial paper which can be discounted through any commercial bank before the due date. This enables an exporter to obtain funds in advance before waiting for the due date. 2.Confirmed or Unconfirmed Letter of Credit An irrevocable Letter of Credit is confirmed when the advising bank add? its confirmation to the Letter of Credit. This means that the advising bank assumes the primary liability for making payment to the beneficiary as if it were the issuing bank. This arrangement is beneficial for the exporter as it enables him to protect himself against the political risks involved in transfer of funds from the importer's country to the exporter's country. This kind of situation may arise when the importer's country is at war or is faced with civil/ ethnic disturbances leading to the imposition of financial emergency or temporary financial crisis leading to the ban on the transfer of funds out of the country. It is important to understand that confirmation of Letter of Credit is possible only if there is a clause in the Letter of Credit which permits the advising bank or any other negotiating bank to add its confirmation. Thus; if an exporter wants confirmation of Letter of Credit then he must negotiate for this with the importer so that he can get this clause included in the Letter of Credit. Confirmation of credit, in fact, operates as an insurance against the political risks to payment. An irrevocable confirmed Letter of Credit is the most beneficial form of credit for the exporter as he has obtained assurance of payment from two banks namely, the issuing bank and the confirming bank. The exporter should take the decision regarding confirmation carefully as it involves cost in terms of payment of confirmation charges to the bank. It is the most desirable to opt for confirmation in the case of those countries which are politically unstable or the financial standing of the issuing bank is not very good. Once the payment is made by the confirming bank (it is usually located in the exporter's country) then it claims the amount of Letter of Credit from the issuing bank. In case it fails to obtain the payment from the issuing bank for any reason, then it cannot claim the amount from the exporter, i.e. the beneficiary under the Letter of Credit. Confirmation of Letter of Credit is, thus, without recourse to the beneficiary. On the other hand, if the irrevocable Letter of Credit does not provide for its confirmation, then it would be known as unconfirmed Letter of Credit 3.Negotiable Letter of Credit

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A Letter of Credit is known as negotiable if the issuing bank authorizes the negotiating bank to honour the draft/s drawn under the terms of the credit. In such a case, the exporter gets the payment even before the documents are scrutinized by the issuing bank. The negotiating bank i.e., the bank through which the documents are presented for negotiation for realization of the export proceeds, would examine the documents and if the same are found to be non discrepant, then the it would release the payment under the terms of the credit to the exporter subject to an undertaking from the exporter that in case the issuing bank does not release the payment then he would refund the amount to the negotiating bank. Thus, the negotiating bank reserves to itself the right to take recourse to the beneficiary in the event of non- payment by the issuing bank under the credit. This facility of payment would be available to the exporter only if it is stated in the Letter of Credit that the payment is allowed by negotiation and the name of the bank(s) allowed to negotiate is also stated in the Letter of Credit. In case the name of the negotiating bank is stated in the letter of credit, then the negotiation is restricted to the nominated bank and the credit is then called the restricted credit. In case the issuing bank agrees for negotiation by any bank then the credit would be called Unrestricted. 4.Revolving Letter of Credit A revolving letter of credit is one which provides for the renewal of the amount of the credit without any amendments to the letter of credit in relation to a given time period or a given amount. The revolving letter of credit may be revocable or irrevocable. For example, a letter of credit may revolve initially for an amount up to $20,000 per month for a fixed period of say, three months. In this case, the amount of credit shall be renewed for $20,000 every month for a period of three months irrespective of whether any credit was utilized or not by the beneficiary during the month. Thus, while the face value of the letter of credit is $20,000, the undertaking of the issuing bank is for the total amount of $60,000 in revolving periods each for $20,000 for three months: The revolving credits are opened in those cases where the importer regularly imports goods from a certain exporter. Instead of opening letter of credit for each import, the importer saves on the transaction costs by opening the revolving credit. The disadvantage of revolving credit from the point of view of the importer is that he enters into long term commitment with a particular supplier and thereby deprives him of the possible of opportunities of making imports at competitive rates in future. The revolving credit may be cumulative or non-cumulative. The
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credit is considered Cumulative if the unutilized amount of one time period can be carried over to the next period. If the unutilized amount cannot be carried over, then the credit would be called Non- cumulative. 5.Red Clause and Green Clause Letters of Credit A Red Clause letter of credit is a kind of credit which enables the confirming bank or the nominated bank to make advances to the beneficiary even before the presentation of the documents. Since this clause used to be written customarily in red ink hence the name Red Clause letter of credit. This clause states the amount that can be advanced to the beneficiary and in certain case it may cover even the full amount of the letter of credit. The confirming or the nominated bank recovers the amount of advance with interest out of the payment realized under the credit. In case the documents presented by the exporter are found to be discrepant then the bank which had given the advance will have the right to demand repayment of the advance amount with interest from the issuing bank. The issuing bank would have the right of recourse against the applicant Le., the importer. This means that the liability will fall on the applicant. Whether such a clause would be included in the letter of credit or not depends upon the agreement between the exporter and the importer. On the other hand, the letter of credit is known as Green Clause letter of credit if it provides for the credit given to the exporter to cover the period of storage of goods at the sea port. 6.Transferable Letter of Credit Transferable letter of credit is a credit which authorizes the advising bank to transfer part or full amount of the credit to any other party at the request of the beneficiary. In this case, the importer runs the risk of accepting the shipment of goods from a party other than with whom the order was placed and the party supplying the goods may not have had any business dealings in the past with the importer. However, once the credit is transferred, the transferee gets the right to make presentation of the draft/.s and the documents and claim payment for the goods supplied. This kind of credit is very useful in those cases where the importer is making imports through an agent in the exporting country. Such agents, known as buying agents in the exporting country, maintain the list of reliable exporters for the supply of goods to their Principals in the foreign country. The transferable credits help the buying agents to transfer part of the credit amount to different exporters who have been given the orders for the supply of goods to the importer.
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7.Back -to- Back Letter of Credit Back -to- Back letter of credit is a credit which is issued at the strength of another letter of credit. For example, an exporter who has received a letter of credit for the export of goods may have to import goods from another country for the execution of the order. The foreign supplier may ask for payment against letter of credit. The exporter can request for the issue of import letter of credit on the strength of the export letter of credit. The second letter of credit is known as the back-to -back letter of credit. Thus, the back- to-back letter of credit involves two separate letters of credits as follows: 1. One opened in favour of the primary beneficiary or the original exporter. 2. The credit opened in favour of the second beneficiary who would supply goods to the first beneficiary. Thus, the first beneficiary becomes the applicant for opening of the second letter of credit. It is important to ensure that the second letter of credit specifies all the documents required by the first credit and the time limits set for presentation of the documents in such a manner that it will enable the primary beneficiary Le., original exporter to present the documents within the time limits set by the primary letter of credit 8.With Recourse or Without Recourse Letter of Credit A letter of credit is with recourse when under the terms of the credit, the negotiating bank or the nominated bank cannot approach the beneficiary for the refund of the payment made under the letter of credit. It is without recourse when the negotiating or the nominated bank cannot approach the beneficiary to refund the payment under the letter of credit. A confirmed letter of credit is without recourse to the beneficiary and the unconfirmed or the negotiable credits are always with recourse to the beneficiary. 9.Standby Letter of Credit Standby letter of credit is an assurance to the beneficiary that the applicant shall perform his part of the obligation undertaken by him under the contract between the applicant and the beneficiary. It is, in fact, a kind of performance guarantee to support the beneficiary in the event of default by the applicant. The subject matter of this kind of letter of credit could be:

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1. Repayment of the money borrowed by the applicant from the beneficiary or 2. Payment on account of any indebtedness undertaken by the applicant or 3. Payment on account of any default by the applicant in the performance of any obligation undertaken by the applicant. 10.Revocable and Irrevocable Letter of Credit:Under the revocable letter of credit, the issuing bank retains the right to cancel or modify the credit. Whereas in an irrevocable letter of credit, the issuing bank gives a binding undertaking to the beneficiary. 11.Restricted Letter of Credit:This refers that negotiations under a credit may be restricted by the issuing bank to a named bank.

6. INCOTERMS 2000
Inco terms stands for International Commercial Terms to provide a set of rules to interpret the most commonly used trade terms in international trade.
This set of rules defines the precise obligations of buyer and seller to reduce the possibility of misunderstanding between the exporter and importer. The purpose of these terms is to clarify who is responsible (seller or buyer) for: 1. The cost of transporting the goods from one point to the other. 2. The risk of loss if the transportation cannot take place.

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3. The risk of loss or damage to goods in transit. In other words, Inco terms 2000 aim is to set out the rights and obligations of the seller and the buyer when it comes to transporting the goods. Each term means a different division of costs, risks, and responsibilities between the seller and the buyer.

6.1 Different types of Inco terms 2000

EXW EX WORKS FCA FREE CARRIER FAS FREE ALONGSIDE SHIP FOB FREE ON BOARD CFR COST AND FREIGHT CIF COST, INSURANCE AND FREIGHT CPT CARRIAGE PAID TO CIP CARRIAGE AND INSURANCE PAID TO DAF DELIVERED AT FRONTIER DES DELIVERED EX SHIP DEQ DELIVERED EX QUAY DDU DELIVERED DUTY UNPAID DDP DELIVERED DUTY PAID

EXW
EXW EX WORKS (... named place)
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"Ex works" means the seller's only responsibility is to make the goods available at the seller's premises, i.e. factory. The seller is not responsible for loading the goods on the vehicle provided by the buyer unless otherwise agreed. The buyer bears the full costs and risk involved in collecting the goods from there to the desired destination. Ex works represents the minimum obligation of the seller.

FCA
FCA FREE CARRIER (... named place) This term has been designed to meet the requirements of multimodal transport, such as container or roll-on, roll-off traffic by trailers and ferries. It is based on the same name principle as FOB (free on board), except that the seller fulfills its obligations when the goods are delivered to the custody of the carrier at the named place. If no precise place can be named at the time of the contract of sale, the parties should refer to the place where the carrier should take the goods into its charge. The risk of loss or damage to the goods is transferred from seller to buyer at that time and not at the ship's rail. The term "carrier" means any person by whom or in whose name a contract of carriage by road, rail, air, sea, or a combination of modes has been made. When a seller has been furnished a bill of lading, way bill or carrier's receipt, the seller duly fulfills its obligation by presenting such a document issued by a carrier.

FAS
FAS FREE ALONGSIDE SHIP (... named port of shipment) FAS or "free alongside ship" requires the seller to deliver the goods alongside the ship on the quay. From that point on, the buyer bears all costs and risks of loss and damage to the goods. Unlike F.O.B., F.A.S. requires
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the buyer to clear the goods for export and pay the cost of loading the goods.

FOB
FOB FREE ON BOARD (... named port of shipment) Under FOB the goods are placed on board the ship by the seller at a port of shipment named in the sales agreement. The risk of loss of or damage to the goods is transferred to the buyer when the goods pass the ship's rail (i.e., off the dock and placed on the ship). The seller pays the cost of loading the goods.

CFR
CFR COST AND FREIGHT (... named port of destination) CFR requires the seller to pay the costs and freight necessary to bring the goods to the named destination, but the risk of loss or damage to the goods, as well as any cost increases, are transferred from the seller to the buyer when the goods pass the ship's rail at the port of shipment (i.e. off the dock and placed on the ship). Insurance is the buyer's responsibility as well as stevedore charges at the named port of destination.

CIF
CIF COST, INSURANCE AND FREIGHT (... named port of destination) CIF is CFR with the additional requirement that the seller procure transport insurance against the risk of loss or damage to goods. The seller must contract with the insurer and pay the insurance premium. Insurance is generally more important in international shipping than domestic shipping, because U.S. laws generally hold a common carrier to be liable for lost or damaged goods.
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CPT
CPT CARRIAGE PAID TO (... named place of destination) This term means the seller pays the freight for the carriage of the goods to the named destination. The risk of loss or damage to the goods and any cost increases transfers from the seller to the buyer when the goods have been delivered to the custody of the first carrier, and not at the ship's rail. Accordingly, "freight/carriage paid to" can be used for all modes of transportation, including container or roll-on roll-off traffic by trailers and ferries. When the seller is required to furnish a bill of lading, way bill, or carrier receipt, the seller duly fulfills its obligation by presenting such a document issued by the person contracted with for carriage to the main destination.

CIP
CIP CARRIAGE AND INSURANCE PAID TO (... named place of destination) This term is the same as "freight/carriage paid to (CPT)" but with the additional requirement that the seller has to procure transport insurance against the risk of loss or damage to the goods during the carriage. The seller contracts with the insurer and pays the insurance premium.

DAF
DAF DELIVERED AT FRONTIER (... named place) "Delivered at frontier" means that the seller's obligations are fulfilled when the goods have arrived at the frontier but before the customs border of the country named in the sales contract. The term is
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primarily used when goods are carried by rail or truck. The seller bears the full cost and risk in delivering the goods up to this point, but the buyer must arrange and pay for the goods to clear customs.

DES
DES DELIVERED EX SHIP (... named port of destination) Means the seller shall make the goods available to the buyer on board the ship at the place named in the sales contract. The seller bears the full cost and risk involved in bringing the goods there. The cost of unloading the goods and any customs duties must be paid by the buyer.

DEQ
DEQ DELIVERED EX QUAY (... named port of destination) Means the seller has agreed to make the goods available to the buyer on the quay or wharf at the place named in the sales contract. The seller bears the full cost and risks in delivering the goods to that point including unloading.

DDU
DDU DELIVERED DUTY UNPAID (... named place of destination) Under these terms, the seller fulfills his obligation to deliver when the goods have been available to the buyer "not cleared" for import at the point or place of the named destination. The seller bears all costs and risks involved in bringing the goods to the point or place of named destination. There is no obligation for import clearance.

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DDP
DDP DELIVERED DUTY PAID (... named place of destination) Represents the seller's maximum obligation. The term "DDP." is generally followed by words indicating the buyer's premises. It notes that the seller bears all risks and all costs until the goods are delivered. This term can be used irrespective of the mode of transport. If the parties wish to make clear that the seller is not responsible for certain costs, additional word should be added (for example, "delivered duty paid exclusive of VAT and/or taxes").

7. Charter Shipping
Charter shipping is a tramp service. The term tramp, as used in the ocean shipping, refers to a cargo ship not operating on regular routes and schedules, and picking up cargo only when it is chartered (hired) from the ship operator. While conference and non-conference shipping are for general cargoes, charter shipping usually is for bulk cargoes like oil, coal, ore, and grain. Charter shipping has the lowest freight rate per unit of weight or measure. A charter party is required in charter shipping.

7.1Charter party contract

It is a written contract between the ship operator and the charterer (shipper). The contract normally includes the ports, freight rate and time involved in the voyage(s). The ship operator issues a charter party bill of lading. Unless a letter of credit (L/C) permits or calls for a charter party bill of lading, the bank will reject such transport document in the L/C negotiation.

7.3Some trade terms used specifically in charter shipping are as follows:

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FI Free In The word "free" as used in the charter shipping term means not including. FI is a pricing term indicating that the charterer of a vessel (i.e., the shipper) is responsible for the cost of loading goods onto the vessel. FO Free Out The word FO is a pricing term indicating that the charterer of a vessel (i.e., the shipper) is responsible for the cost of unloading goods from the vessel. FIO Free In and Out The word FIO is a pricing term indicating that the charterer of a vessel (i.e., the shipper) is responsible for the costs of loading goods onto the vessel and unloading goods from the vessel. Voyage charter The ship is chartered for a single journey and it may involve more than one port of call. The ship operator crews and operates the ship and it is the operator's own ship's master in control of the ship. This type of charter shipping is analogous to the limousine service where the driver, who is in control of the car in a journey, is provided by the car operator. Time charter The ship is chartered for a period of time. This type of charter shipping is similar to a voyage charter in the crewing and operating of the ship. The contract may call for a specific or unlimited number of voyages within the agreed time. Bareboat charter The term bareboat means a ship without a crew and ship's master. The charterer (shipper) is in charge of crewing and operating the ship within a period of time, usually a number of years.This type of charter shipping is analogous to a car leasing where the lessor (the car operator) provides the car only and the lessee provides his/her own driver.

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EXPORT SALES & CONTRACT TERMS & CONDITIONS

Very often exporters do not enter into any formal contract and finalize the trade deal through the exchange of letters, cable, telex etc. It is, however, expedient that the parties (exporters & importers) incorporate all important terms & conditions of their trade deal in a separate document or contract that will avoid disputes arising out of uncertainty or ambiguity. Export contract may be sent in duplicate along with the Proforma Invoice to the overseas buyer. NATURE OF INTERNATIONAL TRADE COUNTRACTS. There are certain, peculiar characteristics of international trade contract which are not present in those for sales of goods in the domestic market Whereas the parties to a domestic trace contract normally needs only agree on the elements which are necessary for their particular trade transactions like price, description, quality and quantity of goods, delivery terms etc the situation will be quite different when the buyer and the seller to sale/purchase contract belong to different countries. The parties to all international trade contracts provide all their relative rights and obligations in several ways For example, they may agree to adopt either the Law of the country of the buyer or that of the seller. The traders are normally reluctant to leave the determination of the rights and obligations by implications under the legal system of eithers country. They prefer to make explicit provisions regarding the rights and obligations by including a set of detailed and precise terms and conditions in their contract. EXPORT OF SAMPLES\GIFTS. Exports of bonafide trade and technical samples of freely exportable items shall be allowed without any limit. Goods including edible items of value not exceeding Rs. 100000/- in a licensing year, may be exported as a gift. However items

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mentioned as restricted for exports in ITC(HS) shall not be exported as a gift without a licence/certificate/permission, except in the case of edible items. STANDARD CONTRACT FOMS: Notwithstanding the efforts made by various national/international organizations like the United Nations Commission on the International Trade Law, there is still no perfection or a device which would give the parties an accurate and complete idea of each others understanding of various trade terms, the commercial practices and the rights and the obligations vis--vis each other so that the misunderstandings are practically eliminated. Nevertheless, the Indian Council of Arbitration published in 1966 a booklet on Standard Contract Forms and Model Arbitration Clause for use in Foreign Trade Contracts. It was revised and reprinted in 1969 and 1977. It can be referred to by exporter for various clause to be incorporated in the Export Contract. ENTERING INTO AN EXPORT CONTRACT In order to avoid disputes, it is necessary to enter into an export contract with the overseas buyer. For this purpose, export contract should be carefully drafted incorporating comprehensive but in precise terms, all relevant and important conditions of the trade deal. There should not be any ambiguity regarding the exact specifications of goods and terms of sale including export price, mode of payment, storage and distribution methods, type of packaging, port of shipment, delivery schedule etc. The different aspects of an export contract are enumerated as under:

Product, Standards and Specifications Quantity Inspection Total Value of Contract

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Terms of Delivery Taxes, Duties and Charges Period of Delivery/Shipment Packing, Labeling and Marking Terms of Payment-- Amount/Mode & Currency Discounts and Commissions Licenses and Permits Insurance Documentary Requirements Guarantee Force Majeure of Excuse for Non-performance of contract Remedies Arbitration clause

It will not be out of place to mention here the importance of arbitration clause in an export contract Court proceedings do not offer a satisfactory method for settlement of commercial disputes, as they involve inevitable delays, costs and technicalities. On the other hand, arbitration provides an economic, expeditious and informal remedy for settlement of commercial disputes. Arbitration proceedings are conducted in privacy and the awards are kept confidential. The Arbitrator is usually an expert in the subject matter of the dispute. The dates for arbitration meetings are fixed with the convenience of all concerned. Thus, arbitration is the most suitable way for settlements of commercial disputes and it may invariably be used by businessmen in their commercial dealings. ARBITRATION: Arbitration clause recommended by the Indian Council of Arbitration:All disputes or differences whatsoever arising between the parties out of / relating to the meaning, construction and operation or effect of this contract or the breach thereof shall be settled by arbitration in accordance with the rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall

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be binding on the parties (or any other arbitration clause that may be agreed upon between the parties).

TERMS OF SHIPMENTS INCOTERMS

The INCOTERMS (International Commercial Terms) is a universally recognized set of definition of international trade terms, such as FOB, CFR & CIF, developed by the International Chamber of Commerce(ICC) in Paris, France. It defines the trade contract responsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving tool. The exporter and the importer need not undergo a lengthy negotiation about the conditions of each transaction. Once they have agreed on a commercial terms like FOB, they can sell and buy at FOB without discussing who will be responsible for the freight, cargo insurance and other costs and risks. The INCOTERMS was first published in 1936 --- INCOTERMS 1936 --- and it is revised periodically to keep with changes in the international trade needs. The complete definition of each term is available from the current publication --INCOTERMS 2000. Under INCOTERMS 2000, the international commercial terms are grouped into E, F, C and D, designated by the first letter of the term, relating to the final letter of the term. E.g. EXWexworks comes under grouped E. 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.

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In international trade, it would be best for exporters to refrain, wherever possible, from dealing in trade terms that would hold the seller responsible for the import customs clearance and/or payment of import customs duties and taxes and/or other costs and risks at the buyers end, for example the trade terms DEO (Delivery Ex Quay) and DDP (Delivered Duty Paid) Quite often, the charges and expenses at the buyers end may cost more to the seller than anticipated. To overcome losses, hire a reliable customs broker or freight forwarder in the importing country to handle the import routines. Similarly, it would be best for importers not to deal in EXW (Ex Works) which would hold the buyer responsible for the export customs clearance, payment of export customs charges and taxes, and other costs and risks at the sellers end

MORE CLARIFICATION ON INCOTERMS EXW {+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 the subsequent costs and risks. In practice, it is not uncommon that the seller loads sthe goods on truck or container at the sellers pre4mises without charging loading fee. N the quotation, indicate the named place (sellers premises) after the acronym EXW for example EXW Kobe and EXW San Antonio. The term EXW is commonly used between the manufacturer (seller) and exporttrader(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.

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FCA {+the named point of departure} Free Carrier: The delivery of goods on truck, rail car or container at the specified point(depot) of departure, which is usually the sellers premises, or a named railroad station or a named cargo terminal or into the custody of the carrier, at sellers expense. The point(depot) at origin may or may not be a customs clearance centre. Buyer is responsible for the main carriage/freight, cargo insurance and other costs and risks. In the air shipment, technically speaking, goods placed in the custody of an air carrier are considered as delivery on board the plane. In practice, many importers and exporters still use the term FOB in the air shipment. The term FCA is also used in the RO/RO (roll on/roll off) services In the export quotation, indicate the point of departure (loading) after the acronym FCA, for example FCA Hong Kong and FCA Seattle. Some manufacturers may use the former terms FOT (Free on Trucks) and FOR (Free on Rail) in selling to export-traders. FAS {+the named port of origin} Free Alongside Ship: Goods are placed in the dock shed or at the side of the ship, on the dock or lighter, within reach of its loading equipment so that they can be loaded aboard the ship, at 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 breakbulk shipments and with the importing countries using their own vessels. FOB {+the named port of origin) Free on Board: The delivery of goods on the board the vessel at the named port of origin (Loading) at sellers expense. Buyer is responsible for the main

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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 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 {+the named port of destination} Cost and Freight: The delivery of goods to the named port of destination (discharge) at the sellers expenses. Buyer is responsible for the cargo insurance and other costs and risks. The term CFR was formerly written as C&F. Many importers and exporters worldwide still use the term C&F. In the export quotation, indicate the port of destination (discharge) after the acronym CFR, for example CFR Karachi and CFR Alexandria. Under the rules of the INCOTERMS 1990, the term Cost and Freight is used for ocean freight only. However, in practice, the term Cost and Freight (C&F) is still commonly used in the air freight.

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CIF {+named port of destination} Cost, Insurance and Freight: The cargo insurance and delivery of goods to the named port of destination (discharge) at the 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 {+the named place of destination} Carriage Paid To: The delivery of goods to the named port of destination (discharge) at the sellers expenses. Buyer assumes the cargo insurance, import custom clearance, payment of custom duties and taxes, and other costs and risks. In the export quotation, indicate the port of destination (discharge) after the acronym CPT, for example CPT Los Angeles and CPT Osaka. CIP {+ the named place of destination) Carriage and Insurance Paid To: The delivery of goods and the cargo insurance to the named place of destination (discharge) at sellers expense. Buyer assumes the importer customs clearance, payment of customs duties and texes, and other costs and risks. In the export quotation, indicate the place of destination (discharge) after the acronym CIP, for example CIP Paris and CIP Athens.

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DAF {+ the names point at frontier} Delivered At Frontier: The delivery of goods to the specified point at the frontier at sellers expense. Buyer is responsible for the import custom clearance, payment of custom duties and taxes, and other costs and risks. In the export quotation, indicate the point at frontier (discharge) after the acronym DAF, for example DAF Buffalo and DAF Welland. DES {+named port of destination} Delivered Ex Ship: The delivery of goods on board the vessel at the named port of destination (discharge) at sellers expense. Buyer assumes the unloading free, import customs clearance, payment of customs duties and taxes, cargo insurance, and other costs and risks. In the export quotation, indicate the Port of destination (discharge) after the acronym DES, for example DES Helsinki and DES Stockholm. DEQ {+ the named port of destination Delivered Ex Quay: The delivery of goods to the Quay (the port) at the destination at buyers expense. Seller is responsible for the importer customs clearance, payment of customs duties and taxes, at the buyers end. Buyer assumes the cargo insurance and other costs and risks. In the export quotation, indicate the Port of destination (discharge) after the acronym DEQ, for example DEQ Libreville and DEQ Maputo. DDU {+ the named point of destination} Delivered Duty Unpaid: The delivery of goods and the cargo insurance to the final point at destination, which is often the project site or buyers premises at sellers expense. Buyer assumes the import customs clearance, payment of

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

E-term,F-term, C-term &D-term: Incoterms 2000, like its immediate predecessor, groups the term in four categories denoted by the first letter in the three-letter abbreviation. Under the E-TERM (EXW), the seller only makes the goods available to the buyer at the 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.

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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 parties respective obligations under each Incoterms.

PROCESSING AN EXPORT ORDER

You should not be happy merely on receiving an export order. You should first acknowledge the export order, and then proceed to examine carefully in respect of Items Specification Pre-shipment inspection Payment conditions Special packaging Labeling and marketing requirements Shipment and delivery date

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Marine insurance Documentation requirement etc.

If you are satisfied on these aspects, a formal confirmation should be sent to the buyer, otherwise clarification should be sought from the buyer before confirming the order. After confirmation of the export order immediate steps should be taken for procurement/manufacture of the export goods. In the meanwhile, you should proceed to enter into a formal export contract with the overseas buyer. Before accepting any order necessary homework should have been done as to availability of the production capacity, raw material e.t.c. It would be in the interest of the exporter to look into entering into forward contract to safeguard against exchange rate fluctuations. Ensure that the mode of payment is also agreed upon. In case of shipment against letter of credit, the buyer should be advised to open the credit well in advance before effecting the shipment.

FINANCIAL RISKS INVOLVED IN FOREIGN TRADE

As an exporter while selling goods abroad, you encounter various types of risks. The major risks which you have to undergo are as follows: Credit Risk Currency Risk Carriage Risk Country Risk

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

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Credit Risks : You can cover your credit risk against the foreign buyer by insisting upon opening a letter of credit in your favour. Alternatively one can avail of the facility offered by various credit risk agencies. A specific insurance cover can also be obtained from ECGC (Exports Credit & Guarantee Corporation) to cover your country risk besides covering credit risk. Currency Risks: As regards covering the currency risk, due to the exchange rate fluctuations, you can request your banker to book a forward contract.

Carriage Risk: The carriage risk can be covered by taking an appropriate general insurance policy. Country Risk: ECGC provides cover to protect the exporter from country risks. Detailed procedures how an exporter can get himself protected against the above risks are given in separate chapters later.

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

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A. Commercial Documents. : - Commercial documents are required for effecting physical transfer of goods and their title from the exporter to the importer and the realisation of export sale proceeds. Out of the 16 commercial documents in the export documentation framework as many as 14 have been standardised and aligned to one another. These are proforma invoice, commercial invoice, packing list, shipping instructions, intimation for inspection, certificate, of inspection of quality control, insurance declaration, certificate' of insurance, mate's receipt, bill of lading or combined transport document, application for certificate origin, certificate of origin, shipment advice and letter to the bank for collection or negotiation of documents. However, shipping order and bill of exchange could not be brought within the fold of the Aligned Documentation System, 1.

Commercial Invoice: Commercial invoice is an important and basic

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

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Exporter's reference number. Buyer's reference number and date. Name of the country of origin of goods. Name of the country of final destination. Terms of delivery and payment. Marks and container number. Number and packing description. Description of goods giving details of quantity, rate and total amount in terms of internationally accepted price quotation. Signature of the exporter with date.

Significance of Commercial Invoice 2 It is the basic document useful in preparation of various other shipping documents. It is used in various export formalities such as quality and pre-Shipment inspection excise and customs procedures etc. It is also useful in negotiation of documents for collection and claim of incentives. It is useful for accounting purposes to both exporters as well as importers. Inspection Certificate: The certificate is issued by the inspection authority such as the export inspection agency. This certificate states that the goods have been inspected before shipment, and that they confirm to accepted quality standards. 3 Marine insurance policy: Goods in transit are subject to risk of loss of goods arising due to fire on ship, perils of sea, theft etc. marine insurance protects losses incidental to voyages and in land transportation. Marine 96

insurance policy is one of the most important document used as collateral security because it protects the interest of all those who have insurable interest at the time of loss. The exporter is bound to insure the goods in case of CIF quotation, but he can also insure the goods in case of FOB contract, at the request of the importer, but the premium payment will be made by the exporter. There are different types of policies such as SPECIFIC POLICY: This policy is taken to cover different risks for a single shipment. For a regular exporter, this policy is not advisable as he will have to take a separate policy every time a shipment is made, so this policy is taken when exports are in frequent. Floating Policy: This is taken to cover all shipments for some months. There is no time limit, but there is a limit on the value of goods and once this value is crossed by several shipments, then it has to be renewed. Open Policy: This policy remains in force until cancelled by either party i.e. insurance company or the exporter. Open Cover Policy: This policy is generally issued for 12 months period, for all shipments to one or more destinations. The open cover may specify the maximum value of consignment that may be sent per ship and if the value exceeded, the insurance company must be informed by the exporter. Insurance Premium: Differs upon product to product and a number of such other factors, such as, distance of voyage, type and condition of packing, etc. Premium for air consignments are lowered as compared to consignments by sea. 4.

Consular Invoice: Consular invoice is a document required mainly by

the Latin American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This invoice is the most important document, which needs to

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be submitted for certification to the Embassy of the importing country concerned. The main purpose of the consular invoice is to enable the authorities of the importing country to collect accurate information about the volume, value, quality, grade, source, etc., of the goods imported for the purpose of assessing import duties and also for statistical purposes. In order to obtain consular invoice, the exporter is required to submit three copies of invoice to the Consulate of the importing country concerned. The Consulate of the importing country certifies them in return for fees. One copy of the invoice is given to the exporter while the other two are dispatched to the customs office of the importer's country for the calculation of the import duty. The exporter negotiates a copy of the consular invoice to the importer along with other shipping documents.

Significance of Consular Invoice for the Exporter It facilitates quick clearance of goods from the customs in exporter's as well as importer's country. Certification' of goods by the Consulate of the importing country indicarer that the importer has fulfilled all procedural and licensing formalities for import of goods. It also assures the exporter of the payment from the importing country. Significance of Consular Invoice for the Importer It facilitates quick clearance of goods from the customs at the port destination and therefore, the importer gets quick delivery of goods. The importer is assured that the goods imported are not banned for imported in his country. 98

Significance of Consular Invoice for the Customs Office It makes the task of the customs authorities easy. It facilitates quick calculation of duties as the value of goods as determine by the Consulate is considered for the purpose. 5.

Certificate of Origin: The importers in several countries require a

certificate of origin without which clearance to import is refused. The certificate of origin states that the goods exported are originally manufactured in the country whose name is mentioned in the certificate. Certificate of origin is required when: The goods produced in a particular country are subject to preferential tariff rates in the foreign market at the time importation. The goods produced in a particular country are banned for import in the foreign market.

Types of the Certificate of Origin (a) Non-preferential Certificate, of Origin: - Non-preferential certificate of origin is required in general by all countries for clearance of goods by the importer, on which no preferential tariff is given. It is issued by: The authorised Chamber of Commerce of the exporting country. Trade Association. Of the exporting country.

(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin required for availing of concessions under Generalised System of Preferences (GSP) extended by certain, countries such as France, Germany, Italy, BENELUX countries, UK, Australia; Japan, USA, etc. This certificate can be obtained from specialised agencies, namely; Export Inspection Agencies.

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 (c)

Jt. Director General of Foreign Trade.. Commodity Boards and their regional offices. Development Commissioner, Handicrafts. Textile Committees for textile products. Marine Products Export Development Authority for marine products. Development Commissioners of EPZs Certificate for availing Concessions under Commonwealth Preferences (CWP): Certificate of origin for the purpose of Commonwealth Preference is also known as 'Combined Certificate of Origin and Value'. It is required by two member countries, i.e. Canada and New Zealand of the Commonwealth. For concession under Commonwealth preferences, the certificates or origin have to be submitted in special forms obtainable, from the High Commission of the country concerned.

(d)

Certificate for availing Concessions under other Systems of Preference:- Certificate of origin is also required for tariff concessions. under the Global System of Trade Preferences (GSTP), Bangkok Agreement(BA) and SAARC Preferential Trading Arrangement (SAPTA) under which India grants and receives tariff concessions On imports and exports. Export Inspection Council (EIC) is the sole authority to print blank Certificates of Origin under BA, SAARC and SAPTA which can be issued by such agencies as EPCs, DCs of EPZs, EIC, APEDA, MPEDA, FIEO, etc...

Contents of Certificate of Origin Name and logo of chamber of commerce. Name and address of the exporter. Name and address of the consignee. Name and the number of Vessel of Flight Name of the port of loading.

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Name of the port of discharge and place of delivery. Marks and container number. Packing and container description. Total number of containers and packages. Description of goods in terms of quantity. Signature and initials of the concerned officer of the issuing authority. Seal of the issuing authority.

Significance of the Certificate of Origin Certificate of origin is required for availing of concessions under Generalised System of Preferences (GSP) as well as under Commonwealth Preferences (CWP). It is to be submitted to the customs for the assessment of duty clearance of goods with concessional duty. It is required when the goods produced in a particular country are banned for import in the foreign market. It helps the buyer in adhering to the import regulations of the country. Sometimes, in order to ensures that goods bought from some other country have not been reshipped by a seller, a certificate of origin IS required. 6.

Bill of Lading:

The bill of lading is a document issued by the shipping

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

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As a document of title to the goods; As a receipt from the shipping company; and As a contract for the transportation of goods.

Types of Bill of Lading Clean Bill of Lading: - A bill of lading acknowledging receipt of the goods apparently in good order and condition and without any qualification is termed as a clean bill of lading. Claused Bill of Lading: - A bill of lading qualified with certain adversere marks such as, "goods insufficiently packed in accordance with the Carriage of Goods by Sea Act," is termed as a claused bill of lading. Transhipment or Through Bill of Lading: - When the carrier uses other transport facilities, such as rail, road, or another steamship company in addition to his own, the carrier issues a through or transhipment bill of lading. Stale Bill of Lading: - A bill of lading that has been held too long before it is passed on to a bank for negotiation or to the consignee is called a stale bill of lading. Freight Paid Bill of Lading: - When freight is paid at the time of shipment or in advance, the bill of landing is marked, freight paid. Such bill of lading is known as freight bill of lading. Freight Collect Bill of lading :- When the freight is not paid and is to be collected from the consignee on the arrival of the goods, the bill of lading is marked, freight collect and is known as freight collect bill of lading Contents of Bill of Lading Name and logo of the shipping line. Name and address of the shipper. Name and the number of vessel. Name of the port of loading. 102

Name of the port of discharge and place of delivery. Marks and container number. Packing and container description. Total number of containers and packages, Description of goods in terms of quantity. Container status and seal number. Gross weight in kg. and volume in terms of cubic meters. Amount of freight paid or payable. Shipping bill number and date. Signature and initials of the Chief Officer. .

Significance of Bill of Lading for Exporters It is a contract between the shipper and the shipping company for carriage of the goods to the port of destination. It is an acknowledgement indicating that the goods mentioned in the document have been received on board for the Purpose of shipment. A clean bill of lading certifies that the goods received on board the ship are in order and good condition. It is useful for claiming incentives offered by the government to exporters The exporter can claim damages from the shipping company if the goods are lost or damaged after the issue of a clean bill of lading. Significance of Bill of Lading for Importers It acts as a document of title to goods, which is transferable endorsement and delivery. The exporter sends the bill of lading to the bank of the importer so as to enable him to take the delivery of goods.

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

Significance of Bill of Lading for Shipping Company It is useful to the shipping company for collection of transport charges from the importer, if not collected from the exporter.

7.

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. Contents of Airway Bill Name of the airport of departure and destination. The names and addresses of the consignor, consignee and the first carrier. Marks and container number. Packing and container description. Total number of containers and packages. Description of goods in terms of quantity. Container status and seal number. Amount of freight paid or payable. Signature and initials of the issuing carrier or his agent. Importance of Airway Bill: It is a contract between the airlines or his agent to carry goods to the destination. It is the document of instructions for the airline handling staff. It acts as a customs declaration form. Since, it contains details about freight it also represents freight bill.

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7.

Shipment Advice to Importer:- After the shipment of goods, the exporter intimates the importer about the shipment of goods giving him details about the date of shipment, the name of the vessel, the destination, etc. He should also send one copy of non-negotiable bill of lading to the importer.

8.

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

9.

Bill of exchange: The instrument is used in receiving payment from the importer. The importer may prefer Bill of Exchange to LC as it does not involve blocking of funds. A bill of exchange is drawn by the exporter on the importer, to make payment on demand at sight or after a certain period of time. B/E is a means to collect payment. B/E is a means to demand payment. B/E is a means to extent the credit. B/E is a means to promise the payment. B/E is an official acknowledgement of receipt of payment. Financial documents perform the function of obtaining the finance collection of payment etc. 2 sets. Each one bearing the exclusion clause making the other part of the draft invalid. Sight B/E. Usance B/E. It is known as draft. Immediate payment Sight draft.

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There are two copies of draft. Each one bears reference to the other part A&B. when any one of the draft is paid, the second draft becomes null and void.

Parties to bill of exchange. 1. The drawer: The exporter / person who draws the bill. 2. The drawee: The importer / person on whom the bill is drawn for payment. 3. The payee: The person to whom payment is made, generally, the exporter / supplier of the goods. B Auxiliary Documents: These documents generally form the basic documents based on which the commercial and or regulatory documents are prepared. These documents also do not have any fixed formats and the number of such documents will wary according to individual requirements. 1. Proforma Invoice: The starting point of the export contract is in the form of offer made by the exporter to the foreign customer. The offer made by the exporter is in the form of a proforma invoice. It is a quotation given as a reply to an inquiry. It normally forms the basis of all trade transactions. Contents of Proforma Invoice Name and address of the exporter. Name and address of the importer. Mode of transportation, such as Sea or Air or Multimodal transport. Name of the port of loading. Name of the port of discharge and final destination. Provisional invoice number and date. Exporter's reference number. Buyer's reference number and date.

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Name of the country of origin of goods. Name of the country of final destination. Marks and container number. Number and packing description. Description of goods giving details of quantity, rate and total amount in terms of internationally accepted price quotation. Signature of the exporter with date. .

Importance of Proforma Invoice It forms the basis of all trade transactions. It may be useful for the importer in obtaining import licence or foreign exchange. 2. Intimation for Inspection: Whenever the consignment requires the preshipment inspection, necessary application is to be made to the concerned inspection agency for conducting the inspection and issue of certificate thereof. 3. Declaration of Insurance: Where the contract terms require that the insurance to be covered by the exporter, the shipper has to give details of the shipment to the insurance company for necessary insurance cover. The detailed declaration will cover: Name of the shipper \ exporter. Name & address of buyer. Details of goods such as packages, quantity, value in foreign currency as well as in Indian Rs. Etc. Name of the Vessel \ Aircraft. Value for which insurance to be covered.

4. Application of the Certificate Origin: In case the exporter has to obtain Certificate of Origin from the concerned authorities, an application has to 107

be made to the concerned authority with required documents. While the simple invoice copy will do for getting C\O from the chamber of commerce, in respect of obtained the same from the office of the Textile Committee or Export Promotion Council, the documents requirement are different. 5. Mate's Receipt: Mate's receipt is a receipt issued by the Commanding Officer of the ship when the cargo is loaded on the ship. The mate's receipt is a prima facie evidence that goods are loaded in the vessel. The mate's receipt is first handed over to the Port Trust Authorities. After making payment of all port dues, the exporter or his agent collects the mate's receipt from the Port Trust Authorities. The mate's receipt is freely transferable. It must be handed over to the shipping company in order to get the bill of lading. Bill of lading is prepared on the basis of the mate's receipt. Types of Mate's Receipts Clean Mate's Receipt: - The Commanding Officer of the

ship issues a clean mate's receipt, if he is satisfied that the goods are packed properly and there is no defect in the packing of the cargo or package. Qualified Mate's Receipt: - The Commanding Officer of the ship issues qualified mate's receipt, when the goods are not packed properly and the shipping company does not take any responsibility of damage. to the goods during transit. Contents of Mate's Receipt Name and logo of the shipping line. Name and address of the shipper. Name and the number of vessel. Name of the port of loading. Name of the port of discharge and place of delivery.

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 meters.

Marks and container number. Packing and container description. Total number of containers and packages. Description of goods in terms of quantity. Container status and seal number. Gross weight in kg. and volume in terms of cubic Shipping bill number and date. Signature and initials of the Chief Officer.

Significance of Mate's Receipt It is an acknowledgement of goods received for export on It is a transferable document. It must be handed over to the Bill of lading, which is the title of goods, is prepared on the It enables the exporter to clear port trust dues to the Port

board the ship. shipping company in order to get the bill of lading. basis of the mate's receipt. Trust Authorities. Obtaining Mate's Receipt The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mate's Receipt to the Port Superintendent. 6. Shipping order: it is issued by the Shipping/Conference Line intimating the exporter about the reservation of space for shipment of cargo which the exporter intends to ship. Details of the vessel, poet of the shipment, and the date on which the goods are to be shipped are mentioned. This order enables the exporter to make necessary arrangements for customs clearance and loading of the goods.

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7. Shipping Instructions: at the pre-shipment stage, when the documents are to sent to the CHA for customs clearance, necessary instructions are to be give with relevance to The export promotion scheme under which goods are to be exported. Name of the specific vessel on which the goods are to be loaded. If goods are to be FCL or LCL. If freight amount are to be paid / collected. If shipment are covered under A.R.E.-1 procedure. Instructions for obtaining Bill of Lading etc. 8. Bank letter for negotiation of documents: at the post shipment stage, the exporter has to submit the documents to a bank for negotiation or discounting or collection for forwarding the same to the customer and also for realization of export proceeds. The bank letter is the set of instruction for the bank as to how to handle the documents by them and by the bank at the buyers country which may include Name and address of the buyer. Details of various documents being sent and the number of the copies thereof. Name and address of the buyers bank if available. If the documents are sent L/C or on open terms. If the proceeds are to adjusted against any pre-shipment packing credit loan. If the bill amount is to be adjusted against any forward exchange cover. In case of credit bill who has to bear the interest, either exporter or if the same is to be collected from the buyer. Instructions in case non-acceptance/non-payment by the buyer.

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C.

Regulatory Document: Regulatory pre-shipment export documents are prescribed by the different government departments and bodies in order to comply with various rules and regulations under the relevant laws governing export trade such as export inspection, foreign exchange regulation, ex port trade control, customs, etc. Out of 9 regulatory documents four have been standardised and aligned. These are shipping bill or bill of export, exchange control declaration (GR from), export application dock challan or port trust copy of shipping bill and receipt for payment of port charges. 1. Shipping Bill: Shipping bill is the main customs document, required by the customs authorities for granting permission for the shipment of goods. The cargo is moved inside the dock area only after the shipping bill is duly stamped, i.e. certified by the customs. Shipping bill is normally prepared in five copies : Customs copy. Drawback copy. Export promotion copy. Port trust copy. Exporter's copy.

Types of Shipping Bill Based on the incentives offered by the government, customs authorities have introduced three types of shipping bills: Drawback Shipping Bill: - Drawback shipping bill is useful for claiming the customs drawback against goods exported. Dutiable Shipping Bill: - Dutiable shipping bill is required for goods which are subject to export duty. Duty-free Shipping Bill: - Duty-free shipping bill is useful for exporting goods on which there is no export duty.

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In order to facilitate easy recognition and quick processing, following colours have been provided to different kinds of shipping bills : Types of goods Drawback shipping bill Dutiable shipping bill Duty-Free shipping bill Contents of Shipping Bill Name and address of the exporter. Name and address of the importer. Name of the vessel, master or agents and flag. Name of the port at which goods are to be discharged. Country of final destination. Details about packages, description of goods, marks and numbers, quantity and details of each case. FOB price and real value of goods as defined in the Sea Customs Act. Whether Indian or foreign merchandise to be re-exported Total number of packages with total weight and value. By Sea Green Yellow White By Air Green Pink Pink

Significance of Shipping Bill a) Shipping bill is the main customs document, required by the customs authorities for granting permission for the shipment of goods. b) The cargo is moved inside the dock area only after the shipping bill is duly stamped, i.e. certified by the customs. c) Duly endorsed shipping bill is also necessary for the collection of export incentives offered by the government. d) It is useful to the Customs Appraiser while determining the actual value of goods exported.

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2. A.R.E. 1 form (Central excise): this form ARE-1 is prescribed under Central Excise rules for export of goods. In case goods meant for export are cleared directly from the premises of a manufacturer, the exporter can avail the facility of exemption from payment of terminal excise duty. The goods may be cleared for export either under claim for rebate of duty paid or under bond without payment of duty. In both the events the goods are to be cleared under form A.R.E-1 which will show the details of the goods being exported, the relevant duty involved and if the duty is paid or goods being cleared under bond, details of goods being sealed either by the exporter or Central Excise officials etc. 3. Exchange Control declaration Form (GR/PP/SOFTEX): under the exchange control regulations all exporters must declare the details of shipment for monitoring by the Reserve Bank of India. For this purpose, RBI has prescribed different forms for different types of shipments like GRI, PP forms etc. These declaration forms must be presented to the customs officials at the time of passing of export documentation. Under the EDI processing of shipping bill in the customs, these forms have been dispensed with and a new form SDF has to be submitted to the customs in the place of above forms. 4. Export Application: this is the application to be made to the customs officials before shipment of goods. The prescribed form of the application is the Shipping Bill/Bill of Export. Different types are required for shipment like ex-bond, duty free goods, and dutiable goods and for export under different export promotion schemes such as claims for duty drawback etc. 5. Vehicle Ticket/Cart Ticket/Gate Pass etc.: before the goods are being taken inside the port for loading, necessary permission has to be obtained for moving the vehicle into the customs area. This permission is granted by the Port Trust Authority. This document will contain the detail of the export cargo, name and address of the shippers, lorry

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number, marks and number of the packages, drivers licence details etc. 6. Bank Certificate of Realisation: this is the form prescribed under the Foreign Trade Policy, wherein the negotiating bank declares the fob value of exports and for the date of realisation of the export proceeds. This certificate is required fore obtaining the benefit under various schemes and this value of fob is reckoned as fob value of exports. D. Other Document: Black List Certificate: it certifies that the ship/aircraft carrying the cargo has not touched the particular country on its journey or that the goods are not from the particular country. This is required by certain nations who have strained political and economical relations with the so called Black Listed Countries. Language Certificate: Importers in the European Community require a language certificate along with the GSP certificate in respect of handloom cotton fabrics classifiable under NAMEX code 55.09. Generally four copies of language certificate are prepared by the concerned authority who issues GSP certificate. Three copies are handed over to the exporter. A copy is sent along with the other documents for realisation of export proceeds. Freight Payment Certificate: in most of the cases, the B/L or AWB will mention the transportation and other related charges. However if the exporter does not want these details to be disclosed to the buyer, the shipping company may issue a separate certificate for payment of the freight charges instead of declaring on the main transport documents. This document showing the freight payment is called the freight certificate.

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Insurance Premium Certificate: this is the certificate issued by the Insurance Company as acknowledgement of the amount of premium paid for the insurance cover. This certificate is required by the bank for arriving at the fob value of the goods to be declared in the bank certificate of realisation.

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

Customs Invoice: this is required by the countries like Canada, USA for imposing preferential tariff rates.

Legalized Invoice: this is required by the certain Latin American Countries like Mexico. It is just like consular invoice, which requires certification from Consulate or authorised mission, stationed in the exporters country.

Special Provision under Uniform Customs and practice for Documentary Credit UCP-500, for Commercial Invoice. Article-37: Commercial Invoice o Must appear on their face to be issued by the beneficiary named in the credit. o Must be made out in the name of the applicant. o Need not be signed

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Banks may refuse Commercial Invoice issued for amounts in excess of the amount permitted by the credit except otherwise stated.

The description of the goods in the commercial invoice must correspond with the description of the credit. In all other documents the goods may be described in the General in general terms not inconsistent with description in the credit. In all documents goods may be described in general terms not inconsistent with the Description of the goods in the credit.

Pre-Shipment Documents: Shipping bill. Export order/Sales contract/Purchase order. Letter of Credit Commercial invoice. Packing list. Certificate of origin. Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or SDF. Certificate of Inspection. Various declarations required as per custom procedure.

Exchange Control Declaration Form: all exports to which the requirement of declaration apply must be declared on appropriate forms as indicated below unless the consignment is of samples and of No Commercial Value GR FORM: to be completed in duplicate for exports otherwise than by post including export of software in physical form i.e. magnetic tape/discs and paper media. SDF FORM: to be completed in duplicate and appended to the Shipping Bill for export declare to the customs offices notified by 116

the Central Government which have introduced EDI system for processing Shipping Bill. PP FORM: to be completed in duplicate for export by post. SOFTX: to be completed in triplicate for export of software otherwise than in the physical form i.e. magnetic tapes/discs and paper media. These forms are available for sale in Reserve Bank of India Export declaration forms have utmost importance and are binding on the exporters. It is, therefore, necessary that enough care is taken while declaring exports on these forms, with special reference on the following points. Name and address of the authorised dealer through whom proceeds of exports have been or will be realized should be specified in the relevant column of the form. Details of commission and discount due to foreign agent or buyer should be correctly declared otherwise difficulties may arise at the time of remittance of such commission. It should be clearly indicated in the form whether the export is on outright sale basis or on consignment basis and irrelevant clauses must be stuck out Under the term analysis of full export value a break up of full export value of goods under F.O.B value, freight and insurance should be furnished in all cases, irrespective of the terms of contract. All documents relating to the export of goods from India must pass through the medium of an authorised dealer in foreign exchange in India within 21 days of shipment. The amount representing the full export value of goods must be realized within six months from date of shipment.

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Disposal of Copies of Export Documentation Form GR forms covering export of goods other than jewellery should be completed by the exporter in duplicate and both the copies should be submitted to customs at the port of Shipment. Customs will give their running serial number on both the copies of the GR forms after verifying the particulars and admitting the corresponding shipping bill. The value declared by the exporter will also be verified by the customs and they will also record the assessed value. Duplicate copy will be returned to the exporter and the original will be remained by the customs for onward submission to the Reserve Bank. Duplicate form of the GR form will again be presented to the customs at the time of actual shipment. After examination of goods and certifying the quantity passed for shipment the duplicate copy will again be returned to exporter for submission to an authorised dealer. However, an exception to submission of GR forms to the Customs authorities have been made in case of deep sea fishing. (a) PP forms are to be first presented to an authorised dealer for countersignature. The form will be countersigned by the authorised dealer only if the post parcel is addressed to his branch or correspondent bank in the country or import. The concerned overseas branch or correspondent is to be instructed to deliver the post parcel against payment or acceptance of relevant bill, as the case may be. (b) For post parcel addressed directly to the consignee, the

authorised dealer will countersign the form, provided (i) an irrevocable letter of credit for the full value of export has been opened in favour of exporter and has been advised through authorised dealer concerned; or

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(ii) the full value of shipment has been received in advance by the exporter through an authorised dealer; or (iii) On receipt of full value of shipment declared on this form the authorised dealer will forward to RBI the duplicate copy along with the certified copy of shippers invoice. (iv) The authorised is satisfied on the basis of standing and track record of the exporter and arrangements made for realisation of the export proceed that he cold do so. If the authorised dealer is not satisfied about standing etc. of the exporter, the application is rejected. No reference is entertained by the Reserve Bank in such cases. (c) The original PP form countersignature will be returned to the exporter by the authorised dealer and the duplicate will be retained by him. Original PP form should then be submitted to the post office along with the parcel. The post office through the goods have been dispatched will forward the original to RBI. The export of computer software may be undertaken in physical form i.e. software prepared on magnetic tape and paper media as well as in non-physical form by direct data transmission through dedicated earth stations/satellite links. The export of computer software in physical form is subject to normal declaration on GR/PP form and regulations applicable there to will also be applicable to such exports. However, export of non-physical form should be declared on SOFTEX Form. Besides computer software, export of video / T.V. Software and all other types of software products / packages should also be declared on the SOFTEX forms. Since export of software is fraught with many risks and special guidelines have been framed for handling such exports.

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OCTROI
Octroi is the local tax levied by the civic body on goods entering into the city. There are three procedures for clearing goods which are meant for export. Procedure 1, Export on payment of octroi duty and refund thereof after export. Pay the Octroi Duty and apply for refund of payment made.

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At Octroi Naka form B is issued with cash receipt for the payment of Octroi Duty. Cargo is moved to the docks. At Docks Octroi officer prepares formC & endorses Shipping Bill Number & Steamers Name. After shipment exporter prepares claim for refund by submitting following documents: Covering Letter for refund of Octroi Duty. Original receipt of Octroi paid. Original Form B. Original Form C. Invoice under which material was bought to the city. Export invoice issued by the Exporter to the importer. Export Promotion Copy of Shipping Bill Photo Copy. Bill of Lading or Airway Bill Copy.

Bar Coding It is the endeavor of the Central Government to enhance export competitiveness of the Indian products and to promote substantially. Compliance with prevalent international best practices. National task force has recommended adoption of Bar-coding for all Indian products within five years. Bar coding, using International Symbologies / Numbering, systems would enable timely and accurate capture of product information and its communication across the supply chain ahead of physical product flow. 121

With the ultimate objective of facilitating adoption of Bar-coding for all products using international Symbologies numbering systems all exports of finished and packaged items meant for retail sale shall incorporate barcodes from a date to be notified by DGFT.

MARINE INSURANCE POLICY Goods in transit are subject to risks of loss of goods arising due to fire on the ship, perils of sea, thefts etc. Marine insurance protects losses incidental to voyages and in land transportation. Marine Insurance Policy is one of the most important document used as collateral security because it protects the interest of all those who have insurable interest at the time of loss. The exporter is bound to insure the goods in case of CIF quotation, but he can also insure the goods in case of FOB contract, at the request of the importer, but the premium payment will be made by the exporter. There are different types of policies such as Specific Policy: This policy is taken to cover different risks for a single

shipment. For a regular exporter, this policy is not advisable as he will have to take a separate policy every time the shipment is made, so this policy is taken when exports are infrequent. Floating Policy: This policy is taken to cover all shipments for same months. There is no time limit, but there is a limit on the value of goods and once this value is crossed by several shipments, then it has to be renewed. Open Policy: This policy remains in force until cancelled by either party, i.e. insurance company or the exporter. Open Cover Policy: This policy is generally issued for 12 months period, for all shipments to one or all destinations. The open cover may specify the maximum

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value of consignment that may be sent pre ship and if the value exceeded, the insurance company must be informed by the exporter. Insurance Premium: Differs upon from product to product and a number of other such factors, such as, distance of voyage, type and condition of packing etc. Premium for air consignments are lower as compared to consignments by sea. The Insurance Policy Normally Contains: The name and address of the insurance company. The name of the assured & description of the risk covered. A description of the consignment. The sum insured & the date of issue. The place where claims are payable together with details of the agent to whom claims may be directed & Any other details, as applicable.

QUALITY CONTROL AND PRE-SHIPMENT INSPECTION

Realizing the importance of the need for supplying quality goods as per international standards, the Government of India has introduced Compulsory Quality Control and Pre-Shipment Inspection of over 1050 items of export under Export (Quality Control and Pre-Shipment Inspection) Act 1963. At present, the export items that are subjected to compulsory inspection includes food and agricultural products, chemicals, engineering, coir, jute and footwear. Compulsory Pre-shipment Inspection: Foods and Agriculture & Fishery Mineral & Ore Organic & Inorganic Chemicals Refectories & Rubber Products 123

Foot wear & Foot wear components Ceramic Products & Pesticides Light Eng. Products Steel ;Products Jute Products Coir & Coir Products

Exemption from compulsory Pre-shipment Inspection: Status Houses Certification by Units IPQC approved by EIA EUO/EPZ/SEZ Firm Letter from the overseas buyer Specified products such as Eng/Fishery average level of Rs.1.5 Cr.for the last three years no compliant. For monitoring pre-shipment inspection, Govt. of India has set up Export Inspection Council (EIO) The EIC has set up 5 Export Inspection Agencies (EIA). The EIAs are located one each at Mumbai, Calcutta, Cochin, Delhi and Chennai. The EIAs has a network of nearly 60 offices throughout India. Each EIA is given certain jurisdiction for inspection purpose. For instance, EIA of Mumbai has jurisdiction over Maharashtra, Gujarat and Goa. Systems of Quality Control: For the purpose of pre-shipment inspection, EIC has recognized three systems of inspection namely: Self-Certification In-Process Quality Control Consignment Wise Inspection

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Self-Certification: Under this system, complete authority is given to the manufacturing units to certify their own products and issue certificates for export. The manufacturing units which have been recognized under this scheme have to pay a nominal yearly fee at the rate of 0.1% of FOB price subject to minimum of Rs.2,500/and maximum of Rs.1 lakh in a year to the concerned EIA In-Process Quality Control (IPQC): In this system, companies/units adjusted as having adequate level of quality control right from raw material stage to the finished product stage including packaging are eligible to get the inspection certificate on a formal request by the exporter. Over 800 units all over India are operating under this system. Constant vigil and surveillance are kept on units approved under IPQC and selfcertification system. Units approved under the above two systems are often known as Export worth Units, because of their consistent standards of quality. Consignment wise Inspection: Under this system, each and every consignment is subject to compulsory inspection. The exporter has to follow a certain procedure such as: He has to make an application to Export Inspection Agency with certain documents. The EIA deputes inspector to inspect the goods After the inspection, the goods are repacked with EIA seal The inspector then makes a report to Deputy Director of EIA The Dy. Director of EIA then issues Inspection Certificate in triplicate if the inspection report is favorable If the inspection report is not favorable, a rejection note is issued.

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o It is to be noted that goods marked with SI/AGMARK/BIS14000/ISO 9000 are not required to be inspected by any agency o Overseas buyer may depute his own inspection team to inspect the goods o Inspection of textile goods is conducted by Textile Committee in respect of those exporters who are registered with the textile committee. Norms: Adequate Testing Facility Raw Material Testing & Process Control After Sales Services & Maintaining Product Quality Control on bought out components Meteorological Control & PKG. Independent Quality Audit & Houses.

Fumigation: For ensuring that no insects or bacteria are carried with the export certain types of export products are fumigated before shipment. The fumigation is carried out in the port of shipment.

SHIPPING AND CUSTOMS FORMALITIES

(As per the Prevailing Law i.e., ICA 62) The shipment of export cargo has to be made with prior permission of, and under the close supervision of the custom authorities. The goods cannot be loaded on board the ship unless a formal permission is obtained from the custom

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authorities. The custom authorities grant this permission only when it is being satisfied that the goods being exported are of the same type and value as have been declared by the exporter or his C&F agent, and that the duty has been properly determined and paid, if any. The custom procedure can be briefly explained as follows: Submission of Documents: The exporter or his agent submits the necessary documents along with the shipping bill to the Custom House. The documents include: o ARE-1 (Original and duplicate) o Excise gate pass (Original and duplicate transporters copy o Proforma Invoice o Packing List o GRI form (Original and duplicate) o Customs Invoice (where required in the importing country) o Original letter of credit/contract o Declaration form in triplicate o Quality Certificate o Purchase memo o Labels o Licence (if any required) including advance licence copy o Railway receipt/lorry way bill o Inspection Certificate by Export Inspection Agency

Verification of Documents: The Customs Appraiser verifies the documents and appraises the value of goods. He then makes an endorsement of Examination Order on the duplicate copy of shipping bill

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regarding the extent of physical examination of the goods at the docks. All documents are returned back to the agent or exporter, except o Original Copy of GR to be forwarded to RBI o Original copy of shipping bill o One copy of commercial invoice Carting Order: The exporters agent has to obtain the carting order from the Port Trust Authorities. Carting Order is the permission to bring the goods inside the docks. The carting order is issued by the superintendent of Port Trust. Carting Order is issued only after verifying the endorsement on the duplicate copy of shipping bill. The Carting Order enables the exporters agent to cart goods inside the docks and store them in proper sheds. Storing the Goods in the Sheds: After securing the carting order, the goods are moved inside the docks. The goods are then stored in the sheds at the docks. Examination of Goods: The exporters agent then approaches the customs examiner to examine the goods. The customs examiner examines the cargo and records his report on the duplicate copy of the shipping bill. The customs examiner then sings the Let Export Order Let Export Order: The Let Export Order is then shown to the Customs Preventive Officer, along with other documents. The CPO is in charge of supervision of loading operations on the vessel. If CPO finds everything in order, he endorses the duplicate copy of shipping bill with the Let Ship Order This order helps the exporter/shipper to load the goods on the ship. Loading Goods: The goods are then loaded on the ship. The CPO supervises the loading operations. After loading is completed, the Chief Mate (Cargo Officer) of the ship issues the Mates Receipt. The Mates 128

Receipt is sent to the Port Trust Office. The C&F agent pays the port trust dues and collects the mates receipt. The C&F agent then approaches the CPO and gets the certification of shipment of goods on AR Forms and other documents Obtaining Bill of Lading: The Mates Receipt is then handed over to the shipping company (on whose vessel the goods are loaded). The shipping company issues bill of lading. The Bill of Lading is issued in: o 3 negotiable copies of Bill of Lading o 10 to 12 Non-negotiable copies of Bill of Lading. The negotiable copies have title to goods; whereas non-negotiable copies do not have title to goods but are used for record purpose. PROCEDURE OF EXCISE CLEARANCE: The common procedure of excise clearance under bond and under rebate is discussed as follows: Preparing of Invoice: The export goods have to be cleared from the factory under invoice. The invoice contains details like name of the exporter, value of goods, excise duty chargeable, etc. The invoice is to be prepared in triplicate. In case of export under Bond, the invoice should be marked as For Export without payment of duty. In addition to the invoice, a prescribed for ARE 1 has to be filed in by exporter. Filling up of ARE-1 form (Annexure-20): The ARE-1 form needs to be filled in four copies. A fifth (Optional) may be filled in by the exporter, which can be used at the time of claiming other export incentives. The ARE-1 copies have distinct color for the purpose of verification and processing.

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Application to Assistant Commissioner of Central Excise (ACCE): The exporter has to make an application to ACCE regarding the removal of goods from the factory/warehouse for export purpose.

Information to Range Superintendent of Central Excise (RSCE): The ACCE will inform the RSCE under whose jurisdiction intended to be cleared for export the goods are

Deputation of Inspector: The RSCE will then depute an inspector to clear the goods, either at the factory or warehouse, and in certain cases at the port.

Processing of ARE-1 Form: The Excise Officer/Inspector will make endorsement on all copies of ARE-1. The handling of ARE-1 Form is done as follows: o The inspector returns the original and duplicate copies to the exporter o The triplicate copy is sent to officer (ACCE or Maritime Commissioner (MCCE) to whom bond was executed or letter of undertaking (LUT) was given. This copy can also be handed over to the exporter in a tamper proof sealed cover to be submitted to ACCE/MCCE. o The 4th copy will be retained by the excise inspector. o The 5th copy is also handed over to the exporter. o At the time of export, original, duplicate and the 5th copy (optional) will be submitted to customs officer. The customs officer will examine these copies and then export will be allowed. o The customs officer will then make endorsement of export on all copies of ARE-1. He will cite shipping bill number and date and other particulars of export on ARE-1. o The original copy and quintuplicate (optional) will be returned to the exporter. The duplicate copy will be sent directly to the ACCE\MCCE i.e. excise officer with whom 130

bond was executed will get 2 copies, one from RSCE (or excise inspector) when goods are cleared from factory and other Custom Officer after export. This will enable him to keep track to ensure that all goods cleared from factory or warehouse without payment of duty are actually exported. In case of export after payment of duty, under claim of rebate, the basic procedure is same as above, except that the triplicate copy (by excise inspector) and duplicate copy(by customs officer)will be sent to the officer to whom rebate claim is filed. If claim of rebate is by electronic submission, these copies well be sent to excise rebate audit section at the place of export. Refund or Release of Bond: The exporter should make an application to the excise officer for refund or release of bond. The application must be supported by original copy of ARE-1 form. The excise officer crosschecks the original copy of ARE-1 form and the duplicate and triplicate copies of ARE-1 form, which he had received earlier. If the copies match, then refund is given or the bond is released. FACTORY STUFFING OF CARGO Clearance of goods to docks: If the goods meant for export is of a small quantity which may not be sufficient to make one full container, the cargo is said to be less than container load (LCL) cargo. Such cargo has to be taken to the docks where the goods will be consolidated (combining the cargo of other exporters to make up quantity for a full container) by the agent and loaded into a container. Here the examination of the cargo is done at the docks.(There are also inland container depots approved by the customs where the goods can be consolidated and stuffed into the container by the agent under the supervision of the customs officer)

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If the goods meant for export is of sufficient quantity to make up a full container, the exporter has the option to take the goods to the docks and get them examined and stuffed into a separate container. An exporter gets the benefit on the freight amount for a full container. (Generally called box rate) Alternatively, he can have a container allotted to him and get the same to his Mills Premises. The goods meant for exports can be stuffed into the container under the supervision of the regional Central Excise Authority. Here the exporter has to Obtain permission from the Customs for getting the container to his mills premises for stuffing (House Stuffing) Inform the C.Excise Authorities at least 24 hours before bringing the container for loading. The C.Excise Authority will supervise the loading, seal the container and certify the invoice as directed in the permission given by the custom authorities. A special Lock is used to lock the doors of the container. Samples from the goods will be drawn, if necessary, as required under the customs permission. Such samples will be sealed and forwarded along with the container. The examiner in the docks may arrange to send the sample for testing. Then the container is moved to the dock for loading. Generally, such containerized goods are not subject to further examination in the customs. They will be directly taken for loading.

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METHODS OF RECEIVING PAYMENT AGAINST EXPORTS

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

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There are three methods of payment depending upon the terms of payment, and each method of payment involves varying degrees of risks for the exporter. The methods are: Payment in advance Documentary Bills Letter of Credit Open Account Counter Trade

A. PAYMENT IN ADVANCE This method does not involve any risk of bad debts, provided entire amount has been received in advance. At times, a certain per cent is paid in advance, say 50% and the rest on delivery. This method of payment is desirable when: The financial position of the buyer is weak or credit worthiness of the buyer is not known. The economic/ political conditions in the buyers country are unstable. The seller is not willing to assume credit risk, as un the case of open account method. However, this is the most unpopular methods as a foreign buyer would not be willing to pay advance of shipment unless: B. The goods are specifically designed for the customer, and There is heavy demand for the goods (a sellers market situation). DOCUMENTARY BILLS:

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

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full set of bill of lading commercial Invoice Marine Insurance policy and other document, if required.

There are two main types of documentary bills: Documents against Payment, Documents against Acceptance.

Documents against payment (D/P): The documents are released to the importer against payment. This method indicates that the payment is made against Sight Draft. Necessary arrangements will have to be made to store the goods, if a delay in payment occurs. The risk involved that the importer may refuse to accept the documents and to pay against them. The reason for non-acceptance may be political or commercial ones. In India, ECGC covers losses arising out of such risks. Under this system, as compared to D/A, the exporter has certain advantages: The document remain in the hands of the bank and the exporter does not lose possession or the ownership of goods till payment is made, Other reason may include that the exporter may not be able to allow credit and wait for payment. Documents Against acceptance (D/A): The document are released against acceptance of the Time Draft i.e. credit allowed for a certain period, say 90 days. However, the exporter need not wait for payment till bill is met on due date, as he can discount the bill with the negotiating bank and can avail of funds immediately after shipment of goods. In case of D/A as compared to D/P bills, the risk involved is much grater, as the importer has already taken possession of goods which may or may not be in his custody on the maturity date of the bill. If the importer fails to pay on due date,

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the exporter, will have to start civil proceedings to receive his payment, if all other alternatives fails. The risk involved can be insured with ECGC. C. LETTER OF CREDIT (L/C):

This method of payment has become the most popular form in recent times, it is more secured as company to other methods of payment (other than advance payment). 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.

THE LETTER OF CREDIT

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Introduction The cycle of a business transaction can be said to be complete prima facie when the buyer has received the product he desires to buy and the seller gets his payment in due consideration of the product supplied. While the seller is keen to receive the payment for his supplies, the buyer is equally keen that he gets what he wants by the paying for the same. Tough there are many merit and demerits in each of the different mode of payments we have discussed earlier, in relation either to the buyer or to the seller, we shall now deal in detail about the mode of payment under the Documentary Credit. Generally, though exporters are complacent once they get the letter of Credit on hand feeling that their payment is secured, let me say it is as much a dubious instrument as is a safe instrument. If one does not understand the implications of the terms and condition of a letter of credit, the provisions under UCP 500, how co-operative are the exporters bank and how good are the L/C opening bank and the reimbursement bank, he is sure to land in trouble at once stage or another. There are ample cases of frauds under the Letter of Credit. More and more ingenious methods are adopted to circumvent the provisions of UPC 500 by fair or foul means. Hence, even the safety and security under the Letters of Credit may prove to be no better than a mirage for a man in the desert. Hence, sufficient care is to be taken by the exporter to ensure that instrument is received in order and the conditions of the L/C can be well complied with, and there are no clauses of ambiguity.

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What is a Documentary Credit? To say in simple language, this is an Undertaking by a Bank associated with the buyer to make the payment for the supply of goods by a seller subject to compliance of various requirements that may be specified in the document of undertaking by the Bank. This document is known as Documentary Credit. A Documentary Credit is also called a Letter of Credit (L/C). CONTENTS OF A LETTER OF CREDIT A letter of credit is an important instrument in realizing the payment against exports. So, needless to mention that the letter of credit when established by the importer must contain all necessary details which should take care of the interest of Importer as well as Exporter. Let us see shat a letter of credit should contain in the interest of the exporter. This is only an illustrative list. 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 Documents to be submitted to the bank upon shipment Tolerance level for both quantity and value If L/C is restricted for negotiation

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Reimbursement clause

PROCEDURE INVOLVED IN THE LETTER OF CREDIT The following are the step in the process of opening a letter of credit: Exporters Request: The exporter requests the importer to issue LC in his favor. LC is the most secured form of payment in foreign trade. Importers Request to his Bank: The importer requests his bank to open a L/C. He May either pay the amount of credit in his current account with the bank. Issue of LC: The issuing bank issues the L/C and forwards it to its correspondent bank with also request to inform the beneficiary that the L/C has been opened. The issuing bank may also request the advising bank to add its confirmation to the L/C, if so required by the beneficiary. Receipt of LC: the exporter takes in his possession the L/C. He should see it that the L/C is confirmed. Shipment of Goods: Then exporter supplies the goods and presents the full set of documents along with the draft to the negotiating bank. Scrutiny of Documents: The negotiating bank then scrutinizes the documents and if they are in order makes the payment to the exporter. Negotiation: The exporters bank negotiates the document against the letter of credit and forwards the export documents to the L/C opening bank or as per their instructions. Realization of payment: The issuing bank will reimburse the amount (which is paid to the exporter) to the negotiating bank. Document to Importer: the issuing in turn presents the documents to the importer and debits his account for the corresponding amount. In order to have uniformity and to avoid disputes, the ICC Paris has evolved uniform customs and practices of documentary credit (UCPDC), in short known as UCP 500 effective from 1-1-96. These are rules have been adopted by more

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than 150 countries. They provide the comprehensive and practical working aid to banker, lawyer, importers, exporters, Exporters, transporters, executives involved in international trade. Note: as soon as an L/C is received ensure that the same is authenticated. Meaning that the genuineness of the L/C is certified by the Advising Bank by an endorsement with the marking AUTHENTICATED OR ELSE THE L/C IS OF NO USE. Different Type of Documentary Credits. There are various types of Documentary Credit opened by a bank in favour of its customer depending upon the requirement. Let us talk about few types of Documentary Credit which are in common use. Revocable / Irrevocable Documentary Credit :A Revocable Documentary Credit can be revoked (cancelled) by the buyer at his own discretion and this does not require the consent of the seller. The risk factor here is that the L/C may be cancelled even after the shipment is done and before the beneficiary present the documents to the bank for claiming the reimbursement. Hence, a revocable L/C is as goods as no L/C. obviously, no seller will entertain a revocable L/C. Contrary to this, an Irrevocable Documentary Credit once established and advised to the beneficiary, cannot be revoked or cancelled unilaterally by the buyer without the consent of the beneficiary (Seller).A Seller must always ask for an Irrevocable Letter of Credit. Restricted/ Unrestricted Documentary Credit: A Documentary Credit stipulates the name of the bank who is authorized to negotiate the document for claming the reimbursement. In this case the beneficiary is obliged to negotiate the documents only through the specified bank i.e. Negotiation of document is restricted to that particular bank. On the contrary if no specific bank is nominated for negotiation, it may say

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Negotiation by any bank which means the beneficiary is free no negotiate the document through the bank of his choice. This is beneficial because he can negotiate the documents through his own bank where he is having an account. Since the bank is not alien to him, he will not face any practical/procedural difficulty in negotiating the document. It is suggested to have an unrestricted L/C or L/C which may be restricted to the bank of the beneficiarys choice.

Confirmed/Unconfirmed Documentary Credit: Confirmed Documentary Credit is one in which the beneficiary has the option to have the L/C confirmed by a bank in the beneficiary country i.e. the bank who confirms the L/C takes the responsibility of making the final payment to the beneficiary upon negotiation of the document in strict compliance with the terms and conditions of the Letter of Credit. By this process the final payment will be made in the beneficiarys country by the bank which confirms the L/C immediately upon negotiation of the documents. The beneficiary do not stand the risk of waiting for the document to reach the opening bank who will have the final say so to the compliance under the L/C before making the payment. Further, the payment is also made immediately after negotiation and without recourse to the beneficiary i.e. the payment once made by the confirmed bank cannot be revoked. Moreover, if the importing countrys regulation changes and the money is not allowed to be repatriated, this will eliminate the risk. On the contrary, in an unconfirmed L/C, the negotiating bank only accepts the documents and pays for the same with recourse i.e. if as and when the documents reach the opening bank, and the opening find some discrepancy in the documents it may refuse to make the payment or seek clarification for the applicant before reimbursement. The beneficiary is fully at the mercy of the opening bank for payment. It is suggested to ask for a Confirmed L/C.

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With Resource and Without (Sans) Resource Letter of Credit: The revocable or irrevocable LC can further be classified as with resource and without resource LC. o With resource LC: In this type the exporter is held liable to the paying/ negotiating bank, if the draft drawn against LC is not honored by the importer/issuing bank. The negotiating bank can make the exporter to pay the amount along with the interest, which it has already paid to the beneficiary. o Without (Sans) Resource LC: In the case of sans (without) resource letter of credit, the negotiating bank has no recourse to the exporter, but only to the issuing bank or to the confirming bank. Normally, the negotiating bank makes advance payment to the exporter in resource of letter of credit either by discounting bills against letter of credit or by purchasing the bills of exchange. In such an instance, if the issuing bank fails to make payment or dishonor the letter of credit, then the negotiating bank cannot get the money back from the exporter or hold him liable to pay the amount. However, in the case of with resource letter of credit, the negotiating bank can ask the exporter to pay back the money along with certain other expenses. For the exporter, sans Resource letter of credit is more safe as compared to With Resource letter of credit.

Transferable/Non-transferable Documentary Credit: In a transferable L/C, the beneficiary can transfer the L/C opened in his name in favor of a third party who may effect the shipment and negotiate the documents and claim payment under the said L/C.

Revolving Documentary Credit: Where an exporter is having a regular shipment for a particular customer and the value of each shipment may also be of more or less equal value, and then one can call for a Revolving Documentary Credit. The salient

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feature of this L/C is that the buyer opens an L/C which can take care of shipments, say, may be for a period of one year on a monthly basis. For e.g. an exporter enters into a contract for supply of 5000 pairs of Trousers valued approx.US.$.75,000/- to be shipped every month. The buyer can open an L/C for a value of US.$.75000/- with validity for 12 months stipulating shipment every month for a value of US$. 75000/-and by adding a clause to make 12 shipment of like value the L/C stands replenished for the full value of the L/C after each shipment is made the documents are negotiated for which payment are also made immediately for the value of the shipment. The main benefit in this L/C is that the buyer, the bank and the exporter are saved from the routine of opening one L/C every month, the anxiety of non-receipt of the L/C on time, the amendments that may be warranted every time, the bank charges for opening number of L/Cs etc.,. A revolving Documentary Credit may have cumulative effect i.e. if a particular shipment is not made, then the value is added to the value for future utilization. In an automatic Revolving Credit, the bank is liable for the total amount covering the entire shipment and where it is non-automatic its responsibility is restricted to the value of one shipment. In automatic Revolving Credit the value of the credit is automatically replenished by an amendment. Where there are continuous shipments like the one stated above one can call for a Revolving Letter of Credit. Assignable Documentary Credit: In this type of L/C the benefit is shared between the first beneficiary and the parties whose names are assigned on the L/C. The assignee is not a party to the letter of credit but he only derives the benefit as per the L/C. this is more beneficial to the assignee because he receives his part of the money once the documents are negotiated by the first beneficiary in whose name the L/C is opened. Calls for an L/C as necessary.

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Stand by Letter of Credit: This is aimed at providing a security to a seller in case the buyer fails to perform his part. Thus this L/C is used in case of non-performance while the other types of L/Cs are generally for some performance. Such credits are paying on first presentation and the only document required therein is a simple declaration of non-performance along with the statement of claim. This type of L/C is mainly common in U.S.A. A standby Documentary Credit is generally common on open account trading where the seller may expect some security for getting his payment. This is not permitted in India.

Red Clause LC: The red clause LC is the usual irrevocable LC with further authorities the negotiating bank to make advance to the beneficiary for the purpose of processing the export goods. Thus, the red LC enables the exporter to obtain packing credit facility for the purpose of processing the goods. It is called a red-cause LC because it is generally printed/ typed in red ink.

Green Clause LC: The Green LC in addition to permitting packing credit advance also provides for the storing facilities at the port of shipment. Green LCs is extensively used in Australian wool creditors.

Back-to-Back LC: Back-to Back LC is a domestic letter of credit. It is a ancillary credit created by a bank based on a confirmed export LC received by the direct exporters. The direct exporter keep the original LC (received from issuing bank) with the negotiating or some other bank in India, as a security, and obtains another LC in favour of domestic supplier. Through this route the domestic supplier gains direct access to a preshipment loan based on the receipt of domestic or back-to-back LC.

Documentary LC: Most of the L\C is documentary L\C. Payment is being made by the bank against delivery of the full set of documents as laid

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down by the terms of credit. The important documents required to be submitted by the exporter under documentary LC includes the following: o Bill of Lading /Airway Bill or any other transport document o Commercial Invoice o Insurance Policy o Shipping Bill o Certificate of Origin o Combined Invoice and Certificate of Value and Origin o GSP/CWP certificate o Packing List o Certificate of Quality Inspection o Bill of Exchange o Any other document if required. A letter of credit may call for some or most of the above documents and may also call for some other documents specific to the shipment. Travelers LC: Travelers LC is issued to the person who intends to make a journey abroad. The correspondent/ agent of the bank honors all the cheques drawn on this credit by its holder up to the amount mentioned in LC. Travelers LC has more advantages as compared to travelers cheques. In case of cheque, the holder can withdraw up to the amount of the cheque. Again, he has to carry a number of cheque. In case of travelers LC, the holder can draw any amount up to the limit mentioned in the LC, and he need to carry only one paper of LC.

Types of Payments under a Documentary Credit.

Payment under a documentary credit can be of the following types:

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payment at Sight: In this mode, the payment is made by the L/C opening bank or its nominated bank or by a confirming bank on presentation of the documents in full conformity with the L/C. The L/C may or may not call for draft at sight for the full value of the documents.

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

Acceptance Credit : This type of credit requires a usance draft to be drawn on a nominated or accepting bank. The payment is made by the nominated/accepting bank on the due date as per instructions of the negotiating bank. In case of a confirmed L/C the payment on due date is made by the negotiating bank (confirming bank).

Negotiation Credit: Here the payment is made by the negotiating bank upon negotiation of the documents if it prepares to take the risk and will recourse to the beneficiary. If the credit is confirmed, then the negotiation bank is obliged to make the payment upon submission of a clean document by the beneficiary.

Expect in the case of confirmed L/C there is always a time lag between the date of negotiation of the document and the date of receipt of the payment. This is a grey area. If the bank acts swiftly and without prejudice, one gets payment within a weeks time. If the payment is delayed beyond this time, though an exporter has every right to ask for compensation, in actual practice, no justice is done to the exporter for the delayed payment. Very rarely, on persistent approach by the exporter/their banker, does a defaulting bank comes forward to compensate for the delayed payment. Generally the exporter has to forego lot of money in correspondence through the negotiating bank because every communication of the bank is charged to the exporter. It is no surprise many exporter suffer this loss silently.

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Feature of a Documentary Credit

A documentary credit is a document in writing issue by the bank on behalf of its customer (The Buyer). Documentary Credit must stipulate the Type of Credit as detailed above and inter alia will also stipulate the Following details : the name of the Bank issuing the Documentary Credit.(The L/C Opening Bank) the name and address of the buyer on whose behalf the credit is Issued. (The Applicant) the name and address of a bank in the country of the seller the credit through Whom the L/C is to be advised to the seller. The name and address of the Seller (Beneficiary) The Maximum Value the opening bank undertakes to pay to the Beneficiary. The date of issue of the credit. The Expiry Date of the L/C The Validity Date for shipment. The Details of the product to be shipped.(Description) Details of document required for claiming the payment from the Opening bank. The name and address of the bank authorized to negotiate the documents. The Reimbursement Clause.

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

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While the above details are the minimum that a Documentary Credit may have in actual practice there can be other stipulations mutually agreeable to the buyer, seller and the opening bank as also the negotiating bank. The guidelines for the interpretation and usage of Letter of Credit are governed by the UCP 500 (Uniform Customs Practice for Documentary Credit) published by the International Chamber of Commerce (ICC). The UPC 500 covers all the procedural aspects relating to the transactions under a Letter of Credit. Hence one is suggested to be familiar with all the 49 Articles as detailed in the UCP 500 of 1994. While all the elements and events that one may encounter in each and every organization can not be explained, the UCP 500 has attempted to take care most of the queries that one may encounter normally. The ICC Uniform Customs and Practice was first published in 1993. Taking into the consideration of the various developments in the transactions under the Documentary Credit the ICC has been reviewing these rules and updating the same. As time changes and the international transactions faces new aspects, attempts will be made to get the UCP 500 revised.

Scrutiny of letter of credit

Mere receipt of letter of credit is no guarantee of payment. There are many ifs and buts before the documents are submitted to the bank against the letter of credit for realization of proceeds from the opening bank. As soon as the letter of credit is received a through scrutiny is to be undertaken to ensure that

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First and foremost that the credit is properly authenticated by the advising bank. The letter of credit has been opened in accordance with the terms of the contract. The name and address of the beneficiary has been spelt properly. The details of product description, quality, and value are in order. The validity of shipment and expiry are correct. The documents that are required can be submitted. There is sufficient % of tolerance of quantity and value. The unit price and the terms of contract are correct. The terms and conditions stipulated can be complied with. That the credit is available for negotiation without restriction. In case of exports requires the credit to be confirmed by the local, then necessary clause is incorporated by the opening bank on the credit. Last but not the least; the credit has a reimbursing clause enabling the negotiation bank to get reimbursement of the money paid to the exporter against the documents.

There are only few suggestions. The requirement may differ for different exporter and the scrutiny has be done relative to the requirement. AMENDMENTS TO THE CREDIT On scrutiny of the letter of credit, if the exporter finds that some change are required to be made in the credit, he should immediately request the buyer to make necessary change in the letter of credit and the opening bank issued necessary amendment in this respect. Any oral and written agreement by the importer about change in the credit directly to the exporter should not be accepted as it is not valid under the credit. Any change must be advised by the importer through the opening bank only as a sort of amendment to the original credit.

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DOCUMENTARY CREDIT IN GENERAL Of all the various type of payments, the most safest as far as the exporter is concerned is to get an advance payment in full for the value of shipment to be effected. Obviously, this puts the buyer totally at the mercy of the seller and unless the buyer feels unavoidable he will not be prepared to make advance payment. Hence, of the rest of the modes of payment, the best is calling for a Documentary Credit for any shipment. Now let us see how we can take care of the interest of the exporter while an L/C is established. It is suggested that the exporter gives the full details as to the various requirements to the buyer for incorporation in the L/C. this will avoid the necessary of asking for amendments and will save both time and money. Bear in mind every amendment costs you badly. Care are should be taken to ensure that there are NO spelling mistakes, omission and commission of , or, or such small things. A discrepancy is a discrepancy and there is nothing like minor discrepancy or major discrepancy as far as the bank is concerned. A bank strictly deals in documents and the documents are expected to be cent percent in line with details give in the Documentary Credit. Ensure that the Validity for shipment and for negotiation of documents can be complied with. If not possible, call for amendment extending the validity as required. Unless the L/C specifies the tolerance for the quantity and value, the exporter should follow the quantity and value as stipulated in the L/C. There is provision for a tolerance of the quantity up to 5 percent more or less than stipulated in the L/C even if the L/C does not specify tolerance exclusively and unless tolerance is prohibited 0 specifically. However, the value of documents, on no account, could exceed the limits of the L/C. Check the description of the product properly, the rates if specified, and quantity of each of the items. Ask for amendment where you cannot copy with the terms.

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Make sure that all the documents as called for by the Credit can be submitted without any exception. The last but not the least is the Reimbursement clause (Getting the funds for the shipment made). An L/C without this clause is no L/C. if there is no provision as to from where the exporter is going to get paid for, the whole exercise of the L/C is futile. The opening bank may specify the reimbursement clauses as follows: The negotiating bank to send the documents to the opening bank who will, upon receipt of the documents, arrange for reimbursement as claimed by the negotiation bank. The negotiating bank can claim reimbursement directly from a nominated bank (say ABC Bank, New York) either upon negotiation of documents or after a period of days of negotiation subject to the documents being submitted by the beneficiary is strictly in conformity with terms and condition of the letter of credit. I for one prefer the reimbursement clause as in b) so that on one hand my bank sends the documents to the opening bank and at the same times claims the reimbursement from nominated bank. These are some of the aspects one should take care to ensure that the L/C established in his favor is in order and that he can comply with all the provision thereof. However, one is advised to make a checklist and take a note of each and every condition of the L/C for compliance at the right time.

PARTIES TO LETTER OF CREDIT Applicant: the buyer or importer of goods. Issuing Bank: importers bank who issues the L/C.

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Beneficiary: the party to whom the L/C is addressed. The seller or supplier of goods. Advising Bank: issuing banks branch or correspondent bank in the exporters country to which the L/C is sent for onward transmission to the beneficiary.

Confirming Bank: the bank in beneficiarys country which guarantees the credit on the request of the issuing bank. (Many a times the advising bank and confirming bank are one and the same).

Negotiation Bank: the bank to whom the beneficiary present his documents for Payment u Under L/C. Reimbursing Bank: the bank which will reimburse the negotiating bank for the value of the credit.

Where an L/C stipulates that the Negotiation is restricted to a specific bank which is not the Advising Bank or Where the L/C is not restricted, and the seller desires to negotiate the document which is not the advising bank, then we have a separate Negotiating Bank. Where the opening bank prefers to advise the L/C through its own branch in the beneficiary country or through another bank of its choice, then the L/C may be advised to the beneficiary directly by this bank or if it instructed to advise the L/C through the buyers nominated bank then it does so. Here, we have two advising bank. As far as possible, one should restrict the involvement of the number of the banks to the minimum. More the number of the banks, more the time in the transmission of the L/C, in addition to multiplicity of bank charges.

SPECIAL NOTE
Though one may strongly feel that a Letter of Credit is the safest mode of payment, one will face innumerous practical difficulties in so far as compliance

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with the terms and conditions of the L/C. since several documents are involved, there are every possible of discrepancy in the documents either between different documents or between the document or between the document and the L/C. the Negotiating bank soft pedal some of the discrepancies which they feel may not be pointed out by the opening bank as discrepancy to favour its customer. In the like manner the opening bank, to safeguard the interest of the buyer, would like to ensure that the document submitted against a Letter of Credit are strictly in full conformity of the L/C. For mastery of the operation under the Letter of Credit one is advised to completely study the various articles of the UCP 500 so that one can be clear in his mind as to the various provisions available under the Documentary Credit which will stand good while negotiating the documents with the bank. While the articles of UCP 500 come safeguard the interest of both the buyer and the seller, there are certain elements which may be outside the definition of the UPC 500. Also there is certain flexibility provisions in the UPC 500 which one might like to exploit to his favour. So, in spite of the L/C being the safest method to ensure the payment, unless both the buyer and the seller follow the business ethics there is every chance that one gets cheated by the other. As a prudent exporter one should be very careful in selecting his customer apart from taking other safety measures. If the customer is too good, and you have been dealing with them for a long time, one may relax and term the L/C as the best method to receive payment. If the customer turns out to be unscrupulous then he can play havoc. This is applicable to both the seller and the buyer. There are books on fraudulent us of the Documentary Credits. Sometimes it may be the buyer who is at the receiving end and some time it may be the other way. A study of such book as above may help one to take adequate care. But, the brain is always working in multi directions. It will be no surprise if one comes

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across newer and newer dubious methods being adopted by the contracting parties. TOTAL OPERATION UNDER THE LETTER OF CREDIT. The Unconfirmed L/C. The Buyer makes an application to his bank to open an L/C. Opening bank establishes the L/C. Opening bank advises the L/C through his associate or through the bank. Nominated by the beneficiary. The Bank in the beneficiary country which receives the L/C sends the Original L/C to the customer either directly or through the bank Specified in the L/C. The buyer complies with the L/C requirements and submits the relevant documents. To the bank for claiming reimbursement. The negotiating bank negotiates and sends the documents to the opening bank or as Directed. Meantime pays the beneficiary. Advises the opening bank or the reimbursement bank the details of his Accounts and the nominated bank where the proceeds are to be credited. Once the credit is received, the nominated bank advises the negotiating bank of the credit. Thus the negotiating bank gets the credit for the L/C documents.

The Confirmed L/C. All the steps from 1to6 as far as the beneficiary are concerned since the payment is made to the beneficiary without recourse. However, the negotiating bank may

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have to follow the subsequent steps since he has to receive his money from the opening bank.

PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK NEGOTTIATION /PURCHASE

Document against exports should normally be realized through an authorized dealer foreign exchange. However payment of export can be received directly from the overseas buyer in the form of bank draft, pay order, bankers cheque, personal cheque foreign currency notes, foreign currency travelers cheque, etc. Without any monetary limit provided the exporters track record is good, he is a customer of the authorized dealers through whom documents are to be negotiated and prima facie the instrument of payment represents export proceeds realization. Take care to submit various documents in a proper manner and within the prescribed time schedule. Apply to the Reserve Bank for extension of time in case you feel there is likely to be a delay in realizing export proceeds. The following are the steps in realizing export proceeds: Approaching a Bank: After dispatch of the goods, either by sea, or by air, the exporter should approach his bank (authorized dealer) with a formal request to realize sale proceeds from the foreign buyer. It is obligatory to submit the shipping documents to an authorized dealer within 21 days of the date of shipment (subject to certain exceptions). In India, the exporters have to realize the full value of exports within 180 days from the date of shipment, (unless the payment terms offered are deferred payment terms). Where it is not possible to realize the sale proceeds within the

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prescribed period, the exporter should apply for extension in prescribed form ETX (in duplicate) to RBI. Submission of Documents to the Bank: The exporter should submit the following documents o Bill of Exchange o Full set of Bill of Lading o Commercial Invoice Copies o Certificate of Origin o Insurance Policy o Inspection Certificate o Packing List o GR (duplicate copy to forward it to RBI) o Bank Certificate o Other relevant documents. The above documents need to be submitted in two complete sets, because it is customary to dispatch two sets of documents, one after the other. This is because, if one set is misplaced or delayed in transit, the importer can get at least the other set and clear the goods. Verification of Documents: The bank will verify the documents to find o Whether the required documents are in order. o Whether the required documents are attested by customs and other authorities. Letter of Indemnity: If the exporter wants immediate payment from his bankers, then his bankers may provide advance payment only when the exporter signs an indemnity letter. The implications of an indemnity letter is that in the event of refusal of payment by the issuing bank in respect of

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LC, then the negotiating bank can ask the exporter to pay back the money advanced along with necessary charges. Common Document Discrepancies o Credit Expired o Late shipment o Presented after permitted time from date of issue of shipping documents o Short Shipment o Credit Amount Exceeded o Underinsured o Description of goods on invoice differ from that of credit o Mark and numbers differ between documents o Bill of lading, Insurance documents, Bill of Exchange not endorsed correctly o Absence of Documents called for under credit. o Insurance certificate submitted instead of policy. o Weight in different document differs. o Class of Bill of lading no acceptable-charter party or House B/L. o Insurance cover expressed in currency other than that of credit. o Absence of signature, where required on documents. o Bill of exchange not drawn as per tenor stated in credit. o Bill of exchange drawn on wrong party. o Insurance risks covered not being those specified in credit. o Absence of freight paid statement on B/L in CFR of CIF shipment. o Bill of lading doses not carry shipped on broad stamp. o Amount shown on invoice and bill of exchange differ. o Shipment not make to port specified.

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o Transshipment/part shipment undertaken where expressly forbidden. exporter, if so required. Dispatch of documents: before the submission of documents for negotiation/collection, the bank examines them thoroughly with reference to the terms and conditions of the buyers order. Letter of credit and the laws relating to foreign exchange control. If any scrutiny, the documents are in order, the bank dispatches them to its overseas branch/correspondent branch as early as possible. The overseas branch of the bank then submits the document to the importers bank, and the importers bank hands it over to the importer. Discounting of bills: the bank may discount or negotiate the bills drawn against LC, and make immediate payment to the

SHIPMENT THROUGH COURIERS

In addition to the exporter by sea, air, rail or road, exports are also allowed by courier under the courier imports or exporters (clearance) Regulation Act, 1998. These regulations shall apply for clearance of goods carried by authorized courier on outgoing flights on behalf of exports. Consigner for a commercial consideration. Export Terms & conditions: Export of any item can be affected by courier, except the following. Goods which are subject to cess. Goods proposed to be exported with claim of duly drawback.

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Goods proposed to be exported under DEPB, EPCG, AL (Advance License) Where the value of goods is more than Rs. 25,0000/Goods where weight of individual packet is more than 32 kg.

CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM

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

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DEEC Shipping Bills EPCG Shipping Bills DEPB Shipping Bills DFRC Shipping Bills 100% EOU Shipping Bills Re export, Jobbing Shipping Bills Drawback Shipping Bills Other NFEI Shipping Bills

The procedure to be followed in respect of filing of shipping bills under the Indian customs EDI System-Exports at CFS-Mulund shall be as follows: 2. DATA ENTRY FOR SHIPPING BILLS 2.1 Exporters/CHAs are required to register their IE codes, CHAs Licence Nos, and the Bank A/C No.(for credit of Drawback amount) in the Customs Computer Systems before an EDI Shipping Bill is filed. 2.2 Exporters/CHAs would be required to submit at the SERVICE CENTRE the following documents. 2.3 A declaration in the specified format SDF declaration Quota/Inspection Certificate Drawback/DEEC/DFRC/DEPB Declarations etc., as applicable The formats should be duly completed in all respects and should be signed by the exporter or his authorized CHA . Forms, which are incomplete or unsigned will not be accepted for data entry 2.4 Initially, data entry for Shipping Bills will be allowed to be made only at the Service centre. After the exporters/CHAs become conversant

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with the EDI procedures, the option of Remote EDI System would also be made available. In the Remote EDI system (RES) Exporters/CHAs can electronically file their shipping bills from their offices. 2.5 The schedule of charges to be levied for data entry at the Service Centre is as follows: Charges for S/Bills having up to five items Charges for additional block of five items Amendment fees (for a block of five items) Printing of a S/Bill for Remote EDI System 2.6 ... ... ... ... Rs.60/Rs.10/Rs.10/Rs.20/-

The Service Centre operators shall carefully enter the data on the basis of declarations made by the CHAs/Exporters. After completion of data entry, the checklist will be printed by the Data Entry Operator and shall be handed over to the Exporters/CHAs for confirmation of the correctness. Thereafter, the CHA/Exporters will make corrections, if any, in the checklist and return the same to the operator duly signed. The operator shall make the corresponding corrections in the date and shall submit the shipping bill. The operator shall not make any amendment after generation of the checklist and before submission in the system unless the corrections made by the CHAs/Exporters are clearly indicated on the checklist against the respective fields and duly authenticated by CHA/Exporters signature.

2.7

The system automatically generates the S/Bill Number. The operator shall endorse the same on the checklist in clear and bold figures. It should be noted that no copy of the S/Bill would be available at this stage.

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2.8

The declarations would be accepted at the service centre from 10.00 hrs to 16.30 hrs. Declarations received up to 16.30 hrs will be entered in the computer system on the same day.

2.9

The validity of the S/Bill in EDI System is fifteen days only. After expiry of fifteen days from the date of filing of shipping bill, the exporter has to file the declaration afresh.

PROCEDURE FOR GR-1 3.1 Under the revised EDI procedure there would be no GR-1 Procedure. Exporters(including CHAs) would be required to file a declaration in the form SDF. It would be filed at the stage of goods arrival One copy of the declaration would be attached to the original copy of the S/Bill generated by the system and retained by the customs.The second copy would be attached to the duplicate S/B (the exchange control copy) and surrendered by the exporter to the authorized dealer for collection/negotiations. 3.2 The exporters are required to obtain a certificate from the bank through which they would be realizing the export proceeds. If the exporter wishes to operate through different banks for the purpose, a certificate would have to be obtained from each of the banks. The certificates would be submitted to customs and registered in the system. These would have to be submitted once a year for confirmation or whenever the bank is changed. 3.3 In the declaration form to be filled by the exporters for the electronic processing of export documents, the exporters would need to mention the name of the bank and the branch code as mentioned in the certificate from the bank. The customs will verify the details in the declaration with the information captured in the system through the certificates registered earlier. 3.4 In the case of S/Bs processed manually, the existing arrangement of filing GR-1 forms would continue.

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OCTROI PROCEDURES, QUOTA ALLOCATION AND OTHER

CERTIFICATION. The processing of S/Bs involving allocation of ready-made garments quota by the Apparel Export Promotion Council (AEPC) will change with the introduction of the system. The quota allocation label will be pasted on the export invoice instead of S/B. Allocation number of AEPC would be entered in the system at the time of S/B data entry. The quota certification on export invoice should be submitted to Customs along with other original documents at the time of examination of export cargo. As a transitional measure, AEPC certification even on S/B form would be accepted. However, in these cases, S/B number should be indicated on the invoice when goods are presented for examination. This transitional facilitation measure will be available for a period of two months i.e., upto 30 th November 2004. For determining the validity date of the quota, the relevant date would be the date on which the full consignment is presented for examination and the date to recorded in the system. The certificate of other agencies, such as, the Cotton Textiles Export Promotion Council; the Wildlife Inspection Agency under CITES; the Engineering Export Promotion Council; the Agricultural Produce Export Development Agency (APEDA), the Central Silk Board and the All India Handicraft Board should also be obtained on the invoice. Similarly, the no objection of the Asst. Drug Controller and of the Archaeological of Survey India would be obtained on the Invoice. The transitional arrangements would be the same as in the case of AEPC certification. The exporters would have to make use of export invoice or such other documents as required by the Octroi Authorities for the purpose of octroi exemption. 1. ARRIVAL OF GOODS AT EXPORT EXAMINATION SHEDS IN CFS

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The existing procedure of permitting entry of goods, brought for the purpose of examination (and subsequent: Let export Order) in the CFS on the strength of S/B shall be discontinued. The CONCOR will permit entry of the goods on the strength of the checklist, the date entry form and the declaration. The CONCOR would endorse the quantity of goods entering the CFS on the reverse of the checklist The goods should be brought for examination within 15 days of filing of declaration in the Centre. In case of delay, a fresh declaration would need to be filed If at any stage subsequent to the entry of goods in CFS it is noticed that the declaration has not been registered in the system, the exporters and CHAs will be responsible for the delay in shipment of goods and any damage, deterioration or pilferage, without prejudice to any other action that may be taken. 2. PROCESSING OF SHIPPING BILLS The S/B shall be processed by the system on the basis of declaration made by the exporter. However, the following S/B shall require clearance of the Assistant Commissioner/Dy. Commissioner (AC/DC Exports): Duty free S/B for FOB value above Rs.10 lakh Free Trade Sample S/B for FOB value above Rs.25,000 Drawback S/B where the drawback exceeds Rs. One lakh

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

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Apart from verifying the value and other particulars for assessment, the AO / AC / DC may call for the sample s for confirming the declared value or the checking classification under the drawback schedule / DEEC / DEPB / DFRC / EOU etc., He may also give special instruction for examination of goods. If the S/B falls in the categories indicted in para 6.1 above, the exporter should check up with the query counter at the Centre, whether the S/B has been cleared by Asstt. Commissioner /Dy. commissioner, before the goods are taken for examination. In case AC / DC raises any query, it should be replied through the Service Centre or, in case of EDI connectivity, through terminals of the Exporter / CHA. After all the queries have been satisfactorily replied to, AC / DC will pass the S/B 3. CUSTOMS EXAMINATION OF EXPORT CARGO On receipt of the goods in the Export Shed in the CFS, the exporter will contact the system examining officer (SEO)and present the checklist with the endorsement of CONCOR on the declaration, along with all original documents such as Invoice, Packing List, ARE-1(AR-4)etc. He will also present additional particulars in the prescribed form. SEO will verify the quantity of the goods actually received against that entered in the system. He will enter the particulars in the system. The system would identify the Examining Officer (if more than one are available)who would be carrying out physical examination of goods. The system would also indicate the packages(the quantity and the serial numbers) to be subjected to examination. SEO would write this information on the checklist and hand it over to the exporter. He would hand over the original documents to the Examining Officer. No examination order shall be given unless the goods have been physically received in the Export Shed. It may, however, be clarified that Customs may examine all the packages/goods in case of any discrepancy. The Examining Officer may inspect and/or examine the shipment, as per instructions contained in the checklist and enter the examination report in the system. There will be no written examination report. He will then mark the Electronic S/B and forward the checklist along with the original documents to the

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Appraiser/Supdt. in Charge.

If the Appraiser/Supdt. is satisfied that the

particulars entered in the system conform to the description given in the original documents (including AEPC quota and other certifications) and the ;physical examination, he will proceed to give :Let Export order for the shipment and inform the exporter. The Appraiser/Supdt. would retain the checklist, the declaration and all original documents with him. In case of any variation between the declaration in S/B and the documents or physical examination report, the Appraiser/Supdt. will mark the electronic S/B to AC/DC Exports. He will also forward the documents to AC/DC and advise the exporters to meet the AC/DC for further action regarding settlement of dispute. In case the Exporter agrees with the views of the Department, the S/B would be processed finally. Where the exporter disputes the views of the Department, the case would be adjudicated following the principles of natural justice. 4. GENERATION OF SHIPPING BILLS As soon as the Shed Appraiser/Supdt.gives Let Export order, the system would print 6 copies of the S/B in case of Free and scheme S/B. In case of DEPB there are 7 S/B. If the S/B (DEPB) is assessed provisionally, then EP copy will be generated only after AC/DC finalises the assessment. On the examination report the Appraiser/Shed Supt.will sign. On all the copies, the Appraiser/Shed Supdt., Examination Offer as well as exporters representative/CHA will sign. Name and ID Card number of the Exporters representative/CHA should be clearly mentioned below his signature. The distribution of S/Bills is as follows: DEPB Scheme S/Bills S/Bills 1. Exporters copy 2. Customs Copy 3. Exchange Control Copy Copy 4. Scheme Bill Copy 166 4. E.P.Copy 1. 2. 3. Exporters copy Customs copy ExchangeControl Other Scheme

5. E.P.Copy 6. TR-1, TR-2 Copies

5.

TR-1. TR-2 Copies

The original AEPC quota and other certificates will be retained with the S/Bills and recorded in the Export Shed. 5. PAYMENT OF MERCHANT OVERTIME (MOT) For the time being the present manual system for payment of Merchant Overtime (MOT) charges will continue. MOT charges will be required to be paid by exporter when the goods are examined by Customs for allowing Let Export beyond the normal office hours. No charges would be required to be paid on normal working days when the examination itself is being done for Let Export upto 05.oo PM. In addition, no charges would be required to be paid if the exporter wants the goods to be entered in CONCOR (CFS) only for meeting the quota deadlines.

6. DRAWAL OF SAMPLES Where the Appraiser of Customs orders for samples to be drawn and tested, the Examining Officers will proceed to draw two samples from the consignment and enter the particulars thereof along with name of the testing agency in the system. No registers will be maintained for recording dates of samples drawn. Three copies of the test memo will be sprepared and signed by the Examining Officer, the Appraiser and Exporter. The disposal of the three copies would be as follows: Original to be sent along with the sample to the testing agency Duplicate copy to be retained with the second sample Triplicate to be handed over to the exporter.

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AC/DC may, if he deems necessary, order for sample to be drawn for purposes other than testing such as visual inspection and verification of description, market value enquiry etc. 11 QUERIES With the discontinuation of the assessment of S/B in the Export Department, there should not be any queries. The exporter, during examination, can clarify doubts, if any. In case where the need arises for the detailed answer from the exporter, a query can be raised in the system buy the Appraiser, but would need prior approval of AC/DC (Exports) The S/B will remain pending and cannot be printed till the exporter replies to the query to the satisfaction of the Assistant Commissioner/Dy. Commissioner 12 AMENDMENTS: Corrections/amendments in the checklist can be made at the service centre provided the system has not generated the S/B number. Where corrections are required to be made after the generation of the S/B No. or, after the goods have been brought in the docks/CFS, amendments will be carried out in the following manner. If the goods have not yet been allowed Let Export, Assistant Commissioner/Dy. Commissioner may allow the amendment. Where the Let Export order has been given, the Addl./Joint Commissioner (Exports) would allow the amendments In both the cases, after the permission for amendments has been granted, the Asstt./Dy. Commissioner(Exports) will approve the amendments on the system. Where the print out of the S/B has already been granted, the exporter will surrender all copies of the S/Bill to the Appraiser for cancellation before amendment is approved in the system. 13. SHORT SHIPMENTS, SHUT OUT, CANCELLATION AND BACK TO TOWN PERMISSIONS.

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AC/DE (Export) will give permission for issue of short shipment certificate, shut out or cancellation of S/B, on the basis of an application made by the exporter. The S/B particulars would need to be cancelled /modified in the system before granting such permission. AC/DC should check the status of the goods, before granting permission. 14. 14.1 AMENDMENT OF FREIGHT AMOUNT If the freight/insurance amount undergoes a change before Let Exports is given, corresponding changes would also need to be made in the S/B with the approval of AC/DC Exports. But if the change has taken place after the Let Exports Order, approval of Additional/Jt.Commissioner would be required. Non-intimation of such changes would amount to mis-declaration and may attract penal action under Customs Act 1962. 15. 15.1 RECONSTRUCTION OF LOST DOCUMENTS: Duplicate print out of EDI S/B cannot be allowed to be generated if it is lost, since extra copies of S/B are liable to be misused. However, a certificate can be issued by the Customs stating that Let Exports order has been passed in the system to enable the goods to be accepted by the Shipping Line, for export. Drawback will be sanctioned on the basis of the Let Export order already recorded on the system. 16 RE-PRINT OF SHIPPING BILL:

16.1 Similarly, reprints can be allowed where there is a system failure, as a result of which the print out(after the Let Export order) has not been generated or there is a misprint. Permission of AC/DC (exports) would be necessary for the purpose. The misprint copy shall be cancelled before such permission is granted

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17 17.1

EXPORT OF GOODS UNDER CESS For export items, which are subject to export cess the corresponding serial number of the Cess Schedule should be clearly mentioned. A printed challan generated by the system would be handed over to the exporter. The cess amount indicated should be paid in the Bank of India, Extension Branch of CFS, under a receipt.

18. 18.1

EXPORT OF GOODS UNDER CLAIM FOR DRAWBACK The scheme of computerized processing of drawback claims under the Indian Customs EDI system-Exports will be applicable for all exports through CFS.

18.2

In respect of goods to be exported under claim for drawback, the exporters will file declaration in the form. The declaration in the form would also be required to be filed when the export goods are presented at the Export Shed for examination & Let Export

18.3

The exporters who intend to export the goods through CFS under claim for drawback are advised to open their account with the Bank of India branch situated at CFS-Mulund. This is required to be done to enable direct credit of the drawback amount to the exporters account, obviating the need for issue of separate cheque by post. The exporters are required to indicate their account number opened with the Bank of India branch at CFS-Mulund. It would not be possible to accept any shipment for export under claim for drawback in case the account number of the exporter in the bank is not indicated in the declaration form.

18.4

The exporters are also required to give their account number along with the details of the bank through which the export proceeds are to be realized.

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18.5

Export declarations involving a drawback amount of more than rupees one lakh will be processed on screen by the AC/DC before the goods can be brought for examination and for allowing Let Export:

18.6

The drawback claims are sanctioned subject to the provisions of the Customs Act 1962, the Customs and Central Excise duties drawback rules 1995 and conditions prescribed under different subheadings of the All Industry rates as per notification number 26/2003-Cus(NT) dated 1.4.2003 as amended by notification number 12/2004-Cus(NT) dated 29-01-04.

18.7

After actual export of the goods, the drawback claims will be processed through EDI system by the officers of drawback branch on first come first serve basis. There is no need for filing separate drawback claim. The claims will be processed, based on the Train Summary/Inward way bill, submitted by CONCOR. The status of the S/Bill and sanction of drawback claim can be ascertained from the query counter set up at the service centre. If any query has been raised or deficiency noticed, the same will be shown on the terminal and a printout of the query/deficiency may be obtained by the authorized person or the exporter from the service centre. The exporters are advised to reply to such queries expeditiously and such replies shall be got entered in the EDI system at the service centre . The claim comes in queue of the EDI system after reply to queries/deficiencies is entered by the service centre.

18.8

Shipping Bills in respect of goods under claim for drawback against brand rates would also be processed in the same manner, except that drawback would be sanctioned only after the original band rate letter is produced before the designated customs officer in the office of Asstt/Dy. Commissioner (Export) and is entered in the system. The exporter should specify the SS No. of drawback as 98.01 for provisional drawback.

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18.9

All the claims sanctioned in a particular day will be enumerated in a scroll and transferred to the Bank through EDI. The bank will credit the drawback amount in the Account of the exporter on the next day and will handle accounts of the exporters as per their instructions. Bank will also send a fortnightly statement to the exporters about the payments of their drawback claims.

19.

EXPORT OF GOODS UNDER DEPB

While filing information as per the format, exporters are required to ensure that correct Group Code No. of the goods being exported and the item No. of relevant Group is clearly mentioned (item-wise details). The exporters/CHAs are advised to fill Item No, in the same manner as given in the Public Notices issued by DGFT. DEPB Credit in respect of items like formulations, injections etc. of group code No.62 (Chemicals) are at a specific percentage of credit rate for the relevant bulk drug. For proper calculations of DEPB rate, exporters/CHAs are advised to claim export under the specific Sl.No. if they are exporting injections and thereafter mention Sl.No. of Group Code 62 of the bulk drug of which such injections have been made. The system will calculate the said specific percentage of the DEPB rate of such bulk drugs, formulations of which are being exported. All the DEPB S/Bills having FOB value less than Rs.5 lakhs and/or DEPB rates less than 20% will be assessed by Appraiser/Supdt. (DEPB Cell) However, the S/Bill having FOB value more than Rs.5 lakhs and/or credit rate 20% or more will be assessed by AC/DC (Export) . Any query at the time assessing by Appraiser (DEPB cell) or AC/DC (Export) may be obtained from the service centre and reply to the query has to be furnished through service centre. If the group code No., Item No. and FOB value declared is accepted by the Appraiser/Supdt (DEPB Cell) or Asstt./Dy. Commissioner(Export), goods may be brought and entered in the system. The examining officer will feed the examination report and Let Export order will be given by Appraiser/Supdt. in the

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EDI system. Seven copies of S/Bill will be printed for the purposes mentioned against each as under : Customs Copy Exporters copy E.P.Copy DPB copy For record of Customs For record of Exporters For office of DGFT For use in the import cell of ICD Bangalore for registration of licence. For negotiating the export documents in bank

Exchange Control Copy TR-1TR-2 copies There is a provision for changing the Group Code No./Item No./Value for DEPB credit purposes and such changes will be reflected in the print out of the S/Bill. Such charges may be done by Appraiser/Supdt. (DEPB Cell) AC/DC(Export) as well as by Appraiser/Supdt.(Exam.) The credit will be allowed by the DGFT at the rate/value (for credit purposes only) as approved by Customs. The EP copy of the shipping bill shall be used by the Exporters to obtain DEPB licence from DGFT.

In case, for credit purposes, the exporter accepts the lower value as determined by customs, such lower value will be entered by Appraiser (DEPB Cell) AC/DC (Export) or by Appraiser (Exam) for each item(s) Printout of S/Bill at item level will indicate for FOB value as well value for DEPB credit purposes. Exporters are required to apply for the DEPB Licence at the B value accepted by Customs and not the value declared by them. However, as DEPB is issued on the basis of exchange rate applicable on the date of Let Export, exporters are advised to apply for DEPB Licence at the value accepted by Customs at the time of export multiplied by exchange rate on the date of Let Export(LEO) (As per para 4.43 of EXIM Policy 2003 edition) In case the exporter does not accept the value determined by the customs, the exports will be allowed provisionally after taking samples for market enquiry. The words NOT VALID FOR DEPB will be printed on all the copies of S/Bill and the exporters will be not be eligible for DEPB licence against provisionally assessed S/Bills. In such cases, EP copy of S/Bill will not be printed and only 6 copies will be printed. However, market enquiries about value will be conducted in such cases and either after issue of the Show Cause Notice the market value will be

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determined or may be accepted by the Exporters on his own. In such cases where samples are drawn subject to market enquiry the copy of the S/Bill for claiming DEPB will be generated after determination of value on the basis of market enquiry and handed over to the exporters duly signed by Appraiser/Supdt. of Customs. In such cases wherever market value has been found to be less than twice the credit claimed, the market value will be mentioned in the EP copy of S/Bill as under : Market value of the goods is Rs..and credit not to exceed 50% of the market value Sample may also be drawn for the other purposes such as Chemical test,. DEPB entitlement etc. The procedure of Provisional Assessment shall be applicable mutates mutandis to above cases as well and the cases will be finalized after necessary reports etc. arte received and unprinted copy of S/Bill meant for DEPB Licence shall be released thereafter for printing.

Registration of DEPB Licence: The DEPB Licence in respect of exports made from this customs station will be required to be registered at the same station. Before registration, the concerned officer will verify the S/Bill(s) in the Licence from the computer ensure that exports have been affected and value mentioned is as determined by customs at the time of export. In cases of S/Bills assessed provisionally, the verification will not be possible because S/Bill will not be in the verification queue. The exporters are advised to obtain licences for the items exported un DEPB scheme and not for non-DEPB items. If the

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lower value for credit purposes has been accepted at the time of export, the licenses shall be obtained only for such lower value and not for FOB value declared in S/Bill or as per Bank realisation certificate. Similarly in cases where market value of the goods is less than twice the credit availed, the licence shall be obtained for 50% of the present market value of the goods. The computer at the time of registration of licence will calculate admissible credit on the basis of exchange rate on the date of realisation of export proceeds (as per bank realisation certificate) for DEPB items only and at customs approved value at the time of export. If the amount of licence is more than the amount of credit calculated by the system, it will not be possible to register a licence and reference will be made to DGFT for correction of amount of credit. If the amount of credit as per customs computer matches with the credit as per DEPB licence, computer will generate printout regarding verification of the exports giving details like S/Bill No. date , rate of credit, FOB value as approved by customs and amount of credit etc. DEPB licence will be registered on the basis of printout of verification report duly signed by AC/DC (Export). If a DEPB Licence is having S/Bills exported from other ports in the same city the exporters can get the licence registered at any of the ports from where he intends to import the goods in the city after verification about exports from other ports from where exports were affected. The same procedure will be followed for DFRC Licences also. 20. EXPORT OF GOODS UNDER 100% EOU SCHEME 20.1 The exporters can get the export goods examined by Central

Excise/Customs Officer at the factory even prior to filling of S/Bill. Self sealing facility is also available. He shall obtain the examination report in the form to this Public Notice duty signed and stamped by the examining officer and supervision officer at the 175

factory. The export invoice shall also be signed and stamped by both the officers at the factory. Thereafter the goods shall be brought to the concerned customs warehouse for the purpose of clearance and subsequent Let Export. The exporters/CHA shall present the goods for registration along with Examination Report, ARE-1, Export Invoice duly signed by the Examining Officer and supervising officer at the factory, check list, declaration in form and other documents such as document of transportation, ARE-1, etc., to the examiner in the concerned shed. After registration of goods, the shipping bill will be marked to an examiner for verification of documents and seal. If seal is found intact the S/Bill will be recommended for LEO, which will be given by the shed appraiser. However if seal is not found intact, the goods will be marked for examination and LEO will be given if the goods are found in order. 21. 21.1 EXPORT OF GOODS UNDER EPCG SCHEME All the exporters intending to file shipping bills under the EPCG scheme

should first get their EPCG licence registered with the Export section. For registration of EPCG licence, the exporter/CHA shall produce the Xerox copy of EPCG licence to the service centre for data entry. A printout of the relevant particulars entered will be given to the exporter/CHA for his confirmation. After verifying the correctness of the particulars entered, the said printout will be signed by the exporter. Thereafter, the original EPCG licence along with the attested copy of the licence and the signed printout of the particulars shall be presented to the Appraiser/Supt (EPCG Cell)The Appraiser/Supdt. (EPCG Cell) would verify the particulars entered in the computer with original licence and register the same in EDI system. The registration number of the EPCG Licence would be furnished to the exporters/CHA, who shall note the same carefully for future reference. The said registration number would need to be mentioned against respective item on the declaration form filed for data entry of the s/bill, at the time of export of goods. All the EPCG S/Bill would be processed on screen 176

by the Appraiser/Supdt.(EPCG Cell) and the AC/DC (Export). After processing of the EPCG S/Bill by the Appraiser EPCG Cell and AC/DC Export, the goods can be presented at the Customs warehouse for registration, examination and Let Export as in the case of other export goods. After train summary is submitted to CONCOR, the S/Bill will be put to Appraiser queue for logging/printing of ledger. After logging/printing of ledger, the EPCG bill will be moved to history tables. 22 22.1 EXPORT OF GOODS UNDER THE DEEC SCHEME Only shipping bills pertaining to DEEC books issued on or after 1.4.95 will

be processed on the EDI system. 22.2 All the exporters intending to file s/bills under the DEEC scheme including

those under the claim for drawback should first get their DEEC Book registered with the CFS Mulund. The registration can be done in the service centre. The original DEEC book would need to be produced at the service centre for data entry. A print out of the relevant particulars entered will be given to the exporter/CHA. The DEEC Book would need to be presented to the Appraiser/Supdt., DEEC Cell, who would verify the particulars entered in the computer with the original DEEC and register the same in the EDI system. The registration No. of the DEEC Book would be furnished to the exporter/CHA, which would need to be mentioned on the declaration forms at the CFS for export of goods It would not be necessary thereafter for the exporter/CHA to produce the original DEEC book for processing of the export declarations 22.3 22.4 Each book will be allotted a Registration No. should be indicated on the shipping bills in the relevant columns. Exporters/CHAs that will be filling S/Bills for export of goods under the DEEC Scheme would be required to file additional declarations regarding availment/non-availment of MODVAT or regarding observance/nonobservance of specified procedures prescribed in the Central Excise 1944 in the form. The declaration should be supported by necessary certificates 177

(ARE-1 or for non-availment of MODVAT) issued by the jurisdiction Central Excise authorities. Let Export would be allowed only after verification of all these certificates at the time of examination of goods. The fact that the prescribed DEEC declaration is being made should be clearly stated at the appropriate place in the declaration being filled in the service centre or through RES-Mode. 22.5 All the export declarations for DEEC would be processed on screen by the Appraiser/Supdt., Export Department and the AC/DC Exports. The said processing would be akin to the processing of Bill of Entry on the EDI System with provisions for query/reply. After the declarations have been so processed and accepted, the goods can be presented at the Export Shed along with DEEC Books registered in the4 EDI System so that the export declarations are processed expeditiously. 22.6 22.7 Further, exporters availing of DEEC benefits in terms of various notifications should file the relevant declarations. It is further clarified as follows: While giving details relating to DEEC operations in the form the exporters/CHAs should indicate the S.No. of the goods being exported in the column titled ITEM S.NO.IN DEEC BOOK PART E If inputs mentioned in DEEC Import book only have been used in the manufacture of the goods under export, in column titled Item Sr.No. in DEEC Book Part C the exporters/CHAs are required to give S.No. of inputs in Part-C of the DEEC Book and Exporters need not fill up column titled DESCRIPTION OF RAW MATERIALS If some inputs which are not in Part-C of the DEEC Book have been used in the manufacture of the goods under export and the exporter wants to declare such inputs, he shall give the description of such inputs in column titled DESCRIPTION OF RAW MATERIALS In the Col. IND/IMP, the exporters are required to write N, if the inputs used are indigenous and M. if the inputs used are imported.

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In column titled Cess Schedule Sl.No. the relevant Sl.No. of the Schedule relating to Cess should be mentioned.

23.

EXPORT OF GOODS UNDER DFRC SCHEME:

The details pertaining to export products i.e. input materials utilized as per SION should be clearly mentioned in the declaration mentioned at Annexure A at the time of filing. 24. EXPORT GENERAL MANIFEST: All the steamer agents shall furnish the Export General Manifest, House Bill of Landing wise, t the Customs electronically. In the beginning, the steamer agents are required to enter the manifest in the Customs Computer System through the Service Centre on payment of the prescribed fee. (In due course, arrangements will be made for the electronic delivery of Export General Manifest through EDI Service Providers. Till such time, all the EGMs will have to be entered at the Customs Computer System only.) 25. GRIEVANCE HANDLING The Asstt. Commissioner/ Dy. Commissioner of Customs, CFS-Mulund may be approached by exporters or their CHAs for settlement of any problems faced at any stage of the export clearance.

THE ECGC COVER

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

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Needless to say that an exporter before entering into a contract with the overseas buyer for making any supply, takes care to ensure that the customer with whom he is dealing have some credit worthiness. This he may be able to do either through the local agent who is in a better position to know about the customer or through a bank or through any of the exporters associates if happens to be in the area of the customer etc., But, in a business things may change. The financial status of a customer may take drastic turn and an established customer may go bankrupt within a short period of time. Moreover, the buyer may be willing to make the payment, but there are other environment which prevents him from effecting the transfer of funds through the bank. For e.g., there could be break out of war, the balance of payment position of the country may become unfavourable, there may be some coup of the government etc., and all transactions could be sealed. These are the risk factors for the exporters. What is the guarantee that he will get paid for the supplies he has made? With a view to provide support to Indian exporters, the Govt. of India set up the Export Risk Insurance Corporation (ERIC) in 1957. This was transformed into Export Credit & Guarantee Corporation Ltd. in 1964. In order to give the Indian identity a sharper focus the name was again changed to Export Credit & Guarantee Corporation of India Ltd., in 1983. This is a company wholly owned by the Govt. of India and functions under the administrative control of the Ministry of Commerce and managed by the Board of Directors representing Government, Banking, Insurance, Trade, Industry etc. Though one may insist for a Letter of Credit, still there could be some elements of risk which we will study later here. Except getting an advance payment for the full value of the supplies, any other mode of payment will have some risk. Take the case of an exporter who has made supplies and before the payment is received the buyer goes bankrupt or there comes some new provision or policy 180

of Government of the importing country preventing repatriation of the funds to other countries what recourse the exporter has to recover his dues. The litigation procedure might be time consuming and the exporter can never be sure of getting his full payment. An ECGC cover a safeguard his interest to a great extent. An exporter can either agree for sight payment or can made shipment on credit terms for say 60 days, 90 days etc., In project exports the period of payment may extend to some years. Longer the period of cre3dit given to the customer, more will be the risk factor for the exporter. In respect of sight bill, there is almost no risk because the customer has to make payment first before he retires the documents. Therefore, before the title of the goods is passed on to the customer, the importer makes the3 payment. However, in respect of usance bill (credit bills) the buyer retires the documents by accepting the usance draft and takes delivery of the goods. In case the customer goes bankrupt or become insolvent, before the due date of payment, the exporter is totally at a loss. While big units may be able to absorb the one time loss, small exporters will get broke even with one such transaction. Here the ECGC comes into picture. It takes up the responsibility of paying the funds to the exporter and makes all efforts including legal proceedings to recover the dues from the customer, provided the exporter has taken an ECGC cover. WHAT ECGC OFFERS FOR PROTECTION OF EXPORTERS INTEREST ? ECGC offers various types of insurance cover to protect the exporters interest. For each type of cover an exporter has to take Policy specific to the respective requirements. The Policy that is most commonly taken by the exporters is the Standard Policy or otherwise called the Shipments (Comprehensive Risks) Policy. SHIPMENTS (COMPREHENSIVE RISKS) POLICY also called STANDARD POLICY 181

For exporters with an annual export turnover in excess of Rs.50 lakhs, the Shipments (Comprehensive Risks) Policy is the one intended for covering shipments on cash basis or on short-term credit basis. (Credits not exceeding 180 days) The risks covered this Policy is as follows effective from the date of shipment.: Commercial Risks Insolvency of the buyer Failure of the buyer to make payment within a specified period. Buyers failure to accept the goods subject to certain conditions. Political Risks Imposition of restrictions by the Govt. of the buyers country or any government action which may block or delay the transfer of payment made by the buyer. War, civil war, revolution or civil disturbances in the buyers country New import restrictions or cancellation of a valid import licence Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which cannot be recovered from the buyer. Any other cause of loss neither occurring outside India nor normally insured by general insurers and beyond the control of both the e porters and the buyer.

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Risks not covered under the Policy The Standard Policy does not cover losses on account of following risks: Commercial disputes including quality disputes raised by the buyer unless the exporter obtains a decree from a competent court of law in the buyers country in his favour Causes inherent in the nature of the goods Buyers failure to obtain necessary import or exchange control clearance from authorities concerned Insolvency or default of the agent of the exporter or of the collecting bank Loss or damage to goods which can be covered by general insurers. Exchange rate fluctuations Failure of the exporter to fulfill the terms of the export contract or negligence on his part. Shipments Covered The Standard Policy is meant to cover all the shipments that may be made by an exporter during a period of 24 months ahead. The policy cannot be issued for selected shipments, selected buyer offered by the corporation Exclusions: Shipments made against advance payments received or shipments against confirmed letters of credit which has the confirmation from the bank in India may be excluded. or selected markets. For specific requirements an exporter can opt for different policy from the various services

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However, shipments against confirmed L/C may be covered for political risks only. The premium for cover under political risks will be less than that under the comprehensive policy. ECGC may also agree to exclude certain items if the exporter is dealingt in different distinct products. Shipments to Associates: Shipments to buyers i.e. the foreign buyers in whose business the exporter has financial interest, are normally excluded from the Policy. However such shipments can be covered against political risks. Shipments on Consignment basis: Shipments on consignment basis can be covered only against political risks. Shipments by Air Since the buyer is able to take delivery of the goods even without retiring the bank documents, shipments by air are not covered under the policy. However, the exporter may cover such shipments for payments under open terms. The exporter can have cover for such shipments, if he has obtained Credit Limit on such buyers on open delivery terms and also pays the premium at rates applicable to open delivery terms. HOW TO GET ECGC COVER Step 1. Open Policy:

An exporter desiring to get the ECGC cover has to approach the office of the ECGC making a Proposal. He must make his home work and be clear as to what will be his total turnover during a year ad what will be the maximum amount he expects to be outstanding from various buyers at a given point of time. Once this is clear he can apply for an Open Policy for the maximum amount that he expects to be outstanding at a given point of time. Suppose, he expects that at

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any given time his outstanding will be say Rs.50/- lakhs then he can apply for a policy for this amount. After is the first step. verification of the details of the exporter, the ECGC may issue a open policy for Rs.50 lakhs with a validity of say 2 years. This

Step 2. -

Credit Limit on Individual Buyer

Once the open policy is taken, as a next step the exporter must make out the list of the customers to whom he expects to make shipment. For each and every customer he has to apply to the ECGC to have a limit of liability fixed. That is to say, he has to declare the maximum amount of bills he expects to be outstanding from each customer at a given point of time. Based on the value of business dealing, suppose the exporter expects that from customer A the outstanding may be Rs.10 lakhs. Then the exporter has to apply to ECGC in the prescribed form for getting limit fixed for the customer. On receipt of the application, ECGC will check for the credit worthiness of the customer either through their own net work of offices globally, or through the customers bank or through some reputed independent agency. Based on the credit report, ECGC will determine the limit that can be fixed for the customer. If it feels that a limit of Rs.10 lakhs is in order, it will advise the exporter of the same. Similarly, the exporter can have the limit fixed to all his customers. Once the limit is taken from ECGC, the exporter is free to make his shipments to the various customers. If shipment for any customer is made before getting the limit fixed by ECGC, no risk will be covered for that shipment. Step 3 Payment of Premium and filing of monthly returns For the risk the ECGC takes, it charges a premium on the value of the shipments actually made. This is calculated as per the table to be supplied by ECGC which shows the premium per Rs.100 of exports.

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This table which gives the premium amount payable is framed based on the following. The various countries around the globe are divided into different groups and are classified as A1, A2, B1, B2, C1,C2 & D. The countries are grouped according to their economic standard. For e.g. USA. Canada, UK are grouped in category A. The premium amount will be less for group A countries and will be increased gradually to group B, C & D countries. The premium for group D countries will be more because they are all economically weaker countries and payment risks are high Again the premium table is based on the period of credit. The slab is for credits up to 90 days, 120 days, 180 days etc. Longer the credit period greater is the premium. Thus, the premium will be least for group A countries and for the shorter credit period and will be maximum for group D countries and for maximum credit period FILING OF MONTHLY RETURNS: The exporter has to send a monthly return in the prescribed form to ECGC declaring the list of various shipments made and the amount of premium payable as per the premium table. The exporter has to work out the total premium applicable on the shipment effected and make payment to the ECGC The exporter is also expected to file a Monthly Return in a separate form listing all the Bills which are not paid on due date, if any, so that ECGC is periodically aware of the defaulters. In case of any eventuality when the buyer goes bankrupt, he may prefer a claim with ECGC for payment.

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The policy that is issued for shipment not covered under L/C is called Comprehensive Policy meaning that the policy will cover both the commercial and political risks. While commercial risk is that of the buyer going bankrupt, the political risk relates to the countrys policies which may prevent the repatriation of funds or there could be outbreak of war preventing financial transactions etc. All the above relates to shipments not covered under L/C. However, an exporter can have a separate ECGC Policy for shipments under L/C. Here the exporter will have the policy covering only the political risk since under L/C, the bank stands as a guarantor and there is no commercial risk. An exporter must cover all his exports under ECGC, including bills on sight basis, and are NOT under L/C. He cannot be selective to certain countries or certain buyer. The cover is on whole turnover basis. For all shipments under L/C, the buyer may take a separate policy to cover the political risks. The premium for L/C shipments will be relatively less than that on comprehensive policy. Note: ECGC cover is not for non-payment on account of dispute on quality, damages to the goods, theft, pilferage etc. The cover is only when the party goes insolvent or there are some political risk due to which the exporter is not in a position to get the payment immediately or on due date. This cover must be distinguished from the general insurance. VARIOUS POLICIES OFFERED BY ECGC: 1. STANDARD POLICY An exporter whose annual export turnover is more than Rs.50 lakhs is eligible for this policy Period of the Policy: 24 Months

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Exclusions permitted:

Export to Associates Letters of Credit Consignment Exports

Risk Covered:

Commercial Risks Political Risks LC Opening Bank Risks

Percentage of Cover: Minimum Premium:

90% Rs.10, 000/- adjustable

Important Obligations of the Exporter Obtaining valid credit limit on buyers and banks Monthly Declaration of shipments and payment of premium Declaration of payment overdue by more than 30 days Filing of claim within 24 months Sharing of recovery

Highlights 2. Lowest Premium Rate NCB OF 5% every year Discrepancy cover of LC Automatic Approval fort resale/shipment upto 25% of GIV Increased discretionary limit SMALL EXPORTERS POLICY 12 Months Exports to Associates

Period of the Policy: Exclusions Permitted:

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Letters of Credit Consignment Exports Risk Covered: Commercial Risks Political Risks LC Opening Bank Risks

Percentage of Cover:

95% for commercial risks 100% for political risks

Minimum Premium:

Rs.2, 000 adjustable

Important Obligations of the Exporter: Obtaining valid credit limit on buyers and banks Quarterly Declaration of shipment and payment of premium.

Declaration of payment overdue by more than 30 days Filing of claim within 24 months Sharing of recovery.

Highlights Highest coverage/compensation Lowest premium rate NCB of 5% every year Discrepancy cover for LC Automatic approval for resale/shipment upto 25% of GIV Increased discretionary limit

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3.

SPECIFIC SHIPMENT POLICIES SHORT TERM (SSP-ST)

These policies can be availed of by exporters who do not hold our Standard Policy or by exporters having standard policy, in respect of shipment permitted to be excluded from the purview of the standard policy. Exporters can pick and choose the contract/shipment to be covered and indicate the type of cover required. Period of Policy :

The policy would be valid for shipment(s) made from the date of the policy upto last date allowed under the relevant contract for shipment. Risk Covered: Commercial Risks Political risks LC Opening Bank Risk Insolvency risk on agent on conditions 80%

Percentage of Cover:

Important Obligations of the exporters: Upfront premium payment Statement of shipment made Payment Advice slip Statement Of Overdue Filing of Claim within 12 months from due date Sharing of recovery

Highlights: Selection for Insurance cover 190

 4.

Other exports not to be declared Add on Marine Insurance Cover Premium rate reduced proportionately on higher share of loss to exporter. EXPORTS (SPECIFIC BUYERS) POLICY

The specific buyer policy provides cover for shipments made to a particular buyer or set of buyers. An exporter not holding the standard policy can avail of this to cover their shipments to one or more buyers. Exporters holding Standard Policy can also avail this Policy for covering shipments to individuals Buyers, if all shipments to such buyers have been permitted to be excluded from the purview of the Standard Policy. Period of the Policy: Risk Covered: 12 Months Commercial Risks Political Risks Insolvency or default of LC Opening Bank Percentage of Cover: Important Obligation of the Exporters: 1. Deposit Premium on Quarterly in advance 2. Submission of shipment declaration quarterly 3. Declaration of payment overdue for more than 30 days 4. Filing of the within 12 months from due date 5. Sharing of recovery Highlights: 1 Selective buyer can be insured 80%

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Option to exclude LC exports

3 Premium rate can be reduced proportionately 5. EXPORTS TURNOVER POLICY Turnover Policy is for the benefit of large exporters who contribute not less than Rs.10 lakhs per annum towards premium. The policy envisages projection of the export turnover of the policyholder for a year and the initial determination on the premium payable on that basis, subject to adjustment at the end of the year based on actual.

Period of the Policy Risk covered:

: 12 Months Commercial Risks Political Risks LC Opening Bank Risks

Percentage of Cover:

90%

Important Obligation of the Exporter 1. 2. 3. 4. 5. Highlights: Premium will be payable in four equal quarterly installments in advance Submission of quarterly statement of shipments Declaration of overdue payments Filling of claim within 24 months from due date Sharing of recovery

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1. 2. 3.

Simplified procedure for payment of premium 10% of projected premium is waived when exports increase beyond projection Increased discretionary limit

6. BUYER EXPOSURE POLICY : The Buyer Exposure Policy is to insure the exporters having large number of shipments with simplified procedure and rationalized premium. An exporters can chose to obtain exposure based cover on the selected buyer. The cover would be cover against commercial and political risk. The option to exclude LC shipment is available. If the exporter has opted for commercial and political risks cover, failure of LC opening bank with World Rank up to 25,000 as per latest Bankers Almanac is available. If exporters opts for only political risks for LC exports premium at a less rate is offered Period of the Policy: Risk covered: 12 months Buyer Risk LC Opening Bank Risks Political Risks Percentage of Cover: 90% for Standard policyholder and 80% for others Important Obligations of the Exporter: 1 2 3 4 5 6 Premium Payable in advance Option to pay the premium quarterly in advance is available Premium non refundable Obtaining approval for extension in due date beyond 180 days Declaration of overdue payments Filing of claim within 12 months from due date

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7 Highlights: 1. 2. 3. 4.

Sharing of recovery

5% discount premium if paid in advance Declaration procedure waived Exporter to approach only for default in claim One Policy for one buyer

7. MULTI-BUYER EXPOSURE POLICY Some exporters export to large number of buyers. The number of shipments made by them is also quite high. In order to meet the needs of such exporters, Multi buyer exposure policy is introduced. Cover would be available for exports to the buyers in countries listed under open cover category as long as the buyer is not in default buyers list maintained by the Corporation and available on its website www.ecgcindia.com. If the transaction is on LC terms, failure of the LC opening bank in respect of exports against LC will also covered, For banks with World Rank upto 25000 as per Latest Bankers Almanac Cover in respect of exports to restricted over countries would not be available under this policy Period of Policy: Risk Covered: 12 Months Buyer Risks Political Risks LC Opening Bank Risks

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Percentage of Cover:

80%

Important Obligations of the Exporters: 1. Premium payable in advance 2. Option to pay the premium quarterly in advance is available 3. Premium non refundable 4. Obtaining approval for extension is due date beyond 180 days 5. Declaration of overdue payments 6. Filing of claim within 12 months from due date 7. Sharing of recovery

Highlights: 1. Policy is best suited for exporters who make frequent shipments 2. Reduced premium rates available on conditions 3. 5% reduction on total premium on lump sum payment 4. No declaration required 5. All buyers in open countries covered on conditions 6. Protection up to Aggregate Loss Limit and Individual buyer up to 10% of All. 8. CONSIGNMENT EXPORTS POLICY (STOCKHOLDING AGENT) Economic liberalization and gradual removal of international barriers for trade and commerce are opening up various new avenues of exports opportunities to Indian exporters of quality goods. A method increasingly adopted by Indian exporters is consignment exports where goods are shipped and held in stock overseas ready for sale to overseas buyers, as and when orders are received. Thus separate Credit Insurance Policy is introduce to cover exclusively

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shipments on consignment basis taking into account their special features, providing adequate incentives and simplifying procedures considerably Period of the Policy: Risks covered: Commercial Risks on stockholding agent and/or ultimate buyer Political Risks 90% for Standard Policyholders and 80% for 12 Months

Percentage of Cover: others

Important obligations of Exporters: Advance deposit of premium in advance on quarterly or monthly basis Obtaining credit limit on ultimate buyers beyond the discretionary limit Quarterly/Monthly statement of actual exports Overdue declaration Filing of claim Sharing of recovery

Highlights: 9 Covers only the consignments exports Rationalized premium for 360 days Automatic cover for ultimate buyers upto discretionary limit Commercial risks on agents covered Extended period for realization upto 360 days CONSIGNMENT EXPORTS POLICY (GLOBAL ENTITY)

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A method adopted by India exporters is consignment exports where goods are shipped to their own branch office overseas ready for sale to overseas buyers, as and when orders are received. Thus separate credit insurance policy is introduce to cover exclusively shipments by the exporters to their branches overseas on consignment basis taking into account their special features, providing adequate incentives and simplifying the procedures considerably. Period of the Policy: Risks covered: Commercial Risks on overseas branch on conditions 90% for Standard Policyholders and 80% for 12 Months

Percentage of Cover: others

Important obligations of Exporters: Advance deposit of premium in advance on quarterly or monthly basis Obtaining credit limit on ultimate buyers beyond the discretionary limit Quarterly/Monthly statement of actual exports Overdue declaration Filing of claim Sharing of recovery

Highlights: Covers only the consignments exports Rationalized premium for 360 days Automatic cover for ultimate buyers upto discretionary limit Commercial risks on agents covered Extended period for realization upto 360 days

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10. SERVICES POLICIES Services Policies offer protection to Indian firms against payments risks involved in rendering services to foreign parties. A wide range of services, hiring or leasing can be covered under these policies. The exporters can opt for whole Turnover Services Policy or for Specific Services Policy depending on the nature of services provided. The premium rates applicable. To standard policy will be applied for whole turnover services policy and specific shipment policy (SSP-ST) premium rates will be applied for Specific Service Policy. Period of the Policy: Risks covered: Commercial Risks on ultimate buyers Political Risks LC Opening Bank Risks 90% for Standard Policyholders and 80% for others 12/24 Months

Percentage of Cover:

Important obligations of Exporters: Advance deposit of premium in advance to cover premium Obtaining credit limit on services receiver Monthly statement of actual service provided Overdue declaration Filing of claim Sharing of recovery

Highlights: Option to select the type of cover.

7. MATURITY FACTORING 198

The Maturity Factoring scheme, as designed by ECGC has unique features and does not exactly fit into the conventional mould of maturity factoring. The changes devised are intended to give the clients the benefits of full factoring services through the maturity factoring scheme, thus effectively addressing the needs of exporters to avail of pre- finance (advance) on the receivable, for their working capital requirements. One important feature is the very role and special benefits envisaged for banks under the scheme. Benefits: 100% credit guarantee protection against had debts Sales register maintenance in respects of factored transaction Regular monitoring of outstanding credits, facilitating collection of receivable on due date, recovery, at its own cost, of all recoverable had debts Setting up Charges and Factoring Charges The factoring application fee payable initially is Rs.10,000/- For setting up permitted limits on each of the overseas customers, the exporter will have to pay a processing fee equal to 0.05% of the permitted limit sought subject to minimum of Rs.2000/- after of this, the factoring charges payable as and when an exports bill is to be factored depends on the country to which the exports is made and the credit period. Exporters Obligations: Registration and obtaining permitted limit on the buyer Payment of factoring charges with statement of exports made Inform developments

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INTRODUCTION
The Constitution of India (Article 265) lays down that _no tax shall be levied or collected except by authority of law_. The law for the levy and collection of Customs duties is the Customs Act, 1962. This legislation has been enacted by Parliament in exercise of the exclusive power vested in it under Article 246 read with Entry 83 of list-I of the Seventh Schedule of the Constitution. The Customs Duties are major tax revenue for the Union Govt. and constitute around 30% of its total tax revenues. Together with Central Excise duties, the contribution amount to nearly three-fourth of total tax revenue of the Union Govt.

An Overview of Customs Law

Customs duties are probably the oldest form of taxation in India. They are as old as international trade itself. Just as domestic production flows provide the base for excise taxation so also international trade flows are the basis for customs duties.

Meaning of customs duty

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Customs duty is a duty or tax, which is levied by Central Govt. on import of goods into, and export of goods from, India. It is collected from the importer or exporter of goods, but its incidence is actually borne by the consumer of the goods and not by the importer or the exporter who pay it. These duties are usually levied with ad valorem rates and their base is determined by the domestic value the imported goods calculated at the official exchange rate. Similarly, export duties are imposed on export values expressed in domestic currency

Development of customs law

There is historical evidence of imposition of import duty during the ancient and medieval era, the development of organised taxation on imports and exports to its present form, originated in 1786, when the Britishers formed the first Board of Revenue in Calcutta. In 1808, a New Board of Trade was established. The provincial import duties were replaced by uniform Tariff Act through Customs Duties Act, 1859 which was made applicable all territories in the country. The general rate of duty was 10%, which was subsequently revised to 7.5% in 1864. Several revisions in the Customs policy and tariff took place during subsequent years, though such revisions were mainly related to the textile products. Sea Customs Act was passed by Government in 1878. The Indian Tariff Act was passed in 1894. Air Customs having been covered under the India Aircrafts Act of 1911, the Land Customs Act was passed in 1924. The Indian Customs Act, 1934, governed the Customs Tariff. After Independence, the Sea Customs Act and other allied enactments were repealed by a consolidating and amending legislation entitled the Customs Act, 1962 (CA). Similarly the Act of 1934 was repealed by the Customs Tariff Act, 1975(CTA).

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Scope and coverage of customs law

There are two Acts, which form part of Customs Law in India, namely, the Customs Act.1962 and Customs Tariff Act, 1975: 1. The Customs Act, 1962 The Customs Act. 1962 is the basic Act for levy and collection of customs duty in India. I contain various provisions relating to imports and exports of goods and merchandize as well as baggage of persons arriving in India. The main purpose of Customs Act, 1962 is the prevention of illegal imports and exports of goods. The Act extends to the whole of the India. It was extended to Sikkim w.e.f. 1st October 1979. 2. The Customs Tariff Act, 1975 The Customs Duty is levied on goods imported or exported from India at the rates specified under the Customs Tariff Act, 1975.The Act contains two schedules - Schedule 1 gives classification and rate of duties for imports, while schedule 2 gives classification and rates of duties for exports. In the present Act, the Tariff Schedule was replaced in 1986. The new Schedule is based on Harmonised System of Nomenclature (HSN). the Internationally accepted Harmonised Commodity Description and Coding System

Objects of customs duty

The customs duty is levied, primarily, for the following purpose: 1. To raise revenue. 2. To regulate imports of foreign goods into India. 3. To conserve foreign exchange, regulate supply of goods into domestic market. 4. To provide protection to the domestic industry from foreign competition by restricting import of selected goods and services, import licensing, import quotas, and outright import ban.

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Nature of Customs Duty

Entry 82 of List-I (Union List) to the Schedule-VII reads as under 82 Duties of Customs including Export duties. Thus, the levy of duty on imports and exports is subject matter of Union and the parliament derives power to make laws related to the duties of customs. Accordingly, the Customs Act, 1962 was enacted by the Parliament. Section 12 of the Customs Act provides that duties of customs shall be levied at such rates as may be specified Under the Customs Tariff Act, 1975 or any other law for the time being in force, on goods imported into or exported from India. Goods become liable to duty if there is import into and export from India.

Taxable Event
Goods become liable to import duty or export duty when there is import into, or export from India Import, as defined in section 2(23), means bringing into India from a place outside India. Export, as defined in section 2(18), means taking out of India to a place outside India. India is defined in section 2(27) to include the territorial waters of India. The definition of India is an inclusive definition. Article I of the Constitution of India defines India as Union of States. General Clauses Act defines India to mean all territories for the time being comprised in India.

Territorial water of India

Territorial waters mean that portion of sea, which is adjacent to the shores of a country. As per section 3 of the Territorial waters, Continental Shelf, Exclusive Economic Zones and Maritime Zones Act, 1978, territorial waters

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of India extend Upto 12 nautical miles from the baseline on the coast of India and include any gulf, harbour, creek or tidal river. Earlier, the territorial waters of India extended upto the 6 nautical miles from the baseline, but it was extended upto 12 nautical miles (1 NM 1.83 kms) in 1967. This definition is well in accordance with the Article 3 of the UN Convention on the Law of Sea, which defines territorial sea. The determination of territorial waters is important for determination of the Chargeabi1ity of the Customs duty, as the entry of goods into the territorial waters is a _taxable event_.

Indian customs water

Section 2(28) defines Indian customs waters to mean the waters extending into the sea up to the limit of contiguous zone of India under section 5 of the 263 Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 and includes any bay, gulf, harbour, creek or tidal river. Contiguous zone of India comes immediately after the territorial waters of India (i.e. after 12 nautical miles from the baseline) and extends upto 24 nautical miles. Thus, Indian customs water extends upto 12 nautical miles beyond the territorial waters of India. The determination of Indian customs waters is necessary in view of certain provisions of the Customs Act, which empower the Customs Officers: (a) To arrest a person in India or within the Indian customs water ;( section 1041) (b) To stop and search any vessel in India or within the Indian customs water; (section 1061) (c) To fire and/or confiscate the vessel, if it does not stop; (section 115) etc.

Type of customs duties

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While Customs Duties include both import and export duties, but as export duties contributed only nominal revenue, due to emphasis on raising competitiveness of exports, import duties alone constituted major part of the revenue from Customs Duties. The import duties are imposed under The Customs Act, 1962 and Customs Tariff Act, 1975. The structure of Customs Duties includes the following: Basic Customs Duty All goods imported into India are chargeable to a duty under Customs Act, 1962 .The rates of this duty, popularly known as basic customs duty, are indicated in the First Schedule of the Customs Tariff Act, 1975as amended from time to time under Finance Acts. The duty may be fixed on ad -valorem basis or specific rate basis. The duty may be a percentage of the value of the goods or at a specific rate. The Central Government has the power to reduce or exempt any good from these duties. Auxiliary Duty of Customs This duty is levied under the Finance Act and is leviable all goods imported into the country at the rate of 50 per cent of their value. However this statutory rate has been reduced in the case of certain types of goods into different slab rates based on the basic duty chargeable on them. Additional (Countervailing) Duty of Customs This countervailing duty is leviable as additional duty on goods imported into the country and the rate structure of this duty is equal to the excise duty on like articles produced in India. The base of this additional duty is c.i.f. value of imports plus the duty levied earlier. If the rate of this duty is on ad-valorem basis, the value for this purpose will be the total of the value of the imported article and the customs duty on it (both basic and auxiliary).

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Export Duties Under Customs Act, 1962, goods exported from India are chargeable to export duty The items on which export duty is chargeable and the rate at which the duty is levied are given in the customs tariff act,1975 as amended from time to time under Finance Acts. However, the Government has emergency powers to change the duty rates and levy fresh export duty depending on the circumstances. Cesses Cesses are leviable on some specified articles of exports like coffee, coir, lac, mica, tobacco (unmanufactured), marine products cashew kernels, black pepper, cardamom, iron ore, oil cakes and meals, animal feed and turmeric. These cesses are collected as parts of Customs Duties and are then passed on to the agencies in charge of the administration of the concerned commodities. Education cess on customs duty An education cess has been imposed on imported goods w.e.f. 9-7-2004. The cess will be 2% of the aggregate duty of customs excluding safeguard duty, countervailing duty, Anti Dumping Duty. Protective Duties Tariff Commission' has been established under Tariff Commission Act, 1951. If the Tariff Commission recommends and Central Government is satisfied that immediate action is necessary to protect interests of Indian industry, protective customs duty at the rate recommended may be imposed under section 6 of Customs Tariff Act. The protective duty will be valid till the date prescribed in the notification.

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Countervailing duty on subsidised goods If a country pays any subsidy (directly or indirectly) to its exporters for exporting goods to India, Central Government can impose Countervailing duty up to the amount of such subsidy under section 9 of Customs Tariff Act. Anti Dumping Duty on dumped articles Often, large manufacturer from abroad may export goods at very low prices compared to prices in his domestic market. Such dumping may be with intention to cripple domestic industry or to dispose of their excess stock. This is called dumping'. In order to avoid such dumping, Central Government can impose, under section 9A of Customs Tariff Act, anti-dumping duty upto margin of dumping on such articles, if the goods are being sold at less than its normal value. Levy of such anti-dumping duty is permissible as per WTO (world trade organisation) agreement. Anti dumping action can be taken only when there is an Indian industry producing 'like articles'. . Safeguard duty Central Government is empowered to impose 'safeguard duty' on specified imported goods if Central Government is satisfied that the goods are being imported in large quantities and under such conditions that they are causing or threatening to cause serious injury to domestic industry. Such duty is permissible under WTO agreement. Safeguard duty is a step in providing a need-based protection to domestic industry for a limited period, with ultimate objective of restoring free and fair competition National Calamity Contingent Duty A National Calamity Contingent Duty (NCCD) of customs has been imposed vide section 129 of Finance Act, 2001. This duty is imposed on pan masala, chewing tobacco and cigarettes. It varies from 10% to 45%. - - NCCD of customs of 1% was imposed on PFY, motor cars, multi utility vehicles and two wheelers and NCCD of Rs 50 per ton was imposed on domestic crude oil,

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vide section 134 of Finance Act, 2003.

Rate of duty applicable

There are different rates of duty for different goods there are different rates of duty for goods imported from certain countries in terms of bilateral or other agreement with such countries which are called preferential rate of duties the duty may be percentage of the value of the goods or at specified rate. Provisions in respect of rate of duty are as follows: Basic Customs duty - The rate of customs duty applicable will be as provided in Customs Act, subject to exemption notifications, if any, applicable. In case of imports from preferential area, the preferential rate is applicable, if mentioned in the Tariff. It is needless to mention that if partial or full exemption has been granted by a notification, the effective rate (as per notification) will apply and not the tariff rate (as mentioned in Customs Tariff). Rate for additional duty - Rate for additional duty (CVD) will be as mentioned in Central Excise Tariff Act, subject to any general exemption notification. Any specific exemption notification (e.g. exemption to goods manufactured by SSI unit or goods manufactured without aid of power) is not considered while calculating CVD

Classification and valuation

Classification of goods
Classification of goods under a particular heading of the import Tariff governed by a set of General Interpretative Rules, which form an integral part of the CTA. As per these Rules, classification is to determine according to the terms of the Headings or Sub-headings or Chapter Notes These Rules also provide that completed unfinished article is to be classified as complete or finished art. it has an essential character of the latter article. Similarly a con

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finished article imported in an unassembled or disassembled condition to be classified an complete or finished article and not as parts. The Rules also provide for the Classification of mixtures and. composite goods consisting of different materials or made to of different articles Once the classification is determined under the Import Tariff, the determination classification under the Central Excise Tariff for the p1irpos of levy of countervailing duty equal to the excise duty is a simple affair as both the Tariff are, more or less, aligned with the HSN.

Valuation of goods
Customs duty is payable as a percentage of Value often called Assessable Value or Customs Value'. The Value may be either (a) Value as defined in section 14 (1) of Customs Act or (b) Tariff value prescribed under section 14 (2) of Customs Act. Tariff Value - Tariff Value can be fixed by CBE&C (Board) for any class of imported goods or export goods. Government should consider trend of value of such or like goods while fixing tariff value. Once so fixed, duty is payable as percentage of this value. (The percentage applicable is as prescribed in Customs Tariff Act). Customs value as per section 14 (1) - Customs Value fixed as per section 14 (1) is the Value normally used for calculating customs duty payable (often called customs value or Assessable Value'.) Section 14 (1) provide following criteria for deciding Value for purpose of Customs Duty: Price at which such or like goods are ordinarily sold or offered for sale Price for delivery at the time and place of importation or exportation Price should be in course of International Trade Seller and buyer have no interest in the business of each other or one

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of them has no interest in the other Price should be sole consideration for sale or offer for sale Rate of exchange as on date of presentation of Bill of Entry as fixed by CBE&C (Board) by Notification should be considered This criterion is fully applicable for valuing export goods. However, in case of imported goods, valuation is required to be done according to valuation rules Valuation has to be on the basis of condition at the time of import (a) CVD should be levied on goods in the stage in which they are imported - stage subsequent to processing of goods is not relevant - (b) It is well settled that the imported goods have to be assessed to duty in the condition in which they are imported. Valuation Rules for imported goods Valuation in Customs Act has to be done as per valuation rules. These rules are based on WTO Valuation Agreement (Earlier termed as GATT Valuation Code). These rules are only for valuation of imported goods and not applicable to export goods. The value of imported goods for purposes of assessment of duly is determined in accordance with the provisions of Section 14 of 1962 and the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, which were brought into force on 16th August, 1988 Rule 3(i) of the Valuation Rules provides that the value of imported goods shall be the. Transaction value under Rule 4 Transaction value has been defined as the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9. The adjustments under Rule 9 provide, inter alia, the addition in all cases, of freight and cost of insurance to the transaction value if not already included and also for the addition of loading, unloading and handling charges for purposes of assessment. In other words, the assessable value is the safe. price of the imported goods plus the landing charges subject to any other adjustment which may be necessary under the provisions of Rule. If the value cannot be determined under Rule 3(i), the value is to be determined under Rules 5 to 8,

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which are required to be in that order. The rate of exchange applicable for conversion of foreign currency in Indian currency is the rate in force on the date of presentation of the Bill Entry under Section 46. Such exchange rates are notified by the Govt. fro time to time by notifications issued under clause a (i) of Section 14(3). Customs Value Inclusions Some costs, services and expenses are to be added to the price paid or payable, if these are not already included in the invoice price. Rule 9 of Customs Valuation Rules provide that following cost and services are to be added Commission and brokerage Cost of container, which are treated as being one with the goods for customs purposes Cost of packing whether labour or materials Materials, components, tools, dies etc. supplied by buyer Royalties and license fees Value of proceeds of subsequent sales Other payment as condition of sale of goods being valued Cost of transport up to place of importation Landing charges Cost of insurance. Exclusions from Assessable Value Note to rule 4 provide that following charges shall be excluded: Charges for construction, erection, assembly, maintenance or technical assistance undertaken after importation of plant, machinery or equipment Cost of transport after importation Duties and taxes in India Methods of Valuation for Customs The Valuation Rules, 1988, based on WTO Valuation Agreement (earlier GATT Valuation Code); consist of rules providing six methods of valuation. The methods are:

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(a) Transaction Value of Imported goods (b) Transaction Value of Identical Goods (c) Transaction Value of Similar Goods (d) Deductive Value, which is based on identical or similar imported goods, sold in India. (e) Computed value, which is based on cost of manufacture of goods plus profits (f) Residual method based on reasonable means and data available. These are to be applied in sequential order, i.e. if method one cannot be applied, then method two comes into force and when method two also cannot be applied, method three should be used and so on. The only exception is that the computed value method may be used before deductive value method, if the importer requests and Assessing Officer permits. Transaction value of same goods: This is the first and primary method as per rule 3 of Valuation Rules. As per rule 4(1), transaction value of imported goods shall be the price actually paid or payable for the goods when sold for exported to India, adjusted in accordance with provisions of rule 9. [Rule 9 gives costs and services to be added to transaction value]. Transaction value of identical goods: Rule 5 of Customs Valuation Rules provide that if valuation on the basis of transaction value is not possible, the Assessable value will be decided on basis of transaction value of identical goods sold for export to India and imported at or about the same time, subject to making necessary adjustments. Identical goods are defined under Rule 2(1)(c) as those goods which fulfil all following conditions i.e. (a) the goods should be same in all respects, including physical characteristics, quality and reputation; except for minor differences in appearance that do not affect value of goods. (b) The goods should have been produced in the same country in which the goods being valued were produced. (c) they should be produced by same manufacturer who has manufactured goods under valuation - if price of such goods are not available, price of goods produced by another manufacturer in the same country.

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Transaction value of similar goods: If first method of transaction value of the goods or second method of transaction value of identical goods cannot be used, rule 6 provide for valuation on basis of Transaction value of similar goods imported at or about the same time'. Rule 2 (1) (e) define similar goods as (a) alike in all respects, have like characteristics and like components and perform same functions. These should be commercially inter-changeable with goods being valued as regards quality, reputation and trade mark. (b) the goods should have been produced in the same country in which the goods being valued were produced. (c) they should be produced by same manufacturer who has manufactured goods under valuation - if price of such goods are not available, price of goods produced by another manufacturer in the same country can be considered. . Deductive Value: Rule 7 of Customs Valuation Rules provide for the next i.e. fourth alternative method, which is called deductive method'. This method should be applied if transaction value of identical goods or similar goods is not available; but these products are sold in India. The assumption made in this method is that identical or similar imported goods are sold in India and its selling price in India is available. The sale should be in the same condition as they are imported. Assessable Value is calculated by reducing postimportation costs and expenses from this selling price. This is called deductive value because assessable value has to be arrived at by method of deduction (deduction means arrive at by inference i.e. by making suitable additions/subtractions from a known price to arrive at required Customs Value'). . Computed Value for Customs: If valuation is not possible by deductive method, the same can be done by computing the value under rule 7A, which is the fifth method. [This method has been added w.e.f. 24-4-95]. If the importer requests and the Customs Officer approves, this method can be used before the method of deductive value'. In this method, value is the sum of (a) Cost of value of materials and fabrication or other processing employed in producing

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the imported goods (b) an amount for profit and general expenses equal to that usually reflected in sales of goods of the same class or kind, which are made in the country of exportation for export to India. (c) The cost or value of all other expenses under rule 9 (2) i.e. transport, insurance, loading, unloading and handling charges. . Residual Method: The sixth and the last method is called residual method. It is also often termed as fallback method. This is similar to best judgment method of the Central Excise. This method is used in cases where Assessable Value cannot be determined by any of the preceding methods. While deciding Assessable Value under this method, reasonable means consistent with general provisions of these rules should be the basis and valuation should be on basis of data available in India. This method can be considered if valuation is not possible by any other method In other words, selling price for export to India can alone form the basis. (Thus, fixing tariff value is really against this rule). Valuation for Assessment of Export Goods Customs value of export goods is to be determined under section 14 (1) of Customs Act. Customs Valuation Rules are applicable only for imported goods. Thus, Assessable Value of export goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of exportation in the course of international trade, where the seller and the buyer have no interest in the business of each other or one of them has no interest in the other, and the price is the sole consideration for the sale or offer for sale. Normally, FOB Value of exports will be the basis. If the export sale contract is a CIF contract, post exportation elements i.e. insurance and outward freight will have to be deducted. However, now many instances have come to notice where exported goods have been over-valued to get export benefits. Valuation for CVD when goods are under MRP provisions

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In respect of some consumer goods, excise duty is payable on basis of MRP (Maximum Retail Price) printed on the carton. If such goods are imported, CVD will be payable on basis of MRP printed on the packing. However, it has been clarified by DGFT vide policy circular No. 38(RE-2000) / 1997-2002 dated 22-1-2001 that labelling requirements for pre-packed commodities are applicable only when they are intended for retail sale. These are not applicable to raw materials, components, bulk imports etc. which will undergo further processing or assembly before they are sold to consume.

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