A

Project Report
On
“EXPORT PROCEDURE AND DOCUMENTATION”

Submitted
In The Partial Fulfillment Of The Requirement
For The Degree
Of
BACHELOR OF COMMERCE

By
Muzakkir Islam
VI Semester B.Com (H)
1027299

Under The Guidance of

Dr. Kamal Pant

Department Of Commerce
Graphic Era Hill University

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 STUDENT DECLARATION

This project has been undertaken in partial fulfillment of the requirement for the award of
degree of Bachelors of Commerce (Honours).

This project was executed under the supervision of Mentor Dr. kamal Pant. Further, I
declared that this project is my original work. The analysis and findings are for academic
purpose only. This Project has not been presented in any seminar & publication or
submitted elsewhere for the award of any degree or diploma.

Signature: Signature:

Dr. kamal pant Muzakkir Islam

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 ACKNOWLEGDEMENT

It is a matter of great satisfaction and pleasure to present this report on “Export

Procedure And Documentation”. I take this opportunity to owe my thanks to all those
involved in my work.

I would like to thank my Faculty Members for giving the opportunity to select and
complete my Project.

I put on record my sincere thanks to my college, Graphic Era Hill University, Dehradun
for
Giving me such a learning environment. I am extremely grateful to DR. ARVIND
MOHAN, for the encouragement, discussions and critical assessment of the project.

I express my gratitude towards my parents and almighty god, who have helped me in
completing the project.

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 CERTIFICATE

This is to certify that the project entitled “EXPORT PROCEDURE AND

DOCUMENTATION” is to bonafide work carried out by MUZAKKIR
ISLAM student of Bachelors of commerce with Honours, Graphic Era Hill
University, Dehradun, during the period 2016-17, in Partial fulfillment of the
requirement for the award of the degree of B.Com(Hons) and that the
project has not formed the basis for the award previously of any Degree,
diploma, associate ship, fellowship or any other similar title.

------------------------------------
------------------------------------
(Dr. Arvind Mohan) (Dr. Kamal Pant)

Place :

Date:

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 INDEX

SERIAL
CONTENT Page no.
NUMBER
1 Objectives 6

2 INTRODUCTION 7

3 HOW TO SET UP AN EXPORT ORGANISATION 9

4 HOW ONE BEGINS TO DO EXPORT 15

5 EXPORT SALES & CONTRACT TERMS & 19

CONGITIONS

6 TERMS OF SHIPMENT – INCOTERMS. 23

7 PROCESSING AN EXPORT ORDER 25

8 FINANCIAL RISK INVOLVED IN FOREIGN 26

TRADE
9 EXPORT DOCUMENTS 28

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 The main objective of the research were :

 To know about the export process

 To know what are the documents required

 To know how to deliver goods

6
 INTRODUCTION

India has a mission to capture 2% of the global share of trade by 20010, up

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

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

TWO CLASSES OF EXPORTS:

Physical Exports: If the goods physically go out of the country or services

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

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 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.

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 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.

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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.

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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.

REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING

IMPORTER EXPORTER CODE (IEC) NUMBER.

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

IEC EXEMPT CATEGORIES.

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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.

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):

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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 (Appendix-5) 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.

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.

HOW ONE BEGINS TO DO EXPORT

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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-Cum-Membership
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 government’s regulations of the importing country as to
restrictions on the quantity, product specification, packing regulations, customs
regulations, requirement of specific documents/information etc.
 Availability of Vessels/Airlines, the transport charges, frequency of operation etc.,
 To look for a Custom House Agent (CHA) (also know as freight forwarders or
clearing agents) for handling the documents/cargo in the customs.
 If the product is covered under any quota regulation, find out the agency/council
who are handling the quota distribution for the product and the availability of
quota for exports.

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FINDING A CUSTOMS
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.

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

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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 either’s country. They prefer to
make explicit provisions regarding the rights and obligations by including a set of
detailed and precise terms and conditions in their contract.

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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 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-à-vis each other so that the misunderstandings are practically eliminated.

Nevertheless, the Indian Council of Arbitration published in 1966 a booklet on “Standard

Contract Forms and Model Arbitration Clause for use in Foreign Trade Contracts”. It was
revised and reprinted in 1969 and 1977. It can be referred to by exporter for various
clause to be incorporated in the Export Contract.

ENTERING INTO AN EXPORT CONTRACT

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

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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
 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

21
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.

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

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

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

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

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

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  Items
 Specification

 Pre-shipment inspection

 Payment conditions

 Special packaging

 Labeling and marketing requirements

 Shipment and delivery date

 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.

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 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.

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.

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Currency Risks:

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

Carriage Risk:

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

Country Risk:

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

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EXPORT DOCUMENTS
Any export shipment involved various documents required by various authorities such as
customs, excise, RBI, Inspection and according depending upon the requirements, there
are categorized into 2 categories, namely commercial documents and regulatory
documents.
A. Commercial Documents. : - Commercial documents are required for effecting
physical transfer of goods and their title from the exporter to the 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

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 Contents of Commercial Invoice

 Name and address of the exporter.

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

Significance of Commercial Invoice

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

documents.
 It is used in various export formalities such as quality and pre-Shipment
inspection excise and customs procedures etc.
 It is also useful in negotiation of documents for collection and claim of incentives.
 It is useful for accounting purposes to both exporters as well as importers.

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

3 Marine insurance policy: Goods in transit are subject to risk of loss of

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

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

31
  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.

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.

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(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.

 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

(c) 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.

Contents of Certificate of Origin

 Name and logo of chamber of commerce.

 Name and address of the exporter.
 Name and address of the consignee.
 Name and the number of Vessel of Flight
 Name of the port of loading.
 Name of the port of discharge and place of delivery.
 Marks and container number.

33
 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.

34
 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:

 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.

35
  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.
 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. .

36
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.
 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

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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.

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  Sight B/E.
 Usance B/E.
 It is known as draft.
 Immediate payment – Sight draft.
 There are two copies of draft. Each one bears reference to the other part
A&B. when any one of the draft is paid, the second draft becomes null and
void.

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.

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.

40
2. Intimation for Inspection: Whenever the consignment requires the pre-
shipment inspection, necessary application is to be made to the concerned
inspection agency for conducting the inspection and issue of certificate thereof.

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:

4. Application of the Certificate Origin: In case the exporter has to obtain

Certificate of Origin from the concerned authorities, an application has to be
made to the concerned authority with required documents. While the 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.

41
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.

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 buyer’s country which may include

 Name and address of the buyer.

 Details of various documents being sent and the number of the
copies thereof.
 Name and address of the buyer’s bank if available.
 If the documents are sent L/C or on open terms.

42
  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.

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.

43
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.

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 Green
Dutiable shipping bill Yellow Pink
Duty-Free shipping bill White Pink

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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.

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

45
 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 number, marks and number of the
packages, driver’s licence details etc.

6. Bank Certificate of Realisation: this is the form prescribed under the Foreign
Trade Policy, wherein the negotiating bank declares the fob value of exports
and for the date of realisation of the export proceeds. This certificate is
required fore obtaining the benefit under various schemes and this value of
fob is reckoned as fob value of exports.

46
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.

 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.

47
  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.

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’

48
  GR FORM: to be completed in duplicate for exports otherwise than by
post including export of software in physical form i.e. magnetic
tape/discs and paper media.
 SDF FORM: to be completed in duplicate and appended to the
Shipping Bill for export declare to the customs offices notified by the
Central Government which have introduced EDI system for processing
Shipping Bill.
 PP FORM: to be completed in duplicate for export by post.
 SOFTX: to be completed in triplicate for export of software otherwise
than in the physical form i.e. magnetic tapes/discs and paper media.

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.

49
 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.

50
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
 Foot wear & Foot wear components
 Ceramic Products & Pesticides
 Light Eng. Products
 Steel ;Products
 Jute Products
 Coir & Coir Products

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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

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 buyer’s country are unstable.
 The seller is not willing to assume credit risk, as un the case of open account
method.

52
However, this is the most unpopular methods as a foreign buyer would not be willing to
pay advance of shipment unless:

 The goods are specifically designed for the customer, and

 There is heavy demand for the goods (a seller’s market situation).

B. DOCUMENTARY BILLS:

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

 full set of bill of lading

 commercial Invoice
 Marine Insurance policy and other document, if required.

There are two main types of documentary bills:

 Documents against Payment,

 Documents against Acceptance.

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

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

53
  The document remain in the hands of the bank and the exporter does not lose
possession or the ownership of goods till payment is made,

 Other reason may include that the exporter may not be able to allow credit and
wait for payment.

Documents Against acceptance (D/A): The document are released against acceptance
of the Time Draft i.e. credit allowed for a certain period, say 90 days. However, the
exporter need not wait for payment till bill is met on due date, as he can discount the bill
with the negotiating bank and can avail of funds immediately after shipment of goods.

In case of D/A as compared to D/P bills, the risk involved is much grater, as the
importer has already taken possession of goods which may or may not be in his custody
on the maturity date of the bill. If the importer fails to pay on due date, the exporter, will
have to start civil proceedings to receive his payment, if all other alternatives fails. The
risk involved can be insured with ECGC.

C. LETTER OF CREDIT (L/C):

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

A letter of credit can be defined as “ an undertaking by importer’s bank stating that

payment will be made to the exporter if the required documents are presented to the bank
within the variety of the L/C

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